N-14/A 1 h41382a2nv14za.txt AMENDMENT TO FORM N-14 As filed with the Securities and Exchange Commission on January 25, 2007 Securities Act Registration No. 333-138762 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-effective Amendment No. 2 Post-effective Amendment No. ____ (Check appropriate box or boxes) AIM INVESTMENT FUNDS (Exact Name of Registrant as Specified in Charter) 11 Greenway Plaza Suite 100 Houston, TX 77046 (Address of Principal Executive Offices) Registrant's Telephone Number: (713) 626-1919 Name and Address of Agent for Service: Copy to: PETER A. DAVIDSON, ESQUIRE PAUL W. SCOTT, ESQUIRE A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP 11 Greenway Plaza 1225 17th Street Suite 100 Suite 2300 Houston, TX 77046 Denver, CO 80202 Approximate Date of Proposed Public Offering: As soon as practicable after the Registration Statement becomes effective under the Securities Act of 1933. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such dates as the Commission, acting pursuant to said Section 8(a), may determine. The title of the securities being registered are Class A, B and C shares of AIM Global Health Care Fund. No filing fee is due in reliance on Section 24(f) of the Investment Company Act of 1940. (AIM INVESTMENTS LOGO) AIM ADVANTAGE HEALTH SCIENCES FUND, A PORTFOLIO OF AIM COUNSELOR SERIES TRUST 11 GREENWAY PLAZA, SUITE 100 HOUSTON, TEXAS 77046-1173 JANUARY 31, 2007 Dear Shareholder: We are seeking your approval of an Agreement and Plan of Reorganization (the "Agreement") that provides for the sale of the assets of AIM Advantage Health Sciences Fund (the "Fund") to AIM Global Health Care Fund ("Buying Fund"). This transaction will result in the combination of the two funds. You will receive shares of Buying Fund in connection with the transaction if shareholders approve it. A I M Advisors, Inc. ("AIM"), the investment advisor to the AIM Funds, conducted a review of the funds and concluded that it would be appropriate to consolidate certain funds having similar investment objectives and strategies. Your Fund is one of the funds that AIM recommended, and your Board of Trustees approved, for consolidation. The attached Proxy Statement and Prospectus seeks your approval of the consolidation of your Fund with Buying Fund. The enclosed Proxy Statement and Prospectus describes the proposed combination and compares, among other things, the investment objectives and strategies, operating expenses and performance history of your Fund and Buying Fund. You should review the enclosed materials carefully. After careful consideration, the Board of Trustees of AIM Counselor Series Trust has approved the Agreement and proposed combination. They recommend that you vote FOR the proposal. Your vote is important. Please take a moment after reviewing the enclosed materials to sign and return your proxy card in the enclosed postage paid return envelope. If you attend the meeting, you may vote in person. If you expect to attend the meeting in person, or have questions, please notify us by calling (800) 952-3502. You may also vote by telephone or through a website established for that purpose by following the instructions that appear on the enclosed proxy card. If we do not hear from you after a reasonable amount of time, you may receive a telephone call from our proxy solicitor, Computershare Fund Services, reminding you to vote. Sincerely, -s- Philip A. Taylor Philip A. Taylor President AIM ADVANTAGE HEALTH SCIENCES FUND, A PORTFOLIO OF AIM COUNSELOR SERIES TRUST 11 GREENWAY PLAZA, SUITE 100 HOUSTON, TEXAS 77046-1173 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 15, 2007 We cordially invite you to attend our Special Meeting of Shareholders to: 1. Approve an Agreement and Plan of Reorganization (the "Agreement") under which all of the assets of AIM Advantage Health Sciences Fund (the "Fund"), an investment portfolio of AIM Counselor Series Trust ("Trust"), will be transferred to AIM Global Health Care Fund ("Buying Fund"), an investment portfolio of AIM Investment Funds ("Buyer"). Buying Fund will assume the liabilities of the Fund and Buyer will issue shares of each class of Buying Fund to shareholders of the corresponding class of shares of the Fund. 2. Transact any other business, not currently contemplated, that may properly come before the Special Meeting, in the discretion of the proxies or their substitutes. We are holding the Special Meeting at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173 on March 15, 2007 at 3:00 p.m., Central Time. Shareholders of record as of the close of business on January 22, 2007 are entitled to notice of, and to vote at, the Special Meeting or any adjournment of the Special Meeting WE REQUEST THAT YOU EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED BY THE BOARD OF TRUSTEES OF TRUST. YOU MAY ALSO VOTE BY TELEPHONE OR THROUGH A WEBSITE ESTABLISHED FOR THAT PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY MATERIALS. YOUR VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY EXECUTING AND SUBMITTING A REVISED PROXY CARD, BY GIVING WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF TRUST OR BY VOTING IN PERSON AT THE SPECIAL MEETING. -s- John M. Zerr John M. Zerr Secretary January 31, 2007 AIM ADVANTAGE HEALTH SCIENCES FUND, AIM GLOBAL HEALTH CARE FUND, A PORTFOLIO OF A PORTFOLIO OF AIM COUNSELOR SERIES TRUST AIM INVESTMENT FUNDS 11 GREENWAY PLAZA, SUITE 100 11 GREENWAY PLAZA, SUITE 100 HOUSTON, TEXAS 77046-1173 HOUSTON, TEXAS 77046-1173 (800) 347-4246 (800) 347-4246
COMBINED PROXY STATEMENT AND PROSPECTUS JANUARY 31, 2007 This document is a combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus"). We are sending you this Proxy Statement/Prospectus in connection with the Special Meeting of Shareholders (the "Special Meeting") of AIM Advantage Health Sciences Fund. The Special Meeting will be held on March 15, 2007 at 3:00 p.m., Central Time. We intend to mail this Proxy Statement/Prospectus, the enclosed Notice of Special Meeting of Shareholders and the enclosed proxy card on or about January 31, 2007 to all shareholders entitled to vote at the Special Meeting. At the Special Meeting, we are asking shareholders of AIM Advantage Health Sciences Fund (your "Fund") to consider and approve an Agreement and Plan of Reorganization (the "Agreement") that provides for the reorganization of your Fund, an investment portfolio of AIM Counselor Series Trust ("Trust"), with AIM Global Health Care Fund ("Buying Fund"), an investment portfolio of AIM Investment Funds ("Buyer") (the "Reorganization"). Under the Agreement, all of the assets of your Fund will be transferred to Buying Fund, Buying Fund will assume the liabilities of your Fund and Buyer will issue shares of each class of Buying Fund to shareholders of the corresponding class of shares of your Fund, as set forth on Exhibit A. The value of your account with Buying Fund immediately after the Reorganization will be the same as the value of your account with your Fund immediately prior to the Reorganization. The Reorganization has been structured as a tax-free transaction. No sales charges will be imposed in connection with the Reorganization. The Board of Trustees of Trust (the "Board") has approved the Agreement and the Reorganization as being advisable and in the best interests of your Fund. Trust and Buyer are both registered open-end management investment companies that issue their shares in separate series. Your Fund is a series of Trust and Buying Fund is a series of Buyer. A I M Advisors, Inc. ("AIM") serves as the investment advisor to both your Fund and Buying Fund. AIM is a wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"), an independent global investment management company. Your Fund and Buying Fund have similar investment objectives. Your Fund seeks capital growth and Buying Fund seeks long-term growth of capital. See "Comparison of Investment Objectives and Principal Strategies." This Proxy Statement/Prospectus sets forth the information that you should know before voting on the Agreement. It is both the Proxy Statement of your Fund and the Prospectus of Buying Fund. You should read and retain this Proxy Statement/Prospectus for future reference. The Prospectus of your Fund dated December 29, 2006, as supplemented, together with the related Statement of Additional Information dated December 29, 2006 (the "Selling Fund Prospectus"), are on file with the Securities and Exchange Commission (the "SEC"). The Selling Fund Prospectus is incorporated by reference into this Proxy Statement/Prospectus. The Prospectus of Buying Fund dated February 28, 2006, as supplemented, (the "Buying Fund Prospectus"), and the related Statement of Additional Information dated February 28, 2006, as supplemented, and the Statement of Additional Information relating to the Reorganization dated January 31, 2007, are on file with the SEC. The Buying Fund Prospectus is incorporated by reference into this Proxy Statement/Prospectus and a copy of the Buying Fund Prospectus is attached as Appendix II to this Proxy Statement/Prospectus. The Statement of Additional Information relating to the Reorganization dated January 31, 2007, also is incorporated by reference into this Proxy Statement/Prospectus. The SEC maintains a website at www.sec.gov that contains the Prospectuses and i Statements of Additional Information described above, material incorporated by reference, and other information about Trust and Buyer. Copies of the Prospectuses of Buying Fund and your Fund and the related Statements of Additional Information are available without charge by writing to A I M Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046- 1173, or by calling (800) 959-4246. Additional information about your Fund and Buying Fund may be obtained on the internet at www.aiminvestments.com. Trust has previously sent to shareholders the most recent annual report for your Fund, including financial statements, and the most recent semi-annual report succeeding the annual report, if any. If you have not received such reports or would like to receive an additional copy, please contact A I M Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or by calling (800) 959-4246. Such reports will be furnished free of charge. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ii TABLE OF CONTENTS
PAGE ---- INTRODUCTION........ 1 SUMMARY............. 1 The Reorganiza- tion........... 1 Comparison of Investment Objectives and Principal Strategies..... 1 Comparison of Performance.... 3 Comparison of Fees and Expenses... 5 Comparison of Multiple Class Structures..... 11 Comparison of Sales Charges.. 11 Comparison of Distribution and Purchase and Redemption Procedures..... 11 The Board's Recommenda- tion........... 12 RISK FACTORS........ 12 Risks Associated with Buying Fund........... 12 Comparison of Risks of Buying Fund and Your Fund........... 13 INFORMATION ABOUT BUYING FUND....... 13 Description of Buying Fund Shares......... 13 Management's Discussion of Fund Performance.... 13 Financial Highlights..... 14 ADDITIONAL INFORMATION ABOUT THE AGREEMENT..... 14 Terms of the Reorganiza- tion........... 14 The Reorganiza- tion........... 14 Board Consider- ations......... 14 Other Terms....... 17 Federal Income Tax Consequences... 18 Accounting Treatment...... 19 RIGHTS OF SHAREHOLDERS...... 19 CAPITALIZATION...... 19 LEGAL MATTERS....... 19 ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND......... 20 INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION........ 20 INFORMATION ABOUT THE SPECIAL MEETING AND VOTING............ 20 Proxy Statement/Pro- spectus........ 20 Time and Place of Special Meeting........ 21 Voting in Person.. 21 Voting by Proxy... 21 Voting by Telephone or the Internet... 21 Quorum Requirement and Adjournment.... 21 Vote Necessary to Approve the Agreement...... 22 Proxy Solicitation... 22 Other Matters..... 22 Ownership of Shares......... 22 Security Ownership of Management and Trustees... 22
iii EXHIBIT A........ Classes of Shares of Your Fund and Corresponding Classes of Shares of Buying Fund EXHIBIT B........ Shares Outstanding of Each Class of Your Fund on Record Date EXHIBIT C........ Ownership of Shares of Your Fund EXHIBIT D........ Ownership of Shares of Buying Fund APPENDIX I....... Agreement and Plan of Reorganization APPENDIX II...... Prospectus of Buying Fund APPENDIX III..... Discussion of Performance of Buying Fund APPENDIX IV...... Financial Highlights of Buying Fund
THE AIM FAMILY OF FUNDS, AIM AND DESIGN, AIM, AIM FUNDS, AIM FUNDS AND DESIGN, AIM INVESTMENTS, AIM INVESTOR, AIM LIFETIME AMERICA, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA FAMILIA AIM DE FONDOS, LA FAMILIA AIM DE FONDOS AND DESIGN, INVIERTA CON DISCIPLINA AND INVEST WITH DISCIPLINE, THE AIM COLLEGE SAVINGS PLAN, AIM SOLO 401(K), AIM INVESTMENTS AND DESIGN AND YOUR GOALS. OUR SOLUTIONS. ARE REGISTERED SERVICE MARKS AND AIM BANK CONNECTION, AIM INTERNET CONNECT, AIM PRIVATE ASSET MANAGEMENT, AIM PRIVATE ASSET MANAGEMENT AND DESIGN, AIM STYLIZED AND/OR DESIGN, AIM ALTERNATIVE ASSETS AND DESIGN, AND MYAIM.COM ARE SERVICE MARKS OF A I M MANAGEMENT GROUP INC. AIM TRIMARK IS A REGISTERED SERVICE MARK OF A I M MANAGEMENT GROUP INC. AND AIM FUNDS MANAGEMENT INC. No dealer, salesperson or any other person has been authorized to give any information or to make any representation other than those contained in this Proxy Statement/Prospectus, and you should not rely on such other information or representations. iv INTRODUCTION AIM continuously analyzes and reviews its U.S. mutual fund offerings. As part of its review, AIM concluded that it would be appropriate to consolidate certain funds having similar investment objectives and strategies. AIM believes that the shareholders of your Fund will benefit from the proposed Reorganization because the combination of the funds will allow Buying Fund the best available opportunities for investment management and potential operating efficiencies. SUMMARY The Board, including the independent trustees, has determined that the Reorganization is advisable and in the best interests of your Fund and that the interests of the shareholders of your Fund will not be diluted as a result of the Reorganization. Your Fund and Buying Fund have similar investment objectives and utilize similar investment strategies, although, as noted below, Buying Fund does not utilize short selling or leverage as investment techniques. The Board believes that the combined fund should have greater market presence and may achieve greater operating efficiencies because certain fixed costs, such as legal, accounting, shareholder services and trustee expenses, will be spread over the greater assets of the combined fund. In addition, the total annual operating expenses of the combined fund are expected to be lower than your Fund's current total annual operating expenses. For additional information concerning the factors the Board of Trustees considered in approving the Agreement, see "Additional Information About the Agreement -- Board Considerations." The following summary discusses some of the key features of the Reorganization and highlights certain differences between your Fund and Buying Fund. This summary is not complete and does not contain all of the information that you should consider before voting on whether to approve the Agreement. For more complete information, please read this entire Proxy Statement/Prospectus. THE REORGANIZATION The Reorganization will result in the combination of your Fund with Buying Fund. Your Fund is a series of Trust, a Delaware statutory trust. Buying Fund is a series of Buyer, also a Delaware statutory trust. If shareholders of your Fund approve the Agreement and other closing conditions are satisfied, all of the assets of your Fund will be transferred to Buying Fund, Buying Fund will assume the liabilities of your Fund, and Buyer will issue shares of each class of Buying Fund to shareholders of the corresponding class of shares of your Fund, as set forth on Exhibit A. For a description of certain of the closing conditions that must be satisfied, see "Additional Information About the Agreement -- Other Terms." The shares of Buying Fund issued in the Reorganization will have an aggregate net asset value equal to the net value of the assets of your Fund transferred to Buying Fund. The value of your account with Buying Fund immediately after the Reorganization will be the same as the value of your account with your Fund immediately prior to the Reorganization. A copy of the Agreement is attached as Appendix I to this Proxy Statement/Prospectus. See "Additional Information About the Agreement." Trust and Buyer will receive an opinion of Ballard Spahr Andrews & Ingersoll, LLP to the effect that the Reorganization will constitute a tax-free reorganization for Federal income tax purposes. Thus, shareholders will not have to pay additional Federal income tax as a result of the Reorganization. See "Additional Information About the Agreement -- Federal Income Tax Consequences." No sales charges will be imposed in connection with the Reorganization. COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES Your Fund and Buying Fund have similar investment objectives and invest in similar types of securities. Your Fund seeks capital growth and Buying Fund seeks long-term growth of capital. Both funds focus their investments in equity securities of companies in the health care industry. 1 The chart below provides a summary for comparison purposes of the investment objectives and principal investment strategies of your Fund and Buying Fund. You can find more detailed information about the investment objectives, strategies and other investment policies of your Fund and Buying Fund in the Selling Fund Prospectus and the Buying Fund Prospectus, respectively. AIM ADVANTAGE HEALTH SCIENCES FUND (YOUR AIM GLOBAL HEALTH CARE FUND (BUYING FUND) FUND) INVESTMENT OBJECTIVES - Long-term growth of capital - Capital growth INVESTMENT STRATEGIES - Invests at least 80% of its assets in - Invests at least 80% of its net assets, securities of health care industry plus any borrowings for investment companies purposes, in the equity securities and - In complying with this 80% investment equity-related instruments of companies requirement, the fund will invest that develop, produce, or distribute primarily in marketable equity products or services related to health securities, including convertible sciences. securities, but its investments may include other securities, such as synthetic instruments. - Invests in the securities of companies - Invests primarily in issuers from at located in at least three different least three different countries, countries, including the United States, including the United States. The fund and may invest a significant portion of may at times invest in fewer than three its assets in the securities of U.S. countries or even a single country. issuers. Will not invest more than 50% of its total assets in the securities of issuers in any one country, other than the U.S. - Will not invest more than 50% of its - May invest up to 100% of its assets in total assets in the securities of securities of non-U.S. issuers issuers in any one country, other than the U.S. - May invest up to 20% of its total - No corresponding strategy assets in companies located in developing countries. - May invest up to 5% of its total assets - No corresponding strategy in lower-quality debt securities, i.e., "junk bonds". - No corresponding strategy - The fund may sell securities short ("short selling"), without holding corresponding long positions - No corresponding strategy - The fund may utilize bank borrowings ("leverage") to purchase securities - The fund is diversified - The fund is non-diversified, therefore, it can invest a greater percentage of its assets in any one issuer than a diversified fund can.
HOW DOES YOUR FUND'S PERFORMANCE COMPARE TO THE BUYING FUND'S PERFORMANCE A bar chart showing the annual total returns for calendar years ended December 31, for Class A shares of your Fund and Buying Fund can be found below. Also included below is a table showing the average annual total returns for the periods indicated for your Fund and Buying Fund. For more information regarding the total return of your Fund, see the "Financial Highlights" section of the Selling Fund Prospectus, which has been made a part of this Proxy 2 Statement/Prospectus by reference. For more information regarding the total return of Buying Fund, see "Information About Buying Fund -- Financial Highlights." Past performance cannot guarantee comparable future results. COMPARISON OF PERFORMANCE AIM ADVANTAGE HEALTH SCIENCES FUND (YOUR FUND) The bar chart and table shown below provide an indication of the risks of investing in your Fund. Your Fund's past performance (before and after taxes) is not necessarily an indication of its future performance. The following bar chart shows changes in the performance of your Fund's Class A shares from year to year. The bar chart does not reflect sales loads. If it did, the annual total returns shown would be lower. LOGO
YEARS ----- 1996.... 9.32% 1997.... 17.53% 1998.... 32.34% 1999.... (0.76)% 2000.... 32.21% 2001.... (18.50)% 2002.... (27.31)% 2003.... 26.74% 2004.... 7.56% 2005.... 10.47% 2006.... 10.51%
During the periods shown in the bar chart, the highest quarterly return was 23.90% (quarter ended June 30, 2000) and the lowest quarterly return was (24.92)% (quarter ended March 31, 2001). The following performance table compares your Fund's performance to that of a broad-based securities market index, a style specific index and a peer group index. your Fund's performance reflects payment of sales loads, if applicable. The indices may not reflect payment of fees, expenses or taxes. Your Fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of your Fund may deviate significantly from the performance of the indices shown below. AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, SINCE INCEPTION 2006) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE ----------------------------------- ------ ------- -------- ------------ --------- CLASS A Return Before Taxes................. 4.43% 2.71% 6.64% 01/23/92 Return After Taxes on Distributions.................... 3.17 2.46 4.69 Return After Taxes on Distributions and Sale of Fund Shares.......... 4.58 2.32 4.89 CLASS B Return Before Taxes................. 4.70 2.46 3.49% 05/15/01 CLASS C Return Before Taxes................. 8.70 2.47 3.04 05/15/01 S&P 500 Index(2)...................... 15.78 6.19 8.42 Morgan Stanley Health Care Product Index(2)(3)......................... 9.71 7.82 15.42 Lipper Health/Biotech Fund Index(3)(4)......................... 4.80 4.69 10.49
3 -------- After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A only and after-tax returns for Class B and C will vary. (1) Since inception performance is only provided for a class with less than ten calendar years of performance. (2) The S&P 500 Index measures the performance of the 500 most widely held common stocks and is considered one of the best indicators of U.S. stock market performance. Your Fund has also included the Morgan Stanley Health Care Product Index, which your Fund believes more closely reflects the performance of securities in which your Fund invests. In addition, the Lipper Health/Biotech Fund Index (which may or may not include your Fund) is included for comparison to a peer group. (3) The Morgan Stanley Health Care Product Index is an equal-dollar weighted index of 26 companies involved in the business of pharmaceuticals, including biotechnology and medical technology. (4) The Lipper Health/Biotech Fund Index is an equally weighted representation of the 30 largest funds within the Lipper Health/Biotech Fund category. These funds invest at least 65% of their portfolios in equity securities of companies engaged in healthcare, medicine, and biotechnology. AIM GLOBAL HEALTH CARE FUND (BUYING FUND) The bar chart and table shown below provide an indication of the risks of investing in Buying Fund. Buying Fund's past performance (before and after taxes) is not necessarily an indication of its future performance. The following bar chart shows changes in the performance of Buying Fund's Class A shares from year to year. The bar chart does not reflect sales loads. If it did, the annual total returns shown would be lower. LOGO
YEARS ----- 1996.... 23.84% 1997.... 7.96% 1998.... 18.43% 1999.... 5.52% 2000.... 52.08% 2001.... 4.70% 2002.... (22.68)% 2003.... 21.44% 2004.... 9.17% 2005.... 8.68% 2006.... 4.36%
During the periods shown in the bar chart, the highest quarterly return was 21.61% (quarter ended December 31, 1998) and the lowest quarterly return was (11.32)% (quarter ended September 30, 1998). 4 The following performance table compares Buying Fund's performance to that of a broad-based securities market index, a style specific index and a peer group index. Buying Fund's performance reflects payment of sales loads, if applicable. The indices may not reflect payment of fees, expenses or taxes. Buying Fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of Buying Fund may deviate significantly from the performance of the indices shown below. AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, SINCE INCEPTION 2006) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE ----------------------------------- ------ ------- -------- ------------ --------- CLASS A.............................. 08/07/89 Return Before Taxes................ (1.37)% 1.90% 8.97% Return After Taxes on Distributions................... (2.77) 1.52 6.85 Return After Taxes on Distributions and Sale of Fund Shares......... 1.00 1.63 6.68 CLASS B.............................. 04/01/93 Return Before Taxes................ (1.05) 2.10 9.14 CLASS C.............................. 03/01/99 Return Before Taxes................ 2.65 2.46 -- 8.37% MSCI World Index(2).................. 20.07 9.97 7.64 -- MSCI World Health Care Index(2)(3)... 10.47 4.58 -- Lipper Health/Biotech Fund Index(2)(4)........................ 4.80 4.69 10.49 --
-------- After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A only and after-tax returns for Class B, and C will vary. (1) Since inception performance is only provided for a class with less than ten calendar years of performance. (2) The Morgan Stanley Capital International World Index measures the performance of securities listed on stock exchanges of 23 developed countries. Buying Fund has also included the Morgan Stanley Capital International World Health Care Index, which Buying Fund believes more closely reflects the performance of the types of securities in which Buying Fund invests. In addition, Buying Fund has included the Lipper Health/Biotech Index (which may or may not include Buying Fund) for comparison to a peer group. (3) The MSCI World Health Care Index includes health care securities tracked by Morgan Stanley Capital International. (4) The Lipper Health/Biotech Fund Index is an equally weighted representation of the 30 largest funds within the Lipper Health/Biotech category. These funds invest at least 65% of their portfolios in equity securities of companies engaged in healthcare, medicine and biotechnology. COMPARISON OF FEES AND EXPENSES FEE TABLE This table compares the shareholder fees and annual operating expenses, expressed as a percentage of net assets ("Expense Ratios"), of Class A, Class B and Class C shares of AIM Advantage Health Sciences Fund ("Your Fund") and Class A, Class B and Class C shares of AIM Global Health Care Fund ("Buying Fund"). Pro Forma 5 Combined Expense Ratios of Buying Fund giving effect to the Reorganization are also provided. There is no guarantee that actual expenses will be the same as those shown in this table.
AIM GLOBAL HEALTH AIM ADVANTAGE HEALTH AIM GLOBAL HEALTH CARE FUND SCIENCES FUND CARE FUND BUYING FUND YOUR FUND BUYING FUND PRO FORMA COMBINED (8/31/06 AS RESTATED) (10/31/06) (10/31/06) --------------------------- --------------------------- --------------------------- CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES ------- ------- ------- ------- ------- ------- ------- ------- ------- SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge (Load) Imposed on Purchase (as a percentage of offering price)............................... 5.50% None None 5.50% None None 5.50% None None Maximum Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable).......................... None(1) 5.00% 1.00% 5.00% 1.00% None(1) 5.00% 1.00% None(1) Redemption/Exchange Fee (as a percentage of amount redeemed/exchanged)(2)............... 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets) Management fees(3)(4).................. 2.09% 2.09% 2.09% 0.62% 0.62% 0.62% 0.61% 0.61% 0.61% Distribution and/or Service (12b-1) Fees................................. 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% Other -- Miscellaneous Expenses(5)(6).................... 0.40% 0.40% 0.40% 0.36% 0.36% 0.36% 0.36% 0.36% 0.36% Other -- Interest Expenses........... 0.81% 0.81% 0.81% -- -- -- -- -- -- Total Other Expenses................... 1.21% 1.21% 1.21% 0.36% 0.36% 0.36% 0.36% 0.36% 0.36% Total Annual Fund Operating Expenses... 3.55% 4.30% 4.30% 1.23% 1.98% 1.98% 1.22% 1.97% 1.97% Fee Waiver(4).......................... 0.41% 0.41% 0.41% -- -- -- -- -- -- Net Annual Fund Operating Expenses..... 3.14% 3.89% 3.89% 1.23% 1.98% 1.98% 1.22% 1.97% 1.97% SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge (Load) Imposed on Purchase (as a percentage of offering price)............................... Maximum Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable).......................... Redemption/Exchange Fee (as a percentage of amount redeemed/exchanged)(2)............... ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets) Management fees(3)(4).................. Distribution and/or Service (12b-1) Fees................................. Other -- Miscellaneous Expenses(5)(6).................... Other -- Interest Expenses........... Total Other Expenses................... Total Annual Fund Operating Expenses... Fee Waiver(4).......................... Net Annual Fund Operating Expenses.....
-------- (1) A contingent deferred sales charge may apply in some cases. (2) Effective December 29, 2006, you may be charged a 2.00% fee on redemptions or exchanges of Class A, B and C shares held 30 days or less. (3) Your Fund pays the advisor a performance-based management fee, and Management Fees have been restated to reflect the methodology currently used by the advisor to calculate the performance-based management fee payable by your fund. Your Fund's base management fee is 1.50%, annualized, of your Fund's average daily net assets during the current month. This fee is subject to a monthly performance adjustment upward or downward of up to 1.00%, annualized, of the average daily net assets of your Fund's Class A shares during a rolling 12 month performance period, depending on your Fund's performance compared to the performance of the Morgan Stanley Health Care Product Index during such performance period. The total management fee payable by your Fund is not susceptible to estimation because it depends upon the future relative performance of your Fund and the Morgan Stanley Health Care Product Index, as well as changes in the average daily net assets of your Fund and its Class A shares over the relevant periods. See the section of this proxy entitled "Summary -- Comparison of Fees and Expenses -- Advisory Fees" for additional information about the calculation of your Fund's management fee. (4) The advisor for your Fund has contractually agreed to waive management fees monthly through at least June 30, 2008 to the extent necessary such that the management fee the advisor receives does not exceed a base management fee of 1.25%, annualized, of your Fund's average daily net assets during the current month, subject to a monthly performance adjustment upward or downward of up to 0.75%, annualized, of the average daily net assets of your Fund's Class A shares during a rolling 12 month performance period (depending on your Fund's performance compared to the performance of the Morgan Stanley Health Care Product Index during such performance period). In addition, under this agreement the maximum management fee payable monthly by your Fund (consisting of the base management fee, as adjusted by the performance adjustment) will not exceed 2.00% of your Fund's average daily net assets during the fiscal year. Fee Waivers have been restated to reflect the methodology currently used by the advisor to calculate the applicable waiver amount under this agreement. (5) Your Fund is estimated to incur $143,000 of expenses in connection with the reorganization and your Fund will pay 100% of the expenses. The Buying Fund is estimated to incur $30,000 of expenses in connection with the Reorganization and will bear all of those costs and expenses. These reorganization expenses have not been reflected in the table above. 6 (6) Includes acquired fund fees and expenses which are less than 0.01%. Acquired fund fees and expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. The impact of the acquired fund fees and expenses is included in the total returns of the fund. EXPENSE EXAMPLE This Example is intended to help you compare the costs of investing in different classes of Your Fund and Buying Fund with the cost of investing in other mutual funds. Pro Forma Combined costs of investing in different classes of Buying Fund giving effect to the reorganization of Your Fund into Buying Fund are also provided. All costs are based upon the information set forth in the Fee Table above. The Example assumes that you invest $10,000 for the time periods indicated and shows the expenses that you would pay both if you redeem all of your shares at the end of those periods and if you do not redeem your shares. The Example also assumes that your investment has a 5% return each year and that the operating expenses remain the same. The Example reflects fee waivers and/or expense reimbursements that are contractual, if any, but does not reflect voluntary fee waivers and/or expense reimbursements. To the extent fees are waived and/or expenses are reimbursed on a voluntary basis, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be: You would pay the following expenses if you redeemed your shares:
ONE THREE FIVE TEN YEAR YEARS YEARS YEARS ---- ------ ------ ------ AIM ADVANTAGE HEALTH SCIENCES FUND (YOUR FUND) Class A....................................... $849 $1,543 $2,256 $4,133 Class B....................................... 891 1,567 2,355 4,275(1) Class C....................................... 491 1,267 2,155 4,430 AIM GLOBAL HEALTH CARE FUND (BUYING FUND) Class A....................................... $668 $ 919 $1,188 $1,957 Class B....................................... 701 921 1,268 2,113(1) Class C....................................... 301 621 1,068 2,306 AIM GLOBAL HEALTH CARE FUND (BUYING FUND) -- PRO FORMA COMBINED Class A....................................... $667 $ 916 $1,183 $1,946 Class B....................................... 700 918 1,262 2,102(1) Class C....................................... 300 618 1,062 2,296
-------- (1) Assumes conversion of Class B shares to Class A shares, which occurs on or about the end of the month which is at least 8 years after the date on which shares were purchased, lowering your annual fund operating expenses from that time on. 7 You would pay the following expenses if you did not redeem your shares:
ONE THREE FIVE TEN YEAR YEARS YEARS YEARS ---- ------ ------ ------ AIM ADVANTAGE HEALTH SCIENCES FUND (YOUR FUND) Class A....................................... $849 $1,543 $2,256 $4,133 Class B....................................... 391 1,267 2,155 4,275(1) Class C....................................... 391 1,267 2,155 4,430 AIM GLOBAL HEALTH CARE FUND (BUYING FUND) Class A....................................... $668 $ 919 $1,188 $1,957 Class B....................................... 201 621 1,068 2,113(1) Class C....................................... 201 621 1,068 2,306 AIM GLOBAL HEALTH CARE FUND (BUYING FUND) -- PRO FORMA COMBINED Class A....................................... $667 $ 916 $1,183 $1,946 Class B....................................... 200 618 1,062 2,102(1) Class C....................................... 200 618 1,062 2,296
-------- (1) Assumes conversion of Class B shares to Class A shares, which occurs on or about the end of the month which is at least 8 years after the date on which shares were purchased, lowering your annual fund operating expenses from that time on. THE EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. YOUR FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND DOES NOT REPRESENT YOUR FUND'S OR BUYING FUND'S PROJECTED OR ACTUAL PERFORMANCE. THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS. ADVISORY FEES (YOUR FUND) For the advisory services it provides to your Fund, AIM is entitled to receive a performance-based or "fulcrum" advisory fee from your Fund that is comprised of two components. The first component is a base management fee of 1.50%, annualized, of your Fund's average daily net assets during the current month (the "Base Fee"). The second component is a monthly performance adjustment that either increases or decreases the Base Fee (the "Fee Adjustment"). The maximum monthly Fee Adjustment upward or downward will be 1.00%, annualized, of the average daily net assets of your Fund's Class A shares during a rolling 12 month performance period. AIM uses a three step process in determining the Fee Adjustment, if any, applicable during any month. AIM uses this three step process to ensure that its determination of the Fee Adjustment complies with applicable law and relevant SEC guidance regarding the calculation of performance-based advisory fees. In step one, AIM compares the investment performance of the Class A shares of your Fund for the 12 month period ending on the last day of the current month (the "First Performance Period") to the investment record of the Morgan Stanley Health Care Product Index (the "Index") during the First Performance Period in order to calculate the fee adjustment rate for the First Performance Period (the "First Fee Adjustment Rate"). The investment performance of your Fund will be determined by adding together (i) the change in the net asset value of the Class A shares during the First Performance Period, (ii) the value of cash distributions made by your Fund to holders of Class A shares to the end of the First Performance Period, and (iii) the value of capital gains taxes per share, if any, paid or payable on undistributed realized long-term capital gains accumulated to the end of the First Performance Period, and will be expressed as a percentage of its net asset value per share at the beginning of the First Performance Period. The investment record of the Index will be determined by adding together (i) the change in the 8 level of the Index during the First Performance Period and (ii) the value, computed consistently with the Index, of cash distributions made by companies whose securities comprise the Index accumulated to the end of the First Performance Period, and will be expressed as a percentage of the Index level at the beginning of such period. The First Fee Adjustment Rate either (i) increases the Base Fee at the rate of 0.20%, on a pro rata basis, for each percentage point the investment performance of Class A shares of your Fund over the First Performance Period exceeds the sum of 2.00% and the investment record of the Index over the First Performance Period, or (ii) decreases the Base Fee at the rate of 0.20%, on a pro rata basis, for each percentage point the investment record of the Index over the First Performance Period less 2.00% exceeds the investment performance of the Class A shares of your Fund over the First Performance Period. After it determines any Fee Adjustment for the First Performance Period, AIM will determine the dollar amount of additional fees or fee reductions to be paid for a month by multiplying the First Fee Adjustment Rate by the average daily net assets of the Class A shares of your Fund (net of any investments in other AIM-advised funds) during the First Performance Period, dividing that number by the number of days in the First Performance Period, and multiplying that number by the number of days in such month. In step two, AIM compares the investment performance of the Class A shares of your Fund for the 12 month period ending on the last day of the prior month (the "Second Performance Period") to the investment record of the Index during the Second Performance Period in order to calculate the fee adjustment rate for the Second Performance Period (the "Second Fee Adjustment Rate"). The investment performance of your Fund will be determined by adding together (i) the change in the net asset value of the Class A shares during the Second Performance Period, (ii) the value of cash distributions made by your Fund to holders of Class A shares to the end of the Second Performance Period, and (iii) the value of capital gains taxes per share, if any, paid or payable on undistributed realized long-term capital gains accumulated to the end of the Second Performance Period, and will be expressed as a percentage of its net asset value per share at the beginning of the Second Performance Period. The investment record of the Index will be determined by adding together (i) the change in the level of the Index during the Second Performance Period and (ii) the value, computed consistently with the Index, of cash distributions made by companies whose securities comprise the Index accumulated to the end of the Second Performance Period, and will be expressed as a percentage of the Index level at the beginning of such period. The Second Fee Adjustment Rate either (i) increases the Base Fee at the rate of 0.20%, on a pro rata basis, for each percentage point the investment performance of Class A shares of your Fund over the Second Performance Period exceeds the sum of 2.00% and the investment record of the Index over the Second Performance Period, or (ii) decreases the Base Fee at the rate of 0.20%, on a pro rata basis, for each percentage point the investment record of the Index over the Second Performance Period less 2.00% exceeds the investment performance of the Class A shares of your Fund over the Second Performance Period. After it determines any Fee Adjustment for the Second Performance Period, AIM will determine the dollar amount of additional fees or fee reductions to be paid for a month by multiplying the Second Fee Adjustment Rate by the average daily net assets of the Class A shares of your Fund (net of any investments in other AIM-advised funds) during the Second Performance Period, dividing that number by the number of days in the Second Performance Period, and multiplying that number by the number of days in such month. In step three, AIM adds whichever of the Fee Adjustments resulting from the calculations in steps one and two above to the Base Fee that will result in the lower amount of management fees payable to AIM for the relevant month. The management fee, as adjusted, is accrued daily based on an estimate of your Fund's average daily net assets and relative performance for the relevant Performance Periods and paid after each month end based on actual results for such month. AIM receives no management fee on the portion of your Fund's assets, if any, invested in other funds advised by AIM, including affiliated money market funds. AIM has contractually agreed to waive management fees monthly through at least June 30, 2008 to the extent necessary such that the management fee AIM receives does not exceed a base management fee of 1.25%, annualized, of your Fund's average daily net assets during the current month, subject to a monthly performance 9 adjustment upward or downward of up to 0.75%, annualized, of the average daily net assets of your Fund's Class A shares during a rolling 12 month performance period (depending on your Fund's performance compared to the performance of the Index during such performance period). This waiver agreement provides that in determining the performance adjustment, the base management fee is adjusted in increments of 0.15%, on a pro rata basis, upward or downward instead of increments of 0.20% as provided in the Advisory Agreement. In addition, under this waiver agreement the maximum management fee payable monthly by your Fund (consisting of the base management fee, as adjusted by the performance adjustment) will not exceed 2.00% of your Fund's average daily net assets during the fiscal year. In determining the performance adjustment required pursuant to this waiver agreement, if any, applicable during any month, AIM follows the same three step calculation approach discussed above. ADVISORY FEES (BUYING FUND) Buying Fund does not utilize a performance based or "fulcrum" fee. Rather, Buying Fund's advisory fee is based on a percentage of net assets only and is equal to:
ANNUAL RATE NET ASSETS ----------- ---------- 0.75%................................................... First $350 million 0.65%................................................... Next $350 million 0.55%................................................... Next $1.3 billion 0.45%................................................... Next $2 billion 0.40%................................................... Next $2.0 billion 0.375%.................................................. Next $2.0 billion 0.35%................................................... Over $8 billion
Buying Fund's advisory fee will be applicable to the combined fund if shareholders approve the Reorganization. This means that you will no longer be investing in a fund with a performance-based advisory fee. However, depending on the future performance of your Fund relative to the Index and changes in the average daily net assets of your Fund and its Class A shares over the relevant performance periods, the application of Buying Fund's advisory fee could result in your Fund's shareholders at times paying a higher advisory fee after the Reorganization. For example, if your Fund underperforms the Morgan Stanley Health Care Product Index by more than 6%, the performance-based reduction of your Fund's base fee could result in a lower effective advisory fee than that which will be applicable to the combined fund. The total performance-based advisory fee payable by your Fund is not susceptible to estimation because it depends upon the future relative performance of your Fund and the Index, as well as changes in the average daily net assets of your Fund and its Class A shares over the relevant performance periods. In addition, the Buying Fund is not prohibited from paying advisory fees on assets invested in other investment companies advised by AIM. The Buying Fund has a practice of investing available cash balances in affiliated money market funds. Upon the Reorganization the combined fund will pay advisory fees to AIM on all assets invested in the affiliated money market funds, including those assets that were acquired from your Fund in the Reorganization. As shown in the "Comparison of Fees and Expenses -- Fee Table", based on the performance of your Fund and the advisory fee waiver agreement in place for your Fund the gross effective advisory fees, restated to reflect the methodology currently used by AIM to calculate the performance-based advisory fee payable by your Fund, are 2.09% before waivers and 1.68% after waivers of 0.41%. The effective advisory fee rate of the Buying Fund is 0.62% before the Reorganization and 0.61% after giving pro forma effect to the Reorganization. Because the investment advisory fee schedule applicable to Buying Fund after the Reorganization may be higher than the investment advisory fee applicable to your Fund under certain circumstances, as discussed above, the advisory agreement of the combined fund could be viewed as being materially different from that of your Fund. Therefore, shareholders of your Fund must approve the Reorganization by a "1940 Act Majority." The 1940 Act Majority requirements are explained more fully below under "Vote Necessary to Approve the Agreement." While Buying Fund's advisory fee may be higher under certain circumstances after the Reorganization, the pro forma net total Expense Ratio of the combined fund is expected to be lower than your Fund's current expenses. 10 COMPARISON OF MULTIPLE CLASS STRUCTURES A comparison of the share classes of your Fund that are currently available to investors and the corresponding share class of Buying Fund that shareholders of your Fund will receive in the Reorganization can be found at Exhibit A. For information regarding the features of each of the share classes of your Fund and Buying Fund, see the Selling Fund Prospectus and the Buying Fund Prospectus, respectively. COMPARISON OF SALES CHARGES No sales charges are applicable to shares of Buying Fund received by holders of your Fund's shares in connection with the Reorganization. No redemption of your Fund's shares that could cause the imposition of a contingent deferred sales charge ("CDSC") will result in connection with the Reorganization. The holding period for purposes of determining whether to charge a CDSC upon redemption of shares of Buying Fund received in connection with the Reorganization will be the same as the holding period of your shares immediately prior to the Reorganization. The chart below provides a summary for comparison purposes of the initial sales charges and CDSCs applicable to each class of shares of your Fund and Buying Fund. The fee tables above in "Comparison of Fees and Expenses" include comparative information about maximum initial sales charges on purchases of Class A shares of your Fund and Buying Fund and the maximum CDSC on redemptions of certain classes of shares of your Fund and Buying Fund. For more detailed information on initial sales charges, including volume purchase breakpoints and waivers, and reductions of CDSCs over time, see the Selling Fund Prospectus and the Buying Fund Prospectus and the related Statements of Additional Information.
CLASS A CLASS B CLASS C ------- ------- ------- - subject to an initial sales - not subject to an initial - not subject to an initial charge* sales charge sales charge - may be subject to a CDSC on - subject to a CDSC on certain - subject to a CDSC on certain redemptions made within 12 redemptions redemptions or 18 months from the date of certain purchases
CLASS R INVESTOR CLASS INSTITUTIONAL CLASS ------- -------------- ------------------- - not subject to an initial - not subject to an initial - not subject to an initial sales charge sales charge sales charge - may be subject to a CDSC on - not subject to a CDSC - not subject to a CDSC redemptions made within 12 months from the date of certain purchases
-------- * Your Fund and Buying Fund waive initial sales charges on Class A shares for certain categories of investors, including certain of their affiliated entities and certain of their employees, officers and trustees and those of their investment advisor. The CDSC on redemptions of shares of Buying Fund is computed based on the lower of their original purchase price or current market value, net of reinvested dividends and capital gains distributions. COMPARISON OF DISTRIBUTION AND PURCHASE AND REDEMPTION PROCEDURES Shares of your Fund and Buying Fund are distributed by A I M Distributors, Inc. ("AIM Distributors"), a registered broker-dealer and wholly owned subsidiary of AIM. Your Fund and Buying Fund have adopted a distribution plan that allows the payment of distribution and service fees for the sale and distribution of the shares of each of their respective classes. Distribution fees are payable to AIM Distributors for distribution services. The fee tables above in "Comparison of Fees and Expenses" include comparative information about the distribution and service fees payable by each class of shares of your 11 Fund and Buying Fund. Each class of shares of Buying Fund will have the same or lower aggregate distribution and service fees as the corresponding class of shares of your Fund. The purchase and redemption procedures of your Fund and Buying Fund are substantially the same. For information regarding the purchase and redemption procedures of your Fund and Buying Fund, see the Selling Fund Prospectus and the Buying Fund Prospectus, respectively. THE BOARD'S RECOMMENDATION The Board, including the independent trustees of your Fund, unanimously recommends that you vote "FOR" this Proposal. For information concerning the factors the Board considered in approving the Agreement, see "Additional Information About the Agreement -- Board Considerations," on page 13 of this Proxy Statement/Prospectus. RISK FACTORS RISKS ASSOCIATED WITH BUYING FUND The following is a discussion of the principal risks associated with Buying Fund. There is a risk that you could lose all or a portion of your investment in Buying Fund. The value of your investment in Buying Fund will go up and down with the prices of the securities in which Buying Fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity. The value of Buying Fund's shares is particularly vulnerable to factors affecting the health care industry, such as substantial government regulation. Government regulation may impact the demand for products and services offered by health care companies. Also, the products and services offered by health care companies may be subject to rapid obsolescence caused by scientific advances and technological innovations. Because Buying Fund focuses its investments in the health care industry, the value of your fund shares may rise and fall more than the value of shares of a fund that invests more broadly. The prices of foreign securities may be further affected by other factors, including: - Currency exchange rates -- The dollar value of Buying Fund's foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded. - Political and economic conditions -- The value of Buying Fund's foreign investments may be adversely affected by political and social instability in their home countries and by changes in economic or taxation policies in those countries. - Regulations -- Foreign companies generally are subject to less stringent regulations, including financial and accounting controls, than are U.S. companies. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. - Markets -- The securities markets of other countries are smaller than U.S. securities markets. As a result, many foreign securities may be less liquid and more volatile than U.S. securities. These factors may affect the prices of securities issued by foreign companies and governments located in developing countries more than those in countries with mature economics. For example, many developing countries have, in the past, experienced high rates of inflation or sharply devalued their currencies against the U.S. dollar, thereby causing the value of investments in companies located in those countries to decline. Transaction costs are often higher in developing countries and there may be delays in settlement procedures. IPOs of securities issued by unseasoned companies with little or no operating history are risky and their prices are highly volatile, but they can result in very large gains in their initial trading. There can be no assurance that 12 Buying Fund will have favorable IPO investment opportunities in the future. Attractive IPOs are often oversubscribed and may not be available to Buying Fund, or may be available in only very limited quantities. An investment in Buying Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. COMPARISON OF RISKS OF BUYING FUND AND YOUR FUND The risks associated with an investment in your Fund are similar to those described above for Buying Fund because the two funds have similar investment objectives and similar investment strategies. Your Fund is non-diversified, which means that it may invest in fewer issuers than if it were a diversified fund. Your Fund also may sell put and covered call options, and purchase put and call options, on securities, securities indices and foreign currencies. Your fund may also sell securities short and borrow money to purchase securities. If your Fund purchases a put or call option that expires without value, your Fund will have incurred an expense in the amount of the cost of the option. If your Fund sells a put option that is exercised, your Fund will have to purchase the security at a price greater than its market value. If your Fund sells a call option that is exercised, your Fund will have to sell the security at a price lower than its market value. If your Fund sells a security short and the security increases in value, your Fund will have to pay the higher price to purchase the security. Since there is no limit on how much the price of the security can increase, your Fund's exposure is unlimited. The more your Fund pays to purchase the security, the more it will lose on the transaction, and the more the price of your shares will be affected. Your Fund will also incur transaction costs to engage in this practice. If your Fund borrows money to buy securities (leverages) and the prices of those securities decrease, or if the cost of borrowing exceeds any increases in the prices of those securities, the net asset value of your Fund's shares will decrease faster than if your Fund had not used leverage. To repay borrowings, your Fund may have to sell securities at a time and at a price that is unfavorable. Interest on borrowings is an expense your Fund would not otherwise incur. After the Reorganization, you will no longer encounter these risks because Buying Fund is a diversified fund, does not sell put and covered call options, does not engage in short sales except where Buying Fund owns an equal amount of such securities and does not utilize leverage. INFORMATION ABOUT BUYING FUND DESCRIPTION OF BUYING FUND SHARES Shares of Buying Fund are redeemable at their net asset value (subject, in certain circumstances, to a contingent deferred sales charge) at the option of the shareholder or at the option of Buyer in certain circumstances. Each share of Buying Fund represents an equal proportionate interest in Buying Fund with each other share and is entitled to such dividends and distributions out of the income belonging to Buying Fund as are declared by the Board of Trustees of Buyer. Each share of Buying Fund generally has the same voting, dividend, liquidation and other rights; however, each class of shares of Buying Fund is subject to different sales loads, conversion features, exchange privileges and class-specific expenses. When issued, shares of Buying Fund are fully paid and nonassessable, have no preemptive or subscription rights, and are freely transferable. Other than the automatic conversion of Class B shares to Class A shares at the end of the month which is eight years after the date on which shares were purchased, there are no conversion rights. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE A discussion of the performance of Buying Fund taken from its semi-annual report to shareholders for the semi-annual period ended April 30, 2006 is set forth in Appendix III of this Proxy Statement/Prospectus. 13 FINANCIAL HIGHLIGHTS For more information about Buying Fund's financial performance, see the financial highlights for Buying Fund in Appendix IV attached to this Proxy Statement/Prospectus, which are more current than and should be read in lieu of the "Financial Highlights" section of the Buying Fund Prospectus that is attached to this Proxy Statement/Prospectus as Appendix II. ADDITIONAL INFORMATION ABOUT THE AGREEMENT TERMS OF THE REORGANIZATION The terms and conditions under which the Reorganization may be consummated are set forth in the Agreement. Significant provisions of the Agreement are summarized below; however, this summary is qualified in its entirety by reference to the Agreement, a copy of which is attached as Appendix I to this Proxy Statement/Prospectus. THE REORGANIZATION Consummation of the Reorganization (the "Closing") is expected to occur on or about April 23, 2007, at 8:00 a.m., Eastern Time (the "Effective Time") on the basis of values calculated as of the close of regular trading on the New York Stock Exchange on April 20, 2007 (the "Valuation Date"). At the Effective Time, all of the assets of your Fund will be delivered to Buyer's custodian for the account of Buying Fund in exchange for the assumption by Buying Fund of the liabilities of your Fund and delivery by Buyer directly to the holders of record as of the Effective Time of the issued and outstanding shares of each class of your Fund of a number of shares of each corresponding class of Buying Fund (including, if applicable, fractional shares rounded to the nearest thousandth), having an aggregate net asset value equal to the value of the net assets of your Fund so transferred, assigned and delivered, all determined and adjusted as provided in the Agreement. Upon delivery of such assets, Buying Fund will receive good and marketable title to such assets free and clear of all liens. In order to ensure continued qualification of your Fund for treatment as a "regulated investment company" for tax purposes and to eliminate any tax liability of your Fund arising by reason of undistributed investment company taxable income or net capital gain, Trust will declare on or prior to the Valuation Date to the shareholders of your Fund a dividend or dividends that, together with all previous such dividends, shall have the effect of distributing (a) all of your Fund's investment company taxable income (determined without regard to any deductions for dividends paid) for the taxable year ended August 31, 2006 and for the short taxable year beginning on September 1, 2006 and ending on the Closing and (b) all of your Fund's net capital gain recognized in its taxable year ended August 31, 2006 and in such short taxable year (after reduction for any capital loss carryover). Buying Fund will proceed with the Reorganization if the shareholders of your Fund approve the Agreement. Following receipt of the requisite shareholder vote and as soon as reasonably practicable after the Closing, Trust will redeem the outstanding shares of your Fund from shareholders in accordance with the applicable Agreement and Declaration of Trust, Bylaws and the Delaware Statutory Trust Act. BOARD CONSIDERATIONS AIM proposed that the Board consider the Reorganization at an in-person meeting of the Boards held on November 6-8, 2006, at which discussions of the Reorganization took place. After careful consideration and after weighing the pros and cons of the Reorganization, the Board of your Fund determined that the Reorganization is advisable and in the best interests of your Fund and will not dilute the interests of your Fund's shareholders. The Board approved the Agreement and the Reorganization based on the following anticipated benefits to shareholders: - The combined fund should have a greater market presence and may achieve greater operating efficiencies due to certain fixed costs, such as legal, accounting, shareholder services and trustee expenses, being spread out over the greater assets of the combined fund. The Board noted that your Fund's net assets have declined substantially as a result of net redemptions, which raises questions about your Fund's continued viability as a 14 stand-alone investment option, and, as a result, your Fund may not be able to achieve economies of scale unless it is combined with another fund. - The more efficient use of AIM's Global Health Care Team. The same management teams manage both funds. While Buying Fund does not utilize short selling or leverage as investment techniques, Buying Fund's investment process has provided better long-term performance to shareholders. - The total annual operating expenses of the combined fund are expected to be lower than your Fund's current total annual operating expenses. The Board received from AIM written materials that contained information concerning your Fund and Buying Fund, including comparative total return and fee and expense information, a comparison of investment objectives and strategies of your Fund and Buying Fund, and pro forma expense ratios for Buying Fund giving effect to the Reorganization. AIM also provided the Board with written materials concerning the structure of the proposed Reorganization and the Federal tax consequences of the Reorganization. The Board also received additional information from AIM with respect to the following: the availability of suitable merger candidates, current litigation, contingent assets and liabilities, the calculation of pro forma expense ratios and the effect on transfer agency fees. In addition, the Board requested a follow-up report after the consummation of the Reorganization that shows the actual cost and expenses of the Reorganization. In evaluating the Reorganization, the Board considered a number of factors, including: - The investment objective and principal investment strategies of your Fund and Buying Fund. - The comparative performance of your Fund and Buying Fund. - The comparative expenses of your Fund and Buying Fund and the pro forma expenses of Buying Fund after giving effect to the Reorganization. - The comparative sizes of your Fund and Buying Fund. - The consequences of the Reorganization for Federal income tax purposes, including the treatment of any unrealized capital gains and capital loss carryforwards available to offset future capital gains of your Fund and Buying Fund. - Any fees and expenses that will be borne directly or indirectly by your Fund or Buying Fund in connection with the Reorganization. - The projected financial impact to AIM and its affiliates of the Reorganization. AIM proposed the Reorganization as part of an effort to consolidate the AIM Funds' retail health industry product offerings. In considering the Reorganization, the Board noted that the funds have the same portfolio management teams, and utilize reasonably similar investment strategies. The Board did note that your Fund will lose the ability to sell securities short and to utilize leverage because Buying Fund is not permitted to utilize these investment techniques. As a result, the Board noted that your Fund will incur certain expenses in covering its short positions and raising cash to return its borrowings. The Board considered AIM's recommendation that Buying Fund be the surviving fund in the Reorganization primarily because the portfolio composition of the combined fund is expected to be more like Buying Fund's current portfolio composition as a result of the application of Buying Fund's investment process after the Reorganization. Consequently Buying Fund's performance track record more accurately reflects the results of the investment process that the combined fund will utilize after the Reorganization. The Board also considered the relative sizes of the two funds, noting that Buying Fund has a significantly larger asset base. As of June 30, 2006, Buying Fund had net assets of approximately $1.44 billion, compared to net assets for your Fund of approximately $145 million. The Board considered the performance of Buying Fund in relation to the performance of your Fund as of June 30, 2006 and September 30, 2006. The Board noted that Buying Fund has provided better long-term returns to 15 its shareholders than your Fund. The relative performance of Class A shares of your Fund and Class A shares of Buying Fund (without sales loads) was as follows: AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 2006
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION INCEPTION DATE -------- ---------- --------- --------------- -------------- Your Fund................. 12.82% 2.46% 6.06% 8.15% January 23, 1992 Buying Fund............... 7.38% 1.47% 10.33% 12.04% August 7, 1989
AVERAGE ANNUAL TOTAL RETURNS AS OF SEPTEMBER 30, 2006
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION INCEPTION DATE -------- ---------- --------- --------------- -------------- Your Fund................. 8.62% 4.56% 6.59% 8.34% January 23, 1992 Buying Fund............... 4.59% 3.80% 10.32% 12.20% August 7, 1989
For more complete performance information, including calendar year returns and benchmark comparisons, see "Comparison of Performance." The Board also considered the operating expenses the funds incur. As a percentage of average daily net assets, the total annual operating expenses of Buying Fund, before giving effect to the Reorganization, are lower than the total annual operating expenses of your Fund. The Board noted that your Fund utilizes a performance-based advisory fee, as more fully described above under "Summary -- Comparison of Fees and Expenses -- Advisory Fees (Your Fund)," and that Buying Fund does not utilize a performance-based fee. The Board considered AIM's proposal that the investment advisory fee schedule applicable to Buying Fund apply to the combined fund. Board noted that where your Fund's performance equals or exceeds the performance of the Index, your Fund's advisory fee would be higher than Buying Fund's, assuming that there are no changes in the average daily net assets of your Fund and its Class A shares over the relevant performance periods. However, the Board also noted that in circumstances where your Fund underperforms the Index, your Fund's performance-based fee could be lower than Buying Fund's advisory fee depending on changes in the average daily net assets of your Fund and its Class A shares over the relevant performance periods. As a result, shareholders of your Fund must approve the Reorganization by a "1940 Act Majority," which is explained more fully below under "Vote Necessary to Approve the Agreement." Based on AIM's recommendation that the Buying Fund be the surviving fund in the Reorganization, as described above, the Board noted that it would be appropriate for the combined fund to utilize the investment advisory fee schedule of Buying Fund. Buying Fund's advisory fee could, under the circumstances described above, be lower than that of your Fund, or under different circumstances, higher than that of your Fund. AIM reported to the Board that, based upon historical data at a specified date and related projected data, on a pro forma basis, the total annual operating expense ratios of Buying Fund, at combined asset levels, are expected to be lower than those of your Fund for Class A, Class B and Class C shares. The Board considered the fact that your Fund's dividend expenses attributable to securities sold short and interest expense are types of expenses not currently incurred by Buying Fund and not expected to be incurred by the combined fund. The Board noted that, excluding dividend expenses attributable to securities sold short and interest expense, based upon historical data at a specified date and related projected data, on a pro forma basis, the total annual operating expense ratios of Buying Fund, at combined asset levels, are expected to be higher than those of your Fund for Class A, Class B and Class C shares, respectively. The Board noted that as of October 17, 2006, approximately 5.46% of your Fund's net assets were invested in illiquid private equity securities. Based on the combined assets of your Fund and Buying Fund as of that date, after giving effect to the Reorganization approximately 0.46% of the combined fund's net assets would be invested in private equity securities. Unless market quotations are available, AIM prices your Fund's private equity securities at fair value in good faith in accordance with its procedures for valuing securities. The NAV of Buying Fund is calculated each day for purposes of processing purchases and redemptions; this NAV calculation includes fair value prices for certain fund securities, including most of the private equity securities. 16 The Board also considered, based upon historical data at a specified date, the effect of the Reorganization on the anticipated tax benefits to shareholders from the utilization of the capital loss carryforwards of your Fund and of Buying Fund as offsets to future realized capital gains. As of June 30, 2006, your Fund was estimated to have no capital loss carryforward. However, your Fund had year-to-date unrealized net capital loss of approximately $11 million. Buying Fund had year-to-date unrealized net capital gain of approximately $103 million. The Board also noted that the treatment of these tax attributes can be affected by a variety of different factors occurring after the date of the data presented to the Board (both before and after the Closing). As a result, the outcome of these matters is difficult to predict. The total expenses to be incurred by your Fund in connection with the Reorganization are expected to be approximately $143,000. AIM proposed that these costs and expenses be paid by your Fund in light of the reduction in total operating expenses that will be paid by your Fund's shareholders after the Reorganization. Buying Fund is expected to incur approximately $30,000 of expenses in connection with the Reorganization and will bear all of those costs and expenses. To determine which party would bear the expenses to be incurred in connection with the Reorganization, AIM estimated the amount of mailing, printing, solicitation, and legal and accounting fees to be incurred by both Buying Fund and your Fund. AIM then performed a qualitative analysis that took into account, among other things, the expected benefits to be enjoyed by your Fund's shareholders through reduced expenses on a pro forma basis, the amount of time estimated for your Fund's shareholders to recoup expenses incurred in the Reorganization in light of such expected benefits, the effect incurring such expenses would have on the net asset value of your Fund, whether there was a financial impact to AIM's profit and loss (positive or negative) and the relative performance of your Fund and Buying Fund. The Board also noted that under the terms of your Fund's current advisory agreement, AIM may not receive advisory fees on your Fund's assets that are invested in affiliated money market funds. After the Reorganization, this limitation will no longer apply and AIM will be able to receive advisory fees on any of your Fund's assets transferred to Buying Fund that are invested in affiliated money market funds, in accordance with AIM's affiliated money market fund procedures. The Board also noted that no sales charges or other charges would be imposed on any of the shares of Buying Fund issued to the shareholders of your Fund in connection with the Reorganization. Based on the foregoing and the information presented at the Board meeting discussed above, the Board determined that the Reorganization is advisable and in the best interests of your Fund and will not dilute the interests of your Fund's shareholders. Therefore, the Board recommended the approval of the Agreement by the shareholders of your Fund at the Special Meeting. OTHER TERMS If any amendment is made to the Agreement following the mailing of this Proxy Statement/Prospectus and prior to the Closing that would have a material adverse effect on shareholders, such change will be submitted to the affected shareholders for their approval. However, if an amendment is made that would not have a material adverse effect on shareholders, the Agreement may be amended without shareholder approval by mutual agreement of the parties. Trust and Buyer have made representations and warranties in the Agreement that are customary in matters such as the Reorganization. The obligations of Trust and Buyer pursuant to the Agreement are subject to various conditions, including the following mutual conditions: - the assets of your Fund to be acquired by Buying Fund shall constitute at least 90% of the fair market value of the net assets and at least 70% of the fair market value of the gross assets held by your Fund immediately prior to the Reorganization; - Buyer's Registration Statement on Form N-14 under the Securities Act of 1933 (the "1933 Act") shall have been filed with the SEC and such Registration Statement shall have become effective, and no stop-order 17 suspending the effectiveness of the Registration Statement shall have been issued, and no proceeding for that purpose shall have been initiated or threatened by the SEC (and not withdrawn or terminated); - the shareholders of your Fund shall have approved the Agreement; and - Trust and Buyer shall have received an opinion from Ballard Spahr Andrews & Ingersoll, LLP that the consummation of the transactions contemplated by the Agreement will not result in the recognition of gain or loss for Federal income tax purposes for your Fund, Buying Fund or their shareholders. The Board of Trustees of Trust and the Board of Trustees of Buyer may waive without shareholder approval any default by Trust or Buyer or any failure by Trust or Buyer to satisfy any of the above conditions as long as such a waiver is mutual and will not have a material adverse effect on the benefits intended under the Agreement for the shareholders of your Fund. The Agreement may be terminated and the Reorganization may be abandoned at any time by mutual agreement of the parties, or by either party if the shareholders of your Fund do not approve the Agreement or if the Closing does not occur on or before September 30, 2007. FEDERAL INCOME TAX CONSEQUENCES The following is a general summary of the material Federal income tax consequences of the Reorganization and is based upon the current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the existing U.S. Treasury regulations thereunder, current administrative rulings of the Internal Revenue Service ("IRS") and published judicial decisions, all of which are subject to change. The principal Federal income tax consequences that are expected to result from the Reorganization, under currently applicable law, are as follows: - the Reorganization will qualify as a "reorganization" within the meaning of Section 368(a) of the Code; - no gain or loss will be recognized by your Fund upon the transfer of its assets to Buying Fund solely in exchange for shares of Buying Fund and Buying Fund's assumption of the liabilities of your Fund or on the distribution of those shares to your Fund's shareholders; - no gain or loss will be recognized by Buying Fund on its receipt of assets of your Fund in exchange for shares of Buying Fund issued directly to your Fund's shareholders; - no gain or loss will be recognized by any shareholder of your Fund upon the exchange of shares of your Fund for shares of Buying Fund; - the tax basis of the shares of Buying Fund to be received by a shareholder of your Fund will be the same as the shareholder's tax basis of the shares of your Fund surrendered in exchange therefor; - the holding period of the shares of Buying Fund to be received by a shareholder of your Fund will include the period for which such shareholder held the shares of your Fund exchanged therefor, provided that such shares of your Fund are capital assets in the hands of such shareholder as of the Closing; and - Buying Fund will thereafter succeed to and take into account any capital loss carryover and certain other tax attributes of your Fund, subject to all relevant conditions and limitations on the use of such tax benefits. Neither Trust nor Buyer has requested or will request an advance ruling from the IRS as to the Federal tax consequences of the Reorganization. As a condition to Closing, Ballard Spahr Andrews & Ingersoll, LLP will render a favorable opinion to Trust and Buyer as to the foregoing Federal income tax consequences of the Reorganization, which opinion will be conditioned upon, among other things, the accuracy, as of the Effective Time, of certain representations of Trust and Buyer upon which Ballard Spahr Andrews & Ingersoll, LLP will rely in rendering its opinion. The conclusions reached in that opinion could be jeopardized if the representations of Trust or Buyer are incorrect in any material respect. A copy of the opinion will be filed with the Securities and Exchange Commission. and will be available for public inspection. See "Information Filed with the Securities and Exchange Commission." THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF ANY SHAREHOLDER OF YOUR FUND. YOUR FUND'S SHAREHOLDERS 18 ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF THE REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS. ACCOUNTING TREATMENT The Reorganization will be accounted for on a tax-free combined basis. Accordingly, the book cost basis to Buying Fund of the assets of your Fund will be the same as the book cost basis of such assets to your Fund. RIGHTS OF SHAREHOLDERS Trust and Buyer are each Delaware statutory trusts. Generally, there are no material differences between the rights of shareholders under the Agreement and Declaration of Trust and the rights of shareholders under the Buyer's Agreement and Declaration of Trust. CAPITALIZATION The following table sets forth, as of April 30, 2006 (i) the capitalization of each class of shares of your Fund; (ii) the capitalization of each class of shares of Buying Fund, and (iii) the pro forma capitalization of each class of shares of Buying Fund as adjusted to give effect to the transactions contemplated by the Agreement.
PRO FORMA YOUR FUND BUYING FUND PRO FORMA BUYING FUND CLASS A SHARES CLASS A SHARES ADJUSTMENTS CLASS A SHARES -------------- -------------- ----------- -------------- Net Assets...................... $153,450,494 $566,996,553 $ (149,293)(1) $720,297,754 Shares Outstanding.............. 8,571,701 18,575,660 (3,548,925)(2) 23,598,436 Net Asset Value Per Share....... $ 17.90 $ 30.52 $ 30.52
PRO FORMA YOUR FUND BUYING FUND PRO FORMA BUYING FUND CLASS B SHARES CLASS B SHARES ADJUSTMENTS CLASS B SHARES -------------- -------------- ----------- -------------- Net Assets........................ $3,145,023 $149,457,427 $ (5,722)(1) $152,596,728 Shares Outstanding................ 183,482 5,437,503 (69,184)(2) 5,551,801 Net Asset Value Per Share......... $ 17.14 $ 27.49 $ 27.49
PRO FORMA YOUR FUND BUYING FUND PRO FORMA BUYING FUND CLASS C SHARES CLASS C SHARES ADJUSTMENTS CLASS C SHARES -------------- -------------- ----------- -------------- Net Assets........................ $2,024,887 $46,315,136 $ (2,721)(1) $48,337,302 Shares Outstanding................ 122,108 1,683,895 (48,554)(2) 1,757,449 Net Asset Value Per Share......... $ 16.58 $ 27.50 $ 27.50
-------- (1) Your Fund will incur approximately $143,000 of expenses in connection with the Reorganization and your Fund will pay 100% of the expenses, therefore Net Assets have been adjusted for expenses expected to be incurred in connection with the Reorganization. The Buying Fund will incur approximately $30,000 of expenses in connection with the Reorganization of which $14,736 was allocated to Buying Fund Classes A, B and C shown above based on relative net assets. Net Assets Pro Forma Adjustments include this amount. (2) Shares Outstanding have been adjusted for the accumulated change in the number of shares of your Fund's shareholder accounts based on the relative value of your Fund's and Buying Fund's Net asset Value Per Share assuming the Reorganization would have taken place on October 31, 2006. LEGAL MATTERS Certain legal matters concerning the tax consequences of the Reorganization will be passed upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, PA 19103-7599. 19 ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND For more information with respect to Buying Fund concerning the following topics, please refer to the following sections of the Buying Fund Prospectus, which has been made a part of this Proxy Statement/ Prospectus by reference and which is attached to this Proxy Statement/Prospectus as Appendix II: (i) see "Performance Information" for more information about the performance of Buying Fund; (ii) see "Fund Management" for more information about the management of Buying Fund; (iii) see "Other Information" for more information about Buying Fund's policy with respect to dividends and distributions; and (iv) see "Other Information" for more information about the pricing, purchase, redemption and repurchase of shares of Buying Fund, tax consequences to shareholders of various transactions in shares of Buying Fund, distribution arrangements and the multiple class structure of Buying Fund. For more information with respect to your Fund concerning the following topics, please refer to the following sections of the Selling Fund Prospectus, which have been made a part of this Proxy Statement/ Prospectus by reference: (i) see "Fund Performance" for more information about the performance of your Fund; (ii) see "Fund Management" and "Portfolio Managers" for more information about the management of your Fund; (iii) see "Shareholder Information" for more information about the pricing of shares of your Fund; (iv) see "Taxes" for more information about tax consequences to shareholders of various transactions in shares of your Fund; and (v) see "Dividends And Capital Gain Distributions" for more information about your Fund's policy with respect to dividends and distributions. INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION This Proxy Statement/Prospectus and the related Statement of Additional Information do not contain all the information set forth in the registration statements and the exhibits relating thereto and annual and semiannual reports which Trust and Buyer have filed with the SEC pursuant to the requirements of the 1933 Act and the 1940 Act, to which reference is hereby made. The SEC file number of Trust's registration statement containing the Selling Fund Prospectuses and related Statement of Additional Information is Registration No. 811-09913. Such Selling Fund Prospectuses are incorporated herein by reference. The SEC file number for Buyer's registration statement containing the Buying Fund Prospectus and related Statement of Additional Information is Registration No. 811-05426. Such Buying Fund Prospectus is incorporated herein by reference. Trust and Buyer are subject to the informational requirements of the Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith files reports and other information with the SEC. Reports, proxy material, registration statements and other information filed by Trust (including the Registration Statement of Buyer relating to Buying Fund on Form N-14 of which this Proxy Statement/Prospectus is a part) may be inspected without charge and copied at the public reference facilities maintained by the SEC at Room 1580, 100 F Street, NE, Washington, DC 20549, and at the following regional office of the SEC: 1801 California Street, Suite 4800, Denver, Colorado 80202. Copies of such material may also be obtained from the Public Reference Section of the SEC at 450 Fifth Street, NW, Washington, DC 20549, at the prescribed rates. The SEC maintains a website at www.sec.gov that contains information regarding Trust and other registrants that file electronically with the SEC. INFORMATION ABOUT THE SPECIAL MEETING AND VOTING PROXY STATEMENT/PROSPECTUS We are sending you this Proxy Statement/Prospectus and the enclosed proxy card because the Board is soliciting your proxy to vote at the Special Meeting and at any adjournments of the Special Meeting. This Proxy Statement/Prospectus gives you information about the business to be conducted at the Special Meeting. However, you do not need to attend the Special Meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card or vote by telephone or through a website established for that purpose. 20 Trust intends to mail this Proxy Statement/Prospectus, the enclosed Notice of Special Meeting of Shareholders and the enclosed proxy card on or about January 31, 2007 to all shareholders entitled to vote. Shareholders of record of your Fund as of the close of business on January 22, 2007 (the "Record Date") are entitled to vote at the Special Meeting. The number of shares outstanding of each class of shares of your Fund on the Record Date can be found at Exhibit D. Each share is entitled to one vote for each full share held, and a fractional vote for a fractional share held. TIME AND PLACE OF SPECIAL MEETING We are holding the Special Meeting at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173 on March 15, 2007, at 3:00 p.m., Central Time. VOTING IN PERSON If you do attend the Special Meeting and wish to vote in person, we will provide you with a ballot prior to the vote. However, if your shares are held in the name of your broker, bank or other nominee, you must bring a letter from the nominee indicating that you are the beneficial owner of the shares on the Record Date and authorizing you to vote. Please call Trust at (800) 952-3502 if you plan to attend the Special Meeting. VOTING BY PROXY Whether you plan to attend the Special Meeting or not, we urge you to complete, sign and date the enclosed proxy card and to return it promptly in the envelope provided. Returning the proxy card will not affect your right to attend the Special Meeting and vote. If you properly fill in and sign your proxy card and send it to us in time to vote at the Special Meeting, your "proxy" (the individual named on your proxy card) will vote your shares as you have directed. If you sign your proxy card but do not make specific choices, your proxy will vote your shares FOR the proposal to approve the Agreement, as recommended by the Board, and in accordance with management's recommendation on other matters. Your proxy will have the authority to vote and act on your behalf at any adjournment of the Special Meeting. If you authorize a proxy, you may revoke it at any time before it is exercised by sending in another proxy card with a later date or by notifying the Secretary of Trust in writing to the address of Trust set forth on the cover page of this Proxy Statement/Prospectus before the Special Meeting that you have revoked your proxy. In addition, although merely attending the Special Meeting will not revoke your proxy, if you are present at the Special Meeting you may withdraw your proxy and vote in person. Shareholders may also transact any other business not currently contemplated that may properly come before the Special Meeting in the discretion of the proxies or their substitutes. VOTING BY TELEPHONE OR THE INTERNET You may vote your shares by telephone or through a website established for that purpose by following the instructions that appear on the proxy card accompanying this Proxy Statement/Prospectus. QUORUM REQUIREMENT AND ADJOURNMENT A quorum of shareholders is necessary to hold a valid meeting. A quorum will exist if shareholders entitled to vote one-third of the issued and outstanding shares of your Fund on the Record Date are present at the Special Meeting in person or by proxy. Under the rules applicable to broker-dealers, if your broker holds your shares in its name, the broker will not be entitled to vote your shares if it has not received instructions from you. A "broker non-vote" occurs when a broker has not received voting instructions from a shareholder and is barred from voting the shares without shareholder instructions because the proposal is non- routine. Abstentions and broker non-votes will count as shares present at the Special Meeting for purposes of establishing a quorum. 21 If a quorum is not present at the Special Meeting or a quorum is present but sufficient votes to approve the Agreement are not received, the persons named as proxies may propose one or more adjournments of the Special Meeting to permit further solicitation of proxies. Any such adjournment will require the affirmative vote of a majority of the votes cast at the Special Meeting in person or by proxy. The persons named as proxies will vote those proxies that they are entitled to vote FOR the Reorganization in favor of such an adjournment and will vote those proxies required to be voted AGAINST the Reorganization against such adjournment. A shareholder vote may be taken on the Reorganization prior to any such adjournment if sufficient votes have been received and it is otherwise appropriate. VOTE NECESSARY TO APPROVE THE AGREEMENT Approval of the Agreement and, in connection therewith, the sale of all of your Fund's assets and the termination of your Fund as a designated series of the Trust, requires a 1940 Act Majority, which is the lesser of (a) the affirmative vote of 67% or more of the voting securities of your Fund present or represented by proxy at the Special Meeting, if the holders of more than 50% of the outstanding voting securities of your Fund are present or represented by proxy, or (b) the affirmative vote of more than 50% of the outstanding voting securities of your Fund. Abstentions and broker non-votes are counted as present but are not considered votes cast at the Special Meeting. As a result, they have the same effect as a vote against the Agreement because approval of the Agreement requires the affirmative vote of a percentage of the voting securities present or represented by proxy or a percentage of the outstanding voting securities. PROXY SOLICITATION Trust will solicit proxies for the Special Meetings. Trust expects to solicit proxies principally by mail, but Trust may also solicit proxies by telephone, facsimile or personal interview. Trust's officers will not receive any additional or special compensation for any such solicitation. Your Fund will bear 100% of its costs and expenses incurred in connection with the reorganization, including solicitation costs. Solicitation costs are expected to be approximately $16,000. OTHER MATTERS Management does not know of any matters to be presented at the Special Meeting other than those discussed in this Proxy Statement/Prospectus. If any other matters properly come before the Special Meeting, the shares represented by proxies will be voted with respect thereto in accordance with management's recommendation. OWNERSHIP OF SHARES A list of the name, address and percent ownership of each person who, as of January 22, 2007, to the knowledge of Trust owned 5% or more of any class of the outstanding shares of your Fund can be found at Exhibit C. A list of the name, address and percent ownership of each person who, as of January 22, 2007, to the knowledge of Buyer owned 5% or more of any class of the outstanding shares of Buying Fund can be found at Exhibit D. SECURITY OWNERSHIP OF MANAGEMENT AND TRUSTEES Information regarding the ownership of each class of each your Fund's shares and Buying Fund's shares by trustees and current executive officers of Trust can be found in Exhibits C and D, respectively. 22 EXHIBIT A CLASSES OF SHARES OF YOUR FUND AND CORRESPONDING CLASSES OF SHARES OF BUYING FUND
CORRESPONDING CLASSES OF CLASSES OF SHARES OF YOUR FUND SHARES OF BUYING FUND ------------------------------ ------------------------ Class A Class A Class B Class B Class C Class C
A-1 EXHIBIT B Shares Outstanding of Each Class of Your Fund on Record Date As of January 22, 2007, there were the following number of shares outstanding of each class of your Fund: YOUR FUND --------- Class A Shares: Class B Shares: Class C Shares: B-1 EXHIBIT C OWNERSHIP OF SHARES OF YOUR FUND SIGNIFICANT HOLDERS Listed below is the name, address and percent ownership of each person who, as of January 22, 2007, to the best knowledge of Trust owned 5% or more of any class of the outstanding shares of your Fund. A shareholder who owns beneficially 25% or more of the outstanding securities of your Fund is presumed to "control" your Fund as defined in the 1940 Act. Such control may affect the voting rights of other shareholders.
CLASS OF NUMBER OF PERCENT OWNED NAME AND ADDRESS SHARES SHARES OWNED OF RECORD* ---------------- -------- ------------ -------------
-------- * Trust has no knowledge of whether all or any portion of the shares owned of record are also owned beneficially. C-1 EXHIBIT D OWNERSHIP OF SHARES OF BUYING FUND SIGNIFICANT HOLDERS Listed below is the name, address and percent ownership of each person who, as of January 22, 2007, to the best knowledge of Buyer owned 5% or more of any class of the outstanding shares of Buying Fund. A shareholder who owns beneficially 25% or more of the outstanding securities of Buying Fund is presumed to "control" Buying Fund as defined in the 1940 Act. Such control may affect the voting rights of other shareholders.
CLASS OF NUMBER OF PERCENT OWNED NAME AND ADDRESS SHARES SHARES OWNED OF RECORD* ---------------- -------- ------------ -------------
-------- * Buyer has no knowledge of whether all or any portion of the shares owned of record are also owned beneficially. SECURITY OWNERSHIP OF MANAGEMENT AND TRUSTEES To the best of the knowledge of Trust, the ownership of shares of each Selling Fund by executive officers and trustees of Trust as a group constituted less than 1% of the outstanding shares of each class of each Selling Fund as of January 22, 2007. D-1 APPENDIX I AGREEMENT AND PLAN OF REORGANIZATION FOR AIM ADVANTAGE HEALTH SCIENCES FUND, A SEPARATE PORTFOLIO OF AIM COUNSELOR SERIES TRUST NOVEMBER 8, 2006 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINITIONS........................................................ 1 SECTION 1.1. Definitions............................................... 1 ARTICLE 2 TRANSFER OF ASSETS................................................. 4 SECTION 2.1. Reorganization of Selling Fund............................ 4 SECTION 2.2. Computation of Net Asset Value............................ 4 SECTION 2.3. Valuation Date............................................ 4 SECTION 2.4. Delivery.................................................. 4 SECTION 2.5. Termination of Series and Redemption of Selling Fund 5 Shares.................................................... SECTION 2.6. Issuance of Buying Fund Shares............................ 5 SECTION 2.7. Investment Securities..................................... 5 SECTION 2.8. Liabilities............................................... 5 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER........................... 5 SECTION 3.1. Organization; Authority................................... 5 SECTION 3.2. Registration and Regulation of Seller..................... 5 SECTION 3.3. Financial Statements...................................... 6 SECTION 3.4. No Material Adverse Changes; Contingent Liabilities....... 6 SECTION 3.5. Selling Fund Shares; Business Operations.................. 6 SECTION 3.6. Accountants............................................... 6 SECTION 3.7. Binding Obligation........................................ 7 SECTION 3.8. No Breaches or Defaults................................... 7 SECTION 3.9. Authorizations or Consents................................ 7 SECTION 3.10. Permits................................................... 7 SECTION 3.11. No Actions, Suits or Proceedings.......................... 7 SECTION 3.12. Contracts................................................. 8 SECTION 3.13. Properties and Assets..................................... 8 SECTION 3.14. Taxes..................................................... 8 SECTION 3.15. Benefit and Employment Obligations........................ 8 SECTION 3.16. Brokers................................................... 8 SECTION 3.17. Voting Requirements....................................... 8 SECTION 3.18. State Takeover Statutes................................... 8 SECTION 3.19. Books and Records......................................... 9 SECTION 3.20. Prospectus and Statement of Additional Information........ 9 SECTION 3.21. No Distribution........................................... 9 SECTION 3.22. Liabilities of Selling Fund............................... 9 SECTION 3.23. Value of Shares........................................... 9 SECTION 3.24. Intercompany Indebtedness; Consideration.................. 9 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER............................ 9 SECTION 4.1. Organization; Authority................................... 9 SECTION 4.2. Registration and Regulation of Buyer...................... 9 SECTION 4.3. Financial Statements...................................... 9 SECTION 4.4. No Material Adverse Changes; Contingent Liabilities....... 10 SECTION 4.5. Registration of Buying Fund Shares........................ 10 SECTION 4.6. Accountants............................................... 10 SECTION 4.7. Binding Obligation........................................ 10 SECTION 4.8. No Breaches or Defaults................................... 10
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PAGE ---- SECTION 4.9. Authorizations or Consents................................ 11 SECTION 4.10. Permits................................................... 11 SECTION 4.11. No Actions, Suits or Proceedings.......................... 11 SECTION 4.12. Taxes..................................................... 11 SECTION 4.13. Brokers................................................... 12 SECTION 4.14. Representations Concerning the Reorganization............. 12 SECTION 4.15. Prospectus and Statement of Additional Information........ 12 SECTION 4.16. Value of Shares........................................... 12 SECTION 4.17. Intercompany Indebtedness; Consideration.................. 12 ARTICLE 5 COVENANTS.......................................................... 13 SECTION 5.1. Conduct of Business....................................... 13 SECTION 5.2. Expenses.................................................. 13 SECTION 5.3. Further Assurances........................................ 13 SECTION 5.4. Notice of Events.......................................... 13 SECTION 5.5. Consents, Approvals and Filings........................... 13 SECTION 5.6. Submission of Agreement to Shareholders................... 14 ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION......................... 14 SECTION 6.1. Conditions Precedent of Buyer............................. 14 SECTION 6.2. Mutual Conditions......................................... 14 SECTION 6.3. Conditions Precedent of Seller............................ 15 ARTICLE 7 TERMINATION OF AGREEMENT........................................... 15 SECTION 7.1. Termination............................................... 15 SECTION 7.2. Survival After Termination................................ 16 ARTICLE 8 MISCELLANEOUS...................................................... 16 SECTION 8.1. Survival of Representations, Warranties and Covenants..... 16 SECTION 8.2. Governing Law............................................. 16 SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment......... 16 SECTION 8.4. Obligations of Buyer and Seller........................... 16 SECTION 8.5. Amendments................................................ 17 SECTION 8.6. Enforcement............................................... 17 SECTION 8.7. Interpretation............................................ 17 SECTION 8.8. Counterparts.............................................. 17 SECTION 8.9. Entire Agreement; Exhibits and Schedules.................. 17 SECTION 8.10. Notices................................................... 17 SECTION 8.11. Representations by Investment Adviser..................... 18 SECTION 8.12. Successors and Assigns; Assignment........................ 18 Excluded Liabilities of Selling Fund EXHIBIT A SCHEDULE 2.1 Classes of Shares of Selling Fund and Corresponding Classes of Shares of Buying Fund SCHEDULE 3.4 Certain Contingent Liabilities of Selling Fund SCHEDULE 4.4 Certain Contingent Liabilities of Buying Fund SCHEDULE 4.5(a) Classes of Shares of Buying Fund SCHEDULE 4.14(b) Permitted Reorganizations of Funds SCHEDULE 6.2(f) Tax Opinions
ii AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION, dated as of November 8, 2006 (this "Agreement"), by and among AIM Counselor Series Trust, a Delaware statutory trust ("Seller"), acting on behalf of AIM Advantage Health Sciences Fund ("Selling Fund"), a separate series of Seller, AIM Investment Funds, a Delaware statutory trust ("Buyer"), acting on behalf of AIM Global Health Care Fund ("Buying Fund"), a separate series of Buyer, and A I M Advisors, Inc., a Delaware corporation. WITNESSETH WHEREAS, Seller is a management investment company registered with the SEC (as defined below) under the Investment Company Act (as defined below) that offers separate series of its shares representing interests in its investment portfolios, including Selling Fund, for sale to the public; and WHEREAS, Buyer is a management investment company registered with the SEC under the Investment Company Act that offers separate series of its shares representing interests in investment portfolios, including Buying Fund, for sale to the public; and WHEREAS, Seller desires to provide for the reorganization of Selling Fund through the transfer of all of its assets to Buying Fund in exchange for the assumption by Buying Fund of all of the Liabilities (as defined below) of Selling Fund and the issuance by Buyer of shares of Buying Fund in the manner set forth in this Agreement; and WHEREAS, the Investment Adviser (as defined below) serves as the investment advisor to both Buying Fund and Selling Fund and is making certain representations, warranties and agreements set forth in this Agreement; WHEREAS, this Agreement is intended to be and is adopted by the parties hereto as a Plan of Reorganization within the meaning of the regulations under Section 368(a) of the Code (as defined below). NOW, THEREFORE, in consideration of the foregoing premises and the agreements and undertakings contained in this Agreement, Seller and Buyer agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.1. Definitions. For all purposes in this Agreement, the following terms shall have the respective meanings set forth in this Section 1.1 (such definitions to be equally applicable to both the singular and plural forms of the terms herein defined): "Advisers Act" means the Investment Advisers Act of 1940, as amended, and all rules and regulations of the SEC adopted pursuant thereto. "Affiliated Person" means an affiliated person as defined in Section 2(a)(3) of the Investment Company Act. "Agreement" means this Agreement and Plan of Reorganization, together with all exhibits and schedules attached hereto and all amendments hereto and thereof. "Applicable Law" means the applicable laws of the state of Delaware and shall include the Delaware Statutory Trust Act. "Benefit Plan" means any material "employee benefit plan" (as defined in Section 3(3) of ERISA) and any material bonus, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, vacation, retirement, profit sharing, welfare plans or other plan, arrangement or understanding maintained or contributed to by Seller on behalf of Selling Fund, or otherwise providing benefits to any current or former employee, officer or director/trustee of Seller. "Buyer" means AIM Investment Funds, a Delaware statutory trust. "Buyer Counsel" means Ballard Spahr Andrews & Ingersoll, LLP. 1 "Buyer Custodian" means State Street Bank and Trust Company acting in its capacity as custodian for the assets of Buying Fund. "Buyer Registration Statement" means the registration statement on Form N-1A of Buyer, as amended, 1940 Act Registration No. 811-01540. "Buying Fund" means AIM Global Health Care Fund, a separate series of Buyer. "Buying Fund Auditors" means PricewaterhouseCoopers LLP. "Buying Fund Financial Statements" means the audited financial statements of Buying Fund for the fiscal year ended October 31, 2006. "Buying Fund Shares" means shares of each class of Buying Fund issued pursuant to Section 2.6 of this Agreement. "Closing" means the transfer of the assets of Selling Fund to Buying Fund, the assumption of all of Selling Fund's Liabilities by Buying Fund and the issuance of Buying Fund Shares directly to Selling Fund Shareholders as described in Section 2.1 of this Agreement. "Closing Date" means March 16, 2007, or such other date as the parties may mutually agree upon. "Code" means the Internal Revenue Code of 1986, as amended, and all rules and regulations adopted pursuant thereto. "Corresponding" means, when used with respect to a class of shares of Selling Fund or Buying Fund, the classes of their shares set forth opposite each other on Schedule 2.1. "Effective Time" means 8:00 a.m. Eastern Time on the Closing Date. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and all rules or regulations adopted pursuant thereto. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and all rules and regulations adopted pursuant thereto. "Governing Documents" means the organic documents which govern the business and operations of each of Buyer and Seller and shall include, as applicable, Amended and Restated Agreement and Declaration of Trust, Amended and Restated Bylaws and Bylaws. "Governmental Authority" means any foreign, United States or state government, government agency, department, board, commission (including the SEC) or instrumentality, and any court, tribunal or arbitrator of competent jurisdiction, and any governmental or non-governmental self-regulatory organization, agency or authority (including the NASD Regulation, Inc., the Commodity Futures Trading Commission, the National Futures Association, the Investment Management Regulatory Organization Limited and the Office of Fair Trading). "Investment Adviser" means A I M Advisors, Inc. "Investment Company Act" means the Investment Company Act of 1940, as amended, and all rules and regulations adopted pursuant thereto. "Liabilities" means all of the liabilities of any kind of Selling Fund, including without limitation all liabilities included in the calculation of the net asset value per share of each class of Selling Fund Shares on the Closing Date, but not including the excluded liabilities set forth on Exhibit A. "Lien" means any pledge, lien, security interest, charge, claim or encumbrance of any kind. "Material Adverse Effect" means an effect that would cause a change in the condition (financial or otherwise), properties, assets or prospects of an entity having an adverse monetary effect in an amount equal to or greater than $50,000. "NYSE" means the New York Stock Exchange. 2 "Permits" shall have the meaning set forth in Section 3.10 of this Agreement. "Person" means an individual or a corporation, partnership, joint venture, association, trust, unincorporated organization or other entity. "Reorganization" means the acquisition of the assets of Selling Fund by Buying Fund in consideration of the assumption by Buying Fund of all of the Liabilities of Selling Fund and the issuance by Buyer of Buying Fund Shares directly to Selling Fund Shareholders as described in this Agreement, and the termination of Selling Fund's status as a designated series of shares of Seller. "Required Shareholder Vote" means, if a quorum is present, a 1940 Act Majority, which is the lesser of (a) the affirmative vote of 67% or more of the voting securities of Selling Fund present or represented by proxy at the Special Meeting, if the holders of more than 50% of the outstanding voting securities of such Selling Fund are present or represented by proxy, or (b) the affirmative vote of more than 50% of the outstanding voting securities of such Selling Fund. "Return" means any return, report or form or any attachment thereto required to be filed with any taxing authority. "SEC" means the United States Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and all rules and regulations adopted pursuant thereto. "Seller" means AIM Counselor Series Trust, a Delaware statutory trust. "Seller Custodian" means State Street Bank and Trust acting in its capacity as custodian for the assets of Selling Fund. "Seller Registration Statement" means the registration statement on Form N-1A of Seller, as amended, 1940 Act Registration No. 811-05426. "Selling Fund" means AIM Advantage Health Sciences Fund, a separate series of Seller. "Selling Fund Auditors" means PricewaterhouseCoopers LLP. "Selling Fund Financial Statements" means the audited financial statements of Selling Fund for the fiscal year ended August 31, 2006. "Selling Fund Shareholders" means the holders of record of the outstanding shares of each class of Selling Fund as of the close of regular trading on the NYSE on the Valuation Date. "Selling Fund Shares" means the outstanding shares of each class of Selling Fund. "Shareholders Meeting" means a meeting of the shareholders of Selling Fund convened in accordance with Applicable Law and the Governing Documents of Seller to consider and vote upon the approval of this Agreement. "Tax" means any tax or similar governmental charge, impost or levy (including income taxes (including alternative minimum tax and estimated tax), franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes, property taxes, withholding taxes, payroll taxes, minimum taxes, or windfall profit taxes), together with any related penalties, fines, additions to tax or interest, imposed by the United States or any state, county, local or foreign government or subdivision or agency thereof. "Termination Date" means September 30, 2007, or such later date as the parties may mutually agree upon. "Treasury Regulations" means the Federal income tax regulations adopted pursuant to the Code. "Trustee Benefit Plans" means the Deferred Compensation Agreement for the Directors/Trustees of the AIM Funds, the AIM Funds Retirement Plan for Eligible Directors/Trustees, the Deferred Fee Agreement, the 3 INVESCO Funds Retirement Plan for Independent Directors and the Deferred Retirement Plan Account Agreement. "Valuation Date" shall have the meaning set forth in Section 2.2 of this Agreement. ARTICLE 2 TRANSFER OF ASSETS SECTION 2.1. Reorganization of Selling Fund. At the Effective Time, all of the assets of Selling Fund shall be delivered to Buyer Custodian for the account of Buying Fund in exchange for the assumption by Buying Fund of all of the Liabilities of Selling Fund and delivery by Buyer directly to the holders of record as of the Effective Time of the issued and outstanding shares of each class of Selling Fund of a number of shares of each corresponding class of Buying Fund, as set forth on Schedule 2.1 (including, if applicable, fractional shares rounded to the nearest thousandth), having an aggregate net asset value equal to the value of the net assets of Selling Fund so transferred, assigned and delivered, all determined and adjusted as provided in Section 2.2 below. Upon delivery of such assets, Buying Fund will receive good and marketable title to such assets free and clear of all Liens. SECTION 2.2. Computation of Net Asset Value. (a) The net asset value per share of each class of Buying Fund Shares, and the value of the assets and the amount of the Liabilities of Selling Fund, shall, in each case, be determined as of the close of regular trading on the NYSE on the business day next preceding the Closing Date (the "Valuation Date"). (b) The net asset value per share of each class of Buying Fund Shares shall be computed in accordance with the policies and procedures of Buying Fund as described in the Buyer Registration Statement. (c) The value of the assets and the amount of the Liabilities of Selling Fund to be transferred to Buying Fund pursuant to this Agreement shall be computed in accordance with the policies and procedures of Selling Fund as described in the Seller Registration Statement. (d) Subject to Sections 2.2(b) and (c) above, all computations of value regarding the assets and Liabilities of Selling Fund and the net asset value per share of each class of Buying Fund Shares to be issued pursuant to this Agreement shall be made by agreement of Seller and Buyer. The parties agree to use commercially reasonable efforts to resolve any material pricing differences between the prices of portfolio securities determined in accordance with their respective pricing policies and procedures. SECTION 2.3. Valuation Date. The share transfer books of Selling Fund will be permanently closed as of the close of business on the Valuation Date and only requests for the redemption of shares of Selling Fund received in proper form prior to the close of regular trading on the NYSE on the Valuation Date shall be accepted by Selling Fund. Redemption requests thereafter received by Selling Fund shall be deemed to be redemption requests for Buying Fund Shares of the corresponding class (assuming that the transactions contemplated by this Agreement have been consummated), to be distributed to Selling Fund Shareholders under this Agreement. SECTION 2.4. Delivery. (a) No later than three (3) business days preceding the Closing Date, Seller shall instruct Seller Custodian to transfer all assets held by Selling Fund to the account of Buying Fund maintained at Buyer Custodian. Such assets shall be delivered by Seller to Buyer Custodian on the Closing Date. The assets so delivered shall be duly endorsed in proper form for transfer in such condition as to constitute a good delivery thereof, in accordance with the custom of brokers, and shall be accompanied by all necessary state stock transfer stamps, if any, or a check for the appropriate purchase price thereof. Cash held by Selling Fund shall be delivered on the Closing Date and shall be in the form of currency or wire transfer in Federal funds, payable to the order of the account of Buying Fund at Buyer Custodian. (b) If, on the Closing Date, Selling Fund is unable to make delivery in the manner contemplated by Section 2.4(a) of securities held by Selling Fund for the reason that any of such securities purchased prior to the Closing Date have not yet been delivered to Selling Fund or its broker, then Buyer shall waive the delivery 4 requirements of Section 2.4(a) with respect to said undelivered securities if Selling Fund has delivered to Buyer Custodian by or on the Closing Date, and with respect to said undelivered securities, executed copies of an agreement of assignment and escrow and due bills executed on behalf of said broker or brokers, together with such other documents as may be required by Buyer or Buyer Custodian, including brokers' confirmation slips. SECTION 2.5. Termination of Series and Redemption of Selling Fund Shares. Following receipt of the Required Shareholder Vote and as soon as reasonably practicable after the Closing, the status of Selling Fund as a designated series of Seller shall be terminated and Seller shall redeem the outstanding shares of Selling Fund from Selling Fund Shareholders in accordance with its Governing Documents and all issued and outstanding shares of Selling Fund shall thereupon be canceled on the books of Seller. SECTION 2.6. Issuance of Buying Fund Shares. At the Effective Time, Selling Fund Shareholders holding shares of a class of Selling Fund shall be issued that number of full and fractional shares of the corresponding class of Buying Fund having a net asset value equal to the net asset value of such shares of such class of Selling Fund held by Selling Fund Shareholders on the Valuation Date in accordance with Sections 2.1 and 2.2. Seller shall provide instructions to the transfer agent of Buyer with respect to the shares of each class of Buying Fund to be issued to Selling Fund Shareholders. Buyer shall have no obligation to inquire as to the validity, propriety or correctness of any such instruction, but shall, in each case, assume that such instruction is valid, proper and correct. Buyer shall record on its books the ownership of the shares of each class of Buying Fund by Selling Fund Shareholders and shall forward a confirmation of such ownership to Selling Fund Shareholders. No redemption or repurchase of such shares credited to former Selling Fund Shareholders in respect of Selling Fund Shares represented by unsurrendered share certificates shall be permitted until such certificates have been surrendered to Buyer for cancellation, or if such certificates are lost or misplaced, until lost certificate affidavits have been executed and delivered to Buyer. SECTION 2.7. Investment Securities. On or prior to the Valuation Date, Seller shall deliver a list setting forth the securities Selling Fund then owned together with the respective Federal income tax bases thereof and holding periods therefor. Seller shall provide to Buyer on or before the Valuation Date detailed tax basis accounting records for each security to be transferred to it pursuant to this Agreement. Such records shall be prepared in accordance with the requirements for specific identification tax lot accounting and clearly reflect the bases used for determination of gain and loss realized on the sale of any security transferred to Buying Fund hereunder. Such records shall be made available by Seller prior to the Valuation Date for inspection by the Treasurer (or his or her designee) or Buying Fund Auditors upon reasonable request. SECTION 2.8. Liabilities. Selling Fund shall use reasonable best efforts to discharge all of its known liabilities, so far as may be possible, prior to the Closing Date. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER Seller, on behalf of Selling Fund, represents and warrants to Buyer as follows: SECTION 3.1. Organization; Authority. Seller is duly organized, validly existing and in good standing under Applicable Law, with all requisite trust power and authority to enter into this Agreement and perform its obligations hereunder. SECTION 3.2. Registration and Regulation of Seller. Seller is duly registered with the SEC as an investment company under the Investment Company Act and all Selling Fund Shares which have been or are being offered for sale have been duly registered under the Securities Act and have been duly registered, qualified or are exempt from registration or qualification under the securities laws of each state or other jurisdiction in which such shares have been or are being offered for sale, and no action has been taken by Seller to revoke or rescind any such registration or qualification. Selling Fund is in compliance in all material respects with all applicable laws, rules and regulations, including, without limitation, the Investment Company Act, the Securities Act, the Exchange Act and all applicable state securities laws. Selling Fund is in compliance in all material respects with the investment policies and restrictions applicable to it set forth in the Seller Registration Statement. The value of the net assets of Selling Fund is determined using portfolio valuation methods that comply in all material respects with the requirements of the 5 Investment Company Act and the policies of Selling Fund and all purchases and redemptions of Selling Fund Shares have been effected at the net asset value per share calculated in such manner. SECTION 3.3. Financial Statements. The books of account and related records of Selling Fund fairly reflect in reasonable detail its assets, liabilities and transactions in accordance with generally accepted accounting principles applied on a consistent basis. The Selling Fund Financial Statements previously delivered to Buyer present fairly in all material respects the financial position of Selling Fund as of the dates indicated and the results of operations and changes in net assets for the periods then ended in accordance with generally accepted accounting principles applied on a consistent basis for the periods then ended. SECTION 3.4. No Material Adverse Changes; Contingent Liabilities. Since the date of the Selling Fund Financial Statements, no material adverse change has occurred in the financial condition, results of operations, business, assets or liabilities of Selling Fund or the status of Selling Fund as a regulated investment company under the Code, other than changes resulting from any change in general conditions in the financial or securities markets or the performance of any investments made by Selling Fund or occurring in the ordinary course of business of Selling Fund or Seller. Except as set forth on Schedule 3.4, there are no contingent liabilities of Selling Fund not disclosed in the Selling Fund Financial Statements and no contingent liabilities of Selling Fund have arisen since the date of the most recent financial statements included in the Selling Fund Financial Statements. SECTION 3.5. Selling Fund Shares; Business Operations. (a) Selling Fund Shares have been duly authorized and validly issued and are fully paid and non-assessable. (b) During the five-year period ending on the date of the Reorganization, neither Selling Fund nor any person related to Selling Fund (as defined in Section 1.368-1(e)(3) of the Treasury Regulations without regard to Section 1.368-1(e)(3)(i)(A)) will have directly or through any transaction, agreement, or arrangement with any other person, (i) acquired shares of Selling Fund for consideration other than shares of Selling Fund, except for shares redeemed in the ordinary course of Selling Fund's business as an open-end investment company as required by the Investment Company Act, or (ii) made distributions with respect to Selling Fund's shares, except for (a) distributions necessary to satisfy the requirements of Sections 852 and 4982 of the Code for qualification as a regulated investment company and avoidance of excise tax liability and (b) additional distributions, to the extent such additional distributions do not exceed 50 percent of the value (without giving effect to such distributions) of the proprietary interest in Selling Fund on the Effective Date. (c) At the time of its Reorganization, Selling Fund shall not have outstanding any warrants, options, convertible securities or any other type of right pursuant to which any Person could acquire Selling Fund Shares, except for the right of investors to acquire Selling Fund Shares at net asset value in the normal course of its business as a series of an open-end management investment company operating under the Investment Company Act. (d) From the date it commenced operations and ending on the Closing Date, Selling Fund will have conducted its historic business within the meaning of Section 1.368-1(d)(2) of the Treasury Regulations in a substantially unchanged manner. In anticipation of its Reorganization, Selling Fund will not dispose of assets that, in the aggregate, will result in less than fifty percent (50%) of its historic business assets (within the meaning of Section 1.368-1(d)(3) of the Treasury Regulations) being transferred to Buying Fund. As of the Closing Date, at least 33 1/3% of Selling Fund's portfolio assets will meet the investment objectives, strategies, policies, risks and restrictions of Buying Fund. Selling Fund did not alter its portfolio in anticipation of the Reorganization to meet the 33 1/3% threshold. (e) Except for the Senior Officer Seller is required to employ pursuant to the Assurance of Discontinuance entered into by the Investment Adviser with the Attorney General of the State of New York on or about October 7, 2004, Seller does not have, and has not had during the six (6) months prior to the date of this Agreement, any employees, and shall not hire any employees from and after the date of this Agreement through the Closing Date. SECTION 3.6. Accountants. Selling Fund Auditors, which have reported upon the Selling Fund Financial Statements for the fiscal year ending October 31, 2006, are independent registered public accountants as required by the Securities Act and the Exchange Act. 6 SECTION 3.7. Binding Obligation. This Agreement has been duly authorized, executed and delivered by Seller on behalf of Selling Fund and, assuming this Agreement has been duly executed and delivered by Buyer and approved by the shareholders of Selling Fund, constitutes the legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms from and with respect to the revenues and assets of Selling Fund, except as the enforceability hereof may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting creditors rights generally, or by general equity principles (whether applied in a court of law or a court of equity and including limitations on the availability of specific performance or other equitable remedies). SECTION 3.8. No Breaches or Defaults. The execution and delivery of this Agreement by Seller on behalf of Selling Fund and performance by Seller of its obligations hereunder has been duly authorized by all necessary trust action on the part of Seller, other than approval by the shareholders of Selling Fund, and (i) do not, and on the Closing Date will not, result in any violation of the Governing Documents of Seller and (ii) do not, and on the Closing Date will not, result in a breach of any of the terms or provisions of, or constitute (with or without the giving of notice or the lapse of time or both) a default under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a material benefit under, or result in the creation or imposition of any Lien upon any property or assets of Selling Fund (except for such breaches or defaults or Liens that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect) under (A) any indenture, mortgage or loan agreement or any other material agreement or instrument to which Seller is a party or by which it may be bound and which relates to the assets of Selling Fund or to which any property of Selling Fund may be subject; (B) any Permit (as defined below); or (C) any existing applicable law, rule, regulation, judgment, order or decree of any Governmental Authority having jurisdiction over Seller or any property of Selling Fund. Seller is not under the jurisdiction of a court in a proceeding under Title 11 of the United States Code or similar case within the meaning of Section 368(a)(3)(A) of the Code. SECTION 3.9. Authorizations or Consents. Other than those which shall have been obtained or made on or prior to the Closing Date and those that must be made after the Closing Date to comply with Section 2.5 of this Agreement, no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority will be required to be obtained or made by Seller in connection with the due execution and delivery by Seller of this Agreement and the consummation by Seller of the transactions contemplated hereby. SECTION 3.10. Permits. Except for the absence of, or default under, Permits (as defined below) that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, Seller has in full force and effect all approvals, consents, authorizations, certificates, filings, franchises, licenses, notices, permits and rights of Governmental Authorities (collectively, "Permits") necessary for it to conduct its business as presently conducted as it relates to Selling Fund. To the knowledge of Seller there are no proceedings relating to the suspension, revocation or modification of any Permit, except for such that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 3.11. No Actions, Suits or Proceedings. (a) There is no pending action, suit or proceeding, nor, to the knowledge of Seller, has any litigation been overtly threatened in writing or, if probable of assertion, orally, against Seller before any Governmental Authority which questions the validity or legality of this Agreement or of the actions contemplated hereby or which seeks to prevent the consummation of the transactions contemplated hereby, including the Reorganization. (b) There are no judicial, administrative or arbitration actions, suits, or proceedings instituted or pending or, to the knowledge of Seller, threatened in writing or, if probable of assertion, orally, against Seller affecting any property, asset, interest or right of Selling Fund, that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Selling Fund. There are not in existence on the date hereof any plea agreements, judgments, injunctions, consents, decrees, exceptions or orders that were entered by, filed with or issued by any Governmental Authority relating to Seller's conduct of the business of Selling Fund affecting in any significant respect the conduct of such business. Seller is not, and has not been, to the knowledge of Seller, the target of any investigation by the SEC or any state securities administrator with respect to its conduct of the business of Selling Fund, other than as has been disclosed to Seller's Board of Trustees. 7 SECTION 3.12. Contracts. Seller is not in default under any contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party and which involves or affects the assets of Selling Fund, by which the assets, business, or operations of Selling Fund may be bound or affected, or under which it or the assets, business or operations of Selling Fund receives benefits, and which default could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, and, to the knowledge of Seller there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. SECTION 3.13. Properties and Assets. Selling Fund has good and marketable title to all properties and assets reflected in the Selling Fund Financial Statements as owned by it, free and clear of all Liens, except as described in the Selling Fund Financial Statements. SECTION 3.14. Taxes. (a) Selling Fund has elected to be a regulated investment company under Subchapter M of the Code and is a fund that is treated as a separate corporation under Section 851(g) of the Code. Since inception, Selling Fund has qualified for treatment as a regulated investment company for each taxable year that has ended prior to the Closing Date and will have satisfied the requirements of Part I of Subchapter M of the Code to maintain such qualification for the period beginning on the first day of its current taxable year and ending on the Closing Date. Selling Fund has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M of the Code did not apply to it. In order to (i) ensure continued qualification of Selling Fund for treatment as a "regulated investment company" for tax purposes and (ii) eliminate any tax liability of Selling Fund arising by reason of undistributed investment company taxable income or net capital gain, Seller will declare on or prior to the Valuation Date to the shareholders of Selling Fund a dividend or dividends that, together with all previous such dividends, shall have the effect of distributing (A) all of Selling Fund's investment company taxable income (determined without regard to any deductions for dividends paid) for the taxable year ended August 31, 2006 and for the short taxable year beginning on September 1, 2006 and ending on the Closing Date and (B) all of Selling Fund's net capital gain recognized in its taxable year ended August 31, 2006 and in such short taxable year (after reduction for any capital loss carryover). (b) Selling Fund has timely filed all Returns required to be filed by it and all Taxes with respect thereto have been paid, except where the failure so to file or so to pay, would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Adequate provision has been made in the Selling Fund Financial Statements for all Taxes in respect of all periods ended on or before the date of such financial statements, except where the failure to make such provisions would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. No deficiencies for any Taxes have been proposed, assessed or asserted in writing by any taxing authority against Selling Fund, and no deficiency has been proposed, assessed or asserted, in writing, where such deficiency would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. No waivers of the time to assess any such Taxes are outstanding nor are any written requests for such waivers pending and no Return of Selling Fund is currently being or has been audited with respect to income taxes or other Taxes by any Federal, state, local or foreign Tax authority. SECTION 3.15. Benefit and Employment Obligations. Except for any obligations under the Trustee Benefit Plans and the Amended and Restated AIM Funds' Incentive/Retention Bonus Plan, Selling Fund has no obligation to provide any post-retirement or post-employment benefit to any Person, including but not limited to, under any Benefit Plan, and has no obligation to provide unfunded deferred compensation or other unfunded or self-funded benefits to any Person. SECTION 3.16. Brokers. No broker, finder or similar intermediary has acted for or on behalf of Seller in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, agent or similar intermediary is entitled to any broker's, finder's or similar fee or other commission in connection therewith based on any agreement, arrangement or understanding with Seller or any action taken by it. SECTION 3.17. Voting Requirements. The Required Shareholder Vote is the only vote of the holders of any class of shares of Selling Fund necessary to approve this Agreement. SECTION 3.18. State Takeover Statutes. No state takeover statute or similar statute or regulation applies or purports to apply to this Agreement or any of the transactions contemplated by this Agreement. 8 SECTION 3.19. Books and Records. The books and records of Seller relating to Selling Fund, reflecting, among other things, the purchase and sale of Selling Fund Shares, the number of issued and outstanding shares owned by each Selling Fund Shareholder and the state or other jurisdiction in which such shares were offered and sold, are complete and accurate in all material respects. SECTION 3.20. Prospectus and Statement of Additional Information. The current prospectus and statement of additional information for Selling Fund as of the date on which they were issued did not contain, and as supplemented by any supplement thereto dated prior to or on the Closing Date do not contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. SECTION 3.21. No Distribution. Buying Fund Shares are not being acquired for the purpose of any distribution thereof, other than in accordance with the terms of this Agreement. SECTION 3.22. Liabilities of Selling Fund. The Liabilities of Selling Fund that are to be assumed by Buying Fund in connection with the Reorganization, or to which the assets of Selling Fund to be transferred in the Reorganization are subject, were incurred by Selling Fund in the ordinary course of its business. The fair market value of the assets of Selling Fund to be transferred to Buying Fund in the Reorganization will equal or exceed the sum of the Liabilities to be assumed by Buying Fund, plus the amount of Liabilities, if any, to which such transferred assets will be subject. SECTION 3.23. Value of Shares. The fair market value of the shares of each class of Buying Fund received by Selling Fund Shareholders in the Reorganization will be approximately equal, as of the Effective Time, to the fair market value of the shares of each corresponding class of Selling Fund to be constructively surrendered in exchange therefor. SECTION 3.24. Intercompany Indebtedness; Consideration. There is no intercompany indebtedness between Seller and Buyer that was issued or acquired, or will be settled, at a discount. No consideration other than Buying Fund Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including for this purpose any liabilities to which the assets of Selling Fund are subject) will be given in exchange for the assets of Selling Fund acquired by Buying Fund in connection with the Reorganization. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER Buyer, on behalf of Buying Fund, represents and warrants to Seller as follows: SECTION 4.1. Organization; Authority. Buyer is duly organized, validly existing and in good standing under Applicable Law, with all requisite corporate or trust power, as applicable, and authority to enter into this Agreement and perform its obligations hereunder. SECTION 4.2. Registration and Regulation of Buyer. Buyer is duly registered with the SEC as an investment company under the Investment Company Act. Buying Fund is in compliance in all material respects with all applicable laws, rules and regulations, including, without limitation, the Investment Company Act, the Securities Act, the Exchange Act and all applicable state securities laws. Buying Fund is in compliance in all material respects with the applicable investment policies and restrictions set forth in the Buyer Registration Statement. The value of the net assets of Buying Fund is determined using portfolio valuation methods that comply in all material respects with the requirements of the Investment Company Act and the policies of Buying Fund and all purchases and redemptions of Buying Fund Shares have been effected at the net asset value per share calculated in such manner. SECTION 4.3. Financial Statements. The books of account and related records of Buying Fund fairly reflect in reasonable detail its assets, liabilities and transactions in accordance with generally accepted accounting principles applied on a consistent basis. The Buying Fund Financial Statements previously delivered to Seller present fairly in all material respects the financial position of Buying Fund as of the dates indicated and the results of operations and changes in net assets for the periods then ended in accordance with generally accepted accounting principles applied on a consistent basis for the periods then ended. 9 SECTION 4.4. No Material Adverse Changes; Contingent Liabilities. Since the date of the Buying Fund Financial Statements, no material adverse change has occurred in the financial condition, results of operations, business, assets or liabilities of Buying Fund or the status of Buying Fund as a regulated investment company under the Code, other than changes resulting from any change in general conditions in the financial or securities markets or the performance of any investments made by Buying Fund or occurring in the ordinary course of business of Buying Fund or Buyer. There are no contingent liabilities of Buying Fund not disclosed in the Buying Fund Financial Statements which are required to be disclosed in accordance with generally accepted accounting principles. Except as set forth on Schedule 4.4, no contingent liabilities of Buying Fund have arisen since the date of the most recent financial statements included in the Buying Fund Financial Statements which are required to be disclosed in accordance with generally accepted accounting principles. SECTION 4.5. Registration of Buying Fund Shares. (a) Buying Fund currently has those classes of shares that are set forth on Schedule 4.5(a). Under its Governing Documents, Buyer is authorized to issue an unlimited number of shares of each such class. (b) Buying Fund Shares to be issued pursuant to Section 2.6 shall on the Closing Date be duly registered under the Securities Act by a Registration Statement on Form N-14 of Buyer then in effect. (c) Buying Fund Shares to be issued pursuant to Section 2.6 are duly authorized and on the Closing Date will be validly issued and fully paid and non-assessable and will conform to the description thereof contained in the Registration Statement on Form N-14 then in effect. At the time of its Reorganization, Buying Fund shall not have outstanding any warrants, options, convertible securities or any other type of right pursuant to which any Person could acquire shares of Buying Fund, except for the right of investors to acquire shares of Buying Fund at net asset value in the normal course of its business as a series of an open-end management investment company operating under the Investment Company Act. (d) The combined proxy statement/prospectus (the "Combined Proxy Statement/Prospectus"), which forms a part of Buyer's Registration Statement on Form N-14, shall be furnished to the shareholders of Selling Fund entitled to vote at the Shareholders Meeting in accordance with normal market practice for such transactions. The Combined Proxy Statement/Prospectus and related Statement of Additional Information of Buying Fund, when they become effective, shall conform in all material respects to the applicable requirements of the Securities Act and the Investment Company Act and shall not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading. (e) The shares of Buying Fund which have been or are being offered for sale (other than the Buying Fund Shares to be issued in connection with the Reorganization) have been duly registered under the Securities Act by the Buyer Registration Statement and have been duly registered, qualified or are exempt from registration or qualification under the securities laws of each state or other jurisdiction in which such shares have been or are being offered for sale, and no action has been taken by Buyer to revoke or rescind any such registration or qualification. SECTION 4.6. Accountants. Buying Fund Auditors, which have reported upon the Buying Fund Financial Statements for the fiscal year ending August 31, 2006, are independent registered public accountants as required by the Securities Act and the Exchange Act. SECTION 4.7. Binding Obligation. This Agreement has been duly authorized, executed and delivered by Buyer on behalf of Buying Fund and, assuming this Agreement has been duly executed and delivered by Seller, constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms from and with respect to the revenues and assets of Buying Fund, except as the enforceability hereof may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting creditors' rights generally, or by general equity principles (whether applied in a court of law or a court of equity and including limitations on the availability of specific performance or other equitable remedies). SECTION 4.8. No Breaches or Defaults. The execution and delivery of this Agreement by Buyer on behalf of Buying Fund and performance by Buyer of its obligations hereunder have been duly authorized by all necessary trust action on the part of Buyer and (i) do not, and on the Closing Date will not, result in any violation of the 10 Governing Documents of Buyer and (ii) do not, and on the Closing Date will not, result in a breach of any of the terms or provisions of, or constitute (with or without the giving of notice or the lapse of time or both) a default under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a material benefit under, or result in the creation or imposition of any Lien upon any property or assets of Buying Fund (except for such breaches or defaults or Liens that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect) under (A) any indenture, mortgage or loan agreement or any other material agreement or instrument to which Buyer is a party or by which it may be bound and which relates to the assets of Buying Fund or to which any properties of Buying Fund may be subject; (B) any Permit; or (C) any existing applicable law, rule, regulation, judgment, order or decree of any Governmental Authority having jurisdiction over Buyer or any property of Buying Fund. Buyer is not under the jurisdiction of a court in a proceeding under Title 11 of the United States Code or similar case within the meaning of Section 368(a)(3)(A) of the Code. SECTION 4.9. Authorizations or Consents. Other than those which shall have been obtained or made on or prior to the Closing Date, no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority will be required to be obtained or made by Buyer in connection with the due execution and delivery by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby. SECTION 4.10. Permits. Except for the absence of, or default under, Permits that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, Buyer has in full force and effect all Permits necessary for it to conduct its business as presently conducted as it relates to Buying Fund. To the knowledge of Buyer there are no proceedings relating to the suspension, revocation or modification of any Permit, except for such that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. SECTION 4.11. No Actions, Suits or Proceedings. (a) There is no pending action, suit or proceeding, nor, to the knowledge of Buyer, has any litigation been overtly threatened in writing or, if probable of assertion, orally, against Buyer before any Governmental Authority which questions the validity or legality of this Agreement or of the transactions contemplated hereby, or which seeks to prevent the consummation of the transactions contemplated hereby, including the Reorganization. (b) There are no judicial, administrative or arbitration actions, suits, or proceedings instituted or pending or, to the knowledge of Buyer, threatened in writing or, if probable of assertion, orally, against Buyer, affecting any property, asset, interest or right of Buying Fund, that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Buying Fund. There are not in existence on the date hereof any plea agreements, judgments, injunctions, consents, decrees, exceptions or orders that were entered by, filed with or issued by any Governmental Authority relating to Buyer's conduct of the business of Buying Fund affecting in any significant respect the conduct of such business. Buyer is not, and has not been, to the knowledge of Buyer, the target of any investigation by the SEC or any state securities administrator with respect to its conduct of the business of Buying Fund, other than as has been disclosed to Buyer's Board of Trustees. SECTION 4.12. Taxes. (a) Buying Fund has elected to be a regulated investment company under Subchapter M of the Code and is a fund that is treated as a separate corporation under Section 851(g) of the Code. Since inception, Buying Fund has qualified for treatment as a regulated investment company for each taxable year that has ended prior to the Closing Date and will satisfy the requirements of Part I of Subchapter M of the Code to maintain such qualification for its current taxable year. Buying Fund has no earnings or profits accumulated in any taxable year in which the provisions of Subchapter M of the Code did not apply to it. (b) Buying Fund has timely filed all Returns required to be filed by it and all Taxes with respect thereto have been paid, except where the failure so to file or so to pay, would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Adequate provision has been made in the Buying Fund Financial Statements for all Taxes in respect of all periods ending on or before the date of such financial statements, except where the failure to make such provisions would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. No deficiencies for any Taxes have been proposed, assessed or asserted in writing by any taxing authority against Buying Fund, and no deficiency has been proposed, assessed or asserted, in writing, 11 where such deficiency would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. No waivers of the time to assess any such Taxes are outstanding nor are any written requests for such waivers pending and no Return of Buying Fund is currently being or has been audited with respect to income taxes or other Taxes by any Federal, state, local or foreign Tax authority. SECTION 4.13. Brokers. No broker, finder or similar intermediary has acted for or on behalf of Buyer in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, agent or similar intermediary is entitled to any broker's, finder's or similar fee or other commission in connection therewith based on any agreement, arrangement or understanding with Buyer or any action taken by it. SECTION 4.14. Representations Concerning the Reorganization. (a) There is no plan or intention by Buyer or any person related to Buyer to acquire or redeem any Buying Fund Shares issued in the Reorganization, either directly or through any transaction, agreement, or arrangement with any other person, except to the extent that Buying Fund is required by the Investment Company Act to redeem any of its shares presented for redemption at net asset value in the ordinary course of its business as an open-end, management investment company as required by the Investment Company Act. (b) Buying Fund has no plan or intention to sell or otherwise dispose of any of the assets of Selling Fund acquired in the Reorganization, other than in the ordinary course of its business and to the extent necessary to maintain its status as a "regulated investment company" under the Code; provided, however, that this Section 4.14(b) shall not preclude any of the reorganizations of funds set forth on Schedule 4.14(b). (c) Following the Reorganization, Buying Fund will continue an "historic business" of Selling Fund or use a significant portion of Selling Fund's "historic business assets" in a business. For purposes of this representation, the terms "historic business" and "historic business assets" shall have the meanings ascribed to them in Section 1.368-1(d) of the Treasury Regulations; provided, however, that this Section 4.14(c) shall not preclude any of the reorganizations of funds set forth on Schedule 4.14(b). (d) Prior to or in the Reorganization, neither Buying Fund nor any person related to Buying Fund (for purposes of this paragraph as defined in Section 1.368-1(e)(3) of the Treasury Regulations) will have acquired directly or through any transaction, agreement or arrangement with any other person, shares of Selling Fund with consideration other than shares of Buying Fund. SECTION 4.15. Prospectus and Statement of Additional Information. The current prospectus and statement of additional information for Buying Fund as of the date on which it was issued does not contain, and as supplemented by any supplement thereto dated prior to or on the Closing Date does not contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. SECTION 4.16. Value of Shares. The fair market value of the shares of each class of Buying Fund received by Selling Fund Shareholders in the Reorganization will be approximately equal, as of the Effective Time, to the fair market value of the shares of each corresponding class of Selling Fund to be constructively surrendered in exchange therefor. The fair market value of the assets of Buying Fund will exceed the amount of its liabilities immediately after the exchange. SECTION 4.17. Intercompany Indebtedness; Consideration. There is no intercompany indebtedness between Seller and Buyer that was issued or acquired, or will be settled, at a discount. No consideration other than Buying Fund Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including for this purpose any liabilities to which the assets of Selling Fund are subject) will be given in exchange for the assets of Selling Fund acquired by Buying Fund in connection with the Reorganization. The fair market value of the assets of Selling Fund transferred to Buying Fund in the Reorganization will equal or exceed the sum of the Liabilities assumed by Buying Fund, plus the amount of liabilities, if any, to which such transferred assets are subject. 12 ARTICLE 5 COVENANTS SECTION 5.1. Conduct of Business. (a) From the date of this Agreement up to and including the Closing Date (or, if earlier, the date upon which this Agreement is terminated pursuant to Article 7), Seller shall conduct the business of Selling Fund only in the ordinary course and substantially in accordance with past practices, and shall use its reasonable best efforts to preserve intact its business organization and material assets and maintain the rights, franchises and business and customer relations necessary to conduct the business operations of Selling Fund in the ordinary course in all material respects; provided, however, that this Section 5.1(a) shall not preclude any of the reorganizations of funds set forth on Schedule 4.14(b). (b) From the date of this Agreement up to and including the Closing Date (or, if earlier, the date upon which this Agreement is terminated pursuant to Article 7), Buyer shall conduct the business of Buying Fund only in the ordinary course and substantially in accordance with past practices, and shall use its reasonable best efforts to preserve intact its business organization and material assets and maintain the rights, franchises and business and customer relations necessary to conduct the business operations of Buying Fund in the ordinary course in all material respects; provided, however, that this Section 5.1(b) shall not preclude any of the reorganizations of funds set forth on Schedule 4.14(b). SECTION 5.2. Expenses. Buying Fund shall bear all of its costs and expenses incurred in connection with this Agreement and the Reorganization without any reimbursement therefor. Prior to the submission of the Agreement to the Boards of Trustees of Buyer and Seller for approval, the Investment Adviser, in the ordinary course of its business as a registered investment advisor operating under the Advisors Act, agreed to bear all of the costs and expenses of Selling Fund incurred in connection with this Agreement and the Reorganization and other transactions contemplated hereby; provided that any such expenses incurred by Selling Fund shall not be reimbursed or paid for by the Investment Advisor unless those expenses are solely and directly related to the Reorganization. Except as provided in the preceding sentence, Selling Fund shall bear all of its costs and expenses incurred in connection with this Agreement and the Reorganization without any reimbursement therefor. Neither Selling Fund nor Buying Fund (nor any Person related to Selling Fund or Buying Fund) will pay or assume any expenses of the Selling Fund Shareholders (including, but not limited to, any expenses of Selling Fund Shareholders that are solely and directly related to the Reorganization). SECTION 5.3. Further Assurances. Each of the parties hereto shall execute such documents and other papers and perform such further acts as may be reasonably required to carry out the provisions hereof and the transactions contemplated hereby. Each such party shall, on or prior to the Closing Date, use its reasonable best efforts to fulfill or obtain the fulfillment of the conditions precedent to the consummation of the Reorganization, including the execution and delivery of any documents, certificates, instruments or other papers that are reasonably required for the consummation of the Reorganization. SECTION 5.4. Notice of Events. Buyer shall give prompt notice to Seller, and Seller shall give prompt notice to Buyer, of (a) the occurrence or non- occurrence of any event which to the knowledge of Buyer or to the knowledge of Seller would be likely to result in any of the conditions specified in (i) in the case of Seller, Sections 6.1 and 6.2 or (ii) in the case of Buyer, Sections 6.2 and 6.3, not being satisfied so as to permit the consummation of the Reorganization and (b) any material failure on its part, or on the part of the other party hereto of which it has knowledge, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 5.5 shall not limit or otherwise affect the remedies available hereunder to any party. SECTION 5.5. Consents, Approvals and Filings. Each of Seller and Buyer shall make all necessary filings, as soon as reasonably practicable, including, without limitation, those required under the Securities Act, the Exchange Act, the Investment Company Act and the Advisers Act, in order to facilitate prompt consummation of the Reorganization and the other transactions contemplated by this Agreement. In addition, each of Seller and Buyer shall use its reasonable best efforts, and shall cooperate fully with each other (i) to comply as promptly as reasonably practicable with all requirements of Governmental Authorities applicable to the Reorganization and the 13 other transactions contemplated herein and (ii) to obtain as promptly as reasonably practicable all necessary permits, orders or other consents of Governmental Authorities and consents of all third parties necessary for the consummation of the Reorganization and the other transactions contemplated herein. Each of Seller and Buyer shall use reasonable efforts to provide such information and communications SECTION 5.6. Submission of Agreement to Shareholders. Seller shall take all action necessary in accordance with applicable law and its Governing Documents to convene the Shareholders Meeting. Seller shall, through its Board of Trustees, recommend to the shareholders of Selling Fund approval of this Agreement. Seller shall use its reasonable best efforts to hold a Shareholders Meeting as soon as practicable and advisable after the date hereof. ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION SECTION 6.1. Conditions Precedent of Buyer. The obligation of Buyer to consummate the Reorganization is subject to the satisfaction, at or prior to the Closing Date, of all of the following conditions, any one or more of which may be waived in writing by Buyer. (a) The representations and warranties of Seller on behalf of Selling Fund set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date with the same effect as though all such representations and warranties had been made as of the Closing Date. (b) Seller shall have complied with and satisfied in all material respects all agreements and conditions relating to Selling Fund set forth herein on its part to be performed or satisfied at or prior to the Closing Date. (c) Buyer shall have received at the Closing Date (i) a certificate, dated as of the Closing Date, from an officer of Seller, in such individual's capacity as an officer of Seller and not as an individual, to the effect that the conditions specified in Sections 6.1(a) and (b) have been satisfied and (ii) a certificate, dated as of the Closing Date, from the Secretary or Assistant Secretary (in such capacity) of Seller certifying as to the accuracy and completeness of the attached Governing Documents of Seller, and resolutions, consents and authorizations of or regarding Seller with respect to the execution and delivery of this Agreement and the transactions contemplated hereby. (d) The dividend or dividends described in the last sentence of Section 3.14(a) shall have been declared. (e) Buyer shall have received from Seller confirmations or other adequate evidence as to the tax costs and holding periods of the assets and property of Selling Fund transferred to Buying Fund in accordance with the terms of this Agreement. (f) To the extent applicable, the Investment Adviser shall have terminated or waived, in either case in writing, any rights to reimbursement from Selling Fund to which it is entitled for fees and expenses absorbed by the Investment Adviser pursuant to voluntary and contractual fee waiver or expense limitation commitments between the Investment Adviser and Selling Fund. SECTION 6.2. Mutual Conditions. The obligations of Seller and Buyer to consummate the Reorganization are subject to the satisfaction, at or prior to the Closing Date, of all of the following further conditions, any one or more of which may be waived in writing by Seller and Buyer, but only if and to the extent that such waiver is mutual. (a) All filings required to be made prior to the Closing Date with, and all consents, approvals, permits and authorizations required to be obtained on or prior to the Closing Date from, Governmental Authorities in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated herein by Seller and Buyer shall have been made or obtained, as the case may be; provided, however, that such consents, approvals, permits and authorizations may be subject to conditions that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. (b) This Agreement, the Reorganization of Selling Fund and related matters shall have been approved and adopted at the Shareholders Meeting by the shareholders of Selling Fund on the record date by the Required Shareholder Vote. 14 (c) The assets of Selling Fund to be acquired by Buying Fund shall constitute at least 90% of the fair market value of the net assets and at least 70% of the fair market value of the gross assets held by Selling Fund immediately prior to the Reorganization. For purposes of this Section 6.2(c), assets used by Selling Fund to pay the expenses it incurs in connection with this Agreement and the Reorganization and to effect all shareholder redemptions and distributions (other than regular, normal dividends and regular, normal redemptions pursuant to the Investment Company Act, and not in excess of the requirements of Section 852 of the Code, occurring in the ordinary course of Selling Fund's business as a series of an open-end management investment company) after the date of this Agreement shall be included as assets of Selling Fund held immediately prior to the Reorganization. (d) No temporary restraining order, preliminary or permanent injunction or other order issued by any Governmental Authority preventing the consummation of the Reorganization on the Closing Date shall be in effect; provided, however, that the party or parties invoking this condition shall use reasonable efforts to have any such order or injunction vacated. (e) The Registration Statement on Form N-14 filed by Buyer with respect to Buying Fund Shares to be issued to Selling Fund Shareholders in connection with the Reorganization shall have become effective under the Securities Act and shall include an undertaking therein to file the opinion referenced in Section 6.2(f) as a post-effective amendment to such Registration Statement after the Closing Date, and no stop order suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the Securities Act. (f) Seller and Buyer shall have received on or before the Closing Date an opinion of Buyer Counsel in form and substance reasonably acceptable to Seller and Buyer, as to the matters set forth on Schedule 6.2(f). In rendering such opinion, Buyer Counsel may request and rely upon representations contained in certificates of officers of Seller, Buyer and others, and the officers of Seller and Buyer shall use their best efforts to make available such truthful certificates. SECTION 6.3. Conditions Precedent of Seller. The obligation of Seller to consummate the Reorganization is subject to the satisfaction, at or prior to the Closing Date, of all of the following conditions, any one or more of which may be waived in writing by Seller. (a) The representations and warranties of Buyer on behalf of Buying Fund set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date with the same effect as though all such representations and warranties had been made as of the Closing Date. (b) Buyer shall have complied with and satisfied in all material respects all agreements and conditions relating to Buying Fund set forth herein on its part to be performed or satisfied at or prior to the Closing Date. (c) Seller shall have received on the Closing Date (i) a certificate, dated as of the Closing Date, from an officer of Buyer, in such individual's capacity as an officer of Buyer and not as an individual, to the effect that the conditions specified in Sections 6.3(a) and (b) have been satisfied and (ii) a certificate, dated as of the Closing Date, from the Secretary or Assistant Secretary of Buyer (in such capacity) certifying as to the accuracy and completeness of the attached Governing Documents of Buyer and resolutions, consents and authorizations of or regarding Buyer with respect to the execution and delivery of this Agreement and the transactions contemplated hereby. ARTICLE 7 TERMINATION OF AGREEMENT SECTION 7.1. Termination. This Agreement may be terminated on or prior to the Closing Date as follows: (a) by mutual written consent of Seller and Buyer; or 15 (b) at the election of Seller or Buyer, to be effectuated by the delivery by the terminating party to the other party of a written notice of such termination: (i) if the Closing Date shall not be on or before the Termination Date, unless the failure to consummate the Reorganization is the result of a willful and material breach of this Agreement by the party seeking to terminate this Agreement; (ii) if, upon a vote at the Shareholders Meeting or any final adjournment thereof, the Required Shareholder Vote shall not have been obtained as contemplated by Section 5.8; or (iii) if any Governmental Authority shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the Reorganization and such order, decree, ruling or other action shall have become final and nonappealable. SECTION 7.2. Survival After Termination. If this Agreement is terminated in accordance with Section 7.1 hereof and the Reorganization of Selling Fund is not consummated, this Agreement shall become void and of no further force and effect with respect to the Reorganization and Selling Fund, except for the provisions of Section 5.3. ARTICLE 8 MISCELLANEOUS SECTION 8.1. Survival of Representations, Warranties and Covenants. The representations and warranties in this Agreement, and the covenants in this Agreement that are required to be performed at or prior to the Closing Date, shall terminate upon the consummation of the transactions contemplated hereunder. The covenants in this Agreement that are required to be performed in whole or in part subsequent to the Closing Date shall survive the consummation of the transactions contemplated hereunder for a period of one (1) year following the Closing Date. SECTION 8.2. Governing Law. This Agreement shall be construed and interpreted according to the laws of the State of Delaware applicable to contracts made and to be performed wholly within such state. SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and the respective successors and assigns of the parties and such Persons. Nothing in this Agreement is intended or shall be construed to confer upon any entity or Person other than the parties hereto and their respective successors and permitted assigns any right, remedy or claim under or by reason of this Agreement or any part hereof. Without the prior written consent of the parties hereto, this Agreement may not be assigned by any of the parties hereto. SECTION 8.4. Obligations of Buyer and Seller. (a) Seller and Buyer hereby acknowledge and agree that Buying Fund is a separate investment portfolio of Buyer, that Buyer is executing this Agreement on behalf of Buying Fund, and that any amounts payable by Buyer under or in connection with this Agreement shall be payable solely from the revenues and assets of Buying Fund. Seller further acknowledges and agrees that this Agreement has been executed by a duly authorized officer of Buyer in his or her capacity as an officer of Buyer intending to bind Buyer as provided herein, and that no officer, trustee or shareholder of Buyer shall be personally liable for the liabilities or obligations of Buyer incurred hereunder. Finally, Seller acknowledges and agrees that the liabilities and obligations of Buying Fund pursuant to this Agreement shall be enforceable against the assets of Buying Fund only and not against the assets of Buyer generally or assets belonging to any other series of Buyer. (b) Seller and Buyer hereby acknowledge and agree that Selling Fund is a separate investment portfolio of Seller, that Seller is executing this Agreement on behalf of Selling Fund and that any amounts payable by Seller under or in connection with this Agreement shall be payable solely from the revenues and assets of Selling Fund. Buyer further acknowledges and agrees that this Agreement has been executed by a duly authorized officer of Seller in his or her capacity as an officer of Seller intending to bind Seller as provided herein, and that no officer, trustee or shareholder of Seller shall be personally liable for the liabilities or obligations of Seller incurred hereunder. Finally, Buyer acknowledges and agrees that the liabilities and obligations of Selling Fund pursuant to this Agreement shall 16 be enforceable against the assets of Selling Fund only and not against the assets of Seller generally or assets belonging to any other series of Seller. SECTION 8.5. Amendments. This Agreement may not be amended, altered or modified except by a written instrument executed by Seller and Buyer. SECTION 8.6. Enforcement. The parties agree irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States or any state having jurisdiction, in addition to any other remedy to which they are entitled at law or in equity. SECTION 8.7. Interpretation. When a reference is made in this Agreement to a Section, Exhibit or Schedule, such reference shall be to a Section of, or an Exhibit or a Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." Each representation and warranty contained in Article 3 or 4 that relates to a general category of a subject matter shall be deemed superseded by a specific representation and warranty relating to a subcategory thereof to the extent of such specific representation or warranty. SECTION 8.8. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and each of which shall constitute one and the same instrument. SECTION 8.9. Entire Agreement; Exhibits and Schedules. This Agreement, including the Exhibits, Schedules, certificates and lists referred to herein, and any documents executed by the parties simultaneously herewith or pursuant thereto, constitute the entire understanding and agreement of the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and understandings, written or oral, between the parties with respect to such subject matter. SECTION 8.10. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand or by overnight courier, two days after being sent by registered mail, return receipt requested, or when sent by telecopier (with receipt confirmed), provided, in the case of a telecopied notice, a copy is also sent by registered mail, return receipt requested, or by courier, addressed as follows (or to such other address as a party may designate by notice to the other): (a) If to Seller: AIM Counselor Series Trust 11 Greenway Plaza, Suite 100 Houston, TX 77046-1173 Attn: John M. Zerr with a copy to: Ballard Spahr Andrews & Ingersoll, LLP 1735 Market Street, 51st Floor Philadelphia, PA 19103-7599 Attn: Martha J. Hays (b) If to Buyer: AIM Investment Funds 11 Greenway Plaza, Suite 100 Houston, TX 77046-1173 Attn: John M. Zerr 17 with a copy to: Ballard Spahr Andrews & Ingersoll, LLP 1735 Market Street, 51st Floor Philadelphia, PA 19103-7599 Attn: Martha J. Hays SECTION 8.11. Representations by Investment Adviser. (a) In its capacity as investment adviser to Seller, the Investment Adviser represents to Buyer that to the best of its knowledge the representations and warranties of Seller and Selling Fund contained in this Agreement are true and correct as of the date of this Agreement. For purposes of this Section 8.11(a), the best knowledge standard shall be deemed to mean that the officers of the Investment Adviser who have substantive responsibility for the provision of investment advisory services to Seller do not have actual knowledge to the contrary after due inquiry. (b) In its capacity as investment adviser to Buyer, the Investment Adviser represents to Seller that to the best of its knowledge the representations and warranties of Buyer and Buying Fund contained in this Agreement are true and correct as of the date of this Agreement. For purposes of this Section 8.11(b), the best knowledge standard shall be deemed to mean that the officers of the Investment Adviser who have substantive responsibility for the provision of investment advisory services to Buyer do not have actual knowledge to the contrary after due inquiry. SECTION 8.12. Successors and Assigns; Assignment. This Agreement shall be binding upon and inure to the benefit of Seller, on behalf of Selling Fund, and Buyer, on behalf of Buying Fund, and their respective successors and permitted assigns. The parties hereto expressly acknowledge and agree that this Agreement shall be binding upon and inure to the benefit of those Delaware statutory trusts that are the resulting entities in the permitted reorganizations of funds set forth on Schedule 4.14(b). 18 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. AIM COUNSELOR SERIES TRUST, acting on behalf of AIM ADVANTAGE HEALTH SCIENCES FUND By: /s/ Philip A. Taylor ------------------------------------ Name: Philip A. Taylor Title: Principal Executive Officer AIM INVESTMENT FUNDS, acting on behalf of AIM GLOBAL HEALTH CARE FUND By: /s/ Philip A. Taylor ------------------------------------ Name: Philip A. Taylor Title: Principal Executive Officer A I M ADVISORS, INC. By: /s/ Philip A. Taylor ------------------------------------ Name: Philip A. Taylor Title: President 19 EXHIBIT A EXCLUDED LIABILITIES OF SELLING FUND None. A-1 SCHEDULE 2.1 CLASSES OF SHARES OF SELLING FUND AND CORRESPONDING CLASSES OF SHARES OF BUYING FUND
CORRESPONDING CLASSES OF CLASSES OF SHARES OF SELLING FUND SHARES OF BUYING FUND --------------------------------- ------------------------ AIM Advantage Health Sciences Fund AIM Global Health Care Fund Class A Shares Class A Shares Class B Shares Class B Shares Class C Shares Class C Shares
1 SCHEDULE 3.4 CERTAIN CONTINGENT LIABILITIES OF SELLING FUND None. 1 SCHEDULE 4.4 CERTAIN CONTINGENT LIABILITIES OF BUYING FUND None. 1 SCHEDULE 4.5(A) CLASSES OF SHARES OF BUYING FUND
CLASSES OF SHARES OF BUYING FUND -------------------------------- Class A Shares Class B Shares Class C Shares
1 SCHEDULE 4.14(B) PERMITTED REORGANIZATIONS OF FUNDS AIM Opportunities I Fund into AIM Small Cap Equity Fund AIM Opportunities II Fund into AIM Select Equity Fund AIM Opportunities III Fund into AIM Select Equity Fund 1 SCHEDULE 6.2(F) TAX OPINIONS (i) The transfer of the assets of Selling Fund to Buying Fund in exchange solely for Buying Fund Shares distributed directly to Selling Fund Shareholders and Buying Fund's assumption of the Liabilities, as provided in the Agreement, will constitute a "reorganization" within the meaning of Section 368(a) of the Code and Selling Fund and Buying Fund will each be "a party to a reorganization" within the meaning of Section 368(b) of the Code. (ii) In accordance with Section 361(a) and Section 361(c)(1) of the Code, no gain or loss will be recognized by Selling Fund on the transfer of its assets to Buying Fund solely in exchange for Buying Fund Shares and Buying Fund's assumption of the Liabilities or on the distribution of Buying Fund Shares to Selling Fund Shareholders. (iii) In accordance with Section 1032 of the Code, no gain or loss will be recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange for Buying Fund Shares issued directly to Selling Fund Shareholders. (iv) In accordance with Section 354(a)(1) of the Code, no gain or loss will be recognized by Selling Fund Shareholders on the receipt of Buying Fund Shares in exchange for Selling Fund Shares. (v) In accordance with Section 362(b) of the Code, the basis to Buying Fund of the assets of Selling Fund will be the same as the basis of such assets in the hands of Selling Fund immediately prior to the Reorganization. (vi) In accordance with Section 358(a) of the Code, a Selling Fund Shareholder's basis for Buying Fund Shares received by the Selling Fund Shareholder will be the same as his or her basis for Selling Fund Shares exchanged therefor. (vii) In accordance with Section 1223(1) of the Code, a Selling Fund Shareholder's holding period for Buying Fund Shares will be determined by including such Selling Fund Shareholder's holding period for Selling Fund Shares exchanged therefor, provided that such Selling Fund Shareholder held such Selling Fund Shares as a capital asset. (viii) In accordance with Section 1223(2) of the Code, the holding period with respect to the assets of Selling Fund transferred to Buying Fund in the Reorganization will include the holding period for such assets in the hands of Selling Fund. (ix) In accordance with Section 381(a)(2) of the Code, Buying Fund will succeed to and take into account the items of Selling Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381 through 384 of the Code and the Treasury Regulations thereunder. 1 Appendix II AIM GLOBAL HEALTH CARE FUND -- CLASS A, B, C AND INVESTOR CLASS SHARES Supplement dated September 20, 2006 to the Prospectus dated February 28, 2006 as supplemented April 21, 2006, May 8, 2006 and July 5, 2006 Effective December 29, 2006, shareholders of AIM Global Health Care Fund may be charged a 2% redemption fee (on redemption proceeds) if shares are redeemed, including redeeming by exchange, within 30 days of their purchase. Also effective December 29, 2006, AIM Global Health Care Fund is added to the list of funds appearing immediately under the heading "SHAREHOLDER INFORMATION -- REDEEMING SHARES -- REDEMPTION FEE" in the prospectus. The following information replaces in its entirety the information appearing under the heading "FEE TABLE AND EXPENSE EXAMPLE" on page 5 of the prospectus: "FEE TABLE This table describes the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES --------------------------------------------------------------------------------------------------------------------------- (fees paid directly from CLASS A CLASS B CLASS C INVESTOR your investment) CLASS --------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(1) 5.00% 1.00% None Redemption/Exchange Fee (as a percentage of amount redeemed/exchanged)(2) 2.00% 2.00% 2.00% 2.00% --------------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES(3),(4) --------------------------------------------------------------------------------------------------------------------------- (expenses that are deducted CLASS A CLASS B CLASS C INVESTOR from fund assets) CLASS --------------------------------------------------------------------------------------------------------------------------- Management Fees(5) 0.62% 0.62% 0.62% 0.62% Distribution and/or Service (12b-1) Fees(6) 0.25 1.00 1.00 0.25 Other Expenses(5) 0.38 0.38 0.38 0.38 Total Annual Fund Operating Expenses(7) 1.25 2.00 2.00 1.25
(1) A contingent deferred sales charge may apply in some cases. See "Shareholder Information -- Choosing a Share Class -- Sales Charges." (2) Effective December 29, 2006, you may be charged a 2.00% fee on redemptions or exchanges of Class A, B, C and Investor Class shares held 30 days or less. See "Shareholder Information -- Redeeming Shares -- Redemption Fee" for more information. (3) There is no guarantee that actual expenses will be the same as those shown in the table. (4) Total Annual Fund Operating Expenses have been restated to reflect the current fees in effect upon the closing of the reorganization of AIM Health Sciences Fund into the fund on July 18, 2005. 1 (5) Effective July 18, 2005, the Board of Trustees approved a permanent reduction of the advisory fee of the fund to 0.75% of the first $350 million, plus 0.65% of the next $350 million, plus 0.55% of the next $1.3 billion, plus 0.45% of the next $2 billion, plus 0.40% of the next $2 billion, plus 0.375% of the next $2 billion, plus 0.35% of the Fund's average daily net assets in excess of $8 billion. (6) The Board of Trustees approved a permanent reduction of the Rule 12b-1 fees applicable to Class A shares to 0.25% effective July 1, 2005. Distribution and/or Service (12b-1) Fees reflect this agreement. (7) At the request of the Board of Trustees, AMVESCAP PLC has agreed to reimburse the fund for expenses related to market timing matters. If a financial institution is managing your account, you may also be charged a transaction or other fee by such financial institution. As a result of 12b-1 fees, long-term shareholders in the fund may pay more than the maximum permitted initial sales charge." 2 AIM COUNSELOR SERIES TRUST AIM Advantage Health Sciences Fund -- Class A, B and C Supplement dated July 5, 2006 to the Prospectus dated December 20, 2005 as supplemented January 17, 2006, April 21, 2006 and May 8, 2006 AIM Multi-Sector Fund -- Class A, B and C Supplement dated July 5, 2006 to the Prospectus dated December 20, 2005 as supplemented January 17, 2006, April 13, 2006, April 21, 2006, and May 8, 2006 AIM Structured Core Fund -- Class A, B, C and R AIM Structured Growth Fund -- Class A, B, C and R AIM Structured Value Fund -- Class A, B, C and R Supplement dated July 5, 2006 to the Prospectuses dated March 31, 2006 as supplemented April 21, 2006 and May 8, 2006 AIM EQUITY FUNDS AIM Capital Development Fund -- Class A, B, C, R and Investor AIM Charter Fund -- Class A, B, C and R AIM Constellation Fund -- Class A, B, C and R AIM Diversified Dividend Fund -- Class A, B, C, R and Investor AIM Large Cap Basic Value Fund -- Class A, B, C, R and Investor AIM Large Cap Growth Fund -- Class A, B, C, R and Investor Supplement dated July 5, 2006 to the Prospectuses dated February 28, 2006 as supplemented April 21, 2006 and May 8, 2006 AIM FUNDS GROUP AIM European Small Company Fund -- Class A, B and C AIM Global Value Fund -- Class A, B and C AIM International Small Company Fund -- Class A, B and C AIM Mid Cap Basic Value Fund -- Class A, B, C and R AIM Select Equity Fund -- Class A, B and C AIM Small Cap Equity Fund -- Class A, B, C and R Supplement dated July 5, 2006 to the Prospectuses dated April 24, 2006 as supplemented May 8, 2006 AIM Basic Balanced Fund -- Class A, B, C, R and Investor Supplement dated July 5, 2006 to the Prospectus dated April 24, 2006 as supplemented May 1, 2006 and May 8, 2006 AIM GROWTH SERIES AIM Basic Value Fund -- Class A, B, C and R AIM Conservative Allocation Fund -- Class A, B, C and R AIM Global Equity Fund -- Class A, B, C and R AIM Growth Allocation Fund -- Class A, B, C and R AIM Income Allocation Fund -- Class A, B, C and R AIM International Allocation Fund -- Class A, B, C and R AIM Mid Cap Core Equity Fund -- Class A, B, C and R AIM Moderate Allocation Fund -- Class A, B, C and R AIM Moderate Growth Allocation Fund -- Class A, B, C and R AIM Moderately Conservative Allocation Fund -- Class A, B, C and R AIM Small Cap Growth Fund -- Class A, B, C, R and Investor Supplement dated July 5, 2006 to the Prospectuses dated April 24, 2006 as supplemented May 8, 2006 AIM INTERNATIONAL MUTUAL FUNDS AIM Asia Pacific Growth Fund -- Class A, B and C AIM European Growth Fund -- Class A, B, C, R and Investor AIM Global Aggressive Growth Fund -- Class A, B and C AIM Global Growth Fund -- Class A, B and C Supplement dated July 5, 2006 to the Prospectuses dated February 28, 2006 as supplemented April 21, 2006 and May 8, 2006 AIM International Core Equity Fund -- Class A, B, C, R and Investor AIM International Growth Fund -- Class A, B, C and R Supplement dated July 5, 2006 to the Prospectuses dated February 28, 2006 as supplemented April 21, 2006, May 1, 2006 and May 8, 2006 AIM INVESTMENT FUNDS AIM China Fund -- Class A, B and C Supplement dated July 5, 2006 to the Prospectus dated March 31, 2006 as supplemented April 21, 2006, May 8, 2006 and June 27, 2006 AIM International Bond Fund -- Class A, B and C AIM Japan Fund -- Class A, B and C Supplement dated July 5, 2006 to the Prospectuses dated March 31, 2006 as supplemented April 21, 2006 and May 8, 2006 AIM Developing Markets Fund -- Class A, B and C AIM Global Health Care Fund -- Class A, B, C and Investor AIM Trimark Endeavor Fund -- Class A, B, C and R AIM Trimark Fund -- Class A, B, C and R Supplement dated July 5, 2006 to the Prospectuses dated February 28, 2006 as supplemented April 21, 2006 and May 8, 2006 AIM Trimark Small Companies Fund -- Class A, B, C and R Supplement dated July 5, 2006 to the Prospectus dated February 28, 2006 as supplemented March 24, 2006, April 21, 2006 and May 8, 2006 AIM INVESTMENT SECURITIES FUNDS AIM Global Real Estate Fund -- Class A, B, C and R AIM Money Market Fund -- AIM Cash Reserve Shares, Class B, C, R and Investor AIM Real Estate Fund -- Class A, B, C, R and Investor Supplement dated July 5, 2006 to the Prospectuses dated October 25, 2005 as supplemented December 8, 2005, April 21, 2006 and May 8, 2006 AIM High Yield Fund -- Class A, B, C and Investor AIM Intermediate Government Fund -- Class A, B, C, R and Investor AIM Municipal Bond Fund -- Class A, B, C and Investor Supplement dated July 5, 2006 to the Prospectuses dated October 25, 2005 as supplemented December 8, 2005, March 31, 2006, April 21, 2006 and May 8, 2006 AIM Income Fund -- Class A, B, C, R and Investor AIM Total Return Bond Fund -- Class A, B, C and R Supplement dated July 5, 2006 to the Prospectuses dated October 25, 2005 as supplemented December 8, 2005, March 31, 2006, April 21, 2006, May 1, 2006 and May 8, 2006 1 AIM SECTOR FUNDS AIM Energy Fund -- Class A, B, C and Investor AIM Financial Services Fund -- Class A, B, C and Investor AIM Gold & Precious Metals Fund -- Class A, B, C and Investor AIM Leisure Fund -- Class A, B, C, R and Investor AIM Technology Fund -- Class A, B, C and Investor AIM Utilities Fund -- Class A, B, C and Investor Supplement dated July 5, 2006 to the Prospectus dated October 25, 2005 as supplemented December 8, 2005, March 31, 2006, April 13, 2006, April 21, 2006 and May 8, 2006 AIM SPECIAL OPPORTUNITIES FUNDS AIM Opportunities I Fund -- Class A, B and C AIM Opportunities II Fund -- Class A, B and C AIM Opportunities III Fund -- Class A, B and C Supplement dated July 5, 2006 to the Prospectuses dated February 28, 2006 as supplemented April 21, 2006, May 8, 2006, June 2, 2006 and June 30, 2006 AIM STOCK FUNDS AIM Dynamics Fund -- Class A, B, C, R and Investor Supplement dated July 5, 2006 to the Prospectus dated October 25, 2005 as supplemented December 8, 2005, April 21, 2006 and May 8, 2006 AIM SUMMIT FUND -- Class A, B and C Supplement dated July 5, 2006 to the Prospectus dated February 28, 2006 as supplemented April 21, 2006 and May 8, 2006 AIM TAX-EXEMPT FUNDS AIM High Income Municipal Fund -- Class A, B and C Supplement dated July 5, 2006 to the Prospectus dated July 29, 2005 as revised April 13, 2006 and as supplemented April 21, 2006 and May 8, 2006 The Boards of Trustees for the series portfolios listed above (each, a "Fund") approved the conversion of certain Class B shares (the "Legacy Class B Shares") of the Funds into Class A shares of such Fund and in the case of AIM Money Market Fund, into AIM Cash Reserve Shares. The Legacy Class B Shares are those Class B shares that were acquired by (i) exchange offer from the closed-end fund predecessor of AIM Floating Rate Fund, or (ii) exchange offer from another Fund if such shares were previously acquired by exchange offer from the closed-end fund predecessor of AIM Floating Rate Fund. The conversion of the Legacy Class B Shares to Class A shares or AIM Cash Reserve Shares, as applicable, is scheduled to occur July 27, 2006 at 5:00 p.m. Eastern time (the "Conversion Date"). On the Conversion Date, each shareholder of record of Legacy Class B Shares of a Fund will receive that number of Class A shares of such Fund or AIM Cash Reserve shares of AIM Money Market Fund having an aggregate net asset value equal to the net asset value of the Legacy Class B Shares of such Fund held by such shareholder immediately prior to the Conversion Date. No Fund or holder of Legacy Class B Shares is expected to recognize gain or loss for federal income tax purposes in connection with the Legacy Class B Shares conversion. After the conversion, and as a result of owning Class A shares, the 12b-1 fees paid by former holders of Legacy Class B Shares will be reduced from 1.00% to 0.25%. * * * * * Effective July 17, 2006, you will not pay a contingent deferred sales charge if you redeem Class B shares that were acquired by (i) exchange offer from the closed-end fund predecessor of AIM Floating Rate Fund, or (ii) exchange offer from another series portfolio listed above if such shares were previously acquired by exchange offer from the closed-end fund predecessor of AIM Floating Rate Fund. 2 AIM COUNSELOR SERIES TRUST AIM INTERNATIONAL MUTUAL FUNDS AIM Advantage Health Sciences Fund -- Class A, B and C AIM Asia Pacific Growth Fund -- Class A, B and C Supplement dated May 8, 2006 to the AIM European Growth Fund -- Class A, B, C, R and Investor Prospectus dated December 20, 2005 AIM Global Aggressive Growth Fund -- Class A, B and C as supplemented January 17, 2006 and April 21, 2006 AIM Global Growth Fund -- Class A, B and C Supplement dated May 8, 2006 to the AIM Floating Rate Fund-Class A, B1, C and R Prospectuses dated February 28, 2006 Supplement dated May 8, 2006 to the as supplemented April 21, 2006 Prospectus dated April 14, 2006 AIM International Core Equity Fund -- AIM Multi-Sector Fund -- Class A, B and C Class A, B, C, R and Investor Supplement dated May 8, 2006 to the AIM International Growth Fund -- Class A, B, C and R Prospectus dated December 20, 2005 Supplement dated May 8, 2006 to the as supplemented January 17, 2006, April 13, 2006 Prospectuses dated February 28, 2006 and April 21, 2006 as supplemented April 21, 2006 and May 1, 2006 AIM Structured Core Fund -- Class A, B, C and R AIM INVESTMENT FUNDS AIM Structured Growth Fund -- Class A, B, C and R AIM Structured Value Fund -- Class A, B, C and R AIM China Fund -- Class A, B and C Supplement dated May 8, 2006 to the AIM Enhanced Short Bond Fund -- Class A, C and R Prospectuses dated March 31, 2006 AIM International Bond Fund -- Class A, B and C as supplemented April 21, 2006 AIM Japan Fund -- Class A, B and C Supplement dated May 8, 2006 to the AIM EQUITY FUNDS Prospectuses dated March 31, 2006 as supplemented April 21, 2006 AIM Capital Development Fund -- Class A, B, C, R and Investor AIM Developing Markets Fund -- Class A, B and C AIM Charter Fund -- Class A, B, C and R AIM Global Health Care Fund -- Class A, B, C and Investor AIM Constellation Fund -- Class A, B, C and R AIM Trimark Endeavor Fund -- Class A, B, C and R AIM Diversified Dividend Fund -- AIM Trimark Fund -- Class A, B, C and R Class A, B, C, R and Investor Supplement dated May 8, 2006 to the AIM Large Cap Basic Value Fund -- Prospectuses dated February 28, 2006 Class A, B, C, R and Investor as supplemented April 21, 2006 AIM Large Cap Growth Fund -- Class A, B, C, R and Investor Supplement dated May 8, 2006 to the AIM Trimark Small Companies Fund -- Class A, B, C and R Prospectuses dated February 28, 2006 Supplement dated May 8, 2006 to the as supplemented April 21, 2006 Prospectus dated February 28, 2006 as supplemented March 24, 2006 and April 21, 2006 AIM FUNDS GROUP AIM INVESTMENT SECURITIES FUNDS AIM European Small Company Fund -- Class A, B and C AIM Global Value Fund -- Class A, B and C AIM Global Real Estate Fund -- Class A, B, C and R AIM International Small Company Fund -- Class A, B and C AIM Money Market Fund -- AIM Cash Reserve Shares, AIM Mid Cap Basic Value Fund -- Class A, B, C and R Class B, C, R and Investor AIM Select Equity Fund -- Class A, B and C AIM Real Estate Fund -- Class A, B, C, R and Investor AIM Small Cap Equity Fund -- Class A, B, C and R Supplement dated May 8, 2006 to the Supplement dated May 8, 2006 to the Prospectuses dated October 25, 2005 Prospectuses dated April 24, 2006 as supplemented December 8, 2005 and April 21, 2006 AIM Basic Balanced Fund -- Class A, B, C, R and Investor Supplement dated May 8, 2006 to the AIM High Yield Fund -- Class A, B, C and Investor Prospectus dated April 24, 2006 AIM Intermediate Government Fund -- as supplemented May 1, 2006 Class A, B, C, R and Investor AIM Limited Maturity Treasury Fund -- Class A and A3 AIM GROWTH SERIES AIM Municipal Bond Fund -- Class A, B, C and Investor Supplement dated May 8, 2006 to the AIM Basic Value Fund -- Class A, B, C and R Prospectuses dated October 25, 2005 AIM Conservative Allocation Fund -- Class A, B, C and R as supplemented December 8, 2005, March 31, 2006 AIM Global Equity Fund -- Class A, B, C and R and April 21, 2006 AIM Growth Allocation Fund -- Class A, B, C and R AIM Income Allocation Fund -- Class A, B, C and R AIM Income Fund -- Class A, B, C, R and Investor AIM International Allocation Fund -- Class A, B, C and R AIM Total Return Bond Fund -- Class A, B, C and R AIM Mid Cap Core Equity Fund -- Class A, B, C and R Supplement dated May 8, 2006 to the AIM Moderate Allocation Fund -- Class A, B, C and R Prospectuses dated October 25, 2005 AIM Moderate Growth Allocation Fund -- Class A, B, C and R as supplemented December 8, 2005, March 31, 2006, AIM Moderately Conservative Allocation Fund -- April 21, 2006 and May 1, 2006 Class A, B, C and R AIM Small Cap Growth Fund -- Class A, B, C, R and Investor Supplement dated May 8, 2006 to the Prospectuses dated April 24, 2006
1 AIM Short Term Bond Fund -- Class A, C and R AIM SUMMIT FUND -- Class A, B and C Supplement dated May 8, 2006 to the Supplement dated May 8, 2006 to the Prospectus dated October 25, 2005 Prospectus dated February 28, 2006 as supplemented December 8, 2005, February 3, 2006, as supplemented April 21, 2006 March 31, 2006 and April 21, 2006 AIM TAX-EXEMPT FUNDS AIM SECTOR FUNDS AIM High Income Municipal Fund -- Class A, B and C AIM Energy Fund -- Class A, B, C and Investor Supplement dated May 8, 2006 to the AIM Financial Services Fund -- Class A, B, C and Investor Prospectus dated July 29, 2005 AIM Gold & Precious Metals Fund -- Class A, B, C and Investor as revised April 13, 2006 and AIM Leisure Fund -- Class A, B, C, R and Investor as supplemented April 21, 2006 AIM Technology Fund -- Class A, B, C and Investor AIM Utilities Fund -- Class A, B, C and Investor AIM Tax-Exempt Cash Fund -- Class A and Investor Supplement dated May 8, 2006 to the Supplement dated May 8, 2006 to the Prospectus dated October 25, 2005 Prospectus dated July 29, 2005 as supplemented December 8, 2005, March 31, 2006 as supplemented December 8, 2005, April 13, 2006 and April 21, 2006 December 23, 2005 and April 21, 2006 AIM SPECIAL OPPORTUNITIES FUNDS AIM Tax-Free Intermediate Fund -- Class A and A3 Supplement dated May 8, 2006 to the AIM Opportunities I Fund -- Class A, B and C Prospectus dated July 29, 2005 AIM Opportunities II Fund -- Class A, B and C as supplemented December 8, 2005, December 23, 2005, AIM Opportunities III Fund -- Class A, B and C March 31, 2006 and April 21, 2006 Supplement dated May 8, 2006 to the Prospectuses dated February 28, 2006 AIM TREASURER'S SERIES TRUST as supplemented April 21, 2006 Premier Portfolio -- Investor Class AIM STOCK FUNDS Premier Tax-Exempt Portfolio -- Investor Class Premier U.S. Government Money Portfolio -- Investor Class AIM Dynamics Fund -- Class A, B, C, R and Investor Supplement dated May 8, 2006 to the Supplement dated May 8, 2006 to the Prospectus dated December 20, 2005 Prospectus dated October 25, 2005 as as supplemented April 21, 2006 supplemented December 8, 2005 and April 21, 2006 AIM S&P 500 Index Fund -- Investor Class Supplement dated May 8, 2006 to the Prospectus dated October 25, 2005 as supplemented December 8, 2005, January 31, 2006 and April 21, 2006
Reference is made to the "SHAREHOLDER INFORMATION -- REDEEMING SHARES -- Permitted Exchanges" section of the above referenced prospectuses. Class B1 Shares of AIM Floating Rate Fund may be exchanged for Class A, Class A3, Investor Class or AIM Cash Reserve Shares. Exceptions are: (1) Class A Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund are currently closed to new investors and (2) Investor Class Shares are currently offered to new investors only on a limited basis (see "SHAREHOLDER INFORMATION -- PURCHASING SHARES -- Grandfathered Investors" section of the above referenced prospectuses). You will not pay a sales charge, contingent deferred sales charge or other sales charge when exchanging such Class B1 shares. Class B1 Shares of AIM Floating Rate Fund may not be exchanged for Class B, Class C, Class P, Class R or Institutional Class Shares. 2 AIM EQUITY FUNDS AIM Capital Development Fund - Class A, B, C, R and Investor AIM Charter Fund - Class A, B, C and R AIM Constellation Fund - Class A, B, C and R AIM Diversified Dividend Fund - Class A, B, C, R and Investor AIM Large Cap Basic Value Fund - Class A, B, C, R and Investor AIM Large Cap Growth Fund - Class A, B, C, R and Investor Supplement dated April 21, 2006 to the Prospectuses dated February 28, 2006 AIM INTERNATIONAL MUTUAL FUNDS AIM Asia Pacific Growth Fund - Class A, B and C AIM European Growth Fund - Class A, B, C, R and Investor AIM Global Aggressive Growth Fund - Class A, B and C AIM Global Growth Fund - Class A, B and C AIM International Core Equity Fund - Class A, B, C, R and Investor AIM International Growth Fund - Class A, B, C and R Supplement dated April 21, 2006 to the Prospectuses dated February 28, 2006 AIM INVESTMENT FUNDS AIM Developing Markets Fund - Class A, B and C AIM Global Health Care Fund - Class A, B, C and Investor AIM Trimark Endeavor Fund - Class A, B, C and R AIM Trimark Fund - Class A, B, C and R Supplement dated April 21, 2006 to the Prospectuses dated February 28, 2006 AIM Trimark Small Companies Fund - Class A, B, C and R Supplement dated April 21, 2006 to the Prospectus dated February 28, 2006 as supplemented March 24, 2006 AIM SPECIAL OPPORTUNITIES FUNDS AIM Opportunities I Fund - Class A, B and C AIM Opportunities II Fund - Class A, B and C AIM Opportunities III Fund - Class A, B and C Supplement dated April 21, 2006 to the Prospectuses dated February 28, 2006 AIM SUMMIT FUND - Class A, B and C Supplement dated April 21, 2006 to the Prospectus dated February 28, 2006 The following replaces in its entirety the heading and the information appearing under the heading "SHAREHOLDER INFORMATION - CHOOSING A SHARE CLASS - SALES CHARGES - AIM SHORT TERM BOND FUND INITIAL SALES CHARGES" on page A-2 of the prospectus: "AIM ENHANCED SHORT BOND FUND, AIM FLOATING RATE FUND AND AIM SHORT TERM BOND FUND INITIAL SALES CHARGES
INVESTOR'S SALES CHARGE --------------------------- AMOUNT OF INVESTMENT AS A % OF AS A % OF IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT --------------------- -------------- ---------- Less than $ 100,000 2.50% 2.56% $100,000 but less than $ 250,000 2.00 2.04 $250,000 but less than $ 500,000 1.50 1.52 $500,000 but less than $1,000,000 1.25 1.27"
The following replaces in their entirety the first two paragraphs appearing under the heading "SHAREHOLDER INFORMATION - CHOOSING A SHARE CLASS - PURCHASES OF CLASS A SHARES AT NET ASSET VALUE - CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND" on page A-3 of the prospectus: "You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of Category I and II funds, AIM Enhanced Short Bond Fund, AIM Floating Rate Fund and AIM Short Term Bond Fund at net asset value. However, if you redeem these shares prior to 18 months after the date of purchase, they will be subject to a CDSC of 1%. If you currently own Class A shares of a Category I or II fund, AIM Enhanced Short Bond Fund, AIM Floating Rate Fund or AIM Short Term Bond Fund and make additional purchases at net asset value that result in account balances of $1,000,000 or more, the additional shares purchased will be subject to an 18-month, 1% CDSC." The following replaces in its entirety the heading and the information appearing under the heading "SHAREHOLDER INFORMATION - CHOOSING A SHARE CLASS - SALES CHARGES - CONTINGENT DEFERRED SALES CHARGES FOR CLASS C SHARES OF AIM SHORT TERM BOND FUND " on page A-3 of the prospectus: 1 "CONTINGENT DEFERRED SALES CHARGES FOR CLASS C SHARES OF AIM ENHANCED SHORT BOND FUND AND AIM SHORT TERM BOND FUND You can purchase Class C shares of AIM Enhanced Short Bond Fund and AIM Short Term Bond Fund at their net asset value and not subject to a CDSC. However, you may be charged a CDSC when you redeem Class C shares of AIM Enhanced Short Bond Fund and AIM Short Term Bond Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC." The following new section is added immediately after the above information: "CONTINGENT DEFERRED SALES CHARGES FOR CLASS B1 SHARES OF AIM FLOATING RATE FUND On April 13, 2006, AIM Floating Rate Fund, a closed-end fund, was reorganized as an open-end fund. Certain shareholders of Class B shares of closed-end AIM Floating Rate Fund (Closed-End Fund) received Class B1 shares of the open-end AIM Floating Rate Fund in the reorganization. Class B1 shares are not available for purchase. If you redeem those shares, they are subject to a CDSC in the following percentages:
YEAR SINCE PURCHASE MADE (HOLDING PERIOD) CLASS B1 ----------------------------------------- -------- First 3.0% Second 2.5% Third 2.0% Fourth 1.0% Longer than Four Years None
For purposes of determining the holding period, the date you acquired Class B shares of the Closed-End Fund is the start of the holding period." The following replaces the information appearing under the heading "SHAREHOLDER INFORMATION - CHOOSING A SHARE CLASS - REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS - REDUCED SALES CHARGES" on page A-4 of the prospectus: "You may be eligible to buy Class A shares at reduced initial sales charge rates under Rights of Accumulation or Letters of Intent under certain circumstances. Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Investor Class shares of any fund will not be taken into account in determining whether a purchase qualified for a reduction in initial sales charges pursuant to Rights of Accumulation or Letters of Intent." The following replaces the information appearing under the heading "SHAREHOLDER INFORMATION - CHOOSING A SHARE CLASS - REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS - REDUCED SALES CHARGES- RIGHTS OF ACCUMULATION" on page A-4 of the prospectus: "You may combine your new purchases of Class A shares of a fund with fund shares currently owned (Class A, B, B1, C or R) and investments in the AIM College Savings Plan(SM) for the purpose of qualifying for the lower initial sales charge rates that apply to larger purchases. The applicable initial sales charge for the new purchase is based on the total of your current purchase and the public offering price of all other shares you own. The transfer agent may automatically link certain accounts registered in the same name, with the same taxpayer identification number, for the purpose of qualifying you for lower initial sales charge rates." The following replaces in its entirety the information appearing under the heading "SHAREHOLDER INFORMATION - CHOOSING A SHARE CLASS - REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS - CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS" on page A-4 of the prospectus: 2 "You will not pay a CDSC - if you redeem Class B shares you held for more than six years; - if you redeem Class B1 shares you held for more than four years from date of purchase of Class B shares of AIM Floating Rate Fund's predecessor, the Closed-End Fund; - if you redeem Class C shares you held for more than one year; - if you redeem Class C shares of a fund other than AIM Enhanced Short Bond Fund or AIM Short Term Bond Fund and you received such Class C shares by exchanging Class C shares of AIM Enhanced Short Bond Fund or AIM Short Term Bond Fund; - if you redeem Class C shares of AIM Enhanced Short Bond Fund or AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another fund and the original purchase was subject to a CDSC; - if you are a participant in a retirement plan and your plan redeems, at any time, less than all of the Class A, C or Class R shares held through such plan that would otherwise be subject to a CDSC; - if you are a participant in a retirement plan and your plan redeems, after having held them for more than one year from the date of the plan's initial purchase, all of the Class A, C or Class R shares held through such plan that would otherwise be subject to a CDSC; - if you are a participant in a qualified retirement plan and redeem Class A, Class C or Class R shares in order to fund a distribution; - if you participate in the Systematic Redemption Plan and withdraw up to 12% of the value of your shares that are subject to a CDSC in any twelve-month period; - if you redeem shares to pay account fees; - for redemptions following the death or post-purchase disability of a shareholder or beneficial owner; - if you redeem shares acquired through reinvestment of dividends and distributions; and - on increases in the net asset value of your shares. There may be other situations when you may be able to purchase or redeem shares at reduced or without sales charges. Consult the fund's Statement of Additional Information for details." The following replaces the first paragraph appearing under the heading "SHAREHOLDER INFORMATION - REDEEMING SHARES - REDEMPTION FEE" on page A-9 of the prospectus: "You may be charged a 2% redemption fee (on redemption proceeds) if you redeem, including redeeming by exchange, shares of the following funds within 30 days of their purchase: AIM Asia Pacific Growth Fund AIM China Fund AIM Developing Markets Fund AIM European Growth Fund AIM European Small Company Fund AIM Floating Rate Fund AIM Global Aggressive Growth Fund AIM Global Equity Fund AM Global Growth Fund AIM Global Real Estate Fund AIM Global Value Fund AIM High Yield Fund AIM International Allocation Fund AIM International Bond Fund AIM International Core Equity Fund AIM International Growth Fund AIM International Small Company Fund AIM Japan Fund AIM S&P 500 Index Fund AIM Trimark Fund" The following replaces in its entirety the information appearing under the heading "SHAREHOLDER INFORMATION - REDEEMING SHARES - REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE" on page A-10 "If you purchase $1,000,000 or more of Class A shares of any fund, or if you make additional purchases of Class A shares at net asset value, your shares may be subject to a CDSC upon redemption as described below. 3
SHARES INITIALLY SHARES HELD CDSC APPLICABLE UPON PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES --------- ----------------- -------------------- - Class A shares of - Class A shares of Category I or - 1% if shares are Category I or II Fund, AIM II Fund, AIM Enhanced Short Bond redeemed within 18 Enhanced Short Bond Fund, Fund, AIM Floating Rate Fund or AIM months of initial AIM Floating Rate Fund or Short Term Bond Fund purchase of Category I AIM Short Term Bond Fund - Class A shares of Category III or II Fund, AIM Enhanced Fund(2) Short Bond Fund, AIM - AIM Cash Reserve Shares of AIM Floating Rate Fund or Money Market Fund AIM Short Term Bond Fund shares - Class A shares of - Class A shares of Category I or - 1% if shares are Category III Fund(1) II Fund, AIM Enhanced Short Bond redeemed within 18 Fund, AIM Floating Rate Fund or AIM months of initial Short Term Bond Fund purchase of Category III Fund shares - Class A shares of - Class A shares of Category III - No CDSC Category III Fund(1) Fund(2) - Class A shares of AIM Tax-Exempt Cash Fund - AIM Cash Reserve Shares of AIM Money Market Fund
(1) As of the close of business on October 30, 2002, only existing shareholders of Class A shares of a Category III Fund may purchase such shares. (2) Class A shares of a Category I, II or III Fund, AIM Enhanced Short Bond Fund, AIM Floating Rate Fund or AIM Short Term Bond Fund may not be exchanged for Class A shares of a Category III Fund." The following replaces in its entirety the information appearing under the heading "SHAREHOLDER INFORMATION - REDEEMING SHARES - REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND" on page A-10 of the prospectus: "If you redeem Class B shares you acquired by exchange via a repurchase offer by closed-end AIM Floating Rate Fund prior to April 13, 2006, the early withdrawal charge applicable to shares of closed-end AIM Floating Rate Fund will be applied instead of the CDSC normally applicable to Class B shares." The following replaces in its entirety the information appearing under the heading "SHAREHOLDER INFORMATION - EXCHANGING SHARES - PERMITTED EXCHANGES" on page A-12 of the prospectus: "Except as otherwise stated under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another fund. 4
EXCHANGE FROM EXCHANGE TO ALLOWED PROHIBITED ------------- ----------- ------- ---------- Class A Class A, A3, Investor Class, or AIM Cash Reserve Shares. Exceptions are: - Class A Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund are currently closed to new investors. - Class A Shares of AIM Limited Maturity Treasury X Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate Fund cannot be exchanged for Class A3 Shares of those funds. - Investor Class Shares of all funds are currently offered to new investors only on a limited basis. Class A Class B, B1, C, P, R or Institutional Class Shares. X Class A3 Class A, A3, Investor Class, or AIM Cash Reserve Shares. Exceptions are: - Class A3 Shares of AIM Limited Maturity Treasury X Fund and AIM Tax-Free Intermediate Fund cannot be exchanged for Class A Shares of those funds. - Investor Class Shares of all funds are currently offered to new investors only on a limited basis. Class A3 Class B, B1, C, P, R or Institutional Class Shares. X Class B Class B. X Class B Class A, A3, B1, C, P, R, AIM Cash Reserve Shares, X Institutional or Investor Class Shares. Class B1 Class A. X Class B1 Class B, A3, C, P, R, AIM Cash Reserve Shares, X Institutional or Investor Class Shares. Class C Class C. X Class C Class A, A3, B, B1, P, R, AIM Cash Reserve Shares, X Institutional or Investor Class Shares. Class R Class R. X Class R Class A, A3, B, B1, C, P, AIM Cash Reserve Shares, X Institutional or Investor Class Shares. AIM Cash Reserve Shares Class A, A3, B, C, R, or Investor Class Shares. Exceptions are: - Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund are currently closed to new investors. - Shares to be exchanged for Class B, C or R shares X must not have been acquired by exchange from Class A shares of any fund. - Investor Class Shares of all funds are currently offered to new investors only on a limited basis. AIM Cash Reserve Shares Class B1, P or Institutional Class shares. X Institutional Class Institutional Class. X
5
EXCHANGE FROM EXCHANGE TO ALLOWED PROHIBITED ------------- ----------- ------- ---------- Institutional Class Class A, A3, B, B1, C, P, R, AIM Cash Reserve Shares X or Investor Class shares. Investor Class A, A3, or Investor Class. Exceptions are: - Investor Class shares cannot be exchanged for X Class A shares of any fund which offers Investor Class shares. - Class a shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund are currently closed to new investors. Investor Class Class B, B1, C, P, R, AIM Cash Reserve Shares or X Institutional Class shares. Class P Class A, A3, or AIM Cash Reserve Shares. Exceptions are: - Class A shares of AIM Limited Maturity Treasury X Fund and AIM Tax-Free Intermediate Fund are currently closed to new investors. Class P Class B, B1, C, R, Institutional or Investor Class X" shares.
The following replaces in its entirety the information appearing under the heading "SHAREHOLDER INFORMATION - EXCHANGING SHARES - EXCHANGES NOT PERMITTED" on page A-13 of the prospectus: "For shares purchased prior to November 15, 2001, you may not exchange: (1) Class A shares of Category I or II funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a contingent deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund; (2) Class A shares of Category III funds purchased at net asset value for Class A shares of a Category I or II fund, Class A shares of AIM Enhanced Short Bond Fund, AIM Floating Rate Fund or Class A shares of AIM Short Term Bond Fund; (3) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category III AIM Funds that are subject to a CDSC. For shares purchased on or after November 15, 2001, you may not exchange: (1) Class A shares of Category I or II funds, Class a shares of AIM Enhanced Short Bond Fund, AIM Floating Rate Fund or Class A shares of AIM Short Term Bond Fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash Fund; (2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money Market Fund; or (3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any fund or for Class A shares of any fund that are subject to a CDSC, however, if you originally purchased Class A shares of a Category I or II fund, AIM Enhanced Short Bond Fund, AIM Floating Rate Fund or AIM Short Term Bond Fund, and exchanged those shares for AIM Cash Reserve Shares of AIM Money Market Fund, you may further exchange the AIM Cash Reserve Shares for Class A shares of a Category I or II fund, AIM Enhanced Short Bond Fund, AIM Floating Rate Fund or AIM Short Term Bond Fund." 6 The following replaces in its entirety the heading and the first paragraph appearing under the heading "SHAREHOLDER INFORMATION - EXCHANGING SHARES - EXCHANGING CLASS B, CLASS C AND CLASS R SHARES" on page A-14 of the prospectus: "EXCHANGING CLASS B, CLASS B1, CLASS C AND CLASS R SHARES If you make an exchange involving Class B, Class C shares or Class R shares, subject to a CDSC, the amount of time you held the original shares will be credited to the holding period of the Class B, Class C or Class R shares, respectively, into which you exchanged for the purpose of calculating contingent deferred sales charges (CDSC) if you later redeem the exchanged shares. If you redeem Class B or Class C shares acquired by exchange via a repurchase offer by the closed-end AIM Floating Rate Fund, prior to April 13, 2006, you will be credited with the time period you held the Class B or Class C shares of the closed-end AIM Floating Rate Fund for the purpose of computing the CDSC applicable to those exchanged shares. If you redeem Class B1 or Class C shares of AIM Floating Rate Fund that were acquired on April 13, 2006 when AIM Floating Rate Fund was reorganized as an open-end fund, you will be credited with the time period you held Class B or Class C shares of the closed-end AIM Floating Rate Fund, for the purpose of computing the CDSC if you later redeem such shares." The following new section is added immediately before the paragraph entitled "Domestic Exchange Traded Equity Securities:" appearing under the heading "PRICING OF SHARES - DETERMINATION OF NET ASSET VALUE" appearing on page A-15 of the prospectus: "Senior Secured Floating Rate Loans and Senior Secured Floating Rate Debt Securities: Senior secured floating rate loans and senior secured floating rate debt securities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may reflect appropriate factors such as ratings, trance type, industry, company performance, spread, individual trading characteristics, institution-size trading in similar groups of securities and other market data." 7 AIM GLOBAL HEALTH CARE FUND PROSPECTUS FEBRUARY 28, 2006 AIM Global Health Care Fund seeks long-term growth of capital. -------------------------------------------------------------------------------- This prospectus contains important information about the Class A, B, C, and Investor Class shares of the fund. Please read it before investing and keep it for future reference. Investor Class shares offered by this prospectus are offered only to grandfathered investors. Please see the section of the prospectus entitled "Purchasing Shares--Grandfathered Investors." As with all other mutual fund securities, the Securities and Exchange Commission has not approved or disapproved these securities or determined whether the information in this prospectus is adequate or accurate. Anyone who tells you otherwise is committing a crime. An investment in the fund: - is not FDIC insured; - may lose value; and - is not guaranteed by a bank. --------------------------- AIM GLOBAL HEALTH CARE FUND --------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fee Table 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 7 ------------------------------------------------------ FUND MANAGEMENT 8 ------------------------------------------------------ The Advisor 8 Advisor Compensation 8 Portfolio Manager(s) 9 OTHER INFORMATION 9 ------------------------------------------------------ Sales Charges 9 Dividends and Distributions 9 FINANCIAL HIGHLIGHTS 10 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Excessive Short-Term Trading Activity Disclosures A-5 Purchasing Shares A-7 Redeeming Shares A-9 Exchanging Shares A-12 Pricing of Shares A-14 Taxes A-16 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investment and Design and Your goals. Our solutions. are registered service marks and AIM Bank Connection, AIM Internet Connect, AIM Private Asset Management, AIM Private Asset Management and Design, AIM Stylized and/or Design, AIM Alternative Assets and Design and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management Inc. No dealer, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus, and you should not rely on such other information or representations. --------------------------- AIM GLOBAL HEALTH CARE FUND --------------------------- INVESTMENT OBJECTIVE AND STRATEGIES -------------------------------------------------------------------------------- The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval. The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of health care industry companies. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a health care industry company to be one that (1) derives at least 50% of its revenues or earnings from health care activities; or (2) devotes at least 50% of its assets to such activities, based on its most recent fiscal year. Such companies include those that design, manufacture, or sell products or services used for or in connection with health care or medicine (such as pharmaceutical companies, biotechnology research firms, companies that sell medical products, and companies that own or operate health care facilities). The fund may invest in debt securities issued by health care industry companies, or in equity and debt securities of other companies the portfolio managers believe will benefit from developments in the health care industry. The fund will normally invest in the securities of companies located in at least three different countries, including the United States, and may invest a significant portion of its assets in the securities of U.S. issuers. However, the fund will invest no more than 50% of its total assets in the securities of issuers in any one country, other than the U.S. The fund may invest up to 20% of its total assets in companies located in developing countries, i.e., those countries that are in the initial stages of their industrial cycles. The fund may also invest up to 5% of its total assets in lower-quality debt securities, i.e., "junk bonds." For cash management purposes, the fund may also hold a portion of its assets in cash or cash equivalents, including shares of affiliated money market funds. Any percentage limitations with respect to assets of the fund are applied at the time of purchase. When suitable opportunities are available, the fund may invest in initial public offerings ("IPOs") of securities. The portfolio managers allocate the fund's assets among securities of countries and in currency denominations that are expected to provide the best opportunities for meeting the fund's investment objective. In analyzing specific companies for possible investment, the portfolio managers ordinarily look for several of the following characteristics: above-average per share earnings growth; high return on invested capital; a healthy balance sheet; sound financial and accounting policies and overall financial strength; strong competitive advantages; effective research and product development and marketing; development of new technologies; efficient service; pricing flexibility; strong management; and general operating characteristics that will enable the companies to compete successfully in their respective markets. The portfolio managers consider whether to sell a particular security when any of these factors materially changes. In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the fund may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. As a result, the fund may not achieve its investment objective. The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective. If the fund does trade in this way, it may incur increased transaction costs, which can lower the actual return on your investment. Active trading may also increase short-term gains and losses, which may affect the taxes you have to pay. PRINCIPAL RISKS OF INVESTING IN THE FUND -------------------------------------------------------------------------------- There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity. The value of the fund's shares is particularly vulnerable to factors affecting the health care industry, such as substantial government regulation. Government regulation may impact the demand for products and services offered by health care companies. Also, the products and services offered by health care companies may be subject to rapid obsolescence caused by scientific advances and technological innovations. Because the fund focuses its investments in the health care industry, the value of your fund shares may rise and fall more than the value of shares of a fund that invests more broadly. The prices of foreign securities may be further affected by other factors, including: - Currency exchange rates--The dollar value of the fund's foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded. - Political and economic conditions--The value of the fund's foreign investments may be adversely affected by political and social 1 --------------------------- AIM GLOBAL HEALTH CARE FUND --------------------------- instability in their home countries and by changes in economic or taxation policies in those countries. - Regulations--Foreign companies generally are subject to less stringent regulations, including financial and accounting controls, than are U.S. companies. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. - Markets--The securities markets of other countries are smaller than U.S. securities markets. As a result, many foreign securities may be less liquid and more volatile than U.S. securities. These factors may affect the prices of securities issued by foreign companies and governments located in developing countries more than those in countries with mature economies. For example, many developing countries have, in the past, experienced high rates of inflation or sharply devalued their currencies against the U.S. dollar, thereby causing the value of investments in companies located in those countries to decline. Transaction costs are often higher in developing countries and there may be delays in settlement procedures. IPOs of securities issued by unseasoned companies with little or no operating history are risky and their prices are highly volatile, but they can result in very large gains in their initial trading. There can be no assurance that the fund will have favorable IPO investment opportunities in the future. Attractive IPOs are often oversubscribed and may not be available to the fund, or may be available in only very limited quantities. An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. 2 --------------------------- AIM GLOBAL HEALTH CARE FUND --------------------------- PERFORMANCE INFORMATION -------------------------------------------------------------------------------- The bar chart and table shown below provide an indication of the risks of investing in the fund. The fund's past performance (before and after taxes) is not necessarily an indication of its future performance. ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------- The following bar chart shows changes in the performance of the fund's Class A shares from year to year. The bar chart does not reflect sales loads. If it did, the annual total returns shown would be lower. (PERFORMANCE GRAPH)
ANNUAL YEAR ENDED TOTAL DECEMBER 31 RETURNS ----------- ------- 1996................................................................... 23.84% 1997................................................................... 7.96% 1998................................................................... 18.43% 1999................................................................... 5.52% 2000................................................................... 52.08% 2001................................................................... 4.70% 2002................................................................... -22.68% 2003................................................................... 21.44% 2004................................................................... 9.17% 2005................................................................... 8.68%
During the periods shown in the bar chart, the highest quarterly return was 21.61% (quarter ended December 31, 1998) and the lowest quarterly return was -11.32% (quarter ended September 30, 1998). 3 --------------------------- AIM GLOBAL HEALTH CARE FUND --------------------------- PERFORMANCE TABLE The following performance table compares the fund's performance to that of a broad-based securities market index, a style specific index, and a peer group index. The fund's performance reflects payment of sales loads, if applicable. The indices may not reflect payment of fees, expenses or taxes. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below.
AVERAGE ANNUAL TOTAL RETURNS ---------------------------------------------------------------------------------------- (for the periods ended December SINCE INCEPTION 31, 2005) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE ---------------------------------------------------------------------------------------- Class A 08/07/89 Return Before Taxes 2.71% 1.97% 10.85% Return After Taxes on Distributions 2.25 1.13 8.52 Return After Taxes on Distributions and Sale of Fund Shares 2.38 1.31 8.14 Class B 04/01/93 Return Before Taxes 2.94 2.23 11.04 Class C 03/01/99 Return Before Taxes 6.93 2.58 -- 9.09 % Investor Class(2) 08/07/89(2) Return Before Taxes 8.72 3.13 11.48 ---------------------------------------------------------------------------------------- MSCI World Index(3) 9.49 2.18 7.04 -- MSCI World Health Care Index(3,4) 9.43 0.01 -- Lipper Health/Biotech Fund Index(3,5) 11.48 1.44 11.32 -- ----------------------------------------------------------------------------------------
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A only and after-tax returns for Class B, C and Investor will vary. (1) Since inception performance is only provided for a class with less than ten calendar years of performance. (2) The returns shown for these periods are the blended returns of the historical performance of the fund's Investor Class shares since their inception and the restated historical performance of the fund's Class A shares (for the periods prior to the inception of the Investor Class shares) at net asset value, which restated performance will reflect the Rule 12b-1 fees applicable to the Class A shares. The inception date shown is that of the fund's Class A shares. The inception date of the Investor Class shares is July 15, 2005. (3) The Morgan Stanley Capital International World Index measures the performance of securities listed on stock exchanges of 23 developed countries. The fund has also included the Morgan Stanley Capital International World Health Care Index, which the fund believes more closely reflects the performance of the types of securities in which the fund invests. In addition, the fund has included the Lipper Health/Biotech Index (which may or may not include the fund) for comparison to a peer group. (4) The MSCI World Health Care Index includes health care securities tracked by Morgan Stanley Capital International. (5) The Lipper Health/Biotech Fund Index is an equally weighted representation of the 30 largest funds within the Lipper Health/Biotech category. These funds invest at least 65% of their portfolios in equity securities of companies engaged in healthcare, medicine and biotechnology. 4 --------------------------- AIM GLOBAL HEALTH CARE FUND --------------------------- FEE TABLE AND EXPENSE EXAMPLE -------------------------------------------------------------------------------- FEE TABLE This table describes the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES ---------------------------------------------------------------------------------------------------- (fees paid directly from INVESTOR your investment) CLASS A CLASS B CLASS C CLASS ---------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(1,2) 5.00% 1.00% None ----------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(3,4) ------------------------------------------------------------------------------------------------- (expenses that are deducted INVESTOR from fund assets) CLASS A CLASS B CLASS C CLASS ------------------------------------------------------------------------------------------------- Management Fees(5) 0.62% 0.62% 0.62% 0.62% Distribution and/or Service (12b-1) Fees(6) 0.25 1.00 1.00 0.25 Other Expenses 0.38 0.38 0.38 0.38 Total Annual Fund Operating Expenses(7) 1.25 2.00 2.00 1.25 -------------------------------------------------------------------------------------------------
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares within 18 months from the date of purchase, you may pay a 1.00% contingent deferred sales charge (CDSC) at the time of redemption. (2) If you are a retirement plan participant and your retirement plan bought $1,000,000 or more of Class A shares, you may pay a 1.00% CDSC if a total redemption of the retirement plan assets occurs within 12 months from the date of the retirement plan's initial purchase. (3) There is no guarantee that actual expenses will be the same as those shown in the table. (4) Total Annual Fund Operating Expenses have been restated to reflect the current fees in effect upon the closing of the reorganization of AIM Health Sciences Fund into the fund on July 18, 2005. (5) Effective July 18, 2005, the Board of Trustees has approved a permanent reduction of the advisory fee of the fund to 0.75% of the first $350 million, plus 0.65% of the next $350 million, plus 0.55% of the next $1.3 billion, plus 0.45% of the next $2 billion, plus 0.40% of the next $2 billion, plus 0.375% of the next $2 billion, plus 0.35% of the Fund's average daily net assets in excess of $8 billion. (6) The Board of Trustees has approved a permanent reduction of the Rule 12b-1 fees applicable to Class A shares to 0.25% effective July 1, 2005. Distribution and/or Services (12b-1) Fees reflect this agreement. (7) At the request of the Board of Trustees, AMVESCAP PLC has agreed to reimburse the fund for expenses related to market timing matters. If a financial institution is managing your account you may also be charged a transaction or other fee by such financial institution. As a result of 12b-1 fees, long-term shareholders in the fund may pay more than the maximum permitted initial sales charge. EXPENSE EXAMPLE This example is intended to help you compare the costs of investing in different classes of the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year, that the fund's operating expenses remain the same and includes the effect of any contractual fee waivers and/or expense reimbursements, if any. To the extent fees are waived and/or expenses are reimbursed voluntarily, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- Class A $670 $925 $1,199 $1,978 Class B 703 927 1,278 2,134 Class C 303 627 1,078 2,327 Investor Class 127 397 686 1,511 --------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- Class A $670 $925 $1,199 $1,978 Class B 203 627 1,078 2,134 Class C 203 627 1,078 2,327 Investor Class 127 397 686 1,511 --------------------------------------------------------------------------------
5 --------------------------- AIM GLOBAL HEALTH CARE FUND --------------------------- HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION -------------------------------------------------------------------------------- The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney general requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following: - You invest $10,000 in the fund and hold it for the entire 10 year period; - Your investment has a 5% return before expenses each year; - Hypotheticals both with and without any applicable initial sales charge applied (see "Shareholder Information--Choosing a Share Class" section of this prospectus for applicability of initial sales charge); and - There is no sales charge on reinvested dividends. There is no assurance that the annual expense ratio will be the expense ratio for the fund classes for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to voluntary arrangement, your actual expenses may be less. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
CLASS A (INCLUDES MAXIMUM SALES CHARGE) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ---------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.25% 1.25% 1.25% 1.25% 1.25% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses (1.75)% 1.93% 5.76% 9.72% 13.84% End of Year Balance $ 9,804.38 $10,172.04 $10,553.49 $10,949.25 $11,359.84 Estimated Annual Expenses $ 670.34 $ 124.85 $ 129.53 $ 134.39 $ 139.43 ---------------------------------------------------------------------------------------------- CLASS A (INCLUDES MAXIMUM SALES CHARGE) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 Annual Expense Ratio(1) 1.25% 1.25% 1.25% 1.25% 1.25% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 18.11% 22.54% 27.13% 31.90% 36.84% End of Year Balance $11,785.84 $12,227.81 $12,686.35 $13,162.09 $13,655.67 Estimated Annual Expenses $ 144.66 $ 150.09 $ 155.71 $ 161.55 $ 167.61 ----------------------------------------------------------------------------------------------
CLASS A (WITHOUT MAXIMUM SALES CHARGE) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ---------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.25% 1.25% 1.25% 1.25% 1.25% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.75% 7.64% 11.68% 15.87% 20.21% End of Year Balance $10,375.00 $10,764.06 $11,167.71 $11,586.50 $12,021.00 Estimated Annual Expenses $ 127.34 $ 132.12 $ 137.07 $ 142.21 $ 147.55 ---------------------------------------------------------------------------------------------- CLASS A (WITHOUT MAXIMUM SALES CHARGE) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ---------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.25% 1.25% 1.25% 1.25% 1.25% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 24.72% 29.39% 34.25% 39.28% 44.50% End of Year Balance $12,471.79 $12,939.48 $13,424.71 $13,928.13 $14,450.44 Estimated Annual Expenses $ 153.08 $ 158.82 $ 164.78 $ 170.96 $ 177.37 ----------------------------------------------------------------------------------------------
CLASS B(2) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ---------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 2.00% 2.00% 2.00% 2.00% 2.00% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.00% 6.09% 9.27% 12.55% 15.93% End of Year Balance $10,300.00 $10,609.00 $10,927.27 $11,255.09 $11,592.74 Estimated Annual Expenses $ 203.00 $ 209.09 $ 215.36 $ 221.82 $ 228.48 ---------------------------------------------------------------------------------------------- CLASS B(2) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ---------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 2.00% 2.00% 2.00% 1.25% 1.25% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 19.41% 22.99% 26.68% 31.43% 36.36% End of Year Balance $11,940.52 $12,298.74 $12,667.70 $13,142.74 $13,635.59 Estimated Annual Expenses $ 235.33 $ 242.39 $ 249.66 $ 161.32 $ 167.36 ----------------------------------------------------------------------------------------------
CLASS C(2) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ---------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 2.00% 2.00% 2.00% 2.00% 2.00% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.00% 6.09% 9.27% 12.55% 15.93% End of Year Balance $10,300.00 $10,609.00 $10,927.27 $11,255.09 $11,592.74 Estimated Annual Expenses $ 203.00 $ 209.09 $ 215.36 $ 221.82 $ 228.48 ---------------------------------------------------------------------------------------------- CLASS C(2) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ---------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 2.00% 2.00% 2.00% 2.00% 2.00% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 19.41% 22.99% 26.68% 30.48% 34.39% End of Year Balance $11,940.52 $12,298.74 $12,667.70 $13,047.73 $13,439.16 Estimated Annual Expenses $ 235.33 $ 242.39 $ 249.66 $ 257.15 $ 264.87 ----------------------------------------------------------------------------------------------
6 --------------------------- AIM GLOBAL HEALTH CARE FUND ---------------------------
INVESTOR CLASS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ---------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.25% 1.25% 1.25% 1.25% 1.25% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.75% 7.64% 11.68% 15.87% 20.21% End of Year Balance $10,375.00 $10,764.06 $11,167.71 $11,586.50 $12,021.00 Estimated Annual Expenses $ 127.34 $ 132.12 $ 137.07 $ 142.21 $ 147.55 ---------------------------------------------------------------------------------------------- INVESTOR CLASS YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ---------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.25% 1.25% 1.25% 1.25% 1.25% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 24.72% 29.39% 34.25% 39.28% 44.50% End of Year Balance $12,471.79 $12,939.48 $13,424.71 $13,928.13 $14,450.44 Estimated Annual Expenses $ 153.08 $ 158.82 $ 164.78 $ 170.96 $ 177.37 ----------------------------------------------------------------------------------------------
(1) Your actual expenses may be higher or lower than those shown. (2) The hypothetical assumes you hold your investment for a full 10 years. Therefore, any applicable deferred sales charge that might apply in years one through five for Class B and year one for Class C, have not been deducted. DISCLOSURE OF PORTFOLIO HOLDINGS -------------------------------------------------------------------------------- The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission (SEC) within 60 days of the fund's first and third fiscal quarter-ends. In addition, portfolio holdings information for the fund is available at http://www.aiminvestments.com. To reach this information, access the fund's overview page on the website. Links to the following fund information are located in the upper right side of this website page:
--------------------------------------------------------------------------------------------------------------------------------- APPROXIMATE DATE OF INFORMATION REMAINS INFORMATION WEBSITE POSTING POSTED ON WEBSITE --------------------------------------------------------------------------------------------------------------------------------- Top ten holdings as of month-end 15 days after month-end Until posting of the following month's top ten holdings --------------------------------------------------------------------------------------------------------------------------------- Complete portfolio holdings as of 30 days after calendar quarter-end For one year calendar quarter-end ---------------------------------------------------------------------------------------------------------------------------------
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information, which is available at http://www.aiminvestments.com. 7 --------------------------- AIM GLOBAL HEALTH CARE FUND --------------------------- FUND MANAGEMENT -------------------------------------------------------------------------------- THE ADVISOR A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund. The advisor has acted as investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives. On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may be harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC. Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; (iii) that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; and (iv) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information. As a result of the matters discussed above, investors in the AIM funds might react by redeeming their investments. This might require the funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the funds. ADVISOR COMPENSATION During the fiscal year ended October 31, 2005, the advisor received compensation of 0.68% of average daily net assets. A discussion regarding the basis for the Board of Trustees' approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve month period ended October 31, 2005. 8 --------------------------- AIM GLOBAL HEALTH CARE FUND --------------------------- PORTFOLIO MANAGER(S) The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio: Derek M. Taner, Portfolio Manager, is primarily responsible for the day-to-day management of the fund's portfolio. He has been responsible for the fund since 2005 and has been associated with the advisor and/or its affiliates since 2005. From 2000 to 2005, he was a portfolio manager and analyst for Franklin Advisers, Inc. He is assisted by the advisor's Global Health Care Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on the portfolio manager and the team, including biographies of other members of the team, may be found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus. The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of his compensation structure, and information regarding other accounts he manages. OTHER INFORMATION -------------------------------------------------------------------------------- SALES CHARGES Purchases of Class A shares of AIM Global Health Care Fund are subject to the maximum of 5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class" section of this prospectus. Certain purchases of Class A shares at net asset value may be subject to the contingent deferred sales charge listed in that section. Purchases of Class B and Class C shares are subject to the contingent deferred sales charges listed in that section. DIVIDENDS AND DISTRIBUTIONS The fund expects that its distributions, if any, will consist primarily of capital gains. DIVIDENDS The fund generally declares and pays dividends, if any, annually. CAPITAL GAINS DISTRIBUTIONS The fund generally distributes long-term and short-term capital gains, if any, annually. 9 --------------------------- AIM GLOBAL HEALTH CARE FUND --------------------------- FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
CLASS A ------------------------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------ 2005 2004 2003 2002 2001 -------- -------- -------- -------- -------- Net asset value, beginning of period $ 26.38 $ 24.09 $ 22.41 $ 29.93 $ 30.12 ---------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.18)(a) (0.17)(a) (0.13) (0.29)(a) (0.39)(a) ---------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.57 2.46 1.81 (3.17) 3.44 ============================================================================================================================ Total from investment operations 3.39 2.29 1.68 (3.46) 3.05 ============================================================================================================================ Less distributions from net realized gains -- -- -- (4.06) (3.24) ============================================================================================================================ Net asset value, end of period $ 29.77 $ 26.38 $ 24.09 $ 22.41 $ 29.93 ____________________________________________________________________________________________________________________________ ============================================================================================================================ Total return(b) 12.85% 9.51% 7.50% (13.76)% 10.85% ____________________________________________________________________________________________________________________________ ============================================================================================================================ Ratios/supplemental data: Net assets, end of period (000s omitted) $554,679 $550,319 $536,746 $533,216 $588,072 ____________________________________________________________________________________________________________________________ ============================================================================================================================ Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.48%(c) 1.89% 1.94% 1.86% 1.75% ---------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.60%(c) 1.91% 1.94% 1.86% 1.75% ============================================================================================================================ Ratio of net investment income (loss) to average net assets (0.64)%(c) (0.63)% (0.56)% (1.10)% (1.28)% ____________________________________________________________________________________________________________________________ ============================================================================================================================ Portfolio turnover rate 92% 64% 99% 153% 207% ____________________________________________________________________________________________________________________________ ============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $551,685,420.
CLASS B ------------------------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------ 2005 2004 2003 2002 2001 -------- -------- -------- -------- -------- Net asset value, beginning of period $ 24.08 $ 22.09 $ 20.66 $ 28.03 $ 28.53 ---------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.33)(a) (0.27)(a) (0.23) (0.38)(a) (0.51)(a) ---------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.24 2.26 1.66 (2.93) 3.25 ============================================================================================================================ Total from investment operations 2.91 1.99 1.43 (3.31) 2.74 ============================================================================================================================ Less distributions from net realized gains -- -- -- (4.06) (3.24) ============================================================================================================================ Net asset value, end of period $ 26.99 $ 24.08 $ 22.09 $ 20.66 $ 28.03 ____________________________________________________________________________________________________________________________ ============================================================================================================================ Total return(b) 12.08% 9.01% 6.92% (14.21)% 10.32% ____________________________________________________________________________________________________________________________ ============================================================================================================================ Ratios/supplemental data: Net assets, end of period (000s omitted) $153,766 $168,468 $179,646 $187,793 $219,036 ____________________________________________________________________________________________________________________________ ============================================================================================================================ Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.14%(c) 2.39% 2.44% 2.36% 2.25% ---------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.26%(c) 2.41% 2.44% 2.36% 2.25% ============================================================================================================================ Ratio of net investment income (loss) to average net assets (1.30)%(c) (1.13)% (1.06)% (1.60)% (1.78)% ____________________________________________________________________________________________________________________________ ============================================================================================================================ Portfolio turnover rate 92% 64% 99% 153% 207% ____________________________________________________________________________________________________________________________ ============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $159,641,010. 10 --------------------------- AIM GLOBAL HEALTH CARE FUND --------------------------- FINANCIAL HIGHLIGHTS (CONTINUED) --------------------------------------------------------------------------------
CLASS C ----------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------- 2005 2004 2003 2002 2001 ------- ------- ------- ------- -------- Net asset value, beginning of period $ 24.09 $ 22.11 $ 20.67 $ 28.03 $ 28.53 --------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.33)(a) (0.27)(a) (0.23) (0.38)(a) (0.51)(a) --------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.25 2.25 1.67 (2.92) 3.25 ===================================================================================================================== Total from investment operations 2.92 1.98 1.44 (3.30) 2.74 ===================================================================================================================== Less distributions from net realized gains -- -- -- (4.06) (3.24) ===================================================================================================================== Net asset value, end of period $ 27.01 $ 24.09 $ 22.11 $ 20.67 $ 28.03 _____________________________________________________________________________________________________________________ ===================================================================================================================== Total return(b) 12.12% 8.95% 6.97% (14.18)% 10.32% _____________________________________________________________________________________________________________________ ===================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $45,591 $42,863 $43,482 $46,759 $ 36,366 _____________________________________________________________________________________________________________________ ===================================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.14%(c) 2.39% 2.44% 2.36% 2.25% --------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.26%(c) 2.41% 2.44% 2.36% 2.25% ===================================================================================================================== Ratio of net investment income (loss) to average net assets (1.30)%(c) (1.13)% (1.06)% (1.60)% (1.78)% _____________________________________________________________________________________________________________________ ===================================================================================================================== Portfolio turnover rate 92% 64% 99% 153% 207% _____________________________________________________________________________________________________________________ =====================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $43,980,251.
INVESTOR CLASS ------------- JULY 15, 2005 (DATE SALES COMMENCED) TO OCTOBER 31, 2005 ------------- Net asset value, beginning of period $ 28.95 ----------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.04)(a) ----------------------------------------------------------------------------- Net gains on securities (both realized and unrealized) 0.86 ============================================================================= Total from investment operations 0.82 ============================================================================= Net asset value, end of period $ 29.77 _____________________________________________________________________________ ============================================================================= Total return(b) 2.83% _____________________________________________________________________________ ============================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $807,560 _____________________________________________________________________________ ============================================================================= Ratio of expenses to average net assets 1.25%(c) ============================================================================= Ratio of net investment income (loss) to average net assets (0.41)%(c) _____________________________________________________________________________ ============================================================================= Portfolio turnover rate 92% _____________________________________________________________________________ =============================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. (c) Ratios are annualized and based on average daily net assets of $808,033,776. 11 ------------- THE AIM FUNDS ------------- SHAREHOLDER INFORMATION -------------------------------------------------------------------------------- In addition to the fund, AIM serves as investment advisor to many other mutual funds (the funds). The following information is about all the funds. CHOOSING A SHARE CLASS Most of the funds have multiple classes of shares, each class representing an interest in the same portfolio of investments. Certain classes have higher expenses than other classes which may lower the return on your investment relative to a less expensive class. In deciding which class of shares to purchase, you should consider, among other things, (i) the length of time you expect to hold your shares, (ii) the provisions of the distribution plan, if any, applicable to the class (iii) the eligibility requirements that apply to purchases of a particular class, and (iv) any services you may receive in making your investment determination. In addition, you should consider the other factors described below. Please contact your financial advisor to assist you in making your decision.
CLASS A(1) CLASS A3 CLASS B(4) CLASS C CLASS R INVESTOR CLASS --------------------------------------------------------------------------------------------------------------- - Initial sales - No initial - No initial sales - No initial - No initial - No initial charge sales charge charge sales charge sales charge sales charge - Reduced or waived - No contingent - Contingent - Contingent - Generally, no - No contingent initial sales deferred sales deferred sales deferred sales contingent deferred sales charge for charge charge on charge on deferred sales charge certain redemptions redemptions charge(2) purchases(2) within six years within one year(7) - Lower - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of distribution and 0.25% 1.00% 1.00% 0.50% 0.25%(3) service (12b-1) fee than Class B, Class C or Class R shares (See "Fee Table and Expense Example")(3) - Does not - Converts to - Does not - Does not - Does not convert to Class A shares convert to convert to convert to Class A shares on or about the Class A shares Class A shares Class A shares end of the month which is at least eight years after the date on which shares were purchased along with a pro rata portion of its reinvested dividends and distributions(5) - Generally more - Available only - Purchase orders - Generally more - Generally, - Closed to new appropriate for for a limited limited to appropriate only available investors, long-term number of amount less than for short-term to employee except as investors funds $100,000(6) investors benefit described in - Purchase plans(9) the orders limited "Purchasing to amount less Shares -- Grandfathered than Investors" $1,000,000(8) section of your prospectus ---------------------------------------------------------------------------------------------------------------
Certain funds also offer Institutional Class shares to certain eligible institutional investors; consult the fund's Statement of Additional Information for the Institutional Class shares for details. (1) As of the close of business on October 30, 2002, Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors. (2) A contingent deferred sales charge may apply in some cases. (3) Class A shares of AIM Tax-Free Intermediate Fund and Investor Class shares of AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio do not have a 12b-1 fee. (4) Class B shares are not available as an investment for retirement plans maintained pursuant to Section 401 of the Internal Revenue Code. These plans include 401(k) plans (including AIM Solo 401(k) plans), money purchase pension plans and profit sharing plans. Plans that have existing accounts invested in Class B shares will continue to be allowed to make additional purchases. (5) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares. (6) Any purchase order for Class B shares in an amount equal to or in excess of $100,000 will be rejected. Although our ability to monitor or enforce this limitation for underlying shareholders of omnibus accounts is severely limited, we have advised the administrators of omnibus accounts maintained by brokers, retirement plans and approved fee-based programs of this limitation. (7) A contingent deferred sales charge (CDSC) does not apply to redemption of Class C shares of AIM Short Term Bond Fund unless you exchange Class C shares of another fund that are subject to a CDSC into AIM Short Term Bond Fund. (8) Any purchase order for Class C shares in an amount equal to or in excess of $1,000,000 will be rejected. Although our ability to monitor or enforce this limitation for underlying shareholders of omnibus accounts is severely limited, we have advised the administrators of omnibus accounts maintained by brokers, retirement plans and approved fee-based programs of this limitation. (9) Generally, Class R shares are only available to employee benefit plans. These may include, for example, retirement and deferred compensation plans maintained pursuant to Sections 401, 403, 457 of the Internal Revenue Code; nonqualified deferred compensation plans; health savings accounts maintained pursuant to Section 223 of the Internal Revenue Code, respectively; and voluntary employees' beneficiary arrangements maintained pursuant to Section 501(c)(9) of the Internal Revenue Code. Retirement plans maintained pursuant to Section 401 generally include 401(k) plans, profit sharing plans, money purchase pension plans, and defined benefit plans. Retirement plans maintained pursuant to Section 403 must be established and maintained by non-profit organizations operating pursuant to Section 501(c)(3) of the Internal Revenue Code in order to purchase Class R shares. Class R shares are generally not available for individual retirement accounts such as traditional, Roth, SEP, SAR-SEP and SIMPLE IRAs. -------------------------------------------------------------------------------- MCF--02/06 A-1 ------------- THE AIM FUNDS ------------- DISTRIBUTION AND SERVICE (12b-1) FEES Each fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares and AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio with respect to their Investor Class shares) has adopted 12b-1 plans that allow the fund to pay distribution fees to A I M Distributors, Inc. (ADI) for the sale and distribution of its shares and fees for services provided to shareholders, all or a substantial portion of which are paid to the dealer of record. Because the fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. SALES CHARGES Sales charges on the funds and classes of those funds are detailed below. As used below, the term "offering price" with respect to all categories of Class A shares includes the initial sales charge. INITIAL SALES CHARGES The funds (except AIM Short Term Bond Fund) are grouped into three categories with respect to initial sales charges. The "Other Information" section of your prospectus will tell you in what category your particular fund is classified. CATEGORY I INITIAL SALES CHARGES -------------------------------------------------------------
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 ------------------------------------------------------------------------------
AIM SHORT TERM BOND FUND INITIAL SALES CHARGES -------------------------------------------------------------
INVESTOR'S SALES CHARGE --------------------------- AMOUNT OF INVESTMENT AS A % OF AS A % OF IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT ------------------------------------------------------------------------------ Less than $ 100,000 2.50% 2.56% $100,000 but less than $ 250,000 2.00 2.04 $250,000 but less than $ 500,000 1.50 1.52 $500,000 but less than $1,000,000 1.25 1.27 ------------------------------------------------------------------------------
SHARES SOLD WITHOUT A SALES CHARGE You will not pay: - an initial sales charge on purchases of Class A shares of AIM Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money Market Fund; - an initial sales charge or a contingent deferred sales charge (CDSC) on Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund; or - an initial sales charge or a CDSC on Investor Class shares of any fund. PURCHASE OF CLASS A SHARES AT NET ASSET VALUE Certain categories of persons are permitted to purchase Class A shares of the funds without paying an initial sales charge because their transactions involve little expense, such as persons who have a relationship with the funds or with AIM and certain programs for purchase. MCF--02/06 A-2 ------------- THE AIM FUNDS ------------- Accordingly, the following purchasers will not pay initial sales charges on purchases of Class A shares: - A I M Management Group Inc., and its affiliates, or their clients; - Any current or retired officer, director, trustee or employee (and members of their Immediate Family) of A I M Management Group Inc., its affiliates or The AIM Family of Funds, and any foundation, trust, employee benefit plan or deferred compensation plan established exclusively for the benefit of, or by, such persons; - Sales representatives and employees (and members of their Immediate Family) of selling group members of financial institutions that have arrangements with such selling group members; - Purchases through approved fee-based programs; - Employer-sponsored retirement plans that are Qualified Purchasers, provided that: a. a plan's assets are at least $1 million; b. there are at least 100 employees eligible to participate in the plan; or c. all plan transactions are executed through a single omnibus account per AIM fund and the financial institution or service organization has entered into the appropriate agreement with the distributor; further provided that retirement plans maintained pursuant to Section 403(b) of the Internal Revenue Code of 1986, as amended, (the Code) are not eligible to purchase shares at net asset value based on the aggregate investment made by the plan or the number of eligible employees unless the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code; - Shareholders of Investor Class shares of an AIM fund; - Qualified Tuition Programs created and maintained in accordance with Section 529 of the Code; - Insurance company separate accounts; - Transfers to IRAs that are attributable to AIM fund investments held in 403(b)(7)s, SIMPLEs, SEPs, SARSEPs, Traditional or Roth IRAs; and - Rollovers from AIM-held 403(b)(7)s, 401(K)s, SEPs, SIMPLEs, SARSEPS, Money Purchase Plans, and Profit Sharing Plans if the assets are transferred to an AIM IRA. For more detailed information regarding eligibility to purchase or redeem shares at reduced or without sales charges, or a description of any defined term used above, please consult the fund's website at www.aiminvestments.com and click on the links "My Account", Service Center, or consult the fund's Statement of Additional Information, which is available on that same website or upon request free of charge. CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of Category I and II funds and AIM Short Term Bond Fund at net asset value. However, if you redeem these shares prior to 18 months after the date of purchase, they will be subject to a CDSC of 1%. If you currently own Class A shares of a Category I or II fund or AIM Short Term Bond Fund and make additional purchases at net asset value that result in account balances of $1,000,000 or more, the additional shares purchased will be subject to an 18-month, 1% CDSC. Some retirement plans can purchase Class A shares at their net asset value per share. If ADI paid a concession to the dealer of record in connection with a Large Purchase of Class A shares by a retirement plan, the Class A shares may be subject to a 1% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the plan's initial purchase. You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC. ADI may pay a dealer concession and/or a service fee for Large Purchases and purchases by certain retirement plans. CONTINGENT DEFERRED SALES CHARGES FOR CLASS B AND CLASS C SHARES OF FUNDS OTHER THAN AIM SHORT-TERM BOND FUND You can purchase Class B and Class C shares at their net asset value per share. However, when you redeem them, they are subject to a CDSC in the following percentages:
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 --------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGES FOR CLASS C SHARES OF AIM SHORT-TERM BOND FUND You can purchase Class C shares of AIM Short Term Bond Fund at their net asset value and not subject to a CDSC. However, you may be charged a CDSC when you redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC. CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES You can purchase Class R shares at their net asset value per share. If ADI pays a concession to the dealer of record, however, the Class R shares are subject to a 0.75% CDSC at the time of redemption if all retirement plan assets are redeemed within 12 months from the date of the retirement plan's initial purchase. MCF--02/06 A-3 ------------- THE AIM FUNDS ------------- COMPUTING A CDSC The CDSC on redemptions of shares is computed based on the lower of their original purchase price or current market value, net of reinvested dividends and capital gains distributions. In determining whether to charge a CDSC, we will assume that you are redeeming shares on which there is no CDSC first and, then, shares in the order of purchase. REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS You may qualify for reduced sales charges or sales charge exceptions. To qualify for these reductions or exceptions, you or your financial advisor must notify the transfer agent at the time of purchase that your purchase qualifies for such treatment. Certain individuals and employer-sponsored retirement plans may link accounts for the purpose of qualifying for lower initial sales charges. You or your financial consultant must provide other account numbers to be considered for Rights of Accumulation, or mark the Letter of Intent section on the account application, or provide other relevant documentation, so that the transfer agent can verify your eligibility for the reduction or exception. Consult the fund's Statement of Additional Information for details. REDUCED SALES CHARGES You may be eligible to buy Class A shares at reduced initial sales charge rates under Rights of Accumulation or Letters of Intent under certain circumstances. Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class B and Class C shares of AIM Floating Rate Fund and Investor Class shares of any fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges pursuant to Rights of Accumulation or Letters of Intent. RIGHTS OF ACCUMULATION You may combine your new purchases of Class A shares of a fund with fund shares currently owned (Class A, B, C or R) and investments in the AIM College Savings Plan(SM) for the purpose of qualifying for the lower initial sales charge rates that apply to larger purchases. The applicable initial sales charge for the new purchase is based on the total of your current purchase and the public offering price of all other shares you own. The transfer agent may automatically link certain accounts registered in the same name, with the same taxpayer identification number, for the purpose of qualifying you for lower initial sales charge rates. LETTERS OF INTENT Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount of Class A shares of the funds during a 13-month period. The amount you agree to purchase determines the initial sales charge you pay. If the full face amount of the LOI is not invested by the end of the 13-month period, your account will be adjusted to the higher initial sales charge level for the amount actually invested. INITIAL SALES CHARGE EXCEPTIONS You will not pay initial sales charges - on shares purchased by reinvesting dividends and distributions; - when exchanging shares among certain funds; or - when a merger, consolidation, or acquisition of assets of a fund occurs. CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS You will not pay a CDSC - if you redeem Class B shares you held for more than six years; - if you redeem Class C shares you held for more than one year; - if you redeem Class C shares of a fund other than AIM Short Term Bond Fund and you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund; - if you redeem Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another fund and the original purchase was subject to a CDSC; - if you are a participant in a retirement plan and your plan redeems, at any time, less than all of the Class A, C or Class R shares held through such plan that would otherwise be subject to a CDSC; - if you are a participant in a retirement plan and your plan redeems, after having held them for more than one year from the date of the plan's initial purchase, all of the Class A, C or Class R shares held through such plan that would otherwise be subject to a CDSC; - if you are a participant in a qualified retirement plan and redeem Class A, Class C or Class R shares in order to fund a distribution; - if you participate in the Systematic Redemption Plan and withdraw up to 12% of the value of your shares that are subject to a CDSC in any twelve-month period; - if you redeem shares to pay account fees; - for redemptions following the death or post-purchase disability of a shareholder or beneficial owner; - if you redeem shares acquired through reinvestment of dividends and distributions; and - on increases in the net asset value of your shares. There may be other situations when you may be able to purchase or redeem shares at reduced or without sales charges. Consult the fund's Statement of Additional Information for details. ADDITIONAL PAYMENTS TO FINANCIAL ADVISORS The financial advisor through which you purchase your shares may receive all or a portion of the sales charges and Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI or one or more of its corporate affiliates (collectively, ADI Affiliates) may make additional cash payments to financial advisors in connection with the promotion and sale of shares of the funds. These MCF--02/06 A-4 ------------- THE AIM FUNDS ------------- additional cash payments may include cash revenue sharing payments and other payments for certain administrative services, transaction processing services and certain other marketing support services. ADI Affiliates make these payments from their own resources, from ADI's retention of underwriting concessions and from payments to ADI under Rule 12b-1 plans. In this context, "financial advisors" include any broker, dealer, bank (including bank trust departments), registered investment advisor, financial planner, retirement plan administrator and any other financial intermediary having a selling, administration or similar agreement with ADI Affiliates. ADI Affiliates make revenue sharing payments as incentives to certain financial advisors to promote and sell shares of the funds. The benefits ADI Affiliates receive when they make these payments include, among other things, placing the funds on the financial advisor's funds sales system, placing the funds on the financial advisor's preferred or recommended fund list, and access (in some cases on a preferential basis over other competitors) to individual members of the financial advisor's sales force or to the financial advisor's management. Revenue sharing payments are sometimes referred to as "shelf space" payments because the payments compensate the financial advisor for including the funds in its fund sales system (on its "sales shelf"). ADI Affiliates compensate financial advisors differently depending typically on the level and/or type of considerations provided by the financial advisor. The revenue sharing payments ADI Affiliates make may be calculated on sales of shares of the funds (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the public offering price of all shares sold by the financial advisor during the particular period. Such payments also may be calculated on the average daily net assets of the applicable AIM funds attributable to that particular financial advisor (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make new sales of shares of the funds and Asset-Based Payments primarily create incentives to retain previously sold shares of the funds in investor accounts. ADI Affiliates may pay a financial advisor either or both Sales-Based Payments and Asset-Based Payments. ADI Affiliates also may make other payments to certain financial advisors for processing certain transactions or account maintenance activities (such as processing purchases, redemptions or exchanges or producing customer account statements) or for providing certain other marketing support services (such as financial assistance for conferences, seminars or sales or training programs at which ADI Affiliates personnel may make presentations on the funds to the financial advisor's sales force). Financial advisors may earn profits on these payments for these services, since the amount of the payment may exceed the cost of providing the service. Certain of these payments are subject to limitations under applicable law. ADI Affiliates are motivated to make the payments described above since they promote the sale of fund shares and the retention of those investments by clients of financial advisors. To the extent financial advisors sell more shares of the funds or retain shares of the funds in their clients' accounts, ADI Affiliates benefit from the incremental management and other fees paid to ADI Affiliates by the funds with respect to those assets. You can find further details in the fund's Statement of Additional Information about these payments and the services provided by financial advisors. In certain cases these payments could be significant to the financial advisor. Your financial advisor may charge you additional fees or commissions other than those disclosed in this prospectus. You can ask your financial advisor about any payments it receives from ADI Affiliates or the funds, as well as about fees and/or commissions it charges. EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES While the funds provide their shareholders with daily liquidity, their investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the funds' shares (i.e., a purchase of fund shares followed shortly thereafter by a redemption of such shares, or vice versa) may hurt the long-term performance of certain funds by requiring them to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of such funds by causing them to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted. The Boards of Trustees have adopted policies and procedures designed to discourage excessive or short-term trading of fund shares for all funds except the money market funds. However, there is the risk that these funds' policies and procedures will prove ineffective in whole or in part to detect or prevent excessive or short-term trading. These funds may alter their policies at any time without prior notice to shareholders if the advisor believes the change would be in the best interests of long-term shareholders. AIM and its affiliates (collectively, AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the retail funds: (1) trade activity monitoring; (2) trading guidelines; (3) redemption fee on trades in certain funds; and (4) use of fair value pricing consistent with procedures approved by the Boards of Trustees of the funds. Each of these tools is described in more detail below. Although these tools are designed to discourage excessive short-term trading, you should understand that none of these tools alone nor all of them taken together eliminate the possibility that excessive short-term trading activity in the funds will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a MCF--02/06 A-5 ------------- THE AIM FUNDS ------------- manner that they believe is consistent with long-term shareholder interests. AIM Money Market Funds. The Boards of Trustees of AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio (the money market funds) have not adopted any policies and procedures that would limit frequent purchases and redemptions of such funds' shares. The Boards do not believe that it is appropriate to adopt any such policies and procedures for the money market funds for the following reasons: - The money market funds are offered to investors as cash management vehicles. Investors must perceive an investment in such funds as an alternative to cash, and must be able to purchase and redeem shares regularly and frequently. - One of the advantages of a money market fund as compared to other investment options is liquidity. Any policy that diminishes the liquidity of the money market funds will be detrimental to the continuing operations of such funds. - The money market funds' portfolio securities are valued on the basis of amortized cost, and such funds seeks to maintain a constant net asset value. As a result, there are no price arbitrage opportunities. - Because the money market funds seek to maintain a constant net asset value, investors expect to receive upon redemption the amount they originally invested in such funds. Imposition of redemption fees would run contrary to investor expectations. AIM Money Market Funds The Boards considered the risks of not having a specific policy that limits frequent purchases and redemptions, and it determined that those risks are minimal, especially in light of the reasons for not having such a policy as described above. Nonetheless, to the extent that the fund must maintain additional cash and/or securities with short-term durations than may otherwise be required, the fund's yield could be negatively impacted. TRADE ACTIVITY MONITORING The AIM Affiliates monitor selected trades on a daily basis in an effort to detect excessive short-term trading activities. If, as a result of this monitoring, the AIM Affiliates believe that a shareholder has engaged in excessive short-term trading, they will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the shareholder to take action to stop such activities or (ii) refusing to process future purchases or exchanges related to such activities in the shareholder's accounts other than exchanges into a money market fund. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the practical limitations described above. The ability of the AIM Affiliates to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and approved fee-based program accounts is severely limited or non-existent in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts. This is one reason why this tool cannot eliminate the possibility of excessive short-term trading. TRADING GUIDELINES If you exceed four exchanges out of a fund (other than AIM Money Market Fund, AIM Tax-Exempt Cash Fund, AIM Limited Maturity Treasury Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio) per calendar year, or a fund or an AIM Affiliate determines, in its sole discretion, that your short-term trading activity is excessive (regardless of whether or not you exceed such guidelines), it may, in its discretion, reject any additional purchase and exchange orders. Each fund and the AIM Affiliates may grant a hardship exception and accept exchanges in excess of these guidelines on a case-by-case basis, if they believe that granting such exceptions would not injure other shareholders. An exchange is the purchase of shares in one fund which is paid for with the proceeds from a redemption of shares of another fund effectuated on the same day. The movement out of one fund (redemption) and into one or more other funds (purchase) on the same day shall be counted as one exchange. Exchanges effected as part of programs that have been determined by an AIM Affiliate to be non-discretionary, such as dollar cost averaging, portfolio rebalancing, or other automatic non-discretionary programs that involve exchanges, generally will not be counted toward the trading guidelines limitation of four exchanges out of a fund per calendar year. The ability of the AIM Affiliates to monitor exchanges made by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and approved fee-based program accounts is severely limited or non-existent in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts and is unwilling or unable to implement these trading guidelines and may be further limited by systems limitations applicable to those types of accounts. Some investments in the funds are made indirectly through vehicles such as qualified tuition plans, variable annuity and insurance contracts, and funds of funds which use the funds as underlying investments (each a conduit investment vehicle). If shares of the funds are held in the name of a conduit investment vehicle and not in the names of the individual investors who have invested in the funds through the conduit investment vehicle, the conduit investment vehicle may be considered an individual shareholder of the funds. To the extent that a conduit investment vehicle is considered an individual shareholder of the funds, the funds are likely to be limited in their ability to impose exchange limitations on individual transactions initiated by investors who have invested in the funds through the conduit investment vehicle. REDEMPTION FEE You may be charged a 2% redemption fee if you redeem, including redeeming by exchange, shares of certain funds within 30 days of purchase. See "Redeeming Shares -- Redemption Fee" for more information. MCF--02/06 A-6 ------------- THE AIM FUNDS ------------- The ability of a fund to assess a redemption fee on the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and approved fee-based program accounts is severely limited or non-existent in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts and is unwilling or unable to assess such fees and may be further limited by systems limitations applicable to these types of accounts. For additional discussion of the applicability of redemption fees on shares of the fund held through omnibus accounts, retirement plan accounts, approved fee-based program accounts and conduit investment vehicles, see "Redeeming Shares -- Redemption Fee". FAIR VALUE PRICING Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of Trustees of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading. See "Pricing of Shares -- Determination of Net Asset Value" for more information. PURCHASING SHARES If you hold your shares through a broker/dealer or other financial institution, your eligibility to purchase those shares, the conditions for purchase and sale, and the minimum and maximum amounts allowed may differ depending on that institution's policies. MINIMUM INVESTMENTS PER FUND ACCOUNT There are no minimum investments with respect to Class R shares for fund accounts. The minimum investments with respect to Class A, A3, B and C shares and Investor Class shares for fund accounts are as follows:
INITIAL ADDITIONAL TYPE OF ACCOUNT INVESTMENTS INVESTMENTS ------------------------------------------------------------------------------------------------------------------------- Employer-Sponsored Retirement Plans (includes section 401, $ 0 ($25 per fund investment for $25 403 and 457 plans, and SEP, SARSEP and SIMPLE IRA plans) salary deferrals from Employer-Sponsored Retirement Plans) Systematic Purchase Plan 50 50 IRA, Roth IRA or Coverdell ESA 250 25 All other accounts 1,000 50 ADI has the discretion to accept orders for lesser amounts. -------------------------------------------------------------------------------------------------------------------------
HOW TO PURCHASE SHARES You may purchase shares using one of the options below. Purchase orders will not be processed unless the account application and purchase payment are received in good order. In accordance with the USA PATRIOT Act, if you fail to provide all the required information requested in the current account application, your purchase order will not be processed. Additionally, Federal law requires that the fund verify and record your identifying information. PURCHASE OPTIONS --------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT ------------------------------------------------------------------------------------------------------------------------- Through a Financial Advisor Contact your financial advisor. Same By Mail Mail completed account application and Mail your check and the remittance slip check to the transfer agent, AIM from your confirmation statement to the Investment Services, Inc., P.O. Box transfer agent. 4739, Houston, TX 77210-4739. By Wire Mail completed account application to Call the transfer agent to receive a the transfer agent. Call the transfer reference number. Then, use the wire agent at (800) 959-4246 to receive a instructions at left. reference number. Then, use the following wire instructions: Beneficiary Bank ABA/Routing #: 021000021 Beneficiary Account Number: 00100366807 Beneficiary Account Name: AIM Investment Services, Inc. RFB: Fund Name, Reference # OBI: Your Name, Account #
MCF--02/06 A-7 ------------- THE AIM FUNDS -------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT ------------------------------------------------------------------------------------------------------------------------- By Telephone Open your account using one of the Select the AIM Bank methods described above. Connection--Servicemark-- option on your completed account application or complete an AIM Bank Connection form. Mail the application or form to the transfer agent. Once the transfer agent has received the form, call the transfer agent to place your purchase order. Call the AIM 24-hour Automated Investor Line at 1-800-246-5463. You may place your order after you have provided the bank instructions that will be requested. By Internet Open your account using one of the Access your account at methods described above. www.aiminvestments.com. The proper bank instructions must have been provided on your account. You may not purchase shares in retirement accounts on the internet. -------------------------------------------------------------------------------------------------------------------------
GRANDFATHERED INVESTORS Investor Class shares of a fund may be purchased only by: (1) persons or entities who had established an account, prior to April 1, 2002, in Investor Class shares of any of the funds currently distributed by ADI (the Grandfathered Funds) and have continuously maintained such account in Investor Class shares since April 1, 2002; (2) any person or entity listed in the account registration for any Grandfathered Funds, which account was established prior to April 1, 2002 and continuously maintained since April 1, 2002, such as joint owners, trustees, custodians and designated beneficiaries; (3) customers of certain financial institutions, wrap accounts or other fee-based advisory programs, or insurance company separate accounts, which have had relationships with ADI and/or any of the Grandfathered Funds prior to April 1, 2002 and continuously maintained such relationships since April 1, 2002; (4) defined benefit, defined contribution and deferred compensation plans; and (5) fund trustees, employees of AMVESCAP PLC and its subsidiaries, AMVESCAP directors, and their immediate families. SPECIAL PLANS SYSTEMATIC PURCHASE PLAN You can arrange for periodic investments in any of the funds by authorizing the transfer agent to withdraw the amount of your investment from your bank account on a day or dates you specify and in an amount of at least $50. You may stop the Systematic Purchase Plan at any time by giving the transfer agent notice ten days prior to your next scheduled withdrawal. DOLLAR COST AVERAGING Dollar Cost Averaging allows you to make automatic monthly or quarterly exchanges, if permitted, from one fund account to one or more other fund accounts with the identical registration. The account from which exchanges are to be made must have a minimum balance of $5,000 before you can use this option. Exchanges will occur on (or about) the day of the month you specify, in the amount you specify. Dollar Cost Averaging cannot be set up for the 29th through the 31st of the month. The minimum amount you can exchange to another fund is $50. You may participate in a dollar cost averaging program hosted by your dealer of record, your financial advisor or another financial intermediary. If such program is the same or similar to AIM's Dollar Cost Averaging program and is non-discretionary, both as determined by an AIM Affiliate, exchanges made pursuant to such program generally will not be counted toward the trading guideline limitation of four exchanges out of a fund per calendar year. AUTOMATIC DIVIDEND INVESTMENT All of your dividends and distributions may be paid in cash or invested in any fund at net asset value. Unless you specify otherwise, your dividends and distributions will automatically be reinvested in the same fund. You may invest your dividends and distributions per the rules listed in the "Permitted Exchanges" section. You must comply with the following requirements to be eligible to invest your dividends and distributions in shares of another fund: (1) Your account balance (a) in the fund paying the dividend must be at least $5,000; and (b) in the fund receiving the dividend must be at least $500; and (2) Both accounts must have identical registration information. PORTFOLIO REBALANCING PROGRAM If you have at least $5,000 in your account, you may participate in the Portfolio Rebalancing Program. Under this Program, you can designate how the total value of your fund holdings should be rebalanced, on a percentage basis, between two and ten of your funds on a quarterly, semiannual or annual basis. Your portfolio will be rebalanced through the exchange of shares in one or more of your funds for shares of the same class of one or more other funds in your portfolio. Rebalancing will NOT occur if your portfolio is within 2% of your stated allocation. If you wish to participate in the Program, make changes or cancel the Program, the transfer agent must receive your request to participate, changes, or cancellation in good order at least five business days prior to the next rebalancing date, which is normally the 28th day of the last month of the period you choose. You may realize taxable gains from these exchanges. We MCF--02/06 A-8 ------------- THE AIM FUNDS ------------- may modify, suspend or terminate the Program at any time on 60 days prior written notice. You may participate in a portfolio rebalancing program hosted by your dealer of record, your financial advisor or another financial intermediary. If such program is the same or similar to AIM's Portfolio Rebalancing Program and is non-discretionary, both as determined by an AIM Affiliate, exchanges made pursuant to such program generally will not be counted toward the trading guideline limitation of four exchanges out of a fund per calendar year. RETIREMENT PLANS Shares of most of the funds can be purchased through tax-sheltered retirement plans made available to corporations, individuals and employees of non-profit organizations and public schools. A plan document must be adopted to establish a retirement plan. You may use ADI sponsored retirement plans, which include IRAs, Roth IRAs, SIMPLE IRA plans, SEP/SARSEP plans, 403(b) plans, Solo 401(k) plans and Money Purchase/Profit Sharing plans, or another sponsor's retirement plan. AIM Investment Services, Inc. assesses certain fees associated with the maintenance of certain types of retirement plan accounts and the provision of specialized recordkeeping services for those plan accounts. ADI also assesses certain fees associated with the maintenance of retirement plan documents for which it acts as the prototype sponsor. Contact your financial advisor for details. REDEEMING SHARES REDEMPTION FEE You may be charged a 2% redemption fee (on redemption proceeds) if you redeem, including redeeming by exchange, shares of the following funds within 30 days of their purchase: AIM Asia Pacific Growth Fund AIM Global Value Fund AIM Developing Markets Fund AIM High Yield Fund AIM European Growth Fund AIM International Allocation Fund AIM European Small Company Fund AIM International Core Equity Fund AIM Global Aggressive Growth Fund AIM International Growth Fund AIM Global Equity Fund AIM International Small Company Fund AIM Global Growth Fund AIM S&P 500 Index Fund AIM Global Real Estate Fund AIM Trimark Fund
The redemption fee will be retained by the fund from which you are redeeming shares (including redemptions by exchange), and is intended to offset the trading costs, market impact and other costs associated with short-term money movements in and out of the fund. The redemption fee is imposed to the extent that the number of fund shares you redeem exceeds the number of fund shares that you have held for more than 30 days. In determining whether the minimum 30 day holding period has been met, only the period during which you have held shares of the fund from which you are redeeming is counted. For this purpose, shares held longest will be treated as being redeemed first and shares held shortest as being redeemed last. The 2% redemption fee generally will not be charged on transactions involving the following: (1) total or partial redemptions of shares by omnibus accounts maintained by brokers that do not have the systematic capability to process the redemption fee; (2) total or partial redemptions of shares by approved fee-based programs that do not have the systematic capability to process the redemption fee; (3) total or partial redemptions of shares held through retirement plans maintained pursuant to Sections 401, 403, 408, 408A and 457 of the Internal Revenue Code (the Code) where the systematic capability to process the redemption fee does not exist; (4) total or partial redemptions effectuated by funds of funds, qualified tuition plans maintained pursuant to Section 529 of the Code, and insurance company separate accounts which use the funds as underlying investments; (5) total or partial redemptions effectuated pursuant to an automatic non-discretionary rebalancing program or a systematic withdrawal plan established with the funds or a financial intermediary; (6) total or partial redemptions requested within 30 days following the death or post-purchase disability of (i) any registered shareholder on an account or (ii) the settlor of a living trust which is the registered shareholder of an account, of shares held in the account at the time of death or initial determination of post-purchase disability; (7) total or partial redemption of shares acquired through investment of dividends and other distributions; or (8) redemptions initiated by a fund. The AIM Affiliates' goals are to apply the redemption fee on all classes of shares of the above funds regardless of the type of account in which such shares are held. This goal is not immediately achievable because of systems limitations and marketplace resistance. Brokers that maintain omnibus accounts, sponsors of fee-based program accounts and retirement plan administrators for accounts that are exempt from the redemption fee pursuant to (1) through (8) above may impose a redemption fee that has different characteristics, which may be more or less restrictive, than those set forth above. Some investments in the funds are made indirectly through conduit investment vehicles. If shares of the funds are held in the name of a conduit investment vehicle and not in the names of the individual investors who have invested in the funds through the conduit investment vehicle, the conduit investment vehicle may be considered an individual shareholder of the funds. To the extent that a conduit investment vehicle is considered an individual shareholder of the funds, the funds are likely to be limited in their ability to assess redemption fees on individual transactions initiated by investors who MCF--02/06 A-9 ------------- THE AIM FUNDS ------------- have invested in the funds through the conduit investment vehicle. In these cases, the applicability of redemption fees will be determined based on the aggregate holdings and redemptions of the conduit investment vehicle in a fund. The funds have the discretion to waive the 2% redemption fee if a fund is in jeopardy of losing its registered investment company qualification for tax purposes. Your broker or financial advisor may charge service fees for handling redemption transactions. Your shares also may be subject to a contingent deferred sales charge (CDSC) in addition to the redemption fee. REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE If you purchase $1,000,000 or more of Class A shares of any fund, or if you make additional purchases of Class A shares at net asset value, your shares may be subject to a CDSC upon redemption as described below.
SHARES INITIALLY SHARES HELD CDSC APPLICABLE UPON PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES --------- ----------------- -------------------- - Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed I or II Fund or AIM Short or II Fund or AIM Short Term within 18 months of initial Term Bond Fund Bond Fund purchase of Category I or II - Class A shares of Category III Fund or AIM Short Term Bond Fund(2) Fund shares - AIM Cash Reserve Shares of AIM Money Market Fund - Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed III Fund(1) or II Fund or AIM Short Term within 18 months of initial Bond Fund purchase of Category III Fund shares - Class A shares of Category - Class A shares of Category III - No CDSC III Fund(1) Fund(2) - Class A shares of AIM Tax- Exempt Cash Fund - AIM Cash Reserve Shares of AIM Money Market
(1) As of the close of business on October 30, 2002, only existing shareholders of Class A shares of a Category III Fund may purchase such shares. (2) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund or AIM Short Term Bond Fund may not be exchanged for Class A shares of Category III Fund. REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND If you redeem Class B shares you acquired by exchange via a tender offer by AIM Floating Rate Fund, the early withdrawal charge applicable to shares of AIM Floating Rate Fund will be applied instead of the CDSC normally applicable to Class B shares. MCF--02/06 A-10 ------------- THE AIM FUNDS ------------- HOW TO REDEEM SHARES -------------------------------------------------------------------------------- Through a Financial Advisor Contact your financial advisor, including your retirement plan or program sponsor. By Mail Send a written request to the transfer agent. Requests must include (1) original signatures of all registered owners/trustees; (2) the name of the fund and your account number; (3) if the transfer agent does not hold your shares, endorsed share certificates or share certificates accompanied by an executed stock power; and (4) signature guarantees, if necessary (see below). The transfer agent may require that you provide additional information, such as corporate resolutions or powers of attorney, if applicable. If you are redeeming from an IRA account, you must include a statement of whether or not you are at least 59 1/2 years old and whether you wish to have federal income tax withheld from your proceeds. The transfer agent may require certain other information before you can redeem from an employer-sponsored retirement plan. Contact your employer for details. By Telephone Call the transfer agent at 1-800-959-4246 or our AIM 24-hour Automated Investor Line at 1-800-246-5463. You will be allowed to redeem by telephone if (1) the proceeds are to be mailed to the address on record (if there has been no change communicated to us within the last 30 days) or transferred electronically to a pre-authorized checking account; (2) you do not hold physical share certificates; (3) you can provide proper identification information; (4) the proceeds of the redemption do not exceed $250,000; and (5) you have not previously declined the telephone redemption privilege. Certain retirement accounts and 403(b) plans, may not be redeemed by telephone. For funds other than Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, the transfer agent must receive your call during the hours of the customary trading session of the New York Stock Exchange (NYSE) in order to effect the redemption at that day's closing price. For Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, the transfer agent must receive your call before the last net asset value determination on a business day in order to effect the redemption at that day's closing price. You may, with limited exceptions, redeem from an IRA account by telephone. Redemptions from other types of retirement accounts may be requested in writing. By Internet Place your redemption request at www.aiminvestments.com. You will be allowed to redeem by internet if (1) you do not hold physical share certificates; (2) you can provide proper identification information; (3) the proceeds of the redemption do not exceed $250,000; and (4) you have already provided proper bank information. AIM prototype retirement accounts may not be redeemed on the internet. For funds other than Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, the transfer agent must confirm your transaction during the hours of the customary trading session of the NYSE in order to effect the redemption at that day's closing price. For Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, the transfer agent must confirm your transaction before the last net asset value determination on a business day in order to effect the redemption at that day's closing price.
-------------------------------------------------------------------------------- TIMING AND METHOD OF PAYMENT We normally will send out checks within one business day, and in any event no more than seven days, after we accept your request to redeem. If you redeem shares recently purchased by check, you will be required to wait up to ten business days before we will send your redemption proceeds. This delay is necessary to ensure that the purchase check has cleared. Payment may be postponed in cases where the SEC declares an emergency or normal trading is halted. REDEMPTION BY MAIL If you mail us a request in good order to redeem your shares, we will mail you a check in the amount of the redemption proceeds to the address on record with us. If your request is not in good order, you may have to provide us with additional documentation in order to redeem your shares. REDEMPTION BY TELEPHONE If you redeem by telephone, we will mail you a check in the amount of the redemption proceeds to your address of record (if there has been no change communicated to the transfer agent within the previous 30 days) or transmit them electronically to your pre-authorized bank account. We use reasonable procedures to confirm that instructions communicated by telephone are genuine, but we are not liable for telephone instructions that are reasonably believed to be genuine. REDEMPTION BY INTERNET If you redeem by internet, we will transmit your redemption proceeds electronically to your pre-authorized bank account. We use reasonable procedures to confirm that instructions communicated by internet are genuine, but we are not liable for internet instructions that are reasonably believed to be genuine. PAYMENT FOR SYSTEMATIC REDEMPTIONS You may arrange for regular monthly or quarterly withdrawals from your account of at least $50. You also may make annual withdrawals if you own Class A shares. We will redeem enough shares from your account to cover the amount withdrawn. You must have an account balance of at least $5,000 to establish a Systematic Redemption Plan. You can stop this plan at any time by giving ten days prior notice to the transfer agent. EXPEDITED REDEMPTIONS (AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ONLY) If we receive your redemption order before 11:30 a.m. Eastern Time, we will try to transmit payment of redemption proceeds on that same MCF--02/06 A-11 ------------- THE AIM FUNDS ------------- day. If we receive your redemption order after 11:30 a.m. Eastern Time and before the close of the customary trading session of the NYSE, we generally will transmit payment on the next business day. REDEMPTIONS BY CHECK (CLASS A SHARES OF AIM TAX-EXEMPT CASH FUND, AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND AND INVESTOR CLASS SHARES OF AIM MONEY MARKET FUND, AIM TAX-EXEMPT CASH FUND, PREMIER PORTFOLIO, PREMIER TAX-EXEMPT PORTFOLIO AND PREMIER U.S. GOVERNMENT MONEY PORTFOLIO ONLY) You may redeem shares of these funds by writing checks in amounts of $250 or more if you have completed an authorization form. Redemption by check is not available for retirement accounts. SIGNATURE GUARANTEES We require a signature guarantee when you redeem by mail and (1) the amount is greater than $250,000; (2) you request that payment be made to someone other than the name registered on the account; (3) you request that payment be sent somewhere other than the bank of record on the account; or (4) you request that payment be sent to a new address or an address that changed in the last 30 days. The transfer agent will accept a guarantee of your signature by a number of financial institutions. Call the transfer agent for additional information. Some institutions have transaction amount maximums for these guarantees. Please check with the guarantor institution. REDEMPTIONS IN KIND Although the funds generally intend to pay redemption proceeds solely in cash, the funds reserve the right to determine, in their sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind). REDEMPTIONS BY THE FUNDS If your account (Class A, Class A3, Class B, Class C and Investor Class shares only) has been open at least one year, you have not made an additional purchase in the account during the past six calendar months, and the value of your account falls below $500 ($250 for Investor Class shares) for three consecutive months due to redemptions or exchanges (excluding retirement accounts), the funds have the right to redeem the account after giving you 60 days' prior written notice. You may avoid having your account redeemed during the notice period by bringing the account value up to $500 ($250 for Investor Class shares) or by utilizing the Automatic Investment Plan. If the fund determines that you have not provided a correct Social Security or other tax ID number on your account application, or the fund is not able to verify your identity as required by law, the fund may, at its discretion, redeem the account and distribute the proceeds to you. EXCHANGING SHARES You may, under certain circumstances, exchange shares in one fund for those of another fund. An exchange is the purchase of shares in one fund which is paid for with the proceeds from a redemption of shares of another fund effectuated on the same day. Before requesting an exchange, review the prospectus of the fund you wish to acquire. Exchange privileges also apply to holders of the Connecticut General Guaranteed Account, established for tax-qualified group annuities, for contracts purchased on or before June 30, 1992. You may be charged a redemption fee on certain redemptions, including exchanges. See "Redeeming Shares -- Redemption Fee." PERMITTED EXCHANGES Except as otherwise stated under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another fund.
------------------------------------------------------------------------------------------------------------------------------------ EXCHANGE FROM EXCHANGE TO ALLOWED PROHIBITED ------------------------------------------------------------------------------------------------------------------------------------ Class A Class A, A3, Investor Class, or AIM Cash Reserve Shares. Exceptions are: - Class A Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund are currently closed to new investors. - Class A Shares of AIM Limited Maturity Treasury Fund, X AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate Fund cannot be exchanged for Class A3 Shares of those funds. - Investor Class Shares of all funds are currently offered to new investors only on a limited basis. ------------------------------------------------------------------------------------------------------------------------------------ Class A Class B, C, P, R or Institutional Class Shares. X ------------------------------------------------------------------------------------------------------------------------------------ Class A3 Class A, A3, Investor Class, or AIM Cash Reserve Shares. Exceptions are: - Class A3 Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund cannot be exchanged X for Class A Shares of those funds. - Investor Class Shares of all funds are currently offered to new investors only on a limited basis. ------------------------------------------------------------------------------------------------------------------------------------ Class A3 Class B, C, P, R or Institutional Class Shares. X ------------------------------------------------------------------------------------------------------------------------------------ Class B Class B. Exceptions are: - Class B Shares of other funds cannot be exchanged for X Class B Shares of AIM Floating Rate Fund. ------------------------------------------------------------------------------------------------------------------------------------ Class B Class A, A3, C, P, R, AIM Cash Reserve Shares, Institutional or Investor Class Shares. X ------------------------------------------------------------------------------------------------------------------------------------
MCF--02/06 A-12 ------------- THE AIM FUNDS -------------
------------------------------------------------------------------------------------------------------------------------------------ EXCHANGE FROM EXCHANGE TO ALLOWED PROHIBITED ------------------------------------------------------------------------------------------------------------------------------------ Class C Class C. Exceptions are: - Class C shares of other funds cannot be exchanged for X Class C shares of AIM Floating Rate Fund. ------------------------------------------------------------------------------------------------------------------------------------ Class C Class A, A3, B, P, R, AIM Cash Reserve Shares, Institutional or Investor Class shares. X ------------------------------------------------------------------------------------------------------------------------------------ Class R Class R X ------------------------------------------------------------------------------------------------------------------------------------ Class R Class A, A3, B, C, P, AIM Cash Reserve Shares, Institutional or Investor Class shares. X ------------------------------------------------------------------------------------------------------------------------------------ AIM Cash Reserve Shares Class A, A3, B, C, R, or Investor Class shares. Exceptions are: - Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund are currently closed to new investors. - Shares to be exchanged for Class B, C or R shares X must not have been acquired by exchange from Class A shares of any fund. - Investor Class Shares of all funds are currently offered to new investors only on a limited basis. ------------------------------------------------------------------------------------------------------------------------------------ AIM Cash Reserve Shares Class P or Institutional Class shares. X ------------------------------------------------------------------------------------------------------------------------------------ Institutional Class Institutional Class X ------------------------------------------------------------------------------------------------------------------------------------ Institutional Class Class A, A3, B, C, P, R, AIM Cash Reserve Shares or Investor Class shares. X ------------------------------------------------------------------------------------------------------------------------------------ Investor Class A, A3, or Investor Class. Exceptions are: - Investor Class shares cannot be exchanged for Class A shares of any fund which offers Investor Class shares. - Class A shares of AIM Limited Maturity Treasury Fund X and AIM Tax-Free Intermediate Fund are currently closed to new investors. ------------------------------------------------------------------------------------------------------------------------------------ Investor Class Class B, C, P, R, AIM Cash Reserve Shares or Institutional Class shares. X ------------------------------------------------------------------------------------------------------------------------------------ Class P Class A, A3, or AIM Cash Reserve Shares. Exceptions are: - Class A shares of AIM Limited Maturity Treasury Fund X and AIM Tax-Free Intermediate Fund are currently closed to new investors. ------------------------------------------------------------------------------------------------------------------------------------ Class P Class B, C, R, Institutional or Investor Class shares. X ------------------------------------------------------------------------------------------------------------------------------------
You may be required to pay an initial sales charge when exchanging from a fund with a lower initial sales charge than the one into which you are exchanging. If you exchange into shares that are subject to a CDSC, we will begin the holding period for purposes of calculating the CDSC on the date you made your initial purchase. EXCHANGES NOT SUBJECT TO A SALES CHARGE You will not pay an initial sales charge when exchanging: (1) Class A shares with an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for (a) Class A shares of another fund; (b) AIM Cash Reserve Shares of AIM Money Market Fund; or (c) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund. (2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund with an initial sales charge for (a) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund; or (b) Class A shares of another Fund, but only if (i) you acquired the original shares before May 1, 1994; or (ii) you acquired the original shares on or after May 1, 1994 by way of an exchange from shares with higher initial sales charges; or (3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for (a) Class A shares of a fund subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if you acquired the original shares (i) prior to May 1, 1994 by exchange from Class A shares subject to an initial sales charge; (ii) on or after May 1, 1994 by exchange from Class A shares subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or (4) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund for (a) AIM Cash Reserve Shares of AIM Money Market Fund; or (b) Class A shares of AIM Tax-Exempt Cash Fund; or (5) Investor Class shares for Class A or Class A3 shares of any fund which does not offer Investor Class shares. You will not pay a CDSC or other sales charge when exchanging: (1) Class A shares for other Class A shares; (2) Class B shares for other Class B shares; (3) Class C shares for other Class C shares; (4) Class R shares for other Class R shares. EXCHANGES NOT PERMITTED For shares purchased prior to November 15, 2001, you may not exchange: (1) Class A shares of Category I or II funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a contingent deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund; MCF--02/06 A-13 ------------- THE AIM FUNDS ------------- (2) Class A shares of Category III funds purchased at net asset value for Class A shares of a Category I or II fund, Class A shares of AIM Short Term Bond Fund; (3) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category III AIM Funds that are subject to a CDSC. For shares purchased on or after November 15, 2001, you may not exchange: (1) Class A shares of Category I or II fund, Class A shares of AIM Short Term Bond Fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash Fund; (2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money Market Fund; or (3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any fund or for Class A shares of any fund that are subject to a CDSC, however, if you originally purchased Class A shares of a Category I or II fund or AIM Short Term Bond Fund, and exchanged those shares for AIM Cash Reserve Shares of AIM Money Market Fund, you may further exchange the AIM Cash Reserve Shares for Class A shares of a Category I or II fund or AIM Short Term Bond Fund. EXCHANGE CONDITIONS The following conditions apply to all exchanges: - Shares of the fund you wish to acquire must be available for sale in your state of residence; - Exchanges must be made between accounts with identical registration information; - The account you wish to exchange from must have a certified tax identification number (or the Fund has received an appropriate Form W-8 or W-9); - Shares must have been held for at least one day prior to the exchange with the exception of dividends that are reinvested; and - If you have physical share certificates, you must return them to the transfer agent prior to the exchange. TERMS OF EXCHANGE Under unusual market conditions, a fund may delay the purchase of shares being acquired in an exchange for up to five business days if it determines that it would be materially disadvantaged by the immediate transfer of exchange proceeds. The exchange privilege is not an option or right to purchase shares. Any of the participating funds or the distributor may modify or terminate this privilege at any time. The fund or the distributor will provide you with notice of such modification or termination whenever it is required to do so by applicable law, but may impose changes at any time for emergency purposes. BY MAIL If you wish to make an exchange by mail, you must include original signatures of each registered owner exactly as the shares are registered, the account registration and account number, the dollar amount or number of shares to be exchanged and the names of the funds from which and into which the exchange is to be made. BY TELEPHONE Conditions that apply to exchanges by telephone are the same as redemptions by telephone, including that the transfer agent must receive exchange requests during the hours of the customary trading session of the NYSE; however, you still will be allowed to exchange by telephone even if you have changed your address of record within the preceding 30 days. BY INTERNET You will be allowed to exchange by internet if you do not hold physical share certificates and you provide the proper identification information. EXCHANGING CLASS B, CLASS C AND CLASS R SHARES If you make an exchange involving Class B or Class C shares or Class R shares subject to a CDSC, the amount of time you held the original shares will be credited to the holding period of the Class B, Class C or Class R shares, respectively, into which you exchanged for the purpose of calculating contingent deferred sales charges (CDSC) if you later redeem the exchanged shares. If you redeem Class B or Class C shares acquired by exchange via a repurchase offer by AIM Floating Rate Fund, you will be credited with the time period you held the Class B or Class C shares of AIM Floating Rate Fund for the purpose of computing the early withdrawal charge applicable to those exchanged shares. -------------------------------------------------------------------------------- EACH FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO: - REJECT OR CANCEL ALL OR ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; - MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY FUND; - REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE SYSTEMATIC PURCHASE PLAN AND SYSTEMATIC REDEMPTION PLAN OPTIONS ON THE SAME ACCOUNT; OR - SUSPEND, CHANGE OR WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS. -------------------------------------------------------------------------------- PRICING OF SHARES DETERMINATION OF NET ASSET VALUE The price of each fund's shares is the fund's net asset value per share. The funds value portfolio securities for which market quotations are readily available at market value. The funds value all other securities and assets for which market quotations are unavailable or unreliable at their fair value in good faith using procedures approved by the MCF--02/06 A-14 ------------- THE AIM FUNDS ------------- Boards of Trustees of the funds. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day. Even when market quotations are available, they may be stale or unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where AIM determines that the closing price of the security is unreliable, AIM will value the security at fair value in good faith using procedures approved by the Boards of Trustees. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading. Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values. AIM may use indications of fair value from pricing services approved by the Boards of Trustees. In other circumstances, the AIM valuation committee may fair value securities in good faith using procedures approved by the Boards of Trustees. As a means of evaluating its fair value process, AIM routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Boards of Trustees. Specific types of securities are valued as follows: Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, AIM will value the security at fair value in good faith using procedures approved by the Boards of Trustees. Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that AIM determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. AIM also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where AIM believes, at the approved degree of certainty, that the price is not reflective of current market value, AIM will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time. Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund. Fixed Income Securities: Government, corporate, asset-backed and municipal bonds, convertible securities, including high yield or junk bonds, and loans, normally are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service and independent quoted prices are unreliable, the AIM valuation committee will fair value the security using procedures approved by the Boards of Trustees. Short-term Securities: The funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio value all their securities at amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund and AIM Tax-Free Intermediate Fund value variable rate securities that have an unconditional demand or put feature exercisable within seven days or less at par, which reflects the market value of such securities. Futures and Options: Futures and options are valued on the basis of market quotations, if available. Open-end Funds: To the extent a fund invests in other open-end funds, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests. Each fund determines the net asset value of its shares on each day the NYSE is open for business (a business day), as of the close of the customary trading session, or earlier NYSE closing time that day. AIM Money Market Fund also determines its net asset value as of 12:00 noon Eastern Time on each business day. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio determine the net asset value of their shares every fifteen minutes on each business day, beginning at 8:00 a.m. Eastern Time. The last net asset value determination on any business day for Premier Portfolio and Premier U.S. Government Money Portfolio will MCF--02/06 A-15 ------------- THE AIM FUNDS ------------- generally occur at 5:30 p.m. Eastern Time, and the last net asset value determination on any business day for Premier Tax-Exempt Portfolio will generally occur at 4:30 p.m. Eastern Time. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio are authorized not to open for trading on a day that is otherwise a business day if the Bond Market Association recommends that government securities dealers not open for trading and any such day will not be considered a business day. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio also may close early on a business day if the Bond Market Association recommends that government securities dealers close early. If Premier Portfolio, Premier Tax-Exempt Portfolio or Premier U.S. Government Money Portfolio uses its discretion to close early on a business day, the last net asset value calculation will occur as of the time of such closing. TIMING OF ORDERS For funds other than Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, you can purchase or redeem shares on each business day prior to the close of the customary trading session or any earlier NYSE closing time that day. For funds other than Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, purchase orders that are received and accepted before the close of the customary trading session or any earlier NYSE closing time on a business day generally are processed that day and settled on the next business day. For Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, you can purchase or redeem shares on each business day, prior to the last net asset value determination on such business day; however, if your order is received and accepted after the close of the customary trading session or any earlier NYSE closing time that day, your order generally will be processed on the next business day and settled on the second business day following the receipt and acceptance of your order. For all funds, you can exchange shares on each business day, prior to the close of the customary trading session or any earlier NYSE closing time that day. Shareholders of Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio therefore cannot exchange their shares after the close of the customary trading session or any earlier NYSE closing time on a particular day, even though these funds remain open after such closing time. The funds price purchase, exchange and redemption orders at the net asset value calculated after the transfer agent receives an order in good order. Any applicable sales charges are applied at the time an order is processed. A fund may postpone the right of redemption only under unusual circumstances, as allowed by the Securities and Exchange Commission, such as when the NYSE restricts or suspends trading. TAXES In general, dividends and distributions you receive are taxable as ordinary income or long-term capital gains for federal income tax purposes, whether you reinvest them in additional shares or take them in cash. Distributions are generally taxable to you at different rates depending on the length of time the fund holds its assets and the type of income that the fund earns. Different tax rates apply to ordinary income, qualified dividend income, and long-term capital gain distributions. Every year, you will be sent information showing the amount of dividends and distributions you received from each fund during the prior year. Any long-term or short-term capital gains realized from redemptions of fund shares will be subject to federal income tax. Exchanges of shares for shares of another fund are treated as a sale, and any gain realized on the transaction will generally be subject to federal income tax. INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING "OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR PROSPECTUS. The foreign, state and local tax consequences of investing in fund shares may differ materially from the federal income tax consequences described above. In addition, the preceding discussion concerning the taxability of fund dividends and distributions and of redemptions and exchanges of fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401, 403, 408, 408A and 457 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing. MCF--02/06 A-16 OBTAINING ADDITIONAL INFORMATION -------------------------------------------------------------------------------- More information may be obtained free of charge upon request. The Statement of Additional Information (SAI), a current version of which is on file with the Securities and Exchange Commission (SEC), contains more details about the fund and is incorporated by reference into the prospectus (is legally a part of the prospectus). Annual and semiannual reports to shareholders contain additional information about the fund's investments. The fund's annual report also discusses the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q. If you have questions about this fund, another fund in The AIM Family of Funds--Registered Trademark-- or your account, or wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact us by mail at AIM Investment Services, Inc., P.O. Box 4739, Houston, TX 77210-4739 or BY TELEPHONE: (800) 959-4246 ON THE INTERNET: You can send us a request by e-mail or download prospectuses, SAIs, annual or semiannual reports via our website: http://www.aiminvestments.com
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, ARE ALSO AVAILABLE AT HTTP://WWW.AIMINVESTMENTS.COM.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplication fee, by sending a letter to the SEC's Public Reference Room, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room. ---------------------------------------- AIM Global Health Care Fund SEC 1940 Act file number: 811-05426 ---------------------------------------- AIMinvestments.com GHC-PRO-1 YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Registered Trademark-- --Registered Trademark-- Appendix III AIM Global Health Care Fund Management's discussion o Diversifying across industries. of Fund performance o Monitoring political trends that could ====================================================================================== negatively affect a specific industry. PERFORMANCE SUMMARY We may sell a holding when: The fiscal year ended October 31, 2006, was a mixed year for health care stocks. The Fund underperformed the S&P 500 Index for the fiscal year due to the strong o We identify a more attractive returns in the broad market over the period. While the Fund performed largely in investment opportunity. line with its peer group, our strategy caused us to underperform the MSCI World Health Care Index due primarily to an underweight position in large-cap o We see a deterioration of a company's pharmaceutical stocks. It is important to know that the benchmark is over 60% fundamentals. weighted in pharmaceuticals while the Fund is more diversified. o A company fails to capitalize on a Your Fund's long-term performance appears on pages 8 and 9. market opportunity. FUND VS. INDEXES o A change in management occurs. Total returns, 10/31/05-10/31/06, excluding applicable sales charges. If sales charges were included, returns would be lower. o A stock's price target has been met. Class A Shares 8.31% MARKET CONDITIONS AND YOUR FUND Class B Shares 7.52 Class C Shares 7.51 The economy has enjoyed several years of Investor Shares 8.35 economic growth fueled by a low interest MSCI World Index (Broad Market Index) 21.32 rate environment, a strong real estate MSCI World Health Care Index (Style-Specific Index) 13.53 market and resilient consumer spending. Lipper Health/Biotechnology Funds Index (Peer Group Index) 8.71 However, in the past year, we have begun to see a moderation of economic growth SOURCE: LIPPER INC. as the U.S. Federal Reserve Board (the ====================================================================================== Fed) raised short-term interest rates 17 times since June 2004 before pausing at HOW WE INVEST services. We look for companies that are 5.25%. Although the current level of financially healthy and, in our opinion, interest rates is low by historical We seek health care stocks of all market likely to sustain their profitability. standards, a five-fold increase over a capitalizations from around the world We assess the long-term commercial two-year period can potentially affect that we believe are attractively priced potential of each company's current and the economy. and have the potential to benefit from prospective products, especially long-term earnings and cash flow growth. products that fill otherwise unfilled Gross domestic product, a measure of market segments. economic growth, has slowed to 2.2% in We typically invest in four broad the third quarter of 2006 compared to segments of the health care sector: We seek to manage risk by generally: the average from the fourth quarter of pharmaceuticals, biotechnology, medical 2002 to the first quarter 2006 of 3.6%. technology and health o Limiting the size of investment in a Additionally, inflation, as measured by single position. the consumer price index, was at an annualized rate of 3.4% for September 2006, which is in line with the inflation rate for (continued) ======================================== ======================================== ========================================= PORTFOLIO COMPOSITION TOP FIVE COUNTRIES* TOP 10 EQUITY HOLDINGS* By industry 1. United States 76.6% 1. Roche Holding A.G. (Switzerland) 5.6% Pharmaceuticals 35.8% 2. Switzerland 9.7 2. Novartis A.G.-ADR (Switzerland) 4.1 Biotechnology 22.0 3. France 3.5 3. Johnson & Johnson 4.0 Health Care Equipment 12.6 4. United Kingdom 2.1 4. Pfizer Inc. 3.5 Health Care Services 7.2 5. Japan 2.0 5. Amgen Inc. 3.4 Managed Health Care 7.2 6. Genzyme Corp. 3.0 Life Sciences Tools & Services 6.1 Total Net Assets $1.46 billion 7. Gilead Sciences, Inc. 3.0 Other Industries, Each Less Than 8. Medco Health Solutions, Inc. 2.7 2.0% of Portfolio 5.9 Total Number of Holdings* 97 9. Wyeth 2.5 Money Market Funds Plus 10. UnitedHealth Group Inc. 2.0 Other Assets Less Liabilities 3.2 The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security. *Excluding money market fund holdings. ======================================== ======================================== =========================================
5 AIM Global Health Care Fund 2005. Despite a moderating economic position in MEDTRONIC, a company that Derek M. Taner environment, the labor force has develops and manufactures therapeutic Chartered Financial remained intact with the unemployment medical devices for chronic diseases, as [TANER Analyst, portfolio rate at 4.4% as of October 31, 2006. we saw fundamentals in implantable PHOTO] manager, is manager Overall, we believed the economic cardiac defibrillator growth of AIM Global Health outlook remained positive although deteriorate. Care Fund. Mr. Taner growth has slowed to a more subdued began his investment career in 1993 with level than what we have seen in the past We maintained our foreign exposure another employer, where he worked as a several years. with moderate weightings in Japan, fixed income analyst, assistant France, Germany, UK and Switzerland. We portfolio manager and manager of a Large-cap pharmaceuticals was the reduced our Japanese holdings due to health care fund. Mr. Taner joined AIM best performing sector for the fiscal profit-taking and increased our position in 2005. He earned a bachelor of science year. Sentiment has improved after four in U.S. equities as we identified degree in accounting and an M.B.A. from years of underperformance due to attractive buying opportunities in the the Hass School of Business at the improving growth rates driven by cost region. University of California at Berkeley. restructurings, less patent expirations and improving product pipelines. ROCHE At the close of the fiscal year, Assisted by the Global Health Care Team HOLDING, a Swiss drug company with very economic indicators showed that the few expiring patents, experienced strong economy had slowed, which tended to sales of its cancer drug, Avastin. The favor defensive growth sectors such as company remained our top performing health care. Historically, the health stock due to its significant ownership care sector has performed well in an of GENENTECH, the biotech company that environment of decelerating earnings developed Avastin. The company continued growth for the broader market. Moreover, to perform well and showed positive health care was one of the better profit margin improvement. performing sectors in the past two quarters when the yield curve has been SHIRE PLC, a specialty pharmaceutical completely inverted. This is the company focused in areas of central environment at the close of the fiscal nervous system, gastrointestinal and year. We continued to balance growth human genetic therapies, contributed to prospects with valuation to determine Fund performance for the fiscal year. the optimal portfolio structure. The stock rose due to the patent settlement for its largest product, IN CLOSING Adderall XR. Furthermore, the company has a solid pipeline with new products We would like to thank any new in process for FDA approval. shareholders who joined the Fund during the period and thank existing UNITEDHEALTH, a U.S. health care shareholders for their continued insurer, detracted from performance for commitment to AIM Global Health Care the fiscal year. The stock was trimmed Fund. due largely to uncertainty surrounding the options scandal at the company. THE VIEWS AND OPINIONS EXPRESSED IN Important to note is that the company MANAGEMENT'S DISCUSSION OF FUND remains a leader in the managed care PERFORMANCE ARE THOSE OF A I M ADVISORS, area with solid assets and sound INC. THESE VIEWS AND OPINIONS ARE fundamentals. SUBJECT TO CHANGE AT ANY TIME BASED ON FACTORS SUCH AS MARKET AND ECONOMIC MERGE TECHNOLOGIES, a health care CONDITIONS. THESE VIEWS AND OPINIONS MAY software and IT services company, also NOT BE RELIED UPON AS INVESTMENT ADVICE detracted from performance for the OR RECOMMENDATIONS, OR AS AN OFFER FOR A period. The company allegedly PARTICULAR SECURITY. THE INFORMATION IS misrepresented prior financial NOT A COMPLETE ANALYSIS OF EVERY ASPECT performance resulting in the replacement OF ANY MARKET, COUNTRY, INDUSTRY, of the entire senior management team. We SECURITY OR THE FUND. STATEMENTS OF FACT sold the position as a result of these ARE FROM SOURCES CONSIDERED RELIABLE, events. BUT A I M ADVISORS, INC. MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR During the fiscal year, we trimmed COMPLETENESS OR ACCURACY. ALTHOUGH MEDCO HEALTH SOLUTIONS, the largest HISTORICAL PERFORMANCE IS NO GUARANTEE pharmacy-benefit manager, as the stock OF FUTURE RESULTS, THESE INSIGHTS MAY appreciated from the purchase price, and HELP YOU UNDERSTAND OUR INVESTMENT we invested in new attractive MANAGEMENT PHILOSOPHY. opportunities. We also sold our See important fund and index disclosures on the inside front cover. FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE, PLEASE SEE PAGES 8 AND 9.
6 Appendix IV AIM Global Health Care Fund NOTE 16--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A ----------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------------------- 2006 2005 2004 2003 2002 ----------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 29.77 $ 26.38 $ 24.09 $ 22.41 $ 29.93 ----------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.15) (0.18)(a) (0.17)(a) (0.13) (0.29)(a) ----------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.59 3.57 2.46 1.81 (3.17) ======================================================================================================================= Total from investment operations 2.44 3.39 2.29 1.68 (3.46) ======================================================================================================================= Less distributions from net realized gains (0.93) -- -- -- (4.06) ======================================================================================================================= Net asset value, end of period $ 31.28 $ 29.77 $ 26.38 $ 24.09 $ 22.41 _______________________________________________________________________________________________________________________ ======================================================================================================================= Total return(b) 8.31% 12.85% 9.51% 7.50% (13.76)% _______________________________________________________________________________________________________________________ ======================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $539,666 $554,679 $550,319 $536,746 $533,216 _______________________________________________________________________________________________________________________ ======================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.22%(c) 1.48% 1.89% 1.94% 1.86% ----------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.22%(c) 1.60% 1.91% 1.94% 1.86% ======================================================================================================================= Ratio of net investment income (loss) to average net assets (0.46)%(c) (0.64)% (0.63)% (0.56)% (1.10)% _______________________________________________________________________________________________________________________ ======================================================================================================================= Portfolio turnover rate 83% 92% 64% 99% 153% _______________________________________________________________________________________________________________________ =======================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $557,208,445.
CLASS B ----------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------------------- 2006 2005 2004 2003 2002 ----------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 26.99 $ 24.08 $ 22.09 $ 20.66 $ 28.03 ----------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.36) (0.33)(a) (0.27)(a) (0.23) (0.38)(a) ----------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.36 3.24 2.26 1.66 (2.93) ======================================================================================================================= Total from investment operations 2.00 2.91 1.99 1.43 (3.31) ======================================================================================================================= Less distributions from net realized gains (0.93) -- -- -- (4.06) ======================================================================================================================= Net asset value, end of period $ 28.06 $ 26.99 $ 24.08 $ 22.09 $ 20.66 _______________________________________________________________________________________________________________________ ======================================================================================================================= Total return(b) 7.52% 12.08% 9.01% 6.92% (14.21)% _______________________________________________________________________________________________________________________ ======================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $138,788 $153,766 $168,468 $179,646 $187,793 _______________________________________________________________________________________________________________________ ======================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.97%(c) 2.14% 2.39% 2.44% 2.36% ----------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.97%(c) 2.26% 2.41% 2.44% 2.36% ======================================================================================================================= Ratio of net investment income (loss) to average net assets (1.21)%(c) (1.30)% (1.13)% (1.06)% (1.60)% _______________________________________________________________________________________________________________________ ======================================================================================================================= Portfolio turnover rate 83% 92% 64% 99% 153% _______________________________________________________________________________________________________________________ =======================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $148,741,953. F-15 AIM Global Health Care Fund NOTE 16--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C ------------------------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------ 2006 2005 2004 2003 2002 ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 27.01 $ 24.09 $ 22.11 $ 20.67 $ 28.03 ------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.36) (0.33)(a) (0.27)(a) (0.23) (0.38)(a) ------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 2.36 3.25 2.25 1.67 (2.92) ================================================================================================================== Total from investment operations 2.00 2.92 1.98 1.44 (3.30) ================================================================================================================== Less distributions from net realized gains (0.93) -- -- -- (4.06) ================================================================================================================== Net asset value, end of period $ 28.08 $ 27.01 $ 24.09 $ 22.11 $ 20.67 __________________________________________________________________________________________________________________ ================================================================================================================== Total return(b) 7.51% 12.12% 8.95% 6.97% (14.18)% __________________________________________________________________________________________________________________ ================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $42,463 $45,591 $42,863 $43,482 $46,759 __________________________________________________________________________________________________________________ ================================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.97%(c) 2.14% 2.39% 2.44% 2.36% ------------------------------------------------------------------------------------------------------------------ Without fee waivers and/or expense reimbursements 1.97%(c) 2.26% 2.41% 2.44% 2.36% ================================================================================================================== Ratio of net investment income (loss) to average net assets (1.21)%(c) (1.30)% (1.13)% (1.06)% (1.60)% __________________________________________________________________________________________________________________ ================================================================================================================== Portfolio turnover rate 83% 92% 64% 99% 153% __________________________________________________________________________________________________________________ ==================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $45,225,318. F-16 AIM GLOBAL HEALTH CARE FUND A PORTFOLIO OF AIM INVESTMENT FUNDS 11 Greenway Plaza, Suite 100 Houston, Texas 77046-1173 Toll Free: (800) 959-4246 AIM ADVANTAGE HEALTH SCIENCES FUND A PORTFOLIO OF AIM COUNSELOR SERIES TRUST 11 Greenway Plaza, Suite 100 Houston, Texas 77046-1173 Toll Free: (800) 959-4246 STATEMENT OF ADDITIONAL INFORMATION (March 15, 2007 Special Meeting of Shareholders of AIM Advantage Health Sciences Fund) This Statement of Additional Information is not a prospectus but should be read in conjunction with the Combined Proxy Statement and Prospectus dated January 31, 2007 for use in connection with the Special Meeting of Shareholders of AIM Advantage Health Sciences Fund to be held on March 15, 2007. Copies of the Combined Proxy Statement and Prospectus may be obtained at no charge by writing A I M Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173 or by calling 1 800-410-4246. Unless otherwise indicated, capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Combined Proxy Statement and Prospectus. A Statement of Additional Information dated February 28, 2006, as supplemented March 24, 2006, March 31, 2006, June 30, 2006, August 1, 2006, September 20, 2006 and December 13, 2006 (the "Statement of Additional Information") for AIM Investment Funds (the "Trust"), has been filed with the Securities and Exchange Commission and is attached hereto as Appendix I which is incorporated herein by this reference. The date of this Statement of Additional Information is January 31, 2007. TABLE OF CONTENTS THE TRUST................................................................. S-3 DESCRIPTION OF PERMITTED INVESTMENTS...................................... S-3 TRUSTEES AND OFFICERS OF THE TRUST........................................ S-3 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES....................... S-3 ADVISORY AND MANAGEMENT RELATED SERVICES AGREEMENTS AND PLANS OF DISTRIBUTION........................................................... S-3 PORTFOLIO TRANSACTIONS.................................................... S-3 DESCRIPTION OF SHARES..................................................... S-3 DETERMINATION OF NET ASSET VALUE.......................................... S-3 TAXES..................................................................... S-4 PERFORMANCE DATA.......................................................... S-4 FINANCIAL INFORMATION..................................................... S-4
Appendix I - Statement of Additional Information of the Trust Appendix II - Pro forma financial statements of the Fund Appendix III - Audited financial statements of the Fund and the report thereon by PricewaterhouseCoopers LLP S-2 THE TRUST This Statement of Additional Information relates to AIM Investment Funds (the "Trust") and its investment portfolio, AIM Global Health Care Fund (the "Fund"). The Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund is a separate series of shares of beneficial interest of the Trust. For additional information about the Trust, see heading "General Information About the Trust" in the Trust's Statement of Additional Information attached hereto as Appendix I. DESCRIPTION OF PERMITTED INVESTMENTS For a discussion of the fundamental and non-fundamental investment policies of the Fund adopted by the Trust's Board of Trustees, see heading "Description of the Funds and Their Investments and Risks" in the Trust's Statement of Additional Information attached hereto as Appendix I. TRUSTEES AND OFFICERS OF THE TRUST For a disclosure of the names and a brief occupational biography of each of the Trust's trustees and executive officers identifying those who are interested persons of the Trust as well as stating their aggregate remuneration, see heading "Management of the Trust" in the Trust's Statement of Additional Information attached hereto as Appendix I. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES For a disclosure of the control persons of the Fund, the principal holders of shares of the Fund and the ownership by officers and trustees of the Fund, see heading "Control Persons and Principal Holders of Securities" in the Trust's Statement of Additional Information attached hereto as Appendix I. ADVISORY AND MANAGEMENT RELATED SERVICES AGREEMENTS AND PLANS OF DISTRIBUTION For a discussion of the Trust's advisory and management-related services agreements and plans of distribution, see headings "Investment Advisory and Other Services" and "Distribution of Securities" in the Trust's Statement of Additional Information attached hereto as Appendix I. PORTFOLIO TRANSACTIONS For a discussion of the Trust's brokerage policy, see heading "Brokerage Allocation and Other Practices" in the Trust's Statement of Additional Information attached hereto as Appendix I. DESCRIPTION OF SHARES For a discussion of the Trust's authorized securities and the characteristics of the Trust's shares of beneficial interest, see heading "General Information About the Trust" in the Trust's Statement of Additional Information attached hereto as Appendix I. DETERMINATION OF NET ASSET VALUE For a discussion of the Trust's valuation and pricing procedures and a description of its purchase and redemption procedures, see heading "Purchase, Redemption and Pricing of Shares" in the Trust's Statement of Additional Information attached hereto as Appendix I. S-3 TAXES For a discussion of any tax information relating to ownership of the Trust's shares, see heading "Dividends, Distributions and Tax Matters" in the Trust's Statement of Additional information attached hereto as Appendix I. PERFORMANCE DATA For a description and quotation of certain performance data used by the Trust, see heading "Calculation of Performance Data" in the Trust's Statement of Additional Information attached hereto as Appendix I. FINANCIAL INFORMATION The pro forma financial statements of the Fund are attached hereto as Appendix II. The October 31, 2006 audited financial statements of the Fund and the report thereon by PricewaterhouseCoopers LLP, are attached hereto as Appendix III. S-4 Appendix I RETAIL CLASSES OF AIM DEVELOPING MARKETS FUND AIM GLOBAL HEALTH CARE FUND AIM TRIMARK ENDEAVOR FUND AIM TRIMARK FUND AIM TRIMARK SMALL COMPANIES FUND (SERIES PORTFOLIOS OF AIM INVESTMENT FUNDS) Supplement dated December 13, 2006 to the Statement of Additional Information dated February 28, 2006, as supplemented March 24, 2006, March 31, 2006, June 30, 2006, August 1, 2006 and September 20, 2006 The following information replaces in its entirety the section entitled "DESCRIPTION OF FUNDS AND THEIR INVESTMENTS AND RISKS - INVESTMENT STRATEGIES AND RISKS - OTHER INVESTMENTS - OTHER INVESTMENT COMPANIES" on page 10 of the Statement of Additional Information: "OTHER INVESTMENT COMPANIES. Each Fund may purchase shares of other investment companies. For each Fund, the 1940 Act imposes the following restrictions on investments in other investment companies: (i) a Fund may not purchase more than 3% of the total outstanding voting stock of another investment company; (ii) a Fund may not invest more than 5% of its total assets in securities issued by another investment company; and (iii) a Fund may not invest more than 10% of its total assets in securities issued by other investment companies. These restrictions do not apply to investments by the Funds in investment companies that are money market funds, including money market funds that have AIM or an affiliate of AIM as an investment advisor (the "Affiliated Money Market Funds"). With respect to a Fund's purchase of shares of another investment company, including an Affiliated Money Market Fund, the Fund will indirectly bear its proportionate share of the advisory fees and other operating expenses of such investment company. EXCHANGE-TRADED FUNDS. Each Fund may purchase shares of exchange-traded funds ("ETFs"). Most ETFs are registered under the 1940 Act as investment companies. Therefore, a Fund's purchase of shares of an ETF may be subject to the restrictions on investments in other investment companies discussed above under "Other Investment Companies." ETFs hold portfolios of securities that are designed to replicate, as closely as possible before expenses, the price and yield of a specified market index. The performance results of ETFs will not replicate exactly the performance of the pertinent index due to transaction and other expenses, including fees to service providers, borne by ETFs. ETF shares are sold and redeemed at net asset value only in large blocks called creation units and redemption units, respectively. ETF shares also may be purchased and sold in secondary market trading on national securities exchanges, which allows investors to purchase and sell ETF shares at their market price throughout the day. Investments in ETFs involve the same risks associated with a direct investment in the types of securities included in the indicies the ETFs are designed to replicate. In addition, shares of an ETF may trade at a market price that is less than their net asset value and an active trading market in such shares may not develop or continue. Finally there can be no assurance that the portfolio of securities purchased by an ETF to replicate a particular index will replicate such index." The following information replaces in its entirety the first paragraph under the heading "DESCRIPTION OF FUNDS AND THEIR INVESTMENTS AND RISKS - FUND POLICIES - NON FUNDAMENTAL RESTRICTIONS" on page 25 of the Statement of Additional Information (such paragraph describes each Fund's non-fundamental investment restriction regarding issuer diversification): "(1) In complying with the fundamental restriction regarding issuer diversification, the Fund will not, with respect to 75% of its total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities and securities issued by other investment companies), if, as a result, (i) more than 5% of the Fund's total assets would be invested in the securities of that issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer. The Fund may purchase securities of other investment companies as permitted by the 1940 Act Laws, Interpretations and Exemptions." Effective January 1, 2007, the following information is added after the second paragraph under the heading "INVESTMENT ADVISORY AND OTHER SERVICES - OTHER SERVICE PROVIDERS - TRANSFER AGENT" on pages 38 and 39 of the Statement of Additional Information: "SUB-TRANSFER AGENT. AIM Funds Management, Inc. ("AFMI"), 5140 Yonge Street, Suite 900, Toronto, Ontario M2N6X7, a wholly owned, indirect subsidiary of AMVESCAP PLC, provides services to the Trust as a sub-transfer agent, pursuant to an agreement between AFMI and AIS. The Trust does not pay a fee to AFMI for these services. Rather AFMI is compensated by AIS, as a sub-contractor." 2 AIM INVESTMENT FUNDS RETAIL CLASSES OF AIM DEVELOPING MARKETS FUND AIM GLOBAL HEALTH CARE FUND AIM TRIMARK ENDEAVOR FUND AIM TRIMARK FUND AIM TRIMARK SMALL COMPANIES FUND Supplement dated September 20, 2006 to the Statement of Additional Information dated February 28, 2006, as supplemented March 24, 2006, March 31, 2006, June 30, 2006 and August 1, 2006 The following replaces in its entirety the information relating to Philip A. Taylor, under the heading "TRUSTEES AND OFFICERS -- INTERESTED PERSONS" in Appendix C in the Statement of Additional Information:
"NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER POSITION(S) HELD WITH THE AND/OR TRUSTEESHIP(S) HELD TRUST OFFICER BY TRUSTEE SINCE INTERESTED PERSONS Philip A. Taylor* -- 1954 2006 Director, Chief Executive Officer and President, A I M None" Trustee, President and Management Group Inc., AIM Mutual Fund Dealer Inc., Principal Executive Officer AIM Funds Management Inc. and 1371 Preferred Inc.; Director and President, A I M Advisors, Inc., INVESCO Funds Group, Inc. and AIM GP Canada Inc.; Director, A I M Capital Management, Inc. and A I M Distributors, Inc.; Director and Chairman, AIM Investment Services, Inc., Fund Management Company and INVESCO Distributors, Inc.; Director, President and Chairman, AVZ Callco Inc., AMVESCAP Inc. and AIM Canada Holdings Inc.; Director and Chief Executive Officer, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.; Trustee, President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust); and Trustee and Executive Vice President, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only) Formerly: President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only); Chairman, AIM Canada Holdings, Inc.; Executive Vice President and Chief Operations Officer, AIM Funds Management Inc.; President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.; and Director, Trimark Trust
Additionally, effective September 20, 2006, Mark H. Williamson resigned as Trustee and Executive Vice President. Philip A. Taylor has been appointed to replace Mark H. Williamson on the Investments Committee and Valuation Committee. ---------- * Mr. Taylor was appointed as President and Principal Executive Officer of the Trust on August 1, 2006 and was appointed as Trustee of the Trust on September 20, 2006. Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. AIM INVESTMENT FUNDS RETAIL CLASSES OF AIM DEVELOPING MARKETS FUND AIM GLOBAL HEALTH CARE FUND AIM TRIMARK ENDEAVOR FUND AIM TRIMARK FUND AIM TRIMARK SMALL COMPANIES FUND Supplement dated August 1, 2006 to the Statement of Additional Information dated February 28, 2006, as supplemented March 24, 2006, March 31, 2006 and June 30, 2006 The following (1) replaces in its entirety, the information relating to Robert H. Graham, under the heading "TRUSTEES AND OFFICERS -- INTERESTED PERSONS" and (2) is added with respect to Philip A. Taylor, under the heading "TRUSTEES AND OFFICERS -- OTHER OFFICERS" in Appendix C in the Statement of Additional Information:
"NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER POSITION(S) HELD WITH THE AND/OR TRUSTEESHIP(S) HELD TRUST OFFICER BY TRUSTEE SINCE -------------------------- ------- --------------------------------------------- ------------------- INTERESTED PERSONS Robert H. Graham(1) -- 1946 1998 Director and Chairman, A I M Management None" Trustee and Vice Chair Group Inc. (financial services holding company); Director and Vice Chairman, AMVESCAP PLC; Chairman, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm); and Trustee and Vice Chair of The AIM Family of Funds--Registered Trademark-- Formerly: President and Chief Executive Officer, A I M Management Group Inc.; Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc. (registered transfer agent), and Fund Management Company (registered broker dealer); Chief Executive Officer, AMVESCAP PLC -- Managed Products; and President and Principal Executive Officer of The AIM Family of Funds--Registered Trademark--
---------- (1) Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust. 1 p "OTHER OFFICERS Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None" President and Principal President, A I M Management Group Inc., Executive Officer AIM Mutual Fund Dealer Inc., AIM Funds Management Inc. and 1371 Preferred Inc.; Director and President, A I M Advisors, Inc., INVESCO Funds Group, Inc. and AIM GP Canada Inc.; Director, A I M Capital Management, Inc. and A I M Distributors, Inc.; Director and Chairman, AIM Investment Services, Inc., Fund Management Company and INVESCO Distributors, Inc.; Director, President and Chairman, AVZ Callco Inc., AMVESCAP Inc. and AIM Canada Holdings Inc.; Director and Chief Executive Officer, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.; and President and Principal Executive Officer of The AIM Family of Funds--Registered Trademark-- Formerly: Chairman, AIM Canada Holdings, Inc.; Executive Vice President and Chief Operations Officer, AIM Funds Management Inc.; President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.; and Director, Trimark Trust
---------- (2) Mr. Taylor was elected as President and Principal Executive Officer of the Trust on August 1, 2006. 2 AIM INVESTMENT FUNDS RETAIL CLASS SHARES OF AIM DEVELOPING MARKETS FUND AIM GLOBAL HEALTH CARE FUND AIM TRIMARK ENDEAVOR FUND AIM TRIMARK FUND AIM TRIMARK SMALL COMPANIES FUND Supplement dated June 30, 2006 to the Statement of Additional Information dated February 28, 2006 as supplemented March 24, 2006 and March 31, 2006 Effective July 1, 2006, the following information replaces the second paragraph in its entirety appearing under the heading "INVESTMENT ADVISORY AND OTHER SERVICES -- OTHER SERVICE PROVIDERS -- TRANSFER AGENT" on page 38 of the Statement of Additional Information: "The Transfer Agency and Service Agreement (the "TA Agreement") between the Trust and AIS provides that AIS will perform certain services related to the servicing of shareholders of the Funds. Other such services may be delegated or sub-contracted to third party intermediaries. For servicing accounts holding Class A, A3, B, C, P, R, AIM Cash Reserve and Investor Class Shares, the TA Agreement provides that the Trust, on behalf of the Funds, will pay AIS an annual fee per open shareholder account plus certain out of pocket expenses. This fee is paid monthly at the rate of 1/12 of the annual rate and is based upon the number of open shareholder accounts during each month. In addition, all fees payable by AIS or its affiliates to third party intermediaries who service accounts pursuant to sub-transfer agency, omnibus account services and sub-accounting agreements are charged back to the Funds, subject to certain limitations approved by the Board of the Trust. These payments are made in consideration of services that would otherwise be provided by AIS if the accounts serviced by such intermediaries were serviced by AIS directly. For more information regarding such payments to intermediaries, see the discussion under "Administrative and Processing Support Payments" below." "APPENDIX L -- CERTAIN FINANCIAL ADVISORS THAT RECEIVE ONE OR MORE TYPES OF PAYMENTS" appearing on page L-1 of the Statement of Additional Information is revised to include AXA Advisors, LLC. AIM DEVELOPING MARKETS FUND AIM GLOBAL HEALTH CARE FUND AIM TRIMARK ENDEAVOR FUND AIM TRIMARK FUND AIM TRIMARK SMALL COMPANIES FUND (SERIES PORTFOLIOS OF AIM INVESTMENTS FUNDS) Supplement dated March 31, 2006 to the Statement of Additional Information dated February 28, 2006 as supplemented March 24, 2006 The following (1) replaces in its entirety, the information relating to Lisa O. Brinkley and Kevin M. Carome and (2) is added with respect to John M. Zerr and Todd L. Spillane, under the heading "APPENDIX C TRUSTEES AND OFFICERS- OTHER OFFICERS" in the Statement of Additional Information.
TRUSTEE OTHER "NAME, YEAR OF BIRTH AND/OR TRUSTEESHIP(S) AND POSITION(S) HELD OFFICER HELD BY WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS TRUSTEE ------------------------ ------- ------------------------------------------------- -------------- OTHER OFFICERS Lisa O. Brinkley - 1959 2004 Global Compliance Director, AMVESCAP PLC; and N/A Vice President Vice President of the AIM Family of Funds Formerly: Senior Vice President, A I M Management Group Inc. (financial services holding company); Senior Vice President and Chief Compliance Officer, A I M Advisors, Inc. and the AIM Family of Funds; Vice President and Chief Compliance Officer, A I M Capital Management, Inc. and A I M Distributors, Inc.; Vice President, AIM Investment Services, Inc. and Fund Management Company; and Senior Vice President and Compliance Director, Delaware Investments Family of Funds
Kevin M. Carome - 1956 2003 Senior Vice President and General Counsel, N/A Vice President AMVESCAP PLC; and Vice President of the AIM Family of Funds Formerly: Director, General Counsel, and Vice President Fund Management Company; Director, Senior Vice President, Secretary and General Counsel, A I M Management Group Inc. (financial services holding company) and A I M Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Senior Vice President, A I M Distributors, Inc.; Vice President, A I M Capital Management, Inc. and AIM Investment Services, Inc.; Senior Vice President and Secretary of the AIM Family of Funds; and Senior Vice President and General Counsel, Liberty Financial Companies, Inc. and Liberty Funds Group, LLC Todd L. Spillane* - 1958 2006 Senior Vice President, A I M Management Group N/A Chief Compliance Officer Inc.; Senior Vice President and Chief Compliance Officer, A I M Advisors, Inc.; Chief Compliance Officer of the AIM Family of Funds; Vice President and Chief Compliance Officer, A I M Capital Management, Inc.; and Vice President, A I M Distributors, Inc., AIM Investment Services, Inc. and Fund Management Company Formerly: Global Head of Product Development, AIG-Global Investment Group, Inc.; Chief Compliance Officer and Deputy General Counsel, AIG-SunAmerica Asset Management, and Chief Compliance Officer, Chief Operating Officer and Deputy General Counsel, American General Investment Management John M. Zerr** - 1962 2006 Director, Senior Vice President, Secretary and N/A Senior Vice President, General Counsel, A I M Management Group Inc. Chief Legal Officer (financial services holding company) and A I M and Secretary Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., AIM Investment Services, Inc., and Fund Management Company; Senior Vice President, A I M Distributors, Inc.; and Senior Vice President, Chief Legal Officer and Secretary of the AIM Family of Funds Formerly: Chief Operating Officer, Senior Vice President, General Counsel, and Secretary, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company); Vice President and Secretary, PBHG Insurance Series Fund (an investment company); General Counsel and Secretary, Pilgrim Baxter Value Investors (an investment adviser); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator); General Counsel and Secretary, Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company)
* Mr. Spillane was elected Chief Compliance Officer effective March 29, 2006. ** Mr. Zerr was elected Senior Vice President, Chief Legal Officer and Secretary effective March 29, 2006. Additionally, effective March 31, 2006, Mr. Edward K. Dunn retired as a Trustee of the AIM Funds." RETAIL CLASSES OF AIM DEVELOPING MARKETS FUND AIM GLOBAL HEALTH CARE FUND AIM TRIMARK ENDEAVOR FUND AIM TRIMARK FUND AIM TRIMARK SMALL COMPANIES FUND (SERIES PORTFOLIO OF AIM INVESTMENT FUNDS) Supplement dated March 24, 2006 to the Statement of Additional Information dated February 28, 2006 Effective March 27, 2006, the following information replaces in its entirety the information appearing under the heading "PORTFOLIO MANAGER FUND HOLDINGS AND INFORMATION ON OTHER MANAGED ACCOUNTS - AIM TRIMARK SMALL COMPANIES FUND" on page H-2 of the Statement of Additional Information:
---------------------------------------------------------------------------------------------------------------------- OTHER REGISTERED MUTUAL OTHER POOLED FUNDS (ASSETS IN INVESTMENT VEHICLES OTHER ACCOUNTS MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)(2) DOLLAR RANGE OF ----------------------- ----------------------- ----------------------- INVESTMENTS IN NUMBER OF TOTAL NUMBER OF TOTAL NUMBER OF TOTAL PORTFOLIO MANAGER EACH FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS ---------------------------------------------------------------------------------------------------------------------- AIM TRIMARK SMALL COMPANIES FUND ---------------------------------------------------------------------------------------------------------------------- Robert Mikalachki None(3) None - 3 $317.3 None - ---------------------------------------------------------------------------------------------------------------------- Ted Chisholm(4) None(3) None - None - None - ----------------------------------------------------------------------------------------------------------------------
(1) This column reflects investments in a Fund's shares owned directly by a portfolio manager or beneficially owned by a portfolio manager (as determined in accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended). A portfolio manager is presumed to be a beneficial owner of securities that are held by his or her immediate family members sharing the same household. (2) These are accounts of individual investors for which AIM's affiliate, AIM Private Asset Management, Inc. ("APAM") provides investment advice. APAM offers separately managed accounts that are managed according to the investment models developed by AIM's portfolio managers and used in connection with the management of certain AIM funds. APAM accounts may be invested in accordance with one or more of those investment models and investments held in those accounts are traded in accordance with the applicable model. (3) Shares of the Funds are not sold in Canada, where the portfolio management is domiciled. Accordingly, no portfolio manager may invest in the Funds. (4) Ted Chisholm began serving as portfolio manager on March 27, 2006. Ownership information and information on other accounts managed has been provided as of February 28, 2006. STATEMENT OF ADDITIONAL INFORMATION AIM INVESTMENT FUNDS 11 GREENWAY PLAZA SUITE 100 HOUSTON, TEXAS 77046-1173 (713) 626-1919 THIS STATEMENT OF ADDITIONAL INFORMATION RELATES TO EACH PORTFOLIO (EACH A "FUND," COLLECTIVELY THE "FUNDS") OF AIM INVESTMENT FUNDS LISTED BELOW. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUSES FOR THE FUNDS LISTED BELOW. PORTIONS OF EACH FUND'S FINANCIAL STATEMENTS ARE INCORPORATED INTO THIS STATEMENT OF ADDITIONAL INFORMATION BY REFERENCE TO SUCH FUND'S MOST RECENT ANNUAL REPORT TO SHAREHOLDERS. YOU MAY OBTAIN, WITHOUT CHARGE, A COPY OF ANY PROSPECTUS AND/OR ANNUAL REPORT FOR ANY FUND LISTED BELOW FROM AN AUTHORIZED DEALER OR BY WRITING TO: AIM INVESTMENT SERVICES, INC. P.O. BOX 4739 HOUSTON, TEXAS 77210-4739 OR BY CALLING (800) 959-4246 THIS STATEMENT OF ADDITIONAL INFORMATION, DATED FEBRUARY 28, 2006, RELATES TO THE CLASS A, CLASS B, CLASS C, CLASS R AND INVESTOR CLASS SHARES, AS APPLICABLE, OF THE FOLLOWING PROSPECTUSES: FUND DATED AIM DEVELOPING MARKETS FUND FEBRUARY 28, 2006 AIM GLOBAL HEALTH CARE FUND FEBRUARY 28, 2006 AIM TRIMARK ENDEAVOR FUND FEBRUARY 28, 2006 AIM TRIMARK FUND FEBRUARY 28, 2006 AIM TRIMARK SMALL COMPANIES FUND FEBRUARY 28, 2006 AIM INVESTMENT FUNDS STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
PAGE GENERAL INFORMATION ABOUT THE TRUST................................................................................. 1 Fund History............................................................................................ 1 Shares of Beneficial Interest........................................................................... 1 DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS............................................................ 3 Classification.......................................................................................... 3 Investment Strategies and Risks......................................................................... 3 Equity Investments.......................................................................... 6 Foreign Investments......................................................................... 6 Debt Investments............................................................................ 8 Other Investments........................................................................... 9 Investment Techniques....................................................................... 11 Derivatives................................................................................. 15 Additional Securities or Investment Techniques.............................................. 22 Fund Policies........................................................................................... 23 Concentration of Investments............................................................................ 26 Temporary Defensive Positions........................................................................... 26 Portfolio Turnover...................................................................................... 26 Policies and Procedures for Disclosure of Fund Holdings................................................. 26 MANAGEMENT OF THE TRUST............................................................................................. 29 Board of Trustees....................................................................................... 29 Management Information.................................................................................. 29 Trustee Ownership of Fund Shares............................................................ 32 Compensation............................................................................................ 32 Retirement Plan For Trustees................................................................ 32 Deferred Compensation Agreements............................................................ 33 Purchase of Class A Shares of the Funds at Net Asset Value.................................. 33 Codes of Ethics......................................................................................... 33 Proxy Voting Policies................................................................................... 34 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES................................................................. 34 INVESTMENT ADVISORY AND OTHER SERVICES.............................................................................. 34 Investment Advisor...................................................................................... 34 Investment Sub-Advisor...................................................................... 37 Portfolio Managers.......................................................................... 38 Securities Lending Arrangements............................................................. 38 Service Agreements...................................................................................... 38 Other Service Providers................................................................................. 38 BROKERAGE ALLOCATION AND OTHER PRACTICES............................................................................ 39 Brokerage Transactions.................................................................................. 39 Commissions............................................................................................. 40 Broker Selection........................................................................................ 40 Directed Brokerage (Research Services).................................................................. 43 Regular Brokers or Dealers.............................................................................. 43 Allocation of Portfolio Transactions.................................................................... 43 Allocation of Initial Public Offering ("IPO") Transactions.............................................. 44
i PURCHASE, REDEMPTION AND PRICING OF SHARES......................................................................... 44 Transactions through Financial Intermediaries.......................................................... 44 Purchase and Redemption of Shares...................................................................... 45 Offering Price......................................................................................... 64 Redemptions In Kind.................................................................................... 66 Backup Withholding..................................................................................... 66 DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS........................................................................... 67 Dividends and Distributions............................................................................ 67 Tax Matters............................................................................................ 68 DISTRIBUTION OF SECURITIES......................................................................................... 75 Distribution Plans..................................................................................... 75 Distributor............................................................................................ 77 CALCULATION OF PERFORMANCE DATA.................................................................................... 79 FINANCIAL STATEMENTS............................................................................................... 84 PENDING LITIGATION................................................................................................. 84 APPENDICES: RATINGS OF DEBT SECURITIES......................................................................................... A-1 PERSONS TO WHOM AIM PROVIDES NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS..................................... B-1 TRUSTEES AND OFFICERS.............................................................................................. C-1 TRUSTEE COMPENSATION TABLE......................................................................................... D-1 PROXY POLICIES AND PROCEDURES...................................................................................... E-1 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES................................................................ F-1 MANAGEMENT FEES.................................................................................................... G-1 PORTFOLIO MANAGERS................................................................................................. H-1 ADMINISTRATIVE SERVICES FEES....................................................................................... I-1 BROKERAGE COMMISSIONS.............................................................................................. J-1 DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES OF REGULAR BROKERS OR DEALERS................... K-1 CERTAIN FINANCIAL ADVISORS THAT RECEIVE ONE OR MORE TYPES OF PAYMENTS.............................................. L-1 AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS............................................ M-1 ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS...................................................... N-1 TOTAL SALES CHARGES................................................................................................ O-1 PENDING LITIGATION................................................................................................. P-1
ii GENERAL INFORMATION ABOUT THE TRUST FUND HISTORY AIM Investment Funds (the "Trust") is a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company. The Trust currently consists of five separate portfolios: AIM Developing Markets Fund, AIM Global Health Care Fund, AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund (each a "Fund" and collectively, the "Funds"). Under the Amended and Restated Agreement and Declaration of Trust, dated September 14, 2005, as amended (the "Trust Agreement"), the Board of Trustees of the Trust (the "Board") is authorized to create new series of shares without the necessity of a vote of shareholders of the Trust. The Trust was originally organized on October 29, 1987 as a Maryland corporation. The Trust reorganized as a Delaware business trust on May 7, 1998. All historical financial and other information contained in this Statement of Additional Information for periods prior to September 8, 1998 relating to these Funds (or a class thereof), except for AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund, is that of AIM Investment Funds, Inc. the Maryland corporation (or the corresponding class thereof). Each of AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund commenced operations as a series of the Trust. On July 18, 2005, AIM Global Health Care Fund acquired the assets of AIM Health Sciences Fund, a portfolio of AIM Sector Funds. SHARES OF BENEFICIAL INTEREST Shares of beneficial interest of the Trust are redeemable at their net asset value (subject, in certain circumstances, to a contingent deferred sales charge or redemption fee) at the option of the shareholder or at the option of the Trust in certain circumstances. The Trust allocates moneys and other property it receives from the issue or sale of shares of each of its series of shares, and all income, earnings and profits from such issuance and sales, subject only to the rights of creditors, to the appropriate Fund. These assets constitute the underlying assets of each Fund, are segregated on the Trust's books of account, and are charged with the expenses of such Fund and its respective classes. The Trust allocates any general expenses of the Trust not readily identifiable as belonging to a particular Fund by or under the direction of the Board, primarily on the basis of relative net assets, or other relevant factors. Each share of each Fund represents an equal proportionate interest in that Fund with each other share and is entitled to such dividends and distributions out of the income belonging to such Fund as are declared by the Board. Each Fund offers the following separate classes of shares:
INSTITUTIONAL INVESTOR FUND CLASS A CLASS B CLASS C CLASS R CLASS CLASS -------------------------------- ------- ------- ------- ------- ------------- -------- AIM Developing Markets Fund X X X X AIM Global Health Care Fund X X X X AIM Trimark Endeavor Fund X X X X X AIM Trimark Fund X X X X X AIM Trimark Small Companies Fund X X X X X
1 This Statement of Additional Information relates solely to the Class A, Class B, Class C, Class R and Investor Class shares, if applicable, of the Funds. The Institutional Class shares of the Funds, which are discussed in a separate Statement of Additional Information, are intended for use by certain eligible institutional investors. Each class of shares represents an interest in the same portfolio of investments. Differing sales charges and expenses will result in differing net asset values and dividends and distributions. Upon any liquidation of the Trust, shareholders of each class are entitled to share pro rata in the net assets belonging to the applicable Fund allocable to such class available for distribution after satisfaction of outstanding liabilities of the Fund allocable to such class. Each share of a Fund generally has the same voting, dividend, liquidation and other rights; however, each class of shares of a Fund is subject to different sales loads, conversion features, exchange privileges and class-specific expenses. Only shareholders of a specific class may vote on matters relating to that class' distribution plan. Because Class B shares automatically convert to Class A shares on or about month-end which is at least eight years after the date of purchase, the Funds' distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act requires that Class B shareholders must also approve any material increase in distribution fees submitted to Class A shareholders of that Fund. A pro rata portion of shares from reinvested dividends and distributions convert along with the Class B shares. Except as specifically noted above, shareholders of each Fund are entitled to one vote per share (with proportionate voting for fractional shares), irrespective of the relative net asset value of the shares of a Fund. However, on matters affecting an individual Fund or class of shares, a separate vote of shareholders of that Fund or class is required. Shareholders of a Fund or class are not entitled to vote on any matter which does not affect that Fund or class but that requires a separate vote of another Fund or class. An example of a matter that would be voted on separately by shareholders of each Fund is the approval of the advisory agreement with A I M Advisors, Inc. ("AIM"), and an example of a matter that would be voted on separately by shareholders of each class of shares is approval of the distribution plans. When issued, shares of each Fund are fully paid and nonassessable, have no preemptive, subscription rights, and are freely transferable. Other than the automatic conversion of Class B shares to Class A shares, there are no conversion rights. Shares do not have cumulative voting rights, which means that in situations in which shareholders elect trustees, holders of more than 50% of the shares voting for the election of trustees can elect all of the trustees of the Trust, and the holders of less than 50% of the shares voting for the election of trustees will not be able to elect any trustees. Under Delaware law, shareholders of a Delaware statutory trust shall be entitled to the same limitations of liability extended to shareholders of private for-profit corporations. There is a remote possibility, however, that shareholders could, under certain circumstances, be held liable for the obligations of the Trust to the extent the courts of another state which does not recognize such limited liability were to apply the laws of such state to a controversy involving such obligations. The Trust Agreement disclaims shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the trustees to all parties, and each party thereto must expressly waive all rights of action directly against shareholders of the Trust. The Trust Agreement provides for indemnification out of the property of a Fund for all losses and expenses of any shareholder of such Fund held liable on account of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss due to shareholder liability is limited to circumstances in which a Fund is unable to meet its obligations and the complaining party is not held to be bound by the disclaimer. The trustees and officers of the Trust will not be liable for any act, omission or obligation of the Trust or any trustee or officer; however, a trustee or officer is not protected against any liability to the Trust or to the shareholders to which a trustee or officer would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office with the Trust ("Disabling Conduct"). The Trust's Bylaws generally provide for 2 indemnification by the Trust of the trustees, the officers and employees or agents of the Trust, provided that such persons have not engaged in Disabling Conduct. Indemnification does not extend to judgments or amounts paid in settlement in an action by or in the right of the Trust. The Trust's Bylaws provide for the advancement of payments to current and former trustees, officers and employees or agents of the Trust, or anyone serving at their request, in connection with the preparation and presentation of a defense to any claim, action, suit or proceeding, expenses for which such person would be entitled to indemnification; provided that any advancement of payments would be reimbursed unless it is ultimately determined that such person is entitled to indemnification for such expenses. SHARE CERTIFICATES. Shareholders of the Funds do not have the right to demand or require the Trust to issue share certificates and share certificates are not issued. DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS CLASSIFICATION The Trust is an open-end management investment company. Each of the Funds other than AIM Developing Markets Fund is "diversified" for purposes of the 1940 Act. INVESTMENT STRATEGIES AND RISKS The table on the following pages identifies various securities and investment techniques used by AIM in managing The AIM Family of Funds registered trademark. The table has been marked to indicate those securities and investment techniques that AIM may use to manage a Fund. A Fund may not use all of these techniques at any one time. A Fund's transactions in a particular security or use of a particular technique is subject to limitations imposed by a Fund's investment objective, policies and restrictions described in that Fund's Prospectus and/or this Statement of Additional Information, as well as federal securities laws. The Funds' investment objectives, policies, strategies and practices are non-fundamental unless otherwise indicated. A more detailed description of the securities and investment techniques, as well as the risks associated with those securities and investment techniques that the Funds utilize, follows the table. The descriptions of the securities and investment techniques in this section supplement the discussion of principal investment strategies contained in each Fund's Prospectus; where a particular type of security or investment technique is not discussed in a Fund's Prospectus, that security or investment technique is not a principal investment strategy. 3 AIM INVESTMENT FUNDS SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND ------------------- SECURITY/ AIM AIM GLOBAL AIM TRIMARK INVESTMENT DEVELOPING HEALTH CARE AIM TRIMARK AIM TRIMARK SMALL TECHNIQUE MARKETS FUND FUND ENDEAVOR FUND FUND COMPANIES FUND ----------------------------------- ------------ ---------- ------------- ----------- -------------- EQUITY INVESTMENTS Common Stock X X X X X Preferred Stock X X X X X Convertible Securities X X X X X Alternative Entity Securities X X X X X FOREIGN INVESTMENTS Foreign Securities X X X X X Foreign Government Obligations X X X X X Foreign Exchange Transactions X X X X X DEBT INVESTMENTS U.S. Government Obligations X X X X X Rule 2a-7 Requirements Mortgage-Backed and Asset-Backed Securities Collateralized Mortgage Obligations Bank Instruments Commercial Instruments Participation Interests Municipal Securities Municipal Lease Obligations Investment Grade Corporate Debt X X X X X Obligations Junk Bonds X X X X X Liquid Assets X X X X X OTHER INVESTMENTS REITs X X X X X Other Investment Companies X X X X X Defaulted Securities Municipal Forward Contracts Variable or Floating Rate X Instruments Indexed Securities X Zero-Coupon and Pay-in-Kind X Securities Synthetic Municipal Instruments INVESTMENT TECHNIQUES Delayed Delivery Transactions X X X X X When-Issued Securities X X X X X Short Sales X X X X X
4
FUND ------------------------ SECURITY/ AIM AIM GLOBAL AIM TRIMARK INVESTMENT DEVELOPING HEALTH CARE AIM TRIMARK AIM TRIMARK SMALL TECHNIQUE MARKETS FUND FUND ENDEAVOR FUND FUND COMPANIES FUND ----------------------------------- ------------ ----------- ------------- ----------- -------------- Margin Transactions Swap Agreements X X X X X Interfund Loans X X X X X Borrowing X X X X X Lending Portfolio Securities X X X X X Repurchase Agreements X X X X X Reverse Repurchase Agreements X X Dollar Rolls X Illiquid Securities X X X X X Rule 144A Securities X X X X X Unseasoned Issuers X Portfolio Transactions Sale of Money Market Securities Standby Commitments DERIVATIVES Equity-Linked Derivatives X X X X X Put Options X X X X X Call Options X X X X X Straddles X X X X X Warrants X X X X X Futures Contracts and Options on X X X X X Futures Contracts Forward Currency Contracts X X X X X Cover X X X X X ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES Investments in Entities with X X X X X Relationships with the Funds/Advisor Loan Participations and Assignments X Privatizations X X X X X Indexed Commercial Paper X Samurai and Yankee Bonds X Premium Securities X Structured Investments X Stripped Income Securities X
5 Equity Investments COMMON STOCK. Common stock is issued by companies principally to raise cash for business purposes and represents a residual interest in the issuing company. A Fund participates in the success or failure of any company in which it holds stock. The prices of equity securities change in response to many factors including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. PREFERRED STOCK. Preferred stock, unlike common stock, often offers a stated dividend rate payable from a corporation's earnings. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, a negative feature when interest rates decline. Dividends on some preferred stock may be "cumulative," requiring all or a portion of prior unpaid dividends to be paid before dividends are paid on the issuer's common stock. Preferred stock also generally has a preference over common stock on the distribution of a corporation's assets in the event of liquidation of the corporation, and may be "participating," which means that it may be entitled to a dividend exceeding the stated dividend in certain cases. In some cases an issuer may offer auction rate preferred stock, which means that the interest to be paid is set by auction and will often be reset at stated intervals. The rights of preferred stocks on the distribution of a corporation's assets in the event of a liquidation are generally subordinate to the rights associated with a corporation's debt securities. CONVERTIBLE SECURITIES. Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into a prescribed amount of common stock or other equity securities at a specified price and time. The holder of convertible securities is entitled to receive interest paid or accrued on debt, or dividends paid or accrued on preferred stock, until the security matures or is converted. The value of a convertible security depends on interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. Convertible securities may be illiquid, and may be required to convert at a time and at a price that is unfavorable to the Fund. The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund. ALTERNATIVE ENTITY SECURITIES. Companies that are formed as limited partnerships, limited liability companies, business trusts or other non-corporate entities may issue equity securities that are similar to common or preferred stock of corporations. Foreign Investments FOREIGN SECURITIES. Foreign securities are equity or debt securities issued by issuers outside the United States, and include securities in the form of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or other securities representing underlying securities of foreign issuers. Depositary Receipts are typically issued by a bank or trust company and evidence ownership of underlying securities issued by foreign corporations. Each Fund may invest up to 100% of its total assets in foreign securities, except that AIM Trimark Endeavor Fund and AIM Trimark Small Companies Fund may each invest up to 25% of its total assets in foreign securities. 6 Investments by a Fund in foreign securities, whether denominated in U.S. dollars or foreign currencies, may entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs or similar securities also may entail some or all of the risks described below. Currency Risk. The value of the Funds' foreign investments will be affected by changes in currency exchange rates. The U.S. dollar value of a foreign security decreases when the value of the U.S. dollar rises against the foreign currency in which the security is denominated, and increases when the value of the U.S. dollar falls against such currency. Political and Economic Risk. The economies of many of the countries in which the Funds may invest may not be as developed as the United States' economy and may be subject to significantly different forces. Political or social instability, expropriation or confiscatory taxation, and limitations on the removal of funds or other assets could also adversely affect the value of the Funds' investments. Regulatory Risk. Foreign companies are not registered with the Securities and Exchange Commission ("SEC") and are generally not subject to the regulatory controls imposed on United States issuers and, as a consequence, there is generally less publicly available information about foreign securities than is available about domestic securities. Foreign companies are not subject to uniform accounting, auditing and financial reporting standards, corporate governance practices and requirements comparable to those applicable to domestic companies. Income from foreign securities owned by the Funds may be reduced by a withholding tax at the source, which tax would reduce dividend income payable to the Funds' shareholders. Market Risk. The securities markets in many of the countries in which the Funds invest will have substantially less trading volume than the major United States markets. As a result, the securities of some foreign companies may be less liquid and experience more price volatility than comparable domestic securities. Increased custodian costs as well as administrative costs (such as the need to use foreign custodians) may be associated with the maintenance of assets in foreign jurisdictions. There is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. In addition, transaction costs in foreign securities markets are likely to be higher, since brokerage commission rates in foreign countries are likely to be higher than in the United States. Risks of Developing Countries. AIM Developing Markets Fund may invest all of its total assets in securities of companies located in developing countries. AIM Global Health Care Fund may invest up to 20%, AIM Trimark Endeavor Fund and AIM Trimark Fund may each invest up to 15% and AIM Trimark Small Companies Fund may invest up to 5%, of their respective total assets in securities of companies located in developing countries. Developing countries are those countries which are not included in the MSCI World Index. The Funds consider various factors when determining whether a company is in a developing country, including whether (1) it is organized under the laws of a developing country; (2) it has a principal office in a developing country; (3) it derives 50% or more of its total revenues from business in a developing country; or (4) its securities are traded principally on a stock exchange, or in an over-the-counter market, in a developing country. Investments in developing countries present risks greater than, and in addition to, those presented by investments in foreign issuers in general. A number of developing countries restrict, to varying degrees, foreign investment in stocks. Repatriation of investment income, capital, and the proceeds of sales by foreign investors may require governmental registration and/or approval in some developing countries. A number of the currencies of developing countries have experienced significant declines against the U.S. dollar in recent years, and devaluation may occur subsequent to investments in these currencies by the Funds. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies and securities markets of certain emerging market countries. Many of the developing securities markets are relatively small or less diverse, have low trading volumes, suffer periods of relative illiquidity, and are characterized by significant price volatility. There is a risk in developing countries that a future economic or political crisis could lead to price controls, forced mergers of companies, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies, any of which may have a detrimental effect on the Fund's investments. 7 FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign governments are often, but not always, supported by the full faith and credit of the foreign governments, or their subdivisions, agencies or instrumentalities that issue them. These securities involve the risk discussed above with respect to foreign securities. Additionally, the issuer of the debt or the governmental authorities that control repayment of the debt may be unwilling or unable to pay interests or repay principal when due. Political or economic changes or the balance of trade may affect a country's willingness or ability to service its debt obligations. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt obligations, especially debt obligations issued by the government of developing countries. Foreign government obligations of developing countries, and some structures of emerging market debt securities, both of which are generally below investment grade, are sometimes referred to as "Brady Bonds." FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include direct purchases of futures contracts with respect to foreign currency, and contractual agreements to purchase or sell a specified currency at a specified future date (up to one year) at a price set at the time of the contract. Such contractual commitments may be forward contracts entered into directly with another party or exchange traded futures contracts. Each Fund has authority to deal in foreign exchange between currencies of the different countries in which it will invest as a hedge against possible variations in the foreign exchange rates between those currencies. A Fund may commit the same percentage of its assets to foreign exchange hedges as it can invest in foreign securities. The Funds may utilize either specific transactions ("transaction hedging") or portfolio positions ("position hedging") to hedge foreign currency exposure through foreign exchange transactions. Transaction hedging is the purchase or sale of foreign currency with respect to specific receivables or payables of a Fund accruing in connection with the purchase or sale of its portfolio securities, the sale and redemption of shares of the Fund, or the payment of dividends and distributions by the Fund. Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions (or underlying portfolio security positions, such as in an ADR) denominated or quoted in a foreign currency. Additionally, foreign exchange transactions may involve some of the risks of investments in foreign securities. Debt Investments U.S. GOVERNMENT OBLIGATIONS. Obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities include bills, notes and bonds issued by the U.S. Treasury, as well as "stripped" or "zero coupon" U.S. Treasury obligations representing future interest or principal payments on U.S. Treasury notes or bonds. Stripped securities are sold at a discount to their "face value," and may exhibit greater price volatility than interest-bearing securities since investors receive no payment until maturity. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association ("GNMA"), are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association ("FNMA"), are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as those of the former Student Loan Marketing Association ("SLMA"), are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, though issued by an instrumentality chartered by the U.S. Government, like the Federal Farm Credit Bureau ("FFCB"), are supported only by the credit of the instrumentality. The U.S. Government may choose not to provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not legally obligated to do so, in which case, if the issuer were to default, the Funds holding securities of such issuer might not be able to recover their investment from the U.S. Government. INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. Each Fund may invest in U.S. dollar-denominated debt obligations issued or guaranteed by U.S. corporations or U.S. commercial banks, U.S. dollar-denominated obligations of foreign issuers and debt obligations of foreign issuers denominated in 8 foreign currencies. Such debt obligations include, among others, bonds, notes, debentures and variable rate demand notes. In choosing corporate debt securities on behalf of a Fund, its investment adviser may consider (i) general economic and financial conditions; (ii) the specific issuer's (a) business and management, (b) cash flow, (c) earnings coverage of interest and dividends, (d) ability to operate under adverse economic conditions, (e) fair market value of assets, and (f) in the case of foreign issuers, unique political, economic or social conditions applicable to such issuer's country; and, (iii) other considerations deemed appropriate. JUNK BONDS. Each of the Funds may invest in junk bonds. Junk bonds are lower-rated or non-rated debt securities. Junk bonds are considered speculative with respect to their capacity to pay interest and repay principal in accordance with the terms of the obligation. While generally providing greater income and opportunity for gain, non-investment grade debt securities are subject to greater risks than higher-rated securities. Companies that issue junk bonds are often highly leveraged, and may not have more traditional methods of financing available to them. During an economic downturn or recession, highly leveraged issuers of high yield securities may experience financial stress, and may not have sufficient revenues to meet their interest payment obligations. Economic downturns tend to disrupt the market for junk bonds, lowering their values, and increasing their price volatility. The risk of issuer default is higher with respect to junk bonds because such issues are generally unsecured and are often subordinated to other creditors of the issuer. The credit rating of a junk bond does not necessarily address its market value risk, and ratings may from time to time change to reflect developments regarding the issuer's financial condition. The lower the rating of a junk bond, the more speculative its characteristics. The Funds may have difficulty selling certain junk bonds because they may have a thin trading market. The lack of a liquid secondary market may have an adverse effect on the market price and a Fund's ability to dispose of particular issues and may also make it more difficult for the Fund to obtain accurate market quotations in valuing these assets. In the event a Fund experiences an unexpected level of net redemptions, the Fund could be forced to sell its junk bonds at an unfavorable price. Prices of junk bonds have been found to be less sensitive to fluctuations in interest rates, and more sensitive to adverse economic changes and individual corporate developments than those of higher-rated debt securities. AIM Global Health Care Fund, AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund may each invest up to 5% of total assets, and AIM Developing Markets Fund may invest up to 50% of total assets in junk bonds. Descriptions of debt securities ratings are found in Appendix A. LIQUID ASSETS. Cash equivalents include money market instruments (such as certificates of deposit, time deposits, bankers' acceptances from U.S. or foreign banks, and repurchase agreements), shares of affiliated money market funds or high-quality debt obligations (such as U.S. Government obligations, commercial paper, master notes and other short-term corporate instruments and municipal obligations). Other Investments REAL ESTATE INVESTMENT TRUSTS ("REITs"). REITs are trusts that sell equity or debt securities to investors and use the proceeds to invest in real estate or interests therein. A REIT may focus on particular projects, such as apartment complexes, or geographic regions, such as the southeastern United States, or both. To the extent consistent with their respective investment objectives and policies, each Fund may invest up to 15% of its total assets in equity and/or debt securities issued by REITs. 9 To the extent that a Fund has the ability to invest in REITs, the Fund could conceivably own real estate directly as a result of a default on the securities it owns. A Fund, therefore, may be subject to certain risks associated with the direct ownership of real estate including difficulties in valuing and trading real estate, declines in the value of real estate, risks related to general and local economic conditions, adverse changes in the climate for real estate, environmental liability risks, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, limitations on rents, changes in neighborhood values, the appeal of properties to tenants, and increases in interest rates. In addition to the risks described above, equity REITs may be affected by any changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Equity and mortgage REITs are dependent upon management skill, are not diversified, and are therefore subject to the risk of financing single or a limited number of projects. Such trusts are also subject to heavy cash flow dependency, defaults by borrowers, self-liquidation, and the possibility of failing to maintain an exemption from the 1940 Act. Changes in interest rates may also affect the value of debt securities held by a Fund. By investing in REITs indirectly through a Fund, a shareholder will bear not only his/her proportionate share of the expenses of the Fund, but also, indirectly, similar expenses of the REITs. OTHER INVESTMENT COMPANIES. With respect to a Fund's purchase of shares of another investment company, including Affiliated Money Market Funds (defined below), the Fund will indirectly bear its proportionate share of the advisory fees and other operating expenses of such investment company. The Funds have obtained an exemptive order from the SEC allowing them to invest in money market funds that have AIM or an affiliate of AIM as an investment advisor (the "Affiliated Money Market Funds"), provided that investments in Affiliated Money Market Funds do not exceed 25% of the total assets of the investing Fund. The following restrictions apply to investments in other investment companies other than Affiliated Money Market Funds: (i) a Fund may not purchase more than 3% of the total outstanding voting stock of another investment company; (ii) a Fund may not invest more than 5% of its total assets in securities issued by another investment company; and (iii) a Fund may not invest more than 10% of its total assets in securities issued by other investment companies. VARIABLE OR FLOATING RATE INSTRUMENTS. AIM Developing Markets Fund may invest in securities which have variable or floating interest rates which are readjusted on set dates (such as the last day of the month or calendar quarter) in the case of variable rates or whenever a specified interest rate change occurs in the case of a floating rate instrument. Variable or floating interest rates generally reduce changes in the market price of securities from their original purchase price because, upon readjustment, such rates approximate market rates. Accordingly, as interest rates decrease or increase, the potential for capital appreciation or depreciation is less for variable or floating rate securities than for fixed rate obligations. Many securities with variable or floating interest rates purchased by a Fund are subject to payment of principal and accrued interest (usually within seven days) on the Fund's demand. The terms of such demand instruments require payment of principal and accrued interest by the issuer, a guarantor, and/or a liquidity provider. All variable or floating rate instruments will meet the applicable quality standards of a Fund. AIM will monitor the pricing, quality and liquidity of the variable or floating rate securities held by the Funds. INDEXED SECURITIES. AIM Developing Markets Fund may invest in indexed securities the value of which is linked to interest rates, commodities, indices or other financial indicators. Most indexed securities are short to intermediate term fixed income securities whose values at maturity (principal value) or interest rates rise or fall according to changes in the value of one or more specified underlying instruments. Indexed securities may be positively or negatively indexed (i.e., their principal value or interest rates may increase or decrease if the underlying instrument appreciates), and may have return characteristics similar to direct investments in the underlying instrument or to one or more options on the underlying instrument. Indexed securities may be more volatile than the underlying instrument itself and could involve the loss of all or a portion of the principal amount of the indexed security. 10 ZERO-COUPON AND PAY-IN-KIND SECURITIES. AIM Developing Markets Fund may, but does not currently intend to, invest in zero-coupon or pay-in-kind securities. These securities are debt securities that do not make regular cash interest payments. Zero-coupon securities are sold at a deep discount to their face value. Pay-in-kind securities pay interest through the issuance of additional securities. Because zero-coupon and pay-in-kind securities do not pay current cash income, the price of these securities can be volatile when interest rates fluctuate. While these securities do not pay current cash income, federal tax law requires the holders of zero-coupon and pay-in-kind securities to include in income each year the portion of the original issue discount (or deemed discount) and other non-cash income on such securities accrued during that year. In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code") and to avoid certain excise taxes, the Fund may be required to distribute a portion of such discount and income, and may be required to dispose of other portfolio securities, which could occur during periods of adverse market prices, in order to generate sufficient cash to meet these distribution requirements. Investment Techniques DELAYED DELIVERY TRANSACTIONS. Delayed delivery transactions, also referred to as forward commitments, involve commitments by a Fund to dealers or issuers to acquire or sell securities at a specified future date beyond the customary settlement for such securities. These commitments may fix the payment price and interest rate to be received or paid on the investment. A Fund may purchase securities on a delayed delivery basis to the extent it can anticipate having available cash on settlement date. Delayed delivery agreements will not be used as a speculative or leveraging technique. Investment in securities on a delayed delivery basis may increase a Fund's exposure to market fluctuation and may increase the possibility that the Fund will incur short-term gains subject to federal taxation or short-term losses if the Fund must engage in portfolio transactions in order to honor a delayed delivery commitment. Until the settlement date, a Fund will segregate liquid assets of a dollar value sufficient at all times to make payment for the delayed delivery transactions. Such segregated liquid assets will be marked-to-market daily, and the amount segregated will be increased if necessary to maintain adequate coverage of the delayed delivery commitments. No additional delayed delivery agreements or when-issued commitments (as described below) will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed. The delayed delivery securities, which will not begin to accrue interest or dividends until the settlement date, will be recorded as an asset of a Fund and will be subject to the risk of market fluctuation. The purchase price of the delayed delivery securities is a liability of a Fund until settlement. Absent extraordinary circumstances, a Fund will not sell or otherwise transfer the delayed delivery basis securities prior to settlement. A Fund may enter into buy/sell back transactions (a form of delayed delivery agreement). In a buy/sell back transaction, a Fund enters a trade to sell securities at one price and simultaneously enters a trade to buy the same securities at another price for settlement at a future date. WHEN-ISSUED SECURITIES. Purchasing securities on a "when-issued" basis means that the date for delivery of and payment for the securities is not fixed at the date of purchase, but is set after the securities are issued. The payment obligation and, if applicable, the interest rate that will be received on the securities are fixed at the time the buyer enters into the commitment. A Fund will only make commitments to purchase such securities with the intention of actually acquiring such securities, but the Fund may sell these securities before the settlement date if it is deemed advisable. Securities purchased on a when-issued basis and the securities held in a Fund's portfolio are subject to changes in market value based upon the public's perception of the creditworthiness of the issuer and, if applicable, changes in the level of interest rates. Therefore, if a Fund is to remain substantially fully invested at the same time that it has purchased securities on a when-issued basis, there will be a possibility that the market value of the Fund's assets will fluctuate to a greater degree. Furthermore, when the time comes for the Fund to meet its obligations under when-issued commitments, 11 the Fund will do so by using then available cash flow, by sale of the segregated liquid assets, by sale of other securities or, although it would not normally expect to do so, by directing the sale of the when-issued securities themselves (which may have a market value greater or less than the Fund's payment obligation). Investment in securities on a when-issued basis may increase a Fund's exposure to market fluctuation and may increase the possibility that the Fund will incur short-term gains subject to federal taxation or short-term losses if the Fund must sell another security in order to honor a when-issued commitment. If a Fund purchases a when-issued security, the Fund will segregate liquid assets in an amount equal to the when-issued commitment. If the market value of such segregated assets declines, additional liquid assets will be segregated on a daily basis so that the market value of the segregated assets will equal the amount of the Fund's when-issued commitments. No additional delayed delivery agreements (as described above) or when-issued commitments will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed. SHORT SALES. The Fund may engage in short sales. The Fund will only make short sales "against the box," meaning that at all times when a short position is open the Fund owns an equal amount of such securities or securities convertible into, or exchangeable without payment of any further consideration for, securities of the same issue as, and in an amount equal to, the securities sold short. To secure its obligation to deliver the securities sold short against the box, the Fund will segregate with its custodian an equal amount of the securities sold short or securities convertible into or exchangeable for such securities. The Fund will not sell a security short if, as a result of such short sale, the aggregate market value of all securities sold short exceeds 10% of the Fund's total assets. The Fund will make a short sale, as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund or a security convertible into or exchangeable for such security, or when the Fund does not want to sell the security it owns, because it wishes to defer recognition of gain or loss for federal income tax purposes. In such case, any future losses in the Fund's long position should be reduced by a gain in the short position. Conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount the Fund owns, either directly or indirectly, and, in the case where the Fund owns convertible securities, changes in the conversion premium. In determining the number of shares to be sold short against the Fund's position in a convertible security, the anticipated fluctuation in the conversion premium is considered. Short sales against the box may afford the Fund an opportunity to earn additional current income to the extent the Fund is able to enter into arrangements with broker-dealers though which the short sales are executed to receive income with respect to the proceeds of the short sales during the period the Fund's short positions remain open. There is no assurance that the Fund will be able to enter into such arrangements. Short sales against the box may be subject to special tax treatment as "constructive sales" and require the Fund to recognize any taxable gain unless an exception to the constructive sale rule applies. See "Dividends, Distributions and Tax Matters - Tax Matters - Determination of Taxable Income of a Regulated Investment Company." MARGIN TRANSACTIONS. None of the Funds will purchase any security on margin, except that each Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities. The payment by a Fund of initial or variation margin in connection with futures or related options transactions will not be considered the purchase of a security on margin. SWAP AGREEMENTS. Each Fund may enter into interest rate, index and currency exchange rate swap agreements for purposes of attempting to obtain a particular desired return at a lower cost to the Fund than if it had invested directly in an instrument that yielded that desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard "swap" transaction, two parties agree to exchange the 12 returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a "basket" of securities representing a particular index. Commonly used swap agreements include: (i) interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; (ii) interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or "floor"; and (iii) interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels. The "notional amount" of the swap agreement is only a fictitious basis on which to calculate the obligations that the parties to a swap agreement have agreed to exchange. Swaps are generally governed by a single master agreement for each counterparty, and the agreements allow for netting of counterparties' obligations on specific transactions. A Fund's obligation or rights will be the net amount owed to or by the counterparty. A Fund's current obligations under a swap agreement will be accrued daily (on a net basis), and the Fund will maintain liquid assets in an amount equal to amounts owed to a swap counterparty less the value of any collateral posted. A Fund will not enter into a transaction with any single counterparty if the net amount owed or to be received under existing transactions under the swap agreements with that counterparty would exceed 5% of the Fund's net assets determined on the date the transaction is entered into. For a discussion of the tax considerations relating to swap agreements, see "Dividends, Distributions and Tax Matters - Swap Agreements." INTERFUND LOANS. Each Fund may lend uninvested cash up to 15% of its net assets to other funds advised by AIM (the "AIM Funds") and each Fund may borrow from other AIM Funds to the extent permitted under such Fund's investment restrictions. During temporary or emergency periods, the percentage of a Fund's net assets that may be loaned to other AIM Funds may be increased as permitted by the SEC. If a Fund has borrowed from other AIM Funds and has aggregate borrowings from all sources that exceed 10% of such Fund's total assets, such Fund will secure all of its loans from other AIM Funds. The ability of a Fund to lend its securities to other AIM Funds is subject to certain other terms and conditions. BORROWING. Each Fund may borrow money to a limited extent for temporary or emergency purposes. If there are unusually heavy redemptions because of changes in interest rates or for any other reason, a Fund may have to sell a portion of its investment portfolio at a time when it may be disadvantageous to do so. Selling fund securities under these circumstances may result in a lower net asset value per share or decreased dividend income, or both. The Trust believes that, in the event of abnormally heavy redemption requests, a Fund's borrowing ability would help to mitigate any such effects and could make the forced sale of their portfolio securities less likely. LENDING PORTFOLIO SECURITIES. The Funds may each lend their portfolio securities (principally to broker-dealers) where such loans are callable at any time and are continuously secured by segregated collateral equal to no less than the market value, determined daily, of the loaned securities. Such collateral will be cash, letters of credit, or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Each Fund may lend portfolio securities to the extent of one-third of its total assets. A Fund will not have the right to vote securities while they are being lent, but it can call a loan in anticipation of an important vote. The Fund would receive income in lieu of dividends on loaned securities and would, at the same time, earn interest on the loan collateral or on the investment of any cash collateral. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the loaned securities increases and the collateral is not increased accordingly, or in the event of a default by the borrower. The Fund could also experience delays and costs in gaining access to the collateral. Any cash received as collateral for loaned securities will be invested, in accordance with a Fund's investment guidelines, in short-term money market instruments or Affiliated Money Market Funds. For 13 purposes of determining whether a Fund is complying with its investment policies, strategies and restrictions, the Fund will consider the loaned securities as assets of the Fund, but will not consider any collateral received as a Fund asset. REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a Fund acquires ownership of a security from a broker-dealer or bank that agrees to repurchase the security at a mutually agreed upon time and price (which is higher than the purchase price), thereby determining the yield during a Fund's holding period. A Fund may, however, enter into a "continuing contract" or "open" repurchase agreement under which the seller is under a continuing obligation to repurchase the underlying obligation from the Fund on demand and the effective interest rate is negotiated on a daily basis. Each of the Funds may engage in repurchase agreement transactions involving the types of securities in which it is permitted to invest. If the seller of a repurchase agreement fails to repurchase the security in accordance with the terms of the agreement, a Fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying security and loss of income. The securities underlying a repurchase agreement will be marked-to-market every business day so that the value of such securities is at least equal to the investment value of the repurchase agreement, including any accrued interest thereon. The Funds may invest their cash balances in joint accounts with other AIM Funds for the purpose of investing in repurchase agreements with maturities not to exceed 60 days and in certain other money market instruments with remaining maturities not to exceed 90 days. Repurchase agreements are considered loans by a Fund under the 1940 Act. REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements are agreements that involve the sale of securities held by a Fund to financial institutions such as banks and broker-dealers, with an agreement that the Fund will repurchase the securities at an agreed upon price and date. A Fund may employ reverse repurchase agreements (i) for temporary emergency purposes, such as to meet unanticipated net redemptions so as to avoid liquidating other portfolio securities during unfavorable market conditions; (ii) to cover short-term cash requirements resulting from the timing of trade settlements; or (iii) to take advantage of market situations where the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. At the time it enters into a reverse repurchase agreement, a Fund will segregate liquid assets having a dollar value equal to the repurchase price, and will subsequently continually monitor the account to ensure that such equivalent value is maintained at all times. Reverse repurchase agreements involve the risk that the market value of securities to be purchased by the Fund may decline below the price at which it is obligated to repurchase the securities, or that the other party may default on its obligation, so that the Fund is delayed or prevented from completing the transaction. Reverse repurchase agreements are considered borrowings by a Fund under the 1940 Act. DOLLAR ROLLS. A dollar roll involves the sale by a Fund of a mortgage security to a financial institution such as a broker-dealer or a bank, with an agreement to repurchase a substantially similar (i.e., same type, coupon and maturity) security at an agreed upon price and date. The mortgage securities that are purchased will bear the same interest rate as those sold, but will generally be collateralized by different pools of mortgages with different prepayment histories. During the period between the sale and repurchase, a Fund will not be entitled to receive interest and principal payments on the securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for the Fund exceeding the yield on the sold security. Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event the buyer of securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's 14 obligation to repurchase the securities. At the time the Fund enters into a dollar roll, it will segregate liquid assets having a dollar value equal to the repurchase price, and will monitor the account to ensure that such equivalent value is maintained. The Fund typically enters into dollar roll transactions to enhance the Fund's return either on an income or total return basis or to manage pre-payment risk. Dollar rolls are considered borrowings by a Fund under the 1940 Act. ILLIQUID SECURITIES. Illiquid securities are securities that cannot be disposed of within seven days in the normal course of business at the price at which they are valued. Illiquid securities may include securities that are subject to restrictions on resale because they have not been registered under the Securities Act of 1933 (the "1933 Act"). Restricted securities may, in certain circumstances, be resold pursuant to Rule 144A under the 1933 Act, and thus may or may not constitute illiquid securities. Each Fund may invest up to 15% of its net assets in securities that are illiquid. Limitations on the resale of restricted securities may have an adverse effect on their marketability, which may prevent a Fund from disposing of them promptly at reasonable prices. A Fund may have to bear the expense of registering such securities for resale, and the risk of substantial delays in effecting such registrations. AIM Global Health Care Fund cannot invest more than 5% of total assets in joint ventures, cooperatives, partnerships and state enterprises which are illiquid. RULE 144A SECURITIES. Rule 144A securities are securities which, while privately placed, are eligible for purchase and resale pursuant to Rule 144A under the 1933 Act. This Rule permits certain qualified institutional buyers, such as the Funds, to trade in privately placed securities even though such securities are not registered under the 1933 Act. AIM, under the supervision of the Board, will consider whether securities purchased under Rule 144A are illiquid and thus subject to the Funds' restriction on investment in illiquid securities. Determination of whether a Rule 144A security is liquid or not is a question of fact. In making this determination AIM will consider the trading markets for the specific security taking into account the unregistered nature of a Rule 144A security. In addition, AIM could consider the (i) frequency of trades and quotes; (ii) number of dealers and potential purchasers; (iii) dealer undertakings to make a market; and (iv) nature of the security and of market place trades (for example, the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). AIM will also monitor the liquidity of Rule 144A securities and, if as a result of changed conditions, AIM determines that a Rule 144A security is no longer liquid, AIM will review a Fund's holdings of illiquid securities to determine what, if any, action is required to assure that such Fund complies with its restriction on investment in illiquid securities. Investing in Rule 144A securities could increase the amount of each Fund's investments in illiquid securities if qualified institutional buyers are unwilling to purchase such securities. UNSEASONED ISSUERS. AIM Trimark Small Companies Fund may invest in equity securities of unseasoned issuers. Investments in the equity securities of companies having less than three years' continuous operations (including operations of any predecessor) involve more risk than investments in the securities of more established companies because unseasoned issuers have only a brief operating history and may have more limited markets and financial resources. As a result, securities of unseasoned issuers tend to be more volatile than securities of more established companies. Derivatives The Funds may each invest in forward currency contracts, futures contracts, options on securities, options on indices, options on currencies, and options on futures contracts to attempt to hedge against the overall level of investment and currency risk normally associated with each Fund's investments. The Funds may also invest in equity-linked derivative products designed to replicate the composition and performance of particular indices. These instruments are often referred to as "derivatives," which may be defined as financial instruments whose performance is derived, at least in part, from the performance of another asset (such as a security, currency or an index of securities). 15 EQUITY-LINKED DERIVATIVES. Equity-Linked Derivatives are interests in a securities portfolio designed to replicate the composition and performance of a particular index. Equity-Linked Derivatives are exchange traded. The performance results of Equity-Linked Derivatives will not replicate exactly the performance of the pertinent index due to transaction and other expenses, including fees to service providers, borne by the Equity-Linked Derivatives. Examples of such products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial Average Instruments ("DIAMONDS") and Optimised Portfolios As Listed Securities ("OPALS"). Investments in Equity-Linked Derivatives involve the same risks associated with a direct investment in the types of securities included in the indices such products are designed to track. There can be no assurance that the trading price of the Equity-Linked Derivatives will equal the underlying value of the basket of securities purchased to replicate a particular index or that such basket will replicate the index. Investments in Equity-Linked Derivatives may constitute investments in other investment companies and, therefore, a Fund may be subject to the same investment restrictions with Equity-Linked Derivatives as with other investment companies. See "Other Investment Companies." PUT AND CALL OPTIONS. A call option gives the purchaser the right to buy the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security contract or foreign currency as the case may be at the time of exercise. If the purchaser exercises the call option, the writer of a call option is obligated to sell the underlying security, contract or foreign currency. A put option gives the purchaser the right to sell the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration date of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, contract or foreign currency, as the case may be at the time of exercise. If the purchaser exercises the put option, the writer of a put option is obligated to buy the underlying security, contract or foreign currency. The premium paid to the writer is consideration for undertaking the obligations under the option contract. Until an option expires or is offset, the option is said to be "open." When an option expires or is offset, the option is said to be "closed." A Fund will not write (sell) options if, immediately after such sale, the aggregate value of securities or obligations underlying the outstanding options exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at the time of the investment, the aggregate premiums paid for the options will exceed 5% of the Fund's total assets. Pursuant to federal securities rules and regulations, if a Fund writes options it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover." Writing Options. A Fund may write put and call options in an attempt to realize, through the receipt of premiums, a greater current return than would be realized on the underlying security, contract, or foreign currency alone. A Fund may only write a call option on a security if it owns an equal amount of such securities or securities convertible into, or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities subject to the call option. In return for the premium received for writing a call option, the Fund foregoes the opportunity for profit from a price increase in the underlying security, contract, or foreign currency above the exercise price so long as the option remains open, but retains the risk of loss should the price of the security, contract, or foreign currency decline. A Fund may write a put option without owning the underlying security if it covers the option as described below in the section "Cover." A Fund may only write a put option on a security as part of an investment strategy, and not for speculative purposes. In return for the premium received for writing a put option, the Fund assumes the risk that the price of the underlying security, contract, or foreign currency will decline below the exercise price, in which case the put would be exercised and the Fund would suffer a loss. 16 If an option that a Fund has written expires, it will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security, contract or currency during the option period. If a call option is exercised, a Fund will realize a gain or loss from the sale of the underlying security, contract or currency, which will be increased or offset by the premium received. A Fund would write a put option at an exercise price that, reduced by the premium received on the option, reflects the price it is willing to pay for the underlying security, contract or currency. The obligation imposed upon the writer of an option is terminated upon the expiration of the option, or such earlier time at which a Fund effects a closing purchase transaction by purchasing an option (put or call as the case may be) identical to that previously sold. Writing call options can serve as a limited hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. Closing transactions may be effected in order to realize a profit on an outstanding call option, to prevent an underlying security, contract or currency from being called or to permit the sale of the underlying security, contract or currency. Furthermore, effecting a closing transaction will permit a Fund to write another call option on the underlying security, contract or currency with either a different exercise price or expiration date, or both. Purchasing Options. A Fund may purchase a call option for the purpose of acquiring the underlying security, contract or currency for its portfolio. The Fund is not required to own the underlying security in order to purchase a call option, and may only cover this transaction with cash, liquid assets and/or short-term debt securities. Utilized in this fashion, the purchase of call options would enable a Fund to acquire the security, contract or currency at the exercise price of the call option plus the premium paid. So long as it holds such a call option, rather than the underlying security or currency itself, the Fund is partially protected from any unexpected increase in the market price of the underlying security, contract or currency. If the market price does not exceed the exercise price, the Fund could purchase the security on the open market and could allow the call option to expire, incurring a loss only to the extent of the premium paid for the option. Each of the Funds may also purchase call options on underlying securities, contracts or currencies against which it has written other call options. For example, where a Fund has written a call option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a call option with a different exercise strike and/or expiration date that would eliminate some or all of the risk associated with the written call. Used in combinations, these strategies are commonly referred to as "call spreads." A Fund may only purchase a put option on an underlying security, contract or currency ("protective put") owned by the Fund in order to protect against an anticipated decline in the value of the security, contract or currency. Such hedge protection is provided only during the life of the put option. The premium paid for the put option and any transaction costs would reduce any profit realized when the security, contract or currency is delivered upon the exercise of the put option. Conversely, if the underlying security, contract or currency does not decline in value, the option may expire worthless and the premium paid for the protective put would be lost. A Fund may also purchase put options on underlying securities, contracts or currencies against which it has written other put options. For example, where a Fund has written a put option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a put option with a different exercise price and/or expiration date that would eliminate some or all of the risk associated with the written put. Used in combinations, these strategies are commonly referred to as "put spreads." Likewise, a Fund may write call options on underlying securities, contracts or currencies against which it has purchased protective put options. This strategy is commonly referred to as a "collar." Over-The-Counter Options. Options may be either listed on an exchange or traded in over-the-counter ("OTC") markets. Listed options are third-party contracts (i.e., performance of the obligations of the purchaser and seller is guaranteed by the exchange or clearing corporation) and have standardized strike prices and expiration dates. OTC options are two-party contracts with negotiated strike prices and expiration dates. A Fund will not purchase an OTC option unless it believes that daily valuations for such options are readily obtainable. OTC options differ from exchange-traded options in that OTC options are transacted with dealers directly and not through a clearing corporation (which 17 guarantees performance). Consequently, there is a risk of non-performance by the dealer. Since no exchange is involved, OTC options are valued on the basis of an average of the last bid prices obtained from dealers, unless a quotation from only one dealer is available, in which case only that dealer's price will be used. In the case of OTC options, there can be no assurance that a liquid secondary market will exist for any particular option at any specific time. Because purchased OTC options in certain cases may be difficult to dispose of in a timely manner, the Fund may be required to treat some or all of these options (i.e., the market value) as illiquid securities. Although a Fund will enter into OTC options only with dealers that are expected to be capable of entering into closing transactions with it, there is no assurance that the Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the dealer, a Fund might be unable to close out an OTC option position at any time prior to its expiration. Index Options. Index options (or options on securities indices) are similar in many respects to options on securities, except that an index option gives the holder the right to receive, upon exercise, cash instead of securities, if the closing level of the securities index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call or put times a specified multiple (the "multiplier"), which determines the total dollar value for each point of such difference. The risks of investment in index options may be greater than options on securities. Because index options are settled in cash, when a Fund writes a call on an index it cannot provide in advance for its potential settlement obligations by acquiring and holding the underlying securities. A Fund can offset some of the risk of writing a call index option position by holding a diversified portfolio of securities similar to those on which the underlying index is based. However, the Fund cannot, as a practical matter, acquire and hold a portfolio containing exactly the same securities as underlie the index and, as a result, bears a risk that the value of the securities held will not be perfectly correlated with the value of the index. Pursuant to federal securities rules and regulations, if a Fund writes index options it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover." STRADDLES. A Fund, for hedging purposes, may write straddles (combinations of put and call options on the same underlying security) to adjust the risk and return characteristics of the Fund's overall position. A possible combined position would involve writing a covered call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written covered call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out. WARRANTS. Warrants are, in effect, longer-term call options. They give the holder the right to purchase a given number of shares of a particular company at specified prices within certain periods of time. The purchaser of a warrant expects that the market price of the security will exceed the purchase price of the warrant plus the exercise price of the warrant, thus giving him a profit. Since the market price may never exceed the exercise price before the expiration date of the warrant, the purchaser of the warrant risks the loss of the entire purchase price of the warrant. Warrants generally trade in the open market and may be sold rather than exercised. Warrants are sometimes sold in unit form with other securities of an issuer. Units of warrants and common stock may be employed in financing young, unseasoned companies. The purchase price of a warrant varies with the exercise price of the warrant, the current market value of the underlying security, the life of the warrant and various other investment factors. FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Futures Contract is a two party agreement to buy or sell a specified amount of a specified security or currency (or delivery of a cash settlement price, in the case of an index future) for a specified price at a designated date, time and place (collectively, "Futures Contracts"). A stock index Futures Contract provides for the delivery, at a designated date, time and place, of an amount of cash equal to a specified dollar amount times the 18 difference between the stock index value at the close of trading on the contract and the price agreed upon in the Futures Contract; no physical delivery of stocks comprising the index is made. Brokerage fees are incurred when a Futures Contract is bought or sold, and margin deposits must be maintained at all times when a Futures Contract is outstanding. A Fund will enter into Futures Contracts for hedging purposes only; that is, Futures Contracts will be sold to protect against a decline in the price of securities or currencies that the Fund owns, or Futures Contracts will be purchased to protect the Fund against an increase in the price of securities or currencies it has committed to purchase or expects to purchase. A Fund's hedging may include sales of Futures Contracts as an offset against the effect of expected increases in interest rates, and decreases in currency exchange rates and stock prices, and purchases of Futures Contracts as an offset against the effect of expected declines in interest rates, and increases in currency exchange rates or stock prices. The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities. The Funds will only enter into Futures Contracts that are traded (either domestically or internationally) on futures exchanges and are standardized as to maturity date and underlying financial instrument. Futures exchanges and trading thereon in the United States are regulated under the Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges and trading thereon are not regulated by the CFTC and are not subject to the same regulatory controls. For a further discussion of the risks associated with investments in foreign securities, see "Foreign Investments" in this Statement of Additional Information. Closing out an open Futures Contract is effected by entering into an offsetting Futures Contract for the same aggregate amount of the identical financial instrument or currency and the same delivery date. There can be no assurance, however, that a Fund will be able to enter into an offsetting transaction with respect to a particular Futures Contract at a particular time. If a Fund is not able to enter into an offsetting transaction, it will continue to be required to maintain the margin deposits on the Futures Contract. "Margin" with respect to Futures Contracts is the amount of funds that must be deposited by a Fund in order to initiate Futures Contracts trading and maintain its open positions in Futures Contracts. A margin deposit made when the Futures Contract is entered ("initial margin") is intended to ensure the Fund's performance under the Futures Contract. The margin required for a particular Futures Contract is set by the exchange on which the Futures Contract is traded and may be significantly modified from time to time by the exchange during the term of the Futures Contract. Subsequent payments, called "variation margin," received from or paid to the futures commission merchant through which a Fund entered into the Futures Contract will be made on a daily basis as the price of the underlying security, currency or index fluctuates making the Futures Contract more or less valuable, a process known as marking-to-market the unrealized gains or losses. If a Fund were unable to liquidate a Futures Contract or an option on a Futures Contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the Futures Contract or option or to maintain cash or securities in a segregated account. Options on Futures Contracts. Options on Futures Contracts are similar to options on securities or currencies except that options on Futures Contracts give the purchaser the right, in return for the premium paid, to assume a position in a Futures Contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the Futures Contract position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the 19 writer's Futures Contract margin account. The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities. Limitations on Futures Contracts and Options on Futures Contracts and on Certain Options on Currencies. To the extent that a Fund enters into Futures Contracts, options on Futures Contracts and options on foreign currencies traded on a CFTC-regulated exchange, in each case other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums required to establish those positions (excluding the amount by which options are "in-the-money") will not exceed 5% of the total assets of the Fund, after taking into account unrealized profits and unrealized losses on any contracts it has entered into. This guideline may be modified by the Board, without a shareholder vote. This limitation does not limit the percentage of the Fund's assets at risk to 5%. Pursuant to federal securities rules and regulations, a Fund's use of Futures Contracts and options on Futures Contracts may require that Fund to set aside assets to reduce the risks associated with using Futures Contracts and options on Futures Contracts. This process is described in more detail below in the section "Cover." FORWARD CURRENCY CONTRACTS. A forward currency contract is an obligation, usually arranged with a commercial bank or other currency dealer, to purchase or sell a currency against another currency at a future date and price as agreed upon by the parties. A Fund either may accept or make delivery of the currency at the maturity of the forward currency contract. A Fund may also, if its contra party agrees prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting contract. Forward currency contracts are traded over-the-counter, and not on organized commodities or securities exchanges. As a result, it may be more difficult to value such contracts, and it may be difficult to enter into closing transactions. Each of the Funds may engage in forward currency transactions in anticipation of, or to protect itself against, fluctuations in exchange rates. A Fund may enter into forward currency contracts with respect to a specific purchase or sale of a security, or with respect to its portfolio positions generally. When a Fund purchases a security denominated in a foreign currency for settlement in the near future, it may immediately purchase in the forward market the currency needed to pay for and settle the purchase. By entering into a forward currency contract with respect to the specific purchase or sale of a security denominated in a foreign currency, the Fund can secure an exchange rate between the trade and settlement dates for that purchase or sale transaction. This practice is sometimes referred to as "transaction hedging." Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions denominated or quoted in a foreign currency. The cost to a Fund of engaging in forward currency contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because forward currency contracts are usually entered into on a principal basis, no fees or commissions are involved. The use of forward currency contracts does not eliminate fluctuations in the prices of the underlying securities a Fund owns or intends to acquire, but it does establish a rate of exchange in advance. In addition, while forward currency contract sales limit the risk of loss due to a decline in the value of the hedged currencies, they also limit any potential gain that might result should the value of the currencies increase. Pursuant to federal securities rules and regulations, a Fund's use of forward currency contracts may require that Fund to set aside assets to reduce the risks associated with using forward currency contracts. This process is described in more detail below in the section "Cover." COVER. Transactions using forward currency contracts, futures contracts and options (other than options purchased by a Fund) expose a Fund to an obligation to another party. A Fund will not enter into any such transactions unless, in addition to complying with all the restrictions noted in the disclosure above, it owns either (1) an offsetting ("covered") position in securities, currencies, or other options, forward currency contracts or futures contracts or (2) cash, liquid assets and/or short-term debt securities with a value sufficient at all times to cover its potential obligations not covered as provided in (1) above. 20 Each Fund will comply with SEC guidelines regarding cover for these instruments and, if the guidelines so require, set aside cash or liquid securities. To the extent that a futures contract, forward currency contract or option is deemed to be illiquid, the assets used to "cover" the Fund's obligation will also be treated as illiquid for purposes of determining the Fund's maximum allowable investment in illiquid securities. Even though options purchased by the Funds do not expose the Funds to an obligation to another party, but rather provide the Funds with a right to exercise, the Funds intend to "cover" the cost of any such exercise. To the extent that a purchased option is deemed illiquid, a Fund will treat the market value of the option (i.e., the amount at risk to the Fund) as illiquid, but will not treat the assets used as cover on such transactions as illiquid. Assets used as cover cannot be sold while the position in the corresponding forward currency contract, futures contract or option is open, unless they are replaced with other appropriate assets. If a large portion of a Fund's assets is used for cover or otherwise set aside, it could affect portfolio management or the Fund's ability to meet redemption requests or other current obligations. GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES. The use by the Funds of options, futures contracts and forward currency contracts involves special considerations and risks, as described below. Risks pertaining to particular strategies are described in the sections that follow. (1) Successful use of hedging transactions depends upon AIM's ability to correctly predict the direction of changes in the value of the applicable markets and securities, contracts and/or currencies. While AIM is experienced in the use of these instruments, there can be no assurance that any particular hedging strategy will succeed. (2) There might be imperfect correlation, or even no correlation, between the price movements of an instrument (such as an option contract) and the price movements of the investments being hedged. For example, if a "protective put" is used to hedge a potential decline in a security and the security does decline in price, the put option's increased value may not completely offset the loss in the underlying security. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as changing interest rates, market liquidity, and speculative or other pressures on the markets in which the hedging instrument is traded. (3) Hedging strategies, if successful, can reduce risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments. (4) There is no assurance that a liquid secondary market will exist for any particular option, futures contract or option thereon or forward currency contract at any particular time. (5) As described above, a Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in instruments involving obligations to third parties. If a Fund were unable to close out its positions in such instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair a Fund's ability to sell a portfolio security or make an investment at a time when it would otherwise be favorable to do so, or require that the Fund sell a portfolio security at a disadvantageous time. (6) There is no assurance that a Fund will use hedging transactions. For example, if a Fund determines that the cost of hedging will exceed the potential benefit to the Fund, the Fund will not enter into such transaction. 21 Additional Securities or Investment Techniques INVESTMENTS IN ENTITIES WITH RELATIONSHIPS WITH THE FUNDS/ADVISOR. The Fund(s) may invest in securities issued, sponsored or guaranteed by the following types of entities or their affiliates: (i) entities that sell shares of the AIM Funds; (ii) entities that rate or rank the AIM Funds; (iii) exchanges on which the AIM Funds buy or sell securities; and (iv) entities that provide services to the AIM Funds (e.g., custodian banks). The Funds will decide whether to invest in or sell securities issued by these entities based on the merits of the specific investment opportunity. PARTICIPATION INTERESTS. AIM Developing Markets Fund may purchase participations in corporate loans. Participation interests generally will be acquired from a commercial bank or other financial institution (a "Lender") or from other holders of a participation interest (a "Participant"). The purchase of a participation interest either from a Lender or a Participant will not result in any direct contractual relationship with the borrowing company (the "Borrower"). The Fund generally will have no right directly to enforce compliance by the Borrower with the terms of the credit agreement. Instead, the Fund will be required to rely on the Lender or the Participant that sold the participation interest both for the enforcement of the Fund's rights against the Borrower and for the receipt and processing of payments due to the Fund under the loans. Under the terms of a participation interest, the Fund may be regarded as a creditor of the Participant and thus the Fund is subject to the credit risk of both the Borrower and a Lender or a Participant. Participation interests are generally subject to restrictions on resale. The Fund considers participation interests to be illiquid and therefore subject to the Fund's percentage limitation for investments in illiquid securities. PRIVATIZATIONS. Each of the Funds may invest in privatizations. The governments of some foreign countries have been engaged in selling part or all of their stakes in government-owned or controlled enterprises ("privatizations"). AIM believes that privatizations may offer opportunities for significant capital appreciation and intends to invest assets of the Funds in privatizations in appropriate circumstances. In certain foreign countries, the ability of foreign entities such as the Funds to participate may be limited by local law, or the terms on which a Fund may be permitted to participate may be less advantageous than those for local investors. There can be no assurance that foreign governments will continue to sell companies currently owned or controlled by them or that privatization programs will be successful. INDEXED COMMERCIAL PAPER. AIM Developing Markets Fund may invest without limitation in commercial paper which is indexed to certain specific foreign currency exchange rates. The terms of such commercial paper provide that its principal amount is adjusted upwards or downwards (but not below zero) at maturity to reflect changes in the exchange rate between two currencies while the obligation is outstanding. The Fund will purchase such commercial paper with the currency in which it is denominated and, at maturity, will receive interest and principal payments thereon in that currency, but the amount of principal payable by the issuer at maturity will change in proportion to the change (if any) in the exchange rate between the two specified currencies between the date the instrument is issued and the date the instrument matures. While such commercial paper entails the risk of loss of principal, the potential for realizing gains as a result of changes in foreign currency exchange rates enables the funds to hedge against a decline in the U.S. dollar value of investments denominated in foreign currencies while seeking to provide an attractive money market rate of return. The Fund will not purchase such commercial paper for speculation. SAMURAI AND YANKEE BONDS. Subject to its fundamental investment restrictions, AIM Developing Markets Fund may invest in yen-denominated bonds sold in Japan by non-Japanese issuers ("Samurai bonds"), and may invest in dollar-denominated bonds sold in the United States by non-U.S. issuers ("Yankee bonds"). As compared with bonds issued in their countries of domicile, such bond issues normally carry a higher interest rate but are less actively traded. It is the policy of the Fund to invest in Samurai or Yankee bond issues only after taking into account considerations of quality and liquidity, as well as yield. 22 PREMIUM SECURITIES. AIM Developing Markets Fund may invest in income securities bearing coupon rates higher than prevailing market rates. Such "premium" securities are typically purchased at prices greater than the principal amounts payable on maturity. The Fund will not amortize the premium paid for such securities in calculating its net investment income. As a result, in such cases the purchase of such securities provides the Fund a higher level of investment income distributable to shareholders on a current basis than if the Fund purchased securities bearing current market rates of interest. If securities purchased by the Fund at a premium are called or sold prior to maturity, the Fund will realize a loss to the extent the call or sale price is less than the purchase price. Additionally, the Fund will realize a loss if it holds such securities to maturity. STRUCTURED INVESTMENTS. AIM Developing Markets Fund may invest a portion of its assets in interests in entities organized and operated solely for the purpose of restructuring the investment characteristics of Sovereign Debt. This type of restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, of specified instruments (such as commercial bank loans or Brady Bonds) and the issuance by that entity of one or more classes of securities ("Structured Investments") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued Structured Investments to create securities with different investment characteristics such as varying maturities, payment priorities and interest rate provisions, and the extent of the payments made with respect to Structured Investments is dependent on the extent of the cash flow on the underlying instruments. Because Structured Investments of the type in which the Fund anticipates it will invest typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. AIM Developing Markets Fund is permitted to invest in a class of Structured Investments that is either subordinated or not subordinated to the right of payment of another class. Subordinated Structured Investments typically have higher yields and present greater risks than unsubordinated Structured Investments. Certain issuers of Structured Investments may be deemed to be "investment companies" as defined in the 1940 Act. As a result, AIM Developing Markets Fund's investment in these Structured Investments may be limited by the restrictions contained in the 1940 Act described below under "Investment Strategies and Risks - Other Investment Companies." Structured Investments are typically sold in private placement transactions, and there currently is no active trading market for Structured Investments. STRIPPED INCOME SECURITIES. AIM Developing Markets Fund may invest a portion of its assets in stripped income securities, which are obligations representing an interest in all or a portion of the income or principal components of an underlying or related security, a pool of securities or other assets. In the most extreme case, one class will receive all of the interest (the "interest only class" or the "IO class"), while the other class will receive all of the principal (the "principal-only class" or the "PO class"). The market values of stripped income securities tend to be more volatile in response to changes in interest rates than are conventional income securities. FUND POLICIES FUNDAMENTAL RESTRICTIONS. Each Fund is subject to the following investment restrictions, which may be changed only by a vote of such Fund's outstanding shares, except that AIM Developing Markets Fund is not subject to restriction (1) and AIM Global Health Care Fund is not subject to restriction (4). Fundamental restrictions may be changed only by a vote of the lesser of (i) 67% or more of the Fund's shares present at a meeting if the holders of more than 50% of the outstanding shares are present in person or represented by proxy, or (ii) more than 50% of the Fund's outstanding shares. Any investment restriction that involves a maximum or minimum percentage of securities or assets (other than with respect to borrowing) shall not be considered to be violated unless an excess over or a deficiency under the percentage occurs immediately after, and is caused by, an acquisition or disposition of securities or utilization of assets by the Fund. 23 (1) The Fund is a "diversified company" as defined in the 1940 Act. The Fund will not purchase the securities of any issuer if, as a result, the Fund would fail to be a diversified company within the meaning of the 1940 Act, and the rules and regulations promulgated thereunder, as such statute, rules and regulations are amended from time to time or are interpreted from time to time by the SEC staff (collectively, the "1940 Act Laws and Interpretations") or except to the extent that the Fund may be permitted to do so by exemptive order or similar relief (collectively, with the 1940 Act Laws and Interpretations, the "1940 Act Laws, Interpretations and Exemptions"). In complying with this restriction, however, the Fund may purchase securities of other investment companies to the extent permitted by the 1940 Act Laws, Interpretations and Exemptions. (2) The Fund may not borrow money or issue senior securities, except as permitted by the 1940 Act Laws, Interpretations and Exemptions. (3) The Fund may not underwrite the securities of other issuers. This restriction does not prevent the Fund from engaging in transactions involving the acquisition, disposition or resale of its portfolio securities, regardless of whether the Fund may be considered to be an underwriter under the 1933 Act. (4) The Fund will not make investments that will result in the concentration (as that term may be defined or interpreted by the 1940 Act Laws, Interpretations and Exemptions) of its investments in the securities of issuers primarily engaged in the same industry. This restriction does not limit the Fund's investments in (i) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, or (ii) tax-exempt obligations issued by governments or political subdivisions of governments. In complying with this restriction, the Fund will not consider a bank-issued guaranty or financial guaranty insurance as a separate security. (5) The Fund may not purchase real estate or sell real estate unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from investing in issuers that invest, deal, or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein. (6) The Fund may not purchase physical commodities or sell physical commodities unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities. (7) The Fund may not make personal loans or loans of its assets to persons who control or are under common control with the Fund, except to the extent permitted by 1940 Act Laws, Interpretations and Exemptions. This restriction does not prevent the Fund from, among other things, purchasing debt obligations, entering into repurchase agreements, loaning its assets to broker-dealers or institutional investors, or investing in loans, including assignments and participation interests. (8) The Fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and restrictions as the Fund. (9) AIM Global Health Care Fund will concentrate (as such term may be defined or interpreted by the 1940 Act Laws, Interpretations and Exemptions) its investments in the securities of domestic and foreign issuers in the health care industry. The investment restrictions set forth above provide each of the Funds with the ability to operate under new interpretations of the 1940 Act or pursuant to exemptive relief from the SEC without receiving prior shareholder approval of the change. Even though each of the Funds has this flexibility, the Board of Trustees has adopted non-fundamental restrictions for each of the Funds relating to certain of these restrictions which AIM and the sub-advisor of AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM 24 Trimark Small Companies Fund must follow in managing the Funds. Any changes to these non-fundamental restrictions, which are set forth below, require the approval of the Board. NON-FUNDAMENTAL RESTRICTIONS. The following non-fundamental investment restrictions apply to each of the Funds, except that AIM Developing Markets Fund is not subject to restriction (1) and AIM Global Health Care is not subject to restriction (3). They may be changed for any Fund without approval of that Fund's voting securities. (1) In complying with the fundamental restriction regarding issuer diversification, the Fund will not, with respect to 75% of its total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities), if, as a result, (i) more than 5% of the Fund's total assets would be invested in the securities of that issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer. The Fund may (i) purchase securities of other investment companies as permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in securities of other money market funds and lend money to other AIM Funds, subject to the terms and conditions of any exemptive orders issued by the SEC. (2) In complying with the fundamental restriction regarding borrowing money and issuing senior securities, the Fund may borrow money in an amount not exceeding 33-1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings). The Fund may borrow from banks, broker-dealers or an AIM Fund. The Fund may not borrow for leveraging, but may borrow for temporary or emergency purposes, in anticipation of or in response to adverse market conditions, or for cash management purposes. The Fund may not purchase additional securities when any borrowings from banks exceed 5% of the Fund's total assets or when any borrowings from an AIM Fund are outstanding. (3) In complying with the fundamental restriction regarding industry concentration, the Fund may invest up to 25% of its total assets in the securities of issuers whose principal business activities are in the same industry. (4) In complying with the fundamental restriction with regard to making loans, the Fund may lend up to 33-1/3% of its total assets and may lend money to an AIM Fund, on such terms and conditions as the SEC may require in an exemptive order. (5) Notwithstanding the fundamental restriction with regard to investing all assets in an open-end fund, the Fund may not invest all of its assets in the securities of a single open-end management investment company with the same fundamental investment objectives, policies and restrictions as the Fund. (6) Notwithstanding the fundamental restriction with regard to engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities, the Fund currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities. (7) The Fund may not acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act. ADDITIONAL NON-FUNDAMENTAL POLICIES. As non-fundamental policies: (1) AIM Developing Markets Fund normally invests at least 80% of its assets in securities of companies that are in developing markets countries. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions. (2) AIM Global Health Care Fund normally invests at least 80% of its assets in securities of health care industry companies. For purposes of the foregoing sentence, "assets" means net assets, plus 25 the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions. (3) AIM Trimark Small Companies Fund normally invests at least 80% of its assets in marketable equity securities of small capitalization companies. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions. CONCENTRATION OF INVESTMENTS For purposes of AIM Global Health Care Fund's fundamental investment restriction regarding industry concentration, a company will be considered a health care company if (1) at least 50% of its gross income or its net sales are derived from activities in the health care industry; (2) at least 50% of its assets are devoted to producing revenues from the health care industry; or (3) based on other available information, AIM determines that its primary business is within the health care industry. TEMPORARY DEFENSIVE POSITIONS In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the Funds may temporarily hold all or a portion of their assets in cash, cash equivalents or high-quality debt instruments. Each of the Funds may also invest up to 25% of its total assets in Affiliated Money Market Funds for these purposes. PORTFOLIO TURNOVER AIM Global Health Care Fund's portfolio turnover rate increased from 64% in 2004 to 92% in 2005 due to repositioning of the portfolio in the type of security the portfolio managers believe would contribute to long term growth. POLICIES AND PROCEDURES FOR DISCLOSURE OF FUND HOLDINGS The Board has adopted policies and procedures with respect to the disclosure of the Funds' portfolio holdings (the "Holdings Disclosure Policy"). AIM and the Board may amend the Holdings Disclosure Policy at any time without prior notice. Details of the Holdings Disclosure Policy and a description of the basis on which employees of AIM and its affiliates may release information about portfolio securities in certain contexts are provided below. 26 PUBLIC RELEASE OF PORTFOLIO HOLDINGS. The Funds disclose the following 1 portfolio holdings information on http://www.aiminvestments.com :
INFORMATION APPROXIMATE DATE OF WEBSITE INFORMATION REMAINS POSTED ON POSTING WEBSITE -------------------------------- ------------------------------- -------------------------------- Top ten holdings as of month-end 15 days after month-end Until replaced with the following month's top ten holdings Select holdings included in the 29 days after calendar Until replaced with the Fund's Quarterly Performance quarter-end following quarter's Quarterly Update Performance Update Complete portfolio holdings as 30 days after calendar For one year of calendar quarter-end quarter-end Complete portfolio holdings as 60-70 days after fiscal quarter- For one year of fiscal quarter-end end
These holdings are listed along with the percentage of the Fund's net assets they represent. Generally, employees of AIM and its affiliates may not disclose such portfolio holdings until one day after they have been posted on http://www.aiminvestments.com. You may also obtain the publicly available portfolio holdings information described above by contacting us at 1-800-959-4246. SELECTIVE DISCLOSURE OF PORTFOLIO HOLDINGS PURSUANT TO NON-DISCLOSURE AGREEMENT. Employees of AIM and its affiliates may disclose non-public full portfolio holdings on a selective basis only if the Internal Compliance Controls Committee (the "ICCC") of A I M Management Group Inc. ("AIM Management") approves the parties to whom disclosure of non-public full portfolio holdings will be made. The ICCC must determine that the proposed selective disclosure will be made for legitimate business purposes of the applicable Fund and address any perceived conflicts of interest between shareholders of such Fund and AIM or its affiliates as part of granting its approval. The Board exercises continuing oversight of the disclosure of Fund portfolio holdings by (1) overseeing the implementation and enforcement of the Holdings Disclosure Policy and the AIM Funds Code of Ethics by the Chief Compliance Officer (or her designee) of AIM and the AIM Funds and (2) considering reports and recommendations by the Chief Compliance Officer concerning any material compliance matters (as defined in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Investment Advisers Act of 1940, as amended) that may arise in connection with the Holdings Disclosure Policy. Pursuant to the Holdings Disclosure Policy, the Board reviews the types of situations in which AIM provides such selective disclosure and approves situations involving perceived conflicts of interest between shareholders of the applicable Fund and AIM or its affiliates brought to the Board's attention by AIM. AIM discloses non-public full portfolio holdings information to the following persons in connection with the day-to-day operations and management of the AIM Funds: - Attorneys and accountants; - Securities lending agents; - Lenders to the AIM Funds; - Rating and rankings agencies; - Persons assisting in the voting of proxies; - AIM Funds' custodians; - The AIM Funds' transfer agent(s) (in the event of a redemption in kind); ---------- 1 To locate a Fund's portfolio holdings information on http://www.aiminvestments.com, click on the Products and Performance tab, then click on the Mutual Funds link, then click on the Fund Overview link and select the Fund from the drop-down menu. Links to the Fund's portfolio holdings are located in the upper right side of this website page. 27 - Pricing services, market makers, or other persons who provide systems or software support in connection with AIM Funds' operations (to determine the price of securities held by an AIM Fund); - Financial printers; - Brokers identified by the AIM Funds' portfolio management team who provide execution and research services to the team; and - Analysts hired to perform research and analysis to the AIM Funds' portfolio management team. In many cases, AIM will disclose current portfolio holdings on a daily basis to these persons. In these situations, AIM has entered into non-disclosure agreements which provide that the recipient of the portfolio holdings will maintain the confidentiality of such portfolio holdings and will not trade on such information ("Non-disclosure Agreements"). Please refer to Appendix B for a list of examples of persons to whom AIM provides non-public portfolio holdings on an ongoing basis. AIM will also disclose non-public portfolio holdings information if such disclosure is required by applicable laws, rules or regulations, or by regulatory authorities having jurisdiction over AIM and its affiliates or the Funds. The Holdings Disclosure Policy provides that AIM will not request, receive or accept any compensation (including compensation in the form of the maintenance of assets in any Fund or other mutual fund or account managed by AIM or one of its affiliates) for the selective disclosure of portfolio holdings information. DISCLOSURE OF CERTAIN PORTFOLIO HOLDINGS AND RELATED INFORMATION WITHOUT NON-DISCLOSURE AGREEMENT. AIM and its affiliates that provide services to the Funds, and the Funds' subadvisors, if applicable, and each of their employees may receive or have access to portfolio holdings as part of the day to day operations of the Funds. From time to time, employees of AIM and its affiliates may express their views orally or in writing on one or more of the Funds' portfolio securities or may state that a Fund has recently purchased or sold, or continues to own, one or more securities. The securities subject to these views and statements may be ones that were purchased or sold since a Fund's most recent quarter-end and therefore may not be reflected on the list of the Fund's most recent quarter-end portfolio holdings disclosed on the website. Such views and statements may be made to various persons, including members of the press, brokers and other financial intermediaries that sell shares of the Funds, shareholders in the applicable Fund, persons considering investing in the applicable Fund or representatives of such shareholders or potential shareholders, such as fiduciaries of a 401(k) plan or a trust and their advisers, and other entities for which AIM or its affiliates provides or may provide investment advisory services. The nature and content of the views and statements provided to each of these persons may differ. From time to time, employees of AIM and its affiliates also may provide oral or written information ("portfolio commentary") about a Fund, including, but not limited to, how the Fund's investments are divided among various sectors, industries, countries, investment styles and capitalization sizes, and among stocks, bonds, currencies and cash, security types, bond maturities, bond coupons and bond credit quality ratings. This portfolio commentary may also include information on how these various weightings and factors contributed to Fund performance. AIM may also provide oral or written information ("statistical information") about various financial characteristics of a Fund or its underlying portfolio securities including, but not limited to, alpha, beta, R-squared, coefficient of determination, duration, maturity, information ratio, sharpe ratio, earnings growth, payout ratio, price/book value, projected earnings growth, return on equity, standard deviation, tracking error, weighted average quality, market capitalization, percent debt to equity, price to cash flow, dividend yield or growth, default rate, portfolio turnover, and risk and style characteristics. This portfolio commentary and statistical information about a Fund may be based on the Fund's portfolio as of the most recent quarter-end or the end of some other interim period, such as month-end. The portfolio commentary and statistical information may be provided 28 to various persons, including those described in the preceding paragraph. The nature and content of the information provided to each of these persons may differ. DISCLOSURE OF PORTFOLIO HOLDINGS BY TRADERS. Additionally, employees of AIM and its affiliates may disclose one or more of the portfolio securities of a Fund when purchasing and selling securities through broker-dealers, requesting bids on securities, obtaining price quotations on securities, or in connection with litigation involving the Funds' portfolio securities. AIM does not enter into formal Non-disclosure Agreements in connection with these situations; however, the Funds would not continue to conduct business with a person who AIM believed was misusing the disclosed information. DISCLOSURE OF PORTFOLIO HOLDINGS OF OTHER AIM-MANAGED PRODUCTS. AIM and its affiliates manage products sponsored by companies other than AIM, including investment companies, offshore funds, and separate accounts. In many cases, these other products are managed in a similar fashion to certain AIM Funds (as defined herein) and thus have similar portfolio holdings. The sponsors of these other products managed by AIM and its affiliates may disclose the portfolio holdings of their products at different times than AIM discloses portfolio holdings for the AIM Funds. AIM provides portfolio holdings information for portfolios of AIM Variable Insurance Funds (the "Insurance Funds") to insurance companies whose variable annuity and variable life insurance accounts invest in the Insurance Funds ("Insurance Companies"). AIM may disclose portfolio holdings information for the Insurance Funds to Insurance Companies with which AIM has entered into Non-disclosure Agreements up to five days prior to the scheduled dates for AIM's disclosure of similar portfolio holdings information for other AIM Funds on http://www.aiminvestments.com. AIM provides portfolio holdings information for the Insurance Funds to such Insurance Companies to allow them to disclose this information on their websites at approximately the same time that AIM discloses portfolio holdings information for the other AIM Funds on its website. AIM manages the Insurance Funds in a similar fashion to certain other AIM Funds and thus the Insurance Funds and such other AIM Funds have similar portfolio holdings. AIM does not disclose the portfolio holdings information for the Insurance Funds on its website, and not all Insurance Companies disclose this information on their websites. MANAGEMENT OF THE TRUST BOARD OF TRUSTEES The overall management of the business and affairs of the Funds and the Trust is vested in the Board. The Board approves all significant agreements between the Trust, on behalf of one or more of the Funds, and persons or companies furnishing services to the Funds. The day-to-day operations of each Fund are delegated to the officers of the Trust and to AIM, subject always to the objective(s), restrictions and policies of the applicable Fund and to the general supervision of the Board. Certain trustees and officers of the Trust are affiliated with AIM and AIM Management, the parent corporation of AIM. All of the Trust's executive officers hold similar offices with some or all of the other AIM Funds. MANAGEMENT INFORMATION The trustees and officers of the Trust, their principal occupations during at least the last five years and certain other information concerning them are set forth in Appendix C. The standing committees of the Board are the Audit Committee, the Compliance Committee, the Governance Committee, the Investments Committee, the Valuation Committee and the Special Market Timing Litigation Committee. The members of the Audit Committee are James T. Bunch, Edward K. Dunn, Jr. (Chair), Lewis F. Pennock, Raymond Stickel, Jr., Dr. Larry Soll, Dr. Prema Mathai-Davis and Ruth H. Quigley, (Vice Chair). The Audit Committee's primary purposes are to: (i) assist the Board in oversight of the independent registered public accountant's qualifications, independence and performance; (ii) appoint independent 29 registered public accountants for the Funds; (iii) to the extent required by Section 10A(h) and (i) of the Exchange Act, to pre-approve all permissible non-audit services that are provided to Funds by their independent registered public accountants; (iv) pre-approve, in accordance with Rule 2-01(c)(7)(ii) of Regulation S-X, certain non-audit services provided by the Funds' independent registered public accountants to the Funds' investment adviser and certain other affiliated entities; (v) to oversee the financial reporting process for the Funds; (vi) the extent required by Regulation 14A under the Exchange Act, to prepare an audit committee report for inclusion in any proxy statement issued by a Fund; (vii) assist the Board's oversight of the performance of the Funds' internal audit function to the extent an internal audit function exists; (viii) assist the Board's oversight of the integrity of the Funds' financial statements; and (ix) assist the Board's oversight of the Funds' compliance with legal and regulatory requirements. During the fiscal year ended October 31, 2005, the Audit Committee held eight meetings. The members of the Compliance Committee are Frank S. Bayley, Bruce L. Crockett (Chair), Albert R. Dowden (Vice Chair) and Mr. Dunn. The Compliance Committee is responsible for: (i) recommending to the Board and the independent trustees the appointment, compensation and removal of the Funds' Chief Compliance Officer; (ii) recommending to the independent trustees the appointment, compensation and removal of the Funds' Senior Officer appointed pursuant to the terms of the Assurances of Discontinuance entered into by the New York Attorney General, AIM and INVESCO Funds Group, Inc. ("IFG"); (iii) recommending to the independent trustees the appointment and removal of AIM's independent Compliance Consultant (the "Compliance Consultant") and reviewing the report prepared by the Compliance Consultant upon its compliance review of AIM (the "Report") and any objections made by AIM with respect to the Report; (iv) reviewing any report prepared by a third party who is not an interested person of AIM, upon the conclusion by such third party of a compliance review of AIM; (v) reviewing all reports on compliance matters from the Funds' Chief Compliance Officer, (vi) reviewing all recommendations made by the Senior Officer regarding AIM's compliance procedures, (vii) reviewing all reports from the Senior Officer of any violations of state and federal securities laws, the Colorado Consumer Protection Act, or breaches of AIM's fiduciary duties to Fund shareholders and of AIM's Code of Ethics; (viii) overseeing all of the compliance policies and procedures of the Funds and their service providers adopted pursuant to Rule 38a-1 of the 1940 Act; (ix) from time to time, reviewing certain matters related to redemption fee waivers and recommending to the Board whether or not to approve such matters; (x) receiving and reviewing quarterly reports on the activities of AIM's Internal Compliance Controls Committee; (xi) reviewing all reports made by AIM's Chief Compliance Officer; (xii) reviewing and recommending to the independent trustees whether to approve procedures to investigate matters brought to the attention of AIM's ombudsman; (xiii) risk management oversight with respect to the Funds and, in connection therewith, receiving and overseeing risk management reports from AMVESCAP PLC that are applicable to the Funds or their service providers; and (xiv) overseeing potential conflicts of interest that are reported to the Compliance Committee by the AIM, the Chief Compliance Officer, the Senior Officer and/or the Compliance Consultant. During the fiscal year ended October 31, 2005, the Compliance Committee held seven meetings. The members of the Governance Committee are Messrs. Bayley, Crockett, Dowden (Chair), Bob R. Baker, and Jack M. Fields (Vice Chair). The Governance Committee is responsible for: (i) nominating persons who will qualify as independent trustees for (a) election as trustees in connection with meetings of shareholders of the Funds that are called to vote on the election of trustees, (b) appointment by the Board as trustees in connection with filling vacancies that arise in between meetings of shareholders; (ii) reviewing the size of the Board, and recommending to the Board whether the size of the Board shall be increased or decreased; (iii) nominating the Chair of the Board; (iv) monitoring the composition of the Board and each committee of the Board, and monitoring the qualifications of all trustees; (v) recommending persons to serve as members of each committee of the Board (other than the Compliance Committee), as well as persons who shall serve as the chair and vice chair of each such committee; (vi) reviewing and recommending the amount of compensation payable to the independent trustees; (vii) overseeing the selection of independent legal counsel to the independent trustees; (viii) reviewing and approving the compensation paid to independent legal counsel and other advisers, if any, to the Audit Committee of the Board; (ix) reviewing and approving the compensation paid to counsel and other advisers, if any, to the Audit Committee of the Board; and (x) reviewing as they deem appropriate administrative and/or logistical matters pertaining to the operations of the Board. 30 The Governance Committee will consider nominees recommended by a shareholder to serve as trustees, provided: (i) that such person is a shareholder of record at the time he or she submits such names and is entitled to vote at the meeting of shareholders at which trustees will be elected; and (ii) that the Governance Committee or the Board, as applicable, shall make the final determination of persons to be nominated. During the fiscal year ended October 31, 2005, the Governance Committee held eight meetings. Notice procedures set forth in the Trust's bylaws require that any shareholder of a Fund desiring to nominate a trustee for election at a shareholder meeting must submit to the Trust's Secretary the nomination in writing not later than the close of business on the later of the 90th day prior to such shareholder meeting or the tenth day following the day on which public announcement is made of the shareholder meeting and not earlier than the close of business on the 120th day prior to the shareholder meeting. The members of the Investments Committee are Messrs. Baker (Vice Chair), Bayley (Chair), Bunch, Crockett, Dowden, Dunn, Fields, Carl Frischling, Robert H. Graham, Pennock, Soll, Stickel, Mark H. Williamson, Dr. Mathai-Davis (Vice Chair) and Miss Quigley (Vice Chair). The Investments Committee's primary purposes are to: (i) assist the Board in its oversight of the investment management services provided by AIM as well as any sub-advisers; and (ii) review all proposed and existing advisory, sub-advisory and distribution arrangements for the Funds, and to recommend what action the full Boards and the independent trustees take regarding the approval of all such proposed arrangements and the continuance of all such existing arrangements. The Investments Committee has established three Sub-Committees. The Sub-Committees are responsible for: (i) reviewing the performance, fees and expenses of the Funds that have been assigned to a particular Sub-Committee (for each Sub-Committee, the "Designated Funds"), unless the Investments Committee takes such action directly; (ii) reviewing with the applicable portfolio managers from time to time the investment objective(s), policies, strategies and limitations of the Designated Funds; (iii) evaluating the investment advisory, sub-advisory and distribution arrangements in effect or proposed for the Designated Funds, unless the Investments Committee takes such action directly; (iv) being familiar with the registration statements and periodic shareholder reports applicable to their Designated Funds; and (v) such other investment-related matters as the Investments Committee may delegate to the Sub-Committee from time to time. During the fiscal year ended October 31, 2005, the Investments Committee held eight meetings. The members of the Valuation Committee are Messrs. Bunch, Pennock (Vice Chair), Soll, and Williamson and Miss Quigley (Chair). The Valuation Committee is responsible for: (i) developing a sufficient knowledge of the valuation process and of AIM's Procedures for Valuing Securities (Pricing Procedures) (the "Pricing Procedures") in order to carry out their responsibilities; (ii) periodically reviewing information provided by AIM or other advisors regarding industry developments in connection with valuation and pricing, and making recommendations to the Board with respect to the Pricing Procedures based upon such review; (iii) reviewing the reports described in the Pricing Procedures and other information from AIM regarding fair value determinations made pursuant to the Pricing Procedures by AIM's internal valuation committee, and reporting to and making recommendations to the Board in connection with such reports; (iv) receiving the reports of AIM's internal valuation committee requesting approval of any changes to pricing vendors or pricing methodologies as required by the Pricing Procedures, receiving the annual report of AIM evaluating the pricing vendors, and approving changes to pricing vendors and pricing methodologies as provided in the Pricing Procedures and recommending the pricing vendors for approval by the Board annually; (v) upon request of AIM, assisting AIM's internal valuation committee and/or the Board in resolving particular fair valuation issues; (vi) receiving any reports of concerns by AIM's internal valuation committee regarding actual or potential conflicts of interest by investment personnel or others that could color their input or recommendations regarding pricing issues, and receiving information from AIM disclosing differences between valuation and pricing procedures used for the Funds and private funds, if any, advised by AIM for which AIM Fund Administration has exclusive accounting responsibility, and the reasons for such differences; and (vii) in 31 each of the foregoing areas, making regular reports to the Board. During the fiscal year ended October 31, 2005, the Valuation Committee held two meetings. The members of the Special Market Timing Litigation Committee are Messrs. Bunch (Chair), Crockett, Dowden (Vice Chair) and Dunn. The Special Market Timing Litigation Committee is responsible: (i) for receiving reports from time to time from management, counsel for management, counsel for the AIM Funds and special counsel for the independent trustees, as applicable, related to (a) the civil lawsuits, including purported class action and shareholder derivative suits, that have been filed against the AIM Funds concerning alleged excessive short term trading in shares of the AIM Funds ("market timing") and (b) the civil enforcement actions and investigations related to market timing activity in the AIM Funds that were settled with certain regulators, including without limitation the SEC, the New York Attorney General and the Colorado Attorney General, and for recommending to the independent trustees what actions, if any, should be taken by the AIM Funds in light of all such reports; (ii) for overseeing the investigation(s) on behalf of the independent trustees by special counsel for the independent trustees and the independent trustees' financial expert of market timing activity in the AIM Funds, and for recommending to the independent trustees what actions, if any, should be taken by the AIM Funds in light of the results of such investigation(s); (iii) for (a) reviewing the methodology developed by AIM's Independent Distribution Consultant (the "Distribution Consultant") for the monies ordered to be paid under the settlement order with the SEC, and making recommendations to the independent trustees as to the acceptability of such methodology and (b) recommending to the independent trustees whether to consent to any firm with which the Distribution Consultant is affiliated entering into any employment, consultant, attorney-client, auditing or other professional relationship with AIM, or any of its present or former affiliates, directors, officers, employees or agents acting in their capacity as such for the period of the Distribution Consultant's engagement and for a period of two years after the engagement; and (iv) for taking reasonable steps to ensure that any AIM Fund which the Special Market Timing Litigation Committee determines was harmed by improper market timing activity receives what the Special Market Timing Litigation Committee deems to be full restitution. During the fiscal year ended October 31, 2005, the Special Market Timing Litigation Committee held three meetings. Trustee Ownership of Fund Shares The dollar range of equity securities beneficially owned by each trustee (i) in the Funds and (ii) on an aggregate basis, in all registered investment companies overseen by the trustee within the AIM Funds complex is set forth in Appendix C. COMPENSATION Each trustee who is not affiliated with AIM is compensated for his or her services according to a fee schedule which recognizes the fact that such trustee also serves as a director or trustee of other AIM Funds. Each such trustee receives a fee, allocated among the AIM Funds for which he or she serves as a director or trustee, which consists of an annual retainer component and a meeting fee component. The Chair of the Board and Chairs and Vice Chairs of certain committees receive additional compensation for their services. Information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2005 is found in Appendix D. Retirement Plan For Trustees The trustees have adopted a retirement plan for the trustees of the Trust who are not affiliated with AIM. The trustees have also adopted a retirement policy that permits each non-AIM-affiliated trustee to serve until December 31 of the year in which the trustee turns 72. A majority of the Trustees may extend from time to time the retirement date of a trustee. 32 Annual retirement benefits are available to each non-AIM-affiliated trustee of the Trust and/or the other AIM Funds (each, a "Covered Fund") who has at least five years of credited service as a trustee (including service to a predecessor fund) for a Covered Fund. Effective January 1, 2006, for retirements after December 31, 2005, the retirement benefits will equal 75% of the trustee's annual retainer paid to or accrued by any Covered Fund for such trustee during the twelve-month period prior to retirement, including the amount of any retainer deferred under a separate deferred compensation agreement between the Covered Fund and the trustee. The amount of benefits does not include additional compensation paid for Board meeting fees or compensation paid to the Chair of the Board and the Chairs and Vice Chairs of certain committees, whether such amounts are paid directly to the trustee or deferred. The annual retirement benefits are payable in quarterly installments for a number of years equal to the lesser of (i) sixteen years or (ii) the number of such trustee's credited years of service. If a trustee dies prior to receiving the full amount of retirement benefits, the remaining payments will be made to the deceased trustee's designated beneficiary for the same length of time that the trustee would have received the payments based on his or her service. A trustee must have attained the age of 65 (60 in the event of death or disability) to receive any retirement benefit. A trustee may make an irrevocable election to receive retirement benefits prior to age 72, subject to a reduction for early payment. Deferred Compensation Agreements Messrs. Crockett, Dunn, Fields, Frischling and Sklar and Drs. Mathai-Davis and Soll (for purposes of this paragraph only, the "Deferring Trustees") have each executed a Deferred Compensation Agreement (collectively, the "Compensation Agreements"). Pursuant to the Compensation Agreements, the Deferring Trustees have the option to elect to defer receipt of up to 100% of their compensation payable by the Trust, and such amounts are placed into a deferral account and deemed to be invested in one or more AIM Funds selected by the Deferring Trustee. Distributions from the Deferring Trustees' deferral accounts will be paid in cash, generally in equal quarterly installments over a period of up to ten (10) years (depending on the Compensation Agreement) beginning on the date selected under the Compensation Agreement. If a Deferring Trustee dies prior to the distribution of amounts in his or her deferral account, the balance of the deferral account will be distributed to his or her designated beneficiary. The Compensation Agreements are not funded and, with respect to the payments of amounts held in the deferral accounts, the Deferring Trustees have the status of unsecured creditors of the Trust and of each other AIM Fund from which they are deferring compensation. Purchase of Class A Shares of the Funds at Net Asset Value The trustees and other affiliated persons of the Trust may purchase Class A shares of the AIM Funds without paying an initial sales charge. AIM Distributors permits such purchases because there is a reduced sales effort involved in sales to such purchasers, thereby resulting in relatively low expenses of distribution. For a complete description of the persons who will not pay an initial sales charge on purchases of Class A shares of the AIM Funds, see "Purchase, Redemption and Pricing of Shares - Purchase and Redemption of Shares - Purchases of Class A Shares, Class A3 Shares, of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money Market Fund - Purchases of Class A Shares at Net Asset Value." CODES OF ETHICS AIM, the Trust, AIM Distributors and AIM Funds Management Inc. have adopted Codes of Ethics governing personal trading activities of all employees of AIM and its subsidiaries, and AIM Funds Management Inc. The Codes of Ethics are intended to address conflicts of interest with the Trust that may arise from personal trading, including personal trading in most of the funds within The AIM Family of Funds registered trademark. Personal trading, including personal trading involving securities that may be purchased or held by a fund within The AIM Family of Funds registered trademark, is permitted under the Codes subject to certain restrictions; however employees are required to pre-clear security transactions with the Compliance Officer or a designee and to report transactions on a regular basis. 33 PROXY VOTING POLICIES The Board has delegated responsibility for decisions regarding proxy voting for securities held by each Fund other than AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund to AIM, the Fund's investment advisor, and with respect to AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund, to AIM Funds Management, Inc., the Sub-Advisor. The investment advisor and Sub-Advisor will vote such proxies in accordance with their proxy policies and procedures, which have been reviewed and approved by the Board, and which are found in Appendix E. Any material changes to the proxy policies and procedures will be submitted to the Board for approval. The Board will be supplied with a summary quarterly report of each Fund's proxy voting record. Information regarding how the Funds voted proxies related to their portfolio securities during the 12 months ended June 30, 2005 is available at our Web site, http://www.aiminvestments.com. This information is also available at the SEC Web site, http://www.sec.gov. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES Information about the ownership of each class of each Fund's shares by beneficial or record owners of such Fund and by trustees and officers as a group is found in Appendix F. A shareholder who owns beneficially 25% or more of the outstanding shares of a Fund is presumed to "control" that Fund. INVESTMENT ADVISORY AND OTHER SERVICES INVESTMENT ADVISOR AIM, the Funds' investment advisor, was organized in 1976, and along with its subsidiaries, manages or advises over 200 investment portfolios encompassing a broad range of investment objectives. AIM is a direct, wholly owned subsidiary of AIM Management, a holding company that has been engaged in the financial services business since 1976. AIM Management is an indirect, wholly owned subsidiary of AMVESCAP. AMVESCAP and its subsidiaries are an independent global investment management group. Certain of the directors and officers of AIM are also executive officers of the Trust and their affiliations are shown under "Management Information" herein. As investment advisor, AIM supervises all aspects of the Funds' operations and provides investment advisory services to the Funds. AIM obtains and evaluates economic, statistical and financial information to formulate and implement investment programs for the Funds. The Advisory Agreement provides that, in fulfilling its responsibilities, AIM may engage the services of other investment managers with respect to one or more of the Funds. The investment advisory services of AIM and the investment sub-advisory services of the Sub-Advisor to the Funds are not exclusive and AIM and the Sub-Advisor(s) are free to render investment advisory services to others, including other investment companies. AIM is also responsible for furnishing to the Funds, at AIM's expense, the services of persons believed to be competent to perform all supervisory and administrative services required by the Funds, in the judgment of the trustees, to conduct their respective businesses effectively, as well as the offices, equipment and other facilities necessary for their operations. Such functions include the maintenance of each Fund's accounts and records, and the preparation of all requisite corporate documents such as tax returns and reports to the SEC and shareholders. The Advisory Agreement provides that each Fund will pay or cause to be paid all expenses of such Fund not assumed by AIM, including, without limitation: brokerage commissions, taxes, legal, auditing or governmental fees, custodian, transfer and shareholder service agent costs, expenses of 34 issue, sale, redemption, and repurchase of shares, expenses of registering and qualifying shares for sale, expenses relating to trustees and shareholder meetings, the cost of preparing and distributing reports and notices to shareholders, the fees and other expenses incurred by the Trust on behalf of each Fund in connection with membership in investment company organizations, and the cost of printing copies of prospectuses and statements of additional information distributed to the Funds' shareholders. AIM, at its own expense, furnishes to the Trust office space and facilities. AIM furnishes to the Trust all personnel for managing the affairs of the Trust and each of its series of shares. Pursuant to the Advisory Agreement with the Trust, AIM receives a monthly fee from each Fund calculated at the annual rates indicated in the second column below, based on the average daily net assets of each Fund during the year: Effective January 1, 2005 the advisor has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by each Fund do not exceed the maximum advisory fee rate set forth in the third column below. The maximum advisory fee rates are effective through the Committed Until Date set forth in the fourth column.
MAXIMUM ADVISORY FEE ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE RATE RATES COMMITTED FUND NAME PER ADVISORY AGREEMENT AFTER JANUARY 1, 2005 UNTIL DATE --------------------------------- --------------------------- ------- ------------------ --------------- AIM Developing Markets Fund 0.975% of first $500M 0.935% of first $250M June 30, 2006 0.95% of next $500M 0.91% of next $250M 0.925% of next $500M 0.885% of next $500M 0.90% on amount thereafter 0.86% of next $1.5B 0.835% of next $2.5B 0.81% of next $2.5B 0.785% of next $2.5B 0.76% of amount over $10B AIM Global Health Care Fund 0.75% of first $350M N/A N/A 0.65% of next $350M 0.55% of next $1.3B 0.45% of next $2B 0.40% of next $2B 0.375% of next $2B 0.35% of next $8B AIM Trimark Endeavor Fund 0.80% of first $1B 0.745% of first $250M June 30, 2006 0.75% on amount thereafter 0.73% of next $250M 0.715% of next $500M 0.70% of next $1.5B 0.685% of next $2.5B 0.67% of next $2.5B 0.655% of next $2.5B 0.64% of amount over $10B
35
MAXIMUM ADVISORY FEE ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE RATE RATES COMMITTED FUND NAME PER ADVISORY AGREEMENT AFTER JANUARY 1, 2005 UNTIL DATE --------------------------------- --------------------------- ------- ------------------ --------------- AIM Trimark Fund 0.85% of first $1B 0.80% of first $250M June 30, 2006 0.80% on amount thereafter 0.78% of next $250M 0.76% of next $500M 0.74% of next $1.5B 0.72% of next $2.5B 0.70% of next $2.5B 0.68% of next $2.5B 0.66% of amount over $10B AIM Trimark Small Companies Fund 0.85% of first $1B 0.745% of first $250M June 30, 2006 0.80% on amount thereafter 0.73% of next $250M 0.715% of next $500M 0.70% of next $1.5B 0.685% of next $2.5B 0.67% of next $2.5B 0.655% of next $2.5B 0.64% of amount over $10B
AIM may from time to time waive or reduce its fee. Voluntary fee waivers or reductions may be rescinded at any time without further notice to investors. During periods of voluntary fee waivers or reductions, AIM will retain its ability to be reimbursed for such fee prior to the end of each fiscal year. Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM and the Fund. AIM has voluntarily agreed to waive a portion of advisory fees payable by each Fund. The amount of the waiver will equal 25% of the advisory fee AIM receives from the Affiliated Money Market Funds as a result of each Fund's investment of uninvested cash in an Affiliated Money Market Fund. Termination of this agreement requires approval by the Board. See "Description of the Funds and Their Investments and Risks - Investment Strategies and Risks - Other Investments - Other Investment Companies." AIM has contractually agreed through October 31, 2006, to limit total annual fund operating expenses (excluding (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by each Fund's Board; and (vi) expenses that each Fund has incurred but did not actually pay because of an expense offset arrangement for the following Funds' shares to the extent necessary to limit the total operating expenses as follows:
FUND EXPENSE LIMITATION ----------------------------------- ------------------ AIM Developing Markets Fund Class A Shares 1.75% Class B Shares 2.50% Class C Shares 2.50% Institutional Class Shares 1.50%
36 AIM Trimark Endeavor Fund Class A Shares 1.90% Class B Shares 2.65% Class C Shares 2.65% Class R Shares 2.15% Institutional Class Shares 1.65% AIM Trimark Fund Class A Shares 2.15% Class B Shares 2.90% Class C Shares 2.90% Class R Shares 2.40% Institutional Class Shares 1.90% AIM Trimark Small Companies Fund Class A Shares 1.50% Class B Shares 2.25% Class C Shares 2.25% Class R. Shares 1.75% Institutional Class Shares 1.25%
Such contractual fee waivers or reductions are set forth in the Fee Table to each Fund's Prospectus and may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM and the Fund. Investment Sub-Advisor AIM has entered into a Sub-Advisory Agreement with the Sub-Advisor to provide investment sub-advisory services to AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund. The Sub-Advisor is registered as an investment advisor under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). The Sub-Advisor is located at 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7 and has provided investment management and/or administrative services to pension funds, insurance funds, unit trusts, offshore funds and a variety of institutional accounts since 1981. AIM and the Sub-Advisor are indirect wholly owned subsidiaries of AMVESCAP PLC (formerly, AMVESCO PLC and INVESCO PLC). For the services to be rendered by the Sub-Advisor under the Sub-Advisory Agreement, AIM will pay to the Sub-Advisor a fee which will be computed daily and paid as of the last day of each month on the basis of each Fund's daily net asset value, using for each daily calculation the most recently determined net asset value of each Fund. (See "Computation of Net Asset Value.") On an annual basis, the sub-advisory fee is equal to 40% of AIM's compensation in respect of the sub-advised assets per year, for each of AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund. The management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund for the last three fiscal years ended October 31 are found in Appendix G. 37 Portfolio Managers Appendix H contains the following information regarding the portfolio managers identified in each Fund's prospectus: - The dollar range of the manager's investments in each Fund. - A description of the manager's compensation structure. - Information regarding other accounts managed by the manager and potential conflicts of interest that might arise from the management of multiple accounts. Securities Lending Arrangements If a Fund engages in securities lending, AIM will provide the Fund investment advisory services and related administrative services. The Advisory Agreement describes the administrative services to be rendered by AIM if a Fund engages in securities lending activities, as well as the compensation AIM may receive for such administrative services. Services to be provided include: (a) overseeing participation in the securities lending program to ensure compliance with all applicable regulatory and investment guidelines; (b) assisting the securities lending agent or principal (the "agent") in determining which specific securities are available for loan; (c) monitoring the agent to ensure that securities loans are effected in accordance with AIM's instructions and with procedures adopted by the Board; (d) preparing appropriate periodic reports for, and seeking appropriate approvals from, the Board with respect to securities lending activities; (e) responding to agent inquiries; and (f) performing such other duties as may be necessary. AIM's compensation for advisory services rendered in connection with securities lending is included in the advisory fee schedule. As compensation for the related administrative services AIM will provide, a lending Fund will pay AIM a fee equal to 25% of the net monthly interest or fee income retained or paid to the Fund from such activities. AIM currently intends to waive such fee, and has agreed to seek Board approval prior to its receipt of all or a portion of such fee. SERVICE AGREEMENTS ADMINISTRATIVE SERVICES AGREEMENT. AIM and the Trust have entered into a Master Administrative Services Agreement ("Administrative Services Agreement") pursuant to which AIM may perform or arrange for the provision of certain accounting and other administrative services to each Fund which are not required to be performed by AIM under the Advisory Agreement. The Administrative Services Agreement provides that it will remain in effect and continue from year to year only if such continuance is specifically approved at least annually by the Board, including the independent trustees, by votes cast in person at a meeting called for such purpose. Under the Administrative Services Agreement, AIM is entitled to receive from the Funds reimbursement of its costs or such reasonable compensation as may be approved by the Board. Currently, AIM is reimbursed for the services of the Trust's principal financial officer and her staff, and any expenses related to fund accounting services. Administrative services fees paid to AIM by each Fund for the last three fiscal years ended October 31 are found in Appendix I. OTHER SERVICE PROVIDERS TRANSFER AGENT. AIM Investment Services, Inc. ("AIS") (formerly, A I M Fund Services, Inc.), 11 Greenway Plaza, Suite 100, Houston, Texas 77046, a wholly owned subsidiary of AIM, is the Trust's transfer agent. The Transfer Agency and Service Agreement (the "TA Agreement") between the Trust and AIS provides that AIS will perform certain services related to the servicing of shareholders of the Funds. 38 Other such services may be delegated or sub-contracted to third party intermediaries. For servicing accounts holding Class A, A3, B, C, P, R, AIM Cash Reserve and Investor Class Shares, the TA Agreement provides that the Trust, on behalf of the Funds, will pay AIS a fee at an annual rate of $21.60 per open shareholder account plus certain out of pocket expenses. This fee is paid monthly at the rate of 1/12 of the annual rate and is based upon the number of open shareholder accounts during each month. In addition, all fees payable by AIS or its affiliates to third party intermediaries who service accounts pursuant to sub-transfer agency, omnibus account services and sub-accounting agreements are charged back to the Funds, subject to certain limitations approved by the Board of the Trust. These payments are made in consideration of services that would otherwise be provided by AIS if the accounts serviced by such intermediaries were serviced by AIS directly. For more information regarding such payments to intermediaries, see the discussion under "Administrative and Processing Support Payments" below. CUSTODIAN. State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street, Boston, Massachusetts 02110, is custodian of all securities and cash of the Funds. Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002, serves as sub-custodian for purchases of shares of the Funds. The Bank of New York, 2 Hanson Place, Brooklyn, New York 11217-1431, also serves as sub-custodian to facilitate cash management. The Custodian is authorized to establish separate accounts in foreign countries and to cause foreign securities owned by the Funds to be held outside the United States in branches of U.S. banks and, to the extent permitted by applicable regulations, in certain foreign banks and securities depositories. AIM is responsible for selecting eligible foreign securities depositories and for assessing the risks associated with investing in foreign countries, including the risk of using eligible foreign securities depositories in a country. The Custodian is responsible for monitoring eligible foreign securities depositories. Under its contract with the Trust, the Custodian maintains the portfolio securities of the Funds, administers the purchases and sales of portfolio securities, collects interest and dividends and other distributions made on the securities held in the portfolios of the Funds and performs other ministerial duties. These services do not include any supervisory function over management or provide any protection against any possible depreciation of assets. AUDITORS. The Funds' independent registered public accounting firm is responsible for auditing the financial statements of the Funds. The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP, 1201 Louisiana, Suite 2900, Houston, Texas 77002, as the independent registered public accounting firm to audit the financial statements of the Funds. Such appointment was ratified and approved by the Board. COUNSEL TO THE TRUST. Legal matters for the Trust have been passed upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103-7599. BROKERAGE ALLOCATION AND OTHER PRACTICES The Sub-Advisor has adopted compliance procedures that cover, among other items, brokerage allocation and other trading practices. Unless specifically noted, the Sub-Advisor's procedures do not materially differ from AIM's procedures as set forth below. BROKERAGE TRANSACTIONS AIM or the Sub-Advisor makes decisions to buy and sell securities for each Fund, selects broker-dealers (each, a "Broker"), effects the Funds' investment portfolio transactions, allocates brokerage fees in such transactions and, where applicable, negotiates commissions and spreads on transactions. AIM's primary consideration in effecting a security transaction is to obtain best execution, which AIM defines as prompt and efficient execution of the transaction at the best obtainable price with payment of commissions, mark-ups or mark-downs which are reasonable in relation to the value of the brokerage 39 services provided by the Broker. While AIM seeks reasonably competitive commission rates, the Funds may not pay the lowest commission or spread available. See "Broker Selection" below. Some of the securities in which the Funds invest are traded in over-the-counter markets. Portfolio transactions placed in such markets may be effected on a principal basis at net prices without commissions, but which include compensation to the Broker in the form of a mark-up or mark-down, or on an agency basis, which involves the payment of negotiated brokerage commissions to the Broker, including electronic communication networks. Purchases of underwritten issues include a commission or concession paid by the issuer (not the Funds) to the underwriter. Purchases of money market instruments may be made directly from issuers without the payment of commissions. Traditionally, commission rates have not been negotiated on stock markets outside the United States. Although in recent years many overseas stock markets have adopted a system of negotiated rates, a number of markets maintain an established schedule of minimum commission rates. Brokerage commissions paid by each of the Funds during the last three fiscal years ended October 31 are found in Appendix J. COMMISSIONS During the last three fiscal years ended October 31, none of the Funds paid brokerage commissions to Brokers affiliated with the Funds, AIM, AIM Distributors, or any affiliates of such entities. The Funds may engage in certain principal and agency transactions with banks and their affiliates that own 5% or more of the outstanding voting securities of an AIM Fund, provided the conditions of an exemptive order received by the AIM Funds from the SEC are met. In addition, a Fund may purchase or sell a security from or to certain other Funds or accounts (and may invest in Affiliated Money Market Funds) provided the Funds follow procedures adopted by the Boards of the various AIM Funds, including the Trust. These inter-fund transactions do not generate brokerage commissions but may result in custodial fees or taxes or other related expenses. BROKER SELECTION AIM's primary consideration in selecting Brokers to execute portfolio transactions for a Fund is to obtain best execution. In selecting a Broker to execute a portfolio transaction in equity securities for a Fund, AIM considers the full range and quality of a Broker's services, including the value of research and/or brokerage services provided, execution capability, commission rate, willingness to commit capital, anonymity and responsiveness. AIM's primary consideration when selecting a Broker to execute a portfolio transaction in fixed income securities for a Fund is the Broker's ability to deliver or sell the relevant fixed income securities; however, AIM will also consider the various factors listed above. In each case, the determinative factor is not the lowest commission or spread available but whether the transaction represents the best qualitative execution for the Fund. AIM will not select Brokers based upon their promotion or sale of Fund shares. In choosing Brokers to execute portfolio transactions for the Funds, AIM may select Brokers that provide brokerage and/or research services ("Soft Dollar Products") to the Funds and/or the other accounts over which AIM and its affiliates have investment discretion. Section 28(e) of the Securities Exchange Act of 1934, as amended, provides that AIM, under certain circumstances, lawfully may cause an account to pay a higher commission than the lowest available. Under Section 28(e)(1), AIM must make a good faith determination that the commissions paid are "reasonable in relation to the value of the brokerage and research services provided ... viewed in terms of either that particular transaction or [AIM's] overall responsibilities with respect to the accounts as to which [it] exercised investment discretion." The services provided by the Broker also must lawfully and appropriately assist AIM in the performance of its investment decision-making responsibilities. Accordingly, a Fund may pay a Broker higher commissions than those available from another Broker in recognition of such Broker's provision of Soft Dollar Products to AIM. 40 AIM faces a potential conflict of interest when it uses client trades to obtain Soft Dollar Products. This conflict exists because AIM is able to use the Soft Dollar Products to manage client accounts without paying cash for the Soft Dollar Products, which reduces AIM's expenses to the extent that AIM would have purchased such products had they not been provided by Brokers. Section 28(e) permits AIM to use Soft Dollar Products for the benefit of any account it manages. Certain AIM-managed accounts may generate soft dollars used to purchase Soft Dollar Products that ultimately benefit other AIM-managed accounts, effectively cross subsidizing the other AIM-managed accounts that benefit directly from the product. AIM may not use all of the Soft Dollar Products provided by Brokers through which a Fund effects securities transactions in connection with managing such Fund. AIM and certain of its affiliates presently engage in the following instances of cross-subsidization: 1. Fixed income funds normally do not generate soft dollar commissions to pay for Soft Dollar Products. Therefore, soft dollar commissions used to pay for Soft Dollar Products which are used to manage the fixed income AIM Funds are generated entirely by equity AIM Funds and other equity client accounts managed by AIM or A I M Capital Management, Inc. ("AIM Capital"), a subsidiary of AIM. In other words, the fixed income AIM Funds are cross-subsidized by the equity AIM Funds in that the fixed income AIM Funds receive the benefit of Soft Dollar Products services for which they do not pay. 2. The investment models used to manage many of the AIM Funds are also used to manage other accounts of AIM and/or AIM Capital. The Soft Dollar Products obtained through the use of soft dollar commissions generated by the transactions of the AIM Funds and/or other accounts managed by AIM and/or AIM Capital are used to maintain the investment models relied upon by both of these advisory affiliates. This type of cross-subsidization occurs in both directions. For example, soft dollar commissions generated by transactions of the AIM Funds and/or other accounts managed by AIM are used for Soft Dollar Products which may benefit those AIM Funds and/or accounts as well as accounts managed by AIM Capital. Additionally, soft dollar commissions generated by transactions of accounts managed by AIM Capital are used for Soft Dollar Products which may benefit those accounts as well as accounts managed by AIM. In certain circumstances, AIM Capital accounts may indicate that their transactions should not be used to generate soft dollar commissions but may still receive the benefits of Soft Dollar Products received by AIM or AIM Capital. 3. Some of the common investment models used to manage various Funds and other accounts of AIM and/or AIM Capital are also used to manage accounts of AIM Private Asset Management, Inc. ("APAM"), another AIM subsidiary. The Soft Dollar Products obtained through the use of soft dollar commissions generated by the transactions of the Funds and/or other accounts managed by AIM and/or AIM Capital are used to maintain the investment models relied upon by AIM, AIM Capital and APAM. This cross-subsidization occurs in only one direction. Most of APAM's accounts do not generate soft dollar commissions which can be used to purchase Soft Dollar Products. The soft dollar commissions generated by transactions of the Funds and/or other accounts managed by AIM and/or AIM Capital are used for Soft Dollar Products which may benefit the accounts managed by AIM, AIM Capital and APAM; however, APAM does not provide any soft dollar research benefit to the Funds and/or other accounts managed by AIM or AIM Capital. AIM and AIM Capital attempt to reduce or eliminate the potential conflicts of interest concerning the use of Soft Dollar Products by directing client trades for Soft Dollar Products only if AIM and AIM Capital conclude that the Broker supplying the product is capable of providing best execution. 41 Certain Soft Dollar Products may be available directly from a vendor on a hard dollar basis; other Soft Dollar Products are available only through Brokers in exchange for soft dollars. AIM uses soft dollars to purchase two types of Soft Dollar Products: - proprietary research created by the Broker executing the trade, and - other products created by third parties that are supplied to AIM through the Broker executing the trade. Proprietary research consists primarily of traditional research reports, recommendations and similar materials produced by the in-house research staffs of broker-dealer firms. This research includes evaluations and recommendations of specific companies or industry groups, as well as analyses of general economic and market conditions and trends, market data, contacts and other related information and assistance. AIM periodically rates the quality of proprietary research produced by various Brokers. Based on the evaluation of the quality of information that AIM receives from each Broker, AIM develops an estimate of each Broker's share of AIM clients' commission dollars. AIM attempts to direct trades to the firms to meet these estimates. AIM also used soft dollars to acquire products from third parties that are supplied to AIM through Brokers executing the trades or other Brokers who "step in" to a transaction and receive a portion of the brokerage commission for the trade. AIM may from time to time instruct the executing Broker to allocate or "step out" a portion of a transaction to another Broker. The Broker to which AIM has "stepped out" would then settle and complete the designated portion of the transaction, and the executing Broker would settle and complete the remaining portion of the transaction that has not been "stepped out." Each Broker may receive a commission or brokerage fee with respect to that portion of the transaction that it settles and completes. Soft Dollar Products received from Brokers supplement AIM's own research (and the research of certain of its affiliates), and may include the following types of products and services: - Database Services - comprehensive databases containing current and/or historical information on companies and industries and indices. Examples include historical securities prices, earnings estimates and financial data. These services may include software tools that allow the user to search the database or to prepare value-added analyses related to the investment process (such as forecasts and models used in the portfolio management process). - Quotation/Trading/News Systems - products that provide real time market data information, such as pricing of individual securities and information on current trading, as well as a variety of news services. - Economic Data/Forecasting Tools - various macro economic forecasting tools, such as economic data or currency and political forecasts for various countries or regions. - Quantitative/Technical Analysis - software tools that assist in quantitative and technical analysis of investment data. - Fundamental/Industry Analysis - industry specific fundamental investment research. - Fixed Income Security Analysis - data and analytical tools that pertain specifically to fixed income securities. These tools assist in creating financial models, such as cash flow projections and interest rate sensitivity analyses, which are relevant to fixed income securities. 42 - Other Specialized Tools - other specialized products, such as consulting analyses, access to industry experts, and distinct investment expertise such as forensic accounting or custom built investment-analysis software. If AIM determines that any service or product has a mixed use (i.e., it also serves functions that do not assist the investment decision-making or trading process), AIM will allocate the costs of such service or product accordingly in its reasonable discretion. AIM will allocate brokerage commissions to Brokers only for the portion of the service or product that AIM determines assists it in the investment decision-making or trading process and will pay for the remaining value of the product or service in cash. Outside research assistance is useful to AIM since the Brokers used by AIM tend to provide more in-depth analysis of a broader universe of securities and other matters than AIM's staff follows. In addition, such services provide AIM with a diverse perspective on financial markets. Some Brokers may indicate that the provision of research services is dependent upon the generation of certain specified levels of commissions and underwriting concessions by AIM's clients, including the Funds. However, the Funds are not under any obligation to deal with any Broker in the execution of transactions in portfolio securities. In some cases, Soft Dollar Products are available only from the Broker providing them. In other cases, Soft Dollar Products may be obtainable from alternative sources in return for cash payments. AIM believes that because Broker research supplements rather than replaces AIM's research, the receipt of such research tends to improve the quality of AIM's investment advice. The advisory fee paid by the Funds is not reduced because AIM receives such services. To the extent the Funds' portfolio transactions are used to obtain Soft Dollar Products, the brokerage commissions obtained by the Funds might exceed those that might otherwise have been paid. AIM may determine target levels of brokerage business with various Brokers on behalf of its clients (including the Funds) over a certain time period. The target levels will be based upon the following factors, among others: (1) the execution services provided by the Broker; and (2) the research services provided by the Broker. Portfolio transactions may be effected through Brokers that recommend the Funds to their clients, or that act as agent in the purchase of a Fund's shares for their clients, provided that AIM believes such Brokers provide best execution and such transactions are executed in compliance with AIM's policy against using directed brokerage to compensate Brokers for promoting or selling AIM Fund shares. AIM will not enter into a binding commitment with Brokers to place trades with such Brokers involving brokerage commissions in precise amounts. DIRECTED BROKERAGE (RESEARCH SERVICES) Directed brokerage (research services) paid by each of the Funds during the last fiscal year ended October 31, 2005 are found in Appendix K. REGULAR BROKERS OR DEALERS Information concerning the Funds' acquisition of securities of their regular brokers or dealers during the last fiscal year ended October 31, 2005 is found in Appendix K. ALLOCATION OF PORTFOLIO TRANSACTIONS AIM and its affiliates manage numerous other AIM Funds and other accounts. Some of these accounts may have investment objectives similar to the Funds. Occasionally, identical securities will be appropriate for investment by one of the Funds and by another Fund or one or more other accounts. However, the position of each account in the same security and the length of time that each account may hold its investment in the same security may vary. The timing and amount of purchase by each account will also be determined by its cash position. If the purchase or sale of securities is consistent with the investment policies of the Fund(s) and one or more of these accounts, and is considered at or about the same time, AIM will allocate transactions in such securities among the Fund(s) and these accounts on a pro rata basis based on order size or in such other manner believed by AIM to be fair and equitable. AIM may combine such transactions, in accordance with applicable laws and regulations, to obtain the most 43 favorable execution. Simultaneous transactions could, however, adversely affect a Fund's ability to obtain or dispose of the full amount of a security which it seeks to purchase or sell. ALLOCATION OF INITIAL PUBLIC OFFERING ("IPO") TRANSACTIONS Certain of the AIM Funds or other accounts managed by AIM may become interested in participating in IPOs. Purchases of IPOs by one AIM Fund or account may also be considered for purchase by one or more other AIM Funds or accounts. It shall be AIM's practice to specifically combine or otherwise bunch indications of interest for IPOs for all AIM Funds and accounts participating in purchase transactions for that IPO, and, when the full amount of all IPO orders for such AIM Funds and accounts cannot be filled completely, to allocate such transactions in accordance with the following procedures: AIM will determine the eligibility of each AIM Fund and account that seeks to participate in a particular IPO by reviewing a number of factors, including market capitalization/liquidity suitability and sector/style suitability of the investment with the AIM Fund's or account's investment objective, policies, strategies and current holdings. The allocation of securities issued in IPOs will be made to eligible AIM Funds and accounts on a pro rata basis based on order size. On occasion, when the Sub-Advisor is purchasing certain thinly-traded securities or shares in an IPO for AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund, the situation may arise that the Sub-Advisor is unable to obtain sufficient securities to fill the orders of the Fund or all other relevant clients. In that situation, the Sub-Advisor is required to use pro-rata allocation methods that ensure the fair and equitable treatment of all clients. The requirement of pro-rata allocation is subject to limited exceptions - such as when the Fund is subject to special investment objectives or size constraints on investment positions. PURCHASE, REDEMPTION AND PRICING OF SHARES TRANSACTIONS THROUGH FINANCIAL INTERMEDIARIES If you are investing indirectly in a Fund through a financial intermediary such as a broker-dealer, a bank (including a bank trust department), an insurance company separate account, an investment advisor, an administrator or trustee of a retirement plan or a qualified tuition plan of a sponsor of a fee-based program that maintains a master account (an omnibus account) with the Fund for trading on behalf of its customers, different guidelines, conditions and restrictions may apply than if you held your shares of the Fund directly. These differences may include, but are not limited to: (i) different eligibility standards to purchase and sell shares, different eligibility standards to invest in funds with limited offering status and different eligibility standards to exchange shares by telephone; (ii) different minimum and maximum initial and subsequent purchase amounts; (iii) system inability to provide Letter of Intent privileges; and (iv) different annual amounts (less than 12%) subject to withdrawal under a Systematic Redemption Plan without being subject to a contingent deferred sales charge. The financial intermediary through whom you are investing may also choose to adopt different exchange and/or transfer limit guidelines and restrictions, including different trading restrictions designed to discourage excessive or short-term trading. The financial intermediary through whom you are investing may also choose to impose a redemption fee that has different characteristics, which may be more or less restrictive, than the redemption fee currently imposed on certain Funds. If the financial intermediary is managing your account, you may also be charged a transaction or other fee by such financial intermediary, including service fees for handling redemption transactions. Consult with your financial intermediary (or, in the case of a retirement plan, your plan sponsor) to determine what fees, guidelines, conditions and restrictions, including any of the above, may be applicable to you. 44 PURCHASE AND REDEMPTION OF SHARES Purchases of Class A Shares, Class A3 Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money Market Fund INITIAL SALES CHARGES. Each AIM Fund (other than AIM Tax-Exempt Cash Fund) is grouped into one of three categories to determine the applicable initial sales charge for its Class A Shares. Additionally, Class A shares of AIM Short Term Bond Fund are subject to an initial sales charge of 2.50%. The sales charge is used to compensate AIM Distributors and participating dealers for their expenses incurred in connection with the distribution of the Funds' shares. You may also be charged a transaction or other fee by the financial institution managing your account. Class A Shares of AIM Tax-Exempt Cash Fund, Class A3 Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money Market Fund are sold without an initial sales charge. 45 CATEGORY I FUNDS AIM Advantage Health Sciences Fund AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund AIM Basic Balanced Fund AIM Basic Value Fund AIM Blue Chip Fund AIM Capital Development Fund AIM Charter Fund AIM Conservative Allocation Fund AIM Constellation Fund AIM Developing Markets Fund AIM Diversified Dividend Fund AIM Dynamics Fund AIM Energy Fund AIM European Growth Fund AIM European Small Company Fund AIM Financial Services Fund AIM Global Aggressive Growth Fund AIM Global Equity Fund AIM Global Growth Fund AIM Global Health Care Fund AIM Global Real Estate Fund AIM Global Value Fund AIM Gold & Precious Metals Fund AIM Growth Allocation Fund AIM Income Allocation Fund AIM International Allocation Fund AIM International Core Equity Fund AIM International Growth Fund AIM International Small Company Fund AIM Large Cap Basic Value Fund AIM Large Cap Growth Fund AIM Leisure Fund AIM Mid Cap Basic Value Fund AIM Mid Cap Core Equity Fund AIM Mid Cap Growth Fund AIM Moderate Allocation Fund AIM Moderate Growth Allocation Fund AIM Moderately Conservative Allocation Fund AIM Multi-Sector Fund AIM Opportunities I Fund AIM Opportunities II Fund AIM Opportunities III Fund AIM Premier Equity Fund AIM Real Estate Fund AIM Select Equity Fund AIM Small Cap Equity Fund AIM Small Cap Growth Fund AIM Small Company Growth Fund AIM Summit Fund AIM Technology Fund AIM Trimark Endeavor Fund AIM Trimark Fund AIM Trimark Small Companies Fund AIM Utilities Fund AIM Weingarten Fund
Dealer Investor's Sales Charge Concession ----------------------------- ------------- As a As a As a Percentage Percentage Percentage of the Public of the Net of the Public Amount of Investment in Offering Amount Offering Single Transaction Price Invested Price --------------------------------- ------------- ------------ -------------- Less than $ 25,000 5.50% 5.82% 4.75% $ 25,000 but less than $ 50,000 5.25 5.54 4.50 $ 50,000 but less than $ 100,000 4.75 4.99 4.00 $100,000 but less than $ 250,000 3.75 3.90 3.00 $250,000 but less than $ 500,000 3.00 3.09 2.50 $500,000 but less than $1,000,000 2.00 2.04 1.60
46 CATEGORY II FUNDS AIM High Income Municipal Fund AIM High Yield Fund AIM Income Fund AIM Intermediate Government Fund AIM Municipal Bond Fund AIM Total Return Bond Fund
Dealer Investor's Sales Charge Concession ----------------------------- ------------- As a As a As a Percentage Percentage Percentage of the Public of the Net of the Public Amount of Investment in Offering Amount Offering Single Transaction Price Invested Price --------------------------------- ------------- ------------ -------------- Less than $ 50,000 4.75% 4.99% 4.00% $ 50,000 but less than $ 100,000 4.00 4.17 3.25 $100,000 but less than $ 250,000 3.75 3.90 3.00 $250,000 but less than $ 500,000 2.50 2.56 2.00 $500,000 but less than $1,000,000 2.00 2.04 1.60
CATEGORY III FUNDS AIM Limited Maturity Treasury Fund AIM Tax-Free Intermediate Fund
Dealer Investor's Sales Charge Concession ----------------------------- ------------- As a As a As a Percentage Percentage Percentage of the Public of the Net of the Public Amount of Investment in Offering Amount Offering Single Transaction Price Invested Price --------------------------------- ------------- ------------ -------------- Less than $ 100,000 1.00% 1.01% 0.75% $100,000 but less than $ 250,000 0.75 0.76 0.50 $250,000 but less than $1,000,000 0.50 0.50 0.40
47 AIM SHORT TERM BOND FUND
Dealer Investor's Sales Charge Concession ----------------------------- ------------- As a As a As a Percentage Percentage Percentage of the Public of the Net of the Public Amount of Investment in Offering Amount Offering Single Transaction Price Invested Price --------------------------------- ------------- ------------ -------------- Less than $ 100,000 2.50% 2.56% 2.00% $100,000 but less than $ 250,000 2.00 2.04 1.50 $250,000 but less than $ 500,000 1.50 1.52 1.25 $500,000 but less than $1,000,000 1.25 1.27 1.00
As of the close of business on October 30, 2002, Class A Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors. Current investors must maintain a share balance in order to continue to make incremental purchases. LARGE PURCHASES OF CLASS A SHARES. Investors who purchase $1,000,000 or more of Class A Shares of a Category I, II or III Fund and Class A shares of AIM Short Term Bond Fund do not pay an initial sales charge. In addition, investors who currently own Class A shares of Category I, II, or III Funds and Class A shares of AIM Short Term Bond Fund and make additional purchases that result in account balances of $1,000,000 or more do not pay an initial sales charge on the additional purchases. The additional purchases, as well as initial purchases of $1,000,000 or more, are referred to as Large Purchases. However, if an investor makes a Large Purchase of Class A shares of a Category I or II Fund and Class A shares of AIM Short Term Bond Fund each share issued will generally be subject to a 1.00% contingent deferred sales charge ("CDSC") if the investor redeems those shares within 18 months after purchase. Large Purchases of Class A Shares by investors who were Class K shareholders of record on October 21, 2005 are not subject to a CDSC. AIM Distributors may pay a dealer concession and/or advance a service fee on Large Purchases, as set forth below. Exchanges between the AIM Funds may affect total compensation paid. PURCHASES OF CLASS A SHARES BY NON-RETIREMENT PLANS. AIM Distributors may make the following payments to dealers of record for Large Purchases of Class A shares of Category I or II Funds or AIM Short Term Bond Fund by investors other than: (i) retirement plans that are maintained pursuant to Sections 401 and 457 of the Internal Revenue Code of 1986, as amended (the Code), and (ii) retirement plans that are maintained pursuant to Section 403 of the Code if the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code: PERCENT OF PURCHASE 1% of the first $2 million plus 0.80% of the next $1 million plus 0.50% of the next $17 million plus 0.25% of amounts in excess of $20 million 48 If (i) the amount of any single purchase order plus (ii) the public offering price of all other shares owned by the same customer submitting the purchase order on the day on which the purchase order is received equals or exceeds $1,000,000, the purchase will be considered a "jumbo accumulation purchase." With regard to any individual jumbo accumulation purchase, AIM Distributors may make payment to the dealer of record based on the cumulative total of jumbo accumulation purchases made by the same customer over the life of his or her account(s). If an investor made a Large Purchase of Class A shares of a Category III Fund on and after November 15, 2001 and through October 30, 2002 and exchanges those shares for Class A shares of a Category I or II Fund, AIM Distributors will pay an additional dealer concession of 0.75% upon exchange. If an investor makes a Large Purchase of Class A3 shares of a Category III Fund on and after October 31, 2002 and exchanges those shares for Class A shares of a Category I or II Fund or AIM Short Term Bond Fund, AIM Distributors will pay 1.00% of such purchase as dealer compensation upon the exchange. The Class A Shares of the Category I or II Fund or AIM Short Term Bond Fund received in exchange generally will be subject to a 1.00% CDSC if the investor redeems such shares within 18 months from the date of exchange. PURCHASES OF CLASS A SHARES BY CERTAIN RETIREMENT PLANS AT NAV. Effective November 1, 2002, for purchases of Class A shares of Category I and II Funds and AIM Short Term Bond Fund, AIM Distributors may make the following payments to investment dealers or other financial service firms for sales of such shares at net asset value ("NAV") to certain retirement plans provided the applicable dealer of record is able to establish that the retirement plan's purchase of Class A shares is a new investment (as defined below): PERCENT OF PURCHASE 0.50% of the first $20 million plus 0.25% of amounts in excess of $20 million This payment schedule will be applicable to purchases of Class A shares at NAV by the following types of retirement plans: (i) all plans maintained pursuant to Sections 401 and 457 of the Code, and (ii) plans maintained pursuant to Section 403 of the Code if the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code. A "new investment" means a purchase paid for with money that does not represent (i) the proceeds of one or more redemptions of AIM Fund shares, (ii) an exchange of AIM Fund shares, (iii) the repayment of one or more retirement plan loans that were funded through the redemption of AIM Fund shares, or (iv) money returned from another fund family. If AIM Distributors pays a dealer concession in connection with a plan's purchase of Class A shares at NAV, such shares may be subject to a CDSC of 1.00% of net assets for 12 months, commencing on the date the plan first invests in Class A shares of an AIM Fund. If the applicable dealer of record is unable to establish that a plan's purchase of Class A shares at NAV is a new investment, AIM Distributors will not pay a dealer concession in connection with such purchase and such shares will not be subject to a CDSC. With regard to any individual jumbo accumulation purchase, AIM Distributors may make payment to the dealer of record based on the cumulative total of jumbo accumulation purchases made by the same plan over the life of the plan's account(s). PURCHASERS QUALIFYING FOR REDUCTIONS IN INITIAL SALES CHARGES. As shown in the tables above, purchases of certain amounts of AIM Fund shares may reduce the initial sales charges. These reductions are available to purchasers that meet the qualifications listed below. We will refer to purchasers that meet these qualifications as "Qualified Purchasers." DEFINITIONS 49 As used herein, the terms below shall be defined as follows: - "Individual" refers to a person, as well as his or her Spouse or Domestic Partner and his or her Children; - "Spouse" is the person to whom one is legally married under state law; - "Domestic Partner" is an adult with whom one shares a primary residence for at least six-months, is in a relationship as a couple where one or each of them provides personal or financial welfare of the other without a fee, is not related by blood and is not married; - "Child" or "Children" include a biological, adopted or foster son or daughter, a Step-child, a legal ward or a Child of a person standing in loco parentis; - "Parent" is a person's biological or adoptive mother or father; - "Step-child" is the child of one's Spouse by a previous marriage or relationship; - "Step-parent" is the Spouse of a Child's Parent; and - "Immediate Family" includes an Individual (including, as defined above, a person, his or her Spouse or Domestic Partner and his or her Children) as well as his or her Parents, Step-parents and the Parents of Spouse or Domestic Partner. INDIVIDUALS - an Individual (including his or her spouse or domestic partner, and children); - a retirement plan established exclusively for the benefit of an Individual, specifically including but not limited to, a Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Solo 401(k), Keogh plan, or a tax sheltered 403(b)(7) custodial account; and - a qualified tuition plan account, maintained pursuant to Section 529 of the Code, or a Coverdell Education Savings Account, maintained pursuant to Section 530 of the Code (in either case, the account must be established by an Individual or have an Individual named as the beneficiary thereof). EMPLOYER-SPONSORED RETIREMENT PLANS - a retirement plan maintained pursuant to Section 401, 403 (only if the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code), 408 (includes SEP, SARSEP, and SIMPLE IRA plans) or 457 of the Code, if: a. the employer or plan sponsor submits all contributions for all participating employees in a single contribution transmittal (the AIM Funds will not accept separate contributions submitted with respect to individual participants); b. each transmittal is accompanied by a single check or wire transfer; and c. if the AIM Funds are expected to carry separate accounts in the names of each of the plan participants, (i) the employer or plan sponsor notifies AIM Distributors in writing that the separate accounts of all plan participants should be linked, and (ii) all new participant accounts are established by submitting an appropriate Account Application on behalf of each new participant with the contribution transmittal. 50 HOW TO QUALIFY FOR REDUCTIONS IN INITIAL SALES CHARGES. The following sections discuss different ways that a Qualified Purchaser can qualify for a reduction in the initial sales charges for purchases of Class A shares of the AIM Funds. LETTERS OF INTENT A Qualified Purchaser may pay reduced initial sales charges by (i) indicating on the Account Application that he, she or it intends to provide a Letter of Intent ("LOI") and (ii) subsequently fulfilling the conditions of that LOI. Employer-sponsored retirement plans, with the exception of Solo 401(k) plans and SEP plans, are not eligible for a LOI. The LOI confirms the total investment in shares of the AIM Funds that the Qualified Purchaser intends to make within the next 13 months. By marking the LOI section on the account application and by signing the account application, the Qualified Purchaser indicates that he, she or it understands and agrees to the terms of the LOI and is bound by the provisions described below: Calculating the Initial Sales Charge - Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI (to determine what the applicable public offering price is, look at the sales charge table in the section on "Initial Sales Charges" above). - It is the purchaser's responsibility at the time of purchase to specify the account numbers that should be considered in determining the appropriate sales charge. - The offering price may be further reduced as described below under "Rights of Accumulation" if the Transfer Agent is advised of all other accounts at the time of the investment. - Shares acquired through reinvestment of dividends and capital gains distributions will not be applied to the LOI. Calculating the Number of Shares to be Purchased - Purchases made within 90 days before signing an LOI will be applied toward completion of the LOI. The LOI effective date will be the date of the first purchase within the 90-day period. - Purchases made more than 90 days before signing an LOI will be applied toward the completion of the LOI based on the value of the shares purchased that is calculated at the public offering price on the effective date of the LOI. - If a purchaser wishes to revise the LOI investment amount upward, he, she or it may submit a written and signed request at any time prior to the completion of the original LOI. This revision will not change the original expiration date. - The Transfer Agent will process necessary adjustments upon the expiration or completion date of the LOI. Fulfilling the Intended Investment - By signing an LOI, a purchaser is not making a binding commitment to purchase additional shares, but if purchases made within the 13-month period do not total the amount specified, the purchaser will have to pay the increased amount of sales charge. 51 - To assure compliance with the provisions of the 1940 Act, the Transfer Agent will escrow in the form of shares an appropriate dollar amount (computed to the nearest full share) out of the initial purchase (or subsequent purchases if necessary). All dividends and any capital gain distributions on the escrowed shares will be credited to the purchaser. All shares purchased, including those escrowed, will be registered in the purchaser's name. If the total investment specified under this LOI is completed within the 13-month period, the escrowed shares will be promptly released. - If the intended investment is not completed, the purchaser will pay the Transfer Agent the difference between the sales charge on the specified amount and the sales charge on the amount actually purchased. If the purchaser does not pay such difference within 20 days of the expiration date, he or she irrevocably constitutes and appoints the Transfer Agent as his attorney to surrender for redemption any or all shares, to make up such difference within 60 days of the expiration date. - Shareholders of AIM Basic Balanced Fund, AIM Developing Markets Fund, AIM Global Aggressive Growth Fund, AIM Global Equity Fund, AIM Global Growth Fund, AIM Global Health Care Fund and AIM Real Estate Fund who have a Letter of Intent in place as of November 1, 2005, will be able to complete the Letter of Intent under the current pricing schedule, and future Letters of Intent or subsequent purchases will be subject to the Category I pricing. Canceling the LOI - If at any time before completing the LOI Program, the purchaser wishes to cancel the agreement, he or she must give written notice to AIM Distributors or its designee. - If at any time before completing the LOI Program the purchaser requests the Transfer Agent to liquidate or transfer beneficial ownership of his total shares, the LOI will be automatically canceled. If the total amount purchased is less than the amount specified in the LOI, the Transfer Agent will redeem an appropriate number of escrowed shares equal to the difference between the sales charge actually paid and the sales charge that would have been paid if the total purchases had been made at a single time. Other Persons Eligible for the LOI Privilege The LOI privilege is also available to holders of the Connecticut General Guaranteed Account, established for tax qualified group annuities, for contracts purchased on or before June 30, 1992. LOIs and Contingent Deferred Sales Charges All LOIs to purchase $1,000,000 or more of Class A shares of Category I and II Funds and AIM Short Term Bond Fund are subject to an 18-month, 1.00% CDSC. RIGHTS OF ACCUMULATION A Qualified Purchaser may also qualify for reduced initial sales charges based upon his, her or its existing investment in shares of any of the AIM Funds at the time of the proposed purchase. To determine whether or not a reduced initial sales charge applies to a proposed purchase, AIM Distributors takes into account not only the money which is invested upon such proposed purchase, but also the value of all shares of the AIM Funds owned by such purchaser, calculated at their then current public offering price. If a purchaser qualifies for a reduced sales charge, the reduced sales charge applies to the total amount of money being invested, even if only a portion of that amount exceeds the breakpoint for the reduced sales charge. For example, if a purchaser already owns qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest an additional $20,000 in a fund with a maximum initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will apply to the full $20,000 purchase and not just to the $15,000 in excess of the $25,000 breakpoint. 52 To qualify for obtaining the discount applicable to a particular purchase, the purchaser or his dealer must furnish the Transfer Agent with a list of the account numbers and the names in which such accounts of the purchaser are registered at the time the purchase is made. Rights of Accumulation are also available to holders of the Connecticut General Guaranteed Account, established for tax-qualified group annuities, for contracts purchased on or before June 30, 1992. If an investor's new purchase of Class A shares of a Category I or II Fund or AIM Short Term Bond Fund is at net asset value, the newly purchased shares will be subject to a CDSC if the investor redeems them prior to the end of the 18 month holding period (12 months for Category III Fund shares). For new purchases of Class A shares of Category III Funds at net asset value made on and after November 15, 2001 and through October 30, 2002, the newly purchased shares will be subject to a CDSC if the investor redeems them prior to the end of the 12 month holding period. OTHER REQUIREMENTS FOR REDUCTIONS IN INITIAL SALES CHARGES. As discussed above, investors or dealers seeking to qualify orders for a reduced initial sales charge must identify such orders and, if necessary, support their qualification for the reduced charge. AIM Distributors reserves the right to determine whether any purchaser is entitled to the reduced sales charge based on the definition of a Qualified Purchaser listed above. No person or entity may distribute shares of the AIM Funds without payment of the applicable sales charge other than to Qualified Purchasers. Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund, and Class B and Class C shares of AIM Floating Rate Fund and Investor Class shares of any fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges. PURCHASES OF CLASS A SHARES AT NET ASSET VALUE. AIM Distributors permits certain categories of persons to purchase Class A shares of AIM Funds without paying an initial sales charge. These are typically categories of persons whose transactions involve little expense, such as persons who have a relationship with the funds or with AIM and certain programs for purchase. It is the purchaser's responsibility to notify AIM Distributors or its designee of any qualifying relationship at the time of purchase. AIM Distributors believes that it is appropriate and in the Funds' best interests that such persons, and certain other persons whose purchases result in relatively low expenses of distribution, be permitted to purchase shares through AIM Distributors without payment of a sales charge. Accordingly, the following purchasers will not pay initial sales charges on purchases of Class A shares because there is a reduced sales effort involved in sales to these purchasers: - AIM Management and its affiliates, or their clients; - Any current or retired officer, director or employee (and members of their Immediate Family) of AIM Management, its affiliates or The AIM Family of Funds, registered trademark and any foundation, trust or employee benefit plan established exclusively for the benefit of, or by, such persons; - Any current or retired officer, director, or employee (and members of their Immediate Family), of DST Systems, Inc. or Personix, a division of Fiserv Solutions, Inc.; - Sales representatives and employees (and members of their Immediate Family) of selling group members of financial institutions that have arrangements with such selling group members; 53 - Purchases through approved fee-based programs; - Employer-sponsored retirement plans that are Qualified Purchasers, as defined above, provided that: a. a plan's assets are at least $1 million; b. there are at least 100 employees eligible to participate in the plan; c. all plan transactions are executed through a single omnibus account per AIM Fund and the financial institution or service organization has entered into the appropriate agreement with the distributor; further provided that retirement plans maintained pursuant to Section 403(b) of the Code are not eligible to purchase shares at NAV based on the aggregate investment made by the plan or the number of eligible employees unless the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code; - Shareholders of record of Advisor Class shares of AIM International Growth Fund or AIM Worldwide Growth Fund on February 12, 1999 who have continuously owned shares of the AIM Funds; - Shareholders of record or discretionary advised clients of any investment advisor holding shares of AIM Weingarten Fund or AIM Constellation Fund on September 8, 1986, or of AIM Charter Fund on November 17, 1986, who have continuously owned shares and who purchase additional shares of the same Fund; - Unitholders of G/SET series unit investment trusts investing proceeds from such trusts in shares of AIM Weingarten Fund or AIM Constellation Fund; provided, however, prior to the termination date of the trusts, a unitholder may invest proceeds from the redemption or repurchase of his units only when the investment in shares of AIM Weingarten Fund and AIM Constellation Fund is effected within 30 days of the redemption or repurchase; - A shareholder of a fund that merges or consolidates with an AIM Fund or that sells its assets to an AIM Fund in exchange for shares of an AIM Fund; - Shareholders of the GT Global funds as of April 30, 1987 who since that date continually have owned shares of one or more of these funds; - Certain former AMA Investment Advisers' shareholders who became shareholders of the AIM Global Health Care Fund in October 1989, and who have continuously held shares in the GT Global funds since that time; - Shareholders of record of Advisor Class shares of an AIM Fund on February 11, 2000 who have continuously owned shares of that AIM Fund, and who purchase additional shares of that AIM Fund; - Shareholders of Investor Class shares of an AIM Fund; - Qualified Tuition Programs created and maintained in accordance with Section 529 of the Code; - Insurance company separate accounts; - Additional purchases of Class A shares by shareholders of record of Class K shares on October 21, 2005 whose Class K shares were converted to Class A shares; 54 - Retirement plan established exclusively for the benefit of an individual (specifically including, but not limited to, a Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Solo 401(k), Keogh plan, or a tax-sheltered 403(b)(7) custodial account) if: a. such plan is funded by a rollover of assets from an Employer-Sponsored Retirement Plan; b. the account being funded by such rollover is to be maintained by the same trustee, custodian or administrator that maintained the plan from which the rollover distribution funding such rollover originated, or an affiliate thereof; and c. the dealer of record with respect to the account being funded by such rollover is the same as the dealer of record with respect to the plan from which the rollover distribution funding such rollover originated, or an affiliate thereof. - Transfers to IRAs that are attributable to AIM Fund investments held in 403(b)(7)s, SIMPLEs, SEPs, SARSEPs, Traditional or Roth IRAs; and - Rollovers from AIM-held 403(b)(7)s, 401(K)s, SEPs, SIMPLEs, SARSEPs, Money Purchase Plans, and Profit Sharing Plans if the assets are transferred to an AIM IRA. In addition, an investor may acquire shares of any of the AIM Funds at net asset value in connection with: - the reinvestment of dividends and distributions from a Fund; - exchanges of shares of certain Funds as more fully described in the Prospectus; - the purchase of shares in connection with the repayment of a retirement plan loan administered by AIS; or - a merger, consolidation or acquisition of assets of a Fund; or - the purchase of Class A Shares with proceeds from the redemption of Class B or Class C shares where the redemption and purchase are effectuated on the same business day. PAYMENTS TO DEALERS. AIM Distributors may elect to re-allow the entire initial sales charge to dealers for all sales with respect to which orders are placed with AIM Distributors during a particular period. Dealers to whom substantially the entire sales charge is re-allowed may be deemed to be "underwriters" as that term is defined under the 1933 Act. The financial advisor through which you purchase your shares may receive all or a portion of the sales charges and Rule 12b-1 distribution fees discussed above. In addition to those payments, AIM Distributors or one or more of its corporate affiliates (collectively, the "ADI Affiliates") may make additional cash payments to financial advisors in connection with the promotion and sale of shares of AIM Funds. ADI Affiliates makes these payments from its own resources, from AIM Distributors' retention of underwriting concessions and from payments to AIM Distributors under Rule 12b-1 plans. These additional cash payments are described below. The categories described below are not mutually exclusive. The same financial advisor may receive payments under more than one or all categories. Most financial advisors that sell shares of AIM Funds receive one or more types of these cash payments. Financial advisors negotiate the cash payments to be paid on an individual basis. Where services are provided, the costs of providing the services and the overall package of services provided may vary from one financial advisor to another. ADI Affiliates do not make an independent assessment of the cost of providing such services. 55 In this context, "financial advisors" include any broker, dealer, bank (including bank trust departments), transfer agent, registered investment advisor, financial planner, retirement plan administrator and any other financial intermediary having a selling, administration or similar agreement with ADI Affiliates. A list of certain financial advisors that received one or more types of payments below during the 2005 calendar year is attached hereto as Appendix L. This list is not necessarily current and will change over time. Certain arrangements are still being negotiated, and there is a possibility that payments will be made retroactively to financial intermediaries not listed below. Accordingly, please contact your financial advisor to determine whether they currently may be receiving such payments and to obtain further information regarding any such payments. REVENUE SHARING PAYMENTS. ADI Affiliates make revenue sharing payments as incentives to certain financial advisors to promote and sell shares of AIM Funds. The benefits ADI Affiliates receive when they make these payments include, among other things, placing AIM Funds on the financial advisor's funds sales system, placing AIM Funds on the financial advisor's preferred or recommended fund list, and access (in some cases on a preferential basis over other competitors) to individual members of the financial advisor's sales force or to the financial advisor's management. Revenue sharing payments are sometimes referred to as "shelf space" payments because the payments compensate the financial advisor for including AIM Funds in its fund sales system (on its "sales shelf"). ADI Affiliates compensate financial advisors differently depending typically on the level and/or type of considerations provided by the financial advisor. In addition, payments typically apply only to retail sales, and may not apply to other types of sales or assets (such as sales to retirement plans, qualified tuition programs, or fee based advisor programs - some of which may generate certain other payments described below.) The revenue sharing payments ADI Affiliates make may be calculated on sales of shares of AIM Funds ("Sales-Based Payments"), in which case the total amount of such payments shall not exceed 0.25% of the public offering price of all shares sold by the financial advisor during the particular period. Such payments also may be calculated on the average daily net assets of the applicable AIM Funds attributable to that particular financial advisor ("Asset-Based Payments"), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make new sales of shares of AIM Funds and Asset-Based Payments primarily create incentives to retain previously sold shares of AIM Funds in investor accounts. ADI Affiliates may pay a financial advisor either or both Sales-Based Payments and Asset-Based Payments. ADMINISTRATIVE AND PROCESSING SUPPORT PAYMENTS. ADI Affiliates also may make payments to certain financial advisors that sell AIM Fund shares for certain administrative services, including record keeping and sub-accounting shareholder accounts. Payments for these services typically do not exceed 0.25% of average annual assets or $19 per annum per shareholder account. ADI Affiliates also may make payments to certain financial advisors that sell AIM Fund shares in connection with client account maintenance support, statement preparation and transaction processing. The types of payments that ADI Affiliates may make under this category include, among others, payment of ticket charges per purchase or exchange order placed by a financial advisor, payment of networking fees of up to $12 per shareholder account maintained on certain mutual fund trading systems, or one-time payments for ancillary services such as setting up funds on a financial advisor's mutual fund trading systems. All fees payable by ADI Affiliates pursuant to a sub-transfer agency, omnibus account service or sub-accounting agreement are charged back to the AIM Funds, subject to certain limitations approved by the Board of the Trust. OTHER CASH PAYMENTS. From time to time, ADI Affiliates, at their expense, may provide additional compensation to financial advisors which sell or arrange for the sale of shares of the Fund. Such compensation provided by ADI Affiliates may include financial assistance to financial advisors that enable ADI Affiliates to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client entertainment, client and investor events, and other financial advisor-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with client prospecting, retention and due diligence trips. Other compensation may be offered to the extent not prohibited by state laws or any self-regulatory agency, such as the NASD, Inc. ("NASD"). ADI Affiliates make payments 56 for entertainment events they deem appropriate, subject to ADI Affiliates guidelines and applicable law. These payments may vary depending upon the nature of the event or the relationship. ADI Affiliates are motivated to make the payments described above since they promote the sale of AIM Fund shares and the retention of those investments by clients of financial advisors. To the extent financial advisors sell more shares of AIM Funds or retain shares of AIM Funds in their clients' accounts, ADI Affiliates benefit from the incremental management and other fees paid to ADI Affiliates by the AIM Funds with respect to those assets. In certain cases these payments could be significant to the financial advisor. Your financial advisor may charge you additional fees or commissions other than those disclosed in the prospectus. You can ask your financial advisor about any payments it receives from ADI Affiliates or the AIM Funds, as well as about fees and/or commissions it charges. Purchases of Class B Shares Class B shares are sold at net asset value, and are not subject to an initial sales charge. Instead, investors may pay a CDSC if they redeem their shares within six years after purchase. See the Prospectus for additional information regarding contingent deferred sales charges. AIM Distributors may pay sales commissions to dealers and institutions who sell Class B shares of the AIM Funds at the time of such sales. Payments will equal 4.00% of the purchase price and will consist of a sales commission equal to 3.75% plus an advance of the first year service fee of 0.25%. Purchases of Class C Shares Class C shares are sold at net asset value, and are not subject to an initial sales charge. Instead, investors may pay a CDSC if they redeem their shares within the first year after purchase (no CDSC applies to Class C shares of AIM Short Term Bond Fund unless you exchange shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund). See the Prospectus for additional information regarding this CDSC. AIM Distributors may pay sales commissions to dealers and institutions who sell Class C shares of the AIM Funds (except for Class C shares of AIM Short Term Bond Fund) at the time of such sales. Payments will equal 1.00% of the purchase price and will consist of a sales commission of 0.75% plus an advance of the first year service fee of 0.25%. These commissions are not paid on sales to investors exempt from the CDSC, including shareholders of record of AIM Advisor Funds, Inc. on April 30, 1995, who purchase additional shares in any of the Funds on or after May 1, 1995, and in circumstances where AIM Distributors grants an exemption on particular transactions. AIM Distributors may pay dealers and institutions who sell Class C shares of AIM Short Term Bond Fund an annual fee of 0.50% of average daily net assets. These payments will consist of an asset-based fee of 0.25% and a service fee of 0.25% and will commence immediately. Class K Shares Class K shares converted to Class A shares at the close of business on October 21, 2005. If AIM Distributors paid a concession at the time of sale to the dealer of record, the Class K shares were subject to a 0.70% CDSC at the time of redemption if all retirement plan assets were redeemed within one year from the date of the retirement plan's initial purchase. This CDSC will continue to apply if all retirement plan assets are redeemed within 12 months from the date of the retirement plan's initial purchase. Payments with Regard to Class K Shares For Class A shares acquired by a former Class K shareholder (i) as a result of a fund merger; or (ii) as a result of the conversion of Class K shares into Class A shares on October 21, 2005, AIM Distributors will pay financial intermediaries 0.45% on such Class A shares as follows: (i) 0.25% from the Class A shares' Rule 12b-1 plan fees; and (ii) 0.20% from AIM Distributors' own resources provided that, on an annualized basis for 2005 as of October 21, 2005, the 0.20% exceeds $2,000 per year. 57 Purchases and Redemption of Class P Shares Class P shares of AIM Summit Fund are only sold to members of the general public through AIM Summit Investors Plans I and AIM Summit Investors Plans II (the "Summit Plans"). The Summit Plans are periodic payment plans, registered as a unit investment trust under the 1940 Act. The terms of offering shares of the AIM Summit Fund and the procedures for requesting redemptions through the Summit Plans are set forth in the Summit Plans respective prospectuses. Shares of AIM Summit Fund are sold to the Summit Plans at net asset value. The Summit Plans are currently closed to new investors. The AIM Summit Fund's prospectus for Class P shares provides for a limited group of individuals (certain individuals employed by or otherwise affiliated with the AIM Distributors) to purchase Class P shares of AIM Summit Fund directly at net asset value. Investors in the Summit Plans also acquire direct ownership of Class P shares of the AIM Summit Fund upon the termination or completion of their periodic payment plans. Shareholder inquiries concerning the status of an account in Class P shares of AIM Summit Fund should be directed to AIS by calling (800) 959-4246. For information regarding inquiries concerning accounts in the Summit Plans, see the applicable prospectus. Purchases of Class R Shares Class R shares are sold at net asset value, and are not subject to an initial sales charge. If AIM Distributors pays a concession to the dealer of record, however, the Class R shares are subject to a 0.75% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the retirement plan's initial purchase. For purchases of Class R shares of Category I or II Funds or AIM Short Term Bond Fund, AIM Distributors may make the following payments to dealers of record provided that the applicable dealer of record is able to establish that the purchase of Class R shares is a new investment or a rollover from a retirement plan in which an AIM Fund was offered as an investment option: PERCENT OF CUMULATIVE PURCHASES 0.75% of the first $5 million plus 0.50% of amounts in excess of $5 million With regard to any individual purchase of Class R shares, AIM Distributors may make payment to the dealer of record based on the cumulative total of purchases made by the same plan over the life of the plan's account(s). Purchases of Investor Class Shares Investor Class shares are sold at net asset value, and are not subject to an initial sales charge or to a CDSC. AIM Distributors may pay dealers and institutions an annual fee of 0.25% of average daily net assets and such payments will commence immediately. Purchases of Institutional Class Shares Institutional Class shares are sold at net asset value, and are not subject to an initial sales charge or to a CDSC. Exchanges TERMS AND CONDITIONS OF EXCHANGES. Normally, shares of an AIM Fund to be acquired by exchange are purchased at their net asset value or applicable offering price, as the case may be, determined on the date that such request is received, but under unusual market conditions such 58 purchases may be delayed for up to five business days if it is determined that a fund would be materially disadvantaged by an immediate transfer of the proceeds of the exchange. If a shareholder is exchanging into a fund paying daily dividends, and the release of the exchange proceeds is delayed for the foregoing five-day period, such shareholder will not begin to accrue dividends until the sixth business day after the exchange. EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with certain dealers and investment advisory firms to accept telephone instructions to exchange shares between any of the AIM Funds. AIM Distributors reserves the right to impose conditions on dealers or investment advisors who make telephone exchanges of shares of the funds, including the condition that any such dealer or investment advisor enter into an agreement (which contains additional conditions with respect to exchanges of shares) with AIM Distributors. To exchange shares by telephone, a shareholder, dealer or investment advisor who has satisfied the foregoing conditions must call AIS at (800) 959-4246. If a shareholder is unable to reach AIS by telephone, he may also request exchanges by fax, telegraph or use overnight courier services to expedite exchanges by mail, which will be effective on the business day received by AIS as long as such request is received in good order prior to the close of the customary trading session of the New York Stock Exchange ("NYSE"). AIS and AIM Distributors may in certain cases be liable for losses due to unauthorized or fraudulent transactions if they do not follow reasonable procedures for verification of telephone transactions. Such reasonable procedures may include recordings of telephone transactions (maintained for six months), requests for confirmation of the shareholder's Social Security Number and current address, and mailings of confirmations promptly after the transaction. Redemptions GENERAL. Shares of the AIM Funds may be redeemed directly through AIM Distributors or through any dealer who has entered into an agreement with AIM Distributors. In addition to the Funds' obligation to redeem shares, AIM Distributors may also repurchase shares as an accommodation to shareholders. To effect a repurchase, those dealers who have executed Selected Dealer Agreements with AIM Distributors must phone orders to the order desk of the Funds at (800) 959-4246 and guarantee delivery of all required documents in good order. A repurchase is effected at the net asset value per share of the applicable Fund next determined after the repurchase order is received in good order. Such an arrangement is subject to timely receipt by AIS, the Funds' transfer agent, of all required documents in good order. If such documents are not received within a reasonable time after the order is placed, the order is subject to cancellation. While there is no charge imposed by a Fund or by AIM Distributors (other than any applicable contingent deferred sales charge and any applicable redemption fee) when shares are redeemed or repurchased, dealers may charge a fair service fee for handling the transaction. SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the date of payment postponed when (a) trading on the NYSE is restricted, as determined by applicable rules and regulations of the SEC, (b) the NYSE is closed for other than customary weekend and holiday closings, (c) the SEC has by order permitted such suspension, or (d) an emergency as determined by the SEC exists making disposition of portfolio securities or the valuation of the net assets of a Fund not reasonably practicable. REDEMPTIONS BY TELEPHONE. By signing an account application form, an investor appoints AIS as his true and lawful attorney-in-fact to surrender for redemption any and all unissued shares held by AIS in the designated account(s), present or future, with full power of substitution in the premises. AIS and AIM Distributors are thereby authorized and directed to accept and act upon any telephone redemptions of shares held in any of the account(s) listed, from any person who requests the redemption. An investor acknowledges by signing the form that he understands and agrees that AIS and AIM Distributors may not be liable for any loss, expense or cost arising out of any telephone redemption requests effected in accordance with the authorization set forth in these instructions if they reasonably believe such request to be genuine, but may in certain cases be liable for losses due to unauthorized or fraudulent transactions. Procedures for verification of telephone transactions may include recordings of telephone transactions (maintained for six months), requests for confirmation of the shareholder's Social 59 Security Number and current address, and mailings of confirmations promptly after the transactions. AIS reserves the right to cease to act as attorney-in-fact subject to this appointment, and AIM Distributors reserves the right to modify or terminate the telephone redemption privilege at any time without notice. An investor may elect not to have this privilege by marking the appropriate box on the application. Then any redemptions must be effected in writing by the investor. SYSTEMATIC REDEMPTION PLAN. A Systematic Redemption Plan permits a shareholder of an AIM Fund to withdraw on a regular basis at least $50 per withdrawal. Under a Systematic Redemption Plan, all shares are to be held by AIS. To provide funds for payments made under the Systematic Redemption Plan, AIS redeems sufficient full and fractional shares at their net asset value in effect at the time of each such redemption. Payments under a Systematic Redemption Plan constitute taxable events. Since such payments are funded by the redemption of shares, they may result in a return of capital and in capital gains or losses, rather than in ordinary income. Because sales charges are imposed on additional purchases of Class A shares, it is disadvantageous to effect such purchases while a Systematic Redemption Plan is in effect. Each AIM Fund bears its share of the cost of operating the Systematic Redemption Plan. Contingent Deferred Sales Charges Imposed upon Redemption of Shares A CDSC may be imposed upon the redemption of Large Purchases of Class A shares of Category I and II Funds and AIM Short Term Bond Fund or upon the redemption of Class B shares or Class C shares (no CDSC applies to Class C shares of AIM Short Term Bond Fund unless you exchange shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund) and, in certain circumstances, upon the redemption of Class R shares. See the Prospectus for additional information regarding CDSCs. CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR LARGE PURCHASES OF CLASS A SHARES. An investor who has made a Large Purchase of Class A shares of a Category I, II, or III Fund or AIM Short Term Bond Fund will not be subject to a CDSC upon the redemption of those shares in the following situations: - Redemptions of shares of Category I or II Funds or AIM Short Term Bond Fund held more than 18 months; - Redemptions of shares of Category III Funds purchased on or after November 15, 2001 and through October 30, 2002 and held for more than 12 months; - Redemptions of shares held by retirement plans in cases where (i) the plan has remained invested in Class A shares of an AIM Fund for at least 12 months, or (ii) the redemption is not a complete redemption of shares held by the plan; - Redemptions from private foundations or endowment funds; - Redemptions of shares by the investor where the investor's dealer waives the amounts otherwise payable to it by the distributor and notifies the distributor prior to the time of investment; - Redemptions of shares of Category I, II or III Funds, or AIM Cash Reserve Shares of AIM Money Market Fund or AIM Short Term Bond Fund acquired by exchange from Class A shares of a Category I or II Fund or AIM Short Term Bond Fund, unless the shares acquired by exchange (on or after November 15, 2001 and through October 30, 2002 with respect to Category III Funds) are redeemed within 18 months of the original purchase of the exchange of Category I or II Fund or AIM Short Term Bond Fund shares; 60 - Redemptions of shares of Category III Funds, shares of AIM Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money Market Fund acquired by exchange from Class A shares of a Category III Fund purchased prior to November 15, 2001; - Redemptions of shares of Category I or II Funds or AIM Short Term Bond Fund acquired by exchange on and after November 15, 2001 from AIM Cash Reserve Shares of AIM Money Market Fund if the AIM Cash Reserve Shares were acquired by exchange from a Category I or II Fund or AIM Short Term Bond Fund, unless the Category I or II Fund or AIM Short Term Bond Fund shares acquired by exchange are redeemed within 18 months of the original purchase of the exchanged Category I or II Funds or AIM Short Term Bond Fund shares; - Redemptions of Category I or II Funds or AIM Short Term Bond Fund by retirement plan participants resulting from a total redemption of the plan assets that occurs more than one year from the date of the plan's initial purchase; and - Redemptions of shares of Category I or II Funds or AIM Short Term Bond Fund held by an Investor Class shareholder. CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR CLASS B AND C SHARES. Investors who purchased former GT Global funds Class B shares before June 1, 1998 are subject to the following waivers from the CDSC otherwise due upon redemption: - Total or partial redemptions resulting from a distribution following retirement in the case of a tax-qualified employer-sponsored retirement; - Minimum required distributions made in connection with an IRA, Keogh Plan or custodial account under Section 403(b) of the Code or other retirement plan following attainment of age 70-1/2; - Redemptions pursuant to distributions from a tax-qualified employer-sponsored retirement plan, which is invested in the former GT Global funds, which are permitted to be made without penalty pursuant to the Code, other than tax-free rollovers or transfers of assets, and the proceeds of which are reinvested in the former GT Global funds; - Redemptions made in connection with participant-directed exchanges between options in an employer-sponsored benefit plan; - Redemptions made for the purpose of providing cash to fund a loan to a participant in a tax-qualified retirement plan; - Redemptions made in connection with a distribution from any retirement plan or account that is permitted in accordance with the provisions of Section 72(t)(2) of the Code, and the regulations promulgated thereunder; - Redemptions made in connection with a distribution from a qualified profit-sharing or stock bonus plan described in Section 401(k) of the Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon hardship of the covered employee (determined pursuant to Treasury Regulation Section 1.401(k)-1(d)(2)); and - Redemptions made by or for the benefit of certain states, counties or cities, or any instrumentalities, departments or authorities thereof where such entities are prohibited or limited by applicable law from paying a sales charge or commission. 61 CDSCs will not apply to the following redemptions of Class B or Class C shares, as applicable: - Additional purchases of Class C shares of AIM International Core Equity Fund (formerly INVESCO International Core Equity Fund and formerly INVESCO International Blue Chip Value Fund) and AIM Real Estate Fund by shareholders of record on April 30, 1995, of AIM International Value Fund, predecessor to AIM International Core Equity Fund, and AIM Real Estate Fund, except that shareholders whose broker-dealers maintain a single omnibus account with AIS on behalf of those shareholders, perform sub-accounting functions with respect to those shareholders, and are unable to segregate shareholders of record prior to April 30, 1995, from shareholders whose accounts were opened after that date will be subject to a CDSC on all purchases made after March 1, 1996; - Redemptions following the death or post-purchase disability of (1) any registered shareholders on an account or (2) a settlor of a living trust, of shares held in the account at the time of death or initial determination of post-purchase disability; - Certain distributions from individual retirement accounts, Section 403(b) retirement plans, Section 457 deferred compensation plans and Section 401 qualified plans, where redemptions result from (i) required minimum distributions to plan participants or beneficiaries who are age 70 1/2 or older, and only with respect to that portion of such distributions that does not exceed 12% annually of the participant's or beneficiary's account value in a particular AIM Fund; (ii) in kind transfers of assets where the participant or beneficiary notifies the distributor of the transfer no later than the time the transfer occurs; (iii) tax-free rollovers or transfers of assets to another plan of the type described above invested in Class B or Class C shares of one or more of the AIM Funds; (iv) tax-free returns of excess contributions or returns of excess deferral amounts; and (v) distributions on the death or disability (as defined in the Code) of the participant or beneficiary; - Amounts from a Systematic Redemption Plan of up to an annual amount of 12% of the account value on a per fund basis, at the time the withdrawal plan is established, provided the investor reinvests his dividends; - Liquidation by the Fund when the account value falls below the minimum required account size of $500; and - Investment account(s) of AIM and its affiliates. CDSCs will not apply to the following redemptions of Class C shares: - A total or partial redemption of shares where the investor's dealer of record notified the distributor prior to the time of investment that the dealer would waive the upfront payment otherwise payable to him; - A total or partial redemption which is necessary to fund a distribution requested by a participant in a retirement plan maintained pursuant to Section 401, 403, or 457 of the Code; - Redemptions of Class C shares of a Fund other than AIM Short Term Bond Fund if you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund; and - Redemptions of Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another Fund and the original purchase was subject to a CDSC. 62 Contingent Deferred Sales Charge Exceptions for Class R Shares and Former Class K Shareholders that Acquired Class A Shares CDSCs will not apply to redemptions of Class A shares acquired as a result of conversion of Class K shares into Class A shares where the retirement plan's dealer of record notified the distributor prior to the time of purchase that the dealer waived the upfront payment otherwise payable to him. CDSCs will not apply to the following redemptions of Class R shares: - A total or partial redemption of Class R shares where the retirement plan's dealer of record notifies the distributor prior to the time of investment that the dealer waives the upfront payment otherwise payable to him; and - Redemptions of shares held by retirement plans in cases where (i) the plan has remained invested in Class R shares of a Fund for at least 12 months, or (ii) the redemption is not a complete redemption of all Class R shares held by the plan. General Information Regarding Purchases, Exchanges and Redemptions GOOD ORDER. Purchase, exchange and redemption orders must be received in good order in accordance with AIS policy and procedures and U.S. regulations. AIS reserves the right to refuse transactions. Transactions not in good order will not be processed and once brought into good order, will receive current price. To be in good order, an investor must supply AIS with all required information and documentation, including signature guarantees when required. In addition, if a purchase of shares is made by check, the check must be received in good order. This means that the check must be properly completed and signed, and legible to AIS in its sole discretion. If a check used to purchase shares does not clear, or if any investment order must be canceled due to nonpayment, the investor will be responsible for any resulting loss. AUTHORIZED AGENTS. AIS and AIM Distributors may authorize agents to accept purchase and redemption orders that are in good form on behalf of the AIM Funds. In certain cases, these authorized agents are authorized to designate other intermediaries to accept purchase and redemption orders on a Fund's behalf. A Fund will be deemed to have received the purchase or redemption order when the Fund's authorized agent or its designee accepts the order. The order will be priced at the net asset value next determined after the order is accepted by a Fund's authorized agent or its designee. TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer or other financial intermediary to ensure that all orders are transmitted on a timely basis to AIS. Any loss resulting from the failure of the dealer or financial intermediary to submit an order within the prescribed time frame will be borne by that dealer or financial intermediary. SIGNATURE GUARANTEES. In addition to those circumstances listed in the "Shareholder Information" section of each Fund's prospectus, signature guarantees are required in the following situations: (1) requests to transfer the registration of shares to another owner; (2) telephone exchange and telephone redemption authorization forms; (3) changes in previously designated wiring or electronic funds transfer instructions; (4) written redemptions or exchanges of shares held in certificate form previously reported to AIM as lost, whether or not the redemption amount is under $250,000 or the proceeds are to be sent to the address of record, and (5) requests to redeem accounts where the proceeds are over $250,000 or the proceeds are to be sent to an address or a bank other than the address or bank of record. AIM Funds may waive or modify any signature guarantee requirements at any time. Acceptable guarantors include banks, broker-dealers, credit unions, national securities exchanges, savings associations and any other organization, provided that such institution or organization qualifies as an "eligible guarantor institution" as that term is defined in rules adopted by the 63 SEC, and further provided that such guarantor institution is listed in one of the reference guides contained in AIS' current Signature Guarantee Standards and Procedures, such as certain domestic banks, credit unions, securities dealers, or securities exchanges. Notary Public signatures are not an acceptable replacement for a signature guarantee. AIS will also accept signatures with either: (1) a signature guaranteed with a medallion stamp of the STAMP Program, or (2) a signature guaranteed with a medallion stamp of the NYSE Medallion Signature Program, provided that in either event, the amount of the total transaction involved does not exceed the surety coverage amount indicated on the medallion. For information regarding whether a particular institution or organization qualifies as an "eligible guarantor institution," an investor should contact the Client Services Department of AIS. TRANSACTIONS BY TELEPHONE. By signing an account application form, an investor appoints AIS as his true and lawful attorney-in-fact to surrender for redemption any and all unissued shares held by AIS in the designated account(s), or in any other account with any of the AIM Funds, present or future, which has the identical registration as the designated account(s), with full power of substitution in the premises. AIS and AIM Distributors are thereby authorized and directed to accept and act upon any telephone redemptions of shares held in any of the account(s) listed, from any person who requests the redemption proceeds to be applied to purchase shares in any one or more of the AIM Funds, provided that such fund is available for sale and provided that the registration and mailing address of the shares to be purchased are identical to the registration of the shares being redeemed. An investor acknowledges by signing the form that he understands and agrees that AIS and AIM Distributors may not be liable for any loss, expense or cost arising out of any telephone exchange requests effected in accordance with the authorization set forth in these instructions if they reasonably believe such request to be genuine, but may in certain cases be liable for losses due to unauthorized or fraudulent transactions. Procedures for verification of telephone transactions may include recordings of telephone transactions (maintained for six months), requests for confirmation of the shareholder's Social Security Number and current address, and mailings of confirmations promptly after the transactions. AIS reserves the right to modify or terminate the telephone exchange privilege at any time without notice. An investor may elect not to have this privilege by marking the appropriate box on the application. Then any exchanges must be effected in writing by the investor. INTERNET TRANSACTIONS. An investor may effect transactions in his account through the internet by establishing a Personal Identification Number (PIN). By establishing a PIN, the investor acknowledges and agrees that neither AIS nor AIM Distributors will be liable for any loss, expense or cost arising out of any internet transaction effected by them in accordance with any instructions submitted by a user who transmits the PIN as authentication of his or her identity. Procedures for verification of internet transactions include requests for confirmation of the shareholder's personal identification number and mailing of confirmations promptly after the transactions. The investor also acknowledges that the ability to effect internet transactions may be terminated at any time by the AIM Funds. ABANDONED PROPERTY. It is the responsibility of the investor to ensure that he maintains a correct address for his account(s). An incorrect address may cause an investor's account statements and other mailings to be returned to AIS. Upon receiving returned mail, AIS will attempt to locate the investor or rightful owner of the account. If unsuccessful, AIS will retain a shareholder locator service with a national information database to conduct periodic searches for the investor. If the search firm is unable to locate the investor, the search firm will determine whether the investor's account has legally been abandoned. AIS is legally obligated to escheat (or transfer) abandoned property to the appropriate state's unclaimed property administrator in accordance with statutory requirements. The investor's last known address of record determines which state has jurisdiction. OFFERING PRICE The following formula may be used to determine the public offering price per Class A share of an investor's investment: Net Asset Value / (1 - Sales Charge as % of Offering Price ) = Offering Price. 64 For example, at the close of business on October 31, 2005, AIM Global Health Care Fund - Class A shares had a net asset value per share of $29.77. The offering price, assuming an initial sales charge of 5.50%, therefore was $31.50. Institutional Class shares of the Funds are offered at net asset value. Calculation of Net Asset Value Each Fund determines its net asset value per share once daily as of the close of the customary trading session of the NYSE (generally 4:00 p.m. Eastern time) on each business day of the Fund. In the event the NYSE closes early (i.e., before 4:00 p.m. Eastern time) on a particular day, each Fund determines its net asset value per share as of the close of the NYSE on such day. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the NYSE. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. The Funds determine net asset value per share by dividing the value of a Fund's securities, cash and other assets (including interest accrued but not collected) attributable to a particular class, less all its liabilities (including accrued expenses and dividends payable) attributable to that class, by the total number of shares outstanding of that class. Determination of a Fund's net asset value per share is made in accordance with generally accepted accounting principles. The net asset value for shareholder transactions may be different than the net asset value reported in the Fund's financial statement due to adjustments required by generally accepted accounting principles made to the net assets of the Fund at period end. Each equity security (excluding convertible bonds) held by a Fund is valued at its last sales price on the exchange where the security is principally traded or, lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each equity security traded in the over-the-counter market (but not including securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services vendors or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") or absent a NOCP, at the closing bid price on that day. Debt securities (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing vendor. Evaluated quotes provided by the pricing vendor may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and ask prices. Securities for which market quotations are not readily available, including situations where market quotations are unreliable, are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in accordance with procedures approved by the Board. Short-term investments are valued at amortized cost when the security has 60 days or less to maturity. Generally, trading in corporate bonds, U.S. Government securities and money market instruments is substantially completed each day at various times prior to the close of the customary trading session of the NYSE. The values of such securities used in computing the net asset value of the a Fund's shares are determined at such times. Occasionally, events affecting the values of such securities may occur between the times at which such values are determined and the close of the customary trading session of the NYSE. If AIM believes a development/event has actually caused a closing price to no longer reflect current market value, the closing price may be adjusted to reflect the fair value of the affected security as of the close of the NYSE as determined in good faith using procedures approved by the Board. 65 Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Trading in certain foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of each Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE. If an issuer specific event has occurred that AIM determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. Issuer specific events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. AIM also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where AIM believes, at the approved degree of certainty, that the price is not reflective of current market value, AIM will use the indication of fair value from the pricing vendor to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time. Multiple factors may be considered by the pricing vendor in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures, and exchange-traded funds. Fund securities primarily traded in foreign markets may be traded in such markets on days that are not business days of the Fund. Because the net asset value per share of each Fund is determined only on business days of the Fund, the value of the portfolio securities of a Fund that invests in foreign securities may change on days when an investor cannot exchange or redeem shares of the Fund. REDEMPTIONS IN KIND Although the Funds generally intend to pay redemption proceeds solely in cash, the Funds reserve the right to determine, in their sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind). For instance, a Fund may make a redemption in kind if a cash redemption would disrupt its operations or performance. Securities that will be delivered as payment in redemptions in kind will be valued using the same methodologies that the Fund typically utilizes in valuing such securities. Shareholders receiving such securities are likely to incur transaction and brokerage costs on their subsequent sales of such securities, and the securities may increase or decrease in value until the shareholder sells them. The Trust, on behalf of the Funds, has made an election under Rule 18f-1 under the 1940 Act (a "Rule 18f-1 Election"), and therefore, the Trust, on behalf of a Fund is obligated to redeem for cash all shares presented to such Fund for redemption by any one shareholder in an amount up to the lesser of $250,000 or 1% of that Fund's net assets in any 90-day period. The Rule 18f-1 Election is irrevocable while Rule 18f-1 under the 1940 Act is in effect unless the SEC by order permits withdrawal of such Rule 18f-1 Election. BACKUP WITHHOLDING Accounts submitted without a correct, certified taxpayer identification number or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for non-resident aliens) or Form W-9 (certifying exempt status) accompanying the registration information will generally be subject to backup withholding. Each AIM Fund, and other payers, generally must withhold 28% of redemption payments and reportable dividends (whether paid or accrued) in the case of any shareholder who fails to provide the Fund with a taxpayer identification number ("TIN") and a certification that he is not subject to backup withholding. An investor is subject to backup withholding if: 1. the investor fails to furnish a correct TIN to the Fund; 2. the IRS notifies the Fund that the investor furnished an incorrect TIN; 66 3. the investor or the Fund is notified by the IRS that the investor is subject to backup withholding because the investor failed to report all of the interest and dividends on such investor's tax return (for reportable interest and dividends only); 4. the investor fails to certify to the Fund that the investor is not subject to backup withholding under (3) above (for reportable interest and dividend accounts opened after 1983 only); or 5. the investor does not certify his TIN. This applies only to non-exempt mutual fund accounts opened after 1983. Interest and dividend payments are subject to backup withholding in all five situations discussed above. Redemption proceeds and long-term gain distributions are subject to backup withholding only if (1), (2) or (5) above applies. Certain payees and payments are exempt from backup withholding and information reporting. AIM or AIS will not provide Form 1099 to those payees. Investors should contact the IRS if they have any questions concerning withholding. IRS PENALTIES - Investors who do not supply the AIM Funds with a correct TIN will be subject to a $50 penalty imposed by the IRS unless such failure is due to reasonable cause and not willful neglect. If an investor falsifies information on this form or makes any other false statement resulting in no backup withholding on an account which should be subject to backup withholding, such investor may be subject to a $500 penalty imposed by the IRS and to certain criminal penalties including fines and/or imprisonment. NONRESIDENT ALIENS - Nonresident alien individuals and foreign entities are not subject to the backup withholding previously discussed, but must certify their foreign status by attaching IRS Form W-8 to their application. Form W-8 generally remains in effect for a period starting on the date the Form is signed and ending on the last day of the third succeeding calendar year. Such shareholders may, however, be subject to federal income tax withholding at a 30% rate on ordinary income dividends and other distributions. Under applicable treaty law, residents of treaty countries may qualify for a reduced rate of withholding or a withholding exemption. DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS DIVIDENDS AND DISTRIBUTIONS It is the present policy of each Fund to declare and pay annually net investment income dividends and capital gain distributions. It is each Fund's intention to distribute substantially all of its net investment income and realized net capital gains. In determining the amount of capital gains, if any, available for distribution, capital gains will generally be offset against available net capital loss, if any, carried forward from previous fiscal periods. All dividends and distributions will be automatically reinvested in additional shares of the same class of each Fund unless the shareholder has requested in writing to receive such dividends and distributions in cash or that they be invested in shares of another AIM Fund, subject to the terms and conditions set forth in the Prospectus under the caption "Special Plans - Automatic Dividend Investment." Such dividends and distributions will be reinvested at the net asset value per share determined on the ex-dividend date. If a shareholder's account does not have any shares in it on a dividend or capital gain distribution payment date, the dividend or distribution will be paid in cash whether or not the shareholder has elected to have such dividends or distributions reinvested. Dividends on Class B, Class C and Class R shares are expected to be lower than those for Class A shares because of higher distribution fees paid by Class B, Class C and Class R shares. Other class-specific expenses may also affect dividends on shares of those classes. Expenses attributable to a particular class ("Class Expenses") include distribution plan expenses, which must be allocated to the 67 class for which they are incurred. Other expenses may be allocated as Class Expenses, consistent with applicable legal principles under the 1940 Act and the Code. TAX MATTERS The following is only a summary of certain additional tax considerations generally affecting the Funds and their shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of each Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning. QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each Fund has elected to be taxed under Subchapter M of the Code as a regulated investment company and intends to maintain its qualification as such in each of its taxable years. As a regulated investment company, each Fund is not subject to federal income tax on the portion of its net investment income (i.e., taxable interest, dividends and other taxable ordinary income, net of expenses) and capital gain net income (i.e., the excess of capital gains over capital losses) that it distributes to shareholders, provided that it distributes an amount equal to (i) at least 90% of its investment company taxable income (i.e., net investment income, net foreign currency ordinary gain or loss and the excess of net short-term capital gain over net long-term capital loss) and (ii) at least 90% of the excess of its tax-exempt interest income under Code Section 103(a) over its deductions disallowed under Code Sections 265 and 171(a)(2) for the taxable year (the "Distribution Requirement"), and satisfies certain other requirements of the Code that are described below. Distributions by a Fund made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year, will be considered distributions of income and gain of the taxable year and can therefore satisfy the Distribution Requirement. Treasury regulations permit a regulated investment company, in determining its investment company taxable income and net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss) for any taxable year, to elect (unless it has made a taxable year election for excise tax purposes as discussed below) to treat all or part of any net capital loss, any net long-term capital loss or any net foreign currency loss incurred after October 31 as if it had been incurred in the succeeding year. Each Fund may use "equalization accounting" in determining the portion of its net investment income and capital gain net income that has been distributed. A Fund that elects to use equalization accounting will allocate a portion of its realized investment income and capital gain to redemptions of Fund shares and will reduce the amount of such income and gain that it distributes in cash. However, each Fund intends to make cash distributions for each taxable year in an aggregate amount that is sufficient to satisfy the Distribution Requirement without taking into account its use of equalization accounting. The IRS has not published any guidance concerning the methods to be used in allocating investment income and capital gains to redemptions of shares. In the event that the IRS determines that a Fund is using an improper method of allocation and has under-distributed its net investment income and capital gain net income for any taxable year, such Fund may be liable for additional federal income tax. In addition to satisfying the Distribution Requirement, a regulated investment company must derive at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies (to the extent such currency gains are directly related to the regulated investment company's principal business of investing in stock or securities), other income (including, but not limited to, gains from options, futures or forward contracts) derived from its business of investing in such stock, securities or currencies and net income derived from certain publicly traded partnerships (the "Income Requirement"). Under certain circumstances, a Fund may be required to sell portfolio holdings to meet this requirement. In addition to satisfying the requirements described above, each Fund must satisfy an asset diversification test in order to qualify as a regulated investment company (the "Asset Diversification Test"). Under this test, at the close of each quarter of each Fund's taxable year, at least 50% of the value of the Fund's assets must consist of cash and cash items, U.S. Government securities, securities of other regulated investment companies, and securities of other issuers, as to which the Fund has not invested 68 more than 5% of the value of the Fund's total assets in securities of such issuer and as to which the Fund does not hold more than 10% of the outstanding voting securities of such issuer, and no more than 25% of the value of its total assets may be invested in the securities of any one issuer (other than U.S. Government securities and securities of other regulated investment companies), or of two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses or collectively, in securities of certain publicly traded partnerships. For purposes of the Asset Diversification Test, the IRS has ruled that the issuer of a purchased listed call option on stock is the issuer of the stock underlying the option. The IRS has also informally ruled that, in general, the issuers of purchased or written call and put options on securities, of long and short positions on futures contracts on securities and of options on such future contracts are the issuers of the securities underlying such financial instruments where the instruments are traded on an exchange. Where the writer of a listed call option owns the underlying securities, the IRS has ruled that the Asset Diversification Test will be applied solely to such securities and not to the value of the option itself. With respect to options on securities indexes, futures contracts on securities indexes and options on such futures contracts, the IRS has informally ruled that the issuers of such options and futures contracts are the separate entities whose securities are listed on the index, in proportion to the weighing of securities in the computation of the index. It is unclear under present law who should be treated as the issuer of forward foreign currency exchange contracts, of options on foreign currencies, or of foreign currency futures and related options. It has been suggested that the issuer in each case may be the foreign central bank or the foreign government backing the particular currency. Due to this uncertainty and because the Funds may not rely on informal rulings of the IRS, the Funds may find it necessary to seek a ruling from the IRS as to the application of the Asset Diversification Test to certain of the foregoing types of financial instruments or to limit its holdings of some or all such instruments in order to stay within the limits of such test. Under an IRS revenue procedure, a Fund may treat its position as lender under a repurchase agreement as a U.S. Government security for purposes of the Asset Diversification where the repurchase agreement is fully collateralized (under applicable SEC standards) with securities that constitute U.S. Government securities. If for any taxable year a Fund does not qualify as a regulated investment company, all of its taxable income (including its net capital gain) will be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and such distributions will be taxable as ordinary dividends to the extent of such Fund's current and accumulated earnings and profits. Such distributions generally will be eligible for the dividends received deduction (to the extent discussed below) in the case of corporate shareholders and will be included in the qualified dividend income of non-corporate shareholders. See "Fund Distributions" below. DETERMINATION OF TAXABLE INCOME OF A REGULATED INVESTMENT COMPANY. In general, gain or loss recognized by a Fund on the disposition of an asset will be a capital gain or loss. However, gain recognized on the disposition of a debt obligation purchased by a Fund at a market discount (generally, at a price less than its principal amount) will be treated as ordinary income to the extent of the portion of the market discount which accrued during the period of time the Fund held the debt obligation unless the Fund made an election to accrue market discount into income. If a Fund purchases a debt obligation that was originally issued at a discount, the Fund is generally required to include in gross income each year the portion of the original issue discount which accrues during such year. In addition, under the rules of Code Section 988, gain or loss recognized on the disposition of a debt obligation denominated in a foreign currency or an option with respect thereto (but only to the extent attributable to changes in foreign currency exchange rates), and gain or loss recognized on the disposition of a foreign currency forward contract or of foreign currency itself, will generally be treated as ordinary income or loss. In certain cases, a fund may make an election to treat such gain or loss as capital. Certain hedging transactions that may be engaged in by certain of the Funds (such as short sales "against the box") may be subject to special tax treatment as "constructive sales" under Section 1259 of 69 the Code if a Fund holds certain "appreciated financial positions" (defined generally as any interest (including a futures or forward contract, short sale or option) with respect to stock, certain debt instruments, or partnership interests if there would be a gain were such interest sold, assigned, or otherwise terminated at its fair market value). Upon entering into a constructive sales transaction with respect to an appreciated financial position, a Fund will generally be deemed to have constructively sold such appreciated financial position and will recognize gain as if such position were sold, assigned, or otherwise terminated at its fair market value on the date of such constructive sale (and will take into account any gain for the taxable year which includes such date). Some of the forward foreign currency exchange contracts, options and futures contracts that certain of the Funds may enter into will be subject to special tax treatment as "Section 1256 contracts." Section 1256 contracts that a Fund holds are treated as if they are sold for their fair market value on the last business day of the taxable year, regardless of whether a taxpayer's obligations (or rights) under such contracts have terminated (by delivery, exercise, entering into a closing transaction or otherwise) as of such date. Any gain or loss recognized as a consequence of the year-end deemed disposition of Section 1256 contracts is combined with any other gain or loss that was previously recognized upon the termination of Section 1256 contracts during that taxable year. The net amount of such gain or loss for the entire taxable year (including gain or loss arising as a consequence of the year-end deemed sale of such contracts) is deemed to be 60% long-term and 40% short-term gain or loss. If such a future or option is held as an offsetting position and can be considered a straddle under Section 1092 of the Code, such a straddle will constitute a mixed straddle. A mixed straddle will be subject to both Section 1256 and Section 1092 unless certain elections are made by the Fund. Other hedging transactions in which the Funds may engage may result in "straddles" or "conversion transactions" for U.S. federal income tax purposes. The straddle and conversion transaction rules may affect the character of gains (or in the case of the straddle rules, losses) realized by the Funds. In addition, losses realized by the Funds on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the losses are realized. Because only a few regulations implementing the straddle rules and the conversion transaction rules have been promulgated, the tax consequences to the Funds of hedging transactions are not entirely clear. The hedging transactions may increase the amount of short-term capital gain realized by the Funds (and, if they are conversion transactions, the amount of ordinary income) which is taxed as ordinary income when distributed to shareholders. Because application of any of the foregoing rules governing Section 1256 contracts, constructive sales, straddle and conversion transactions may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected investment or straddle positions, the taxable income of a Fund may exceed or be less than its book income. Accordingly, the amount which must be distributed to shareholders and which will be taxed to shareholders as ordinary income, qualified dividend income, or long-term capital gain may also differ from the book income of the Fund and may be increased or decreased as compared to a fund that did not engage in such transactions. PFIC INVESTMENTS. The Funds are permitted to invest in foreign equity securities and thus may invest in stocks of foreign companies that are classified under the Code as passive foreign investment companies ("PFICs"). In general, a foreign company is classified as a PFIC if at least one-half of its assets constitute investment-type assets or 75% or more of its gross income is investment-type income. The application of the PFIC rules may affect, among other things, the character of gain, the amount of gain or loss and the timing of the recognition and character of income with respect to PFIC stock, as well as subject the Funds themselves to tax on certain income from PFIC stock. For these reasons the amount that must be distributed to shareholders, and which will be taxed to shareholders as ordinary income or long-term capital gain, may be increased or decreased substantially as compared to a fund that did not invest in PFIC stock. SWAP AGREEMENTS. Each Fund may enter into swap agreements. The rules governing the tax aspects of certain types of swap agreements are in a developing stage and are not entirely clear in 70 certain respects. Accordingly, while a Fund intends to account for such transactions in a manner deemed to be appropriate, the IRS might not accept such treatment. If it did not, the status of a Fund as a regulated investment company might be affected. Each Fund intends to monitor developments in this area. Certain requirements that must be met under the Code in order for a Fund to qualify as a regulated investment company may limit the extent to which a Fund will be able to engage in certain types of swap agreements. EXCISE TAX ON REGULATED INVESTMENT COMPANIES. A 4% non-deductible excise tax is imposed on a regulated investment company that fails to distribute in each calendar year an amount equal to 98% of ordinary taxable income for the calendar year and 98% of capital gain net income (excess of capital gains over capital losses) for the one-year period ended on October 31 of such calendar year (or, at the election of a regulated investment company having a taxable year ending November 30 or December 31, for its taxable year (a "taxable year election")). The balance of such income must be distributed during the next calendar year. For the foregoing purposes, a regulated investment company is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year. For purposes of the excise tax, a regulated investment company shall (1) reduce its capital gain net income (but not below its net capital gain) by the amount of any net ordinary loss for the calendar year and (2) exclude Section 988 foreign currency gains and losses incurred after October 31 (or after the end of its taxable year if it has made a taxable year election) in determining the amount of ordinary taxable income for the current calendar year (and, instead, include such gains and losses in determining ordinary taxable income for the succeeding calendar year). Each Fund generally intends to make sufficient distributions or deemed distributions of its ordinary taxable income and capital gain net income prior to the end of each calendar year to avoid liability for the excise tax. However, in the event that the IRS determines that a Fund is using an improper method of allocation for purposes of equalization accounting (as discussed above), such Fund may be liable for excise tax. Moreover, investors should note that a Fund may in certain circumstances be required to liquidate portfolio investments to make sufficient distributions to avoid excise tax liability. In addition, under certain circumstances, a Fund may elect to pay a minimal amount of excise tax. FUND DISTRIBUTIONS. Each Fund anticipates distributing substantially all of its investment company taxable income for each taxable year. Such distributions will be taxable to shareholders as ordinary income and treated as dividends for federal income tax purposes, but they will qualify for the 70% dividends received deduction for corporations and as qualified dividend income for individuals and other non-corporate taxpayers to the extent that shareholders have held their fund shares for a minimum required period and the distributions satisfy other requirements that are discussed below. A Fund may either retain or distribute to shareholders its net capital gain (net long-term capital gain over net short-term capital loss) for each taxable year. Each Fund currently intends to distribute any such amounts. If net capital gain is distributed and designated as a capital gain dividend, it will be taxable to shareholders as long-term capital gain (currently taxable at a maximum rate of 15% for non-corporate shareholders) regardless of the length of time the shareholder has held his shares or whether such gain was recognized by the Fund prior to the date on which the shareholder acquired his shares. Conversely, if a Fund elects to retain its net capital gain, the Fund will be taxed thereon (except to the extent of any available capital loss carry forwards) at the 35% corporate tax rate. If a Fund elects to retain its net capital gain, it is expected that the Fund also will elect to have shareholders treated as if each received a distribution of its pro rata share of such gain, with the result that each shareholder will be required to report its pro rata share of such gain on its tax return as long-term capital gain, will receive a refundable tax credit for its pro rata share of tax paid by the Fund on the gain, and will increase the tax basis for its shares by an amount equal to the deemed distribution less the tax credit. Ordinary income dividends paid by a Fund with respect to a taxable year will qualify for the 70% dividends received deduction generally available to corporations (other than corporations, such as "S" corporations, which are not eligible for the deduction because of their special characteristics and other 71 than for purposes of special taxes such as the accumulated earnings tax and the personal holding company tax) to the extent of the amount of qualifying dividends received by the Fund from domestic corporations for the taxable year. However, the alternative minimum tax applicable to corporations may reduce the value of the dividends received deduction. Ordinary income dividends paid by a Fund to individuals and other non-corporate taxpayers will be treated as qualified dividend income that is subject to tax at a maximum rate of 15% to the extent of the amount of qualifying dividends received by the Fund from domestic corporations and from foreign corporations that are either incorporated in a possession of the United States, or are eligible for benefits under certain income tax treaties with the United States that include an exchange of information program. In addition, qualifying dividends include dividends paid with respect to stock of a foreign corporation that is readily tradable on an established securities market in the United States. Dividends received by the Fund from PFICs are not qualifying dividends. If the qualifying dividend income received by a Fund is equal to 95% (or a greater percentage) of the Fund's gross income (exclusive of net capital gain) in any taxable year, all of the ordinary income dividends paid by the Fund will be qualifying dividend income. Dividends paid by a Fund will not be eligible for the dividends received deduction when received by a corporation that has not held its shares of the Fund for at least 46 days during the 91-day period beginning 45 days before the date on which the shares become ex-dividend and will not be treated as qualified dividend income when received by an individual or other noncorporate shareholder who has not held its shares of the Fund for at least 61 days during the 121-day period beginning 60 days before the date on which the shares become ex-dividend. Alternative minimum tax ("AMT") is imposed in addition to, but only to the extent it exceeds, the regular tax and is computed at a maximum rate of 28% for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount. However, the AMT on capital gain dividends and qualified dividend income paid by a Fund to a non-corporate shareholder may not exceed a maximum rate of 15%. The corporate dividends received deduction is not itself an item of tax preference that must be added back to taxable income or is otherwise disallowed in determining a corporation's AMTI. However, corporate shareholders will generally be required to take the full amount of any dividend received from the Fund into account (without a dividends received deduction) in determining their adjusted current earnings, which are used in computing an additional corporate preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings over its AMTI (determined without regard to this item and the AMTI net operating loss deduction)) that is includable in AMTI. However, certain small corporations are wholly exempt from the AMT. Distributions by a Fund that are not made from earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in his shares; any excess will be treated as gain from the sale of his shares. Distributions by a Fund will be treated in the manner described above regardless of whether such distributions are paid in cash or reinvested in additional shares of the Fund (or of another Fund). Shareholders receiving a distribution in the form of additional shares will be treated as receiving a distribution in an amount equal to the fair market value of the shares received, determined as of the ex-dividend date. Ordinarily, shareholders are required to take distributions by a Fund into account in the year in which the distributions are made. However, dividends declared in October, November or December of any year and payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders (and made by the Fund) on December 31 of such calendar year if such dividends are actually paid in January of the following year. Shareholders will be advised annually as to the U.S. federal income tax consequences of distributions made (or deemed made) during the year in accordance with the guidance that has been provided by the IRS. 72 If the net asset value of shares is reduced below a shareholder's cost as a result of a distribution by a Fund, such distribution generally will be taxable even though it represents a return of invested capital. Investors should be careful to consider the tax implications of buying shares of a Fund just prior to a distribution. The price of shares purchased at this time may reflect the amount of the forthcoming distribution. Those purchasing just prior to a distribution will receive a distribution which generally will be taxable to them. SALE OR REDEMPTION OF SHARES. A shareholder will recognize gain or loss on the sale or redemption of shares of a Fund in an amount equal to the difference between the proceeds of the sale or redemption and the shareholder's adjusted tax basis in the shares. All or a portion of any loss so recognized may be deferred under the wash sale rules if the shareholder purchases other shares of the Fund within 30 days before or after the sale or redemption. In general, any gain or loss arising from (or treated as arising from) the sale or redemption of shares of a Fund will be considered capital gain or loss and will be long-term capital gain or loss if the shares were held for longer than one year. Currently, any long-term capital gain recognized by a non-corporate shareholder will be subject to tax at a maximum rate of 15%. However, any capital loss arising from the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of the amount of capital gain dividends received on such shares. Capital losses in any year are deductible only to the extent of capital gains plus, in the case of a non-corporate taxpayer, $3,000 of ordinary income. If a shareholder (a) incurs a sales load in acquiring shares of a Fund, (b) disposes of such shares less than 91 days after they are acquired, and (c) subsequently acquires shares of the Fund or another fund at a reduced sales load pursuant to a right to reinvest at such reduced sales load acquired in connection with the acquisition of the shares disposed of, then the sales load on the shares disposed of (to the extent of the reduction in the sales load on the shares subsequently acquired) shall not be taken into account in determining gain or loss on the shares disposed of, but shall be treated as incurred on the acquisition of the shares subsequently acquired. The wash sale rules may also limit the amount of loss that may be taken into account on disposition after such adjustment. BACKUP WITHHOLDING. The Funds may be required to withhold 28% of taxable distributions and/or redemption payments. For more information refer to "Purchase, Redemption and Pricing of Shares - Backup Withholding." FOREIGN SHAREHOLDERS. Taxation of a shareholder who, as to the United States, is a nonresident alien individual, foreign trust or estate, foreign corporation, or foreign partnership ("foreign shareholder"), depends on whether the income from a Fund is "effectively connected" with a U.S. trade or business carried on by such shareholder. If the income from a Fund is not effectively connected with a U.S. trade or business carried on by a foreign shareholder, distributions (other than distributions of long-term and short-term capital gain and of certain types of interest income) will be subject to U.S. withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount of the distribution to the extent discussed below. Such a foreign shareholder would generally be exempt from U.S. federal income tax on gain realized on the redemption of shares of a Fund, capital gain dividends and amounts retained by a Fund that are designated as undistributed net capital gain. As a consequence of the enactment of the American Jobs Creation Act of 2004, such a foreign shareholder will also generally be exempt from U.S. federal income tax on distributions that a Fund designates as "short-term capital gain dividends" or as "interest-related dividends" for Fund taxable years beginning after December 31, 2004 and before January 1, 2008. The aggregate amount that may be designated as short-term capital gain dividends for a Fund's taxable year is generally equal to the excess (if any) of the Fund's net short-term capital gain over its net long-term capital loss. The aggregate amount designated as interest-related dividends for any Fund taxable year is generally limited to the excess of the amount of "qualified interest income" of the Fund over allocable expenses. Qualified interest income is generally equal to the sum of a Fund's U.S.-source income that constitutes (1) bank deposit interest; (2) short-term original issue discount that is exempt from withholding tax; (3) interest on a debt obligation which is in registered form, unless it is earned on a debt obligation issued by a corporation or partnership 73 in which the Fund holds a 10-percent ownership interest or its payment is contingent on certain events; and (4) interest-related dividends received from another regulated investment company. If the income from a Fund is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then ordinary income dividends, capital gain dividends, short-term capital gain dividends, interest-related dividends and any gains realized upon the sale or redemption of shares of the Fund will be subject to U.S. federal income tax at the rates applicable to U.S. citizens or domestic corporations. In the case of foreign non-corporate shareholders, a Fund may be required to withhold U.S. federal income tax at a rate of 28% on distributions that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate) unless such shareholders furnish the Fund with proper notification of their foreign status. Foreign shareholders may be subject to U.S. withholding tax at a rate of 30% on the income resulting from the foreign tax election (as defined below), but may not be able to claim a credit or deduction with respect to the withholding tax for the foreign tax treated as having been paid by them. Foreign persons who file a United States tax return to obtain a U.S. tax refund and who are not eligible to obtain a social security number must apply to the IRS for an individual taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form W-7 and accompanying instructions, please contact your tax adviser or the IRS. Transfers by gift of shares of a Fund by a foreign shareholder who is a nonresident alien individual will not be subject to U.S. federal gift tax. An individual who, at the time of death, is a foreign shareholder will nevertheless be subject to U.S. federal estate tax with respect to shares at the graduated rates applicable to U.S. citizens and residents, unless a treaty exception applies. In the absence of a treaty, there is a $13,000 statutory estate tax credit. Estates of non-resident alien shareholders dying after December 31, 2004 and before January 1, 2008 will be able to exempt from federal estate tax the proportion of the value of a Fund's shares attributable to "qualifying assets" held by the Fund at the end of the quarter immediately preceding the decedent's death (or such other time as the IRS may designate in regulations). Qualifying assets include bank deposits and other debt obligations that pay interest or accrue original issue discount that is exempt from withholding tax, debt obligations of a domestic corporation that are treated as giving rise to foreign source income, and other investments that are not treated for tax purposes as being within the United States. Shareholders will be advised annually of the portion of a Fund's assets that constituted qualifying assets at the end of each quarter of its taxable year. The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax consequences to them of an investment in a Fund, including the applicability of foreign tax. FOREIGN INCOME TAX. Investment income received by each Fund from sources within foreign countries may be subject to foreign income tax withheld at the source. The United States has entered into tax treaties with many foreign countries which entitle the Funds to a reduced rate of, or exemption from, tax on such income. It is impossible to determine the effective rate of foreign tax in advance since the amount of a Fund's assets to be invested in various countries is not known. If more than 50% of the value of a Fund's total assets at the close of each taxable year consists of the stock or securities of foreign corporations, the Fund may elect to "pass through" to the Fund's shareholders the amount of foreign income tax paid by the Fund (the "Foreign Tax Election"). Pursuant to the Foreign Tax Election, shareholders will be required (i) to include in gross income, even though not actually received, their respective pro-rata shares of the foreign income tax paid by the Fund that are attributable to any distributions they receive; and (ii) either to deduct their pro-rata share of foreign tax in computing their taxable income, or to use it (subject to various Code limitations) as a foreign tax credit 74 against Federal income tax (but not both). No deduction for foreign tax may be claimed by a non-corporate shareholder who does not itemize deductions or who is subject to alternative minimum tax. Unless certain requirements are met, a credit for foreign tax is subject to the limitation that it may not exceed the shareholder's U.S. tax (determined without regard to the availability of the credit) attributable to the shareholder's foreign source taxable income. In determining the source and character of distributions received from a Fund for this purpose, shareholders will be required to allocate Fund distributions according to the source of the income realized by the Fund. Each Fund's gain from the sale of stock and securities and certain currency fluctuation gain and loss will generally be treated as derived from U.S. sources. In addition, the limitation on the foreign tax credit is applied separately to foreign source "passive" income, such as dividend income, and the portion of foreign source income consisting of qualified dividend income is reduced by approximately 57% to account for the tax rate differential. Individuals who have no more than $300 ($600 for married persons filing jointly) of creditable foreign tax included on Form 1099 and whose foreign source income is all "qualified passive income" may elect each year to be exempt from the foreign tax credit limitation and will be able to claim a foreign tax credit without filing Form 1116 with its corresponding requirement to report income and tax by country. Moreover, no foreign tax credit will be allowable to any shareholder who has not held his shares of the Fund for at least 16 days during the 30-day period beginning 15 days before the day such shares become ex-dividend with respect to any Fund distribution to which foreign income taxes are attributed (taking into account certain holding period reduction requirements of the Code). Because of these limitations, shareholders may be unable to claim a credit for the full amount of their proportionate shares of the foreign income tax paid by a Fund. EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS. The foregoing general discussion of U.S. federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on February 15, 2006. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein. Rules of state and local taxation of ordinary income, qualified dividend income and capital gain dividends may differ from the rules for U.S. federal income taxation described above. Distributions may also be subject to additional state, local and foreign taxes depending on each shareholder's particular situation. Non-U.S. shareholders may be subject to U.S. tax rules that differ significantly from those summarized above. Shareholders are urged to consult their tax advisers as to the consequences of these and other state and local tax rules affecting investment in the Funds. DISTRIBUTION OF SECURITIES DISTRIBUTION PLANS The Trust has adopted distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to each Fund's Class A shares, Class B shares, Class C shares, Class R and Investor Class shares, if applicable, (collectively the "Plans"). Each Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate, shown immediately below, of the Fund's average daily net assets of the applicable class.
INVESTOR FUND CLASS A CLASS B CLASS C CLASS R CLASS ---- ------- ------- ------- ------- -------- AIM Developing Markets Fund 0.25% 1.00% 1.00% N/A N/A AIM Global Health Care Fund 0.25 1.00 1.00 N/A 0.25% AIM Trimark Endeavor Fund 0.25 1.00 1.00 0.50% N/A AIM Trimark Fund 0.25 1.00 1.00 0.50 N/A AIM Trimark Small Companies Fund 0.25 1.00 1.00 0.50 N/A
75 All of the Plans compensate AIM Distributors for the purpose of financing any activity which is primarily intended to result in the sale of shares of the Funds. Such activities include, but are not limited to, the following: printing of prospectuses and statements of additional information and reports for other than existing shareholders; overhead; preparation and distribution of advertising material and sales literature; expenses of organizing and conducting sales seminars; supplemental payments to dealers and other institutions such as asset-based sales charges or as payments of service fees under shareholder service arrangements; and costs of administering each Plan. Amounts payable by a Fund under the Class A, Class B, Class C, Class R and Investor Class Plans need not be directly related to the expenses actually incurred by AIM Distributors on behalf of each Fund. These Plans do not obligate the Funds to reimburse AIM Distributors for the actual allocated share of expenses AIM Distributors may incur in fulfilling its obligations under these Plans. Thus, even if AIM Distributors' actual expenses exceeds the fee payable to AIM Distributors at any given time, under these Plans the Funds will not be obligated to pay more than that fee. If AIM Distributors' actual allocated share of expenses is less than the fee it receives, under these Plans AIM Distributors will retain the full amount of the fee. AIM Distributors may from time to time waive or reduce any portion of its 12b-1 fee for Class A shares, Class C shares, Class R shares or Investor Class shares. Voluntary fee waivers or reductions may be rescinded at any time without further notice to investors. During periods of voluntary fee waivers or reductions, AIM Distributors will retain its ability to be reimbursed for such fee prior to the end of each fiscal year. Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM Distributors and the Fund. The Funds may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R and Investor Class shares attributable to the customers of selected dealers and financial institutions to such dealers and financial institutions, including AIM Distributors, acting as principal, who furnish continuing personal shareholder services to their customers who purchase and own the applicable class of shares of the Fund. Under the terms of a shareholder service agreement, such personal shareholder services include responding to customer inquiries and providing customers with information about their investments. Any amounts not paid as a service fee under each Plan would constitute an asset-based sales charge. AIM Distributors may pay dealers and institutions who sell Class R shares an annual fee of 0.50% of average daily net assets. These payments will consist of an asset-based fee of 0.25% and a service fee of 0.25% and will commence either on the thirteenth month after the first purchase, on accounts on which a dealer concession was paid, or immediately, on accounts on which a dealer concession was not paid. If AIM Distributors pays a dealer concession, it will retain all payments received by it relating to Class R shares for the first year after they are purchased. AIM Distributors will make quarterly payments to dealers and institutions based on the average net asset value of Class R shares which are attributable to shareholders for whom the dealers and institutions are designated as dealers of record. Under a Shareholder Service Agreement, a Fund agrees to pay periodically fees to selected dealers and other institutions who render the foregoing services to their customers. The fees payable under a Shareholder Service Agreement will be calculated at the end of each payment period for each business day of the Funds during such period at the annual rate specified in each agreement based on the average daily net asset value of the Funds' shares purchased or acquired through exchange. Fees shall be paid only to those selected dealers or other institutions who are dealers or institutions of record at the close of business on the last business day of the applicable payment period for the account in which such Fund's shares are held. Selected dealers and other institutions entitled to receive compensation for selling Fund shares may receive different compensation for selling shares of one particular class over another. Under the Plans, certain financial institutions which have entered into service agreements and which sell shares of the Funds on an agency basis, may receive payments from the Funds pursuant to the respective Plans. 76 AIM Distributors does not act as principal, but rather as agent for the Funds, in making dealer incentive and shareholder servicing payments to dealers and other financial institutions under the Plans. These payments are an obligation of the Funds and not of AIM Distributors. Payments pursuant to the Plans are subject to any applicable limitations imposed by rules of the NASD. See Appendix M for a list of the amounts paid by each class of shares of each Fund to AIM Distributors pursuant to the Plans for the year, or period, ended October 31, 2005 and Appendix N for an estimate by category of the allocation of actual fees paid by each class of shares of each Fund pursuant to its respective distribution plan for the year or period ended October 31, 2005. As required by Rule 12b-1, the Plans and related forms of Shareholder Service Agreements were approved by the Board, including a majority of the trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of the Plans or in any agreements related to the Plans (the "Rule 12b-1 Trustees"). In approving the Plans in accordance with the requirements of Rule 12b-1, the trustees considered various factors and determined that there is a reasonable likelihood that the Plans would benefit each class of the Funds and its respective shareholders. The anticipated benefits that may result from the Plans with respect to each Fund and/or the classes of each Fund and its shareholders include but are not limited to the following: (1) rapid account access; (2) relatively predictable flow of cash; and (3) a well-developed, dependable network of shareholder service agents to help curb sharp fluctuations in rates of redemptions and sales, thereby reducing the chance that an unanticipated increase in net redemptions could adversely affect the performance of each Fund. Unless terminated earlier in accordance with their terms, the Plans continue from year to year as long as such continuance is specifically approved, in person, at least annually by the Board, including a majority of the Rule 12b-1 Trustees. A Plan may be terminated as to any Fund or class by the vote of a majority of the Rule 12b-1 Trustees or, with respect to a particular class, by the vote of a majority of the outstanding voting securities of that class. Any change in the Plans that would increase materially the distribution expenses paid by the applicable class requires shareholder approval; otherwise, the Plans may be amended by the trustees, including a majority of the Rule 12b-1 Trustees, by votes cast in person at a meeting called for the purpose of voting upon such amendment. As long as the Plans are in effect, the selection or nomination of the Independent Trustees is committed to the discretion of the Independent Trustees. The Class B Plan obligates Class B shares to continue to make payments to AIM Distributors following termination of the Class B shares Distribution Agreement with respect to Class B shares sold by or attributable to the distribution efforts of AIM Distributors or its predecessors, unless there has been a complete termination of the Class B Plan (as defined in such Plan) and the Class B Plan expressly authorizes AIM Distributors to assign, transfer or pledge its rights to payments pursuant to the Class B Plan. DISTRIBUTOR The Trust has entered into master distribution agreements, as amended, relating to the Funds (the "Distribution Agreements") with AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which AIM Distributors acts as the distributor of shares of the Funds. The address of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain trustees and officers of the Trust are affiliated with AIM Distributors. See "Management of the Trust." The Distribution Agreements provide AIM Distributors with the exclusive right to distribute shares of the Funds on a continuous basis directly and through other broker dealers with whom AIM Distributors 77 has entered into selected dealer agreements. AIM Distributors has not undertaken to sell any specified number of shares of any classes of the Funds. AIM Distributors expects to pay sales commissions from its own resources to dealers and institutions who sell Class B, Class C and Class R shares of the Funds at the time of such sales. Payments with respect to Class B shares will equal 4.00% of the purchase price of the Class B shares sold by the dealer or institution, and will consist of a sales commission equal to 3.75% of the purchase price of the Class B shares sold plus an advance of the first year service fee of 0.25% with respect to such shares. The portion of the payments to AIM Distributors under the Class B Plan which constitutes an asset-based sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a portion of such sales commissions plus financing costs. In the future, if multiple distributors serve a Fund, each such distributor (or its assignee or transferee) would receive a share of the payments under the Class B Plan based on the portion of the Fund's Class B shares sold by or attributable to the distribution efforts of that distributor. AIM Distributors may pay sales commissions to dealers and institutions who sell Class C shares of the AIM Funds at the time of such sales. Payments with respect to Class C shares will equal 1.00% of the purchase price of the Class C shares sold by the dealer or institution, and will consist of a sales commission of 0.75% of the purchase price of the Class C shares sold plus an advance of the first year service fee of 0.25% with respect to such shares. AIM Distributors will retain all payments received by it relating to Class C shares for the first year after they are purchased. The portion of the payments to AIM Distributors under the Class A, Class C and Class R Plan attributable to Class C shares which constitutes an asset-based sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a portion of the sales commissions to dealers plus financing costs, if any. After the first full year, AIM Distributors will make quarterly payments to dealers and institutions based on the average net asset value of Class C shares which are attributable to shareholders for whom the dealers and institutions are designated as dealers of record. These payments will consist of an asset-based sales charge of 0.75% and a service fee of 0.25%. AIM Distributors may pay dealers and institutions who sell Class R shares an annual fee of 0.50% of average daily net assets. These payments will consist of an asset-based fee of 0.25% and a service fee of 0.25% and will commence either on the thirteenth month after the first purchase, on accounts on which a dealer concession was paid, or immediately, on accounts on which a dealer concession was not paid. If AIM Distributors pays a dealer concession, it will retain all payments received by it relating to Class R shares for the first year after they are purchased. AIM Distributors will make quarterly payments to dealers and institutions based on the average net asset value of Class R shares which are attributable to shareholders for whom the dealers and institutions are designated as dealers of record. The Trust (on behalf of any class of any Fund) or AIM Distributors may terminate the Distribution Agreements on 60 days' written notice without penalty. The Distribution Agreements will terminate automatically in the event of their assignment. In the event the Class B shares Distribution Agreement is terminated, AIM Distributors would continue to receive payments of asset-based distribution fees in respect of the outstanding Class B shares attributable to the distribution efforts of AIM Distributors or its predecessors; provided, however that a complete termination of the Class B Plan (as defined in such Plan) would terminate all payments to AIM Distributors. Termination of the Class B Plan or the Distribution Agreement for Class B shares would not affect the obligation of Class B shareholders to pay contingent deferred sales charges. Total sales charges (front end and contingent deferred sales charges) paid in connection with the sale of shares of each class of each Fund, if applicable, for the last three fiscal years ended October 31 are found in Appendix O. 78 CALCULATION OF PERFORMANCE DATA Although performance data may be useful to prospective investors when comparing a Fund's performance with other funds and other potential investments, investors should note that the methods of computing performance of other potential investments are not necessarily comparable to the methods employed by a Fund. Average Annual Total Return Quotation The standard formula for calculating average annual total return is as follows: n P(1+T) =ERV Where P = a hypothetical initial payment of $1,000; T = average annual total return (assuming the applicable maximum sales load is deducted at the beginning of the one, five, or ten year periods); n = number of years; and ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the one, five and ten year periods at the end of the one, five, or ten year periods (or fractional portion of such period). Total returns quoted in advertising reflect all aspects of a Fund's return, including the effect of reinvesting dividends and capital gain distributions, and any change in the Fund's net asset value per share over the period. Cumulative total return reflects the performance of a Fund over a stated period of time. Average annual total returns are calculated by determining the growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Each Fund's total return is calculated in accordance with a standardized formula for computation of annualized total return. Standardized total return for: (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge, at the time of purchase; (2) Class B and Class C shares reflects the deduction of the maximum applicable CDSC on a redemption of shares held for the period; (3) Class R shares does not reflect a deduction of any sales charge since that class is generally sold and redeemed at net asset value; and (4) Investor Class shares does not reflect a deduction of any sales charge since that class is sold and redeemed at net asset value. A Fund's total return shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. A cumulative total return reflects the Fund's performance over a stated period of time. An average annual total return reflects the hypothetical compounded annual rate of return that would have produced the same cumulative total return if the Fund's performance had been constant over the entire period. Because average annual returns tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its cumulative and average annual returns into income results and capital gains or losses. Alternative Total Return Quotations Standard total return quotes may be accompanied by total return figures calculated by alternative methods. For example, average annual total return may be calculated without assuming payment of the full sales load according to the following formula: 79 n P(1+U) =ERV Where P = a hypothetical initial payment of $1,000; U = average annual total return assuming payment of only a stated portion of, or none of, the applicable maximum sales load at the beginning of the stated period; n = number of years; and ERV = ending redeemable value of a hypothetical $1,000 payment at the end of the stated period. Cumulative total return across a stated period may be calculated as follows: P(1+V)=ERV Where P = a hypothetical initial payment of $1,000; V = cumulative total return assuming payment of all of,a stated portion of, or none of, the applicable maximum sales load at the beginning of the stated period; and ERV = ending redeemable value of a hypothetical $1,000 payment at the end of the stated period. Calculation of Certain Performance Data AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund may use a restated or blended performance calculation to derive certain performance data shown for their Class R shares in this Statement of Additional Information and in each Fund's advertisements and other sales material. If a Fund's Class R shares were not offered to the public during the performance period covered, the performance data shown will be the restated historical performance of such Fund's Class A shares at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. If such Fund's Class R shares were offered to the public only during a portion of the performance period covered, the performance data shown will be the blended returns of the historical performance of such Fund's Class R shares since their inception and the restated historical performance of such Fund's Class A shares (for periods prior to the inception of such Fund's Class R shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. If such Fund's Class R shares were offered to the public during the entire performance period covered, the performance data shown will be the historical performance of the Fund's Class R shares. AIM Global Health Care Fund may also use a restated or a blended performance calculation to derive certain performance data shown for the Fund's Investor Class shares in this Statement of Additional Information and in the Fund's advertisements and other sales material. If the Fund's Investor Class shares were not offered to the public during the performance period covered, the performance data shown will be the restated historical performance of the Fund's Class A shares at net asset value and reflecting the Rule 12b-1 fees applicable to the Class A shares. If the Fund's Investor Class shares were offered to the public only during a portion of the performance period covered, the performance data shown will be the blended returns of the historical performance of the Fund's Investor Class shares since their inception and the restated historical performance of the Fund's Class A shares (for periods prior to inception of the Investor Class shares) at net asset value and reflecting the Rule 12b-1 fees applicable to the Class A shares. If the Fund's Investor Class shares were offered to the public during the entire performance period covered, the performance data shown will be the historical performance of each the Fund's Investor Class shares. A restated or blended performance calculation may be used to derive (i) each Funds' standardized average annual total returns over a stated period and (ii) each Funds' non-standardized cumulative total returns over a stated period. Average Annual Total Return (After Taxes on Distributions) Quotation 80 A Fund's average annual total return (after taxes on distributions) shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. It reflects the deduction of federal income taxes on distributions, but not on redemption proceeds. Average annual total returns (after taxes on distributions) are calculated by determining the after-tax growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Because average annual total returns (after taxes on distributions) tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its average annual total returns (after taxes on distributions) into income results and capital gains or losses. The standard formula for calculating average annual total return (after taxes on distributions) is: n P(1+T) = ATV D Where P = a hypothetical initial payment of $1,000; T = average annual total return (after taxes on distributions); N = number of years; and ATV = ending value of a hypothetical $1,000 payment made at the D beginning of the one, five, or ten year periods (or since inception, if applicable) at the end of the one, five, or ten year periods (or since inception, if applicable), after taxes on fund distributions but not after taxes on redemption. Standardized average annual total return (after taxes on distributions) for (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge at the time of purchase; and (2) Class B and Class C shares reflects the deduction of the maximum applicable CDSC on a redemption of shares held for the period; and (3) Investor Class shares does not reflect a deduction of any sales charge since that class is sold and redeemed at net asset value. The after-tax returns assume all distributions by a Fund, less the taxes due on such distributions, are reinvested at the price calculated as stated in the prospectus on the reinvestment dates during the period. Taxes on a Fund's distributions are calculated by applying to each component of the distribution (e.g., ordinary income and long-term capital gain) the highest corresponding individual marginal federal income tax rates in effect on the reinvestment date. The taxable amount and tax character of each distribution is as specified by the Fund on the dividend declaration date, but reflects any subsequent recharacterizations of distributions. The effect of applicable tax credits, such as the foreign tax credit, are also taken into account. The calculations only reflect federal taxes, and thus do not reflect state and local taxes or the impact of the federal alternative minimum tax. Average Annual Total Return (After Taxes on Distributions and Sale of Fund Shares) Quotation A Fund's average annual total return (after taxes on distributions and sale of Fund shares) shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. It reflects the deduction of federal income taxes on both distributions and proceeds. Average annual total returns (after taxes on distributions and redemption) are calculated by determining the after-tax growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Because average annual total returns (after taxes on distributions and redemption) tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its average annual total returns (after taxes on distributions and redemption) into income results and capital gains or losses. 81 The standard formula for calculating average annual total return (after taxes on distributions and redemption) is: n P(1+T) = ATV DR Where P = a hypothetical initial payment of $1,000; T = average annual total return (after taxes on distributions and redemption); N = number of years; and ATV = ending value of a hypothetical $1,000 payment made at the DR beginning of the one, five, or ten year periods (or since inception, if applicable) at the end of the one, five, or ten year periods (or since inception, if applicable), after taxes on fund distributions and redemption. Standardized average annual total return (after taxes on distributions and redemption) for: (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge at the time of purchase; (2) Class B and Class C shares reflects the deduction of the maximum applicable CDSC on a redemption of shares held for the period; and (3) Investor Class shares does not reflect a deduction of any sales charge since that class is sold and redeemed at net asset value. The after-tax returns assume all distributions by a Fund, less the taxes due on such distributions, are reinvested at the price calculated as stated in the prospectus on the reinvestment dates during the period. Taxes due on a Fund's distributions are calculated by applying to each component of the distribution (e.g., ordinary income and long-term capital gain) the highest corresponding individual marginal federal income tax rates in effect on the reinvestment date. The taxable amount and tax character of each distribution is as specified by the Fund on the dividend declaration date, but reflects any subsequent recharacterizations of distributions. The effect of applicable tax credits, such as the foreign tax credit, are also taken into account. The calculations only reflect federal taxes, and thus do not reflect state and local taxes or the impact of the federal alternative minimum tax. The ending values for each period assume a complete liquidation of all shares. The ending values for each period are determined by subtracting capital gains taxes resulting from the sale of Fund shares and adding the tax benefit from capital losses resulting from the sale of Fund shares. The capital gain or loss upon sale of Fund shares is calculated by subtracting the tax basis from the proceeds. Capital gains taxes (or the benefit resulting from tax losses) are calculated using the highest federal individual capital gains tax rate for gains of the appropriate character (e.g., ordinary income or long-term) in effect on the date of the sale of Fund shares and in accordance with federal tax law applicable on that date. The calculations assume that a shareholder may deduct all capital losses in full. The basis of shares acquired through the $1,000 initial investment are tracked separately from subsequent purchases through reinvested distributions. The basis for a reinvested distribution is the distribution net of taxes paid on the distribution. Tax basis is adjusted for any distributions representing returns of capital and for any other tax basis adjustments that would apply to an individual taxpayer. The amount and character (i.e., short-term or long-term) of capital gain or loss upon sale of Fund shares is determined separately for shares acquired through the $1,000 initial investment and each subsequent purchase through reinvested distributions. The tax character is determined by the length of the measurement period in the case of the initial $1,000 investment and the length of the period between reinvestment and the end of the measurement period in the case of reinvested distributions. Performance Information All advertisements of the Funds will disclose the maximum sales charge (including deferred sales charges) imposed on purchases of a Fund's shares. If any advertised performance data does not reflect the maximum sales charge (if any), such advertisement will disclose that the sales charge has not been deducted in computing the performance data, and that, if reflected, the maximum sales charge would 82 reduce the performance quoted. Further information regarding each Fund's performance is contained in that Fund's annual report to shareholders, which is available upon request and without charge. From time to time, AIM or its affiliates may waive all or a portion of their fees and/or assume certain expenses of any Fund. Fee waivers or reductions or commitments to reduce expenses will have the effect of increasing that Fund's yield and total return. The performance of each Fund will vary from time to time and past results are not necessarily indicative of future results. Total return and yield figures for the Funds are neither fixed nor guaranteed. The Funds may provide performance information in reports, sales literature and advertisements. The Funds may also, from time to time, quote information about the Funds published or aired by publications or other media entities which contain articles or segments relating to investment results or other data about one or more of the Funds. The following is a list of such publications or media entities: Advertising Age Financial World New York Times Barron's Forbes Pension World Best's Review Fortune Pensions & Investments Bloomberg Hartford Courant Inc. Personal Investor Broker World Institutional Investor Philadelphia Inquirer Business Week Insurance Forum The Bond Buyer Changing Times Insurance Week USA Today Christian Science Monitor Investor's Business Daily U.S. News & World Report Consumer Reports Journal of the American Wall Street Journal Economist Society of CLU & ChFC Washington Post FACS of the Week Kiplinger Letter CNN Financial Planning Money CNBC Financial Product News Mutual Fund Forecaster PBS Financial Services Week Nation's Business
Each Fund may also compare its performance to performance data of similar mutual funds as published by the following services: Bank Rate Monitor Morningstar, Inc. Bloomberg Standard & Poor's Factset Data Systems Strategic Insight Thompson Financial
Each Fund's performance may also be compared in advertising to the performance of comparative benchmarks such as the following: Lipper Emerging Markets Fund Index MSCI Europe, Australasia, and Far East Index Lipper Global Fund Index MSCI Europe Index Lipper Global Multi-Cap Growth Fund Index MSCI World Health Care Index Lipper Health/Biotech Fund Index MSCI World Index Lipper Mid-Cap Core Fund Index Russell 2000 Index Lipper Multi-Cap Growth Fund Index Russell Midcap registered trademark Index Lipper Small-Cap Core Fund Index Standard & Poor's 500 Stock Index MSCI All Country World Free Index Standard & Poor's Composite Index of 500 Stocks MSCI Emerging Markets Free Index
83 Each Fund may also compare its performance to rates on Certificates of Deposit and other fixed rate investments such as the following: 10 year Treasury Notes 90 day Treasury Bills Advertising for the Funds may from time to time include discussions of general economic conditions and interest rates. Advertising for such Funds may also include references to the use of those Funds as part of an individual's overall retirement investment program. From time to time, sales literature and/or advertisements for any of the Funds may disclose: (i) the largest holdings in the Funds' portfolios; (ii) certain selling group members; (iii) certain institutional shareholders; (iv) measurements of risk, including standard deviation, Beta and Sharpe ratios; and/or (v) capitalization and sector analyses of holdings in the Funds' portfolios. From time to time, the Funds' sales literature and/or advertisements may discuss generic topics pertaining to the mutual fund industry. This includes, but is not limited to, literature addressing general information about mutual funds, discussions regarding investment styles, such as the growth, value or GARP (growth at a reasonable price) styles of investing, variable annuities, dollar-cost averaging, stocks, bonds, money markets, certificates of deposit, retirement, retirement plans, asset allocation, tax-free investing, college planning and inflation. FINANCIAL STATEMENTS Each Fund's Financial Statements for the period ended October 31, 2005, including the Financial Highlights and the report of the independent registered public accounting firm pertaining thereto, are incorporated by reference into this Statement of Additional Information ("SAI") from such Fund's Annual Report to shareholders. The portions of such Annual Reports that are not specifically listed above are not incorporated by reference into this SAI and are not a part of this Registration Statement. PENDING LITIGATION Regulatory Action Alleging Market Timing On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds) and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code Section 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking injunctive relief; civil monetary penalties; a writ of quo warranto against the defendants; pre-judgment and post-judgment interest; costs and expenses, including counsel fees; and other relief. If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from serving as an investment adviser for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could affect the ability of AIM or any other investment advisor directly or indirectly owned by AMVESCAP PLC ("AMVESCAP") from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to 84 continue to serve as your Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On October 19, 2005, the WVAG lawsuit was transferred for pretrial purposes to the MDL Court (as defined below). On July 7, 2005, the Supreme Court of West Virginia ruled in an unrelated lawsuit that is similar to this action that the WVAG does not have authority to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling. On August 30, 2005, the West Virginia Office of the State Auditor - Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI (Order No. 05-1318). The WVASC makes findings of fact that essentially mirror the WVAG's allegations mentioned above and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions, including restitution to affected investors, disgorgement of fees, reimbursement of investigatory, administrative and legal costs and an "administrative assessment," to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. AIM and ADI have the right to challenge this action, which they intend to do. Private Civil Actions Alleging Market Timing Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP, the parent company of IFG and AIM, certain related entities, certain of their current and former officers and/or certain unrelated third parties) based on allegations of improper market timing and related activity in the AIM Funds. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal and state securities laws; (ii) violation of various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated in both Federal and state courts and seek such remedies as compensatory damages; restitution; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of February 16, 2006 is set forth in Appendix P-1. All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties. A list identifying the amended complaints in the MDL Court is included in Appendix P-1. Plaintiffs in two of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action to state court. These lawsuits are identified in Appendix P-1. Private Civil Actions Alleging Improper Use of Fair Value Pricing Multiple civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM) alleging that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) common law breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs. A list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of February 16, 2006 is set forth in Appendix P-2. 85 Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of February 16, 2006 is set forth in Appendix P-3. Private Civil Actions Alleging Improper Mutual Fund Sales Practices and Directed-Brokerage Arrangements Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of February 16, 2006 is set forth in Appendix P-4. 86 APPENDIX A RATINGS OF DEBT SECURITIES The following is a description of the factors underlying the debt ratings of Moody's, S&P and Fitch: MOODY'S LONG-TERM DEBT RATINGS Moody's corporate ratings are as follows: Aaa: Bonds and preferred stock which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt-edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa: Bonds and preferred stock which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. These are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk in Aa rated bonds appear somewhat larger than those securities rated Aaa. A: Bonds and preferred stock which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Bonds and preferred stock which are rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba: Bonds and preferred stock which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds and preferred stock which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Bonds and preferred stock which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca: Bonds and preferred stock which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C: Bonds and preferred stock which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating A-1 category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. MOODY'S SHORT-TERM PRIME RATING SYSTEM Moody's short-term ratings are opinions of the ability of issuers to honor senior financial obligations and contracts. Such obligations generally have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following designations, all judged to be investment grade , to indicate the relative repayment ability of rated issuers. PRIME-1: Issuers (or supporting institutions) rated Prime-1 have a superior ability for repayment of senior short-term obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structure with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial charges and high internal cash generation; and well-established access to a range of financial markets and assured sources of alternate liquidity. PRIME-2: Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. PRIME-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable ability for repayment of senior short-term debt obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories. Note: In addition, in certain countries the prime rating may be modified by the issuer's or guarantor's senior unsecured long-term debt rating. Moody's municipal ratings are as follows: MOODY'S U.S. LONG-TERM MUNICIPAL BOND RATING DEFINITIONS Municipal Ratings are opinions of the investment quality of issuers and issues in the US municipal and tax-exempt markets. As such, these ratings incorporate Moody's assessment of the default probability and loss severity of these issuers and issues. Municipal Ratings are based upon the analysis of four primary factors relating to municipal finance: economy, debt, finances, and administration/management strategies. Each of the factors is evaluated individually and for its effect on the other factors in the context of the municipality's ability to repay its debt. Aaa: Issuers or issues rated Aaa demonstrate the strongest creditworthiness relative to other US municipal or tax-exempt issuers or issues. Aa: Issuers or issues rated Aa demonstrate very strong creditworthiness relative to other US municipal or tax-exempt issuers or issues. A-2 A: Issuers or issues rated A present above-average creditworthiness relative to other US municipal or tax-exempt issuers or issues. Baa: Issuers or issues rated Baa represent average creditworthiness relative to other US municipal or tax-exempt issuers or issues. Ba: Issuers or issues rated Ba demonstrate below-average creditworthiness relative to other US municipal or tax-exempt issuers or issues. B: Issuers or issues rated B demonstrate weak creditworthiness relative to other US municipal or tax-exempt issuers or issues. Caa: Issuers or issues rated Caa demonstrate very weak creditworthiness relative to other US municipal or tax-exempt issuers or issues. Ca: Issuers or issues rated Ca demonstrate extremely weak creditworthiness relative to other US municipal or tax-exempt issuers or issues. C: Issuers or issues rated C demonstrate the weakest creditworthiness relative to other US municipal or tax-exempt issuers or issues. Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa to Caa. The modifier 1 indicates that the issue ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic category. MOODY'S MIG/VMIG US SHORT-TERM RATINGS In municipal debt issuance, there are three rating categories for short-term obligations that are considered investment grade. These ratings are designated as Moody's Investment Grade (MIG) and are divided into three levels - MIG 1 through MIG 3. In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade. In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned. The first element represents Moody's evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody's evaluation of the degree of risk associated with the demand feature, using the MIG rating scale. The short-term rating assigned to the demand feature of VRDOs is designated as VMIG. When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1. MIG ratings expire at note maturity. By contrast, VMIG rating expirations will be a function of each issue's specific structural or credit features. Gradations of investment quality are indicated by rating symbols, with each symbol representing a group in which the quality characteristics are broadly the same. MIG 1/VMIG 1: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing. A-3 MIG 2/VMIG 2: This designation denotes strong credit quality. Margins of protection are ample although not as large as in the preceding group. MIG 3/VMIG 3: This designation denotes acceptable credit quality. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. SG: This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection. STANDARD & POOR'S LONG-TERM CORPORATE AND MUNICIPAL RATINGS Issue credit ratings are based in varying degrees, on the following considerations: likelihood of payment - capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation; nature of and provisions of the obligation; and protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. The issue ratings definitions are expressed in terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. S&P describes its ratings for corporate and municipal bonds as follows: AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong. AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree. A: Debt rated A has a strong capacity to meet its financial commitments although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB: Debt rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to meet its financial commitment on the obligation. BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having significant speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. NR: Not Rated. S&P DUAL RATINGS S&P assigns "dual" ratings to all debt issues that have a put option or demand feature as part of their structure. The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. The long-term debt rating symbols are used for bonds to denote the long-term maturity and the commercial paper rating symbols for the put option (for example, A-4 AAA/A-1+). With short-term demand debt, the note rating symbols are used with the commercial paper rating symbols (for example, SP-1+/A-1+). S&P COMMERCIAL PAPER RATINGS An S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days. These categories are as follows: A-1: This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1. A-3: Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B: Issues rated 'B' are regarded as having only speculative capacity for timely payment. C: This rating is assigned to short-term debt obligations with a doubtful capacity for payment. D: Debt rated 'D' is in payment default. The 'D' rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless Standard & Poor's believes such payments will be made during such grace period. S&P SHORT-TERM MUNICIPAL RATINGS An S&P note rating reflect the liquidity factors and market-access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment: amortization schedule (the larger the final maturity relative to other maturities, the more likely it will be treated as a note); and source of payment (the more dependant the issue is on the market for its refinancing, the more likely it will be treated as a note). Note rating symbols are as follows: SP-1: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation. SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. SP-3: Speculative capacity to pay principal and interest. FITCH LONG-TERM CREDIT RATINGS Fitch Ratings provides an opinion on the ability of an entity or of a securities issue to meet financial commitments, such as interest, preferred dividends, or repayment of principal, on a timely basis. These credit ratings apply to a variety of entities and issues, including but not limited to sovereigns, A-5 governments, structured financings, and corporations; debt, preferred/preference stock, bank loans, and counterparties; as well as the financial strength of insurance companies and financial guarantors. Credit ratings are used by investors as indications of the likelihood of getting their money back in accordance with the terms on which they invested. Thus, the use of credit ratings defines their function: "investment grade" ratings (international Long-term 'AAA' - 'BBB' categories; Short-term 'F1' - 'F3') indicate a relatively low probability of default, while those in the "speculative" or "non-investment grade" categories (international Long-term 'BB' - 'D'; Short-term 'B' - 'D') either signal a higher probability of default or that a default has already occurred. Ratings imply no specific prediction of default probability. However, for example, it is relevant to note that over the long term, defaults on 'AAA' rated U.S. corporate bonds have averaged less than 0.10% per annum, while the equivalent rate for 'BBB' rated bonds was 0.35%, and for 'B' rated bonds, 3.0%. Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated. Entities or issues carrying the same rating are of similar but not necessarily identical credit quality since the rating categories do not fully reflect small differences in the degrees of credit risk. Fitch credit and research are not recommendations to buy, sell or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature of taxability of payments of any security. The ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch Ratings believes to be reliable. Fitch Ratings does not audit or verify the truth or accuracy of such information. Ratings may be changed or withdrawn as a result of changes in, or the unavailability of, information or for other reasons. Our program ratings relate only to standard issues made under the program concerned; it should not be assumed that these ratings apply to every issue made under the program. In particular, in the case of non-standard issues, i.e., those that are linked to the credit of a third party or linked to the performance of an index, ratings of these issues may deviate from the applicable program rating. Credit ratings do not directly address any risk other than credit risk. In particular, these ratings do not deal with the risk of loss due to changes in market interest rates and other market considerations. AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong capacity for timely payment of financial commitments, which is unlikely to be affected by foreseeable events. AA: Bonds considered to be investment grade and of very high credit quality. The obligor has a very strong capacity for timely payment of financial commitments which is not significantly vulnerable to foreseeable events. A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. BBB: Bonds considered to be investment grade and of good credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances are more likely to impair this capacity. PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the "AAA" category. NR: Indicates that Fitch does not rate the specific issue. A-6 WITHDRAWN: A rating will be withdrawn when an issue matures or is called or refinanced and at Fitch's discretion, when Fitch Ratings deems the amount of information available to be inadequate for ratings purposes. RATINGWATCH: Ratings are placed on RatingWatch to notify investors that there is a reasonable possibility of a rating change and the likely direction of such change. These are designated as "Positive," indicating a potential upgrade, "Negative," for potential downgrade, or "Evolving," if ratings may be raised, lowered or maintained. RatingWatch is typically resolved over a relatively short period. FITCH SPECULATIVE GRADE BOND RATINGS BB: Bonds are considered speculative. There is a possibility of credit risk developing, particularly as the result of adverse economic changes over time. However, business and financial alternatives may be available to allow financial commitments to be met. B: Bonds are considered highly speculative. Significant credit risk is present but a limited margin of safety remains. While bonds in this class are currently meeting financial commitments, the capacity for continued payment is contingent upon a sustained, favorable business and economic environment. CCC: Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. CC: Default of some kind appears probable. C: Bonds are in imminent default in payment of interest or principal. DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and are valued on the basis of their prospects for achieving partial or full recovery value in liquidation or reorganization of the obligor. "DDD" represents the highest potential for recovery on these bonds, and "D" represents the lowest potential for recovery. PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in categories below CCC. FITCH SHORT-TERM CREDIT RATINGS The following ratings scale applies to foreign currency and local currency ratings. A Short-term rating has a time horizon of less than 12 months for most obligations, or up to three years for U.S. public finance securities, and thus places greater emphasis on the liquidity necessary to meet financial commitments in a timely manner. F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated "F-1+." F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as in the case of the higher ratings. A-7 F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could result in a reduction to non-investment grade. B: Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions. C: High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment. D: Default. Issues assigned this rating are in actual or imminent payment default. A-8 APPENDIX B PERSONS TO WHOM AIM PROVIDES NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS (AS OF FEBRUARY 21, 2006)
SERVICE PROVIDER DISCLOSURE CATEGORY ---------------- ------------------------------- ABN AMRO Financial Services, Inc. Broker (for certain AIM funds) AIM Investment Services, Inc. Transfer Agent Anglemyer & Co. Analyst (for certain AIM funds) Ballard Spahr Andrews & Ingersoll, LLP Legal Counsel BB&T Capital Markets Broker (for certain AIM funds) Belle Haven Investments L.P. Broker (for certain AIM funds) Bloomberg System Provider (for certain AIM funds) BOSC, Inc. Broker (for certain AIM funds) BOWNE & Co. Financial Printer Brown Brothers Harriman & Co. Securities Lender (for certain AIM funds) Cabrera Capital Markets Broker (for certain AIM funds) Cenveo Financial Printer Classic Printers Inc. Financial Printer Coastal Securities, LP Broker (for certain AIM funds) Color Dynamics Financial Printer Duncan-Williams, Inc. Broker (for certain AIM funds) Earth Color Houston Financial Printer EMCO Press Financial Printer Empirical Research Partners Analyst (for certain AIM funds) Fidelity Investments Broker (for certain AIM funds) First Albany Capital Broker (for certain AIM funds) First Tryon Securities Broker (for certain AIM funds) Foley & Lardner LLP Legal Counsel (for certain AIM funds) GainsKeeper Software Provider (for certain AIM funds) GCom2 Solutions Software Provider (for certain AIM funds) George K. Baum & Company Broker (for certain AIM funds) Global Trend Alert Analyst (for certain AIM funds) Grover Printing Financial Printer Gulfstream Graphics Corp. Financial Printer Hattier, Sanford & Reynoir Broker (for certain AIM funds) Howe Barnes Investments, Inc. Broker (for certain AIM funds) Hutchinson, Shockey, Erley & Co. Broker (for certain AIM funds) iMoneyNet Rating & Ranking Agency (for certain AIM funds) Institutional Shareholder Services, Inc. Proxy Voting Service (for certain AIM funds) J.P.Morgan Securities Inc. Analyst (for certain AIM funds) JPMorgan Securities Inc.\Citigroup Global Markets Lender (for certain AIM funds) Inc.\JPMorgan Chase Bank John Hancock Investment Management Services, LLC Sub-advisor (for certain sub-advised accounts) Kevin Dann & Partners Analyst (for certain AIM funds) Kirkpatrick, Pettis, Smith, Pollian, Inc. Broker (for certain AIM funds) Kramer, Levin Naftalis & Frankel LLP Legal Counsel Legg Mason Wood Walker Broker (for certain AIM funds) Lipper Rating & Ranking Agency (for certain AIM funds) Loan Pricing Corporation Pricing Service (for certain AIM funds) Loop Capital Markets Broker (for certain AIM funds) M.R. Beal & Company Broker (for certain AIM funds) McDonald Investments Inc. Broker (for certain AIM funds)
B-1
SERVICE PROVIDER DISCLOSURE CATEGORY ---------------- ------------------------------- Mesirow Financial, Inc. Broker (for certain AIM funds) Moody's Investors Service Rating & Ranking Agency (for certain AIM funds) Morgan Keegan & Company, Inc. Broker (for certain AIM funds) Morrison Foerster LLP Legal Counsel Muzea Insider Consulting Services, LLC Analyst (for certain AIM funds) Noah Financial, LLC Analyst (for certain AIM funds) Piper Jaffray Analyst and Broker (for certain AIM funds) PricewaterhouseCoopers LLP Independent Registered Public Accounting Firm (for certain AIM funds) Printing Arts of Houston Financial Printer Ramirez & Co., Inc. Broker (for certain AIM funds) Raymond James & Associates, Inc. Broker (for certain AIM funds) RBC Capital Markets Analyst (for certain AIM funds) RBC Dain Rauscher Incorporated Broker (for certain AIM funds) Reuters America Inc. Pricing Service (for certain AIM funds) Robert W. Baird & Co. Incorporated Broker (for certain AIM funds) RR Donnelley Financial Printer Salomon Smith Barney Broker (for certain AIM funds) SBK Brooks Investment Corp. Broker (for certain AIM funds) Seattle Northwest Securities Corporation Broker (for certain AIM funds) Siebert Brandford Shank & Co., L.L.C. Broker (for certain AIM funds) Signature Financial Printer Simon Printing Company Financial Printer Southwest Precision Printers, Inc. Financial Printer Standard and Poor's/Standard and Poor's Securities Pricing Service (for certain AIM funds) Evaluations, Inc. State Street Bank and Trust Company Custodian (for certain AIM funds); Lender (for certain AIM Funds); Securities Lender (for certain AIM funds) Sterne, Agee & Leach, Inc. Broker (for certain AIM funds) Stifel, Nicholaus & Company, Incorporated Broker (for certain AIM funds) The Bank of New York Custodian (for certain AIM funds) The MacGregor Group, Inc. Software Provider Thomson Information Services Incorporated Software Provider UBS Financial Services, Inc. Broker (for certain AIM funds) VCI Group Inc. Financial Printer Wachovia National Bank, N.A. Broker (for certain AIM funds) Western Lithograph Financial Printer Wiley Bros. Aintree Capital L.L.C. Broker (for certain AIM funds) XSP, LLC\Solutions Plus, Inc. Software Provider
B-2 APPENDIX C TRUSTEES AND OFFICERS As of January 31, 2006 The address of each trustee and officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 109 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with any predecessor entities, if any.
TRUSTEE NAME, YEAR OF BIRTH AND AND/OR OTHER POSITION(S) HELD WITH THE OFFICER TRUSTEESHIPS HELD TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS BY TRUSTEE -------------------------- ------- ------------------------------------------- ------------------ INTERESTED PERSONS 1998 Director and Chairman, A I M Management Group None 1 Robert H. Graham -- 1946 Trustee, Vice Chair, President Inc. (financial services holding company); and Principal Executive Officer Director and Vice Chairman, AMVESCAP PLC and Chairman, AMVESCAP PLC - AIM Division (parent of AIM and a global investment management firm) Formerly: President and Chief Executive Officer, A I M Management Group Inc.; Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc. (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC - Managed Products 2 Mark H. Williamson -- 1951 2003 Director, President and Chief Executive Officer, None Trustee and Executive Vice A I M Management Group Inc. (financial services President holding company); Director and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent), Fund Management Company (registered broker dealer) and INVESCO Distributors, Inc. (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC - AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc.; President and Chief Executive Officer, INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC - Managed Products; and Chairman, A I M Advisors, Inc.
---------------- 1 Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust. 2 Mr. Williamson is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of the Trust. C-1
TRUSTEE NAME, YEAR OF BIRTH AND AND/OR OTHER POSITION(S) HELD WITH THE OFFICER TRUSTEESHIPS HELD TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS BY TRUSTEE -------------------------- ------- ------------------------------------------- ------------------ INDEPENDENT TRUSTEES Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited Trustee and Chair (technology consulting company) (insurance company); and Captaris, Inc. (unified messaging provider) Bob R. Baker - 1936 2003 Retired None Trustee Frank S. Bayley -- 1939 1987 Retired Badgley Funds, Inc. Trustee Formerly: Partner, law firm of Baker & McKenzie (registered investment company (2 portfolios)) James T. Bunch - 1942 2003 Founder, Green, Manning & Bunch Ltd. None Trustee (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation Albert R. Dowden -- 1941 2001 Director of a number of public and private None Trustee business corporations, including the Boss Group, Ltd. (private investment and management); Cortland Trust, Inc. (Chairman) (registered investment company (3 portfolios)); Annuity and Life Re (Holdings), Ltd. (insurance company); CompuDyne Corporation (provider of products and services to the public security market) and Homeowners of America Holding Corporation Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo companies Edward K. Dunn, Jr. -- 1935 2001 Retired None Trustee Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Century Administaff ; and Trustee Group, Inc. (government affairs company) and; Discovery Global Owner, Dos Angelos Ranch, L.P. Education Fund (non-profit) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Naftalis and Cortland Trust, Trustee Frankel LLP Inc. (registered investment company (3 portfolios))
C-2
TRUSTEE NAME, YEAR OF BIRTH AND AND/OR OTHER POSITION(S) HELD WITH THE OFFICER TRUSTEESHIPS HELD TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS BY TRUSTEE -------------------------- ------- ------------------------------------------- ------------------ Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the None Trustee USA Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None Trustee Ruth H. Quigley -- 1935 1987 Retired None Trustee Larry Soll - 1942 2003 Retired None Trustee Raymond Stickel, Jr. - 1944 2005 Retired None Trustee Formerly: Partner, Deloitte & Touche OTHER OFFICERS Lisa O. Brinkley -- 1959 2004 Senior Vice President, A I M Management Group N/A Senior Vice President and Inc. (financial services holding company); Chief Compliance Officer Senior Vice President and Chief Compliance Officer, A I M Advisors, Inc.; Vice President and Chief Compliance Officer, A I M Capital Management, Inc.; and Vice President, A I M Distributors, Inc., AIM Investment Services, Inc. and Fund Management Company and Global Compliance Director, AMVESCAP Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds; and Chief Compliance Officer, A I M Distributors, Inc. Russell C. Burk - 1958 2005 Formerly: Director of Compliance and Assistant N/A Senior Vice President and General Counsel, ICON Advisers, Inc.; Financial Senior Officer Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc.
C-3
TRUSTEE NAME, YEAR OF BIRTH AND AND/OR OTHER POSITION(S) HELD WITH THE OFFICER TRUSTEESHIPS HELD TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS BY TRUSTEE -------------------------- ------- ------------------------------------------- ------------------ Kevin M. Carome - 1956 Senior 2003 Director, Senior Vice President, Secretary and N/A Vice President, Chief Legal General Counsel, A I M Management Group Inc. Officer and Secretary (financial services holding company) and A I M Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., AIM Investment Services, Inc., and Fund Management Company; and Senior Vice President, A I M Distributors, Inc. and Senior Vice President and General Counsel, AMVESCAP Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC; and Vice President, A I M Distributors, Inc.; and Director and General Counsel, Fund Management Company Sidney M. Dilgren - 1961 2004 Vice President and Fund Treasurer, A I M N/A Vice President, Advisors, Inc. Treasurer and Principal Formerly: Senior Vice President, AIM Investment Financial Officer Services, Inc.; and Vice President, A I M Distributors, Inc. J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief Investment N/A Vice President Officer, A I M Advisors Inc.; Director, Chairman, Chief Executive Officer, President and Chief Investment Officer, A I M Capital Management, Inc; and Executive Vice President, A I M Management Group Inc. Formerly: Senior Vice President, AIM Private Asset Management, Inc.; and Chief Equity Officer, and Senior Investment Officer, A I M Capital Management, Inc. Karen Dunn Kelley - 1960 2004 Director of Cash Management, Managing Director N/A Vice President and Chief Cash Management Officer, A I M Capital Management, Inc.; Director and President, Fund Management Company; and Vice President, A I M Advisors, Inc.
C-4 TRUSTEE OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2005
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL REGISTERED INVESTMENT COMPANIES OVERSEEN BY DOLLAR RANGE OF EQUITY SECURITIES TRUSTEE IN THE AIM FAMILY NAME OF TRUSTEE PER FUND OF FUNDS REGISTERED TRADEMARK ----------------- ------------------------------------------------------ ----------------------------- Robert H. Graham AIM Developing Markets Fund Over $100,000 Over $100,000 Mark H. Williamson AIM Global Health Care Fund $10,001 - $50,000 Over $100,000 Bob R. Baker -0- Over $100,000 Frank S. Bayley AIM Developing Markets Fund $1 - $10,000 Over $100,000 AIM Trimark Small Companies Fund $10,001 - $50,000 3 James T. Bunch -0- Over $100,000 3 Bruce L. Crockett AIM Developing Markets Fund $10,001 - $50,000 Over $100,000 Albert R. Dowden -0- Over $100,000 3 Edward K. Dunn, Jr. AIM Trimark Endeavor Fund $10,001 - $50,000 Over $100,000 3 Jack M. Fields -0- Over $100,000 3 Carl Frischling AIM Developing Markets Fund Over $100,000 Over $100,000 AIM Trimark Small Companies Fund $50,001 - $100,000 3 Prema Mathai-Davis -0- Over $100,000 Lewis F. Pennock -0- Over $100,000 3 Ruth H. Quigley AIM Developing Markets Fund $10,001 - $50,000 $50,001 - $100,000 3 Larry Soll AIM Developing Markets Fund $10,001 - $50,000 Over $100,000 AIM Global Health Care Fund $50,001 - $100,000 4 Raymond Stickel, Jr. AIM Trimark Small Companies Fund $10,001 - $50,000 Over $100,000
---------------------- 3 Include the total amount of compensation deferred by the trustee at his or her election pursuant to a deferred compensation plan. Such deferred compensation is placed in a deferral account and deemed to be invested in one or more of the AIM Funds. 4 Mr. Stickel was elected as a trustee of the Trust effective October 1,2005. C-5 APPENDIX D TRUSTEE COMPENSATION TABLE Set forth below is information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2005:
RETIREMENT AGGREGATE BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION FROM ACCRUED BENEFITS UPON COMPENSATION THE BY ALL RETIREMENT FROM ALL FROM ALL AIM (1) (2) (3) (4) TRUSTEE TRUST AIM FUNDS AIM FUNDS FUNDS --------- -------------------- -------------- -------------------- ------------ Bob R. Baker $ 6,962 $ 200,136 $ 162,613 $ 213,750 Frank S. Bayley 7,451 132,526 120,000 229,000 James T. Bunch 6,472 162,930 120,000 198,500 Bruce L. Crockett 11,455 83,764 120,000 359,000 Albert R. Dowden 7,451 112,024 120,000 229,000 Edward K. Dunn, Jr. 7,451 141,485 120,000 229,000 Jack M. Fields 6,031 59,915 120,000 185,000 (5) Carl Frischling 6,366 59,042 120,000 195,250 (6) Gerald J. Lewis 6,472 162,930 114,375 198,500 Prema Mathai-Davis 6,962 69,131 120,000 213,750 Lewis F. Pennock 6,472 86,670 120,000 198,500 Ruth H. Quigley 6,962 154,658 120,000 213,750 (6) Louis S. Sklar 1,184 51,638 101,250 - Larry Soll 6,472 201,483 138,990 198,500 (7) Raymond Stickel, Jr. 654 - 120,000 54,000
(1) Amounts shown are based on the fiscal year ended October 31, 2005. The total amount of compensation deferred by all trustees of the Trust during the fiscal year ended October 31, 2005, including earnings, was $15,770. (2) During the fiscal year ended October 31, 2005, the total amount of expenses allocated to the Trust in respect of such retirement benefits was $31,359. (3) These amounts represent the estimated annual benefits payable by the AIM Funds upon the trustee's retirement and assumes each trustee serves until his or her normal retirement date. (4) All trustees currently serve as trustees of 19 registered investment companies advised by AIM. (5) During the fiscal year ended October 31, 2005, the Trust paid $17,534 in legal fees to Kramer Levin Naftalis & Frankel LLP for services rendered by such firm as counsel to the independent trustees of the Trust. Mr. Frischling is a partner of such firm. (6) Mr. Sklar and Mr. Lewis retired effective December 31, 2004 and December 31, 2005, respectively. (7) Mr. Stickel was elected as trustee of the Trust effective October 1, 2005. D-1 APPENDIX E PROXY POLICIES AND PROCEDURES (AS AMENDED OCTOBER 1, 2005) A. PROXY POLICIES Each of A I M Advisors, Inc., A I M Capital Management, Inc. and AIM Private Asset Management, Inc. (each an "AIM Advisor" and collectively "AIM") has the fiduciary obligation to, at all times, make the economic best interest of advisory clients the sole consideration when voting proxies of companies held in client accounts. As a general rule, each AIM Advisor shall vote against any actions that would reduce the rights or options of shareholders, reduce shareholder influence over the board of directors and management, reduce the alignment of interests between management and shareholders, or reduce the value of shareholders' investments. At the same time, AIM believes in supporting the management of companies in which it invests, and will accord proper weight to the positions of a company's board of directors, and the AIM portfolio managers who chose to invest in the companies. Therefore, on most issues, our votes have been cast in accordance with the recommendations of the company's board of directors, and we do not currently expect that trend to change. Although AIM's proxy voting policies are stated below, AIM's proxy committee considers all relevant facts and circumstances, and retains the right to vote proxies as deemed appropriate. I. BOARDS OF DIRECTORS A board that has at least a majority of independent directors is integral to good corporate governance. The key board committees (e.g., Audit, Compensation and Nominating) should be composed of only independent trustees. There are some actions by directors that should result in votes being withheld. These instances include directors who: - Are not independent directors and (a) sit on the board's audit, compensation or nominating committee, or (b) sit on a board where the majority of the board is not independent; - Attend less than 75 percent of the board and committee meetings without a valid excuse; - It is not clear that the director will be able to fulfill his function; - Implement or renew a dead-hand or modified dead-hand poison pill; - Enacted egregious corporate governance or other policies or failed to replace management as appropriate; - Have failed to act on takeover offers where the majority of the shareholders have tendered their shares; or - Ignore a shareholder proposal that is approved by a majority of the shares outstanding. Votes in a contested election of directors must be evaluated on a case-by-case basis, considering the following factors: - Long-term financial performance of the target company relative to its industry; - Management's track record; - Portfolio manager's assessment; - Qualifications of director nominees (both slates); - Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and - Background to the proxy contest. II. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM A company should limit its relationship with its auditors to the audit engagement, and certain closely related activities that do not, in the aggregate, raise an appearance of impaired independence. We will support the reappointment of the company's auditors unless: - It is not clear that the auditors will be able to fulfill their function; E-1 - There is reason to believe the independent auditors have rendered an opinion that is neither accurate nor indicative of the company's financial position; or - The auditors have a significant professional or personal relationship with the issuer that compromises the auditors' independence. III. COMPENSATION PROGRAMS Appropriately designed equity-based compensation plans, approved by shareholders, can be an effective way to align the interests of long-term shareholders and the interests of management, employees and directors. Plans should not substantially dilute shareholders' ownership interests in the company, provide participants with excessive awards or have objectionable structural features. We will consider all incentives, awards and compensation, and compare them to a company-specific adjusted allowable dilution cap and a weighted average estimate of shareholder wealth transfer and voting power dilution. - We will generally vote against equity-based plans where the total dilution (including all equity-based plans) is excessive. - We will support the use of employee stock purchase plans to increase company stock ownership by employees, provided that shares purchased under the plan are acquired for no less than 85% of their market value. - We will vote against plans that have any of the following structural features: ability to re-price underwater options without shareholder approval, ability to issue options with an exercise price below the stock's current market price, ability to issue reload options, or automatic share replenishment ("evergreen") feature. - We will vote for proposals to reprice options if there is a value-for-value (rather than a share-for-share) exchange. - We will generally support the board's discretion to determine and grant appropriate cash compensation and severance packages. IV. CORPORATE MATTERS We will review management proposals relating to changes to capital structure, reincorporation, restructuring and mergers and acquisitions on a case by case basis, considering the impact of the changes on corporate governance and shareholder rights, anticipated financial and operating benefits, portfolio manager views, level of dilution, and a company's industry and performance in terms of shareholder returns. - We will vote for merger and acquisition proposals that the proxy committee and relevant portfolio managers believe, based on their review of the materials, will result in financial and operating benefits, have a fair offer price, have favorable prospects for the combined companies, and will not have a negative impact on corporate governance or shareholder rights. - We will vote against proposals to increase the number of authorized shares of any class of stock that has superior voting rights to another class of stock. - We will vote for proposals to increase common share authorization for a stock split, provided that the increase in authorized shares would not result in excessive dilution given a company's industry and performance in terms of shareholder returns. - We will vote for proposals to institute open-market share repurchase plans in which all shareholders participate on an equal basis. V. SHAREHOLDER PROPOSALS Shareholder proposals can be extremely complex, and the impact on share value can rarely be anticipated with any high degree of confidence. The proxy committee reviews shareholder proposals on a case-by-case basis, giving careful consideration to such factors as: the proposal's impact on the company's short-term and long-term share value, its effect on the company's reputation, the economic effect of the proposal, industry and regional norms E-2 applicable to the company, the company's overall corporate governance provisions, and the reasonableness of the request. - We will generally abstain from shareholder social and environmental proposals. - We will generally support the board's discretion regarding shareholder proposals that involve ordinary business practices. - We will generally vote for shareholder proposals that are designed to protect shareholder rights if the company's corporate governance standards indicate that such additional protections are warranted. - We will generally vote for proposals to lower barriers to shareholder action. - We will generally vote for proposals to subject shareholder rights plans to a shareholder vote. In evaluating these plans, we give favorable consideration to the presence of "TIDE" provisions (short-term sunset provisions, qualified bid/permitted offer provisions, and/or mandatory review by a committee of independent directors at least every three years). VI. OTHER - We will vote against any proposal where the proxy materials lack sufficient information upon which to base an informed decision. - We will vote against any proposals to authorize the proxy to conduct any other business that is not described in the proxy statement. - We will vote any matters not specifically covered by these proxy policies and procedures in the economic best interest of advisory clients. AIM's proxy policies, and the procedures noted below, may be amended from time to time. B. PROXY COMMITTEE PROCEDURES The proxy committee currently consists of representatives from the Legal and Compliance Department, the Investments Department and the Finance Department. The committee members review detailed reports analyzing the proxy issues and have access to proxy statements and annual reports. Committee members may also speak to management of a company regarding proxy issues and should share relevant considerations with the proxy committee. The committee then discusses the issues and determines the vote. The committee shall give appropriate and significant weight to portfolio managers' views regarding a proposal's impact on shareholders. A proxy committee meeting requires a quorum of three committee members, voting in person or by e-mail. AIM's proxy committee shall consider its fiduciary responsibility to all clients when addressing proxy issues and vote accordingly. The proxy committee may enlist the services of reputable outside professionals and/or proxy evaluation services, such as Institutional Shareholder Services or any of its subsidiaries ("ISS"), to assist with the analysis of voting issues and/or to carry out the actual voting process. To the extent the services of ISS or another provider are used, the proxy committee shall periodically review the policies of that provider. The proxy committee shall prepare a report for the Funds' Board of Trustees on a periodic basis regarding issues where AIM's votes do not follow the recommendation of ISS or another provider because AIM's proxy policies differ from those of such provider. In addition to the foregoing, the following shall be strictly adhered to unless contrary action receives the prior approval of the Funds' Board of Trustees: 1. Other than by voting proxies and participating in Creditors' committees, AIM shall not engage in conduct that involves an attempt to change or influence the control of a company. 2. AIM will not publicly announce its voting intentions and the reasons therefore. 3. AIM shall not participate in a proxy solicitation or otherwise seek proxy-voting authority from any other public company shareholder. 4. All communications regarding proxy issues between the proxy committee and companies or their agents, or with fellow shareholders shall be for the sole purpose of expressing and E-3 discussing AIM's concerns for its advisory clients' interests and not for an attempt to influence or control management. C. BUSINESS/DISASTER RECOVERY If the proxy committee is unable to meet due to a temporary business interruption, such as a power outage, a sub-committee of the proxy committee, even if such subcommittee does not constitute a quorum of the proxy committee, may vote proxies in accordance with the policies stated herein. If the sub-committee of the proxy committee is not able to vote proxies, the sub-committee shall authorize ISS to vote proxies by default in accordance with ISS' proxy policies and procedures, which may vary slightly from AIM's. D. RESTRICTIONS AFFECTING VOTING If a country's laws allow a company in that country to block the sale of the company's shares by a shareholder in advance of a shareholder meeting, AIM will not vote in shareholder meetings held in that country, unless the company represents that it will not block the sale of its shares in connection with the meeting. Administrative or other procedures, such as securities lending, may also cause AIM to refrain from voting. Although AIM considers proxy voting to be an important shareholder right, the proxy committee will not impede a portfolio manager's ability to trade in a stock in order to vote at a shareholder meeting. E. CONFLICTS OF INTEREST The proxy committee reviews each proxy to assess the extent to which there may be a material conflict between AIM's interests and those of advisory clients. A potential conflict of interest situation may include where AIM or an affiliate manages assets for, administers an employee benefit plan for, provides other financial products or services to, or otherwise has a material business relationship with, a company whose management is soliciting proxies, and failure to vote proxies in favor of management of the company may harm AIM's relationship with the company. In order to avoid even the appearance of impropriety, the proxy committee will not take AIM's relationship with the company into account, and will vote the company's proxies in the best interest of the advisory clients, in accordance with these proxy policies and procedures. If AIM's proxy policies and voting record do not guide the proxy committee's vote in a situation where a conflict of interest exists, the proxy committee will vote the proxy in the best interest of the advisory clients, and will provide information regarding the issue to the Funds' Board of Trustees in the next quarterly report. If a committee member has any conflict of interest with respect to a company or an issue presented, that committee member should inform the proxy committee of such conflict and abstain from voting on that company or issue. F. FUND OF FUNDS When an AIM Fund (an "Investing Fund") that invests in another AIM Fund(s) (an "Underlying Fund") has the right to vote on the proxy of the Underlying Fund, the Investing Fund will echo the votes of the other shareholders of the Underlying AIM Fund. G. CONFLICT IN THESE POLICIES If following any of the policies listed herein would lead to a vote that the proxy committee deems to be not in the best interest of AIM's advisory clients, the proxy committee will vote the proxy in the manner that they deem to be the best interest of AIM's advisory clients and will inform the Funds' Board of Trustees of such vote and the circumstances surrounding it promptly thereafter. E-4 AIM TRIMARK INVESTMENTS PROXY VOTING GUIDELINES (SEPTEMBER 15, 2005) PURPOSE AND BACKGROUND In its trusteeship and management of mutual funds, AIM Trimark acts as fiduciary to the unitholders and must act in their best interests. APPLICATION AIM Trimark will make every effort to exercise all voting rights with respect to securities held in the mutual funds that it manages in Canada or to which it provides sub-advisory services, including a Fund registered under and governed by the US Investment Company act of 1940, as amended (the "US Funds") (collectively, the "Funds"). Proxies for the funds distributed by AIM Trimark Investments and managed by an affiliate or a third party (a "Sub-Advisor") will be voted in accordance with the Sub-Advisor's policy, unless the sub-advisory agreement provides otherwise. The portfolio managers have responsibility for exercising all proxy votes and in doing so, for acting in the best interest of the Fund. Portfolio managers must vote proxies in accordance with the Guidelines, as amended from time to time, a copy of which is attached to this policy. When a proxy is voted against management's recommendation, the portfolio manager will provide to the CIO the reasons in writing for any vote in opposition to management's recommendation. AIM Trimark may delegate to a third party the responsibility to vote proxies on behalf of all or certain Funds, in accordance with the Guidelines. RECORDS MANAGEMENT The Investment Department will endeavour to ensure that all proxies and notices are received from all issuers on a timely basis, and will maintain for all Funds - A record of all proxies received; - a record of votes cast; - a copy of the reasons for voting against management; and for the US Funds - the documents mentioned above; and - a copy of any document created by AIM Trimark that was material to making a decision how to vote proxies on behalf of a US Fund and that memorializes the basis of that decision. AIM Trimark has a dedicated Central Proxy Administrator who manages all proxy voting materials. Proxy voting circulars for all companies are received electronically through an external service provider. Circulars for North American companies and ADRs are generally also received in paper format. Once a circular is received, the Administrator verifies that all shares and Funds affected are correctly listed. The Administrator then gives a copy of the proxy summary to each affected portfolio manager and maintains a tracking list to ensure that all proxies are voted within the prescribed deadlines. Once voting information has been received from the portfolio managers, voting instructions are sent electronically to the service provider who then forwards the instructions to the appropriate proxy E-5 voting agent or transfer agent. The external service provider retains on behalf of AIM Trimark a record of the votes cast and agrees to provide AIM Trimark with a copy of proxy records promptly upon request. The service provider must make all documents available to AIM Trimark for a period of six years. In the event that AIM Trimark ceases to use an external service provider, all documents would be maintained and preserved in an easily accessible place (i) for a period of two years where AIM Trimark carries on business in Canada and (ii) for a period of three years thereafter at the same location or at any other location. REPORTING The CIO will report on proxy voting to the Fund Boards on an annual basis with respect to all funds managed in Canada or distributed by AIM Trimark Investments and managed by a Sub-Advisor. The CIO will report on proxy voting to the Board of Directors of the US Funds as required from time to time. Compliance will review the proxy voting records held by AIM Trimark on an annual basis. E-6 AIM TRIMARK INVESTMENTS PROXY VOTING GUIDELINES (SEPTEMBER 15, 2005) PURPOSE The purpose of this document is to describe AIM Trimark's general guidelines for voting proxies received from companies held in AIM Trimark's Canada-managed funds. Proxy voting for the funds managed on behalf of AIM Trimark on a sub-advised basis (i.e. by other AMVESCAP business units or on a third party basis) are subject to the proxy voting policies & procedures of those other entities. As part of its regular due diligence, AIM Trimark will review the proxy voting policies & procedures of any new sub-advisors to ensure that they are appropriate in the circumstances. INTRODUCTION AIM Trimark has the fiduciary obligation to ensure that the long-term economic best interest of unitholders is the key consideration when voting proxies of portfolio companies. As a general rule, AIM Trimark shall vote against any actions that would - reduce the rights or options of shareholders, - reduce shareholder influence over the board of directors and management, - reduce the alignment of interests between management and shareholders, or - reduce the value of shareholders' investments. At the same time, since AIM Trimark's portfolio managers follow an investment discipline that includes investing in companies that are believed to have strong management teams, the portfolio managers will generally support the management of companies in which they invest, and will accord proper weight to the positions of a company's board of directors. Therefore, in most circumstances, votes will be cast in accordance with the recommendations of the company's board of directors. While AIM Trimark's proxy voting guidelines are stated below, the portfolio managers will take into consideration all relevant facts and circumstances (including country specific considerations), and retain the right to vote proxies as deemed appropriate. These guidelines may be amended from time to time. CONFLICTS OF INTEREST When voting proxies, AIM Trimark's portfolio managers assess whether there are material conflicts of interest between AIM Trimark's interests and those of unitholders. A potential conflict of interest situation may include where AIM Trimark or an affiliate manages assets for, provides other financial services to, or otherwise has a material business relationship with, a company whose management is soliciting proxies, and failure to vote in favour of management of the company may harm AIM Trimark's relationship with the company. In all situations, the portfolio managers will not take AIM Trimark's relationship with the company into account, and will vote the proxies in the best interest of the unitholders. To the extent that a portfolio manager has any conflict of interest with respect to a company or an issue presented, that portfolio manager should abstain from voting on that company or issue. Portfolio managers are required to report to the Chief Investment Officer any such conflicts of interest and/or attempts by outside parties to improperly influence the voting process. E-7 I BOARDS OF DIRECTORS We believe that a board that has at least a majority of independent directors is integral to good corporate governance. Unless there are restrictions specific to a company's home jurisdiction, key board committees, including audit and compensation committees, should be completely independent. VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS Votes in an uncontested election of directors are evaluated on a CASE-BY-CASE basis, considering factors that may include: - Long-term company performance relative to a market index, - Composition of the board and key board committees, - Nominee's attendance at board meetings, - Nominee's investments in the company, - Whether the chairman is also serving as CEO, and - Whether a retired CEO sits on the board. VOTING ON DIRECTOR NOMINEES IN CONTESTED ELECTIONS Votes in a contested election of directors are evaluated on a CASE-BY-CASE basis, considering factors that may include: - Long-term financial performance of the target company relative to its industry, - Management's track record, - Background to the proxy contest, - Qualifications of director nominees (both slates), - Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met, and - Stock ownership positions. REIMBURSEMENT OF PROXY SOLICITATION EXPENSES Decisions to provide reimbursement for dissidents waging a proxy contest are made on a CASE-BY-CASE basis. SEPARATING CHAIRMAN AND CEO Shareholder proposals to separate the chairman and CEO positions should be evaluated on a CASE-BY-CASE basis. While we generally support these proposals, some companies have governance structures in place that can satisfactorily counterbalance a combined position. Voting decisions will take into account factors such as: E-8 - Designated lead director, appointed from the ranks of the independent board members with clearly delineated duties; - Majority of independent directors; - All-independent key committees; - Committee chairpersons nominated by the independent directors; - CEO performance is reviewed annually by a committee of outside directors; and - Established governance guidelines. MAJORITY OF INDEPENDENT DIRECTORS While we generally support shareholder proposals asking that a majority of directors be independent, each proposal should be evaluated on a CASE-BY-CASE basis. We generally vote for shareholder proposals that request that the board's audit, compensation, and/or nominating committees be composed exclusively of independent directors. STOCK OWNERSHIP REQUIREMENTS We believe that individual directors should be appropriately compensated and motivated to act in the best interests of shareholders. Share ownership by directors better aligns their interests with those of other shareholders. Therefore, we believe that meaningful share ownership by directors is in the best interest of the company. We generally vote FOR proposals that require a certain percentage of a director's compensation to be in the form of common stock. SIZE OF BOARDS OF DIRECTORS We believe that the number of directors is important to ensuring the board's effectiveness in maximizing long-term shareholder value. The board must be large enough to allow it to adequately discharge its responsibilities, without being so large that it becomes cumbersome. While we prefer a board of no fewer than five and no more than 16 members, each situation will be considered on a CASE-BY-CASE basis taking into consideration the specific company circumstances. CLASSIFIED OR STAGGERED BOARDS In a classified or staggered board, directors are typically elected in two or more "classes", serving terms greater than one year. We prefer the annual election of all directors and will generally NOT SUPPORT proposals that provide for staggered terms for board members. We recognize that there may be jurisdictions where staggered terms for board members is common practice and, in such situations, we will review the proposals on a CASE-BY-CASE basis. DIRECTOR INDEMNIFICATION AND LIABILITY PROTECTION We recognize that many individuals may be reluctant to serve as corporate directors if they were to be personally liable for all lawsuits and legal costs. As a result, limitations on directors' liability can E-9 benefit the corporation and its shareholders by helping to attract and retain qualified directors while providing recourse to shareholders on areas of misconduct by directors. We generally vote FOR proposals that limit directors' liability and provide indemnification as long as the arrangements are limited to the director acting honestly and in good faith with a view to the best interests of the corporation and, in criminal matters, are limited to the director having reasonable grounds for believing the conduct was lawful. II AUDITORS A strong audit process is a requirement for good corporate governance. A significant aspect of the audit process is a strong relationship with a knowledgeable and independent set of auditors. RATIFICATION OF AUDITORS We believe a company should limit its relationship with its auditors to the audit engagement, and certain closely related activities that do not, in the aggregate, raise an appearance of impaired independence. We generally vote FOR the reappointment of the company's auditors unless: - It is not clear that the auditors will be able to fulfill their function; - There is reason to believe the auditors have rendered an opinion that is neither accurate nor indicative of the company's financial position; or - The auditors have a significant professional or personal relationship with the issuer that compromises their independence. DISCLOSURE OF AUDIT VS. NON-AUDIT FEES Understanding the fees earned by the auditors is important for assessing auditor independence. Our support for the re-appointment of the auditors will take into consideration whether the management information circular contains adequate disclosure about the amount and nature of audit vs. non-audit fees. There may be certain jurisdictions that do not currently require disclosure of audit vs. non-audit fees. In these circumstances, we will generally SUPPORT proposals that call for this disclosure. III COMPENSATION PROGRAMS Appropriately designed equity-based compensation plans, approved by shareholders, can be an effective way to align the interests of long-term shareholders and the interests of management, employees and directors. Plans should not substantially dilute shareholders' ownership interests in the company, provide participants with excessive awards or have objectionable structural features. We will consider each compensation plan in its entirety (including all incentives, awards and other compensation) to determine if the plan provides the right incentives to managers and directors and is reasonable on the whole. The following are specific guidelines dealing with some of the more common features of compensation programs (features not specifically itemized below will be considered on a CASE-BY-CASE basis taking into consideration the general principles described above): E-10 CASH COMPENSATION AND SEVERANCE PACKAGES We will generally SUPPORT the board's discretion to determine and grant appropriate cash compensation and severance packages. EQUITY-BASED PLANS - DILUTION We will generally vote AGAINST equity-based plans where the total dilution (including all equity-based plans) is excessive. EMPLOYEE STOCK PURCHASE PLANS We will generally vote FOR the use of employee stock purchase plans to increase company stock ownership by employees, provided that shares purchased under the plan are acquired for no less than 85% of their market value. It is recognized that country specific circumstances may exist (e.g. tax issues) that require proposals to be reviewed on a CASE-BY-CASE basis. LOANS TO EMPLOYEES We will vote AGAINST the corporation making loans to employees to allow employees to pay for stock or stock options. STOCK OPTION PLANS - BOARD DISCRETION We will vote AGAINST stock option plans that give the board broad discretion in setting the terms and conditions of the programs. Such programs should be submitted with detail and be reasonable in the circumstances regarding their cost, scope, frequency and schedule for exercising the options. STOCK OPTION PLANS - INAPPROPRIATE FEATURES We will generally vote AGAINST plans that have any of the following structural features: - ability to re-price "underwater" options without shareholder approval, - ability to issue options with an exercise price below the stock's current market price, - ability to issue "reload" options, or - automatic share replenishment ("evergreen") features. STOCK OPTION PLANS - DIRECTOR ELIGIBILITY We will generally SUPPORT stock option plans for directors as long as the terms and conditions of director options are clearly defined and are reasonable. STOCK OPTION PLANS - REPRICING We will vote FOR proposals to re-price options if there is a value-for-value (rather than a share-for-share) exchange. STOCK OPTION PLANS - VESTING We will vote AGAINST stock option plans that are 100% vested when granted. E-11 STOCK OPTION PLANS - AUTHORIZED ALLOCATIONS We will generally vote AGAINST stock option plans that authorize allocation of 25% or more of the available options to any one individual. STOCK OPTION PLANS - CHANGE IN CONTROL PROVISIONS We will vote AGAINST stock option plans with change in control provisions that allow option holders to receive more for their options than shareholders would receive for their shares. STOCK OPTION PLANS - EXPENSING We will consider proposals that deal with the expensing of the costs associated with stock option plans on a CASE-BY-CASE basis. IV CORPORATE MATTERS We will review management proposals relating to changes in capital structure, reincorporation, restructuring and mergers & acquisitions on a CASE-BY-CASE basis, taking into consideration the impact of the changes on corporate governance and shareholder rights, anticipated financial and operating benefits, portfolio manager views, level of dilution, and a company's industry and performance in terms of shareholder returns. COMMON STOCK AUTHORIZATION We will review proposals to increase the number of shares of common stock authorized for issue on a CASE-BY-CASE basis. DUAL CLASS SHARE STRUCTURES Dual class share structures involve the creation of a second class of common stock with either superior or inferior voting rights to those of the existing class of stock. Such share structures violate the principle of "one share, one vote", leading to the possibility that the company may take actions or fail to take actions without the support of a true majority of shareholders. We will generally vote AGAINST proposals to create or extend dual class share structures where certain stockholders have superior or inferior voting rights to another class of stock. STOCK SPLITS We will vote FOR proposals to increase common share authorization for a stock split, provided that the increase in authorized shares would not result in excessive dilution given a company's industry and performance in terms of shareholder returns. REVERSE STOCK SPLITS We will vote FOR management proposals to implement a reverse stock split, provided that the reverse split does not result in an increase of authorized but unissued shares of more than 100% after giving effect to the shares needed for the reverse split. SHARE REPURCHASE PROGRAMS We will vote AGAINST proposals to institute open-market share repurchase plans if all shareholders do not participate on an equal basis. E-12 REINCORPORATION Reincorporation involves re-establishing the company in a different legal jurisdiction. We will generally vote FOR proposals to reincorporate the company provided that the board and management have demonstrated sound financial or business reasons for the move. Proposals to reincorporate will NOT BE SUPPORTED if solely as part of an anti-takeover defense or as a way to limit directors' liability. MERGERS & ACQUISITIONS We will vote FOR merger & acquisition proposals that the relevant portfolio managers believe, based on their review of the material: - will result in financial and operating benefits, - have a fair offer price, - have favourable prospects for the combined companies, and - will not have a negative impact on corporate governance or shareholder rights. V SHAREHOLDER PROPOSALS We recognize that to effectively manage a corporation, directors and management must consider not only the interests of shareholders, but the interests of employees, customers, suppliers, creditors and the general community as well. Shareholder proposals can be extremely complex, and the impact on the interests of all stakeholders can rarely be anticipated with a high degree of confidence. Shareholder proposals will be reviewed on a CASE-BY-CASE basis with consideration of factors such as: - the proposal's impact on the company's short-term and long-term share value, - its effect on the company's reputation, - the economic effect of the proposal, - industry and regional norms applicable to the company, - the company's overall corporate governance provisions, and - the reasonableness of the request. We will generally NOT SUPPORT proposals that place arbitrary or artificial constraints on the board, management or the company. ORDINARY BUSINESS PRACTICES We will generally SUPPORT the board's discretion regarding shareholder proposals that involve ordinary business practices. E-13 PROTECTION OF SHAREHOLDER RIGHTS We will generally vote FOR shareholder proposals that are designed to protect shareholder rights if the company's corporate governance standards indicate that such additional protections are warranted. BARRIERS TO SHAREHOLDER ACTION We will generally vote FOR proposals to lower barriers to shareholder action. SHAREHOLDER RIGHTS PLANS We will generally vote FOR proposals to subject shareholder rights plans to a shareholder vote. VI OTHER We will vote AGAINST any proposal where the proxy materials lack sufficient information upon which to base an informed decision. We will vote AGAINST any proposals to authorize the company to conduct any other business that is not described in the proxy statement. E-14 APPENDIX F CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES To the best knowledge of the Trust, the names and addresses of the record and beneficial holders of 5% or more of the outstanding shares of each class of the Trust's equity securities and the percentage of the outstanding shares held by such holders are set forth below. Unless otherwise indicated below, the Trust has no knowledge as to whether all or any portion of the shares owned of record are also owned beneficially. A shareholder who owns beneficially 25% or more of the outstanding securities of a Fund is presumed to "control" that Fund as defined in the 1940 Act. Such control may affect the voting rights of other shareholders. All information listed below is as of February 2, 2006. AIM DEVELOPING MARKETS FUND
CLASS A CLASS B CLASS C INSTITUTIONAL SHARES SHARES SHARES CLASS SHARES ------------ ------------ ------------ --------------- PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF PRINCIPAL HOLDER RECORD RECORD RECORD RECORD ------------------------------------------------- ------------ ------------ ------------ --------------- Citigroup Global Markets House Account 10.56% -- 15.40% -- Attn: Cindy Tempesta, 7th Floor 333 West 34th Street NY, NY 10001-2402 AIM International Allocation Fund Omnibus Account C/O AIM Advisors 11 E Greenway Plz Ste 100 -- -- -- 98.89% Houston, TX 77046-1113 Merrill Lynch Pierce Fenner & Smith 6.50% -- 11.98% -- FBO The Sole Benefit of Customers Attn: Fund Administration 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 Morgan Stanley DW Attn: Mutual Fund Operations 3 Harborside Pl, Floor 6 -- -- 6.95% -- Jersey City, NJ 07311-3907
F-1 AIM GLOBAL HEALTH CARE FUND
INVESTOR CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS SHARES -------------- -------------- -------------- ------------ PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF PRINCIPAL HOLDER RECORD RECORD RECORD RECORD -------------------------------- -------------- -------------- -------------- ------------ Charles Schwab & Co Inc Special Custody Acct for the Exclusive Benefit of Customers ATTN: Mutual Funds 101 Montgomery St -- -- -- 19.08% San Francisco, CA 94104-4122 Citigroup Global Markets House Account Attn: Cindy Tempesta, 7th Floor 333 West 34th Street 7.25% 6.29% -- N/A New York, NY 10001-2402 Merrill Lynch Pierce Fenner & Smith FBO The Sole Benefit of Customers Attn: Fund Administration 7.17% -- 10.81% N/A 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 Nat'l Financial Services Corp The Exclusive Benefit of Cust One World Financial Center 200 Liberty St 5th Floor ATTN: Kate - Recon -- -- -- 5.33% New York, NY 10281
AIM TRIMARK ENDEAVOR FUND
INSTITUTIONAL CLASS A CLASS B CLASS C CLASS R CLASS SHARES SHARES SHARES SHARES SHARES ---------- ---------- ---------- ---------- ------------- PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD ----------------------------------- ---------- ---------- ---------- ---------- ------------- American Enterprise Investment Svcs 1120 AMP Financial Center Minneapolis, MN 55474-0001 -- -- -- 5.01% -- Charles Schwab & Co Inc Reinvestment Account 101 Montgomery St 8.61% -- -- -- -- San Francisco, CA 94104-4122
F-2
INSTITUTIONAL CLASS A CLASS B CLASS C CLASS R CLASS SHARES SHARES SHARES SHARES SHARES ---------- ---------- ---------- ---------- ------------- PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD ----------------------------------- ---------- ---------- ---------- ---------- ------------- AIM Conservative Asset Allocation Fund Omnibus Account c/o AIM Advisors -- -- -- -- 99.49% 11 E. Greenway Plz, Suite 100 Houston, TX 77046-1113 Merrill Lynch Pierce Fenner & Smith FBO the Sole Benefit of Customers Attn: Fund Administration 4800 Deer Lake Dr East 15.53% -- 22.08% -- -- 2nd Floor Jacksonville, FL 32246-6484 MG Trust Company Cust FBO F & F Roofing Co 401k Savings Pl 700 17th St Ste 300 -- -- -- 42.98% -- Denver, CO 80202-3531 MG Trust Co. Cust continental Agency of Florida, Inc. 700 17th St Ste 300 Denver, CO 80202-3531 -- -- -- 7.58% --
AIM TRIMARK FUND
INSTITUTIONAL CLASS A CLASS B CLASS C CLASS R CLASS SHARES SHARES SHARES SHARES SHARES ---------- ---------- ---------- ---------- ------------- PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD ------------------------------------- ---------- ---------- ---------- ---------- ------------- (1) A I M Advisors, Inc. Attn: Corporate Controller 11 Greenway Plaza, Suite 1919 Houston, TX 77046-1103 -- -- -- 17.26% 100.00% Charles Schwab & Co. Inc. Special Custody FBO Customers (RPS) Attn: Mutual Funds 19.21% -- -- -- -- 101 Montgomery St. San Francisco, CA 94104-4122 Chisholm Trail Financial Services Larry F. Cain 4100 S. Medford Dr., Suite B -- -- -- 5.07% -- Lufkin, TX 75901-5617 Coinage of America Gregory A. Howe 2219 E. Thousand Oaks Blvd. #251 -- -- -- 11.67% -- Thousand Oaks, CA 91362-2930
(1) Owned of record and beneficially. F-3
INSTITUTIONAL CLASS A CLASS B CLASS C CLASS R CLASS SHARES SHARES SHARES SHARES SHARES ---------- ---------- ---------- ---------- ------------- PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD ------------------------------------- ---------- ---------- ---------- ---------- ------------- Leslie F Branyon Leslie F Branyon 2484 Bentridge Ct Orange Park, FL 32065-5701 -- -- -- 17.95% -- Merrill Lynch Pierce Fenner & Smith FBO The Sole Benefit of Customers Attn: Fund Administration 5.21% 7.23% 21.75% -- -- 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 MG Trust Co Cust Liberty Homes 401k 700 17th St Ste 300 -- -- -- 11.61% -- Denver, CO 80202-3531 Yuri Bast Interior Design Inc Yuri C Bast 6 Andaluz -- -- -- 15.35% -- Aliso Viejo, CA 92656-6061 Yuri Bast Interior Design Inc Edward O. Bast 6 Andaluz Aliso Viejo, CA 92656-6061 -- -- -- 14.46% --
AIM TRIMARK SMALL COMPANIES FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL SHARES SHARES SHARES SHARES CLASS SHARES ---------- ---------- ---------- ---------- ------------- PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD ----------------------------------- ---------- ---------- ---------- ---------- ------------- Charles Schwab & Co Inc Special Custody FBO Customers (RPS) ATTN: Mutual Funds 101 Montgomery St 16.51% -- -- -- -- San Francisco, CA 94104-4122 Merrill Lynch Pierce Fenner & Smith FBO the Sole Benefit of Customers Attn: Fund Administration 4800 Deer Lake Dr East 19.52% -- 29.45% -- -- 2nd Floor Jacksonville, FL 32246-6484 AIM Moderate Asset Allocation Fund Omnibus Account c/o AIM Advisors -- -- -- -- 100.00% 11 E. Greenway Plz, Suite 100 Houston, TX 77046-1113
F-4
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL SHARES SHARES SHARES SHARES CLASS SHARES ---------- ---------- ---------- ---------- ------------- PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD ----------------------------------- ---------- ---------- ---------- ---------- ------------- Reliance Trust Co FBO Kraft Construction Co Inc 401(k) PSP -- -- -- 70.66% -- PO Box 48529 Atlanta, GA 30362-1529 Reliance Trust Company Custodian FBO R&H Motor Cars Ltd 401K Profit Sharing Plan P.O. Box 48529 -- -- -- 9.05% -- Atlanta, GA 30362-1529
MANAGEMENT OWNERSHIP As of February 2, 2006, the trustees and officers as a group owned less than 1% of the outstanding shares of each class of each Fund. F-5 APPENDIX G MANAGEMENT FEES For the last three fiscal years ended October 31, the management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund were as follows:
FUND NAME 2005 2004 --------- ---------------------------------------- ------------------------------------------- NET NET MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT FEE PAYABLE FEE WAIVERS FEE PAYABLE FEE PAYABLE FEE WAIVERS FEE PAYABLE ----------- ----------- ----------- ----------- ----------- ------------ AIM Developing Markets Fund $ 2,656,492 $ 388,181 $ 2,268,311 $ 2,305,531 $ 480,137 $ 1,825,394 AIM Global Health Care Fund 7,999,419 919,507 7,079,912 7,724,785 14,503 7,710,282 AIM Trimark 1 Endeavor Fund 589,927 36,105 553,822 104,953 104,953 N/A 1 AIM Trimark Fund 226,802 83,997 142,805 87,385 87,385 N/A AIM Trimark Small 1 Companies Fund 1,057,747 121,616 936,131 93,787 93,787 N/A 2003 -------------------------------------------- NET MANAGEMENT MANAGEMENT MANAGEMENT FUND NAME FEE PAYABLE FEE WAIVERS FEE PAYABLE --------- ----------- ----------- ----------- AIM Developing Markets Fund $ 1,755,280 $ 598,343 $ 1,156,937 AIM Global Health Care Fund 7,101,823 7,033 7,094,790 AIM Trimark 1 Endeavor Fund N/A N/A N/A 1 AIM Trimark Fund N/A N/A N/A AIM Trimark Small 1 Companies Fund N/A N/A N/A
---------------- 1 Commenced operations on November 4, 2003 G-1 APPENDIX H PORTFOLIO MANAGERS PORTFOLIO MANAGER FUND HOLDINGS AND INFORMATION ON OTHER MANAGED ACCOUNTS AIM's portfolio managers develop investment models which are used in connection with the management of certain AIM funds as well as other mutual funds for which AIM or an affiliate acts as sub-advisor, other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals. The following chart reflects the portfolio managers' investments in the Funds that they manage. The chart also reflects information regarding accounts other than the Fund for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into three categories: (i) mutual funds, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance ("performance-based fees"), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. Dollars using the exchange rates as of the applicable date. The following table reflects information as of October 31, 2005:
OTHER REGISTERED OTHER POOLED MUTUAL FUNDS (ASSETS INVESTMENT VEHICLES OTHER ACCOUNTS 2 IN MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS) DOLLAR RANGE --------------------- --------------------- --------------------- PORTFOLIO OF INVESTMENTS NUMBER OF TOTAL NUMBER OF TOTAL NUMBER OF TOTAL 1 MANAGER IN EACH FUND ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS ----------------- -------------- --------- --------- --------- --------- --------- ------ AIM DEVELOPING MARKETS FUND Shuxin Cao $ 10,001- 8 $ 4,266.9 1 $ 24.5 594 $227.3 $ 50,000 Borge Endresen $ 10,001- 4 $ 2,676.7 3 $ 113.4 None -- $ 50,000 AIM GLOBAL HEALTH CARE FUND 3 Derek M. Taner None 5 $ 529.6 4 $ 337.2 None -- AIM TRIMARK ENDEAVOR FUND 3 Jeff Hyrich None None -- 2 $ 901.0 None -- 3 Geoff MacDonald None None -- 5 $ 9,057.2 None --
------------ 1 This column reflects investments in a Fund's shares owned directly by a portfolio manager or beneficially owned by a portfolio manager (as determined in accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended). A portfolio manager is presumed to be a beneficial owner of securities that are held by his or her immediate family members sharing the same household. 2 These are accounts of individual investors for which AIM's affiliate, AIM Private Asset Management, Inc. ("APAM") provides investment advice. APAM offers separately managed accounts that are managed according to the investment models developed by AIM's portfolio managers and used in connection with the management of certain AIM funds. APAM accounts may be invested in accordance with one or more of those investment models and investments held in those accounts are traded in accordance with the applicable models. 3 Shares of the Funds are not sold in Canada, where the portfolio management is domiciled. Accordingly, no portfolio manager may invest in the Funds. H-1
OTHER REGISTERED OTHER POOLED MUTUAL FUNDS (ASSETS INVESTMENT VEHICLES OTHER ACCOUNTS 2 DOLLAR RANGE IN MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS) PORTFOLIO OF INVESTMENTS --------------------- --------------------- ----------------------- 1 NUMBER OF TOTAL NUMBER OF TOTAL NUMBER OF TOTAL MANAGER IN EACH FUND ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS ----------------- -------------- --------- --------- --------- --------- --------- ------ AIM TRIMARK FUND 3 Tye Bousada None 1 $ 20.2 8 $ 3,888.5 None -- 3 Dana Love None 1 $ 20.2 10 $ 4,391.1 None -- AIM TRIMARK SMALL COMPANIES FUND 3 Robert Mikalachki None None -- 3 $ 317.3 None --
POTENTIAL CONFLICTS OF INTEREST A I M ADVISORS, INC. Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one Fund or other account. More specifically, portfolio managers who manage multiple Funds and /or other accounts may be presented with one or more of the following potential conflicts: - The management of multiple Funds and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each Fund and/or other account. AIM seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most other accounts managed by a portfolio manager are managed using the same investment models that are used in connection with the management of the Funds. - If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one Fund or other account, a Fund may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible Funds and other accounts. To deal with these situations, AIM and the Funds have adopted procedures for allocating portfolio transactions across multiple accounts. - With respect to securities transactions for the Funds, AIM determines which broker to use to execute each order, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts (such as mutual funds for which AIM or an affiliate acts as sub-advisor, other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals), AIM may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, trades for a Fund in a particular security may be placed separately from, rather than aggregated with, such other accounts. Having separate transactions with respect to a security may temporarily affect the market price of the security or the execution of the transaction, or both, to the possible detriment of the Fund or other account(s) involved. - Finally, the appearance of a conflict of interest may arise where AIM has an incentive, such as a performance-based management fee, which relates to the management of one Fund or account but not all Funds and accounts with respect to which a portfolio manager has day-to-day management responsibilities. ---------------- 3 Shares of the Funds are not sold in Canada, where the portfolio management is domiciled. Accordingly, no portfolio manager may invest in the Funds. H-2 AIM and the Funds have adopted certain compliance procedures which are designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises. AIM FUNDS MANAGEMENT, INC. Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one Fund or other account. More specifically, portfolio managers who manage multiple Funds and/or other accounts are presented with the following potential conflicts: - The management of multiple Funds and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each Fund and/or other account. The Sub-advisor seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most other accounts managed by a portfolio manager are managed using the same investment models that are used in connection with the management of the Funds. - If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one Fund or other account, a Fund may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible Funds and other accounts. To deal with these situations, the Sub-advisor and the Funds have adopted procedures for allocating portfolio transactions across multiple accounts. The Sub-advisor and the Funds have adopted certain compliance procedures which are designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises. DESCRIPTION OF COMPENSATION STRUCTURE A I M ADVISORS, INC. AIM seeks to maintain a compensation program that is competitively positioned to attract and retain high-caliber investment professionals. Portfolio managers receive a base salary, an incentive bonus opportunity, an equity compensation opportunity, and a benefits package. Portfolio manager compensation is reviewed and may be modified each year as appropriate to reflect changes in the market, as well as to adjust the factors used to determine bonuses to promote good sustained fund performance. AIM evaluates competitive market compensation by reviewing compensation survey results conducted by an independent third party of investment industry compensation. Each portfolio manager's compensation consists of the following five elements: - BASE SALARY. Each portfolio manager is paid a base salary. In setting the base salary, AIM's intention is to be competitive in light of the particular portfolio manager's experience and responsibilities. - ANNUAL BONUS. Each portfolio manager is eligible to receive an annual cash bonus which has quantitative and non-quantitative components. Generally, 70% of the bonus is quantitatively determined, based typically on a four-year rolling average of pre-tax performance of all registered investment company accounts for which a portfolio manager has day-to-day management responsibilities versus the performance of a pre-determined peer group. In instances where a portfolio manager has responsibility for management of more than one fund, an asset weighted four-year rolling average is used. High fund performance (against applicable peer group) would deliver compensation generally associated with top pay in the industry (determined by reference to the third-party provided H-3 compensation survey information) and poor fund performance (versus applicable peer group) could result in no bonus. The amount of fund assets under management typically have an impact on the bonus potential (for example, managing more assets increases the bonus potential); however, this factor typically carries less weight than relative performance. The remaining 30% portion of the bonus is discretionary as determined by AIM and takes into account other subjective factors. - EQUITY-BASED COMPENSATION. Portfolio managers may be awarded options to purchase common shares and/or granted restricted shares of AMVESCAP stock from pools determined from time to time by the Remuneration Committee of the AMVESCAP Board of Directors. Awards of equity-based compensation typically vest over time, so as to create incentives to retain key talent. - PARTICIPATION IN GROUP INSURANCE PROGRAMS. Portfolio managers are provided life insurance coverage in the form of a group variable universal life insurance policy, under which they may make additional contributions to purchase additional insurance coverage or for investment purposes. - PARTICIPATION IN DEFERRED COMPENSATION PLAN. Portfolio managers are eligible to participate in a non-qualified deferred compensation plan, which affords participating employees the tax benefits of deferring the receipt of a portion of their cash compensation. Portfolio managers also participate in benefit plans and programs available generally to all employees. AIM FUNDS MANAGEMENT INC. AIM Funds Management Inc.'s compensation practices for its Investment team are aimed at retaining and motivating employees in order to maximize investment performance. Accordingly, the compensation packages offered to the portfolio managers are competitive with opportunities in the best managed firms in the investment management industry. Portfolio managers receive a competitive base salary, an incentive bonus opportunity, equity compensation and a benefits package. Total cash compensation, as described below, is set for each portfolio manager relative to his or her performance. Portfolio manager compensation is reviewed and modified each year as appropriate. Each portfolio manager's compensation consists of the following elements: - BASE SALARY. Each portfolio manager is paid a base salary. In setting the base salary, AIM Funds Management Inc.'s intention is to be competitive in light of the particular portfolio manager's experience and responsibilities. - ANNUAL BONUS. Each portfolio manager is eligible to receive an annual cash bonus which has quantitative and qualitative components. Generally, 75% of the bonus is quantitatively determined, based primarily on the 3 and 5-year investment results of the funds for which the portfolio manager has day-to-day responsibility. In instances where a portfolio manager has responsibility for more than one fund, consideration is given to both the overall assets under management as well as the individual fund performances. The remaining 25% portion of the bonus is discretionary as determined by AIM Funds Management Inc. and takes into account other subjective factors. - EQUITY-BASED COMPENSATION. Portfolio managers may be awarded options to purchase common shares and/or may be granted restricted shares of AMVESCAP stock from pools determined by the Remuneration Committee of the AMVESCAP Board of Directors. Awards of equity-based compensation typically vest over time, so as to create incentives to retain key talent. - PARTICIPATION IN GROUP INSURANCE PROGRAMS. Portfolio managers are provided life insurance coverage in the form of a group term life insurance policy. They also have the opportunity of purchasing optional life insurance for their spouse and dependents. Portfolio managers also participate in benefit plans and programs available generally to all employees. H-4 APPENDIX I ADMINISTRATIVE SERVICES FEES The Funds paid AIM the following amounts for administrative services for the last three fiscal years ended October 31:
FUND NAME 2005 2004 2003 --------------------------------- -------- -------- -------- AIM Developing Markets Fund $ 82,858 $ 74,387 $ 50,000 AIM Global Health Care Fund 252,124 203,995 185,138 1 AIM Trimark Endeavor Fund 50,000 50,000 N/A 1 AIM Trimark Fund 50,000 50,000 N/A 1 AIM Trimark Small Companies Fund 50,000 50,000 N/A
1 Commenced operations on November 4, 2003. I-1 APPENDIX J BROKERAGE COMMISSIONS 1 Brokerage commissions paid by each of the Funds listed below during the last three fiscal years ended October 31 were as follows:
FUND 2005 2004 2003 --------------------------------- ---------- ---------- ------------ AIM Developing Markets Fund $ 628,725 $ 784,157 $ 858,656 AIM Global Health Care Fund 2,253,159 1,407,846 2,353,702 3 AIM Trimark Endeavor Fund 46,146 26,199 N/A 3 AIM Trimark Fund 28,259 17,546 N/A 2,3 AIM Trimark Small Companies Fund 203,574 33,485 N/A
1 Disclosure regarding brokerage commissions is limited to commissions paid on agency trades and designated as such on the trade confirm. 2 The variation in brokerage commission paid by the fund for the fiscal year ended October 31, 2005, as compared to the prior fiscal year was due to increased size of the Fund. 3 Commenced operations on November 4, 2003. J-1 APPENDIX K DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES OF REGULAR BROKERS OR DEALERS During the last fiscal year ended October 31, 2005, each Fund allocated the following amount of transactions to broker-dealers that provided AIM with certain research, statistics and other information:
RELATED 1 1 FUND TRANSACTIONS BROKERAGE COMMISSIONS -------------------------------- --------------- ---------------------- AIM Developing Markets Fund $ 200,781,023 $ 895,451 AIM Global Health Care Fund 1,207,554,955 3,372,064 AIM Trimark Endeavor Fund 14,643,858 25,512 AIM Trimark Fund 12,324,862 17,060 AIM Trimark Small Companies Fund 44,922,992 95,464
1 Amount is inclusive of commissions paid to, and brokerage transactions placed with, certain brokers that provide execution, research and other services. During the last fiscal year ended October 31, 2005, the Funds did not hold securities issued by "regular" brokers or dealers of the Funds. K-1 APPENDIX L CERTAIN FINANCIAL ADVISORS THAT RECEIVE ONE OR MORE TYPES OF PAYMENTS ST 1 Global Capital Corporation A G Edwards & Sons, Inc. ADP Broker Dealer, Inc. Advantage Capital Corporation Advest, Inc Allstate Life Insurance Company American General Securities, Inc. American Skandia Life Assurance Corporation American United Life Insurance Company Ameriprise Financial Services, Inc. Amsouth Investment Services, Inc. Associated Investment Services Associated Securities Corporation B N Y Investment Center Inc. Banc One Securities Corporation Bank of Oklahoma N.A. Cadaret Grant & Company, Inc. Cambridge Investment Research, Inc. Capital Analysts, Inc. Charles Schwab & Company, Inc. Chase Investment Services Corporation CitiCorp Investment Services Citigroup Global Markets, Inc. Citistreet Equities LLC City National Bank Comerica Bank Comerica Securities, Inc. Commonwealth Financial Network Compass Brokerage, Inc. Contemporary Financial Solutions, Inc. CUNA Brokerage Services, Inc. CUSO Financial Services, Inc. Equity Services, Inc. Fidelity Brokerage Services, LLC Fidelity Institutional Operations Company, Inc. Financial Network Investment Corporation Fintegra Financial Solutions Frost Brokerage Services, Inc. FSC Securities Corporation Great West Life & Annuity Company Guardian Insurance & Annuity Company, Inc. H & R Block Financial Advisors, Inc. H Beck, Inc. H. D. Vest Investment Securities, Inc. Hibernia Investments LLC Hilliard Lyons, Inc. Hornor Townsend & Kent, Inc. HSBC Brokerage, Inc. Infinex Investments, Inc. ING Financial Partners, Inc. ING USA Annuity and Life Insurance Company Intersecurities, Inc. INVEST Financial Corporation, Inc. Investment Centers of America, Inc. Investments By Planners, Inc. Investors Capital Corporation Jefferson Pilot Securities Corporation Lasalle Street Securities LLC Leg Mason Wood Walker, Inc. Lincoln Financial Advisors Corporation Lincoln Investment Planning, Inc. Linsco/Private Ledger Corporation M & I Brokerage Services, Inc. M & T Securities, Inc. M M L Investors Services, Inc. Manulife Wood Logan, Inc. McDonald Investments, Inc. Mellon Bank, N.A. Merrill Lynch & Company, Inc. Merrill Lynch Life Insurance Company Metlife Securities, Inc. Money Concepts Capital Corporation Morgan Keegan & Company, Inc. Morgan Stanley DW Inc. Morningstar, Inc. Multi-Financial Securities Corporation Mutual Service Corporation N F P Securities, Inc. NatCity Investments, Inc. National Planning Corporation Nationwide Financial Services, Inc. Nationwide Investment Services Corporation Nationwide Life and Annuity Company of America Nationwide Life and Annuity Insurance Company of America Nationwide Life Insurance Company New England Securities Corporation Next Financial Group, Inc. Northwestern Mutual Investment Services NYLIFE Distributors, LLC Oppenheimer & Company, Inc. Pershing LLC PFS Investments, Inc. Piper Jaffray & Company Popular Securities, Inc. Prime Capital Services, Inc. Primevest Financial Services, Inc. Proequities, Inc. R B C Centura Securities, Inc. R B C Dain Rauscher, Inc. Raymond James & Associates, Inc. Raymond James Financial Services, Inc. Royal Alliance Associates, Inc. S I I Investments, Inc. Securities America, Inc. Securities Service Network, Inc. Security Benefit life Insurance Company Sentra Securities Corporation Sigma Financial Corporation Signator Investors, Inc. Spelman & Company, Inc. State Farm VP Management Corp Stifel Nicolaus & Company, Inc. Sungard Investment Products, Inc. SunTrust Bank, Central Florida, N.A. TD Waterhouse Investor Services, Inc. Terra Securities Corporation TFS Securities, Inc. Tower Square Securities, Inc. Transamerica Financial Advisors, Inc. Transamerica Life Insurance & Annuity Company U.S. Bancorp Investments, Inc. UBS Financial Services, Inc. United Planner Financial Service USAllianz Securities, Inc. UVEST Financial Services, Inc. V S R Financial Services, Inc. VALIC Financial Advisors, Inc. Wachovia Securities, LLC Walnut Street Securities, Inc. Waterstone Financial Group, Inc. Webster Investments Service Inc. Wells Fargo Bank, N.A. Wells Fargo Investments, LLC Woodbury Financial Services, Inc. X C U Capital Corporation, Inc. L-1 APPENDIX M AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS A list of amounts paid by each class of shares to AIM Distributors pursuant to the Plans for the fiscal year or period ended October 31, 2005 follows:
CLASS CLASS CLASS CLASS INVESTOR A B C R CLASS 1 FUND SHARES SHARES SHARES SHARES SHARES -------------------------------- ---------- ---------- ---------- ---------- ----------- AIM Developing Markets Fund $ 767,321 $ 308,695 $ 97,264 N/A N/A AIM Global Health Care Fund 1,881,602 1,596,410 439,803 N/A $ 603,258 AIM Trimark Endeavor Fund 147,287 115,390 118,450 $ 464 N/A AIM Trimark Fund 47,837 58,011 53,995 140 N/A AIM Trimark Small Companies Fund 249,302 135,891 141,100 3,082 N/A
------------- 1 Commenced operations on July 15, 2005. M-1 APPENDIX N ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS An estimate by category of the allocation of actual fees paid by Class A shares of the Funds during the year ended October 31, 2005, follows:
TRAVEL PRINTING EXPENSES & UNDERWRITERS DEALERS RELATED TO ADVERTISING MAILING COMPENSATION COMPENSATION PERSONNEL SEMINARS MARKETING ----------- --------- ------------ ------------ --------- ---------- ---------- AIM Developing Markets Fund $ 24,902 $ 2,592 0 $ 629,195 $ 103,431 $ 3,273 $ 3,928 AIM Global Health Care Fund 25,645 2,344 0 1,748,036 98,373 3,602 3,602 AIM Trimark Endeavor Fund 4,147 380 0 127,365 14,187 604 604 AIM Trimark Fund 1,325 96 0 40,737 5,147 355 177 AIM Trimark Small Companies Fund 5,051 486 0 221,688 20,321 810 945
An estimate by category of the allocation of actual fees paid by Class B shares of the Funds during the year ended October 31, 2005, follows:
TRAVEL PRINTING EXPENSES & UNDERWRITERS DEALERS RELATED TO ADVERTISING MAILING COMPENSATION COMPENSATION PERSONNEL SEMINARS MARKETING ----------- --------- ------------ ------------ --------- ---------- ---------- AIM Developing Markets Fund $ 653 $ 0 $ 231,522 $ 71,731 $ 4,354 $ 435 $ 0 AIM Global Health Care Fund 3,849 349 1,197,308 379,080 14,856 484 484 AIM Trimark Endeavor Fund 803 0 86,542 22,830 5,215 0 0 AIM Trimark Fund 0 0 43,509 11,681 2,821 0 0 AIM Trimark small Companies Fund 725 0 101,918 27,812 5,074 362 0
N-1 An estimate by category of the allocation of actual fees paid by Class C shares of the Funds during the year ended October 31, 2005, follows:
TRAVEL PRINTING EXPENSES & UNDERWRITERS DEALERS RELATED TO ADVERTISING MAILING COMPENSATION COMPENSATION PERSONNEL SEMINARS MARKETING ----------- -------- ------------ ------------ --------- -------- ---------- AIM Developing Markets Fund $ 1,268 $ 60 $ 27,901 $ 62,056 $ 5,979 $ 0 $ 0 AIM Global Health Care Fund 1,984 216 40,190 388,815 7,998 400 200 AIM Trimark Endeavor Fund 1,562 58 38,875 69,532 7,451 648 324 AIM Trimark Fund 1,085 0 24,423 23,602 4,885 0 0 AIM Trimark Small Companies Fund 3,043 254 65,009 59,133 12,719 471 471
An estimate by category of the allocation of actual fees paid by Class R shares of the Funds during the period ended October 31, 2005, follows:
TRAVEL PRINTING EXPENSES & UNDERWRITERS DEALERS RELATED TO ADVERTISING MAILING COMPENSATION COMPENSATION PERSONNEL SEMINARS MARKETING ----------- -------- ------------ ------------ --------- -------- ---------- AIM Trimark Endeavor Fund $ 0 $ 0 $ 170 $ 125 $ 169 $ 0 $ 0 AIM Trimark Fund 0 0 65 23 52 0 0 AIM Trimark Small Companies Fund 0 0 1,471 1,179 433 0 0
An estimate by category of the allocation of actual fees paid by Investor Class shares of the Funds during the fiscal year ended October 31, 2005, follows:
TRAVEL PRINTING EXPENSES & UNDERWRITERS DEALERS RELATED TO ADVERTISING MAILING COMPENSATION COMPENSATION PERSONNEL SEMINARS MARKETING ----------- -------- ------------ ------------ --------- -------- ---------- AIM Global Health Care Fund $ 0 $ 0 $ 0 $ 603,258 $ 0 $ 0 $ 0
N-2 APPENDIX O TOTAL SALES CHARGES The following chart reflects the total sales charges paid in connection with the sale of Class A shares of each Fund and the amount retained by AIM Distributors for the last three fiscal years ending October 31:
2005 2004 2003 ---- ---- ---- SALES AMOUNT SALES AMOUNT SALES AMOUNT CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED ---------- --------- --------- ----------- ----------- ----------- AIM Developing Markets Fund $ 304,163 $ 56,027 $ 136,410 $ 27,772 $ 68,195 $ 12,641 AIM Global Health Care Fund 466,000 86,137 678,933 126,743 709,375 128,248 1 AIM Trimark Endeavor Fund 368,411 58,928 165,034 26,908 N/A N/A 1 AIM Trimark Fund 110,765 19,200 154,275 23,974 N/A N/A 1 AIM Trimark Small Companies Fund 616,318 105,490 141,011 23,572 N/A N/A
The following chart reflects the contingent deferred sales charges paid by Class A, Class B, Class C and Class R, if any, shareholders and retained by AIM Distributors for the last three fiscal years ended October 31:
2005 2004 2003 ---------- ----------- ---------- AIM Developing Markets Fund $ 58,761 $ 126,736 $ 20,360 AIM Global Health Care Fund 71,017 26,438 10,199 1,2 AIM Trimark Endeavor Fund 12,598 5,652 N/A 1,2 AIM Trimark Fund 9,229 1,520 N/A 1,2 AIM Trimark Small Companies Fund 24,482 806 N/A
1 Commenced operations on November 4, 2003. 2 Information which includes Class R Shares in the table is for the period April 30, 2004 (the date Class R Shares commenced sales) to October 31, 2004. O-1 APPENDIX P-1 PENDING LITIGATION ALLEGING MARKET TIMING The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties and are based on allegations of improper market timing and related activity in the AIM Funds. These lawsuits either have been served or have had service of process waived as of February 16, 2006 (with the exception of the Sayegh lawsuit discussed below). RICHARD LEPERA, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., INVESCO BOND FUNDS, INC., INVESCO SECTOR FUNDS, INC. AND DOE DEFENDANTS 1-100, in the District Court, City and County of Denver, Colorado, (Civil Action No. 03-CV-7600), filed on October 2, 2003. This claim alleges: common law breach of fiduciary duty; common law breach of contract; and common law tortious interference with contract. The plaintiff in this case is seeking: compensatory and punitive damages; injunctive relief; disgorgement of revenues and profits; and costs and expenses, including counsel fees and expert fees. MIKE SAYEGH, ON BEHALF OF THE GENERAL PUBLIC, V. JANUS CAPITAL CORPORATION, JANUS CAPITAL MANAGEMENT LLC, JANUS INVESTMENT FUND, EDWARD J. STERN, CANARY CAPITAL PARTNERS LLC, CANARY INVESTMENT MANAGEMENT LLC, CANARY CAPITAL PARTNERS LTD., KAPLAN & CO. SECURITIES INC., BANK ONE CORPORATION, BANC ONE INVESTMENT ADVISORS, THE ONE GROUP MUTUAL FUNDS, BANK OF AMERICA CORPORATION, BANC OF AMERICA CAPITAL MANAGEMENT LLC, BANC OF AMERICA ADVISORS LLC, NATIONS FUND INC., ROBERT H. GORDON, THEODORE H. SIHPOL III, CHARLES D. BRYCELAND, SECURITY TRUST COMPANY, STRONG CAPITAL MANAGEMENT INC., JB OXFORD & COMPANY, ALLIANCE CAPITAL MANAGEMENT HOLDING L.P., ALLIANCE CAPITAL MANAGEMENT L.P., ALLIANCE CAPITAL MANAGEMENT CORPORATION, AXA FINANCIAL INC., ALLIANCEBERNSTEIN REGISTRANTS, GERALD MALONE, CHARLES SCHAFFRAN, MARSH & MCLENNAN COMPANIES, INC., PUTNAM INVESTMENTS TRUST, PUTNAM INVESTMENT MANAGEMENT LLC, PUTNAM INVESTMENT FUNDS, AND DOES 1-500, in the Superior Court of the State of California, County of Los Angeles (Case No. BC304655), filed on October 22, 2003 and amended on December 17, 2003 to substitute INVESCO Funds Group, Inc. and Raymond R. Cunningham for unnamed Doe defendants. This claim alleges unfair business practices and violations of Sections 17200 and 17203 of the California Business and Professions Code. The plaintiff in this case is seeking: injunctive relief; restitution, including pre-judgment interest; an accounting to determine the amount to be returned by the defendants and the amount to be refunded to the public; the creation of an administrative process whereby injured customers of the defendants receive their losses; and counsel fees. RAJ SANYAL, DERIVATIVELY ON BEHALF OF NATIONS INTERNATIONAL EQUITY FUND, V. WILLIAM P. CARMICHAEL, WILLIAM H. GRIGG, THOMAS F. KELLER, CARL E. MUNDY, JR., CORNELIUS J. PINGS, A. MAX WALKER, CHARLES B. WALKER, EDMUND L. BENSON, III, ROBERT H. GORDON, JAMES B. SOMMERS, THOMAS S. WORD, JR., EDWARD D. BEDARD, GERALD MURPHY, ROBERT B. CARROLL, INVESCO GLOBAL ASSET MANAGEMENT, PUTNAM INVESTMENT MANAGEMENT, BANK OF AMERICA CORPORATION, MARSICO CAPITAL MANAGEMENT, LLC, BANC OF AMERICA ADVISORS, LLC, BANC OF AMERICA CAPITAL MANAGEMENT, LLC, AND NATIONS FUNDS TRUST, in the Superior Court Division, P-1 State of North Carolina (Civil Action No. 03-CVS-19622), filed on November 14, 2003. This claim alleges common law breach of fiduciary duty; abuse of control; gross mismanagement; waste of fund assets; and unjust enrichment. The plaintiff in this case is seeking: injunctive relief, including imposition of a constructive trust; damages; restitution and disgorgement; and costs and expenses, including counsel fees and expert fees. L. SCOTT KARLIN, DERIVATIVELY ON BEHALF OF INVESCO FUNDS GROUP, INC. V. AMVESCAP, PLC, INVESCO, INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD., in the United States District Court, District of Colorado (Civil Action No. 03-MK-2406), filed on November 28, 2003. This claim alleges violations of Section 36(b) of the Investment Company Act of 1940 ("Investment Company Act"), and common law breach of fiduciary duty. The plaintiff in this case is seeking damages and costs and expenses, including counsel fees and expert fees. RICHARD RAVER, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC, AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC., AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL PARTNERS, LLC, AND DOES 1-100, in the United States District Court, District of Colorado (Civil Action No. 03-F-2441), filed on December 2, 2003. This claim alleges violations of: Sections 11 and 15 of the Securities Act of 1933 (the "Securities Act"); Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"); Rule 10b-5 under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of the Investment Company Act. The claim also alleges common law breach of fiduciary duty. The plaintiffs in this case are seeking: damages; pre-judgment and post-judgment interest; counsel fees and expert fees; and other relief. JERRY FATTAH, CUSTODIAN FOR BASIM FATTAH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM INVESCO U.S. GOVERNMENT MONEY FUND, INVESCO ADVANTAGE P-2 FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO, INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States District Court, District of Colorado (Civil Action No. 03-F-2456), filed on December 4, 2003. This claim alleges violations of: Sections 11 and 15 of Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Section 206 of the Investment Advisers Act of 1940, as amended (the "Advisers Act"). The plaintiffs in this case are seeking: compensatory damages; rescission; return of fees paid; accounting for wrongfully gotten gains, profits and compensation; restitution and disgorgement; and other costs and expenses, including counsel fees and expert fees. EDWARD LOWINGER AND SHARON LOWINGER, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM INVESCO U.S. GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO; INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States District Court, Southern District of New York (Civil Action No. 03-CV-9634), filed on December 4, 2003. This claim alleges violations of: Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in this case are seeking: compensatory damages; rescission; return of fees P-3 paid; accounting for wrongfully gotten gains, profits and compensation; restitution and disgorgement; and other costs and expenses, including counsel fees and expert fees. JOEL GOODMAN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC. AND RAYMOND R. CUNNINGHAM, in the District Court, City and County of Denver, Colorado (Case Number 03CV9268), filed on December 5, 2003. This claim alleges common law breach of fiduciary duty and aiding and abetting breach of fiduciary duty. The plaintiffs in this case are seeking: injunctive relief; accounting for all damages and for all profits and any special benefits obtained; disgorgement; restitution and damages; costs and disbursements, including counsel fees and expert fees; and equitable relief. STEVEN B. EHRLICH, CUSTODIAN FOR ALEXA P. EHRLICH, UGTMA/FLORIDA, AND DENNY P. JACOBSON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURERS MONEY MARKET RESERVE FUND, AIM INVESCO TREASURERS TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States District Court, District of Colorado (Civil Action No. 03-N-2559), filed on December 17, 2003. This claim alleges violations of: Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in this case are seeking: compensatory damages; rescission; return of fees paid; accounting for wrongfully gotten gains, profits and compensation; restitution and disgorgement; and other costs and expenses, including counsel fees and expert fees. JOSEPH R. RUSSO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY P-4 GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURERS MONEY MARKET RESERVE FUND, AIM INVESCO TREASURERS TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States District Court, Southern District of New York (Civil Action No. 03-CV-10045), filed on December 18, 2003. This claim alleges violations of: Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in this case are seeking: compensatory damages; rescission; return of fees paid; accounting for wrongfully gotten gains, profits and compensation; restitution and disgorgement; and other costs and expenses, including counsel fees and expert fees. MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. AMVESCAP PLC, AVZ, INC., AMVESCAP RETIREMENT, INC., AMVESCAP NATIONAL TRUST COMPANY, ROBERT F. MCCULLOUGH, GORDON NEBEKER, JEFFREY G. CALLAHAN, INVESCO FUNDS GROUP, INC., RAYMOND R. CUNNINGHAM, AND DOES 1-100, in the United States District Court, District of Colorado (Civil Action No. 03-M-2604), filed on December 24, 2003. This claim alleges violations of Sections 404, 405 and 406B of the Employee Retirement Income Security Act ("ERISA"). The plaintiffs in this case are seeking: declarations that the defendants breached their ERISA fiduciary duties and that they are not entitled to the protection of Section 404(c)(1)(B) of ERISA; an order compelling the defendants to make good all losses to a particular retirement plan described in this case (the "Retirement Plan") resulting from the defendants' breaches of their fiduciary duties, including losses to the Retirement Plan resulting from imprudent investment of the Retirement Plan's assets, and to restore to the Retirement Plan all profits the defendants made through use of the Retirement Plan's assets, and to restore to the Retirement Plan all profits which the participants would have made if the defendants had fulfilled their fiduciary obligations; damages on behalf of the Retirement Plan; imposition of a constructive trust, injunctive relief, damages suffered by the Retirement Plan, to be allocated proportionately to the participants in the Retirement Plan; restitution and other costs and expenses, including counsel fees and expert fees. PAT B. GORSUCH AND GEORGE L. GORSUCH V. INVESCO FUNDS GROUP, INC. AND AIM ADVISER, INC., in the United States District Court, District of Colorado (Civil Action No. 03-MK-2612), filed on December 24, 2003. This claim alleges violations of Sections 15(a), 20(a) and 36(b) of the Investment Company Act. The plaintiffs in this case are seeking: rescission and/or voiding of the investment advisory agreements; return of fees paid; damages; and other costs and expenses, including counsel fees and expert fees. P-5 LORI WEINRIB, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC., AMVESCAP PLC, TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States District Court, Southern District of New York (Civil Action No. 04-CV-00492), filed on January 21, 2004. This claim alleges violations of: Sections 11 and 15 of the 1933 Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in this case are seeking: compensatory damages; rescission; return of fees paid; accounting for wrongfully gotten gains, profits and compensation; restitution and disgorgement; and other costs and expenses, including counsel fees and expert fees. ROBERT S. BALLAGH, JR., INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC., AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL PARTNERS, LLC, AND DOES 1-100, in the United States District Court, District of Colorado (Civil Action No. 04-MK-0152), filed on January 28, 2004. This claim alleges violations of: Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of the Investment Company Act. The claim also alleges common law breach of fiduciary duty. The plaintiffs in this case are seeking: damages; pre-judgment and post-judgment interest; counsel fees and expert fees; and other relief. JONATHAN GALLO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC., AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE P-6 OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL PARTNERS, LLC, AND DOES 1-100, in the United States District Court, District of Colorado (Civil Action No. 04-MK-0151), filed on January 28, 2004. This claim alleges violations of: Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of the Investment Company Act. The claim also alleges common law breach of fiduciary duty. The plaintiffs in this case are seeking: damages; pre-judgment and post-judgment interest; counsel fees and expert fees; and other relief. EILEEN CLANCY, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO, INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM AND THOMAS KOLBE, in the United States District Court, Southern District of New York (Civil Action No. 04-CV-0713), filed on January 30, 2004. This claim alleges violations of Sections 11 and 15 of the Securities Act. The plaintiffs in this case are seeking: compensatory damages, rescission; return of fees paid; and other costs and expenses, including counsel fees and expert fees. SCOTT WALDMAN, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO DYNAMICS FUND, INVESCO EUROPEAN FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC., AMVESCAP PLC, AND RAYMOND CUNNINGHAM, in the United States District Court, Southern District of New York (Civil Action No. 04-CV-00915), filed on February 3, 2004. This claim alleges violations of Sections 11 and 15 of the Securities Act and common law breach of fiduciary duty. The plaintiffs in this case are seeking compensatory damages; injunctive relief; and costs and expenses, including counsel fees and expert fees. P-7 CARL E. VONDER HAAR AND MARILYN P. MARTIN, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC. AND DOE DEFENDANTS 1-100, in the United States District Court, District of Colorado (Civil Action No. 04-CV-812), filed on February 5, 2004. This claim alleges: common law breach of fiduciary duty; breach of contract; and tortious interference with contract. The plaintiffs in this case are seeking: injunctive relief; damages; disgorgement; and costs and expenses, including counsel fees and expert fees. HENRY KRAMER, DERIVATIVELY ON BEHALF OF INVESCO ENERGY FUND, INVESCO STOCK FUNDS, INC., AND INVESCO MUTUAL FUNDS V. AMVESCAP, PLC, INVESCO FUNDS GROUP, INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD., DEFENDANTS, AND INVESCO ENERGY FUND, INVESCO STOCK FUNDS, INC., AND INVESCO MUTUAL FUNDS, NOMINAL DEFENDANTS, in the United States District Court, District of Colorado (Civil Action No. 04-MK-0397), filed on March 4, 2004. This claim alleges violations of Section 36(b) of the Investment Company Act and common law breach of fiduciary duty. The plaintiff in this case is seeking damages and costs and expenses, including counsel fees and expert fees. CYNTHIA L. ESSENMACHER, DERIVATIVELY ON BEHALF OF THE INVESCO DYNAMICS FUND AND THE REMAINING "INVESCO FUNDS" V. INVESCO FUNDS GROUPS, INC., AMVESCAP PLC, AIM MANAGEMENT GROUP, INC., RAYMOND CUNNINGHAM, TIMOTHY MILLER, THOMAS KOLBE AND MICHAEL LEGOSKI, DEFENDANTS, AND INVESCO DYNAMICS FUND AND THE "INVESCO FUNDS", NOMINAL DEFENDANTS, in the United States District Court, District of Delaware (Civil Action No. 04-CV-188), filed on March 29, 2004. This claim alleges: violations of Section 36(b) of the Investment Company Act; violations of Section 206 of the Advisers Act; common law breach of fiduciary duty; and civil conspiracy. The plaintiff in this case is seeking: damages; injunctive relief; and costs and expenses, including counsel fees and expert fees. ANNE G. PERENTESIS (WIDOW) V. AIM INVESTMENTS, ET AL (INVESCO FUNDS GROUP, INC.), in the District Court of Maryland for Baltimore County (Case No. 080400228152005), filed on July 21, 2005. This claim alleges financial losses, mental anguish and emotional distress as a result of unlawful market timing and related activity by the defendants. The plaintiff in this case is seeking damages and costs ad expenses. Pursuant to an Order of the MDL Court, plaintiffs in the above lawsuits (with the exception of Carl E. Vonder Haar, et al. v. INVESCO Funds Group, Inc. et al. and Mike Sayegh v. Janus Capital Corporation, et al.) consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds (the Lepera lawsuit discussed below); (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants (the Essenmacher lawsuit discussed below); and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan (the Calderon lawsuit discussed below). The plaintiffs in the Vonder Haar and Sayegh lawsuits continue to seek remand of their lawsuits to state court. Set forth below is detailed information about these three amended complaints. RICHARD LEPERA, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED (LEAD PLAINTIFF: CITY OF CHICAGO DEFERRED COMPENSATION PLAN), V. INVESCO FUNDS GROUP, INC., AMVESCAP, PLC, AIM INVESTMENTS, AIM ADVISORS, INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO ASSETS MANAGEMENT LIMITED, INVESCO GLOBAL ASSETS MANAGEMENT (N.A.), AIM STOCK FUNDS, AIM MUTUAL FUNDS, AIM COMBINATION STOCK & BOND P-8 FUNDS, AIM SECTOR FUNDS, AIM TREASURER'S SERIES TRUST, INVESCO DISTRIBUTORS, INC., AIM DISTRIBUTORS, INC., RAYMOND R. CUNNINGHAM, TIMOTHY J. MILLER, THOMAS A. KOLBE, MICHAEL D. LEGOSKI, MICHAEL K. BRUGMAN, MARK WILLIAMSON, EDWARD J. STERN, CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., RYAN GOLDBERG, MICHAEL GRADY, CITIGROUP, INC., CITIGROUP GLOBAL MARKETS HOLDINGS, INC., SALOMON SMITH BARNEY, INC., MORGAN STANLEY DW, ANNA BRUGMAN, ANB CONSULTING, LLC, KAPLAN & CO. SECURITIES INC., SECURITY TRUST COMPANY, N.A., GRANT D. SEEGER, JB OXFORD HOLDINGS, INC., NATIONAL CLEARING CORPORATION, JAMES G. LEWIS, KRAIG L. KIBBLE, JAMES Y. LIN, BANK OF AMERICA CORPORATION, BANC OF AMERICA SECURITIES LLC, THEODORE C. SIHPOL, III, BEAR STEARNS & CO., INC., BEAR STEARNS SECURITIES CORP., CHARLES SCHWAB & CO., CREDIT SUISSE FIRST BOSTON (USA) INC., PRUDENTIAL FINANCIAL, INC., PRUDENTIAL SECURITIES, INC., CANADIAN IMPERIAL BANK OF COMMERCE, JP MORGAN CHASE AND CO., AND JOHN DOE DEFENDANTS 1-100, in the MDL Court (Case No. 04-MD-15864; No. 04-CV-00814-JFM) (originally in the United States District Court for the District of Colorado), filed on September 29, 2004. This lawsuit alleges violations of Sections 11, 12(a) (2), and 15 of the Securities Act; Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder; Section 20(a) of the Exchange Act; Sections 34(b), 36(a), 36(b) and 48(a) of the Investment Company Act; breach of fiduciary duty/constructive fraud; aiding and abetting breach of fiduciary duty; and unjust enrichment. The plaintiffs in this lawsuit are seeking: compensatory damages, including interest; and other costs and expenses, including counsel and expert fees. CYNTHIA ESSENMACHER, SILVANA G. DELLA CAMERA, FELICIA BERNSTEIN AS CUSTODIAN FOR DANIELLE BROOKE BERNSTEIN, EDWARD CASEY, TINA CASEY, SIMON DENENBERG, GEORGE L. GORSUCH, PAT B. GORSUCH, L. SCOTT KARLIN, HENRY KRAMER, JOHN E. MORRISEY, HARRY SCHIPPER, BERTY KREISLER, GERSON SMITH, CYNTHIA PULEO, ZACHARY ALAN STARR, JOSHUA GUTTMAN, AND AMY SUGIN, DERIVATIVELY ON BEHALF OF THE MUTUAL FUNDS, TRUSTS AND CORPORATIONS COMPRISING THE INVESCO AND AIM FAMILY OF MUTUAL FUNDS V. AMVESCAP, PLC, INVESCO FUNDS GROUP, INC., INVESCO DISTRIBUTORS, INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO ASSETS MANAGEMENT LIMITED, INVESCO GLOBAL ASSETS MANAGEMENT (N.A.), AIM MANAGEMENT GROUP, INC., AIM ADVISERS, INC., AIM INVESTMENT SERVICES, INC., AIM DISTRIBUTORS, INC., FUND MANAGEMENT COMPANY, MARK H. WILLIAMSON, RAYMOND R. CUNNINGHAM, TIMOTHY MILLER, THOMAS KOLBE, MICHAEL LEGOSKI, MICHAEL BRUGMAN, FRED A. DEERING, VICTOR L. ANDREWS, BOB R. BAKER, LAWRENCE H. BUDNER, JAMES T. BUNCH, GERALD J. LEWIS, JOHN W. MCINTYRE, LARRY SOLL, RONALD L. GROOMS, WILLIAM J. GALVIN, JR., ROBERT H. GRAHAM, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JACK M. FIELDS, CARL FRISCHILING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, LOUIS S. SKLAR, OWEN DALY II, AURUM SECURITIES CORP., AURUM CAPITAL MANAGEMENT CORP., GOLDEN GATE FINANCIAL GROUP, LLC, BANK OF AMERICA CORP., BANC OF AMERICA SECURITIES LLC, BANK OF AMERICA, N.A., BEAR STEARNS & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY INVESTMENT MANAGEMENT, LLC, EDWARD J. STERN, CANADIAN IMPERIAL BANK OF COMMERCE, CIRCLE TRUST COMPANY, RYAN GOLDBERG, MICHAEL GRADY, KAPLAN & CO. SECURITIES, INC., JP MORGAN CHASE & CO., OPPENHEIMER & CO., INC., PRITCHARD CAPITAL PARTNERS LLC, TIJA MANAGEMENT, TRAUTMAN WASSERMAN & COMPANY, INC., DEFENDANTS, AND THE INVESCO FUNDS AND THE AIM FUNDS AND ALL TRUSTS AND CORPORATIONS THAT COMPRISE THE INVESCO FUNDS AND AIM FUNDS THAT P-9 WERE MANAGED BY INVESCO AND AIM, NOMINAL DEFENDANTS, in the MDL Court (Case No. 04-MD-15864-FPS; No. 04-819), filed on September 29, 2004. This lawsuit alleges violations of Sections 206 and 215 of the Investment Advisers Act; Sections 36(a), 36(b) and 47 of the Investment Company Act; control person liability under Section 48 of the Investment Company Act; breach of fiduciary duty; aiding and abetting breach of fiduciary duty; breach of contract; unjust enrichment; interference with contract; and civil conspiracy. The plaintiffs in this lawsuit are seeking: removal of director defendants; removal of adviser, sub-adviser and distributor defendants; rescission of management and other contracts between the Funds and defendants; rescission of 12b-1 plans; disgorgement of management fees and other compensation/profits paid to adviser defendants; compensatory and punitive damages; and fees and expenses, including attorney and expert fees. MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. AVZ, INC., AMVESCAP RETIREMENT, INC., AMVESCAP NATIONAL TRUST COMPANY, INVESCO FUNDS GROUP, INC., AMVESCAP, ROBERT F. MCCULLOUGH, GORDON NEBEKER, JEFFREY G. CALLAHAN, AND RAYMOND R. CUNNINGHAM, in the MDL Court (Case No. 1:04-MD-15864-FPS), filed on September 29, 2004. This lawsuit alleges violations of ERISA Sections 404, 405 and 406. The plaintiffs in this lawsuit are seeking: declaratory judgment; restoration of losses suffered by the plan; disgorgement of profits; imposition of a constructive trust; injunctive relief; compensatory damages; costs and attorneys' fees; and equitable restitution. On August 25, 2005, the MDL Court issued rulings on the common issues of law presented in defendants' motions to dismiss shareholder class action and derivative complaints that were filed in unrelated lawsuits similar to the Lepera and Essenmacher lawsuits discussed above. On November 3, 2005, the MDL Court issued short opinions for the most part applying these rulings to the Lepera and Essenmacher lawsuits. The MDL Court dismissed all derivative causes of action but one: the excessive fee claim under Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"). The MDL Court dismissed all claims asserted in the class action complaint but three: (i) the securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934; (ii) the excessive fee claim under Section 36(b) of the 1940 Act (which survived only insofar as plaintiffs seek recovery of fees associated with the assets involved in market timing); and (iii) the MDL Court deferred ruling on the "control person liability" claim under Section 48 of the 1940 Act. The question whether the duplicative Section 36(b) claim properly belongs in the derivative complaint or in the class action complaint will be decided at a later date. At the MDL Court's request, the parties submitted proposed orders implementing these rulings in the Lepera and Essenmacher lawsuits. The MDL Court has not entered any orders on the motions to dismiss in these lawsuits and it is possible the orders may differ in some respects from the rulings described above. Based on the MDL Court's opinion and both parties' proposed orders, however, all claims asserted against the Funds that have been transferred to the MDL Court will be dismissed, although certain Funds will remain nominal defendants in the derivative (Essenmacher) lawsuit. On December 6, 2005, the MDL Court issued rulings on the common issues of law presented in defendants' omnibus motion to dismiss ERISA complaints that were filed in unrelated lawsuits that are similar to the Calderon lawsuit discussed above. The MDL Court: (i) denied the motion to dismiss on the grounds that the plaintiffs lack standing or that the defendants' investments in company stock are entitled to a presumption of prudence; (ii) granted the motion to dismiss as to defendants not named in the employee benefit plan documents as fiduciaries but gave plaintiffs leave to replead facts sufficient to show that such defendants acted as de facto fiduciaries; and (iii) confirmed plaintiffs' withdrawal of their prohibited transactions and misrepresentations claims. P-10 APPENDIX P-2 PENDING LITIGATION ALLEGING INADEQUATELY EMPLOYED FAIR VALUE PRICING The following civil class action lawsuits involve, depending on the lawsuit, one or more AIM Funds, IFG and/or AIM and allege that the defendants inadequately employed fair value pricing. These lawsuits either have been served or have had service of process waived as of February 16, 2006. T.K. PARTHASARATHY, EDMUND WOODBURY, STUART ALLEN SMITH AND SHARON SMITH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. T. ROWE PRICE INTERNATIONAL FUNDS, INC., T. ROWE PRICE INTERNATIONAL, INC., ARTISAN FUNDS, INC., ARTISAN PARTNERS LIMITED PARTNERSHIP, AIM INTERNATIONAL FUNDS, INC. AND AIM ADVISORS, INC., in the Third Judicial Circuit Court for Madison County, Illinois (Case No. 2003-L-001253), filed on September 23, 2003. This claim alleges: common law breach of duty and common law negligence and gross negligence. The plaintiffs in these cases are seeking: compensatory and punitive damages; interest; and attorneys' fees and costs. The Third Judicial Circuit Court for Madison County, Illinois has issued an order severing the claims of plaintiff Parthasarathy from the claims of the other plaintiffs against AIM and other defendants. As a result, AIM is a defendant in the following severed action: EDMUND WOODBURY, STUART ALLEN SMITH and SHARON SMITH, Individually and On Behalf of All Others Similarly Situated, v. AIM INTERNATIONAL FUNDS, INC., ET AL., in the Third Judicial Circuit Court for Madison County, Illinois (Case No. 03-L-1253A). The claims made by plaintiffs and the relief sought in the Woodbury lawsuit are identical to those in the Parthasarathy lawsuit. On April 22, 2005, Defendants in the Woodbury lawsuit removed the action to Federal Court (U.S. District Court, Southern District of Illinois, No. 05-CV-302-DRH). Based on a recent Federal appellate court decision (the "Kircher" case), AIM and the other defendants in the Woodbury lawsuit removed the action to Federal court (U.S. District Court, Southern District of Illinois, Cause No. 05-CV-302-DRH) on April 22, 2005. On April 26, 2005, AIM and the other defendants filed their Motion to Dismiss the plaintiffs' state law based claims. On June 10, 2005, the Court dismissed the Woodbury lawsuit based upon the Kircher ruling and ordered the court clerk to close this case. Plaintiffs filed a Motion to Amend the Judgment arguing that the Kircher ruling does not apply to require the dismissal of the claims against AIM in the Woodbury lawsuit. On July 7, 2005, the Court denied this Motion. The plaintiffs filed a Notice of Appeal. On September 2, 2005, the Court combined the nine cases on this subject matter, including the case against AIM. JOHN BILSKI, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. AIM INTERNATIONAL FUNDS, INC., AIM ADVISORS, INC., INVESCO INTERNATIONAL FUNDS, INC., INVESCO FUNDS GROUP, INC., T. ROWE PRICE INTERNATIONAL FUNDS, INC. AND T. ROWE PRICE INTERNATIONAL, INC., in the United States District Court, Southern District of Illinois (East St. Louis) (Case No. 03-772), filed on November 19, 2003. This claim alleges: violations of Sections 36(a) and 36(b) of the Investment Company Act of 1940; common law breach of duty; and common law negligence and gross negligence. The plaintiff in this case is seeking: compensatory and punitive damages; interest; and attorneys' fees and costs. This lawsuit has been transferred to the MDL Court by order of the United States District Court, Southern District of Illinois (East St. Louis). P-11 APPENDIX P-3 PENDING LITIGATION ALLEGING EXCESSIVE ADVISORY AND/OR DISTRIBUTION FEES The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of IFG, AIM, IINA, ADI and/or INVESCO Distributors and allege that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and, in some cases, also allege that the defendants adopted unlawful distribution plans. These lawsuits either have been served or have had service of process waived as of February 16, 2006 All of the lawsuits discussed below have been transferred to the United States District Court for the Southern District of Texas, Houston Division by order of the applicable United States District Court in which they were initially filed. By order of the United States District Court for the Southern District of Texas, Houston Division, the Kondracki and Papia lawsuits discussed below have been consolidated for pre-trial purpose into the Berdat lawsuit discussed below and administratively closed. On December 8, 2005, the Court granted plaintiffs' Motion for Leave to File a Second Amended Consolidated Complaint. The result of the Court's order is to remove certain plaintiffs from the suit, remove certain claims by other plaintiffs relating to certain funds and bring in additional plaintiffs' claims relating to additional funds. On December 29, 2005, the defendants filed a Notice of Tag-Along case in the MDL Court regarding this matter due to the extensive allegations of market timing contained in the plaintiffs' Second Amended Consolidated Complaint. On February 1, 2006, the MDL Court issued a Conditional Transfer Order transferring the Berdat lawsuit to the MDL Court. The plaintiffs filed a Notice of Opposition to this Conditional Transfer Order on February 17, 2006. RONALD KONDRACKI V. AIM ADVISORS, INC. AND AIM DISTRIBUTOR, INC., in the United States District Court for the Southern District of Illinois (Civil Action No. 04-CV-263-DRH), filed on April 16, 2004. This claim alleges violations of Section 36(b) of the Investment Company Act of 1940 (the "Investment Company Act"). The plaintiff in this case is seeking: damages; injunctive relief; prospective relief in the form of reduced fees; rescission of the investment advisory agreements and distribution plans; and costs and expenses, including counsel fees. DOLORES BERDAT, MARVIN HUNT, MADELINE HUNT, RANDAL C. BREVER AND RHONDA LECURU V. INVESCO FUNDS GROUP, INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO DISTRIBUTORS, INC., AIM ADVISORS, INC. AND AIM DISTRIBUTORS, INC., in the United States District Court for the Middle District of Florida, Tampa Division (Case No. 8:04-CV-978-T24-TBM), filed on April 29, 2004. This claim alleges violations of Sections 36(b) and 12(b) of the Investment Company Act. The plaintiffs in this case are seeking: damages; injunctive relief; rescission of the investment advisory agreements and distribution plans; and costs and expenses, including counsel fees. FERDINANDO PAPIA, FRED DUNCAN, GRACE GIAMANCO, JEFFREY S. THOMAS, COURTNEY KING, KATHLEEN BLAIR, HENRY BERDAT, RUTH MOCCIA, MURRAY BEASLEY AND FRANCES J. BEASLEY V. A I M ADVISORS, INC. AND A I M DISTRIBUTORS, INC., in the United States District Court for the Middle District of Florida, Tampa Division (Case No. 8:04-CV-977-T17-MSS), filed on April 29, 2004. This claim alleges violations of Sections 36(b) and 12(b) of the Investment Company Act. The plaintiffs in this case are seeking: damages; injunctive relief; rescission of the investment advisory agreements and distribution plans; and costs and expenses, including counsel fees. P-12 APPENDIX P-4 PENDING LITIGATION ALLEGING IMPROPER MUTUAL FUND SALES PRACTICES AND DIRECTED-BROKERAGE ARRANGEMENTS The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of AIM Management, IFG, AIM, AIS and/or certain of the trustees of the AIM Funds and allege that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively push the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits either have been served or have had service of process waived as of February 16, 2006. By order of the United States District Court for the Southern District of Texas, Houston Division, the claims made in the Beasley, Kehlbeck Trust, Fry, Apu and Bendix lawsuits discussed below were consolidated into the Boyce lawsuit discussed below and these other lawsuits were administratively closed. On June 7, 2005, plaintiffs filed their Consolidated Amended Complaint in which they make substantially identical allegations to those of the individual underlying lawsuits. However, the City of Chicago Deferred Compensation Plan has been joined as an additional plaintiff in the Consolidated Amended Complaint. Plaintiffs added defendants, including current and former directors/trustees of the AIM Funds formerly advised by IFG. On December 16, 2005, the defendants filed their Motions to Dismiss these claims. JOY D. BEASLEY AND SHEILA MCDAID, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY P-13 GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court for the District of Colorado (Civil Action No. 04-B-0958), filed on May 10, 2004. The plaintiffs voluntarily dismissed this case in Colorado and re-filed it on July 2, 2004 in the United States District Court for the Southern District of Texas, Houston Division (Civil Action H-04-2589). This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment Company Act of 1940 (the "Investment Company Act") and violations of Sections 206 and 215 of the Investment Advisers Act of 1940 (the "Advisers Act"). The claim also alleges common law breach of fiduciary duty. The plaintiffs in this case are seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. RICHARD TIM BOYCE V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court for the District of Colorado (Civil Action No. 04-N-0989), filed on May 13, 2004. The plaintiff voluntarily dismissed this case in Colorado and re-filed it on July 1, 2004 in the United States District Court for the Southern District of Texas, Houston Division (Civil Action H-04-2587). This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment Company Act and violations of Sections 206 and 215 of the Advisers Act. The claim also alleges common law breach of fiduciary duty. The plaintiff in this case is seeking: compensatory and punitive damages; rescission of certain Funds' advisory P-14 agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. KEHLBECK TRUST DTD 1-25-93, BILLY B. KEHLBECK AND DONNA J. KEHLBECK, TTEES V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court for the Southern District of Texas, Houston Division (Civil Action No. H-04-2802), filed on July 9, 2004. This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment Company Act and violations of Sections 206 and 215 of the Advisers Act. The claim also alleges common law breach of fiduciary duty. The plaintiff in this case is seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. JANICE R. FRY, BOB J. FRY, JAMES P. HAYES, VIRGINIA L. MAGBUAL, HENRY W. MEYER AND GEORGE ROBERT PERRY V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH P-15 FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court for the Southern District of Texas, Houston Division (Civil Action No. H-04-2832), filed on July 12, 2004. This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment Company Act and violations of Sections 206 and 215 of the Advisers Act. The claim also alleges common law breach of fiduciary duty. The plaintiff in this case is seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. ROBERT P. APU, SUZANNE K. APU, MARINA BERTI, KHANH DINH, FRANK KENDRICK, EDWARD A. KREZEL, DAN B. LESIUK, JOHN B. PERKINS, MILDRED E. RUEHLMAN, LOUIS E. SPERRY, J. DORIS WILLSON AND ROBERT W. WOOD V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH P-16 INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court for the Southern District of Texas, Houston Division (Civil Action No. H-04-2884), filed on July 15, 2004. This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment Company Act and violations of Sections 206 and 215 of the Advisers Act. The claim also alleges common law breach of fiduciary duty. The plaintiff in this case is seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. HARVEY R. BENDIX, CVETAN GEORGIEV, DAVID M. LUCOFF, MICHAEL E. PARMELEE, TRUSTEE OF THE HERMAN S. AND ESPERANZA A.. DRAYER RESIDUAL TRUST U/A 1/22/83 AND STANLEY S. STEPHENSON, TRUSTEE OF THE STANLEY J. STEPHENSON TRUST V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM P-17 SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court for the Southern District of Texas, Houston Division (Civil Action No. H-04-3030), filed on July 27, 2004. This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the Investment Company Act and violations of Sections 206 and 215 of the Advisers Act. The claim also alleges common law breach of fiduciary duty. The plaintiff in this case is seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. P-18 Appendix II PRO FORMA COMBINING SCHEDULE OF INVESTMENTS * OF AIM HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND APRIL 30, 2006 (UNAUDITED)
SHARES VALUE -------------------------------- -------------------------------------------- AIM AIM ADVANTAGE AIM ADVANTAGE AIM HEALTH GLOBAL HEALTH GLOBAL SCIENCES HEALTH PRO FORMA SCIENCES HEALTH PRO FORMA FUND CARE FUND COMBINING FUND CARE FUND COMBINING ---------- ---------- ---------- -------------- -------------- -------------- DOMESTIC COMMON STOCKS & OTHER EQUITY INTERESTS -- 78.31% BIOTECHNOLOGY--23.22% 68,653 -- 68,653 Altus Pharmaceuticals Inc. (a)(b) $ 1,499,381 $ -- $ 1,499,381 46,542 689,874 736,416 Amgen Inc. (a) 3,150,893 46,704,470 49,855,363 70,028 472,019 542,047 Arena Pharmaceuticals, Inc. (a)(b) 991,596 6,683,789 7,675,385 87,600 662,110 749,710 ARIAD Pharmaceuticals, Inc. (a) 512,460 3,873,344 4,385,804 70,802 580,836 651,638 Array BioPharma Inc. (a) 524,643 4,303,995 4,828,638 72,400 884,635 957,035 Biogen Idec Inc. (a) 3,247,140 39,675,880 42,923,020 25,250 248,487 273,737 Cephalon, Inc. (a)(b) 1,657,915 16,315,656 17,973,571 32,131 344,138 376,269 Charles River Laboratories International, Inc. (a) 1,518,190 16,260,521 17,778,711 25,800 255,543 281,343 Coley Pharmaceutical Group, Inc. (a)(b) 412,542 4,086,133 4,498,675 40,918 391,308 432,226 Cubist Pharmaceuticals, Inc. (a) 927,611 8,870,952 9,798,563 28,227 125,391 153,618 DOV Pharmaceutical, Inc. (a)(b) 229,805 1,020,683 1,250,488 3,663,120 -- 3,663,120 Evolutionary Genomics/GenoPlex, Inc. (Acquired 09/15/97-06/25/98; Cost $408,490) (a)(c)(d)(e)(f)(g) 0 -- 0 45,700 -- 45,700 Exelixis, Inc. (a) 491,732 -- 491,732 10,915 107,724 118,639 Genentech, Inc. (a) 870,035 8,586,680 9,456,715 47,342 -- 47,342 Genomic Health, Inc. (a) 505,612 -- 505,612 53,967 668,415 722,382 Genzyme Corp. (a) 3,300,622 40,880,261 44,180,883 24,458 241,372 265,830 Gilead Sciences, Inc. (a) 1,406,335 13,878,890 15,285,225 104,416 704,412 808,828 Human Genome Sciences, Inc. (a) 1,191,386 8,037,341 9,228,727 19,559 180,140 199,699 Idenix Pharmaceuticals Inc. (a)(b) 196,372 1,808,606 2,004,978 41,535 -- 41,535 Immunicon Corp. (a) 204,768 -- 204,768 134,819 704,814 839,633 Incyte Corp. (a) 562,195 2,939,074 3,501,269 54,611 300,219 354,830 InterMune, Inc. (a)(b) 873,230 4,800,502 5,673,732 24,000 153,900 177,900 Invitrogen Corp. (a) 1,584,240 10,158,939 11,743,179 25,537 257,414 282,951 Keryx Biopharmaceuticals, Inc.(a) 434,895 4,383,760 4,818,655 42,755 304,634 347,389 Mannkind Corp. (a)(b) 855,100 6,092,680 6,947,780 -- 166,398 166,398 Medarex, Inc. (a) -- 1,998,440 1,998,440 85,607 925,337 1,010,944 MedImmune, Inc. (a) 2,694,052 29,120,355 31,814,407 37,696 406,998 444,694 Millennium Pharmaceuticals, Inc. (a) 342,280 3,695,542 4,037,822 23,610 116,502 140,112 Myogen, Inc. (a) 780,547 3,851,556 4,632,103 60,690 618,764 679,454 NPS Pharmaceuticals, Inc. (a)(b) 520,113 5,302,808 5,822,921 17,400 186,500 203,900 OSI Pharmaceuticals, Inc. (a)(b) 462,318 4,955,305 5,417,623 97,108 854,929 952,037 Panacos Pharmaceuticals Inc. (a) 678,785 5,975,954 6,654,739 71,815 707,544 779,359 PDL BioPharma Inc. (a)(b) 2,066,836 20,363,116 22,429,952 16,100 208,400 224,500 Rigel Pharmaceuticals, Inc. (a)(b) 172,753 2,236,132 2,408,885 51,263 515,637 566,900 Serologicals Corp. (a)(b) 1,595,305 16,046,623 17,641,928 145,299 -- 145,299 Sonus Pharmaceuticals, Inc. (a)(b) 816,580 -- 816,580 90,500 -- 90,500 Sunesis Pharmaceuticals, Inc. (a)(b) 617,210 -- 617,210 15,700 138,521 154,221 Theravance, Inc. (a) 440,542 3,886,899 4,327,441 67,828 -- 67,828 TorreyPines Therapeutics, Inc. (Acquired 09/15/97-06/25/98; Cost $202,031) (a)(c)(d)(e)(f) 67,828 -- 67,828 11,372 118,031 129,403 Vertex Pharmaceuticals Inc. (a)(b) 413,600 4,292,787 4,706,387 48,926 312,390 361,316 ZymoGenetics, Inc. (a) 1,001,515 6,394,623 7,396,138 -------------- -------------- -------------- 39,818,962 357,482,296 397,301,258 -------------- -------------- -------------- DRUG RETAIL--1.25% 78,020 641,676 719,696 CVS Corp. 2,318,754 19,070,611 21,389,365 -------------- -------------- -------------- HEALTH CARE DISTRIBUTORS--0.85% 70,940 734,619 805,559 PSS World Medical, Inc. (a) 1,279,758 13,252,527 14,532,285 -------------- -------------- --------------
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS * OF AIM HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND APRIL 30, 2006 (UNAUDITED)
SHARES VALUE -------------------------------- -------------------------------------------- AIM AIM ADVANTAGE AIM ADVANTAGE AIM HEALTH GLOBAL HEALTH GLOBAL SCIENCES HEALTH PRO FORMA SCIENCES HEALTH PRO FORMA FUND CARE FUND COMBINING FUND CARE FUND COMBINING ---------- ---------- ---------- -------------- -------------- -------------- HEALTH CARE EQUIPMENT--17.71% 16,601 164,581 181,182 Advanced Medical Optics, Inc. (a)(b) $ 773,607 $ 7,669,475 $ 8,443,082 -- 122,000 122,000 Beckman Coulter, Inc. -- 6,265,920 6,265,920 41,458 415,429 456,887 Biomet, Inc. 1,541,408 15,445,650 16,987,058 136,857 1,440,510 1,577,367 Boston Scientific Corp. (a) 3,180,557 33,477,452 36,658,009 259,750 -- 259,750 Cambridge Heart, Inc. (b) 755,872 -- 755,872 60,552 210,859 271,411 Cyberonics, Inc. (a)(b) 1,404,201 4,889,820 6,294,021 70,981 459,673 530,654 Cytyc Corp. (a) 1,834,859 11,882,547 13,717,406 41,803 -- 41,803 Dade Behring Holdings, Inc. 1,630,317 -- 1,630,317 15,252 149,303 164,555 Dionex Corp. (a) 916,950 8,976,096 9,893,046 13,166 130,913 144,079 Edwards Lifesciences Corp. (a)(b) 585,097 5,817,774 6,402,871 20,129 209,700 229,829 EPIX Pharmaceuticals Inc. (a)(b) 78,302 815,733 894,035 18,000 193,600 211,600 Fisher Scientific International Inc. (a) 1,269,900 13,658,480 14,928,380 65,490 481,794 547,284 Medtronic, Inc. 3,282,359 24,147,515 27,429,874 91,915 688,407 780,322 Mentor Corp. (b) 3,982,677 29,828,675 33,811,352 75,000 -- 75,000 Nuvasive, Inc. (a) 1,494,000 -- 1,494,000 43,275 337,776 381,051 Respironics, Inc. (a) 1,584,730 12,369,357 13,954,087 92,292 679,550 771,842 St. Jude Medical, Inc. (a) 3,643,688 26,828,634 30,472,322 1,449 -- 1,449 Sensys Medical, Inc. (Acquired 04/23/04; Cost $688) (a)(c)(d)(e)(f) 145 -- 145 4,057 -- 4,057 Sensys Medical, Inc.-Wts., expiring 08/13/06 (Acquired 10/18/01-04/23/04; Cost $239) (c)(d)(e)(f)(h) 0 -- 0 1,622 -- 1,622 Sensys Medical, Inc.-Wts., expiring 09/17/06 (Acquired 10/05/01-04/23/04; Cost $96) (c)(d)(e)(f)(h) 0 -- 0 1,622 -- 1,622 Sensys Medical, Inc.-Wts., expiring 10/19/06 (Acquired 11/07/01-04/23/04; Cost $96) (c)(d)(e)(f)(h) 0 -- 0 26,000 285,000 311,000 Stryker Corp. 1,137,500 12,468,750 13,606,250 45,046 441,249 486,295 Thermo Electron Corp. (a) 1,736,073 17,005,737 18,741,810 84,095 385,879 469,974 Thoratec Corp. (a)(b) 1,514,551 6,949,681 8,464,232 12,325 130,384 142,709 Varian Inc. (a) 533,303 5,641,716 6,175,019 22,100 238,400 260,500 Varian Medical Systems, Inc. (a) 1,157,598 12,487,392 13,644,990 44,226 486,476 530,702 Wright Medical Group, Inc. (a) 1,037,984 11,417,592 12,455,576 -------------- -------------- -------------- 35,075,678 268,043,996 303,119,674 -------------- -------------- -------------- HEALTH CARE FACILITIES--0.87% 53,503 -- 53,503 Community Health Systems, Inc. (a) 1,938,949 -- 1,938,949 27,608 362,817 390,425 Kindred Healthcare, Inc. (a)(b) 669,770 8,801,940 9,471,710 39,598 394,594 434,192 Tenet Healthcare Corp. (a)(b) 329,455 3,283,022 3,612,477 -------------- -------------- -------------- 2,938,174 12,084,962 15,023,136 -------------- -------------- -------------- HEALTH CARE SERVICES--8.17% 139,185 -- 139,185 Allion Healthcare, Inc. (a) 1,485,104 -- 1,485,104 66,726 -- 66,726 Allscripts Healthcare Solutions, Inc. (a)(b) 1,136,344 -- 1,136,344 -- 137,000 137,000 DaVita, Inc. (a) -- 7,758,254 7,758,254 71,959 724,340 796,299 Eclipsys Corp. (a) 1,584,537 15,949,967 17,534,504 149,706 1,598,153 1,747,859 HMS Holdings Corp. (a)(g) 1,282,980 13,696,171 14,979,151 73,549 748,199 821,748 Medco Health Solutions, Inc. (a) 3,915,013 39,826,633 43,741,646 77,730 773,935 851,665 Merge Technologies Inc. (a)(b) 982,507 9,782,539 10,765,046 24,111 -- 24,111 Nighthawk Radiology Holdings, Inc. (a) 584,210 -- 584,210 31,859 331,906 363,765 Omnicare, Inc. (b) 1,806,724 18,822,389 20,629,113 45,198 474,544 519,742 Pharmaceutical Product Development, Inc. 1,621,252 17,021,893 18,643,145 98,802 -- 98,802 Trizetto Group, Inc. (a) 1,553,167 -- 1,553,167 40,326 -- 40,326 Visicu, Inc. (a)(b) 959,759 -- 959,759 -------------- -------------- -------------- 16,911,597 122,857,846 139,769,443 -------------- -------------- --------------
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS * OF AIM HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND APRIL 30, 2006 (UNAUDITED)
SHARES VALUE -------------------------------- -------------------------------------------- AIM AIM ADVANTAGE AIM ADVANTAGE AIM HEALTH GLOBAL HEALTH GLOBAL SCIENCES HEALTH PRO FORMA SCIENCES HEALTH PRO FORMA FUND CARE FUND COMBINING FUND CARE FUND COMBINING ---------- ---------- ---------- -------------- -------------- -------------- HEALTH CARE SUPPLIES--2.56% 30,536 303,593 334,129 Alcon, Inc. (a) $ 3,105,816 $ 30,878,444 $ 33,984,260 13,400 -- 13,400 Advanced Magnetics, Inc.(a)(b) 349,740 -- 349,740 15,343 157,601 172,944 Cooper Cos., Inc (The) 841,103 8,639,687 9,480,790 -------------- -------------- -------------- 4,296,659 39,518,131 43,814,790 -------------- -------------- -------------- INDUSTRIAL CONGLOMERATES--1.80% 107,250 1,061,338 1,168,588 Tyco International Ltd. 2,826,038 27,966,256 30,792,294 -------------- -------------- -------------- LIFE & HEALTH INSURANCE--0.51% 50,302 543,805 594,107 Universal American Financial Corp. (a) 741,451 8,015,686 8,757,137 -------------- -------------- -------------- MANAGED HEALTH CARE--9.21% 66,538 658,850 725,388 Aetna Inc. 2,561,713 25,365,725 27,927,438 71,600 775,100 846,700 Aveta, Inc. (Acquired 12/21/05; Cost $11,430,450)(a)(c)(e) 1,163,500 12,595,375 13,758,875 33,789 360,587 394,376 Coventry Health Care, Inc. (a) 1,678,300 17,910,356 19,588,656 33,187 325,407 358,594 Health Net, Inc. (a) 1,350,711 13,244,065 14,594,776 95,516 943,237 1,038,753 UnitedHealth Group Inc. 4,750,966 46,916,608 51,667,574 36,259 387,085 423,344 WellPoint, Inc. (a) 2,574,389 27,483,035 30,057,424 -------------- -------------- -------------- 14,079,579 143,515,164 157,594,743 -------------- -------------- -------------- PHARMACEUTICALS--12.16% 65,902 512,317 578,219 Cypress Bioscience, Inc. (a) 490,970 3,816,762 4,307,732 65,977 538,328 604,305 Endo Pharmaceuticals Holdings Inc.(a) 2,074,977 16,930,416 19,005,393 16,555 173,333 189,888 Forest Laboratories, Inc. (a) 668,491 6,999,187 7,667,678 81,268 766,376 847,644 Impax Laboratories, Inc. (a)(b) 751,729 7,088,978 7,840,707 112,949 862,645 975,594 Johnson & Johnson 6,619,941 50,559,623 57,179,564 61,404 432,900 494,304 Medicines Co. (The) (a)(b) 1,180,185 8,320,338 9,500,523 33,300 455,700 489,000 MGI Pharma, Inc.(a) 622,044 8,512,476 9,134,520 -- 1,290,727 1,290,727 Pfizer Inc. -- 32,694,115 32,694,115 28,852 312,099 340,951 Sepracor Inc. (a)(b) 1,287,953 13,932,099 15,220,052 49,170 -- 49,170 SuperGen, Inc. (a)(b) 266,501 -- 266,501 -- 825,345 825,345 Wyeth -- 40,169,541 40,169,541 17,895 210,400 228,295 XenoPort, Inc. (a)(b) 401,743 4,723,480 5,125,223 -------------- -------------- -------------- 14,364,534 193,747,015 208,111,549 -------------- -------------- -------------- Total Domestic Common Stocks & Other Equity Interests (Cost $1,246,401,499) 134,651,184 1,205,554,490 1,340,205,674 -------------- -------------- -------------- FOREIGN STOCKS & OTHER EQUITY INTERESTS --20.77% CANADA--1.35% 59,955 649,321 709,276 Biovail Corp. (Pharmaceuticals) 1,562,427 16,921,305 18,483,732 72,818 359,083 431,901 Cardiome Pharma Corp. (Pharmaceuticals)(a) 771,871 3,806,280 4,578,151 -------------- -------------- -------------- 2,334,298 20,727,585 23,061,883 -------------- -------------- -------------- FRANCE--3.56% 59,673 606,049 665,722 Ipsen S.A. (Pharmaceuticals) (Acquired 12/06/05; Cost $17,425,953)(a)(b)(c)(i) 2,673,349 27,150,983 29,824,332 -- 313,000 313,000 Sanofi-Aventis (Pharmaceuticals)(i) -- 29,512,359 29,512,359 35,386 -- 35,386 Sanofi-Aventis-ADR (Pharmaceuticals) 1,664,558 -- 1,664,558 -------------- -------------- -------------- 4,337,907 56,663,342 61,001,249 -------------- -------------- -------------- GERMANY--0.99% 14,865 145,794 160,659 Merck KGaA (Pharmaceuticals)(i) 1,575,007 15,447,469 17,022,476 -------------- -------------- --------------
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS * OF AIM HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND APRIL 30, 2006 (UNAUDITED)
SHARES VALUE -------------------------------- -------------------------------------------- AIM AIM ADVANTAGE AIM ADVANTAGE AIM HEALTH GLOBAL HEALTH GLOBAL SCIENCES HEALTH PRO FORMA SCIENCES HEALTH PRO FORMA FUND CARE FUND COMBINING FUND CARE FUND COMBINING ---------- ---------- ---------- -------------- -------------- -------------- ISRAEL--0.50% 18,379 19,355 37,734 Teva Pharmaceutical Industries Ltd -ADR (Pharmaceuticals)(b) $ 744,350 $ 7,837,762 $ 8,582,112 -------------- -------------- -------------- JAPAN--2.23% 50,000 507,400 557,400 Eisai Co., Ltd. (Pharmaceuticals)(b)(i) 2,284,560 23,183,716 25,468,276 70,000 688,000 758,000 Shionogi & Co., Ltd. (Pharmaceuticals)(b)(i) 1,179,614 11,593,918 12,773,532 -------------- -------------- -------------- 3,464,174 34,777,634 38,241,808 -------------- -------------- -------------- SWITZERLAND--9.52% 94,409 1,006,768 1,101,177 Novartis A.G. -ADR (Pharmaceuticals) 5,429,462 57,899,227 63,328,689 59,566 587,850 647,416 Roche Holding A.G. (Pharmaceuticals) (b)(i) 9,157,741 90,376,690 99,534,431 -------------- -------------- -------------- 14,587,203 148,275,917 162,863,120 -------------- -------------- -------------- UNITED KINGDOM--2.62% 22,455 221,602 244,057 AstraZeneca PLC -ADR (Pharmaceuticals) 1,237,944 12,216,918 13,454,862 310,847 3,090,447 3,401,294 iSoft Group PLC (Health Care Services)(i) 665,073 6,612,172 7,277,245 500,000 -- 500,000 Renovo Group PLC (Biotechnology) (a) 1,034,950 -- 1,034,950 43,225 439,684 482,909 Shire PLC-ADR (Pharmaceuticals) (b) 2,047,136 20,823,434 22,870,570 -------------- -------------- -------------- 4,985,103 39,652,524 44,637,627 -------------- -------------- -------------- Total Foreign Stocks & Other Equity Interests (Cost $261,930,165) 32,028,042 323,382,233 355,410,275 -------------- -------------- -------------- PREFERRED STOCKS --0.54% BIOTECHNOLOGY--0.03% 416,667 416,667 833,334 Athersys Inc. -Series F, Conv. Pfd. (Acquired 04/17/00; Cost $10,000,000) (a)(c)(d)(e)(f) 235,293 235,293 470,586 103,055 103,055 206,110 Ingenex, Inc.-Series B, Pfd. (Acquired 09/27/94; Cost $1,200,000) (a)(c)(d)(e)(f) 0 -- 0 -------------- -------------- -------------- 235,293 235,293 470,586 -------------- -------------- -------------- HEALTH CARE DISTRIBUTORS--0.07% 2,000,000 -- 2,000,000 Locus Pharmaceuticals, Inc.-Series C, Pfd. (Acquired 11/21/00; Cost $4,500,000) (a)(c)(d)(e)(f) 978,000 -- 978,000 588,235 -- 588,235 Locus Pharmaceuticals, Inc.-Series D, Pfd. (Acquired 09/06/01; Cost $2,352,940) (a)(c)(d)(e)(f) 287,647 -- 287,647 -------------- -------------- -------------- 1,265,647 -- 1,265,647 -------------- -------------- -------------- HEALTH CARE EQUIPMENT--0.40% 125,000 -- 125,000 Masimo Corp.-Series C, Pfd (Acquired 10/07/98; Cost $1,000,000) (a)(c)(d)(e)(f) 2,525,000 -- 2,525,000 15,909 -- 15,909 Masimo Corp.-Series F, Conv. Pfd (Acquired 09/14/99; Cost $174,999) (a)(c)(d)(e)(f) 321,362 -- 321,362 2,439,026 -- 2,439,026 Neothermia Corp.-Series C, Pfd. (Acquired 03/26/01; Cost $2,000,001)(a)(c)(d)(e)(f) 2,219,514 -- 2,219,514 2,173,209 -- 2,173,209 Sensys Medical, Inc.-Series A-2, Pfd. (Acquired 02/25/98-09/30/05; Cost $7,627,993) (a)(c)(d)(e)(f)(g) 1,608,175 -- 1,608,175 -------------- -------------- -------------- 6,674,051 -- 6,674,051 -------------- -------------- --------------
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS * OF AIM HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND APRIL 30, 2006 (UNAUDITED)
SHARES VALUE -------------------------------- -------------------------------------------- AIM AIM ADVANTAGE AIM ADVANTAGE AIM HEALTH GLOBAL HEALTH GLOBAL SCIENCES HEALTH PRO FORMA SCIENCES HEALTH PRO FORMA FUND CARE FUND COMBINING FUND CARE FUND COMBINING ---------- ---------- ---------- -------------- -------------- -------------- PHARMACEUTICALS--0.04% 93,867 93,867 187,734 BioImagene, Inc.-Series B-2, Pfd. (Acquired 05/24/01; Cost $2,700,000) (a)(c)(d)(e)(f) $ 94,336 $ 94,336 $ 188,672 1,471,072 -- 1,471,072 Predix Pharmaceuticals Holdings, Inc.-Series A, Conv. Pfd. (Acquired 11/07/97-09/21/04; Cost $1,511,468) (a)(c)(d)(e)(f) 357,228 -- 357,228 850,039 850,039 Predix Pharmaceuticals Holdings, Inc.-Series C, Conv. Pfd. (Acquired 08/05/04; Cost $187,323) (a)(c)(d)(e)(f) 206,419 -- 206,419 -------------- -------------- -------------- 657,983 94,336 752,319 -------------- -------------- -------------- Total Preferred Stocks (Cost $33,254,724) 8,832,974 329,629 9,162,603 -------------- -------------- --------------
PRINCIPAL AMOUNT ---------- BONDS & NOTES--0.01% PHARMACEUTICALS--0.01% $222,563 $ -- $222,563 Sensys Medical, Inc., Sec. Notes, 8.00%, 06/30/06 (Acquired 03/16/05-06/15/05; Cost $222,563) (c)(d)(e)(f) 222,563 -- 222,563 -------------- -------------- --------------
SHARES ---------- MONEY MARKET FUNDS--0.91% 5,596,960 5,596,960 Liquid Assets Portfolio-Institutional Class (j) -- 5,596,960 5,596,960 4,442,258 -- 4,442,258 Premier Portfolio-Institutional Class (j) 4,442,258 -- 4,442,258 5,596,960 5,596,960 STIC Prime Portfolio-Institutional Class (j) -- 5,596,960 5,596,960 Total Money Market Funds (Cost $15,636,178) 4,442,258 11,193,920 15,636,178 Adjustment for Extinguishment of Debt--(1.40%) (Cost $24,418,246) (k) (24,000,000) (24,000,000) Total Investments (excluding investments purchased with cash collateral from securities loaned)--99.14% (Cost $1,533,026,883) 156,177,021 1,540,460,272 1,696,637,293 -------------- -------------- -------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS--7.00% -- 47,089,563 47,089,563 Liquid Assets Portfolio-Institutional Class (j)(l) -- 47,089,563 47,089,563 25,710,819 -- 25,710,819 Premier Portfolio-Institutional Class (j)(l) 25,710,819 -- 25,710,819 -- 47,089,563 47,089,563 STIC Prime Portfolio-Institutional Class (j)(l) -- 47,089,563 47,089,563 Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $119,889,945) 25,710,819 94,179,126 119,889,945 -------------- -------------- -------------- TOTAL INVESTMENTS -- 106.14% (Cost $1,652,916,828) 181,887,840 1,634,639,398 1,816,527,238 -------------- -------------- -------------- OTHER ASSETS LESS LIABILITIES -- -6.15%(m) (23,410,436) (81,770,910) (105,181,346) -------------- -------------- -------------- NET ASSETS -- 100.00% $ 158,477,404 $1,552,868,488 $1,711,345,892 ============== ============== ==============
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS * OF AIM HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND APRIL 30, 2006 (UNAUDITED)
SHARES VALUE -------------------------------- -------------------------------------------- AIM AIM ADVANTAGE AIM ADVANTAGE AIM HEALTH GLOBAL HEALTH GLOBAL SCIENCES HEALTH PRO FORMA SCIENCES HEALTH PRO FORMA FUND CARE FUND COMBINING FUND CARE FUND COMBINING ---------- ---------- ---------- -------------- -------------- -------------- SECURITIES SOLD SHORT(*) COMMON STOCKS--0.00% (N) BIOTECHNOLOGY--0.00% 20,000 -- -- Celegene Corp. $ 843,200 $ -- $ -- -------------- -------------- -------------- HEALTH CARE DISTRIBUTORS--0.00% 34,929 -- -- AmerisourceBergen Corp. 1,507,186 -- -- -------------- -------------- -------------- HEALTH CARE EQUIPMENT--0.00% 200,000 -- -- Quidell Corp. 2,290,000 -- -- -------------- -------------- -------------- HEALTH CARE SERVICES--0.00% 19,128 -- -- Express Scripts, Inc. 1,494,662 -- -- -------------- -------------- -------------- MANAGED HEALTH CARE--0.00% 14,000 -- -- Cigna Corp. 1,498,000 -- -- -------------- -------------- -------------- Total Securities Sold Short (Total Proceeds $7,131,178) $ 7,633,048 $ -- Adjustment for liquidation of short sale positions (7,633,048) -- -------------- -------------- Total Securities Sold Short After Adjustments (Total Proceeds $0) (o) $ -- $ -- -------------- --------------
Investment Abbreviations: ADR - American Depositary Receipt Conv.-Convertible Disc. - Discounted Pfd.-Preferred Sec.-Secured Wts.-Warrants Notes to Proforma Combining Schedule of Investments: * At April 30, 2006, AIM Advantage Health Sciences Fund engaged in short selling (uncovered short positions) and borrowing for the purposes of making additional investments; two strategies that the buying fund AIM Global Health Care Fund is restricted from engaging in. Therefore, prior to the closing of the reorganization AIM Advantage Health Sciences Fund will cover all of its open short positions and sell off securities in a sufficient amount to return the borrowings on the line of credit. With the exception of the two items noted above all securities held by AIM Advantage Health Sciences Fund comply with the investment objectives, strategies and restrictions of AIM Global Health Care Fund at April 30, 2006. reorganization. (a) Non-income producing security. (b) All or a portion of this security was out on loan at April 30, 2006. (c) Security not registered under the Securities Act of 1993, as amended (e.g., the security was purchased in a Rule 144A transaction or a Regulation D transaction). The security may be resold only pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. AIM Global Health Care Fund has no rights to demand registration of these securities. The aggregate market value of these securities at April 30, 2006 was $12,960,359, which represented 8.17% of the Net Assets of AIM Advantage Health Sciences. The aggregate market value of these securities at April 30, 2006 was $40,075,987, which represented 2.58% of the Net Assets of AIM Global Health Care Fund. The aggregate market value of these securities at April 30, 2006 was $53,036,346, which represented 3.10% of the pro forma combining Net Assets of AIM Global Health Care Fund. Unless otherwise indicated, these securities are not considered to be illiquid. Notes to Proforma Combining Schedule of Investments-(continued) (d) Security fair valued in good faith in accordance with the procedures established by the Board of Trustees. The aggregate market value of these securities at April 30, 2006 was $9,123,510, which represented 5.75% of the Net Assets of AIM Advantage Health Sciences Fund. The aggregate market value of these securities at April 30, 2006 was $329,629, which represented 0.20% of the Net Assets of AIM Global Health Care Fund. The aggregate market value of these securities at April 30, 2006 was $9,453,139, which represented 0.55% of the pro forma combining Net Assets of AIM Global Health Care Fund. See Note 4. (e) Security considered to be illiquid. AIM Global Health Care Fund is limited to investing 15% of net assets in illiquid securities at the time of purchase. The aggregate value of these securities considered illiquid at April 30, 2006 was $10,287,010, which represented 6.49% of the Net Assets of AIM Advantage Health Sciences Fund. The aggregate value of these securities considered illiquid at April 30, 2006 was $12,925,004, which represented 0.83% of the Net Assets of AIM Global Health Care Fund. The aggregate value of these securities considered illiquid at April 30, 2006 was $23,212,014, which represented 1.36% of the pro forma combining Net Assets of AIM Global Health Care Fund. (f) Security is considered venture capital. (g) Affiliated company. The Investment Company Act of 1940 defines affiliates as those companies in which a find holds 5% or more of the outstanding voting securities. AIM Global Health Care Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The market value of these securities as of April 30, 2006 was $1,608,175, which represented 1.01% of the Net Assets of AIM Advantage Health Sciences Fund. The market value of these securities as of April 30, 2006 was $13,696,171, which represented 0.88% of the Net Assets of AIM Global Health Care Fund. The market value of these securities as of April 30, 2006 was $16,587,326, which represented 0.97% of the pro forma combining Net Assets of AIM Global Health Care Fund. (h) Non-income producing security acquired as part of a unit with or in exchange for other securities. (i) In accordance with the procedures established by the Board of Trustees, the foreign security is fair valued using adjusted closing market prices. The aggregate value of these securities at April 30, 2006 was $221,412,651, which represented 12.94% of the pro forma combining Net Assets of AIM Global Health Care Fund. See Note 4. (j) Liquid Assets Portfolio, Premier Portfolio and STIC Prime Portfolio are affiliated with AIM Advantage Health Sciences Fund and AIM Global Health Care Fund by having the same investment advisor. (k) At April 30, 2006 AIM Advantage Health Sciences Fund had an outstanding loan of $24,000,000 that will be extinguished prior to the closing of the reorganization. AIM Advantage Health Sciences Fund is expected to sell securities valued at $24,000,000 and accordingly the value of the AIM Advantage Health Sciences Fund investments and the payable for the loan outstanding have been reduced by $24,000,000. The AIM Advantage Health Sciences Fund cost of securities has been reduced by $24,418,246 based on the proportion of borrowing to total investments. This does not reflect an estimate of the actual gains or losses expected to be realized as a result of the securities sold as the specific securities and value of those securities is not known at this time, but has been included to incorporate the concept that there will be a reduction in the costs of securities owned upon the liquidation of securities to raise cash for extinguishing the debt. (l) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. (m) The estimated transaction costs for the reorganization, which includes legal, accounting, filing, printing, postage and solicitation, are estimated to be $143,000 for AIM Advantage Health Sciences. AIM Advantage Health Sciences will bear all of the transaction costs and accordingly the liabilities of AIM Advantage Health Sciences Fund have been increased. In addition AIM Global Health Care Fund will bear approximately $30,000 with respect to the reorganization and accordingly the liabilities of AIM Health Care Fund have been increased by $30,000. (n) Collateral on short sales segregated by AIM Advantage Health Sciences Fund in the amount of $8,640,606, which represents 113.20% of the market value of securities sold short. (o) At April 30, 2006 AIM Advantage Health Sciences Fund had open short positions valued at $7,633 049 with proceeds of $7,131,178 that are required to be covered prior to the closing of the reorganization, accordingly the liability for securities sold short and proceeds on short sales have been adjusted to reflect this change. SEE ACCOMPANYING NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. PRO FORMA COMBINING STATEMENT OF ASSETS & LIABILITIES OF AIM ADVANTAGE HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND APRIL 30, 2006 (Unaudited)
AIM AIM ADVANTAGE AIM GLOBAL HEALTH HEALTH GLOBAL CARE FUND SCIENCES HEALTH CARE PRO FORMA FUND FUND ADJUSTMENTS ** COMBINING ------------ -------------- -------------- -------------- ASSETS: Investments, at value * $174,126,588 $1,515,570,181 $(24,000,000)(a) $1,665,696,769 (cost $171,286,275 - AIM Advantage Health Sciences Fund) (cost $1,357,644,435 - AIM Global Health Care Fund) (cost $1,528,930,710- Pro Forma Combining) Investments in affiliates, at value 31,761,252 119,069,217 -- 150,830,469 (cost $38,189,559 - AIM Advantage Health Sciences Fund) (cost $110,214,805 - AIM Global Health Care Fund) (cost $148,404,364 - Pro Forma Combining) Total Investments 205,887,840 1,634,639,398 (24,000,000)(a) 1,816,527,238 (cost $209,475,834 - AIM Advantage Health Sciences Fund) (cost $1,467,859,240 - AIM Global Health Care Fund) (cost adjustment $(24,418,246) - AIM Advantage Health Sciences Fund) (cost $1,652,916,828- Pro Forma Combining) Cash -- -- 1,217,597(b) 1,217,597 Foreign currencies, at value 633,382 12,844,934 -- 13,478,316 (cost $624,012 - AIM Advantage Health Sciences Fund) (cost $12,664,264 - AIM Global Health Care Fund) (cost $13,288,276 - Pro Forma Combining) Receivables for: Deposits with brokers for securities sold short 8,934,633 -- (8,934,633)(b) -- Investments sold 563,233 8,566,016 -- 9,129,249 Fund shares sold 229,389 726,667 -- 956,056 Dividends and interest 90,896 542,510 -- 633,406 Short stock rebates 22,613 -- (22,613)(b) -- Investment for trustee deferred compensation and retirement plans 41,911 213,101 -- 255,012 Other assets 73,135 61,259 -- 134,394 ------------ -------------- ------------ -------------- Total assets 216,477,032 1,657,593,885 (31,739,649) 1,842,331,268 ------------ -------------- ------------ -------------- LIABILITIES: Payables for: Fund shares reacquired 238,760 2,344,228 -- 2,582,988 Foreign currency contracts -- 6,366,348 -- 6,366,348 Trustee deferred compensation and retirement plans 49,078 297,246 -- 346,324 Collateral upon return of securities loaned 25,710,819 94,179,126 -- 119,889,945 Loan outstanding 24,000,000 -- (24,000,000)(a) -- Securities sold short, at value (proceeds $7,131,178) 7,633,049 -- (7,633,049)(b) -- Accrued interest expense 106,600 -- (106,600)(a) -- Accrued distribution fees 31,649 437,058 -- 468,707 Accrued trustees' and officer's fees and benefits -- 3,608 -- 3,608 Accrued transfer agent fees -- 926,578 -- 926,578 Accrued reorganization expenses -- -- 173,000 173,000 Accrued operating expenses 86,673 141,205 -- 227,878 ------------ -------------- ------------ -------------- Total liabilities 57,856,628 104,695,397 (31,566,649) 130,985,376 ------------ -------------- ------------ -------------- Net assets applicable to shares outstanding $158,620,404 $1,552,898,488 $ (173,000) $1,711,345,892 ------------ -------------- ------------ -------------- NET ASSETS CONSIST OF: Shares of beneficial interest $147,592,628 $1,206,115,697 $ -- $1,353,708,325 Undistributed net investment income (loss) (830,391) (4,975,041) (173,000) (5,978,432) Undistributed net realized gain from investment securities, foreign currencies, foreign currency contracts and securities sold short 15,937,774 191,327,797 -- 207,265,571 Unrealized appreciation of investment securities, foreign currencies, foreign currency contracts and securities sold short (4,079,607) 160,430,035 -- 156,350,428 ------------ -------------- ------------ -------------- $158,620,404 $1,552,898,488 $ (173,000) $1,711,345,892 ============ ============== ============ ============== NET ASSETS: Class A $153,450,494 $ 566,996,553 $ (149,293) $ 720,297,754 Class B $ 3,145,023 $ 149,457,427 $ (5,722) $ 152,596,728 Class C $ 2,024,887 $ 46,315,136 $ (2,721) $ 48,337,302 Investor Class $ -- $ 790,129,372 $ (15,264) $ 790,114,108 SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE: Class A 8,571,701 18,575,660 (3,548,925) 23,598,436 Class B 183,482 5,437,503 (69,184) 5,551,801 Class C 122,108 1,683,895 (48,554) 1,757,449 Investor Class -- 25,882,358 -- 25,882,358 Class A: Net asset value per share $ 17.90 $ 30.52 $ 30.52 Offering price per share: (Net asset value of $17.90 / 94.50% - AIM Advantage Health Sciences Fund) (Net asset value of $30.52 / 94.50% - AIM Global Health Care Fund) $ 18.94 $ 32.30 $ 32.30 Class B: Net asset value and offering price per share $ 17.14 $ 27.49 $ 27.49 Class C: Net asset value and offering price per share $ 16.58 $ 27.50 $ 27.50 Investor Class: Net asset value and offering price per share $ -- $ 30.53 $ 30.53
* At April 30, 2006, securities with an aggregate value of $25,127,048 and $90,972,895 were on loan to brokers for AIM Advantage Health Sciences Fund and AIM Global Health Care Fund, respectively. ** See Note 2 Pro Forma Adjustments. SEE ACCOMPANYING NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. PRO FORMA COMBINING STATEMENT OF OPERATIONS OF AIM ADVANTAGE HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND FOR THE YEAR ENDED APRIL 30, 2006 (Unaudited)
AIM AIM ADVANTAGE AIM GLOBAL HEALTH HEALTH GLOBAL CARE FUND SCIENCES HEALTH CARE PRO FORMA FUND FUND ADJUSTMENTS * COMBINING ----------- ------------ ------------- ------------- INVESTMENT INCOME: Dividends $ 2,314,670 $ 9,256,619 $ (269,817)(c) $ 11,301,472 (net of foreign withholding tax of $77,402 - AIM Advantage Health Sciences Fund) (net of foreign withholding tax of $520,771 - AIM Global Health Care Fund) (net of foreign withholding tax of $598,173 - Pro Forma Combining) Dividends from affiliated money market funds 215,282 1,431,707 -- 1,646,989 (including securities lending income of $39,506 - AIM Advantage Health Sciences Fund) (including securities lending income of $226,516 - AIM Global Health Care Fund) (including securities lending income of $266,022 - Pro Forma Combining) Short stock rebates 303,821 -- (303,821)(b) -- Interest 30,437 -- -- 30,437 ----------- ------------ ----------- ------------ Total investment income 2,864,210 10,688,326 (573,638) 12,978,898 ----------- ------------ ----------- ------------ EXPENSES: Advisory fees 3,012,967 9,312,131 (2,048,503)(d) 10,276,595 Administrative services fees 50,000 349,613 (16,785)(e) 382,828 Custodian fees 50,637 227,448 (15,572)(f) 262,513 Distribution fees: Class A 398,546 1,510,460 -- 1,909,006 Class B 19,410 1,567,619 -- 1,587,029 Class C 8,299 468,184 -- 476,483 Investor Class -- 1,630,112 -- 1,630,112 Dividends on short sales 9,448 -- (9,448)(b) -- Interest and line of credit fees 1,090,064 -- (1,090,064)(b) -- Transfer agent fees--A, B, C & Investor 273,186 4,046,491 (5,227)(g) 4,314,450 Trustees' and officer's fees and benefits 15,007 46,900 (10,891)(h) 51,016 Other 177,052 554,036 (72,572)(i) 658,516 ----------- ------------ ----------- ------------ Total expenses 5,104,616 19,712,994 (3,269,062) 21,548,548 ----------- ------------ ----------- ------------ Less: Fees waived, expenses reimbursed and expense offset arrangements (574,595) (435,560) 501,265 (508,890) ----------- ------------ ----------- ------------ Net expenses 4,530,021 19,277,434 (2,767,797) 21,039,658 ----------- ------------ ----------- ------------ Net investment income (loss) (1,665,811) (8,589,108) 2,194,159 (8,060,760) ----------- ------------ ----------- ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES, FOREIGN CURRENCIES, FOREIGN CURRENCY CONTRACTS, OPTION CONTRACTS AND SECURITIES SOLD SHORT: Net realized gain (loss) from: Investment securities 26,390,175 178,612,349 (3,076,258)(c) 201,926,266 (includes net gains from securities sold to affiliates of $522,587 - AIM Advantage Health Sciences Fund) (includes net gains from securities sold to affiliates of $4,833,530 - AIM Global Health Care Fund) (includes net gains from securities sold to affiliates of $5,356,117 - Pro Forma Combining) Foreign currencies (58,553) (845,691) -- (904,244) Foreign currency contracts -- 5,169,796 -- 5,169,796 Option contracts written 17,978 144,858 162,836 Securities sold short (1,610,221) -- 1,610,221(b) -- ----------- ------------ ----------- ------------ 24,739,379 183,081,312 (1,466,037) 206,354,654 ----------- ------------ ----------- ------------ Net unrealized appreciation (depreciation) of: Investment securities 6,664,681 88,327,961 (776,891)(c) 94,215,751 Foreign currencies 8,295 172,060 -- 180,355 Foreign currency contracts -- (6,540,825) (6,540,825) Option contracts written 4,931 (16,991) (12,060) Securities sold short (905,609) -- 905,609(b) -- ----------- ------------ ----------- ------------ 5,772,298 81,942,205 128,718 87,843,221 ----------- ------------ ----------- ------------ Net gain from investment securities, foreign currencies, foreign currency contracts, option contracts and securities sold short 30,511,677 265,023,517 (1,337,319) 294,197,875 ----------- ------------ ----------- ------------ Net increase in net assets resulting from operations $28,845,866 $256,434,409 $ 856,840 $286,137,115 =========== ============ =========== ============
* See Note 2 to Proforma Adjustments. SEE ACCOMPANYING NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS OF AIM ADVANTAGE HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND APRIL 30, 2006 (UNAUDITED) NOTE 1 - BASIS OF PRO FORMA PRESENTATION The pro forma financial statements and the accompanying pro forma schedule of investments give effect to the proposed Agreement and Plan of Reorganization (the "Plan") between AIM Global Health Care Fund ("Buying Fund") and AIM Advantage Health Sciences Fund ("Selling Fund") and the consummation of the transactions contemplated therein to be accounted for as a tax-free reorganization of investment companies. Selling Fund and Buying Fund are both registered open-end management investment companies that issue their shares in separate series. The Plan would be accomplished by an exchange of shares of Buying Fund for the net assets of Selling Fund and the distribution of Buying Fund shares to Selling Fund shareholders. If the Plan were to have taken place at April 30, 2006, Selling Fund - Class A shareholders would have received 5,022,776 shares of Buying Fund - Class A shares, Selling Fund - Class B shareholders would have received 114,298 shares of Buying Fund - Class B shares and Selling Fund - Class C shareholders would have received 73,554 shares of Buying Fund - Class C shares. The preparation of pro forma combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the pro forma combined financial statements and the reported amounts of revenues and expenses during the reporting period. Certain expenses have been adjusted to reflect the expected expenses of the combined entity. The merger adjustments represent those adjustments needed to present the results of operations of the pro forma combined Buying Fund as if the proposed merger had taken effect on April 30, 2006. [Adjustments include estimated costs of securities transactions for Buying Fund to be in compliance with its investment restrictions and strategies.] Actual results could differ from those estimates. The pro forma financial statements should be read in conjunction with the historical financial statements of Selling Fund and Buying Fund. NOTE 2 - PRO FORMA ADJUSTMENTS (a) With respect to the Pro Forma Statement of Assets and Liabilities as of April 30, 2006, Selling Fund is expected to sell securities valued at $24,000,000 and accordingly the value of the Selling Fund's investments and the payable for the loan outstanding have been reduced by $24,000,000. The Selling Fund's cost of securities has been reduced by $24,418,246 based on the proportion of borrowing to total investments at April 30, 2006. This does not reflect an estimate of the actual gains or losses expected to be realized as a result of the securities sold as the specific securities and value of those securities is not known at this time, but has been included to incorporate the concept that there will be a reduction in the costs of securities owned upon the liquidation of securities to raise cash for extinguishing the debt. (b) For the 12 months ended April 30, 2006 Selling Fund engaged in short selling (uncovered short positions) and borrowing for the purposes of making additional investments; two strategies that the Buying Fund is restricted from engaging in. Therefore, the Pro Forma Combining Statement of Assets and Liabilities and the Pro Forma Combining Statement of Operations have been adjusted to eliminate the estimated effects of these strategies as of April 30, 2006 and for the 12 months ended April 30, 2006, respectively. (c) During the 12 months ended April 30, 2006, the Selling Fund had average borrowings of approximately 12% as a percentage of total investments, accordingly the dividend income, realized gains and the change in unrealized appreciation in the Pro Forma Combining Statement of Operations have been reduced by 12% to eliminate the estimated effects of the borrowings on the results of operations. This is an estimate of the effects on the results of operations based on the relative amount of borrowings. (d) Under the terms of the investment advisory contract of Buying Fund, the advisory fees based on pro forma combined assets for the year ended April 30, 2006 are $10,276,595. (e) Pursuant to the master administrative services agreement for Buying Fund, fees paid on pro forma combined assets for the year ended April 30, 2006 are $382,828. The administrative services fees were adjusted to reflect the fees in effect under the administrative services agreement for Buying Fund. (f) Custodian fees were reduced by $15,572 to reflect the transaction costs on the pro forma combined assets for the year ended April 30, 2006. (g) Transfer agency fees were restated to reflect the pro forma combined number of open accounts under the terms of the transfer agency agreement of Buying Fund. The effect of this restatement is to reduce transfer agency fees on a pro forma basis by $5,227 for Class A, Class B, Class C and Investor class shares. (h) Trustees' and Officer's fees and benefits were reduced by $10,891 to eliminate the effects of duplicative fixed costs of retainer and meeting fees. (i) Other Expenses were reduced by $72,572 to eliminate the effects of duplicative fixed costs of production of reports to shareholders and professional services fees. NOTE 3 - REORGANIZATION COSTS Selling Fund is expected to incur an estimated $143,000 in reorganization costs. These costs represent the estimated non recurring expense of Selling Fund carrying out their obligations under the Plans and consist of management's estimate of professional services fees, printing costs and mailing charges related to the proposed reorganizations. Buying Fund is expected to incur approximately $30,000 of expenses in connection with the Reorganization and will bear all of those costs and expenses. NOTE 4 - SECURITY VALUATION POLICY Securities, including restricted securities, are valued according to the following policy for Selling Fund and Buying Fund. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services, which may be considered fair valued, or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs and domestic and foreign index futures. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. NOTE 5 - FEDERAL INCOME TAXES The Selling Fund and the Buying Fund intend to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the pro forma financial statements. Appendix III AIM Global Health Care Fund SCHEDULE OF INVESTMENTS October 31, 2006
SHARES VALUE ------------------------------------------------------------------------------ DOMESTIC COMMON STOCKS-76.53% BIOTECHNOLOGY-21.41% Altus Pharmaceuticals Inc.(a) 158,074 $ 2,605,059 ------------------------------------------------------------------------------ Amgen Inc.(a) 646,300 49,060,633 ------------------------------------------------------------------------------ Arena Pharmaceuticals, Inc.(a) 249,846 3,810,151 ------------------------------------------------------------------------------ Array BioPharma Inc.(a) 444,107 4,361,131 ------------------------------------------------------------------------------ Biogen Idec Inc.(a) 500,886 23,842,173 ------------------------------------------------------------------------------ BioMarin Pharmaceutical Inc.(a) 229,102 3,672,505 ------------------------------------------------------------------------------ Celgene Corp.(a) 159,114 8,503,052 ------------------------------------------------------------------------------ Cubist Pharmaceuticals, Inc.(a) 326,221 7,264,942 ------------------------------------------------------------------------------ Genentech, Inc.(a) 181,740 15,138,942 ------------------------------------------------------------------------------ Genzyme Corp.(a) 658,462 44,452,770 ------------------------------------------------------------------------------ Gilead Sciences, Inc.(a) 637,543 43,926,713 ------------------------------------------------------------------------------ Human Genome Sciences, Inc.(a) 704,412 9,403,900 ------------------------------------------------------------------------------ InterMune, Inc.(a)(b) 174,945 3,866,284 ------------------------------------------------------------------------------ Keryx Biopharmaceuticals, Inc.(a) 257,414 3,614,092 ------------------------------------------------------------------------------ Mannkind Corp.(a)(b) 179,040 3,625,560 ------------------------------------------------------------------------------ Medarex, Inc.(a) 413,074 5,336,916 ------------------------------------------------------------------------------ MedImmune, Inc.(a) 68,819 2,204,961 ------------------------------------------------------------------------------ Myogen, Inc.(a) 231,276 12,095,735 ------------------------------------------------------------------------------ Myriad Genetics, Inc.(a) 144,240 3,878,614 ------------------------------------------------------------------------------ OSI Pharmaceuticals, Inc.(a) 91,975 3,520,803 ------------------------------------------------------------------------------ Panacos Pharmaceuticals Inc.(a) 596,617 4,092,793 ------------------------------------------------------------------------------ PDL BioPharma Inc.(a) 617,936 13,056,988 ------------------------------------------------------------------------------ Theravance, Inc.(a) 138,521 4,357,871 ------------------------------------------------------------------------------ United Therapeutics Corp.(a)(b) 284,214 17,010,208 ------------------------------------------------------------------------------ Vertex Pharmaceuticals Inc.(a) 324,099 13,158,419 ------------------------------------------------------------------------------ ZymoGenetics, Inc.(a) 417,753 6,704,936 ============================================================================== 312,566,151 ============================================================================== DRUG RETAIL-0.82% CVS Corp. 379,329 11,903,344 ============================================================================== HEALTH CARE DISTRIBUTORS-0.88% PSS World Medical, Inc.(a) 641,296 12,902,876 ============================================================================== HEALTH CARE EQUIPMENT-12.57% Baxter International Inc. 350,840 16,128,115 ------------------------------------------------------------------------------ Biomet, Inc. 310,117 11,734,827 ------------------------------------------------------------------------------ Cytyc Corp.(a) 1,014,716 26,808,797 ------------------------------------------------------------------------------ Dexcom Inc.(a) 760,328 6,690,886 ------------------------------------------------------------------------------ Hospira, Inc.(a) 390,556 14,196,711 ------------------------------------------------------------------------------ Mentor Corp. 462,067 21,624,735 ------------------------------------------------------------------------------ NxStage Medical, Inc.(a)(b) 796,891 5,841,211 ------------------------------------------------------------------------------ Respironics, Inc.(a) 524,200 18,514,744 ------------------------------------------------------------------------------ St. Jude Medical, Inc.(a) 298,343 10,248,082 ------------------------------------------------------------------------------
SHARES VALUE ------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT-(CONTINUED) Thoratec Corp.(a) 575,245 $ 9,060,109 ------------------------------------------------------------------------------ Varian Medical Systems, Inc.(a) 238,400 13,078,624 ------------------------------------------------------------------------------ Wright Medical Group, Inc.(a) 437,018 10,798,715 ------------------------------------------------------------------------------ Zimmer Holdings, Inc.(a) 261,079 18,800,299 ============================================================================== 183,525,855 ============================================================================== HEALTH CARE SERVICES-7.25% DaVita, Inc.(a) 452,957 25,197,998 ------------------------------------------------------------------------------ Express Scripts, Inc.(a) 210,314 13,401,208 ------------------------------------------------------------------------------ HMS Holdings Corp.(a)(c) 697,959 9,589,957 ------------------------------------------------------------------------------ Medco Health Solutions, Inc.(a) 748,199 40,028,646 ------------------------------------------------------------------------------ Omnicare, Inc. 168,405 6,379,181 ------------------------------------------------------------------------------ Quest Diagnostics Inc. 225,904 11,236,465 ============================================================================== 105,833,455 ============================================================================== HEALTH CARE SUPPLIES-0.62% Cooper Cos., Inc. (The) 157,601 9,082,546 ============================================================================== HEALTH CARE TECHNOLOGY-1.09% Eclipsys Corp.(a) 506,262 10,727,692 ------------------------------------------------------------------------------ TriZetto Group, Inc. (The)(a) 301,083 5,145,508 ============================================================================== 15,873,200 ============================================================================== INDUSTRIAL CONGLOMERATES-1.78% Tyco International Ltd. 884,484 26,030,364 ============================================================================== LIFE & HEALTH INSURANCE-0.69% Universal American Financial Corp.(a) 543,805 10,109,335 ============================================================================== LIFE SCIENCES TOOLS & SERVICES-5.45% Charles River Laboratories International, Inc.(a) 344,138 14,770,403 ------------------------------------------------------------------------------ Dionex Corp.(a) 148,481 8,077,367 ------------------------------------------------------------------------------ Fisher Scientific International Inc.(a) 102,816 8,803,106 ------------------------------------------------------------------------------ Invitrogen Corp.(a) 208,884 12,117,361 ------------------------------------------------------------------------------ Millipore Corp.(a) 15,710 1,013,766 ------------------------------------------------------------------------------ Molecular Devices Corp.(a) 115,595 2,328,083 ------------------------------------------------------------------------------ Pharmaceutical Product Development, Inc. 580,980 18,388,017 ------------------------------------------------------------------------------ Thermo Electron Corp.(a) 203,382 8,718,986 ------------------------------------------------------------------------------ Varian Inc.(a) 113,006 5,298,851 ============================================================================== 79,515,940 ============================================================================== MANAGED HEALTH CARE-7.20% Aetna Inc. 358,216 14,765,663 ------------------------------------------------------------------------------ Aveta, Inc. (Acquired 12/21/05; Cost $9,929,723)(a)(d)(e) 735,535 12,504,095 ------------------------------------------------------------------------------ Coventry Health Care, Inc.(a) 283,083 13,290,747 ------------------------------------------------------------------------------ Health Net Inc.(a) 507,105 21,049,929 ------------------------------------------------------------------------------
F-1 AIM Global Health Care Fund
SHARES VALUE ------------------------------------------------------------------------------ MANAGED HEALTH CARE-(CONTINUED) UnitedHealth Group Inc. 600,974 $ 29,315,512 ------------------------------------------------------------------------------ WellPoint Inc.(a) 186,942 14,267,413 ============================================================================== 105,193,359 ============================================================================== PHARMACEUTICALS-16.77% Allergan, Inc. 209,604 24,209,262 ------------------------------------------------------------------------------ Cadence Pharmaceuticals, Inc.(a) 372,454 3,575,558 ------------------------------------------------------------------------------ Cypress Bioscience, Inc.(a) 512,317 4,037,058 ------------------------------------------------------------------------------ Endo Pharmaceuticals Holdings Inc.(a) 234,947 6,705,387 ------------------------------------------------------------------------------ Forest Laboratories, Inc.(a) 324,707 15,891,161 ------------------------------------------------------------------------------ Johnson & Johnson 862,645 58,142,273 ------------------------------------------------------------------------------ Lilly (Eli) and Co. 251,500 14,086,515 ------------------------------------------------------------------------------ Medicines Co. (The)(a) 211,805 5,498,458 ------------------------------------------------------------------------------ Pfizer Inc. 1,892,645 50,438,989 ------------------------------------------------------------------------------ POZEN Inc.(a)(b) 248,481 4,132,239 ------------------------------------------------------------------------------ Sepracor Inc.(a) 147,297 7,624,093 ------------------------------------------------------------------------------ Warner Chilcott Ltd.-Class A(a) 716,017 9,451,424 ------------------------------------------------------------------------------ Wyeth 706,922 36,074,230 ------------------------------------------------------------------------------ Xenoport Inc.(a) 210,400 5,064,328 ============================================================================== 244,930,975 ============================================================================== Total Domestic Common Stocks (Cost $945,118,511) 1,117,467,400 ============================================================================== FOREIGN COMMON STOCKS & OTHER EQUITY INTERESTS-20.28% AUSTRALIA-0.24% CSL Ltd. (Biotechnology)(f) 82,064 3,560,173 ============================================================================== CANADA-1.05% Cardiome Pharma Corp. (Pharmaceuticals)(a) 529,099 6,089,930 ------------------------------------------------------------------------------ MDS Inc. (Life Sciences Tools & Services) 520,200 9,174,276 ============================================================================== 15,264,206 ============================================================================== FRANCE-3.53% Ipsen S.A. (Pharmaceuticals) (Acquired 12/06/05; Cost $15,863,951)(d)(f) 606,049 25,008,627 ------------------------------------------------------------------------------ Sanofi-Aventis (Pharmaceuticals)(f) 313,000 26,585,039 ============================================================================== 51,593,666 ============================================================================== GERMANY-1.27% Merck KGaA (Pharmaceuticals) 175,391 18,490,861 ============================================================================== JAPAN-2.02% Eisai Co., Ltd. (Pharmaceuticals)(f) 328,500 16,773,207 ------------------------------------------------------------------------------ Shionogi & Co., Ltd. (Pharmaceuticals)(b)(f) 636,850 12,735,627 ============================================================================== 29,508,834 ============================================================================== SPAIN-0.34% Grifols S.A. (Biotechnology) (Acquired 05/16/06 Cost $2,701,233)(a)(d)(f) 480,110 5,018,549 ==============================================================================
SHARES VALUE ------------------------------------------------------------------------------
SWITZERLAND-9.70% Novartis A.G.-ADR (Pharmaceuticals) 978,109 $ 59,400,560 ------------------------------------------------------------------------------ Roche Holding A.G. (Pharmaceuticals)(f) 470,758 82,269,351 ============================================================================== 141,669,911 ============================================================================== UNITED KINGDOM-2.13% AstraZeneca PLC-ADR (Pharmaceuticals) 221,602 13,008,037 ------------------------------------------------------------------------------ Shire PLC-ADR (Pharmaceuticals) 328,714 18,029,963 ============================================================================== 31,038,000 ============================================================================== Total Foreign Common Stocks & Other Equity Interests (Cost $202,608,969) 296,144,200 ============================================================================== PREFERRED STOCKS-0.02% BIOTECHNOLOGY-0.01% Athersys Inc.-Series F, Conv. Pfd. (Acquired 04/17/00; Cost $5,000,000)(a)(d)(e)(g)(h) 416,667 235,293 ------------------------------------------------------------------------------ Ingenex, Inc.-Series B, Pfd. (Acquired 09/27/94; Cost $600,000)(a)(d)(e)(g)(h) 103,055 0 ============================================================================== 235,293 ============================================================================== PHARMACEUTICALS-0.01% BioImagene, Inc.-Series B-2, Pfd. (Acquired 05/24/01; Cost $1,350,000)(a)(d)(e)(g)(h) 93,867 94,336 ============================================================================== Total Preferred Stocks (Cost $6,950,000) 329,629 ============================================================================== MONEY MARKET FUNDS-1.43% Liquid Assets Portfolio-Institutional Class(i) 10,405,502 10,405,502 ------------------------------------------------------------------------------ Premier Portfolio-Institutional Class(i) 10,405,502 10,405,502 ============================================================================== Total Money Market Funds (Cost $20,811,004) 20,811,004 ============================================================================== TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities loaned)-98.26% (Cost $1,175,488,484) 1,434,752,233 ============================================================================== INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-1.10% Liquid Assets Portfolio-Institutional Class(i)(j) 8,025,662 8,025,662 ------------------------------------------------------------------------------ STIC Prime Portfolio-Institutional Class(i)(j) 8,025,662 8,025,662 ============================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $16,051,324) 16,051,324 ============================================================================== TOTAL INVESTMENTS-99.36% (Cost $1,191,539,808) 1,450,803,557 ============================================================================== OTHER ASSETS LESS LIABILITIES-0.64% 9,296,489 ============================================================================== NET ASSETS-100.00% $1,460,100,046 ______________________________________________________________________________ ==============================================================================
F-2 AIM Global Health Care Fund Investment Abbreviations: ADR - American Depositary Receipt Conv. - Convertible Pfd. - Preferred
Notes to Schedule of Investments: (a) Non-income producing security. (b) All or a portion of this security was out on loan at October 31, 2006. (c) Affiliated company. The Investment Company Act of 1940 defines affiliates as those issuances in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The value of this security as of October 31, 2006 represented 0.66% of the Fund's Net Assets. See Note 3. (d) Security not registered under the Securities Act of 1933, as amended (e.g., the security was purchased in a Rule 144A transaction or a Regulation D transaction). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The Fund has no rights to demand registration of these securities. The aggregate value of these securities at October 31, 2006 was $42,860,900, which represented 2.94% of the Fund's Net Assets. Unless otherwise indicated, these securities are not considered to be illiquid. (e) Security considered to be illiquid. The Fund is limited to investing 15% of net assets in illiquid securities at the time of purchase. The aggregate value of these securities considered illiquid at October 31, 2006 was $12,833,724, which represented 0.88% of the Fund's Net Assets. (f) In accordance with the procedures established by the Board of Trustees, the foreign security is fair valued using adjusted closing market prices. The aggregate value of these securities at October 31, 2006 was $171,950,573, which represented 11.78% of the Fund's Net Assets. See Note 1A. (g) Security fair valued in good faith in accordance with the procedures established by the Board of Trustees. The aggregate value of these securities at October 31, 2006 was $329,629, which represented 0.02% of the Fund's Net Assets. See Note 1A. (h) Security is considered venture capital. (i) The money market fund and the Fund are affiliated by having the same investment advisor. See Note 3. (j) The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 8. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-3 AIM Global Health Care Fund STATEMENT OF ASSETS AND LIABILITIES October 31, 2006 ASSETS: Investments, at value (cost $1,152,860,973)* $1,404,351,272 ------------------------------------------------------------ Investments in affiliates, at value (cost $38,678,835) 46,452,285 ============================================================ Total investments (cost $1,191,539,808) 1,450,803,557 ============================================================ Foreign currencies, at value (cost $518) 519 ------------------------------------------------------------ Cash 1,715,290 ------------------------------------------------------------ Receivables for: Investments sold 43,073,141 ------------------------------------------------------------ Fund shares sold 619,096 ------------------------------------------------------------ Dividends 502,534 ------------------------------------------------------------ Foreign currency contracts outstanding 4,275,400 ------------------------------------------------------------ Investment for trustee deferred compensation and retirement plans 210,751 ------------------------------------------------------------ Other assets 27,508 ============================================================ Total assets 1,501,227,796 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Investments purchased 14,974,969 ------------------------------------------------------------ Fund shares reacquired 8,472,978 ------------------------------------------------------------ Trustee deferred compensation and retirement plans 301,787 ------------------------------------------------------------ Collateral upon return of securities loaned 16,051,324 ------------------------------------------------------------ Accrued distribution fees 430,296 ------------------------------------------------------------ Accrued trustees' and officer's fees and benefits 2,875 ------------------------------------------------------------ Accrued transfer agent fees 741,052 ------------------------------------------------------------ Accrued operating expenses 152,469 ============================================================ Total liabilities 41,127,750 ============================================================ Net assets applicable to shares outstanding $1,460,100,046 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $1,072,248,155 ------------------------------------------------------------ Undistributed net investment income (loss) (196,077) ------------------------------------------------------------ Undistributed net realized gain from investment securities, foreign currencies and foreign currency contracts 124,513,802 ------------------------------------------------------------ Unrealized appreciation of investment securities, foreign currencies and foreign currency contracts 263,534,166 ============================================================ $1,460,100,046 ____________________________________________________________ ============================================================ NET ASSETS: Class A $ 539,665,871 ____________________________________________________________ ============================================================ Class B $ 138,788,067 ____________________________________________________________ ============================================================ Class C $ 42,463,134 ____________________________________________________________ ============================================================ Investor Class $ 739,182,974 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 17,251,688 ____________________________________________________________ ============================================================ Class B 4,945,582 ____________________________________________________________ ============================================================ Class C 1,512,116 ____________________________________________________________ ============================================================ Investor Class 23,626,537 ____________________________________________________________ ============================================================ Class A: Net asset value per share $ 31.28 ------------------------------------------------------------ Offering price per share (Net asset value of $31.28 divided by 94.50%) $ 33.10 ____________________________________________________________ ============================================================ Class B: Net asset value and offering price per share $ 28.06 ____________________________________________________________ ============================================================ Class C: Net asset value and offering price per share $ 28.08 ____________________________________________________________ ============================================================ Investor Class: Net asset value and offering price per share $ 31.29 ____________________________________________________________ ============================================================
* At October 31, 2006, securities with an aggregate value of $15,424,594 were on loan to brokers. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-4 AIM Global Health Care Fund STATEMENT OF OPERATIONS For the year ended October 31, 2006 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $745,126) $ 9,396,462 -------------------------------------------------------------------------- Dividends from affiliates (includes securities lending income of $296,727) 2,166,871 ========================================================================== Total investment income 11,563,333 ========================================================================== EXPENSES: Advisory fees 9,503,577 -------------------------------------------------------------------------- Administrative services fees 379,812 -------------------------------------------------------------------------- Custodian fees 204,615 -------------------------------------------------------------------------- Distribution fees: Class A 1,393,021 -------------------------------------------------------------------------- Class B 1,487,420 -------------------------------------------------------------------------- Class C 452,253 -------------------------------------------------------------------------- Investor Class 1,964,596 -------------------------------------------------------------------------- Transfer agent fees 4,268,998 -------------------------------------------------------------------------- Trustees' and officer's fees and benefits 43,786 -------------------------------------------------------------------------- Other 524,759 ========================================================================== Total expenses 20,222,837 ========================================================================== Less: Fees waived, expenses reimbursed and expense offset arrangements (104,815) ========================================================================== Net expenses 20,118,022 ========================================================================== Net investment income (loss) (8,554,689) ========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN CURRENCIES, FOREIGN CURRENCY CONTRACTS AND OPTION CONTRACTS: Net realized gain (loss) from: Investment securities (includes net gains from securities sold to affiliates of $4,075,862) 143,887,046 -------------------------------------------------------------------------- Foreign currencies 15,550 -------------------------------------------------------------------------- Foreign currency contracts (4,356,776) ========================================================================== 139,545,820 ========================================================================== Change in net unrealized appreciation (depreciation) of: Investment securities (9,650,044) -------------------------------------------------------------------------- Foreign currencies 68,353 -------------------------------------------------------------------------- Foreign currency contracts (9,570) -------------------------------------------------------------------------- Option contracts written (175,192) ========================================================================== (9,766,453) ========================================================================== Net gain from investment securities, foreign currencies, foreign currency contracts and option contracts 129,779,367 ========================================================================== Net increase in net assets resulting from operations $121,224,678 __________________________________________________________________________ ==========================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-5 AIM Global Health Care Fund STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2006 and 2005
2006 2005 ---------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (8,554,689) $ (7,152,220) ---------------------------------------------------------------------------------------------- Net realized gain from investment securities, foreign currencies, foreign currency contracts and option contracts 139,545,820 50,260,671 ---------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of investment securities, foreign currencies, foreign currency contracts and option contracts (9,766,453) 67,462,270 ============================================================================================== Net increase in net assets resulting from operations 121,224,678 110,570,721 ============================================================================================== Distributions to shareholders from net realized gains: Class A (17,233,165) -- ---------------------------------------------------------------------------------------------- Class B (5,229,262) -- ---------------------------------------------------------------------------------------------- Class C (1,560,543) -- ---------------------------------------------------------------------------------------------- Investor Class (24,873,030) -- ============================================================================================== Decrease in net assets resulting from distributions (48,896,000) -- ============================================================================================== Share transactions-net: Class A (40,904,171) (62,648,022) ---------------------------------------------------------------------------------------------- Class B (20,671,331) (32,952,102) ---------------------------------------------------------------------------------------------- Class C (4,768,512) (2,314,428) ---------------------------------------------------------------------------------------------- Investor Class (107,480,024) 787,288,620 ============================================================================================== Net increase (decrease) in net assets resulting from share transactions (173,824,038) 689,374,068 ============================================================================================== Net increase (decrease) in net assets (101,495,360) 799,944,789 ============================================================================================== NET ASSETS: Beginning of year 1,561,595,406 761,650,617 ============================================================================================== End of year (including undistributed net investment income (loss) of $(196,077) and $(201,937), respectively) $1,460,100,046 $1,561,595,406 ______________________________________________________________________________________________ ==============================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-6 AIM Global Health Care Fund NOTES TO FINANCIAL STATEMENTS October 31, 2006 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Global Health Care Fund (the "Fund") is a series portfolio of AIM Investment Funds (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine separate series portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently consists of multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is long-term growth of capital. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on the prices furnished by independent pricing services, in which case the securities may be considered fair valued, or by market makers. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are recorded at amortized cost which approximates value. Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs and domestic and foreign index futures. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net F-7 AIM Global Health Care Fund gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, AIM may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund's taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. G. ACCOUNTING ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates. H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. J. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. Realized and unrealized gains and losses on these contracts are included in the Statement of Operations. The Fund could be exposed to risk, which may be in excess of the amount reflected in the Statement of Assets and Liabilities, if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. K. COVERED CALL OPTIONS -- The Fund may write call options.. A call option gives the purchaser of such option the right to buy, and the writer (the Fund) the obligation to sell, the underlying security at the stated exercise price during the option period. Written call options are recorded as a liability in the Statement of Assets and Liabilities. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. F-8 AIM Global Health Care Fund Realized gains and losses on these contracts are included in the Statement of Operations. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. L. COLLATERAL -- To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund's practice to replace such collateral no later than the next business day. This practice does not apply to securities pledged as collateral for securities lending transactions. NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE -------------------------------------------------------------------- First $350 million 0.75% -------------------------------------------------------------------- Next $350 million 0.65% -------------------------------------------------------------------- Next $1.3 billion 0.55% -------------------------------------------------------------------- Next $2 billion 0.45% -------------------------------------------------------------------- Next $2 billion 0.40% -------------------------------------------------------------------- Next $2 billion 0.375% -------------------------------------------------------------------- Over $8 billion 0.35% ___________________________________________________________________ ====================================================================
AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the fund). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2006, AIM waived advisory fees of $10,004. At the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the year ended October 31, 2006, AMVESCAP reimbursed expenses of the Fund in the amount of $3,570. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. Pursuant to such agreement, for the year ended October 31, 2006, AIM was paid $379,812. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AIS") a fee for providing transfer agency and shareholder services to the Fund and reimburse AIS for certain expenses incurred by AIS in the course of providing such services. AIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by AIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust's Board of Trustees. For the year ended October 31, 2006, the Fund paid AIS $4,268,998. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B, Class C and Investor Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Investor Class shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays ADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.25% of the average daily net assets of Investor Class shares. Of the Rule 12b-1 payments, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Investor Class shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. National Association of Securities Dealers ("NASD") Rules impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2006, the Class A, Class B, Class C and Investor Class shares paid $1,393,021, $1,487,420, $452,253 and $1,964,596, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2006, ADI advised the Fund that it retained $92,711 in front-end sales commissions from the sale of Class A shares and $805, $84,731 and $4,671 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AIS and/or ADI. F-9 AIM Global Health Care Fund NOTE 3--INVESTMENTS IN AFFILIATES The Fund is permitted, pursuant procedures approved by the Board of Trustees, to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 2006. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
CHANGE IN UNREALIZED VALUE PURCHASES AT PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED FUND 10/31/05 COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS) ----------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $14,651,082 $342,077,818 $(346,323,398) $ -- $10,405,502 $ 934,143 $ -- ----------------------------------------------------------------------------------------------------------------------------------- Premier Portfolio- Institutional Class -- 104,576,664 (94,171,162) -- 10,405,502 462,977 -- ----------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 14,651,082 255,091,953 (269,743,035) -- -- 473,024 -- =================================================================================================================================== Subtotal $29,302,164 $701,746,435 $(710,237,595) $ -- $20,811,004 $1,870,144 $ -- ===================================================================================================================================
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
CHANGE IN UNREALIZED VALUE PURCHASES AT PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED FUND 10/31/05 COST FROM SALES (DEPRECIATION) 10/31/06 INCOME* GAIN (LOSS) ---------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $ 87,949,707 $247,470,825 $(327,394,870) $ -- $ 8,025,662 $147,940 $ -- ---------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 87,949,707 247,470,825 (327,394,870) -- 8,025,662 148,787 -- ================================================================================================================================== Subtotal $175,899,414 $494,941,650 $(654,789,740) $ -- $16,051,324 $296,727 $ -- ==================================================================================================================================
* Net of compensation to counterparties. INVESTMENTS IN OTHER AFFILIATES: The Investment Company Act of 1940 defines affiliates as those issuances in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The following is a summary of the transactions with affiliates for the year ended October 31, 2006
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED 10/31/05 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS) ----------------------------------------------------------------------------------------------------------------------------------- HMS Holdings Corp. (cost $1,816,507) $ 13,492,400 $ -- $ (11,367,799) $700,948 $ 9,589,957 $ -- $6,764,408 =================================================================================================================================== Total Investments in Affiliates $218,693,978 $1,196,688,085 $(1,376,395,134) $700,948 $46,452,285 $2,166,871 $6,764,408 ___________________________________________________________________________________________________________________________________ ===================================================================================================================================
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended October 31, 2006, the Fund engaged in securities sales of $16,074,256, which resulted in net realized gains of $4,075,862, and securities purchases of $6,568,204. NOTE 5--EXPENSE OFFSET ARRANGEMENTS The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions, (ii) custodian credits which result from periodic overnight cash balances at the custodian and (iii) a one time custodian fee credit to be used to offset future custodian fees. For the year ended October 31, 2006, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $91,241. F-10 AIM Global Health Care Fund NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee and Officer of the Fund who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2006, the Fund paid legal fees of $8,907 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 7--BORROWINGS Pursuant to an exemptive order from the Securities and Exchange Commission, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the year ended October 31, 2006, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and AIM, not to exceed the contractually agreed upon rate. NOTE 8--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. At October 31, 2006, securities with an aggregate value of $15,424,594 were on loan to brokers. The loans were secured by cash collateral of $16,051,324 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2006, the Fund received dividends on cash collateral investments of $296,727 for securities lending transactions, which are net of compensation to counterparties. F-11 AIM Global Health Care Fund NOTE 9--FOREIGN CURRENCY CONTRACTS
OPEN FOREIGN CURRENCY CONTRACTS AT PERIOD END --------------------------------------------------------------------------------------------------------------------------------- CONTRACT TO SETTLEMENT -------------------------------------- VALUE UNREALIZED DATE DELIVER RECEIVE 10/31/06 APPRECIATION --------------------------------------------------------------------------------------------------------------------------------- 11/08/06 GBP 15,520,000 USD 29,610,590 $ 29,607,353 $ 3,237 --------------------------------------------------------------------------------------------------------------------------------- 11/08/06 EUR 53,250,000 USD 68,879,203 67,996,949 882,254 --------------------------------------------------------------------------------------------------------------------------------- 11/08/06 CHF 177,000,000 USD 145,747,530 142,392,079 3,355,451 ================================================================================================================================= Total open foreign currency contracts $4,240,942 =================================================================================================================================
CLOSED FOREIGN CURRENCY CONTRACTS AT PERIOD END --------------------------------------------------------------------------------------------------------------------------------- CONTRACT TO -------------------------------------- VALUE REALIZED CLOSED DATE DELIVER RECEIVE 10/31/06 GAIN --------------------------------------------------------------------------------------------------------------------------------- 08/15/06 USD 3,563,258 EUR 2,750,000 $ 3,528,800 $ 34,458 ================================================================================================================================= Total foreign currency contracts $4,275,400 _________________________________________________________________________________________________________________________________ =================================================================================================================================
CHF - Swiss Franc EUR - Euro GBP - British Pound Sterling USD - U.S. Dollar
NOTE 10--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD ------------------------------------------------------------------------------------ CALL OPTION CONTRACTS ---------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED ------------------------------------------------------------------------------------ Beginning of period 600 $ 199,192 ------------------------------------------------------------------------------------ Exercised (600) (199,192) ==================================================================================== End of period -- $ -- ____________________________________________________________________________________ ====================================================================================
NOTE 11--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS DISTRIBUTIONS TO SHAREHOLDERS: The tax character of distributions paid during the years October 31, 2006 and 2005 was as follows:
2006 2005 ----------------------------------------------------------------------------------- Distributions paid from long-term capital gain $48,896,000 $ -- ___________________________________________________________________________________ ===================================================================================
TAX COMPONENTS OF NET ASSETS: As of October 31, 2006, the components of net assets on a tax basis were as follows:
2006 ------------------------------------------------------------------------------ Undistributed long-term gain $ 138,569,904 ------------------------------------------------------------------------------ Unrealized appreciation -- investments 249,478,064 ------------------------------------------------------------------------------ Temporary book/tax differences (196,077) ------------------------------------------------------------------------------ Shares of beneficial interest 1,072,248,155 ============================================================================== Total net assets $1,460,100,046 ______________________________________________________________________________ ==============================================================================
F-12 AIM Global Health Care Fund The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to losses on wash sales and the tax deferral of losses on certain option contracts. The tax-basis unrealized appreciation on investments amount includes appreciation on foreign currencies of $29,475. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan expenses. The Fund does not have a capital loss carryforward as of October 31, 2006. NOTE 12--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended October 31, 2006 was $1,245,371,171 and $1,465,816,975, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $269,852,086 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (20,403,497) ============================================================================== Net unrealized appreciation of investment securities $249,448,589 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,201,354,968.
NOTE 13--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of foreign currency transactions, merger expenses and net operating losses, on October 31, 2006, undistributed net investment income (loss) was increased by $8,560,549, undistributed net realized gain was decreased by $15,550 and shares of beneficial interest decreased by $8,544,999. This reclassification had no effect on the net assets of the Fund. F-13 AIM Global Health Care Fund NOTE 14--SHARE INFORMATION The Fund currently consists of four different classes of shares: Class A, Class B, Class C and Investor Class. Investor Class shares of the Fund are offered only to certain grandfathered investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met. Class B shares and Class C shares are sold with CDSC. Investor Class shares are sold at net asset value. Under certain circumstances, Class A shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase.
CHANGES IN SHARES OUTSTANDING ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED OCTOBER 31, ---------------------------------------------------------- 2006(A) 2005 --------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------------ Sold: Class A 1,953,021 $ 59,888,031 1,946,091 $ 55,019,351 ------------------------------------------------------------------------------------------------------------------------ Class B 450,233 12,430,712 537,747 13,820,503 ------------------------------------------------------------------------------------------------------------------------ Class C 343,417 9,538,681 555,603 14,168,389 ------------------------------------------------------------------------------------------------------------------------ Investor Class 1,056,376 32,328,843 369,060 11,047,153 ======================================================================================================================== Issued as reinvestment of dividends: Class A 537,542 16,276,764 -- -- ------------------------------------------------------------------------------------------------------------------------ Class B 181,425 4,961,982 -- -- ------------------------------------------------------------------------------------------------------------------------ Class C 53,848 1,473,808 -- -- ------------------------------------------------------------------------------------------------------------------------ Investor Class 799,951 24,230,526 -- -- ======================================================================================================================== Issued in connection with acquisitions:(b) Class A -- -- 368,152 10,701,977 ------------------------------------------------------------------------------------------------------------------------ Class B -- -- 117,495 3,103,206 ------------------------------------------------------------------------------------------------------------------------ Class C -- -- 168,018 4,441,104 ------------------------------------------------------------------------------------------------------------------------ Investor Class -- -- 28,635,830 832,396,790 ======================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 211,052 6,451,381 385,626 10,779,491 ------------------------------------------------------------------------------------------------------------------------ Class B (234,284) (6,451,381) (423,694) (10,779,491) ======================================================================================================================== Reacquired: Class A (4,082,361) (123,520,347) (4,928,710) (139,148,841) ------------------------------------------------------------------------------------------------------------------------ Class B (1,148,199) (31,612,644) (1,531,933) (39,096,320) ------------------------------------------------------------------------------------------------------------------------ Class C (572,962) (15,781,001) (814,778) (20,923,921) ------------------------------------------------------------------------------------------------------------------------ Investor Class (5,353,563) (164,039,393) (1,881,117) (56,155,323) ======================================================================================================================== (5,804,504) $(173,824,038) 23,503,390 $ 689,374,068 ________________________________________________________________________________________________________________________ ========================================================================================================================
(a) There is one entity that is record owner of more than 5% of the outstanding shares of the Fund and it owns 9% of the outstanding shares of the Fund. ADI has an agreement with this entity to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by this entity are owned beneficially. (b) As of the opening of business on July 18, 2005, the Fund acquired all the net assets of AIM Health Sciences Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on March 22, 2005 and by the shareholders of AIM Health Sciences Fund on June 28, 2005. The acquisition was accomplished by a tax free exchange of 29,289,495 shares of the Fund for 16,440,625 shares of AIM Health Sciences Fund shares outstanding as of the close of business on July 15, 2005. Each class of shares of AIM Health Sciences Fund was exchanged for the like class of shares of the Fund based on the relative net asset value of AIM Health Sciences Fund to the net asset value of the Fund on the close of business, July 15, 2005. AIM Health Sciences Fund's net assets as of the close of business on July 15, 2005 of $850,643,077, including $80,900,111 of unrealized appreciation, were combined with the net assets of the Fund immediately before the acquisition of $752,218,175. The combined aggregate net assets of the Fund subsequent to the reorganization were $1,602,861,252. NOTE 15--NEW ACCOUNTING STANDARD In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement for a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions for FIN 48 are effective for fiscal years beginning after December 15, 2006. Management is currently assessing the impact of FIN 48, if any, on the Fund's financial statements and intends for the Fund to adopt the FIN 48 provisions during 2007. F-14 AIM Global Health Care Fund NOTE 16--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A ----------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------------------- 2006 2005 2004 2003 2002 ----------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 29.77 $ 26.38 $ 24.09 $ 22.41 $ 29.93 ----------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.15) (0.18)(a) (0.17)(a) (0.13) (0.29)(a) ----------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.59 3.57 2.46 1.81 (3.17) ======================================================================================================================= Total from investment operations 2.44 3.39 2.29 1.68 (3.46) ======================================================================================================================= Less distributions from net realized gains (0.93) -- -- -- (4.06) ======================================================================================================================= Net asset value, end of period $ 31.28 $ 29.77 $ 26.38 $ 24.09 $ 22.41 _______________________________________________________________________________________________________________________ ======================================================================================================================= Total return(b) 8.31% 12.85% 9.51% 7.50% (13.76)% _______________________________________________________________________________________________________________________ ======================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $539,666 $554,679 $550,319 $536,746 $533,216 _______________________________________________________________________________________________________________________ ======================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.22%(c) 1.48% 1.89% 1.94% 1.86% ----------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.22%(c) 1.60% 1.91% 1.94% 1.86% ======================================================================================================================= Ratio of net investment income (loss) to average net assets (0.46)%(c) (0.64)% (0.63)% (0.56)% (1.10)% _______________________________________________________________________________________________________________________ ======================================================================================================================= Portfolio turnover rate 83% 92% 64% 99% 153% _______________________________________________________________________________________________________________________ =======================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $557,208,445.
CLASS B ----------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------------------- 2006 2005 2004 2003 2002 ----------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 26.99 $ 24.08 $ 22.09 $ 20.66 $ 28.03 ----------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.36) (0.33)(a) (0.27)(a) (0.23) (0.38)(a) ----------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.36 3.24 2.26 1.66 (2.93) ======================================================================================================================= Total from investment operations 2.00 2.91 1.99 1.43 (3.31) ======================================================================================================================= Less distributions from net realized gains (0.93) -- -- -- (4.06) ======================================================================================================================= Net asset value, end of period $ 28.06 $ 26.99 $ 24.08 $ 22.09 $ 20.66 _______________________________________________________________________________________________________________________ ======================================================================================================================= Total return(b) 7.52% 12.08% 9.01% 6.92% (14.21)% _______________________________________________________________________________________________________________________ ======================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $138,788 $153,766 $168,468 $179,646 $187,793 _______________________________________________________________________________________________________________________ ======================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.97%(c) 2.14% 2.39% 2.44% 2.36% ----------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.97%(c) 2.26% 2.41% 2.44% 2.36% ======================================================================================================================= Ratio of net investment income (loss) to average net assets (1.21)%(c) (1.30)% (1.13)% (1.06)% (1.60)% _______________________________________________________________________________________________________________________ ======================================================================================================================= Portfolio turnover rate 83% 92% 64% 99% 153% _______________________________________________________________________________________________________________________ =======================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $148,741,953. F-15 AIM Global Health Care Fund NOTE 16--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C ------------------------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------ 2006 2005 2004 2003 2002 ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 27.01 $ 24.09 $ 22.11 $ 20.67 $ 28.03 ------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.36) (0.33)(a) (0.27)(a) (0.23) (0.38)(a) ------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 2.36 3.25 2.25 1.67 (2.92) ================================================================================================================== Total from investment operations 2.00 2.92 1.98 1.44 (3.30) ================================================================================================================== Less distributions from net realized gains (0.93) -- -- -- (4.06) ================================================================================================================== Net asset value, end of period $ 28.08 $ 27.01 $ 24.09 $ 22.11 $ 20.67 __________________________________________________________________________________________________________________ ================================================================================================================== Total return(b) 7.51% 12.12% 8.95% 6.97% (14.18)% __________________________________________________________________________________________________________________ ================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $42,463 $45,591 $42,863 $43,482 $46,759 __________________________________________________________________________________________________________________ ================================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.97%(c) 2.14% 2.39% 2.44% 2.36% ------------------------------------------------------------------------------------------------------------------ Without fee waivers and/or expense reimbursements 1.97%(c) 2.26% 2.41% 2.44% 2.36% ================================================================================================================== Ratio of net investment income (loss) to average net assets (1.21)%(c) (1.30)% (1.13)% (1.06)% (1.60)% __________________________________________________________________________________________________________________ ================================================================================================================== Portfolio turnover rate 83% 92% 64% 99% 153% __________________________________________________________________________________________________________________ ==================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $45,225,318.
INVESTOR CLASS ------------------------------- JULY 15, 2005 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2006 2005 --------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 29.77 $ 28.95 --------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.15) (0.04)(a) --------------------------------------------------------------------------------------------- Net gains on securities (both realized and unrealized) 2.60 0.86 ============================================================================================= Total from investment operations 2.45 0.82 ============================================================================================= Less distributions from net realized gains (0.93) -- ============================================================================================= Net asset value, end of period $ 31.29 $ 29.77 _____________________________________________________________________________________________ ============================================================================================= Total return(b) 8.35% 2.83% _____________________________________________________________________________________________ ============================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $739,183 $807,560 _____________________________________________________________________________________________ ============================================================================================= Ratio of expenses to average net assets 1.22%(c) 1.25%(d) ============================================================================================= Ratio of net investment income (loss) to average net assets (0.46)%(c) (0.41)%(d) _____________________________________________________________________________________________ ============================================================================================= Portfolio turnover rate(e) 83% 92% _____________________________________________________________________________________________ =============================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $785,838,302. (d) Annualized. (e) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year. F-16 AIM Global Health Care Fund NOTE 17--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlement. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. PENDING LITIGATION AND REGULATORY INQUIRIES On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI entered into certain arrangements permitting market timing of the AIM Funds and failed to disclose these arrangements in the prospectuses for such Funds, and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions, including restitution to affected investors, disgorgement of fees, reimbursement of investigatory, administrative and legal costs and an "administrative assessment," to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging: - that the defendants permitted improper market timing and related activity in the AIM Funds; - that certain AIM Funds inadequately employed fair value pricing; - that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; and - that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions (all the claims in this category of lawsuits were dismissed with prejudice by the court on September 29, 2006, except for the Section 36(b) claim which was dismissed with leave to amend to plead it properly as a derivative claim). These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees. All lawsuits based on allegations of market timing, late trading and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Based on orders issued by the MDL Court, all claims asserted against the AIM Funds that have been transferred to the MDL Court have been dismissed, although certain Funds remain nominal defendants in the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the MDL Court granted the AMVESCAP defendants' motion to dismiss the Amended Class Action Complaint for Violations of ERISA and dismissed such Complaint. The plaintiff has commenced an appeal from that decision. IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, among others, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost security holders. IFG, AIM and ADI have advised the Fund that they are F-17 AIM Global Health Care Fund NOTE 17--LEGAL PROCEEDINGS--(CONTINUED) providing full cooperation with respect to these inquiries. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Pending Litigation and Regulatory Inquiries described above may have on AIM, ADI or the Fund. F-18 AIM Global Health Care Fund REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of AIM Investment Funds and Shareholders of AIM Global Health Care Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of AIM Global Health Care Fund (one of the funds constituting AIM Investment Funds, hereafter referred to as the "Fund") at October 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP December 20, 2006 Houston, Texas F-19 AIM Global Health Care Fund TAX DISCLOSURES REQUIRED FEDERAL INCOME TAX INFORMATION The Fund distributed long-term capital gains of $48,896,000 for the Fund's tax year ended October 31, 2006. TAX INFORMATION FOR NON-RESIDENT ALIEN SHAREHOLDERS The percentage of qualifying assets not subject to the U.S. estate tax for the fiscal quarters ended January 31, 2006, April 30, 2006, July 31, 2006 and October 31, 2006 are 24.60%, 22.26%, 23.85% and 21.89%, respectively. F-20 PART C. OTHER INFORMATION Item 15. Indemnification Indemnification provisions for officers, trustees, and employees of the Registrant are set forth in Article VIII of the Registrant's Amended and Restated Agreement and Declaration of Trust and Article VIII of its Amended and Restated Bylaws, and are hereby incorporated by reference. Under the Amended and Restated Agreement and Declaration of Trust, effective as of September 14, 2005, as amended (i) Trustees or officers, when acting in such capacity, shall not be personally liable for any act, omission or obligation of the Registrant or any Trustee or officer except by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office with the Trust; (ii) every Trustee, officer, employee or agent of the Registrant shall be indemnified to the fullest extent permitted under the Delaware Statutory Trust act, the Registrant's Bylaws and other applicable law; and (iii) in case any shareholder or former shareholder of the Registrant shall be held to be personally liable solely by reason of his being or having been a shareholder of the Registrant or any portfolio or class and not because of his acts or omissions or for some other reason, the shareholder or former shareholder (or his heirs, executors, administrators or other legal representatives, or, in the case of a corporation or other entity, its corporate or general successor) shall be entitled, out of the assets belonging to the applicable portfolio (or allocable to the applicable class), to be held harmless from and indemnified against all loss and expense arising from such liability in accordance with the Bylaws and applicable law. The Registrant, on behalf of the affected portfolio (or class), shall upon request by the shareholder, assume the defense of any such claim made against the shareholder for any act or obligation of that portfolio (or class). A I M Advisors, Inc. ("AIM"), the Registrant and other investment companies managed by AIM, their respective officers, trustees, directors and employees (the "Insured Parties") are insured under a joint Mutual Fund and Investment Advisory Professional and Directors and Officers Liability Policy, issued by ICI Mutual Insurance Company, with a $60,000,000 limit of liability (an additional $20,000,000 coverage applies to independent directors/trustees only). Section 16 of the Master Investment Advisory Agreement between the Registrant and AIM provides that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of AIM or any of its officers, directors or employees, that AIM shall not be subject to liability to the Registrant or to any series of the Registrant, or to any shareholder of any series of the Registrant for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. Any liability of AIM to any series of the Registrant shall not automatically impart liability on the part of AIM to any other series of the Registrant. No series of the Registrant shall be liable for the obligations of any other series of the Registrant. Section 7 of the Master Intergroup Sub-Advisory Contract for Mutual Funds (the "Sub-Advisory Contract") between AIM and AIM Funds Management Inc., between AIM and INVESCO Asset Management Limited, between AIM and INVESCO Asset Management (Japan) Limited, between AIM and INVESCO Institutional (N.A.), Inc and between AIM and INVESCO Hong Kong Limited provides that the Sub-advisor shall not be liable for any costs or liabilities arising from any error of judgment or mistake of law or any loss suffered by any series of the Registrant or the Registrant in connection with the matters to which the Sub-Advisory Contract relates except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Sub-advisor in the C-1 performance by the Sub-advisor of its duties or from reckless disregard by the Sub-advisor of its obligations and duties under the Sub-Advisory Contract. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in connection with the successful defense of any action suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the shares being registered, such indemnification by it is against public policy, as expressed in the Act and be governed by final adjudication of such issue. Item 16. Exhibits 1 (a) - (1) Amended and Restated Agreement and Declaration of Trust of Registrant, dated September 14, 2005.(15) - (2) Amendment No. 1, dated January 9, 2006, to the Amended and Restated Agreement and Declaration of Trust of Registrant, dated September 14, 2005.(16) (3) Amendment No. 2, dated May 24, 2006, to the Amended and Restated Agreement and Declaration of Trust of Registrant, dated September 14, 2005.(19) (4) Amendment No. 3, dated July 5, 2006, to the Amended and Restated Agreement and Declaration of Trust of Registrant, dated September 14, 2005.(19) 2 (a) - (1) Amended and Restated By-Laws of Registrant, adopted effective September 14, 2005.(15) (2) Amendment, adopted effective August 1, 2006, to Amended and Restated By-Laws of Registrant, adopted effective September 14, 2005.(19) 3 - Voting Trust Agreements - None 4 - Form of Agreement and Plan of Reorganization between AIM Counselor Series Trust, on behalf of AIM Advantage Health Sciences Fund, and Registrant, on behalf of AIM Global Health Care Fund is attached as Appendix I to the Combined Proxy Statement Prospectus relating to AIM Advantage Health Sciences Fund contained in this Registrant Statement. 5 - All rights of security holders are contained in the Registrant's Amended and Restated Agreement and Declaration of Trust. 6 (a) - (1) Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(2) - (2) Amendment No. 1, dated September 1, 2001, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(3) C-2 - (3) Amendment No. 2, dated December 28, 2001, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(4) - (4) Amendment No. 3, dated July 1, 2002, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(5) - (5) Amendment No. 4, dated September 23, 2002, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(6) - (6) Amendment No. 5, dated November 1, 2002, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(6) - (7) Amendment No. 6, dated February 28, 2003, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(6) - (8) Amendment No. 7, dated June 23, 2003, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(7) - (9) Amendment No. 8, dated November 3, 2003, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(9) - (10) Amendment No. 9, dated November 24, 2003, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(10) - (11) Amendment No. 10, dated July 18, 2005, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(14) - (12) Form of Amendment No. 11, dated March 31, 2006, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(16) (b) - Master Intergroup Sub-Advisory Contract for Mutual Funds, dated November 4, 2003, between A I M Advisors, Inc. and AIM Funds Management Inc.(9) (c) - Form of Master Intergroup Sub-Advisory Contract for Mutual Funds, dated March 31, 2006, between A I M Advisors, Inc. and INVESCO Asset Management Limited on behalf of AIM International Bond Fund.(16) (d) - Form of Master Intergroup Sub-Advisory Contract for Mutual Funds, dated March 31, 2006, between A I M Advisors, Inc. and INVESCO Asset Management (Japan) Limited on behalf of AIM Japan Fund.(16) (e) - Form of Master Intergroup Sub-Advisory Contract for Mutual Funds, dated March 31, 2006, between A I M Advisors, Inc. and INVESCO Institutional (N.A.), Inc. on behalf of AIM Enhanced Short Bond Fund.(16) C-3 (f) - Form of Master Intergroup Sub-Advisory Contract for Mutual Funds, dated March 31, 2006, between A I M Advisors, Inc. and INVESCO Hong Kong Limited on behalf of AIM China Fund.(16) 7 (a) - (1) Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(8) - (2) Amendment No. 1, dated October 29, 2003, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(9) - (3) Amendment No. 2, dated November 4, 2003, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(9) - (4) Amendment No. 3, dated November 20, 2003, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(9) - (5) Amendment No. 4, dated November 24, 2003, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(9) - (6) Amendment No. 5, dated November 25, 2003, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(9) - (7) Amendment No. 6, dated January 6, 2004, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(10) - (8) Amendment No. 7, dated March 31, 2004, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(10) - (9) Amendment No. 8, dated April 30, 2004, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(10) - (10) Amendment No. 9, dated September 14, 2004, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(11) - (11) Amendment No. 10, dated September 15, 2004, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(11) - (12) Amendment No. 11, dated October 15, 2004, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(11) - (13) Amendment No. 12, dated November 30, 2004, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(11) C-4 - (14) Amendment No. 13, dated December 30, 2004, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(12) - (15) Amendment No. 14, dated February 23, 2005, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(13) - (16) Amendment No. 15, dated March 15, 2005, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(13) - (17) Amendment No. 16, dated April 29, 2005, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(14) - (18) Amendment No. 17, dated July 13, 2005, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(15) - (19) Amendment No. 18, dated July 18, 2005, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(15) - (20) Amendment No. 19, dated October 22, 2005, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(15) - (21) Amendment No. 20, dated October 25, 2005, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(15) - (22) Amendment No. 21, dated October 31, 2005, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(15) - (23) Amendment No. 22, dated January 31, 2006, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(17) - (24) Form of Amendment No. 23, dated March 13, 2006, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(16) - (25) Form of Amendment No. 24, dated March 27, 2006, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(16) - (26) Form of Amendment No. 25, dated March 31, 2006, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(16) (b) - (1) Amended and Restated Master Distribution Agreement (Class B shares) dated August 18, 2003, between Registrant and A I M Distributors, Inc.(8) C-5 - (2) Amendment No. 1, dated October 1, 2003, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(9) - (3) Amendment No. 2, dated October 29, 2003, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(9) - (4) Amendment No. 3, dated November 3, 2003, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(9) - (5) Amendment No. 4, dated November 4, 2003, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(9) - (6) Amendment No. 5, dated November 20, 2003, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(9) - (7) Amendment No. 6, dated November 24, 2003, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(9) - (8) Amendment No. 7, dated November 25, 2003, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(9) - (9) Amendment No. 8, dated March 31, 2004, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(10) - (10) Amendment No. 9, dated April 30, 2004, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(10) - (11) Amendment No. 10, dated September 15, 2004, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(11) - (12) Amendment No. 11, dated October 15, 2004, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(11) - (13) Amendment No. 12, dated December 30, 2004, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(12) - (14) Amendment No. 13, dated March 15, 2005, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(14) C-6 - (15) Amendment No. 14, dated April 29, 2005, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(14) - (16) Amendment No. 15, dated July 18, 2005, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(14) - (17) Amendment No. 16, dated October 31, 2005, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(15) - (18) Form of Amendment No. 17, dated March 13, 2006, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(16) - (19) Form of Amendment No. 18, dated March 27, 2006, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(16) - (20) Form of Amendment No. 19, dated March 31, 2006, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(16) 8 (a) - AIM Funds Retirement Plan for Eligible Directors/Trustees, as restated October 1, 2001.(4) (b) - Form of AIM Funds Director Deferred Compensation Agreement, as amended September 26, 2002.(6) 9 (a) - (1) Master Custodian Contract, dated May 1, 2000, between Registrant and State Street Bank and Trust Company.(2) - (2) Amendment, dated May 1, 2000, to the Master Custodian Contract, dated May 1, 2000, between Registrant and State Street Bank and Trust Company.(2) - (3) Amendment, dated June 29, 2001, to the Master Custodian Contract, dated May 1, 2000, between Registrant and State Street Bank and Trust Company.(4) - (4) Amendment, dated April 2, 2002, to the Master Custodian Contract, dated May 1, 2000, between Registrant and State Street Bank and Trust Company.(5) - (5) Amendment, dated September 8, 2004, to the Master Custodian Contract, dated May 1, 2000, between Registrant and State Street Bank and Trust Company.(12) (6) Amendment, dated February 8, 2006, to the Master Custodian Contract, dated May 1, 2000, between Registrant and State Street Bank and Trust Company. (17) (b) - (1) Subcustodian Agreement, dated September 9, 1994, between Registrant, Texas Commerce Bank National Association, State Street Bank and Trust Company and A I M Fund Services, Inc. (now known as AIM Investment Services, Inc.)(3) C-7 - (2) Amendment No. 1, dated October 2, 1998, to the Subcustodian Agreement, dated September 9, 1994, between Registrant, Chase Bank of Texas, N.A. (formerly Texas Commerce Bank National Association), State Street Bank and Trust Company and A I M Fund Services, Inc. (now known as AIM Investment Services, Inc.)(3) - (3) Amendment No. 2, dated March 15, 2002, to the Subcustodian Agreement, dated September 9, 1994, between Registrant, JPMorgan Chase Bank (formerly Chase Bank of Texas, N.A., State Street Bank and Trust Company and A I M Fund Services, Inc. (now known as AIM Investment Services, Inc.)(5) (4) Amendment No. 3, dated May 1, 2004, to the Subcustodian Agreement, dated September 9, 1994, among the Registrant, JP Morgan Chase Bank (formerly Chase Bank of Texas, N.A.), State Street Bank and Trust Company and A I M Investment Services, Inc.(17) (c) - Subcustodian Agreement, dated January 20, 1993, between State Street Bank and Trust Company and The Bank of New York.(4) 10 (a) - (1) Amended and Restated Master Distribution Plan (Class A Shares), effective as of August 18, 2003.(8) - (2) Amendment No. 1, dated October 29, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(9) - (3) Amendment No. 2, dated November 4, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(9) - (4) Amendment No. 3, dated November 20, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(9) - (5) Amendment No. 4, dated November 24, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(9) - (6) Amendment No. 5, dated November 25, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(9) - (7) Amendment No. 6, dated March 31, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(10) - (8) Amendment No. 7, dated April 30, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(10) - (9) Amendment No. 8, dated September 15, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(11) - (10) Amendment No. 9, dated October 15, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(11) - (11) Amendment No. 10, dated December 30, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(12) - (12) Amendment No. 11, dated January 1, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(12) C-8 - (13) Amendment No. 12, dated March 15, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(14) - (14) Amendment No. 13, dated April 29, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(14) - (15) Amendment No. 14, dated July 1, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(14) - (16) Amendment No. 15, dated July 18, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(14) - (17) Amendment No. 16, dated October 31, 2005, to the Amended and Restated Master Distribution Plan (Class A Shares)(15) - (18) Amendment No. 17, dated March 13, 2006, to the Amended and Restated Master Distribution Plan (Class A Shares)(16) - (19) Amendment No. 18, dated March 27, 2006, to the Amended and Restated Master Distribution Plan (Class A Shares)(16) - (20) Amendment No. 19, dated March 31, 2006, to the Amended and Restated Master Distribution Plan (Class A Shares).(16) (b) - (1) Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature), effective as of August 18, 2003.(8) - (2) Amendment No. 1, dated October 29, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(9) - (3) Amendment No. 2, dated November 4, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(9) - (4) Amendment No. 3, dated November 20, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(9) - (5) Amendment No. 4, dated November 24, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(9) - (6) Amendment No. 5, dated November 25, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(9) - (7) Amendment No. 6, dated March 31, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(10) - (8) Amendment No. 7, dated April 30, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(10) - (9) Amendment No. 8, dated September 15, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(11) - (10) Amendment No. 9, dated October 15, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(11) C-9 - (11) Amendment No. 10, dated December 30, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(12) - (12) Amendment No. 11, dated March 15, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(14) - (13) Amendment No. 12, dated April 29, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(14) - (14) Amendment No. 13, dated July 18, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(14) - (15) Amendment No. 14, dated October 31, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(15) - (16) Amendment No. 15, dated March 13, 2006, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(16) - (17) Amendment No. 16, dated March 27, 2006, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(16) - (18) Amendment No. 17, dated March 31, 2006, to the Registrant's Amended and Restated Master Distribution Plan (Class B Shares) (Securitization Feature).(16) (c) - (1) Amended and Restated Master Distribution Plan (Class C Shares), effective as of August 18, 2003.(8) - (2) Amendment No. 1, dated October 29, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(9) - (3) Amendment No. 2, dated November 4, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(9) - (4) Amendment No. 3, dated November 20, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(9) - (5) Amendment No. 4, dated November 24, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(9) - (6) Amendment No. 5, dated November 25, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(9) - (7) Amendment No. 6, dated March 31, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(10) - (8) Amendment No. 7, dated April 30, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(10) - (9) Amendment No. 8, dated September 15, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(11) - (10) Amendment No. 9, dated October 15, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(11) C-10 - (11) Amendment No. 10, dated December 30, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(12) - (12) Amendment No. 11, dated March 15, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(14) - (13) Amendment No. 12, dated April 29, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(14) - (14) Amendment No. 13 dated July 18, 2005 to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(14) - (15) Amendment No. 14, dated October 31, 2005, to the Amended and Restated Master Distribution Plan (Class C Shares).(15) - (16) Amendment No. 15, dated March 13, 2006, to the Amended and Restated Master Distribution Plan (Class C Shares).(16) - (17) Amendment No. 16, dated March 27, 2006, to the Amended and Restated Master Distribution Plan (Class C Shares).(16) - (18) Amendment No. 17, dated March 31, 2006, to the Amended and Restated Master Distribution Plan (Class C Shares).(16) (d) - (1) Amended and Restated Master Distribution Plan (Class R shares), effective as of August 18, 2003.(8) - (2) Amendment No. 1, dated November 4, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(9) - (3) Amendment No. 2, dated November 24, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(9) - (4) Amendment No. 3, dated November 25, 2003, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(9) - (5) Amendment No. 4, dated April 30, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(10) - (6) Amendment No. 5, dated September 14, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(11) - (7) Amendment No. 6, dated October 15, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(11) - (8) Amendment No. 7, dated April 29, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(14) - (9) Amendment No. 8, dated July 18, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(14) - (10) Amendment No. 9, dated October 25, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(15) C-11 - (11) Amendment No. 10, dated October 31, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(15) - (12) Amendment No. 11, dated March 13, 2006, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(16) - (13) Amendment No. 12, dated March 27, 2006, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(16) - (14) Amendment No. 13, dated March 31, 2006, to the Registrant's Amended and Restated Master Distribution Plan (Class R Shares).(16) (e) - (1) Amended and Restated Master Distribution Plan (Compensation) (Investor Class Shares) effective July 1, 2004.(13) - (2) Amendment No. 1, dated October 15, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Compensation) (Investor Class Shares).(13) - (3) Amendment No. 2, dated November 30, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Compensation) (Investor Class Shares).(13) - (4) Amendment No. 3, dated April 29, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Compensation) (Investor Class Shares).(13) - (5) Amendment No. 4, dated July 18, 2005, to the Registrant's Amended and Restated Master Distribution Plan (Compensation) (Investor Class Shares).(18) (f) - Form of Master Related Agreement to Amended and Restated Master Distribution Plan (Class A Shares).(16) (g) - Form of Master Related Agreement to Amended and Restated Master Distribution Plan (Class C Shares).(16) (h) - Form of Master Related Agreement to Amended and Restated Master Distribution Plan (Class R Shares).(16) (i) - Master Related Agreement to Amended and Restated Master Distribution Plan (Compensation) (Investor Class Shares).(16) (j) - Ninth Amended and Restated Multiple Class Plan of The AIM Family of Funds(R) effective December 12, 2001, as amended and restated effective December 6, 2005.(16) 11 - Consent of Ballard Spahr Andrews & Ingersoll, LLP is filed herewith. 12 Opinion of Counsel and Consent of Ballard Spahr Andrews & Ingersoll, LLP, supporting the tax matters and consequences to shareholders will be filed as part of a Post-Effective Amendment to this Registration Statement. 13 (a) - Second Amended and Restated Transfer Agency and Service Agreement, dated October 1, 2005, between Registrant and AIM Investment Services, Inc.(15) (b) - (1) Amended and Restated Master Administrative Services Agreement, dated July 1, 2004, between Registrant and A I M Advisors, Inc.(10) C-12 - (2) Amendment No. 1, dated December 2, 2004, to the Amended and Restated Master Administrative Services Agreement.(11) - (3) Amendment No. 2, dated July 18, 2005, to the Amended and Restated Master Administrative Services Agreement.(14) - (4) Form of Amendment No. 3, dated March 31, 2006, to the Amended and Restated Master Administrative Services Agreement.(16) (c) - Memorandum of Agreement, regarding securities lending, dated October 29, 2003, between Registrant (on behalf of all Funds) and A I M Advisors, Inc.(16) (d) - Memorandum of Agreement, regarding expense limitations, dated January 1, 2006, between Registrant (on behalf of AIM Developing Markets Fund, AIM Trimark Endeavor, AIM Trimark Fund and AIM Trimark Small Companies Fund) and A I M Advisors, Inc.(16) (e) - Memorandum of Agreement dated May 5, 2005, between Registrant (on behalf of all Funds) and A I M Advisors, Inc.(16) (f) - Form of Memorandum of Agreement, regarding expense limitations, dated March 31, 2006, between Registrant (on behalf of AIM China Fund, AIM Enhanced Short Bond Fund, AIM International Bond Fund and AIM Japan Fund) and A I M Advisors, Inc.(16) (g) - Form of Memorandum of Agreement, regarding fee waivers, dated March 31, 2006, between Registrant (on behalf of AIM Enhanced Short Bond Fund) and A I M Advisors, Inc.(18) (h) - Second Amended and Restated Interfund Loan Agreement dated April 30, 2004 between Registrant and A I M Advisors, Inc.(12) (i) - Expense Reimbursement Agreement, dated June 30, 2003, between Registrant and A I M Fund Services, Inc. (now known as AIM Investment Services, Inc.).(10) 14 - Consent of PricewaterhouseCoopers LLP is filed herewith. 15 - Financial Statements for the period ended October 31, 2005 are incorporated by reference to the Fund's annual report to shareholders contained in the Registrant's Form N-CSR filed on January 6, 2006. 16 - Powers of Attorney for Baker, Bayley, Bunch, Crockett, Dowden, Fields, Frischling, Graham, Mathai-Davis, Pennock, Quigley, Soll, Stickel, Taylor and Zerr.(19) 17 Form of Proxy relating to the Special Meeting of Shareholders of AIM Advantage Health Sciences Fund is filed herewith. C-13 ---------- (1) Incorporated herein by reference to PEA No. 58, to Registrant's Registration Statement on Form N-1A, filed on February 24, 2000. (2) Incorporated herein by reference to PEA No. 59, to Registrant's Registration Statement on Form N-1A, filed on February 28, 2001. (3) Incorporated herein by reference to PEA No. 60, to Registrant's Registration Statement on Form N-1A, filed on October 12, 2001. (4) Incorporated herein by reference to PEA No. 61, to Registrant's Registration Statement on Form N-1A, filed on January 30, 2002. (5) Incorporated herein by reference to PEA No. 62, to Registrant's Registration Statement on Form N-1A,filed on August 14, 2002.b (6) Incorporated herein by reference to PEA No. 63, to Registrant's Registration Statement on Form N-1A,filed on February 20, 2003. (7) Incorporated herein by reference to PEA No. 64, to Registrant's Registration Statement on Form N-1A, filed on August 20, 2003. (8) Incorporated herein by reference to PEA No. 65, to Registrant's Registration Statement on Form N-1A, filed on October 10, 2003. (9) Incorporated herein by reference to PEA No. 66, to Registrant's Registration Statement on Form N-1A, filed on February 25, 2004. (10) Incorporated herein by reference to PEA No. 67, to Registrant's Registration Statement on Form N-1A, filed August 31, 2004. (11) Incorporated herein by reference to PEA No. 70, to Registrant's Registration Statement on Form N-1A, filed on December 23, 2004. (12) Incorporated herein by reference to PEA No. 71, to Registrant's Registration Statement on Form N-1A, filed on February 23, 2005. (13) Incorporated herein by reference to PEA No. 72, to Registrant's Registration Statement on Form N-1A, filed on March 1, 2005. (14) Incorporated herein by reference to PEA No. 74, to Registrant's Registration Statement on Form N-1A, filed on August 24, 2005. (15) Incorporated herein by reference to PEA No. 75, to Registrant's Registration Statement on Form N-1A, filed on December 15, 2005. (16) Incorporated herein by reference to PEA No. 76, to Registrant's Registration Statement on Form N-1A, filed on January 13, 2006. (17) Incorporated herein by reference to PEA No. 77, to Registrant's Registration Statement on Form N-1A, filed on February 23, 2006. (18) Incorporated herein by reference to PEA No. 78, to Registrant's Registration Statement on Form N-1A, filed on March 24, 2006. (19) Incorporated herein by reference to Registrant's Initial Registration Statement on From N-14, filed on November 16, 2006. Item 17. (1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act [17 CRF 203.145C], the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The undersigned Registrant agrees that every prospectus that is filled under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. (3) The undersigned Registrant undertakes to file an opinion of counsel supporting the tax matters and consequences to shareholders discussed in the prospectus in a post-effective amendment to this registration statement. C-14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Amendment to its Registration Statement on Form N-14 to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Houston, State of Texas, on the 25th day of January, 2007. REGISTRANT: AIM INVESTMENT FUNDS By: /s/ Philip A. Taylor ------------------------------------ Philip A. Taylor, President Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement on Form N-14 has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ------------------------------------- ----------------------------- ---------------- /s/ Philip A. Taylor Trustee & President January 25, 2007 ------------------------------------- (Principal Executive Officer) (Philip A. Taylor) /s/ Bob R. Baker* Trustee January 25, 2007 ------------------------------------- (Bob R. Baker) /s/ Frank S. Bayley* Trustee January 25, 2007 ------------------------------------- (Frank S. Bayley) /s/ James T. Bunch* Trustee January 25, 2007 ------------------------------------- (James T. Bunch) /s/ Bruce L. Crockett* Chair & Trustee January 25, 2007 ------------------------------------- (Bruce L. Crockett) /s/ Albert R. Dowden* Trustee January 25, 2007 ------------------------------------- (Albert R. Dowden) /s/ Jack M. Fields* Trustee January 25, 2007 ------------------------------------- (Jack M. Fields) /s/ Carl Frischling* Trustee January 25, 2007 ------------------------------------- (Carl Frischling) /s/ Robert H. Graham* Trustee January 25, 2007 ------------------------------------- (Robert H. Graham) /s/ Prema Mathai-Davis* Trustee January 25, 2007 ------------------------------------- (Prema Mathai-Davis) /s/ Lewis F. Pennock* Trustee January 25, 2007 ------------------------------------- (Lewis F. Pennock) /s/ Ruth H. Quigley* Trustee January 25, 2007 ------------------------------------- (Ruth H. Quigley)
/s/ Larry Soll* Trustee January 25, 2007 ------------------------------------- (Larry Soll) /s/ Raymond Stickel, Jr.* Trustee January 25, 2007 ------------------------------------- (Raymond Stickel, Jr.) /s/ Sidney M. Dilgren Vice President & Treasurer January 25, 2007 ------------------------------------- (Principal Financial and (Sidney M. Dilgren) Accounting Officer)
*By /s/ Philip A. Taylor --------------------------------- Philip A. Taylor Attorney-in-Fact * Philip A. Taylor, pursuant to powers of attorney filed in Registrant's Registration Statement on Form N-14 on November 16, 2006. INDEX
Exhibit Number Description ------- ----------- 11 Consent of Ballard Spahr Andrews & Ingersoll, LLP. 14 Consent of PricewaterhouseCoopers LLP 17 Form of Proxy relating to the Special meeting of Shareholders of AIM Advantage Health Sciences Fund