<PAGE> 1
As filed with the Securities and Exchange Commission on August 26, 1998
1933 Act Registration No. 333-30551
1940 Act Registration No. 811-7787
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ---
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Post-Effective Amendment No. 6 X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 7 X
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(Check appropriate box or boxes.)
AIM SERIES TRUST
--------------------------------------------------
(Exact name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (713) 626-1919
Copy to:
<TABLE>
<S> <C> <C>
Michael A. Silver, Esq. Samuel D. Sirko, Esq. Arthur J. Brown, Esq.
INVESCO (NY), Inc. A I M Advisors, Inc. R. Darrell Mounts, Esq.
50 California Street, 27th Floor 11 Greenway Plaza, Suite 100 Kirkpatrick & Lockhart LLP
San Francisco, CA 94111 Houston, Texas 77046 1800 Massachusetts Avenue, N.W.,
(Name and Address of Agent for 2nd Floor
Service) Washington, D.C. 20036
</TABLE>
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Amendment
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b)
---
X on September 8, 1998 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2)
---
If appropriate, check the following box:
--- This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest
<PAGE> 2
AIM SERIES TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT
This Post-Effective Amendment to the Registration Statement of AIM Series Trust
contains the following documents:
Facing Sheet
Contents of Post-Effective Amendment
Cross-Reference Sheet
Part A - Prospectus - Class A, Class B and Class C
- AIM Global Trends Fund
- Prospectus - Advisor Class
- AIM Global Trends Fund
Part B - Statement of Additional Information - Class A, Class B
and Class C
- AIM Global Trends Fund
- Statement of Additional Information - Advisor Class
- AIM Global Trends Fund
Part C - Other Information
Signature Page
- AIM Series Trust
Exhibits
<PAGE> 3
AIM SERIES TRUST
CROSS-REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<S> <C>
N-1A ITEM NO. PROSPECTUS LOCATION
- ------------- -------------------
I. CLASS A, CLASS B AND CLASS C
PART A
Item 1 Cover Page....................................................................................Cover Page
Item 2. Synopsis.............................................................Summary; Table of Fees and Expenses
Item 3. Condensed Financial Information.....................................................Financial Highlights
Item 4. General Description of Registrant.................Cover Page; Summary; Investment Program; Risk Factors;
Management; Organization of the Trust; General Information
Item 5. Management of the Fund...................................................Management; General Information
Item 5A. Management's Discussion of Fund Performance............................................See Annual Report
Item 6. Capital Stock and Other Securities...........Summary; Organization of the Trust; How to Purchase Shares;
Dividends, Distributions and Tax Matters; General Information
Item 7. Purchase of Securities Being Offered.......................Management; How to Purchase Shares; Terms and
Conditions of Purchase of the AIM Funds; Special Plans;
Exchange Privilege; Determination of Net Asset Value
Item 8. Redemption or Repurchase............................................Special Plans; How to Redeem Shares;
Determination of Net Asset Value
Item 9. Pending Legal Proceedings.................................................................Not applicable
II. ADVISOR CLASS PROSPECTUS LOCATION
-------------------
PART A
Item 1 Cover Page...................................................................................Cover Page
Item 2. Synopsis............................................................Summary; Table of Fees and Expenses
Item 3. Condensed Financial Information....................................................Financial Highlights
Item 4. General Description of Registrant................Cover Page; Summary; Investment Program; Risk Factors;
Management; Organization of the Trust; General Information
Item 5. Management of the Fund..................................................Management; General Information
Item 5A. Management's Discussion of Fund Performance...........................................See Annual Report
Item 6. Capital Stock and Other Securities..........Summary; Organization of the Trust; How to Purchase Shares;
Dividends, Distributions and Tax Matters; General Information
Item 7. Purchase of Securities Being Offered......................Management; How to Purchase Shares; Terms and
Conditions of Purchase of the AIM Funds; Special Plans;
Exchange Privilege; Determination of Net Asset Value
Item 8. Redemption or Repurchase...........................................Special Plans; How to Redeem Shares;
Determination of Net Asset Value
Item 9. Pending Legal Proceedings................................................................Not applicable
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
III. CLASS A, CLASS B AND CLASS C STATEMENT OF ADDITIONAL INFORMATION LOCATION
--------------------------------------------
PART B
Item 10. Cover Page...................................................................................Cover Page
Item 11. Table of Contents.....................................................................Table of Contents
Item 12. General Information and History...........................Cover Page; Introduction; General Information
About the Funds; Miscellaneous Information
Item 13. Investment Objectives and Policies......................Investment Objectives and Policies; Investment
Limitations; Options and Futures; Risk Factors;
Execution of Portfolio Transactions
Item 14. Management of the Funds......................................................................Management
Item 15. Control Persons and Principal Holders of Securities...........................Miscellaneous Information
Item 16. Investment Advisory and Other Services............................Management; Miscellaneous Information
Item 17. Brokerage Allocation and Other Practices............................Execution of Portfolio Transactions
Item 18. Capital Stock and Other Securities..................................General Information About the Funds
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered.............................Net Asset Value Determination; How to Purchase and
Redeem Shares; Programs and Services For Shareholders
Item 20. Tax Status........................................................................................Taxes
Item 21. Underwriters.................................................................................Management
Item 22. Calculation of Performance Data......................................................Investment Results
Item 23. Financial Statements...............................................................Financial Statements
IV. ADVISOR CLASS STATEMENT OF ADDITIONAL INFORMATION LOCATION
--------------------------------------------
PART B
Item 10. Cover Page...................................................................................Cover Page
Item 11. Table of Contents.....................................................................Table of Contents
Item 12. General Information and History...........................Cover Page; Introduction; General Information
About the Funds; Miscellaneous Information
Item 13. Investment Objectives and Policies......................Investment Objectives and Policies; Investment
Limitations; Options and Futures; Risk Factors;
Execution of Portfolio Transactions
Item 14. Management of the Funds......................................................................Management
Item 15. Control Persons and Principal Holders of Securities...........................Miscellaneous Information
Item 16. Investment Advisory and Other Services............................Management; Miscellaneous Information
Item 17. Brokerage Allocation and Other Practices............................Execution of Portfolio Transactions
Item 18. Capital Stock and Other Securities..................................General Information About the Funds
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered.............................Net Asset Value Determination; How to Purchase and
Redeem Shares; Programs and Services For Shareholders
Item 20. Tax Status........................................................................................Taxes
Item 21. Underwriters.................................................................................Management
Item 22. Calculation of Performance Data......................................................Investment Results
Item 23. Financial Statements...............................................................Financial Statements
PART C
Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C to this
Registration Statement.
</TABLE>
2
<PAGE> 5
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
CLASS A, CLASS B AND CLASS C SHARES OF
AIM GLOBAL TRENDS FUND
(A SERIES PORTFOLIO OF AIM SERIES TRUST)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM GLOBAL TRENDS FUND (the "Fund"),
which is a series investment portfolio of AIM Series Trust (the "Trust"), an
open-end, series, management investment company. The Fund is a diversified
portfolio which seeks long-term growth of capital. Unlike a typical mutual fund,
which invests directly in portfolio securities, the Fund invests substantially
all of its assets in shares of the AIM theme funds: AIM Global Consumer Products
and Services Fund; AIM Global Financial Services Fund; AIM Global Health Care
Fund; AIM Global Infrastructure Fund; AIM Global Resources Fund; and AIM Global
Telecommunications Fund (collectively, the "Underlying Theme Funds").
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
September 8, 1998, has been filed with the Securities and Exchange Commission
(the "SEC") and is incorporated herein by reference. The Statement of Additional
Information is available without charge upon written request to the Trust at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173 or by calling
1-800-347-4246. The SEC maintains a Web site at http://www.sec.gov that contains
the Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund. Additional information about the Fund may
also be obtained from http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 6
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................ 2
THE FUND............................... 4
Table of Fees and Expenses........... 4
Financial Highlights................. 6
Performance.......................... 6
Investment Program................... 7
Description of the Underlying Theme
Funds............................. 8
Risk Factors and Special
Considerations.................... 10
Management........................... 12
Other Information.................... 14
INVESTOR'S GUIDE TO THE AIM FAMILY OF
FUNDS--Registered Trademark--........ A-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction to The AIM Family of
Funds............................. A-1
How to Purchase Shares............... A-1
Terms and Conditions of Purchase of
the AIM Funds..................... A-2
Special Plans........................ A-9
Exchange Privilege................... A-12
How to Redeem Shares................. A-14
Determination of Net Asset Value..... A-19
Dividends, Distributions and Tax
Matters........................... A-19
General Information.................. A-23
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND
The Fund is a diversified series of the Trust.
INVESTMENT OBJECTIVE. The Fund seeks long-term growth of capital.
PRINCIPAL INVESTMENTS. The Fund invests, under normal circumstances,
substantially all of its assets in shares of the following Underlying Theme
Funds: AIM Global Consumer Products and Services Fund ("Consumer Products and
Services Fund"); AIM Global Financial Services Fund ("Financial Services Fund");
AIM Global Health Care Fund ("Health Care Fund"); AIM Global Infrastructure Fund
("Infrastructure Fund"); AIM Global Resources Fund ("Resources Fund"); and AIM
Global Telecommunications Fund ("Telecommunications Fund"). The allocation of
the Fund's assets to the Underlying Theme Funds is governed strictly by a
formula described herein. See "Investment Program."
INVESTMENT MANAGERS: The Fund is managed by A I M Advisors, Inc. ("AIM") and
is sub-advised and sub-administered by INVESCO (NY), Inc. (the "Sub-advisor").
AIM and the Sub-advisor and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-advisor are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
AIM was organized in 1976 and, together with its subsidiaries, currently advises
approximately 90 investment company portfolios.
PURCHASING SHARES. Investors may select Class A, Class B or Class C shares of
the Fund which are offered by this Prospectus at an offering price that reflects
differing sales charges and expense levels. See "Terms and Conditions of
Purchase of the AIM Funds -- Sales Charges and Dealer Concessions." Pursuant to
a separate prospectus, the Fund also offers Advisor Class shares, which
represent interests in the Fund. The Advisor Class has different distribution
arrangements.
CLASS A SHARES -- Shares are offered at net asset value plus any applicable
initial sales charge.
CLASS B SHARES -- Shares are offered at net asset value without an initial
sales charge, and are subject to a maximum contingent deferred sales charge of
5% on certain redemptions made within six years from the date such shares were
purchased. Class B shares automatically convert to Class A shares eight years
following the end of the calendar month in which a purchase was made. Class B
shares are subject to higher expenses than Class A shares.
CLASS C SHARES -- Shares are offered at net asset value without an initial
sales charge, and are subject to a contingent deferred sales charge of 1% on
certain redemptions made within one year from the date such shares were
purchased. Class C shares are subject to higher expenses than Class A shares.
Initial investments in any class of shares must be at least $500 and
additional investments must be at least $50. The minimum initial investment is
modified for investments through tax-qualified retirement plans and accounts
initially established with an Automatic Investment Plan. The distributor of the
Fund's shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares" and "Special Plans."
SUITABILITY FOR INVESTORS. An investor in Class A, Class B or Class C shares
of the Fund should consider the method of purchasing shares that is most
beneficial given the amount of the purchase, the length of time the shares are
expected to be held, and other
2
<PAGE> 7
circumstances. Investors should consider whether, during the anticipated life of
their investment in the Fund, the accumulated distribution fees and any
applicable contingent deferred sales charges on Class B shares prior to
conversion or Class C shares would be less than the initial sales charge and
accumulated distribution fees on Class A shares purchased at the same time, and
to what extent such differential would be offset by the higher return on Class A
shares. To assist investors in making this determination, the table under the
caption "Table of Fees and Expenses" sets forth examples of the charges
applicable to each class of shares. Class A shares will normally be more
beneficial than Class B or Class C shares to the investor who qualifies for
reduced initial sales charges, as described below. Therefore, AIM Distributors
will reject any order for purchase of more than $250,000 for Class B shares.
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds"). Class
A, Class B and Class C shares of the Fund may be exchanged for shares of other
funds in The AIM Family of Funds in the manner and subject to the policies and
charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Class A shareholders of the Fund may redeem all or a portion
of their shares at the Fund's net asset value on any business day, generally
without charge. A contingent deferred sales charge of 1% may apply to certain
redemptions where a purchase of more than $1 million is made at net asset value.
See "How to Redeem Shares -- Contingent Deferred Sales Charge Program for Large
Purchases."
Class B shareholders of the Fund may redeem all or a portion of their shares
at net asset value on any business day, less a contingent deferred sales charge
for redemptions made within six years from the date such shares were purchased.
Class B shares redeemed after six years from the date such shares were purchased
will not be subject to any contingent deferred sales charge. See "How to Redeem
Shares -- Multiple Distribution System."
Class C shareholders of the Fund may redeem all or a portion of their shares
at net asset value on any business day, less a 1% contingent deferred sales
charge for redemptions made within one year from the date such shares were
purchased. See "How to Redeem Shares -- Multiple Distribution Systems."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be reinvested at net asset value without
payment of a sales charge in the Fund's shares or may be invested in shares of
the other funds in The AIM Family of Funds. See "Dividends, Distributions and
Tax Matters" and "Special Plans."
RISK FACTORS. There is no assurance that the Fund will achieve its investment
objective. The Fund's net asset value will fluctuate, reflecting fluctuations in
the net asset value of the shares of the Underlying Theme Funds. Investors
should review the investment objectives and policies of the Fund and the
Underlying Theme Funds carefully and consider their ability to assume these and
other risks involved in purchasing shares of the Fund. See "Investment Program,"
"Description of the Underlying Theme Funds" and "Risk Factors and Special
Considerations." As a recently organized entity, the Fund has a limited
operating history.
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
3
<PAGE> 8
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Class A, Class B and Class C shares of the Fund are reflected in the following
tables.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Shareholder Transaction Costs*:
Maximum sales charge on purchases of shares (as a % of
offering price)....................................... 4.75% None None
Sales charges on reinvested distributions to
shareholders.......................................... None None None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)....... None 5.00% 1.00%
Redemption charges....................................... None None None
Exchange fees............................................ None None None
Annual Fund Operating Expenses+: (as a % of average net
assets)
Investment management fees............................... None None None
12b-1 distribution and service fees...................... 0.50% 1.00% 1.00%
Other expenses........................................... None None None
---- ---- ----
Total Fund Operating Expenses.................... 0.50% 1.00% 1.00%
==== ==== ====
</TABLE>
* Sales charge waivers are available for Class A, Class B and Class C shares,
and reduced sales charges are available for Class A shares. The maximum 5%
contingent deferred sales charge on Class B shares applies to redemptions
during the first year after purchase. The charge declines thereafter, reaching
zero after six years. The 1% contingent deferred sales charge on Class C
shares applies only to redemptions during the first year after purchase. See
"How to Purchase Shares."
+ The Annual Fund Operating Expenses are estimated for the Fund's initial fiscal
period. "Other expenses" (including transfer agency, legal and audit fees and
other operating expenses) initially will be borne by AIM and the Sub-advisor.
Subject to receipt of an order of the SEC pursuant to a pending exemptive
application, such expenses may be borne by AIM and the Sub-advisor and the
Underlying Theme Funds or the Underlying Theme Funds alone. See "Other
Information -- Special Servicing Agreement." Long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. rules
regarding investment companies. See "Management" and the Statement of
Additional Information for more information.
In addition to the Annual Fund Operating Expenses shown above, the Fund, as a
shareholder in the Underlying Theme Funds, indirectly bears its pro rata share
of the fees and expenses incurred by the Underlying Theme Funds. As a result,
the investment returns of the Fund reflect the expenses of the Underlying Theme
Funds in which it holds shares. Because the Fund invests only in Advisor Class
shares of the Underlying Theme Funds, it pays no sales charge or 12b-1
distribution or service fees in connection with these investments. The following
table shows the expense ratios applicable to Advisor Class shares of the
Underlying Theme Funds for their fiscal years ended October 31, 1997.
<TABLE>
<CAPTION>
EXPENSE RATIO OF
ADVISOR CLASS
UNDERLYING THEME FUND SHARES(1)
--------------------- ----------------
<S> <C>
Consumer Products and Services Fund......................... 1.34%
Financial Services Fund..................................... 1.50%
Health Care Fund............................................ 1.27%
Infrastructure Fund......................................... 1.50%
Resources Fund.............................................. 1.50%
Telecommunications Fund..................................... 1.29%
</TABLE>
(1) Effective January 1, 1998, AIM has undertaken to limit each Underlying Theme
Fund's expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to a maximum level of 1.50% of the average daily net
assets of such fund's Advisor Class shares.
4
<PAGE> 9
- --------------------------------------------------------------------------------
The following table shows the aggregate expense ratio of each class of the
Fund based on a weighted average of the expense ratios of Advisor Class shares
of the Underlying Theme Funds in which the Fund was invested as of October 31,
1997, plus the Fund's total operating expenses.(1)
<TABLE>
<CAPTION>
AIM GLOBAL TRENDS FUND
(INCLUDING THE FUND'S INDIRECT PRO RATA SHARE ESTIMATED AGGREGATE
OF THE EXPENSES OF THE UNDERLYING THEME FUNDS) EXPENSE RATIO(2)
---------------------------------------------- -------------------
<S> <C>
Class A..................................................... 1.85%
Class B..................................................... 2.35%
Class C..................................................... 2.35%
</TABLE>
(1)These percentages do not necessarily reflect the current allocation of the
Fund's assets to the Underlying Theme Funds or the allocation of the Fund's
assets on any other date.
(2)Because of AIM's undertaking to limit each Underlying Theme Fund's expenses
as described above, the Fund's aggregate expense ratio will not exceed 2.00%,
2.50% and 2.50% for Class A, Class B and Class C Shares, respectively.
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES. An investor would have directly or
indirectly paid the following expenses of the Fund based upon the Fund's
estimated aggregate expense ratio at the end of the periods shown on a $1,000
investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class A shares(1)........................... $66 $103 $144 $256
Class B shares:
Assuming a complete redemption at end of
period(2).............................. $75 $107 $150 $259
Assuming no redemption.................... $24 $ 74 $127 $259
Class C shares:
Assuming a complete redemption at end of
period(2).............................. $34 $ 74 $127 $271
Assuming no redemption.................... $24 $ 74 $127 $271
</TABLE>
(1)Assumes payment of maximum sales charge by the investor.
(2)Assumes deduction of the applicable contingent deferred sales charge.
The foregoing table is intended to assist investors in understanding the
various costs and expenses associated with investing in the Fund.
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF FUTURE EXPENSES. THE
FUND'S ACTUAL DIRECT AND INDIRECT EXPENSES, AND AN INVESTOR'S DIRECT AND
INDIRECT EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE EXAMPLE ASSUMES
PAYMENT BY THE FUND OF OPERATING EXPENSES AT THE LEVEL SET FORTH UNDER "ANNUAL
FUND OPERATING EXPENSES" ABOVE AND OF ITS INDIRECT PRO RATA SHARE OF THE ADVISOR
CLASS SHARE EXPENSES OF THE UNDERLYING THEME FUNDS, AS DESCRIBED ABOVE.
THE TABLE AND THE ASSUMPTION IN THE HYPOTHETICAL 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 THE FUND'S OR ANY
UNDERLYING THEME FUND'S PROJECTED OR ACTUAL PERFORMANCE.
5
<PAGE> 10
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The table below provides condensed financial information concerning income and
capital changes for one Class A, Class B and Class C share of the Fund. This
information is supplemented by the financial statements and accompanying notes
appearing in the Statement of Additional Information. The financial statements
and notes, for the fiscal period ended December 31, 1997, have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report thereon also
is included in the Statement of Additional Information. The unaudited financial
statements and notes, for the semi-annual June 30, 1998, are also included in
the Statement of Additional Information.
AIM GLOBAL TRENDS FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C+
---------------------------------- ---------------------------------- -----------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED SEPTEMBER 15, 1997 ENDED SEPTEMBER 15, 1997 ENDED
JUNE 30, (COMMENCEMENT JUNE 30, (COMMENCEMENT JUNE 30,
1998(D) OF OPERATIONS) TO 1998(D) OF OPERATIONS) TO 1998(D)
(UNAUDITED) DECEMBER 31, 1997(D) (UNAUDITED) DECEMBER 31, 1997(D) (UNAUDITED)
----------- -------------------- ----------- -------------------- -----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period............................ $ 10.63 $ 11.43 $ 10.62 $ 11.43 $10.62
------- ------- ------- ------- ------
Income from investment operations:
Net investment income (loss)...... (0.02) (0.01) (0.05) (0.02) (0.05)
Net realized and unrealized loss
on investments.................. 1.24 (0.31) 1.23 (0.32) 1.23
------- ------- ------- ------- ------
Net increase (decrease) from
investment operations......... 1.22 (0.32) 1.18 (0.34) 1.18
------- ------- ------- ------- ------
Distributions to shareholders:
In excess of net investment
income.......................... -- (0.48) -- (0.47) --
------- ------- ------- ------- ------
Total distributions........ -- (0.48) -- (0.47) --
------- ------- ------- ------- ------
Net asset value, end of period...... $ 11.85 $ 10.63 $ 11.80 $ 10.62 $11.80
======= ======= ======= ======= ======
Total investment return(b)(c)....... 11.48% (2.68)% 11.11% (2.83)% 11.11%
======= ======= ======= ======= ======
Ratios and supplemental data:
Net assets, end of period (in
000's)............................ $23,947 $15,145 $30,480 $19,184 $ 267
Ratio of net investment income
(loss) to average net assets(a)... (0.49)% (0.35)% (0.99)% (0.85)% (0.99)%
Ratio of operating expenses to
average net assets:(a)............ 0.50% 0.50% 1.00% 1.00% 1.00%
Portfolio turnover rate(a)++........ 8% 1% 8% 1% 8%
</TABLE>
- ---------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) Calculated based upon average shares outstanding during the period.
+ Commencing January 1, 1998, the Fund began offering Class C shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the 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 reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. Standardized total return
for Class A shares reflects the deduction of the Fund's maximum front-end sales
charge at the time of purchase.
6
<PAGE> 11
Standardized total return for Class B and Class C shares reflects the deduction
of the maximum applicable contingent deferred sales charge on a redemption of
shares held for the period.
The 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, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Underlying Theme Funds. Such
practices will have the effect of increasing the Fund's total return. The
performance of the Fund will vary from time to time and past results are not
necessarily representative of future results. The Fund's performance is a
function of its portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses of the Fund as well
as by general market conditions.
UNDERLYING THEME FUND PERFORMANCE. The Fund has a limited history and
therefore a limited performance record. Thus, the performance shown below is not
the performance of the Fund, but instead reflects the performance of the
Underlying Theme Funds. The following table shows the average annual total
returns of Class A and Class B shares of each Underlying Theme Fund for the most
recent one- and five-year periods (as applicable) and for the life of the
Underlying Theme Funds. The performance information reflects deduction of the
maximum applicable sales charges. Returns would be higher if these charges were
not reflected. The Fund invests in the Advisor Class shares of the Underlying
Theme Funds, which are not subject to sales charges and distribution and service
fees. However, Class A and Class B shares of the Fund are subject to their own
sales charges and distribution and service fees.
<TABLE>
<CAPTION>
UNDERLYING THEME FUND CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
--------------------- ------- ------- ------- ------- ------- -------
1 YEAR 5 YEARS LIFE OF FUND
----------------- ----------------- -------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH 4/30/98
<S> <C> <C> <C> <C> <C> <C>
Consumer Products and Services
Fund............................ 45.69% 47.14% n/a n/a 30.87%(1) 31.66%(1)
Financial Services Fund........... 33.53% 34.54% n/a n/a 17.52%(2) 17.94%(2)
Health Care Fund.................. 28.90% 29.62% 17.91% 18.25% 14.59%(3) 18.50%(4)
Infrastructure Fund............... 8.37% 8.14% n/a n/a 9.93%(5) 10.17%(5)
Resources Fund.................... 7.91% 7.80% n/a n/a 9.00%(6) 9.24%(6)
Telecommunications Fund........... 36.09% 37.17% 14.34% 14.64% 13.67%(7) 14.85%(8)
</TABLE>
Past performance of the Underlying Theme Funds is not a guarantee of future
results for either the Underlying Theme Funds or the Fund. Further information
about each Underlying Theme Fund's performance is contained in its Annual Report
to Shareholders, which may be obtained without charge by calling (800) 824-1580
or contacting your financial adviser.
- ---------------
(1)The Consumer Products and Services Fund commenced operations on December 30,
1994.
(2)The Financial Services Fund commenced operations on May 31, 1994.
(3)Class A shares of the Health Care Fund were initially offered on August 7,
1989.
(4)Class B shares of the Health Care Fund were initially offered on April 1,
1993.
(5)The Infrastructure Fund commenced operations on May 31, 1994.
(6)The Resources Fund commenced operations on May 31, 1994.
(7)Class A Shares of the Telecommunications Fund were initially offered on
January 27, 1992.
(8)Class B shares of the Telecommunications Fund were initially offered on April
1, 1993.
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
INVESTMENT OBJECTIVE. The Fund seeks long-term growth of capital. Unlike a
typical mutual fund, which invests directly in securities, the Fund invests,
under normal circumstances, substantially all of its assets in the following
Underlying Theme Funds: Consumer Products and Services Fund; Financial Services
Fund; Health Care Fund; Infrastructure Fund; Resources Fund and
Telecommunications Fund.
INVESTMENT POLICIES. The Sub-advisor exercises no discretion in investing the
Fund's assets. Rather, the Sub-advisor periodically determines the allocation of
the Fund's assets to the Underlying Theme Funds according to the industry
weightings of the companies composing the Morgan Stanley Capital International
All Country (AC) World Index ("MSCI"). (The MSCI is a broad unmanaged index of
global stock prices, comprising approximately 2,483 different issuers, located
in 48 countries including both developed and
7
<PAGE> 12
developing countries as of April 30, 1998. Each of the 2,483 stocks is placed
into one of 38 MSCI industry sectors.) The Sub-advisor assesses which of the
Underlying Theme Funds can invest, as part of its primary focus, in each of
these industries. For example, industries in the MSCI in which the Financial
Services Fund invests include the Banking, Financial Services, Insurance and
Real Estate industries. The percentage that those industries compose in the MSCI
is the initial weighting assigned to the Financial Services Fund. Where two or
more Underlying Theme Funds can invest in an industry, the weighting of that
industry in the MSCI is split equally among each qualifying Underlying Theme
Fund. See the Appendix for the allocation of the 38 industries to the Underlying
Theme Funds. Of course, the Underlying Theme Funds do not invest necessarily in
the same industries or the same companies that compose the MSCI. Because the
percentage weight assigned to each industry in the MSCI changes over time and
because the percentage of the Fund's assets invested in each Underlying Theme
Fund will change over time, the Sub-advisor will rebalance the Fund's assets
among the Underlying Theme Funds at least semi-annually. In addition, the
Sub-advisor will invest incoming money in, and satisfy redemption requests by
redeeming shares of, each Underlying Theme Fund according to the MSCI weighting
as of the last business day of the preceding month.
As of April 30, 1998, the allocation of the Fund's assets to the Underlying
Theme Funds was as follows:
<TABLE>
<S> <C>
Consumer Products and Services Fund......................... 30.8%
Financial Services Fund..................................... 21.5%
Health Care Fund............................................ 10.4%
Infrastructure Fund......................................... 16.4%
Resources Fund.............................................. 11.1%
Telecommunications Fund..................................... 9.7%
</TABLE>
These percentages do not include cash or money market instruments held by the
Fund and do not necessarily reflect the current allocation of the Fund's assets
to the Underlying Theme Funds or the allocation of the Fund's assets on any
other date.
The Fund is a more diversified investment than any single Underlying Theme
Fund. However, because the Underlying Theme Funds are actively managed without
any attempt to reflect the country, industry or company weightings of the MSCI,
the Underlying Theme Funds will perform differently than the corresponding
industry components of the MSCI, and the Underlying Theme Funds will perform
differently than the overall MSCI. While the Fund does not therefore represent
the performance of the MSCI, it does represent a globally diversified portfolio,
with allocations among developed and emerging countries, industries and
companies intended to achieve long-term growth of capital.
The Fund is designed to meet the needs of investors who seek professional
money management services and who appreciate the advantages of diversification.
The Fund by itself should not be considered a complete investment program. As a
recently organized entity, the Fund has a limited operating history.
OTHER INFORMATION. The investment objective of the Fund may not be changed
without the approval of a majority of its outstanding voting securities. As
defined in the Investment Company Act of 1940, as amended ("1940 Act"), and as
used in this Prospectus, a "majority of the Fund's outstanding voting
securities" means the lesser of (i) 67% of the Fund's shares represented at a
meeting at which more than 50% of the outstanding shares are represented, or
(ii) more than 50% of the outstanding shares. In addition, the Fund has adopted
certain investment limitations as fundamental policies that also may not be
changed without shareholder approval. See "Investment Limitations" in the
Statement of Additional Information. Unless specifically noted, the Fund's
investment policies described in this Prospectus, and in the Statement of
Additional Information, are not fundamental policies and may be changed by the
Trust's Board of Trustees without shareholder approval.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE UNDERLYING THEME FUNDS
The following descriptions summarize the investment objectives and policies of
the Underlying Theme Funds. There is no assurance that any Underlying Theme Fund
will achieve its investment objective. The Statement of Additional Information
includes more information about the investment policies of the Underlying Theme
Funds. Investors desiring more information on an Underlying Theme Fund should
call (800) 347-4246 or contact their financial adviser for the Underlying Theme
Fund's prospectus.
CONSUMER PRODUCTS AND SERVICES FUND. The Consumer Products and Services Fund's
investment objective is long-term capital growth. It seeks its objective by
investing all of its investable assets in the Consumer Products and Services
Portfolio, that, in turn, invests primarily in equity securities of companies
throughout the world that manufacture, market, retail or distribute consumer
products and services. The Consumer Products and Services Portfolio's investment
objective is identical to that of the Consumer Products and Services Fund.
At least 65% of the Consumer Products and Services Portfolio's total assets
normally will be invested in common and preferred stocks and warrants to acquire
such securities issued by consumer products and services companies. A "consumer
products or services" company is an entity in which (i) at least 50% of either
the revenues or earnings was derived from activities relating to consumer
products or services, or (ii) at least 50% of the assets was devoted to such
activities, based on the company's most recent fiscal year. The remainder of the
Consumer Products and Services Portfolio's assets may be invested in debt
securities issued by consumer
8
<PAGE> 13
products or services companies and/or equity and debt securities of companies
outside the consumer products or services industries, which, in the opinion of
the Sub-advisor, stand to benefit from developments in such industries.
FINANCIAL SERVICES FUND. The Financial Services Fund's investment objective is
long-term capital growth. It seeks its objective by investing all of its
investable assets in the Financial Services Portfolio, that, in turn, invests
primarily in equity securities of companies throughout the world that operate in
the financial services industries. The Financial Services Portfolio's investment
objective is identical to that of the Financial Services Fund.
At least 65% of the Financial Services Portfolio's total assets normally will
be invested in common and preferred stocks and warrants to acquire such
securities issued by financial services companies. A "financial services"
company is an entity in which (i) at least 50% of either the revenues or
earnings was derived from financial services activities, or (ii) at least 50% of
the assets was devoted to such activities, based on the company's most recent
fiscal year. The remainder of the Financial Services Portfolio's assets may be
invested in debt securities issued by financial services companies and/or equity
and debt securities of companies outside of the financial services industries,
which, in the opinion of the Sub-advisor, stand to benefit from developments in
the financial services industries.
HEALTH CARE FUND. The Health Care Fund's investment objective is long-term
capital appreciation. It seeks its objective by investing primarily in equity
securities of health care companies throughout the world.
At least 65% of the Health Care Fund's total assets normally will be invested
in common and preferred stocks and warrants to acquire such securities issued by
health care companies. A "health care" company is an entity in which (i) at
least 50% of either the revenues or earnings was derived from health care
activities, or (ii) at least 50% of the assets was devoted to such activities,
based on the company's most recent fiscal year. The remainder of the Health Care
Fund's assets may be invested in debt securities issued by health care companies
and/or equity and debt securities of companies outside of the health care
industry, which, in the opinion of the Sub-advisor, stand to benefit from
developments in the health care industries.
INFRASTRUCTURE FUND. The Infrastructure Fund's investment objective is
long-term capital growth. It seeks its objective by investing all of its
investable assets in the Infrastructure Portfolio, that, in turn, invests
primarily in equity securities of companies throughout the world that design,
develop or provide products and services significant to a country's
infrastructure. The Infrastructure Portfolio's investment objective is identical
to that of the Infrastructure Fund.
At least 65% of the Infrastructure Portfolio's total assets normally will be
invested in common and preferred stocks and warrants to acquire such securities
issued by infrastructure companies. An "infrastructure" company is an entity in
which (i) at least 50% of either the revenues or earnings was derived from
infrastructure activities, or (ii) at least 50% of the assets was devoted to
such activities, based on the company's most recent fiscal year. The remainder
of the Infrastructure Portfolio's assets may be invested in debt securities
issued by infrastructure companies and/or equity and debt securities of
companies outside of the infrastructure industries, which, in the opinion of the
Sub-advisor, stand to benefit from developments in the infrastructure
industries.
RESOURCES FUND. The Resources Fund's investment objective is long-term capital
growth. It seeks its objective by investing all of its investable assets in the
Resources Portfolio, that, in turn, invests primarily in equity securities of
companies throughout the world that own, explore or develop natural resources
and other basic commodities, or supply goods and services to such companies. The
Resources Portfolio's investment objective is identical to that of the Resources
Fund.
At least 65% of the Resources Portfolio's total assets will normally be
invested in common and preferred stocks and warrants to acquire such securities
issued by natural resource companies. A "natural resource" company is an entity
in which (i) at least 50% of either the revenues or earnings was derived from
natural resource activities, or (ii) at least 50% of the assets was devoted to
such activities, based upon the company's most recent fiscal year. The remainder
of the Resources Portfolio's assets may be invested in debt securities issued by
natural resource companies and/or equity and debt securities of companies
outside of the natural resource industries, which, in the opinion of the
Sub-advisor, stand to benefit from developments in the natural resource
industries.
TELECOMMUNICATIONS FUND. The Telecommunications Fund's investment objective is
long-term growth of capital. It seeks its objective by investing primarily in
equity securities of companies throughout the world engaged in the development,
manufacture or sale of telecommunications services or equipment.
At least 65% of the Telecommunications Fund's total assets normally will be
invested in common and preferred stocks and warrants to acquire such securities
issued by telecommunications companies. A "telecommunications" company is an
entity in which (i) at least 50% of either its revenues or earnings was derived
from telecommunications activities, or (ii) at least 50% of its assets was
devoted to telecommunications activities, based on the company's most recent
fiscal year. The remainder of the assets of the Telecommunications Fund may be
invested in debt securities issued by telecommunications companies and/or equity
and debt securities of companies outside of the telecommunications industry
which, in the opinion of the Sub-advisor, stand to benefit from developments in
the telecommunications industries.
9
<PAGE> 14
- --------------------------------------------------------------------------------
RISK FACTORS AND SPECIAL CONSIDERATIONS
INVESTING IN THE UNDERLYING THEME FUNDS. The investments of the Fund are
concentrated in the Underlying Theme Funds, so the Fund's investment performance
is directly related to the investment performance of the Underlying Theme Funds.
The ability of the Fund to meet its investment objective is directly related to
the allocation among those Underlying Theme Funds as well as the ability of the
Underlying Theme Funds to meet their objectives. There is no assurance that the
investment objective of the Fund or any Underlying Theme Fund will be achieved.
The value of the Underlying Theme Funds' domestic and foreign investments varies
in response to many factors. The value of equity securities held by an
Underlying Theme Fund will fluctuate in response to general market and economic
developments, as well as developments affecting the particular issuers of such
securities. In addition, the value of debt securities held by an Underlying
Theme Fund generally will fluctuate with changes in the perceived
creditworthiness of the issuers of such securities and interest rates.
Because each Underlying Theme Fund focuses its investments on particular
industries, an investment in each may be more volatile than that of other
investment companies that do not concentrate their investments in such a manner.
The value of the shares of each Underlying Theme Fund will be especially
susceptible to factors affecting the industries in which it focuses. In
particular, each of the industries is subject to governmental regulation that
may have a material effect on the products and services offered by companies in
these industries.
UNDERLYING THEME FUNDS' INVESTMENT ALLOCATION. The Sub-advisor allocates each
Underlying Theme Fund's (or its corresponding Portfolio's) assets among
securities of countries and in currency denominations where opportunities for
meeting each Underlying Theme Fund's investment objective are expected to be the
most attractive. Each Underlying Theme Fund may invest substantially in
securities denominated in foreign currencies or in multinational currency units
(such as euros). Under normal conditions, each Underlying Theme Fund invests in
the securities of issuers located in at least three countries, including the
United States; investments in securities of issuers in any one country, other
than the United States, will represent no more than 40% of the Financial
Services Portfolio's and the Telecommunication Fund's total assets, and no more
than 50% of the Infrastructure Portfolio's, the Resources Portfolio's, the
Health Care Fund's and the Consumer Products and Services Portfolio's total
assets.
In analyzing specific companies for possible investment the Sub-advisor, on
behalf of the Underlying Theme Funds, ordinarily looks 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. In assessing companies for the
Resources Portfolio, the Sub-advisor will also evaluate, among other factors,
their capabilities for expanded exploration and production, superior exploration
programs and production techniques and facilities, current inventories, expected
production and demand levels and the potential to accumulate new resources.
FOREIGN INVESTMENTS. The Underlying Theme Funds' investments in foreign
securities may involve risks in addition to those of U.S. investments, including
increased political and economic risk, as well as exposure to currency
fluctuations. By investing in foreign securities, the Underlying Theme Funds
also have increased economic and political risks as they are exposed to events
and factors in the various world markets. This is especially true of an
Underlying Theme Fund that invests in emerging markets. Many investments in
emerging markets are considered speculative and therefore may offer greater
return potential, but have significantly greater risk. Also, to the extent that
an Underlying Theme Fund's investments are denominated in foreign currencies,
changes in the value of foreign currencies can significantly affect the Fund's
share price.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, and Spain are members of the European Economic and
Monetary Union (the "EEMU"). The EEMU intends to establish a common European
currency for participating countries which will be known as the "euro." It is
anticipated that each participating country will supplement its existing
currency with the euro on January 1, 1999, and will replace its existing
currency with the euro on July 1, 2002. Any other European country which is a
member of the EEMU may elect to participate in the EEMU and may supplement its
existing currency with the euro after January 1, 1999.
The expected introduction of the euro presents unique risks and uncertainties,
including whether the payment and operational systems of banks and other
financial institutions will be ready by January 1, 1999; how outstanding
financial contracts will be treated after January 1, 1999; the establishment of
exchange rates for existing currencies and the euro; and the creation of
suitable clearing and settlement systems for the euro. These and other factors
could cause market disruptions before or after the introduction of the euro and
could adversely affect the value of securities held by the Fund.
LOWER QUALITY DEBT SECURITIES. The Fund may invest in an Underlying Theme Fund
that invests in high yield, high risk securities, commonly known as "junk
bonds." As a result, the Fund may be subject to some of the risks resulting from
high yield investing. The Fund also may invest in Underlying Theme Funds that
invest in medium grade bonds. Lower quality debt instruments generally offer a
higher current yield than that available from higher grade issues, but typically
involve greater risk. Lower rated and comparable unrated securities are
especially subject to adverse changes in general economic conditions, to changes
in the financial condition of their issuers, and to price fluctuation in
response to changes in interest rates. During periods of economic downturn or
rising inter-
10
<PAGE> 15
est rates, issuers of these instruments may experience financial stress that
could adversely affect their ability to make payments of principal and interest
and increase the possibility of default.
ILLIQUID SECURITIES. The Underlying Theme Funds may invest in securities for
which no readily available market exists, so-called "illiquid securities."
Illiquid securities may be more difficult to value than liquid securities and
the sale of illiquid securities generally will require more time and result in
higher brokerage charges or dealer discounts and other selling expenses than the
sale of liquid securities. Moreover, illiquid securities often sell at prices
lower than similar securities that are liquid.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Each Underlying Theme Fund
is authorized to enter into options, futures and forward currency transactions,
although they might not enter into such transactions. Options, futures and
forward currency transactions involve certain risks, which include: (1)
dependence on the Sub-advisor's ability to predict movements in the prices of
individual securities, fluctuations in the general securities markets or in the
appropriate market sector and movements in interest rates and currency markets;
(2) imperfect correlation, or even no correlation, between movements in the
price of options, forward contracts, futures contracts or options thereon and
movements in the price of the currency or security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are different from
those needed to select the securities in which an Underlying Theme Fund invests;
(4) lack of assurance that a liquid secondary market will exist for any
particular option, futures contract or option thereon at any particular time;
(5) the possible loss of principal under certain conditions; and (6) the
possible inability of an Underlying Theme Fund to purchase or sell a portfolio
security at a time when it would otherwise be favorable for it to do so, or the
possible need for an Underlying Theme Fund to sell a security at a
disadvantageous time, due to the need for the Underlying Theme Fund to maintain
"cover" or to set aside securities in connection with hedging transactions.
INVESTING IN SMALLER COMPANIES. Each Underlying Theme Fund may invest in
smaller companies that may present greater opportunities for capital
appreciation, but may also involve greater risks than large, established
issuers. Such smaller companies may have limited resources, and their securities
may trade less frequently and in more limited volume than the securities of
larger, more established companies. As a result, the prices of the securities of
such smaller companies may fluctuate to a greater degree than the prices of the
securities of other issuers.
OTHER INVESTMENT PRACTICES OF THE UNDERLYING THEME FUNDS. In addition to the
investment practices described in this Prospectus, the Underlying Theme Funds
may engage in certain other investment practices, including lending their
portfolio securities; purchasing securities on a when-issued or delayed delivery
basis; entering into repurchase or reverse repurchase agreements; and borrowing
money. Further information on the investment policies, practices and risks of
the Underlying Theme Funds can be found in the Statement of Additional
Information as well as the Underlying Theme Funds' prospectuses and statement of
additional information.
PURCHASES AND REDEMPTIONS. From time to time, the Underlying Theme Funds may
experience relatively large purchases or redemptions due to rebalancing of the
Fund by the Sub-advisor. This may have a material effect on the Underlying Theme
Funds, because Underlying Theme Funds that experience redemptions as a result of
the rebalancing may have to sell portfolio securities and because Underlying
Theme Funds that receive additional cash will have to invest it. While it is
impossible to predict the overall impact of these transactions over time, there
could be adverse effects on portfolio management to the extent that Underlying
Theme Funds may be required to sell securities at times when they would not
otherwise do so, or receive cash that cannot be invested in an expeditious
manner. There may be tax consequences associated with purchases and sales of
securities, and such sales also may increase transaction costs.
MASTER-FEEDER STRUCTURE OF CERTAIN UNDERLYING THEME FUNDS. The Financial
Services Fund, Infrastructure Fund, Resources Fund and Consumer Products and
Services Fund, unlike mutual funds that directly acquire and manage their own
portfolios of securities, each seeks its investment objective by investing all
of its investable assets in the Financial Services Portfolio, Infrastructure
Portfolio, Resources Portfolio and Consumer Products and Services Portfolio
(each a "Portfolio"), respectively. Each Portfolio is a separate investment
company. Because each such Underlying Theme Fund will invest only in its
corresponding Portfolio, that Underlying Theme Fund's shareholders will acquire
only an indirect interest in the investments of that Portfolio.
TEMPORARY DEFENSIVE STRATEGIES. The Underlying Theme Funds retain the
flexibility to respond promptly to changes in market and economic conditions.
Accordingly, in the interest of preserving shareholders' capital the Sub-advisor
may employ a temporary defensive investment strategy if it determines such a
strategy to be warranted due to market, economic or political conditions. Under
a defensive strategy, the Underlying Theme Funds may invest up to 100% of their
total assets in cash and/or high quality debt securities and money market
instruments. To the extent an Underlying Theme Fund adopts a temporary defensive
posture, it will not be invested so as to achieve directly its investment
objective.
In addition, pending investment of proceeds from new sales of the shares or to
meet its ordinary daily cash needs, the Underlying Theme Funds may hold cash
and/or may invest in high quality debt instruments and money market instruments.
The Fund may hold cash and/or may invest in money market instruments under
similar circumstances. Money market instruments in which the Underlying Theme
Funds and the Fund may invest include, but are not limited to, United States
government securities; high-grade commercial paper; bank certificates of
deposit; bankers' acceptances and repurchase agreements related to any of the
foregoing. "High-grade
11
<PAGE> 16
commercial paper" refers to commercial paper rated A-1 by Standard & Poor's, a
division of The McGraw-Hill Companies, Inc., or P-1 by Moody's Investors
Service, Inc. or, if not rated, determined by the Sub-advisor to be of
comparable quality.
PORTFOLIO TURNOVER. The Fund's portfolio turnover rate is expected to be low
and is not anticipated to exceed 20% annually. The portfolio turnover rates of
the Underlying Theme Funds and their corresponding Portfolios have ranged from
35% to 392% during their most recent fiscal years. There is no assurance that
the turnover rates of the Underlying Theme Funds and their corresponding
Portfolios will remain within this range during subsequent fiscal years. Higher
turnover rates may result in higher expenses being incurred by the Underlying
Theme Funds.
AFFILIATED PERSONS. The officers and trustees of the Trust currently serve as
officers and trustees of the Underlying Theme Funds. AIM and the Sub-advisor
also serves as investment advisor and/or administrator and sub-advisor and/or
sub-administrator, respectively, to the Underlying Theme Funds. Therefore,
conflicts may arise as these persons fulfill their fiduciary responsibilities to
the Fund and the Underlying Theme Funds.
- --------------------------------------------------------------------------------
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Fund. The Trust's Board of Trustees has approved all significant agreements
between the Trust on the one side and persons or companies furnishing services
to the Fund on the other, including the investment management and administration
agreement with AIM, the investment sub-advisory and sub-administration agreement
between AIM and the Sub-advisor, the agreements with AIM Distributors regarding
distribution of the Fund's shares, the custody agreement and the transfer agency
agreement. The day-to-day operations of the Fund are delegated to the officers
of the Trust, subject always to the investment objective and policies of the
Fund and to the general supervision of the Trust's Board of Trustees. See
"Trustees and Executive Officers" in the Statement of Additional Information for
information on the Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Subject to the supervision and
direction of the Trust's Board of Trustees, AIM and the Sub-advisor will ensure
that the Fund's assets are invested in the Underlying Theme Funds according to
the formula and pre-determined percentages described in the "Investment Program"
section of this Prospectus. AIM and the Sub-advisor will determine how the
Fund's assets will be invested in short-term investments and place all purchase
and sale orders for such instruments and for the Underlying Theme Funds. AIM and
the Sub-advisor provide the following administration services to the Fund:
furnishing corporate officers and clerical staff; providing office space,
services and equipment; and supervising all matters relating to the Fund's
operation. The Sub-advisor also serves as the Fund's pricing and accounting
agent. Finally, AIM and the Sub-advisor will initially assume all costs of the
Fund's operation, except for service and distribution fees described below and
non-recurring and extraordinary expenses. The Fund, as a shareholder in the
Underlying Theme Funds, indirectly will bear its proportionate share of any
investment management fees and other expenses paid by the Underlying Theme
Funds. The investment management and administration fees paid by the Underlying
Theme Funds are higher than those paid by most mutual funds.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment manager to the Fund pursuant to a master investment management and
administration agreement, (the "Advisory Agreement"). AIM was organized in 1976
and, together with its subsidiaries, manages or advises approximately 90
investment company portfolios encompassing a broad range of investment
objectives. The Sub-advisor, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-advisor to the Fund pursuant to an investment sub-advisory and
sub-administration agreement. Prior to May 29, 1998, the Sub-advisor was known
as Chancellor LGT Asset Management, Inc. On May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of the Sub-advisor,
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included the Sub-advisor and
certain other affiliates. As a result of this transaction, the Sub-advisor is
now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to the sale, the
Sub-advisor and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
AIM and the Sub-advisor and their worldwide asset management affiliates
provide investment management and/or administrative services to institutional,
corporate and individual clients around the world. AIM and the Sub-advisor are
both indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and
New York offices, AIM and the Sub-advisor draw upon the expertise, personnel,
data and systems of other offices in Atlanta, Boston, Dallas, Denver,
Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong, London, Singapore,
Sydney, Tokyo and Toronto. In managing the Fund, the Sub-advisor employs a team
approach, taking advantage of its investment resources around the world.
While the Fund will not be actively managed or have a portfolio manager, the
Underlying Theme Funds are actively managed by teams of investment
professionals. At least semi-annually the Fund will rebalance the Fund's assets
among the Underlying Theme Funds according to the MSCI weighting as of the last
business day of the preceding month.
12
<PAGE> 17
DISTRIBUTOR. The Trust has entered into a Master Distribution Agreement, on
behalf of Class A and Class C shares of the Fund, and has entered into a Master
Distribution Agreement, on behalf of Class B shares of the Fund (individually
referred to as a "Distribution Agreement" or collectively as the "Distribution
Agreements") with AIM Distributors, a registered broker-dealer and a wholly
owned subsidiary of AIM, to act as the distributor of Class A, Class B and Class
C shares of the Fund. Certain trustees and officers of the Trust are affiliated
with AIM Distributors.
The Distribution Agreements provide AIM Distributors with the exclusive right
to distribute shares of the Fund directly and through institutions with whom AIM
Distributors has entered into selected dealer agreements. Under the Distribution
Agreement for the Class B shares, AIM Distributors sells Class B shares of the
Fund at net asset value subject to a contingent deferred sales charge
established by AIM Distributors. AIM Distributors is authorized to advance to
institutions through whom Class B shares are sold a sales commission under
schedules established by AIM Distributors. The Distribution Agreement for the
Class B shares provides that AIM Distributors (or its assignee or transferee)
will receive 0.75% (of the total 1.00% payable under the distribution plan
applicable to Class B shares) of the Fund's average daily net assets
attributable to Class B shares attributable to the sales efforts of AIM
Distributors and its predecessor. In the event the Class B shares Distribution
Agreement is terminated, AIM Distributors would continue to receive payments of
asset based sales charges in respect of the outstanding Class B shares
attributable to the distribution efforts of AIM Distributors and its
predecessor; provided, however, that a complete termination of the Class B
shares master distribution plan (as defined in the plan) would terminate all
payments by the Fund of asset based sales charges and service fees to AIM
Distributors. Termination of the Class B shares distribution plan or
Distribution Agreement does not affect the obligation of Class B shareholders to
pay contingent deferred sales charges.
DISTRIBUTION PLANS. Class A and C Plan. The Trust has adopted a Master
Distribution Plan applicable to Class A and Class C shares of the Fund (the
"Class A and C Plan") pursuant to Rule 12b-1 under the 1940 Act, to compensate
AIM Distributors for the purpose of financing any activity that is intended to
result in the sale of Class A and Class C shares of the Fund.
Under the Class A and C Plan, the Trust may compensate AIM Distributors an
aggregate amount of 0.50% of the average daily net assets of Class A shares of
the Fund on an annualized basis and an aggregate amount of 1.00% of the average
daily net assets of Class C shares of the Fund on an annualized basis.
The Class A and C Plan is designed to compensate AIM Distributors, on a
quarterly basis, for certain promotional and other sales-related costs, and to
implement a dealer incentive program which provides for periodic payments to
selected dealers who furnish continuing personal shareholder services to their
customers who purchase and own Class A or Class C shares of the Fund. Payments
can also be directed by AIM Distributors to selected institutions who have
entered into service agreements with respect to Class A and Class C shares of
the Fund and who provide continuing personal services to their customers who own
Class A and Class C shares of the Fund. The service fees payable to selected
institutions are calculated at the annual rate of 0.25% of the average daily net
asset value of those Fund shares that are held in such institution's customers'
accounts which were purchased on or after a prescribed date set forth in the
Plan.
Of the aggregate amount payable under the Class A and C Plan, payments to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average net assets of the Fund attributable to
the customers of such dealers or financial institutions are characterized as a
service fee, and payments to dealers and other financial institutions in excess
of such amount and payments to AIM Distributors would be characterized as an
asset-based sales charge pursuant to the Class A and C Plan. The Class A and C
Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Trust with respect to the
Fund. The Class A and C Plan does not obligate the Fund to reimburse AIM
Distributors for the actual expenses AIM Distributors may incur in fulfilling
its obligations under the Class A and C Plan on behalf of the Fund. Thus, under
the Class A and C Plan, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Fund will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Class B Plan. The Trust has also adopted a master distribution plan applicable
to Class B shares of the Fund (the "Class B Plan"). Under the Class B Plan, the
Fund pays distribution expenses at an annual rate of 1.00% of the average daily
net assets attributable to the Fund's Class B shares. Of such amount the Fund
pays a service fee of 0.25% of the average daily net assets attributable to the
Fund's Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee would
constitute an asset-based sales charge. Amounts paid in accordance with the
Class B Plan with respect to the Fund may be used to finance any activity
primarily intended to result in the sale of Class B shares of the Fund.
Both Plans. Activities that may be financed under the Class A and C Plan and
the Class B Plan (collectively, the "Plans") include, but are not limited to:
printing of prospectuses and statements of additional information and reports
for other than existing shareholders, overhead, preparation and distribution of
advertising material and sales literature, expense 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 the cost of administering the Plans. These amounts
payable by the Fund under the Plans need not be directly related to the expenses
actually incurred by AIM Distributors on behalf of the Fund. Thus, even if AIM
Distributors' actual expenses exceed the fee payable to AIM Distributors
thereunder at any given time, the Trust will not be obligated to pay more than
that fee, and if AIM Distributors' expenses are less than the fee it receives,
AIM Distributors will retain the full amount
13
<PAGE> 18
of the fee. Payments pursuant to the Plans are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc.
Each of the Plans may be terminated at any time by a vote of the majority of
those Trustees who are not "interested persons" of the Trust or by a vote of the
holders of the majority of the outstanding shares of the applicable class.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Fund on an agency basis, may
receive payments from the Fund pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent for the Fund in
making such payments. The Fund will obtain a representation from such financial
institutions that they will either be licensed as dealers as required under
applicable state law, or that they will not engage in activities which would
constitute acting as a "dealer" as defined under applicable state law. Financial
intermediaries and any other person entitled to receive compensation for selling
Fund shares may receive different compensation for selling shares of one class
over another.
For additional information concerning the operation of the Plans see the
Statement of Additional Information.
- --------------------------------------------------------------------------------
OTHER INFORMATION
SPECIAL SERVICING AGREEMENT. Until the Special Servicing Agreement described
below its entered into, AIM and the Sub-advisor will pay all the expenses of the
Fund, excluding service and distribution fees and certain non-recurring and
extraordinary expenses. Expenses initially paid by AIM and the Sub-advisor will
include fees and expenses of the Fund's accounting agent; legal, auditing and
accounting expenses; taxes; fees and expenses of A I M Fund Services, Inc. (the
"Transfer Agent"); fees and expenses of registering or qualifying the Fund's
shares for sale; fees and expenses of Trustees, officers and employees of the
Trust who are not affiliated with AIM or the Sub-advisor; the cost of printing
and distributing reports and notices to existing shareholders; and fees and
expenses incurred in connection with membership in investment company
organizations.
An exemptive application has been filed with the SEC requesting relief from
certain provisions of the 1940 Act to permit the Fund, AIM, the Sub-advisor, the
Underlying Theme Funds and the Transfer Agent to enter into a Special Servicing
Agreement ("Agreement"). If exemptive relief is obtained, all the Fund's
expenses except for service and distribution fees and certain non-recurring and
extraordinary expenses will be paid for in accordance with the Agreement. Under
the Agreement, to the extent that the aggregate expenses of the Fund are less
than the estimated savings to the Underlying Theme Funds from the operation of
the Fund, each Underlying Theme Fund will bear those expenses in proportion to
the average daily value of its shares owned by the Fund and/or the number of
shareholder accounts at the Fund. The estimated savings are expected to result
from the reduction of the Underlying Theme Funds' shareholder servicing costs
due to the elimination of separate shareholder accounts that either currently
are or have potential to be invested in the Underlying Theme Funds. The
estimated savings produced by the operation of the Fund may offset most, if not
all, the expenses incurred by the Fund other than service and distribution fees.
To the extent that the Fund's expenses exceed the aggregate financial benefits
to the Underlying Theme Funds, AIM and the Sub-advisor will pay that excess.
ORGANIZATION OF THE TRUST. The Trust was organized as a Delaware business
trust on May 7, 1998. On May 29, 1998, the Trust succeeded to the business of GT
Global Series Trust, a Massachusetts business trust organized on August 26,
1996. The Trust currently consists of one series. From time to time, the Trust
may establish other series, each holding a distinct investment portfolio and
issuing a distinct series of the Trust's shares of beneficial interest. Shares
of each series are entitled to one vote per share (with proportional voting for
fractional shares) and are transferable. Shareholders have no preemptive rights.
Other than the automatic conversion of Class B shares to Class A shares, there
are no conversion rights.
If any additional series of the Trust are established, on any matter submitted
to a vote of shareholders, shares of each series will be voted by its
shareholders individually when the matter affects the specific interest of that
series only, such as approval of its investment management arrangements. The
shares of the Trust's series would be voted in the aggregate on other matters,
such as the election of Trustees and ratification of the selection by the Board
of Trustees of the Trust's independent accountants.
Normally there will be no annual meeting of shareholders in any year, except
as required under the 1940 Act. Fund shares do not have cumulative voting
rights, which means that the holders of a majority of the shares voting for the
election of Trustees can elect all the Trustees. A Trustee may be removed at any
meeting of the shareholders of the Trust by a vote of the shareholders owning at
least two-thirds of the outstanding shares. Any Trustee may call a special
meeting of shareholders for any purpose. Furthermore, Trustees shall promptly
call a meeting of shareholders solely for the purpose of removing one or more
Trustees when requested in writing to do so by shareholders holding 10% of the
Trust's outstanding shares.
Pursuant to the Trust's Declaration of Trust, the Trust may issue an unlimited
number of shares of the Fund. Each share of the Fund represents an interest in
the Fund only, has a par value of $0.01 per share, represents an equal
proportionate interest in the Fund with other Fund shares and is entitled to
such dividends and other distributions out of the income earned and gain
realized on the assets belonging to the Fund as may be declared at the
discretion of the Board of Trustees. Each share of the Fund is equal in
earnings, assets and voting privileges, except that each class normally has
exclusive voting rights with respect to its distribution plan and bears the
expenses, if any, related to the distribution of its shares. Fund shares, when
issued, are fully paid and nonassessable.
LEGAL COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800 acts as counsel to the Trust and the
Fund.
14
<PAGE> 19
APPENDIX
- --------------------------------------------------------------------------------
The chart below shows the allocation of the 38 industries comprising the MSCI
to the Underlying Theme Funds as of April 30, 1998.
<TABLE>
<CAPTION>
CONSUMER
PRODUCTS AND FINANCIAL HEALTH TELE-
MSCI AC WORLD INDEX INDUSTRY SERVICES SERVICES CARE INFRASTRUCTURE RESOURCES COMMUNICATIONS
- ---------------------------- ------------ --------- ------ -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Aerospace and Military
Technology.................... X
Appliances & Household
Durables...................... X
Automobiles..................... X
Banking......................... X
Beverages & Tobacco............. X
Broadcasting & Publishing....... X X
Building Materials &
Components.................... X
Business & Public Services...... X
Chemicals....................... X
Construction & Housing.......... X
Data Processing &
Reproduction.................. X
Electrical Components,
Instruments................... X
Electrical & Electronics........ X X
Energy Equipment & Service...... X
Energy Sources.................. X
Financial Services.............. X
Food & Household Products....... X
Forest Products & Paper......... X
Gold Mines...................... X
Health & Personal Care.......... X
Industrial Components........... X
Insurance....................... X
Leisure & Tourism............... X
Machinery & Engineering......... X
Merchandising................... X
Metals -- Non Ferrous........... X
Metals -- Steel................. X
Misc. Materials & Commodities... X
Multi-Industry.................. X
Real Estate..................... X
Recreation, Consumer Goods...... X
Telecommunications.............. X X
Textiles & Apparel.............. X
Transportation -- Airlines...... X
Transportation -- Road & Rail... X
Transportation -- Shipping...... X
Utilities Electrical & Gas...... X
Wholesale & International
Trade......................... X
</TABLE>
15
<PAGE> 20
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Registered Trademark--
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM ADVISOR FLEX FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM ADVISOR INTERNATIONAL VALUE FUND AIM GLOBAL RESOURCES FUND
AIM ADVISOR LARGE CAP VALUE FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM ADVISOR MULTIFLEX FUND AIM GLOBAL TRENDS FUND
AIM ADVISOR REAL ESTATE FUND AIM GLOBAL UTILITIES FUND
AIM AGGRESSIVE GROWTH FUND AIM HIGH INCOME MUNICIPAL FUND
AIM ASIAN GROWTH FUND AIM HIGH YIELD FUND
AIM BALANCED FUND AIM INCOME FUND
AIM BASIC VALUE FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM BLUE CHIP FUND AIM INTERNATIONAL EQUITY FUND
AIM CAPITAL DEVELOPMENT FUND AIM INTERNATIONAL GROWTH FUND
AIM CHARTER FUND AIM JAPAN GROWTH FUND
AIM CONSTELLATION FUND AIM LATIN AMERICAN GROWTH FUND
AIM DEVELOPING MARKETS FUND AIM LIMITED MATURITY TREASURY FUND
AIM DOLLAR FUND(*) AIM MID CAP GROWTH FUND
AIM EMERGING MARKETS FUND AIM MONEY MARKET FUND(*)
AIM EMERGING MARKET DEBT FUND AIM MUNICIPAL BOND FUND
AIM EUROPEAN DEVELOPMENT FUND AIM NEW PACIFIC GROWTH FUND
AIM EUROPE GROWTH FUND AIM SELECT GROWTH FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM SMALL CAP EQUITY FUND
AIM GLOBAL CONSUMER PRODUCTS AND AIM SMALL CAP OPPORTUNITIES FUND
SERVICES FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM GLOBAL GOVERNMENT INCOME FUND AIM TAX-EXEMPT CASH FUND(*)
AIM GLOBAL GROWTH FUND AIM TAX-FREE INTERMEDIATE FUND
AIM GLOBAL GROWTH & INCOME FUND AIM VALUE FUND
AIM GLOBAL HEALTH CARE FUND AIM WEINGARTEN FUND
AIM GLOBAL INCOME FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
(*) Class A shares of AIM TAX-EXEMPT CASH FUND and AIM DOLLAR FUND and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND are offered to investors at net
asset value, without payment of a sales charge, as described below. Other
funds, including the Class A, Class B and Class C shares of AIM MONEY MARKET
FUND, are sold with an initial sales charge or subject to a contingent
deferred sales charge upon redemption, as described below.
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds ("AIM Funds"), an investor must submit a fully completed new Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by A I M Distributors, Inc. ("AIM
Distributors") to sell shares of the AIM Funds.
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 be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment is
$500, except for accounts initially established through an Automatic Investment
Plan, which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for an Individual Retirement Arrangement ("IRA") or Roth IRA is $250.
There are no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, Simplified Employee Pension
("SEP") accounts, Savings Incentive Match Plans for Employee IRA ("SIMPLE IRA")
accounts, 403(b) plans or 457 (state deferred compensation) plans (except that
the minimum initial investment for salary deferrals for such plans is $25 per
fund investment), or for investment of dividends and distributions of any of the
AIM Funds into any existing AIM
A-1
<PAGE> 21
Funds account. Notwithstanding the foregoing, the minimum initial investment
applicable to AIM Small Cap Opportunities Fund is $10,000.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus, as well as
Advisor Class shares of certain AIM Funds, are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his dealer should call AFS' Client Services Department
at (800) 959-4246 prior to sending a wire to receive a reference number for the
wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
HOW TO PURCHASE ADDITIONAL SHARES. Additional shares may be purchased directly
through AIM Distributors or through any dealer who has entered into an agreement
with AIM Distributors. The minimum investment for subsequent purchases is $50.
The minimum employee salary deferral investment for participants in
money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or 457 plans is
$25. Notwithstanding the foregoing, the minimum subsequent purchases of shares
of AIM Small Cap Opportunities Fund is $1,000. There are no such minimum
investment requirements for investment of dividends and distributions of any of
the AIM Funds into any other existing AIM Funds account.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional shares by electronic funds
transfer, please contact the Client Services Department of AFS for details.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE
CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND, AIM
AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BASIC
VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND,
AIM CONSTELLATION FUND, AIM DEVELOPING MARKETS FUND, AIM DOLLAR FUND, AIM
EMERGING MARKETS FUND, AIM EMERGING MARKETS DEBT FUND, AIM EUROPEAN DEVELOPMENT
FUND, AIM EUROPE GROWTH FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL SERVICES FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL GROWTH &
INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL
INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL TELECOMMUNICATIONS
FUND, AIM GLOBAL TRENDS FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH INCOME
MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM INTERNATIONAL GROWTH FUND,
AIM JAPAN GROWTH FUND, AIM LATIN AMERICAN GROWTH FUND, AIM LIMITED MATURITY
TREASURY FUND, AIM MID CAP EQUITY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL
BOND FUND, AIM NEW PACIFIC GROWTH FUND, AIM SELECT GROWTH FUND, AIM SMALL CAP
GROWTH FUND, AIM SMALL CAP OPPORTUNITIES FUND, AIM STRATEGIC INCOME FUND,AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND, AIM TAX-FREE
INTERMEDIATE FUND, AIM VALUE FUND, AIM WEINGARTEN FUND and AIM WORLDWIDE GROWTH
FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM LIMITED MATURITY
TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND
and AIM TAX-FREE INTERMEDIATE FUND), the "Multiple Class Funds," may be
purchased at their respective net asset value plus a sales charge as indicated
below, except that Class A shares of AIM DOLLAR FUND and AIM TAX-EXEMPT CASH
FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold without a
sales charge and Class B shares (the "Class B shares") and Class C shares (the
"Class C shares") of the Multiple Class Funds which offer such classes are sold
at net asset value subject to a contingent deferred sales charge payable upon
certain redemptions. Class B shares of AIM DOLLAR FUND, however, may be acquired
only by an exchange of shares of another AIM Fund. These contingent deferred
sales charges are described under the caption "How to Redeem Shares -- Multiple
Distribution System." Securities dealers and other persons entitled to receive
compensation for selling or servicing shares of a Multiple Class Fund may
receive different compensation for selling or servicing one particular class of
shares over
A-2
<PAGE> 22
another class in the same Multiple Class Fund. Factors an investor should
consider prior to purchasing Class A, Class B or Class C shares (or, if
applicable, AIM Cash Reserve Shares) of a Multiple Class Fund are described
below under "Special Information Relating to Multiple Class Funds." For
information on purchasing any of the AIM Funds and to receive a prospectus,
please call (800) 347-4246. As described below, the sales charge otherwise
applicable to a purchase of shares of a fund may be reduced if certain
conditions are met. In order to take advantage of a reduced sales charge, the
prospective investor or his dealer must advise AIM Distributors that the
conditions for obtaining a reduced sales charge have been met. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
The following Multiple Class Funds sometimes are referred to herein as the
"AIM/GT Funds": AIM AMERICA VALUE FUND, AIM DEVELOPING MARKETS FUND, AIM DOLLAR
FUND, AIM EMERGING MARKETS FUND, AIM EMERGING MARKETS DEBT FUND, AIM EUROPE
GROWTH FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL
FINANCIAL SERVICES FUND, AIM GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH &
INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL INFRASTRUCTURE FUND, AIM
GLOBAL RESOURCES FUND, AIM GLOBAL TELECOMMUNICATIONS FUND, AIM GLOBAL TRENDS
FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM LATIN AMERICAN
GROWTH FUND, AIM MID CAP GROWTH FUND, AIM NEW PACIFIC GROWTH FUND, AIM SMALL CAP
EQUITY FUND, AIM STRATEGIC INCOME FUND and AIM WORLDWIDE GROWTH FUND.
The following tables show the sales charge and dealer concession at various
investment levels for the AIM Funds.
SALES CHARGES AND DEALER CONCESSIONS
GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds include Class A shares of each of AIM ADVISOR FLEX FUND, AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, AIM AGGRESSIVE GROWTH FUND, AIM BASIC VALUE FUND, AIM ASIAN
GROWTH FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND,
AIM CONSTELLATION FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM EUROPE GROWTH FUND,
AIM GLOBAL UTILITIES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM INTERNATIONAL
EQUITY FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM MID CAP
EQUITY FUND, AIM MONEY MARKET FUND, AIM NEW PACIFIC GROWTH FUND, AIM SELECT
GROWTH FUND, AIM SMALL CAP GROWTH FUND, AIM SMALL CAP OPPORTUNITIES FUND, AIM
VALUE FUND, AIM WEINGARTEN FUND and AIM WORLDWIDE GROWTH FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION(1) PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
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
</TABLE>
- ---------------
(1) AIM Small Cap Opportunities Fund will not accept any single purchase in
excess of $250,000.
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
A-3
<PAGE> 23
GROUP II. Certain AIM Funds are currently sold with a sales charge ranging from
4.75% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds are: the Class A shares of each of AIM ADVISOR REAL ESTATE FUND, AIM
BALANCED FUND, AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM
EMERGING MARKETS DEBT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL SERVICES FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE
FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL
RESOURCES FUND, AIM GLOBAL TELECOMMUNICATIONS FUND, AIM GLOBAL TRENDS FUND, AIM
HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM LATIN AMERICAN GROWTH FUND, AIM MUNICIPAL BOND
FUND, AIM STRATEGIC INCOME FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
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
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are the Class A shares of each of AIM LIMITED MATURITY TREASURY
FUND and AIM TAX-FREE INTERMEDIATE FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
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
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million of more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to
A-4
<PAGE> 24
a contingent deferred sales charge, for all AIM Funds other than Class A shares
of each of AIM LIMITED MATURITY TREASURY FUND and AIM TAX-FREE INTERMEDIATE FUND
as follows: 1% of the first $2 million of such purchases, plus 0.80% of the next
$1 million of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in excess of $20 million of such purchases. See
"Contingent Deferred Sales Charge Program for Large Purchases." AIM Distributors
may make payments to dealers and institutions who are dealers of record for
purchases of $1 million or more of Class A shares (or shares which normally
involve payment of initial sales charges), and which are sold at net asset value
and are not subject to a contingent deferred sales charge, in an amount up to
0.10% of such purchases of Class A shares of AIM LIMITED MATURITY TREASURY FUND,
and in an amount up to 0.25% of such purchases of Class A shares of AIM TAX-FREE
INTERMEDIATE FUND.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.00% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price of the Class C
shares sold by the dealer or institution, and will consist of a sales commission
of 0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. After the first full year, AIM Distributors will make such
payments quarterly to dealers and institutions based on the average net asset
value of Class C shares which are attributable to shareholders for whom the
dealers and institutions are designated as dealers of record. These commissions
on Class C shares are not paid on sales to investors exempt from the CDSC,
including Class C shareholders of record on April 30, 1995 who purchase
additional shares in any of the Funds on or after May 1, 1995, and in
circumstances where AIM Distributors grants an exemption on particular
transactions.
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of regular trading on the New York Stock Exchange ("NYSE"), which is
generally 4:00 p.m. Eastern Time (and which is hereinafter referred to as "NYSE
Close"), on any business day of an AIM Fund will be confirmed at the price next
determined. Orders received after NYSE Close will be confirmed at the price
determined on the next business day of the AIM Fund. Certain financial
institutions (or their designees) may be authorized to accept purchase orders on
behalf of the AIM Funds. Orders received by authorized institutions (or their
designees) before NYSE Close will be deemed to have been received by an AIM Fund
on such day and will be effected that day, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. It is the responsibility of the dealer/financial institution to ensure
that all orders are transmitted on a timely basis to the Transfer Agent. Any
loss resulting from the dealer/financial institution's failure to submit an
order within the prescribed time frame will be borne by that dealer/financial
institution. Please see "How to Purchase Shares -- Purchases by Wire" for
information on obtaining a reference number for wire orders, which will
facilitate the handling of such orders and ensure prompt credit to an investor's
account. A "business day" of an AIM Fund is any day on which the NYSE is open
for business. It is expected that the NYSE will be closed during the next twelve
months on Saturdays and Sundays and on the days on which New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class Funds
currently offer two or more classes of shares through separate distribution
systems (the "Multiple Distribution System"). Although each class of shares of a
particular Multiple Class Fund represents an interest in the same portfolio of
investments, each class is subject to a different distribution structure and, as
a result, differing expenses. This Multiple Distribution System allows investors
to select the class that is best suited to the investor's needs and objectives.
In considering the options afforded by the Multiple Distribution System,
investors should consider both the applicable initial sales charge or contingent
deferred sales charge, as well as the ongoing expenses borne by each class of
shares and other relevant factors, such as whether his or her investment goals
are long-term or short-term.
CLASS A SHARES generally are sold subject to the initial sales charges
described above and are subject to the other fees and expenses described
herein. Class A shares of AIM MONEY MARKET FUND are designed to meet the
needs of an investor who wishes to establish a dollar cost averaging
program, pursuant to which Class A shares an investor owns may be exchanged
at net asset value for Class A shares of another Multiple Class Fund or
shares of another AIM Fund which is not a Multiple Class Fund, subject to
the terms and conditions described under the caption "Exchange
Privilege -- Terms and Conditions of Exchanges."
A-5
<PAGE> 25
CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Rule 12b-1 Plan payments of 1.00%
per annum on the average daily net assets of a Multiple Class Fund
attributable to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the date such shares were purchased are subject to a
contingent deferred sales charge ranging from 5% for redemptions made
within the first year to 1% for redemptions made within the sixth year. No
contingent deferred sales charge will be imposed if Class B shares are
redeemed after six years from the date such shares were purchased.
Redemptions of Class B shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and other distributions)
eight years from the end of the calendar month in which the purchase of
Class B shares was made. Class B shares of AIM GLOBAL TRENDS FUND that were
outstanding on May 29, 1998 and which are continuously held by the
shareholder, automatically convert to Class A shares of AIM GLOBAL TRENDS
FUND seven years from the end of the calendar month in which the purchase
of such Class B shares was made. If a shareholder exchanges Class B shares
of AIM GLOBAL TRENDS FUND that were outstanding on, and continuously held
since, May 29, 1998 for Class B shares of any other AIM Fund, such Class B
shares will be subject to the eight year conversion feature applicable to
Class B shares of all other AIM Funds. Following such conversion of their
Class B shares, investors will be relieved of the higher Rule 12b-1 Plan
payments associated with Class B shares. See "Management -- Distribution
Plans."
AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold without an
initial sales charge and are not subject to a contingent deferred sales
charge; however, they are subject to the other fees and expenses described
in the prospectus for AIM MONEY MARKET FUND.
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon Eastern Time or NYSE Close on any
business day of the Fund will be confirmed at the price next determined. Net
asset value is normally determined at 12:00 noon Eastern Time and NYSE Close on
each business day of AIM MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO AIM MONEY MARKET FUND, AIM TAX-EXEMPT CASH
FUND and AIM DOLLAR FUND (THE "MONEY MARKET FUNDS"). Because each Money Market
Fund uses the amortized cost method of valuing the securities it holds and
rounds its per share net asset value to the nearest whole cent, it is
anticipated that the net asset value of the shares of such funds will remain
constant at $1.00 per share. However, there is no assurance that each Money
Market Fund can maintain a $1.00 net asset value per share. In order to earn
dividends with respect to AIM MONEY MARKET FUND on the same day that a purchase
is made, purchase payments in the form of federal funds must be received by the
Transfer Agent before 12:00 noon Eastern Time on that day. Purchases made by
payments in any other form, or payments in the form of federal funds received
after such time but prior to NYSE Close, will begin to earn dividends on the
next business day following the date of purchase. The Money Market Funds
generally will not issue share certificates but will record investor holdings in
noncertificate form and regularly advise the shareholder of his ownership
position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of Class A shares of the AIM Funds that
are otherwise subject to an initial sales charge, provided that such purchases
are made by a "purchaser" as hereinafter defined. Purchases of Class A shares of
AIM TAX-EXEMPT CASH FUND and AIM DOLLAR FUND, AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and Class B and Class C shares of the Multiple Class Funds
will not be taken into account in determining whether a purchase qualifies for a
reduction in initial sales charges.
A-6
<PAGE> 26
The term "purchaser" means:
- an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, Roth IRA, a single-participant
money-purchase/profit-sharing plan or an individual participant in a 403(b)
plan (unless such 403(b) plan qualifies as the purchaser as defined below);
- a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
- a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
- a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP"), or Savings Incentive Match
Plans for Employees IRA ("SIMPLE IRA") where the employer has notified AIM
Distributors in writing that all of its related employee SEP, SARSEP or
SIMPLE IRA accounts should be linked;
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
- the discretionary advised accounts of A I M Advisors, Inc. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge provided herein.
(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for (i) Class A
shares of AIM DOLLAR FUND, AIM TAX-EXEMPT CASH FUND, and AIM Cash Reserve Shares
of AIM MONEY MARKET FUND and (ii) Class B and Class C shares of the Multiple
Class Funds) within the following 13 consecutive months. By marking the LOI
section on the account application and by signing the account application, the
purchaser indicates that he understands and agrees to the terms of the LOI and
is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gain distributions
will not be applied to the LOI. At any time during the 13-month period after
meeting the original obligation, a purchaser may revise his intended investment
amount upward by submitting a written and signed request. Such a revision will
not change the original expiration date. By signing an LOI, a purchaser is not
making a binding commitment to purchase additional shares, but if purchases made
within the 13-month period do not total the amount specified, the investor will
pay the increased amount of sales charge as described below. Purchases made
within 90 days before signing an LOI will be applied toward completion of the
LOI. The LOI effective date will be the date of the first purchase with the
90-day period. The Transfer Agent will process necessary adjustments upon the
expiration or completion date of the LOI. Purchases made more than 90 days
before signing an LOI will be applied toward completion of the LOI based on the
value of the shares purchased calculated at the public offering price on the
effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
A-7
<PAGE> 27
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
Any investor who purchased shares of the AIM/GT Funds pursuant to a LOI
entered into prior to June 1, 1998 may continue to make such purchases under the
terms of such LOI. See "How to Purchase and Redeem Shares" in the Statement of
Additional Information.
(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM DOLLAR FUND, AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and (ii) Class B and Class C shares of the Multiple Class
Funds) at the time of the proposed purchase. Rights of accumulation are also
available to holders of the Connecticut General Guaranteed Account, established
for tax-qualified group annuities, for contracts purchased on or before June 30,
1992. To determine whether or not a reduced initial sales charge applies to a
proposed purchase, AIM Distributors takes into account not only the money which
is invested upon such proposed purchase, but also the value of all shares of the
AIM Funds (except for (i) Class A shares of AIM DOLLAR FUND, AIM TAX-EXEMPT CASH
FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND and (ii) Class B and
Class C shares of the Multiple Class Funds) owned by such purchaser, calculated
at their then current public offering price. If a purchaser so qualifies for a
reduced sales charge, the reduced sales charge applies to the total amount of
money then being invested by such purchaser and not just to the portion that
exceeds the breakpoint above which a reduced sales charge applies. For example,
if a purchaser already owns qualifying shares of any AIM Fund with a value of
$20,000 and wishes to invest an additional $20,000 in a fund with a maximum
initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will
apply to the full $20,000 purchase and not just to the $15,000 in excess of the
$25,000 breakpoint. To qualify for obtaining the discount applicable to a
particular purchase, the purchaser or his dealer must furnish AFS with a list of
the account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and other distributions from
a fund (see "Dividends, Distributions and Tax Matters"); (b) exchanges of shares
of certain other funds (see "Exchange Privilege"); (c) use of the reinstatement
privilege (see "How to Redeem Shares"); or (d) a merger, consolidation or
acquisition of assets of a fund.
Shareholders of record of Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
shares of the particular AIM Fund(s) whose shares they owned on such date, at
net asset value (without payment of a sales charge) for as long as they
continuously own Class A shares of such AIM Fund(s) having a market value of at
least $500. In addition, discretionary advised clients of any investment
advisors whose clients held Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A shares of the applicable AIM
Fund(s) at the net asset value of such shares.
The following persons may purchase Class A shares of the AIM Funds through AIM
Distributors without payment of an initial sales charge: (a) A I M Management
Group Inc. ("AIM Management") and its affiliated companies; (b) any current or
retired officer, director, trustee or employee, or any member of the immediate
family (including spouse, children, parents and parents of spouse) of any such
person, of AIM Management or its affiliates or of certain mutual funds which are
advised or managed by AIM; or any trust established exclusively for the benefit
of such persons; (c) any employee benefit plan established for employees of AIM
Management or its affiliates; (d) any current or retired officer, director,
trustee or employee, or any member of the immediate family (including spouse,
children, parents and parents of spouse) of any such person, or of CIGNA
Corporation or of any of its affiliated companies, or of First Data Investor
Services Group (formerly The Shareholder Services Group, Inc.); (e) any
investment company sponsored by CIGNA Investments, Inc. or any of its affiliated
companies for the benefit of its directors' deferred compensation plans; (f)
discretionary advised clients of AIM or AIM Capital; (g) registered
representatives and employees of dealers who have entered into agreements with
AIM Distributors (or financial institutions that have arrangements with such
dealers with respect to the sale of shares of the AIM Funds) and any member of
the immediate family (including spouse, children, parents and parents of spouse)
of any such person, provided that purchases at net asset value are permitted by
the policies of such person's employer; (h) certain broker-dealers, investment
advisers or bank trust departments that provide asset allocation, similar
specialized investment services or investment company transaction services for
their customers, that charge a minimum annual fee for such services, and that
have entered into an agreement with AIM Distributors with respect to their use
of the AIM Funds in connection with such services; (i) any employee or any
member of the immediate family (including spouse, children, parents and parents
of spouse) of any employee, of Triformis Inc.; (j) shareholders of the AIM/GT
Funds as of April 30, 1987 who since that date continually have owned shares of
one or more of the AIM/GT Funds; and (k) 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 AIM/GT Funds since
that time.
In addition, shares of any AIM Fund (except AIM Small Cap Opportunities Fund)
may be purchased at net asset value, without payment of a sales charge, by
pension, profit-sharing or other employee benefit plans created pursuant to a
plan qualified under Section 401 of the Code or plans under Section 457 of the
Code, or employee benefit plans created pursuant to Section 403(b) of the
A-8
<PAGE> 28
Code and sponsored by nonprofit organizations defined under Section 501(c)(3) of
the Code. Such plans will qualify for purchases at net asset value provided that
(1) the total amount invested in the plan is at least $1,000,000, (2) the
sponsor signs a $1,000,000 LOI, (3) such shares are purchased by an
employer-sponsored plan with at least 100 eligible employees, or (4) all of the
plan's transactions are executed through a single financial institution or
service organization who has entered into an agreement with AIM Distributors
with respect to their use of the AIM Funds in connection with such accounts.
Section 403(b) plans sponsored by public educational institutions will not be
eligible for net asset value purchases based on the aggregate investment made by
the plan or the number of eligible employees. Participants in such plans will be
eligible for reduced sales charges based solely on the aggregate value of their
individual investments in the applicable AIM Fund. PLEASE NOTE THAT TAX-EXEMPT
FUNDS ARE NOT APPROPRIATE INVESTMENTS FOR SUCH PLANS. AIM Distributors may pay
investment dealers or other financial service firms for share purchases of the
Load Funds (as defined under the caption "Exchange Privilege") sold at net asset
value to an employee benefit plan in accordance with this paragraph as follows:
1% of the first $2 million of such purchases, plus 0.80% of the next $1 million
of such purchases, plus 0.50% of the next $17 million of such purchases, plus
0.25% of amounts in excess of $20 million of such purchases and up to 0.10% of
the net asset value of any Class A shares of AIM LIMITED MATURITY TREASURY FUND
sold at net asset value to an employee benefit plan in accordance with this
paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A shares of such funds may also be purchased at net asset
value by other unit investment trusts approved by the Board of Directors of AIM
Equity Funds, Inc. Unit holders of such trusts may elect to invest cash
distributions from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND at net asset value, including: (a) distributions of any
dividend income or other income received by such trusts; (b) distributions of
any net capital gains received in respect of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sales of Class A shares of
AIM WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such
trusts; and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided: (a) that the investment in Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND is effected within 30 days of such
redemption or repurchase; and (b) that the unit holder or his dealer provides
AIM Distributors with a letter which: (i) identifies the name, address and
telephone number of the dealer who sold to the unit holder the units to be
redeemed or repurchased; and (ii) states that the investment in Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND is being funded exclusively by
the proceeds from the redemption or repurchase of units of such trusts.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns shares which are not subject to a contingent deferred sales charge, can
arrange for monthly, quarterly or annual amounts (but not less than $50) to be
drawn against the balance of his account in the designated AIM Fund.
Shareholders who own shares subject to a contingent deferred sales charge, can
only arrange for monthly or quarterly withdrawals under a Systematic Withdrawal
Plan. Payment of this amount can be made on any day of the month the shareholder
specifies, except the thirtieth or thirty-first day of each month in which a
payment is to be made. A minimum account balance of $5,000 is required to
establish a Systematic Withdrawal Plan, but there is no requirement thereafter
to maintain any minimum investment. With respect to shares subject to a
contingent deferred sales charge (all classes) no contingent deferred sales
charge will be imposed on withdrawals made under a Systematic Withdrawal Plan,
provided that the amounts withdrawn under such a plan do not exceed on an annual
basis 12% of the account value at the time the shareholder elects to participate
in the Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to
shares subject to a contingent deferred sales charge that
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<PAGE> 29
exceed on an annual basis 12% of such account will be subject to a contingent
deferred sales charge on the amounts exceeding 12% of the account value at the
time the shareholder elects to participate in the Systematic Withdrawal Plan.
Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested to shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic Withdrawal Plan, the Transfer Agent redeems sufficient full
and fractional shares at their net asset value in effect at the time of each
such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C shares of the Multiple Class Funds, and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND), it is disadvantageous to effect such
purchases while a Systematic Withdrawal Plan is in effect.
The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make regular systematic
investments may establish an Automatic Investment Plan. Under this plan
withdrawal is made on the shareholder's bank account in the amount specified by
the shareholder (minimum $50 per investment, per account) and on a day or
date(s) specified by the shareholder. The proceeds are invested in shares of the
designated AIM Fund at the applicable offering price determined on the date of
the withdrawal. An Automatic Investment Plan may be discontinued upon 10 days'
prior notice to the Transfer Agent or AIM Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; dividends and distributions attributable to Class C
shares may be reinvested in Class C shares of the same fund or in Class C shares
of another Multiple Class Fund; and dividends and distributions attributable to
AIM Cash Reserve Shares of AIM MONEY MARKET FUND may be reinvested in additional
shares of such fund, in Class A shares of another Multiple Class Fund or in
shares of another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" for a description
of payment dates for these options. In order to qualify to have dividends and
distributions of one AIM Fund invested in shares of another AIM Fund, the
following conditions must be satisfied: (a) the shareholder must have an account
balance in the dividend paying fund of at least $5,000; (b) the account must be
held in the name of the shareholder (i.e., the account may not be held in
nominee name); and (c) the shareholder must have requested and completed an
authorization relating to the reinvestment of dividends into another AIM Fund.
An authorization may be given on the account application or on an authorization
form available from AIM Distributors. An AIM Fund will waive the $5,000 minimum
account value requirement if the shareholder has an account in the fund selected
to receive the dividends and distributions with a value of at least $500.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." The account from
which exchanges are to be made must have a value of at least $5,000 when a
shareholder elects to begin this program, and the exchange minimum is $50 per
transaction. All of the accounts that are part of this program must have
identical registrations. The net asset value of shares purchased under this
program may vary, and may be more or less advantageous than if shares were not
exchanged automatically. There is no charge for entering the Dollar Cost
Averaging program. Sale charges may apply, as described under the caption
"Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM
TAX-EXEMPT CASH FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the
following prototype retirement plans available to corporations, individuals and
employees of non-profit organizations and public schools: combination
money-purchase/profit-sharing plans; 403(b) plans; IRA plans; Roth IRA plans;
SARSEP plans; SEP plans; and SIMPLE IRA plans (collectively, "retirement
accounts"). Information concerning these plans, including the custodian's fees
and the forms necessary to adopt such plans, can be obtained by calling or
writing the AIM Funds or AIM Distributors. Shares of the AIM Funds are also
available for investment through existing 401(k) plans (for both individuals and
employers) adopted under the Code. The plan custodian currently imposes an
annual $10 maintenance fee with respect to each retirement account for which it
serves as the custodian. This fee is generally charged in December. Each AIM
Fund and/or the custodian reserve the right to change this maintenance fee and
to initiate an establishment fee (not to exceed its cost).
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of AIM Funds. The Program
automatically rebalances holdings of AIM Funds to the established allocation on
a periodic basis. Under the Program, a shareholder may predesig-
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<PAGE> 30
nate, on a percentage basis, how the total value of his or her holdings in a
minimum of two, and a maximum of ten, AIM Funds ("Personal Portfolio") is to be
rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more AIM Funds in the shareholder's Personal Portfolio for shares of
the same class(es) of one or more other AIM Funds in the shareholder's Personal
Portfolio. See "Exchange Privilege." If shares of the AIM Fund(s) in a
shareholder's Personal Portfolio have appreciated during a rebalancing period,
the Program will result in shares of AIM Fund(s) that have appreciated most
during the period being exchanged for shares of AIM Fund(s) that have
appreciated least. SUCH EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A
SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE MAY BE, FOR FEDERAL INCOME
TAX PURPOSES. See "Dividends, Distributions and Tax Matters -- Dividends and
Distributions." Participation in the Program does not assure that a shareholder
will profit from purchases under the Program nor does it prevent or lessen
losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular AIM Fund would be 2% or less.
In predesignating percentages, shareholders must use whole percentages and
totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an AIM Fund's shares. The
AIM Funds and AIM Distributors reserve the right to modify, suspend, or
terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which AIM Funds
or what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Shareholders participating in
the Program may also participate in the Right of Accumulation, LOI, and
Automatic Investment Plan. Certain dealers/financial institutions may charge a
fee for establishing accounts relating to the Program. Investors should contact
their dealers/financial institutions or AIM Distributors for more information.
A-11
<PAGE> 31
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange 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. AIM Distributors acts as distributor for the AIM Funds
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds, listed below
and referred to herein as the "Load Funds," are sold at a public offering price
that includes a maximum sales charge of 5.50% or 4.75% of the public offering
price of such shares; Class A shares (or shares which normally involve the
payment of initial sales charges) of certain of the AIM Funds, listed below and
referred to herein as the "Lower Load Funds," are sold at a public offering
price that includes a maximum sales charge of 1.00% of the public offering price
of such shares; and Class A shares or shares of certain other funds, listed
below and referred to herein as the "No Load Funds," are sold at net asset
value, without payment of a sales charge.
<TABLE>
<S> <C> <C>
LOAD FUNDS: LOWER LOAD FUNDS:
AIM ADVISOR FLEX FUND -- AIM GLOBAL INCOME AIM LIMITED MATURITY TREASURY FUND
CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR INTERNATIONAL AIM GLOBAL INFRASTRUCTURE AIM TAX-FREE INTERMEDIATE FUND
VALUE FUND -- CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR LARGE CAP AIM GLOBAL RESOURCES NO LOAD FUNDS:
VALUE FUND -- CLASS A FUND -- CLASS A
AIM ADVISOR MULTIFLEX AIM GLOBAL TELECOMMUNICATIONS AIM MONEY MARKET FUND
FUND -- CLASS A FUND -- CLASS A -- AIM CASH RESERVE SHARES
AIM ADVISOR REAL ESTATE AIM GLOBAL TRENDS AIM TAX-EXEMPT CASH FUND -- CLASS A
FUND -- CLASS A FUND -- CLASS A AIM DOLLAR FUND -- CLASS A
AIM AGGRESSIVE GROWTH AIM GLOBAL UTILITIES
FUND -- CLASS A FUND -- CLASS A
AIM ASIAN GROWTH AIM HIGH INCOME MUNICIPAL
FUND -- CLASS A FUND -- CLASS A
AIM BALANCED FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A
AIM BASIC VALUE AIM INCOME FUND -- CLASS A
FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT
AIM BLUE CHIP FUND -- CLASS A FUND -- CLASS A
AIM CAPITAL DEVELOPMENT AIM INTERNATIONAL EQUITY
FUND -- CLASS A FUND -- CLASS A
AIM CHARTER FUND -- CLASS A AIM INTERNATIONAL GROWTH
AIM CONSTELLATION FUND -- CLASS A
FUND -- CLASS A AIM JAPAN GROWTH FUND -- CLASS A
AIM DEVELOPING MARKETS AIM LATIN AMERICAN GROWTH
FUND -- CLASS A FUND -- CLASS A
AIM EMERGING MARKETS AIM MID CAP EQUITY
FUND -- CLASS A FUND -- CLASS A
AIM EMERGING MARKETS DEBT AIM MONEY MARKET
FUND -- CLASS A FUND -- CLASS A
AIM EUROPE GROWTH AIM MUNICIPAL BOND
FUND -- CLASS A FUND -- CLASS A
AIM EUROPEAN DEVELOPMENT AIM NEW PACIFIC GROWTH
FUND -- CLASS A FUND -- CLASS A
AIM GLOBAL AGGRESSIVE GROWTH AIM SELECT GROWTH FUND -- CLASS A
FUND -- CLASS A AIM SMALL CAP GROWTH
AIM GLOBAL CONSUMER PRODUCTS FUND -- CLASS A
AND SERVICES FUND -- CLASS A AIM SMALL CAP OPPORTUNITIES
AIM GLOBAL FINANCIAL SERVICES FUND -- CLASS A
FUND -- CLASS A AIM STRATEGIC INCOME
AIM GLOBAL GOVERNMENT INCOME FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM GLOBAL GROWTH OF CONNECTICUT -- CLASS A
FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM GLOBAL GROWTH & AIM WEINGARTEN FUND -- CLASS A
INCOME FUND -- CLASS A AIM WORLDWIDE GROWTH
AIM GLOBAL HEALTH CARE FUND -- CLASS A
FUND -- CLASS A
</TABLE>
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<PAGE> 32
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund on
the terms described on the chart below, except that (i) Load Fund share
purchases of $1,000,000 or more which are subject to a contingent deferred sales
charge may not be exchanged for Lower Load Funds or for AIM TAX-EXEMPT CASH FUND
(AND CLASS A SHARES OF AIM DOLLAR FUND); (II) LOWER LOAD FUND SHARE PURCHASES OF
$1,000,000 OR MORE AND AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND, AIM
TAX-EXEMPT CASH FUND AND AIM DOLLAR FUND PURCHASES MAY BE EXCHANGED FOR LOAD
FUND SHARES IN AMOUNTS OF $1,000,000 OR MORE WHICH WILL THEN BE SUBJECT TO A
CONTINGENT DEFERRED SALES CHARGE; HOWEVER, FOR PURPOSES OF CALCULATING THE
CONTINGENT DEFERRED SALES CHARGES ON THE LOAD FUND SHARES ACQUIRED, THE 18-MONTH
PERIOD SHALL BE COMPUTED FROM THE DATE OF SUCH EXCHANGE; (iii) Class A shares
may be exchanged for Class A shares; (iv) Class B shares may be exchanged only
for Class B shares; (v) Class C shares may only be exchanged for Class C shares;
and (vi) AIM Cash Reserve Shares of AIM MONEY MARKET FUND may not be exchanged
for Class A, Class B or Class C shares of AIM MONEY MARKET FUND. Class C shares
of AIM Small Cap Opportunities Fund are currently not available.
DEPENDING UPON THE FUND FROM WHICH AND INTO WHICH AN EXCHANGE IS BEING MADE,
SHARES BEING ACQUIRED IN AN EXCHANGE MAY BE ACQUIRED AT THEIR OFFERING PRICE OR
AT THEIR NET ASSET VALUE (WITHOUT PAYMENT OF A SALES CHARGE) AS SET FORTH IN THE
TABLE BELOW FOR SHARES INITIALLY PURCHASED PRIOR TO MAY 1, 1994:
<TABLE>
<CAPTION>
MULTIPLE CLASS FUNDS:
LOWER LOAD NO LOAD ------------------------------
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B CLASS C
----- -------------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load Funds.. Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund or any Fund or any Lower Load
Lower Load Fund. Fund; otherwise,
Offering Price.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load Funds.. Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable Not Applicable
acquired upon exchange of any
Load Fund. Otherwise, difference
in sales charge will apply.
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund. Fund or any Lower Load
Difference in sales charge will Fund; otherwise,
apply if No Load shares were Offering Price.
acquired upon exchange of Lower
Load Fund shares.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
Class C........ Not Applicable Not Applicable Not Applicable Not Applicable Net Asset Value
</TABLE>
An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A, Class B and Class C shares of a Multiple Class Fund
cannot be exchanged for each other) except that AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may be exchanged for Class A shares of another Multiple Class
Fund; (b) the dollar amount of the exchange must be at least equal to the
minimum investment applicable to the shares of the fund acquired through such
exchange; (c) the shares of the fund acquired through exchange must be qualified
for sale in the state in which the shareholder resides; (d) the exchange must be
made between accounts having identical registrations and addresses; (e) the full
amount of the purchase price for the shares being exchanged must have already
been received by the fund; (f) the account from which shares have been exchanged
must be coded as having a certified taxpayer identification number on file or,
in the alternative, an appropriate IRS Form W-8 (certificate of foreign status)
or Form W-9 (certifying exempt status) must have been received by the fund; (g)
newly acquired shares (through either an initial or subsequent investment) are
held in an account for at least ten busi-
A-13
<PAGE> 33
ness days, and all other shares are held in an account for at least one day,
prior to the exchange; and (h) certificates representing shares must be returned
before shares can be exchanged. There is no fee for exchanges among the AIM
Funds.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received after NYSE Close will result in the redemption of shares at their net
asset value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. Normally, shares of an AIM Fund to be acquired
by exchange are purchased at their net asset value or applicable offering price,
as the case may be, determined on the date that such request is received, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is determined that a fund would be materially disadvantaged
by an immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into a fund paying daily dividends (See "Dividends, Distributions and
Tax Matters -- Dividends and Distributions," below), 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. Shares purchased by check may not be exchanged until it is determined
that the check has cleared, which may take up to ten business days from the date
that the check is received. See "Terms and Conditions of Purchase of the AIM
Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AFS. The request should contain 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. The
request should comply with all of the requirements for redemption by mail,
except those required for redemption of IRAs. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AFS at (800) 959-4246. If a shareholder is unable to reach
AFS by telephone, he may also request exchanges by telegraph or use overnight
courier services to expedite exchanges by mail, which will be effective on the
business day received by the Transfer Agent as long as such request is received
prior to NYSE Close. The Transfer Agent and AIM Distributors will not be liable
for any loss, expense or cost arising out of any telephone exchange request that
they reasonably believe to be genuine, but 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.
EXCHANGES OF CLASS B AND CLASS C SHARES. A contingent deferred sales charge
will not be imposed in connection with exchanges among Class B or Class C
shares. For purposes of determining a shareholder's holding period of Class B or
Class C shares in the calculation of the applicable contingent deferred sales
charge, the period of time during which Class B or Class C shares were held
prior to an exchange will be added to the holding period of the applicable Class
B or Class C shares acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. Although
a contingent deferred sales charge may be applicable to certain redemptions as
described below, there is no redemption fee imposed when shares are redeemed or
repurchased; however, dealers may charge service fees for handling repurchase
transactions.
A-14
<PAGE> 34
MULTIPLE DISTRIBUTION SYSTEM. Class B Shares. Class B shares purchased under
the Multiple Distribution System may be redeemed on any business day of a
Multiple Class Fund at the net asset value per share next determined following
receipt of the redemption order, as described under the caption "Timing and
Pricing of Redemption Orders," less the applicable contingent deferred sales
charge shown in the table below. No deferred sales charge will be imposed (i) on
redemptions of Class B shares following six years from the date such shares were
purchased, (ii) on Class B shares acquired through reinvestments of dividends
and distributions attributable to Class B shares or (iii) on amounts that
represent capital appreciation in the shareholder's account above the purchase
price of the Class B shares.
<TABLE>
<CAPTION>
YEARS CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
- -------- -------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and other distributions; third, of shares
held for more than six years from the date such shares were purchased; and
fourth, of shares held less than six years from the date such shares were
purchased. The applicable sales charge will be applied against the lesser of the
current market value of shares redeemed or their original cost.
Class B shares that are acquired during a tender offer by AIM Floating Rate
Fund ("Floating Rate Fund") pursuant to an exchange will be subject, in lieu of
the contingent deferred sales charge described above, to a contingent deferred
sales charge equivalent to the early withdrawal charge on the shares of the
Floating Rate Fund. For purposes of computing such early withdrawal charge, the
holding period of Class B shares being redeemed will include the holding period
of the Floating Rate Fund shares prior to exchange.
Class C Shares. Class C shares purchased under the Multiple Distribution
System may be redeemed on any business day of a Multiple Class Fund at the net
asset value per share next determined following receipt of the redemption order,
as described under the caption "Timing and Pricing of Redemption Orders," less a
1% contingent deferred sales charge. No deferred sales charge will be imposed
(i) on redemptions of Class C shares following one year from the date such
shares were purchased; (ii) on Class C shares acquired through reinvestment of
dividends and distributions attributable to Class C shares; (iii) on amounts
that represent capital appreciation in the shareholder's account above the
purchase price of the Class C shares; (iv) on redemptions of additional
purchases of shares of AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE
FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, and AIM
ADVISOR REAL ESTATE FUND, by shareholders of record on April 30, 1995 of these
funds (shareholders whose broker/dealers maintain a single omnibus account with
the Transfer Agent 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).
Waivers. Contingent deferred sales charges on Class B and Class C shares will
be waived on redemptions (1) following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust (provided AIM Distributors is notified of such death or
post-purchase disability at the time of the redemption request and is provided
with satisfactory evidence of such death or post-purchase disability), (2) in
connection with certain distributions from IRAs, custodial accounts maintained
pursuant to Code Section 403(b), deferred compensation plans qualified under
Code Section 457 and plans qualified under Code Section 401 (collectively,
"Retirement Plans"), (3) pursuant to a Systematic Withdrawal Plan, provided that
amounts withdrawn under such plan do not exceed on an annual basis 12% of the
value of the shareholder's investment in Class B or Class C shares at the time
the shareholder elects to participate in the Systematic Withdrawal Plan, (4)
effected pursuant to the right of a Multiple Class Fund to liquidate a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the designated minimum account size described in the
prospectus of such Multiple Class Fund, (5) effected by AIM of its investment in
Class B or Class C shares and (6) of Class C shares where such investor's dealer
of record, due to the nature of the investor's account, notifies AIM
Distributors prior to the time of investment that the dealer waives the payment
otherwise payable to the dealer described in the last paragraph under the
caption "Terms and Conditions of Purchase of the AIM Funds -- All Groups of AIM
Funds."
Waiver category (1) above applies only to redemptions of Class B or Class C
shares held at the time of death or initial determination of post-purchase
disability.
Waiver category (2) above applies only to redemptions resulting 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 which does not exceed 12% annually of the
participant's or beneficiary's account value in a particular AIM Fund;
A-15
<PAGE> 35
(ii) in-kind transfers of assets where the participant or beneficiary
notifies AIM Distributors of such transfer no later than the time such
transfer occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement
Plan invested in Class B or Class C shares of one or more Multiple Class
Funds;
(iv) tax-free returns of excess contributions or returns of excess
deferral amounts; and
(v) distributions upon the death or disability (as defined in the
Code) of the participant or beneficiary.
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B and Class C shares of a Multiple Class Fund and purchases
of shares of the No Load Funds and Lower Load Funds, A CONTINGENT DEFERRED SALES
CHARGE OF 1% APPLIES TO PURCHASES OF $1,000,000 OR MORE THAT ARE REDEEMED WITHIN
18 MONTHS OF THE DATE OF PURCHASE. For a description of the AIM Funds
participating in the program, see "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions." This charge will be 1% of the
lesser of the value of the shares redeemed (excluding reinvested dividends and
capital gains distributions) or the total original cost of such shares. In
determining whether a contingent deferred sales charge is payable, and the
amount of any such charge, shares not subject to the contingent deferred sales
charge are redeemed first (including shares purchased by reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-MONTH PERIOD, (i) shares of any
Load Fund or AIM Cash Reserve shares of AIM MONEY MARKET FUND or Class A shares
of AIM DOLLAR FUND which were acquired through an exchange of shares which
previously were subject to the 1% contingent deferred sales charge will be
credited with the period of time such exchanged shares were held, and (ii)
shares of any Load Fund which are subject to the 1% contingent deferred sales
charge and which were acquired through an exchange of shares of a Lower Load or
a No Load Fund which previously were not subject to the 1% contingent deferred
sales charge will not be credited with the period of time such exchanged shares
were held. The charge will be waived in the following circumstances: (l)
redemptions of shares by employee benefit plans ("Plans") qualified under
Sections 401 or 457 of the Code, or Plans created under Section 403(b) of the
Code and sponsored by nonprofit organizations as defined under Section 501(c)(3)
of the Code, where shares are being redeemed in connection with employee
terminations or withdrawals, and (a) the total amount invested in a Plan is at
least $1,000,000, (b) the sponsor of a Plan signs a letter of intent to invest
at least $1,000,000 in one or more of the AIM Funds, or (c) the shares being
redeemed were purchased by an employer-sponsored Plan with at least 100 eligible
employees; provided, however, that Plans created under Section 403(b) of the
Code which are sponsored by public educational institutions shall qualify under
(a), (b) or (c) above on the basis of the value of each Plan participant's
aggregate investment in the AIM Funds, and not on the aggregate investment made
by the Plan or on the number of eligible employees; (2) redemptions of shares
following the death or post-purchase disability, as defined in Section 72(m)(7)
of the Code, of a shareholder or a settlor of a living trust; (3) redemptions of
shares purchased at net asset value by private foundations or endowment funds
where the initial amount invested was at least $1,000,000; (4) redemptions of
shares purchased by an investor in amounts of $1,000,000 or more where such
investor's dealer of record, due to the nature of the investor's account,
notifies AIM Distributors prior to the time of investment that the dealer waives
the payments otherwise payable to the dealer as described in the third paragraph
under the caption "Terms and Conditions of Purchase of the AIM Funds -- All
Groups of AIM Funds;" and (5) pursuant to a Systematic Withdrawal Plan, provided
that amounts withdrawn under such plan do not exceed on an annual basis 12% of
the value of the shareholder's investment in Class A shares at the time the
shareholder elects to participate in the Systematic Withdrawal Plan.
Shareholders who purchased $500,000 or more of Class A shares of the AIM/GT
Funds prior to June 1, 1998 are entitled to certain waivers of the contingent
deferred sales charge on those shares as described in the Statement of
Additional Information under "How to Purchase and Redeem Shares."
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
In addition to these requirements, shareholders who have invested in a fund to
establish as IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares; (a) a statement
as to whether or not the shareholder has attained age 59 1/2, and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.
A-16
<PAGE> 36
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
this account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but 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 taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
EXPEDITED REDEMPTIONS (AIM Cash Reserve shares of AIM MONEY MARKET FUND
ONLY). If a redemption order is received prior to 11:30 a.m. Eastern Time, the
redemption will be effective on that day and AIM MONEY MARKET FUND will endeavor
to transmit payment on that same business day. If the redemption order is
received after 11:30 a.m. and prior to NYSE Close, the redemption will be made
at the next determined net asset value and payment will generally be transmitted
on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and Class A shares of AIM DOLLAR FUND). After completing the
appropriate authorization form, shareholders may use checks to effect
redemptions from AIM TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM MONEY
MARKET FUND and Class A shares of AIM DOLLAR FUND. This privilege does not apply
to retirement accounts or qualified plans. Checks may be drawn in any amount of
$250 or more. Checks drawn against insufficient shares in the account, against
shares held less than ten business days, or in amounts of less than the
applicable minimum will be returned to the payee. The payee of the check may
cash or deposit it in the same way as an ordinary bank check. When a check is
presented on the Transfer Agent for payment, the Transfer Agent will cause a
sufficient number of shares of such fund to be redeemed to cover the amount of
the check. Shareholders are entitled to dividends on the shares redeemed through
the day on which the check is presented to the Transfer Agent for payment.
TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds
(other than AIM MONEY MARKET FUND) are redeemed at their net asset value next
computed after a request for redemption in proper form (including signature
guarantees and other required documentation for written redemptions) is received
by the Transfer Agent or certain financial institutions (or their designees) who
are authorized to accept redemption orders on behalf of the AIM Funds, provided
that such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders, except that shares that are subject to a contingent
deferred sales charge, may be subject to the imposition of deferred sales
charges that will be deducted from the redemption proceeds. See "Multiple
Distribution System" and "Contingent Deferred Sales Charge Program for Large
Purchases." Orders for the redemption of shares received in proper form prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer/financial institution to
ensure that all orders are transmitted on a timely basis. Any resulting loss
from the dealer/financial institution's failure to submit a request for
redemption within the prescribed time frame will be borne by that
dealer/financial institution. Telephone redemption requests must be made by NYSE
Close on any business day of an AIM Fund and will be confirmed at the price
determined as of the close of that day. No AIM Fund will accept requests which
specify a particular date for redemption or which specify any special
conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone
A-17
<PAGE> 37
exchange and telephone redemption authorization forms; (7) changes in previously
designated wiring or electronic funds transfer instructions, and (8) written
redemptions or exchanges of shares previously reported as lost, whether or not
the redemption amount is under $50,000 or the proceeds are to be sent to the
address of record. These requirements may be waived or modified upon notice to
shareholders.
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 in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the NYSE Medallion Signature Program,
provided that in either event, the amount of the transaction involved does not
exceed the surety coverage amount indicated on the medallion. For information
regarding whether a particular institution or organization qualifies as an
"eligible guarantor institution," an investor should contact the Client Services
Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY). Within ninety (90) days of a
redemption, a shareholder may invest all or part of the redemption proceeds in
Class A shares of any AIM Fund at the net asset value next computed after
receipt by the Transfer Agent of the funds to be reinvested; provided, however,
if the redemption was made from Class A shares of either AIM LIMITED MATURITY
TREASURY FUND or AIM TAX-FREE INTERMEDIATE FUND, the reinvested proceeds will be
subject to the difference in sales charge between the shares redeemed and the
shares the proceeds are reinvested in. The shareholder must ask the Transfer
Agent for such privilege at the time of reinvestment. A realized gain on the
redemption is taxable, and reinvestment will not alter the taxes due on any
capital gains, except under the circumstances described below. If there has been
a loss on the redemption and shares of the same fund are repurchased, all of the
loss may not be tax deductible, depending on the timing and amount reinvested.
Under the Code, if the redemption proceeds of fund shares on which a sales
charge was paid are reinvested in shares of the same fund, or exchanged for
shares of another AIM Fund, at a reduced sales charge within 90 days of the
payment of the sales charge, the shareholder's basis in the fund shares redeemed
may not include the amount of the sales charge paid, thereby reducing the loss
or increasing the gain recognized from the redemption; however, the
shareholder's basis in the fund shares purchased will include the sales charge.
Each AIM Fund may amend, suspend or cease offering the privilege at any time as
to shares redeemed after the date of such amendment, suspension or cessation.
This privilege may only be exercised once each year by a shareholder with
respect to each AIM Fund.
Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares and who subsequently reinvest a portion or
all of the value of the redeemed shares in Class A shares of any AIM Fund within
ninety (90) days after such redemption may do so at net asset value if such
privilege is claimed at the time of reinvestment. Such reinvested proceeds will
not be subject to either a front-end sales charge at the time of reinvestment or
an additional contingent deferred sales charge upon subsequent redemption. In
order to exercise this reinvestment privilege, the shareholder must notify the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B or Class C shares.
A-18
<PAGE> 38
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon Eastern Time and NYSE Close with
respect to AIM MONEY MARKET FUND) on each "business day" of a fund as previously
defined. In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time)
on a particular day, the net asset value of an AIM Fund's share will be
determined as of the close of the NYSE on such day. For purposes of defining net
asset value per share, futures and options contracts generally will be valued 15
minutes after the close of trading of the NYSE. The net asset value per share is
calculated by subtracting a class' liabilities from its assets and dividing the
result by the total number of class shares outstanding. The determination of net
asset value per share is made in accordance with generally accepted accounting
principles. Among other items, liabilities include accrued expenses and
dividends payable, and total assets include portfolio securities valued at their
market value, as well as income accrued but not yet received. Securities for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the supervision of the fund's officers and
in accordance with methods which are specifically authorized by its governing
Board of Directors or Trustees. Short-term obligations with maturities of 60
days or less, and the securities held by the Money Market Funds, are valued at
amortized cost as reflecting fair value. AIM HIGH INCOME MUNICIPAL FUND, AIM
MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT and AIM TAX-FREE
INTERMEDIATE FUND value variable rate securities that have an unconditional
demand or put feature exercisable within seven days or less at par, which
reflects the market value of such securities.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as
set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM ADVISOR FLEX FUND..................... declared and paid quarterly quarterly annually
AIM ADVISOR INTERNATIONAL VALUE FUND...... declared and paid annually annually annually
AIM ADVISOR LARGE CAP VALUE FUND.......... declared and paid quarterly quarterly annually
AIM ADVISOR MULTIFLEX FUND................ declared and paid quarterly quarterly annually
AIM ADVISOR REAL ESTATE FUND.............. declared and paid quarterly quarterly annually
AIM AGGRESSIVE GROWTH FUND................ declared and paid annually annually annually
AIM ASIAN GROWTH FUND..................... declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BASIC VALUE FUND...................... declared and paid annually annually annually
AIM BLUE CHIP FUND........................ declared and paid annually annually annually
AIM CAPITAL DEVELOPMENT FUND.............. declared and paid annually annually annually
AIM CHARTER FUND.......................... declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND............... declared and paid annually annually annually
AIM DOLLAR FUND........................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND................. declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND............ declared and paid monthsly annually annually
AIM EUROPE GROWTH FUND.................... declared and paid annually annually annually
AIM EUROPEAN DEVELOPMENT FUND............. declared and paid annually annually annually
AIM GLOBAL AGGRESSIVE GROWTH FUND......... declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES
FUND.................................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES FUND........ declared and paid annually annually annually
</TABLE>
A-19
<PAGE> 39
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
- ---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM GLOBAL GOVERNMENT INCOME FUND......... declared and paid monthly annually annually
AIM GLOBAL GROWTH FUND.................... declared and paid annually annually annually
AIM GLOBAL GROWTH & INCOME FUND........... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND............... declared and paid annually annually annually
AIM GLOBAL INCOME FUND.................... declared daily; paid monthly annually annually
AIM GLOBAL INFRASTRUCTURE FUND............ declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND................. declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS FUND........ declared and paid annually annually annually
AIM GLOBAL TRENDS FUND.................... declared and paid annually annually annually
AIM GLOBAL UTILITIES FUND................. declared daily; paid monthly annually annually
AIM HIGH INCOME MUNICIPAL FUND............ declared daily; paid monthly annually annually
AIM HIGH YIELD FUND....................... declared daily; paid monthly annually annually
AIM INCOME FUND........................... declared daily; paid monthly annually annually
AIM INTERMEDIATE GOVERNMENT FUND.......... declared daily; paid monthly annually annually
AIM INTERNATIONAL EQUITY FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND............. declared and paid annually annually annually
AIM JAPAN GROWTH FUND..................... declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND............ declared and paid annually annually annually
AIM LIMITED MATURITY TREASURY FUND........ declared daily; paid monthly annually annually
AIM MID CAP EQUITY FUND................... declared and paid annually annually annually
AIM MONEY MARKET FUND..................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................... declared daily; paid monthly annually annually
AIM NEW PACIFIC GROWTH FUND............... declared and paid annually annually annually
AIM SELECT GROWTH FUND.................... declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND................. declared and paid annually annually annually
AIM SMALL CAP OPPORTUNITIES FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND................. declared and paid monthly annually annually
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT... declared daily; paid monthly annually annually
AIM TAX-EXEMPT CASH FUND.................. declared daily; paid monthly at least annually annually
AIM TAX-FREE INTERMEDIATE FUND............ declared daily; paid monthly annually annually
AIM VALUE FUND............................ declared and paid annually annually annually
AIM WEINGARTEN FUND....................... declared and paid annually annually annually
AIM WORLDWIDE GROWTH FUND................. declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each AIM Fund may make
additional distributions, if necessary, to avoid a non-deductible 4% federal
excise tax on certain undistributed income and capital gain (the "Excise Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to a class are reinvested in additional
shares of such class, absent an election by a shareholder to receive cash or to
have such dividends and distributions reinvested in like shares of another
Multiple Class Fund, to the extent permitted. For funds that do not declare a
dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the ex-dividend date. For funds that declare
a dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or the
dividend portion thereof, in cash, or to invest such dividends and distributions
in shares of another fund in the AIM Funds; provided that (i) dividends and
distributions attributable to Class B shares may only be reinvested in Class B
shares, (ii) dividends and distributions attributable to Class C shares may only
be reinvested in Class C shares, (iii) dividends and distributions attributable
to Class A shares may not be reinvested in Class B or Class C shares, and (iv)
dividends and distributions attributable to the AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may not be reinvested in the Class A shares of that Fund or in
any Class B or Class C shares. Investors who have not previously selected such a
reinvestment option on the account application form may contact the Transfer
Agent at any time to obtain a form to authorize such reinvestments in another
AIM Fund. Such reinvestments into the AIM Funds are not subject to sales
charges, and shares so purchased are automatically credited to the account of
the shareholder.
Dividends on Class B and Class C shares of an AIM Fund are expected to be
lower than dividends for Class A shares of that fund or AIM Cash Reserve Shares
because of higher distribution fees paid by Class B and Class C shares.
Dividends on all shares may also be affected by other class-specific expenses.
A-20
<PAGE> 40
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares, except for "exempt-interest dividends" paid by
AIM HIGH INCOME MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND
FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND
(the "Tax-Exempt Funds"), which are exempt from federal income tax. With respect
to tax-exempt shareholders, dividends and distributions from the AIM Funds are
not subject to federal income taxation to the extent permitted under the
applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR REAL ESTATE FUND, AIM ASIAN GROWTH FUND,
AIM DEVELOPING MARKETS FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS FUND, AIM
EMERGING MARKETS DEBT FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GOVERNMENT INCOME FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL TRENDS FUND, AIM HIGH
YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL
EQUITY FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM LATIN
AMERICAN GROWTH FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MONEY MARKET FUND,
AIM NEW PACIFIC GROWTH FUND, AIM STRATEGIC INCOME FUND or any of the Tax-Exempt
Funds will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year. No gain or loss will be recognized by shareholders upon
the automatic conversion of Class B shares of a Multiple Class Fund into Class A
shares of such fund.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
A-21
<PAGE> 41
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may affect the amount of social security and railroad retirement
benefits subject to federal income tax, may affect the deductibility of interest
on certain indebtedness of a shareholder, and may have other collateral federal
income tax consequences. In addition, the Tax-Exempt Funds may invest in
Municipal Securities the interest on which will constitute an item of tax
preference and which therefore could give rise to a federal alternative minimum
tax liability for certain shareholders; each Tax-Exempt Fund may invest up to
20% of its net assets in such securities and other taxable securities. For
additional information concerning the alternative minimum tax and certain
collateral tax consequences of the receipt of exempt-interest dividends, see the
Statements of Additional Information applicable to the Tax-Exempt Funds.
The Tax-Exempt Funds may pay dividends to shareholders that are taxable, but
will endeavor to avoid investments that would result in taxable dividends. The
percentage of dividends that constitutes exempt-interest dividends, and the
percentage thereof (if any) that constitutes items of tax preference, will be
determined annually. These percentages may differ from the actual percentages
for any particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional fund shares.
Distributions of net capital gain will be taxable as long-term capital gains,
whether received in cash or additional fund shares and regardless of the length
of time a shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM GLOBAL GOVERNMENT INCOME FUND, AIM
GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HIGH INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP EQUITY FUND,
AIM SMALL CAP GROWTH FUND, AIM STRATEGIC INCOME FUND -- SPECIAL TAX INFORMATION.
Certain states exempt from income taxes dividends paid by mutual funds
attributable to interest on U.S. Treasury and certain other U.S. government
obligations. Investors should consult with their own tax advisors concerning the
availability of such exemption.
AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ASIAN GROWTH FUND, AIM DEVELOPING
MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH FUND, AIM EUROPEAN
DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL CONSUMER
PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL SERVICES FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INCOME FUND, AIM GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND,
AIM GLOBAL TELECOMMUNICATIONS FUND, AIM GLOBAL UTILITIES FUND, AIM INTERNATIONAL
EQUITY FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM LATIN
AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND, AIM WORLDWIDE GROWTH
FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is eligible to do
so, each of these funds may elect to pass through to its shareholders credits
for foreign taxes paid. If a fund makes such an election, a shareholder who
receives a distribution (1) will be required to include in gross income his
proportionate share of foreign taxes allocable to the distribution and (2) may
claim a credit or deduction for such share for his taxable year in which the
distribution is received, subject to the general limitations imposed on the
allowance of foreign tax credits and deductions. Shareholders should also note
that certain gains or losses attributable to fluctuations in exchange rates or
foreign currency forward contracts may increase or decrease the amount of income
of the fund available for distribution to shareholders and should note that if,
for any fund, such losses exceed other income during a taxable year, the fund
would not be able to pay ordinary income dividends for that year.
A-22
<PAGE> 42
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM LIMITED MATURITY TREASURY FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE
INTERMEDIATE FUND, for which The Bank of New York, 90 Washington Street, 11th
Floor, New York, New York 10286, serves as custodian. Chase Bank of Texas, N.A.,
P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for retail
purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each AIM Fund's transfer agent and dividend
payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be viewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-23
<PAGE> 43
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
------------ -------------------- ------------ ------------------
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for the Requester of Form W-9 (which can be obtained
from the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding 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.
MCF-07/98
B-1
<PAGE> 44
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney-in-fact to surrender for redemption any and all unissued
shares held by the Transfer Agent in the designated account(s), or in any other
account with any of the AIM Funds, present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and
mailing address of the shares to be purchased are identical to the registration
of the shares being redeemed. An investor acknowledges by signing the form that
he understands and agrees that the Transfer Agent and AIM Distributors may not
be liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. 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 transaction. The Transfer Agent
reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone 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 (see the
applicable Fund's prospectus under the caption "Exchange Privilege -- Exchanges
by Mail").
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by the Transfer Agent in the designated account(s), present
or future, with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption. An investor acknowledges by signing the
form that he understands and agrees that the Transfer Agent and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any redemptions must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "How to Redeem
Shares -- Redemptions by Mail").
MCF-07/98
B-2
<PAGE> 45
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
Investment Manager
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Sub-Advisor
INVESCO (NY), Inc.
50 California Street, 27th Floor
San Francisco, CA 94111
Principal Underwriter
A I M Distributors, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Independent Accountants
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
For more complete information about any other fund in The AIM Family of
Funds--Registered Trademark--, including charges and expenses, please call (800)
347-4246 or write to A I M Distributors, Inc. and request a free prospectus.
Please read the prospectus carefully before you invest or send money.
NDM-PRO-1
<PAGE> 46
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS OF
AIM GLOBAL TRENDS FUND
(A SERIES PORTFOLIO OF AIM SERIES TRUST)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM GLOBAL TRENDS FUND (the "Fund"),
which is a series investment portfolio of AIM Series Trust (the "Trust"), an
open-end, series, management investment company. The Fund is a diversified
portfolio which seeks long-term growth of capital. Unlike a typical mutual fund,
which invests directly in portfolio securities, the Fund invests substantially
all of its assets in shares of the AIM theme funds: AIM Global Consumer Products
and Services Fund; AIM Global Financial Services Fund; AIM Global Health Care
Fund; AIM Global Infrastructure Fund; AIM Global Resources Fund; and AIM Global
Telecommunications Fund (collectively, the "Underlying Theme Funds").
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
September 8, 1998, has been filed with the Securities and Exchange Commission
(the "SEC") and is incorporated herein by reference. The Statement of Additional
Information is available without charge upon written request to the Trust at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or by calling (800)
347-4246. The SEC maintains a Web site at http://www.sec.gov that contains the
Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund. Additional information about the Fund may
also be obtained from http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 47
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................ 2
THE FUND............................... 4
Table of Fees and Expenses........... 4
Financial Highlights................. 6
Performance.......................... 7
Investment Program................... 7
Description of the Underlying Theme
Funds............................. 8
Risk Factors and Special
Considerations.................... 10
Management........................... 12
Other Information.................... 13
INVESTOR'S GUIDE TO THE AIM FAMILY OF
FUNDS--Registered Trademark--........ A-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction to The AIM Family of
Funds............................. A-1
How to Purchase Shares............... A-1
Terms and Conditions of Purchase of
the AIM Funds..................... A-2
Special Plans........................ A-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
Appendix............................. A-11
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND
The Fund is a diversified series of the Trust.
INVESTMENT OBJECTIVE. The Fund seeks long-term growth of capital.
PRINCIPAL INVESTMENTS. The Fund invests, under normal circumstances,
substantially all of its assets in shares of the following Underlying Theme
Funds: AIM Global Consumer Products and Services Fund ("Consumer Products and
Services Fund"); AIM Global Financial Services Fund ("Financial Services Fund");
AIM Global Health Care Fund ("Health Care Fund"); AIM Global Infrastructure Fund
("Infrastructure Fund"); AIM Global Resources Fund ("Resources Fund"); and AIM
Global Telecommunications Fund ("Telecommunications Fund"). The allocation of
the Fund's assets to the Underlying Theme Funds is governed strictly by a
formula described herein. See "Investment Objective and Policies."
INVESTMENT MANAGERS. The Fund is managed by A I M Advisors, Inc. ("AIM") and
is sub-advised and sub-administered by INVESCO (NY), Inc. (the "Sub-advisor").
AIM and the Sub-advisor and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-advisor are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
AIM was organized in 1976 and, together with its subsidiaries, currently advises
approximately 90 investment company portfolios.
PURCHASING SHARES. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of a least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the funds in The AIM Family of Funds that are sub-advised
by the Sub-advisor ("AIM Funds") on May 29, 1998; and (e) any of the companies
affiliated with AMVESCAP PLC.
Pursuant to a separate prospectus, the Fund also offers Class A, Class B and
Class C shares, which represent interests in the Fund. The Class A, Class B and
Class C shares have different distribution arrangements.
Initial investments in Advisor Class shares must be at least $500 and
additional investments must be at least $50. The distributor of the Advisor
Class shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds").
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain funds in The AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
2
<PAGE> 48
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at the Fund's net asset value on any business day. See
"How to Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be reinvested at net asset value without
payment of a sales charge in the Fund's shares or may be invested in shares of
the other funds in The AIM Family of Funds. See "Dividends, Distributions and
Tax Matters."
RISK FACTORS. There is no assurance that the Fund will achieve its investment
objective. The Fund's net asset value will fluctuate, reflecting fluctuations in
the net asset value of the shares of the Underlying Theme Funds. Investors
should review the investment objectives and policies of the Fund and the
Underlying Theme Funds carefully and consider their ability to assume these and
other risks involved in purchasing shares of the Fund. See "Investment Program,"
"Description of the Underlying Theme Funds' and "Risk Factors and Special
Considerations." As a recently organized entity, the Fund has a limited
operating history.
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
3
<PAGE> 49
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in
Advisor Class shares of the Fund are reflected in the following table:
<TABLE>
<S> <C>
Shareholder Transactions Costs:
Maximum sales charge on purchase of shares (as a % of
offering price)........................................ None
Sales charges on reinvested distributions to
shareholders........................................... None
Maximum deferred sales charges (as a % of net asset value
at time of purchase or sale, whichever is less)........ None
Redemption charges........................................ None
Exchange fees............................................. None
Annual Fund Operating Expenses*: (as a % of average net
assets)
Investment management fees................................ None
12b-1 distribution and service fees....................... None
Other expenses............................................ None
----
Total Fund Operating Expenses..................... 0.00%
====
</TABLE>
* The Annual Fund Operating Expenses are estimated for the Fund's initial fiscal
period. "Other expenses" (including transfer agency, legal and audit fees and
other operating expenses) initially will be borne by AIM and the Sub-advisor.
Subject to receipt of an order of the SEC pursuant to a pending exemptive
application, such expenses may be borne by AIM, the Sub-advisor and the
Underlying Theme Funds or the Underlying Theme Funds alone. See "Other
Information -- Special Servicing Agreement." Investors purchasing Advisor
Class shares through financial planners, trust companies, bank trust
departments or registered investment advisers, or under a "wrap fee" program,
will be subject to additional fees charged by such entities or by the sponsors
of such programs. Where any account advised by one of the companies composing
or affiliated with AMVESCAP PLC invests in Advisor Class shares of the Fund,
such account shall not be subject to duplicative advisory fees.
In addition to the Annual Fund Operating Expenses shown above, the Fund, as a
shareholder in the Underlying Theme Funds, indirectly bears its pro rata share
of the fees and expenses incurred by the Underlying Theme Funds. As a result,
the investment returns of the Fund reflect the expenses of the Underlying Theme
Funds in which it holds shares. Because the Fund invests only in Advisor Class
shares of the Underlying Theme Funds it pays no sales charge or 12b-1
distribution or service fees in connection with these investments. The following
table shows the expense ratios applicable to Advisor Class shares of the
Underlying Theme Funds for their fiscal years ended October 31, 1997.
<TABLE>
<CAPTION>
EXPENSE RATIO OF
ADVISOR CLASS
UNDERLYING THEME FUND SHARES(1)
- --------------------- ----------------
<S> <C>
Consumer Products and Services Fund......................... 1.34%
Financial Services Fund..................................... 1.50%
Health Care Fund............................................ 1.27%
Infrastructure Fund......................................... 1.50%
Resources Fund.............................................. 1.50%
Telecommunications Fund..................................... 1.29%
</TABLE>
(1) Effective January 1, 1998, AIM has undertaken to limit each Underlying Theme
Fund's expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to a maximum level of 1.50% of the average daily net
assets of such fund's Advisor Class shares.
4
<PAGE> 50
The following table shows the aggregate expense ratio of the Fund based on a
weighted average of the expense ratios of Advisor Class shares of the Underlying
Theme Funds in which the Fund was invested as of October 31, 1997, plus the
Fund's total operating expenses.(1)
<TABLE>
<CAPTION>
AIM GLOBAL TRENDS FUND ESTIMATED
(INCLUDING THE FUND'S INDIRECT PRO RATA SHARE AGGREGATE
OF THE EXPENSES OF THE UNDERLYING THEME FUNDS) EXPENSE RATIO(2)
---------------------------------------------- ----------------
<S> <C>
Advisor Class............................................... 1.35%
</TABLE>
(1) These percentages do not necessarily reflect the current allocation of the
Fund's assets to the Underlying Theme Funds or the allocation of the Fund's
assets on any other date.
(2) Because of AIM's undertaking to limit each Underlying Theme Fund's expenses
as described above, the Fund's aggregate expense ratio will not exceed 1.50%
for Advisor Class shares. AIM has voluntarily agreed to continue this
limitation through May 31, 2000.
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES. An investor would have directly or
indirectly paid the following expenses of the Fund based upon the Fund's
estimated aggregate expense ratio at the end of the periods shown on a $1,000
investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class shares................................ $14 $43 $75 $164
</TABLE>
The foregoing table is intended to assist investors in understanding the
various costs and expenses associated with investing in the Fund.
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF FUTURE EXPENSES. THE
FUND'S ACTUAL DIRECT AND INDIRECT EXPENSES, AND AN INVESTOR'S DIRECT AND
INDIRECT EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE EXAMPLE ASSUMES
PAYMENT BY THE FUND OF OPERATING EXPENSES AT THE LEVEL SET FORTH UNDER "ANNUAL
FUND OPERATING EXPENSES" ABOVE AND OF ITS INDIRECT PRO RATA SHARE OF THE ADVISOR
CLASS SHARE EXPENSES OF THE UNDERLYING THEME FUNDS, AS DESCRIBED ABOVE.
THE TABLE AND THE ASSUMPTION IN THE HYPOTHETICAL EXAMPLE OF A 5% ANNUAL RETURN
ARE REQUIRED BY REGULATION OF THE SEC APPLICABLE TO ALL MUTUAL FUNDS. THE 5%
ANNUAL RETURN IS NOT A PREDICTION OF AND DOES NOT REPRESENT THE FUND'S OR ANY
UNDERLYING THEME FUND'S PROJECTED OR ACTUAL PERFORMANCE.
5
<PAGE> 51
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The table below provides condensed financial information concerning income and
capital changes for one Advisor Class share of the Fund. This information is
supplemented by the financial statements and accompanying notes appearing in the
Statement of Additional Information. The financial statements and notes, for the
fiscal period ended December 31, 1997 have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report thereon also
is included in the Statement of Additional Information. The unaudited financial
statements and notes for the semi-annual period ended June 30, 1998, are also
included in the Statement of Additional Information.
AIM GLOBAL TRENDS FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
<TABLE>
<CAPTION>
SIX MONTHS SEPTEMBER 15, 1997
ENDED (COMMENCEMENT OF
JUNE 30, OPERATIONS) TO
1998(C) DECEMBER 31,
(UNAUDITED) 1997(C)
----------- ------------------
<S> <C> <C>
ADVISOR CLASS
Per Share Operating Performance:
Net asset value, beginning of period...................... $10.64 $11.43
------ ------
Income from investment operations:
Net investment income (loss).............................. -- 0.01
Net realized and unrealized gain (loss) on investments.... 1.24 (0.31)
------ ------
Net increase (decrease) from investment operations........ 1.24 (0.30)
------ ------
Distributions to shareholders:
In excess of net investment income........................ -- (0.49)
------ ------
Total distributions............................... -- (0.49)
------ ------
Net asset value, end of period.............................. $11.88 $10.64
====== ======
Total investment return(b).................................. 11.65% (2.51)%
====== ======
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $1,419 $1,241
Ratio of net investment income (loss) to average net
assets(a)................................................. 0.01% 0.15%
Ratio of operating expenses to average net assets: (a)...... 0.00% 0.00%
Portfolio turnover rate(a)+................................. 8% 1%
</TABLE>
- ---------------
(a) Annualized.
(b) Not annualized.
(c) Calculated based upon average shares outstanding during the period.
+ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issues.
6
<PAGE> 52
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the 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 reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
The 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, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Fund. Such practices will
have the effect of increasing the Fund's total return. The performance of the
Fund will vary from time to time and past results are not necessarily
representative of future results. The Fund's performance is a function of its
portfolio management in selecting the type and quality of portfolio securities
and is affected by operating expenses of the Fund as well as by general market
conditions.
UNDERLYING THEME FUND PERFORMANCE. The Fund has a limited history and
therefore a limited performance record. Thus, the performance shown below is not
the performance of the Fund, but instead reflects the performance of the
Underlying Theme Funds. The following table shows the average annual total
returns of Class A and Class B shares of each Underlying Theme Fund for the most
recent one- and five-year periods (as applicable) and for the life of the
Underlying Theme Funds. The performance information reflects deduction of the
maximum applicable sales charges. Returns would be higher if these charges were
not reflected. The Fund invests in the Advisor Class shares of the Underlying
Theme Funds, which are not subject to sales charges and distribution and service
fees. However, Class A and Class B shares of the Fund are subject to their own
sales charges and distribution and service fees.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE OF FUND
----------------- ----------------- -----------------
UNDERLYING THEME FUND CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
- --------------------- ------- ------- ------- ------- ------- -------
AVERAGE ANNUAL TOTAL RETURN THROUGH 4/30/98
<S> <C> <C> <C> <C> <C> <C>
Consumer Products and Services Fund... 45.69% 47.14% n/a n/a 30.87%(1) 31.66%(1)
Financial Services Fund............... 33.53% 34.54% n/a n/a 17.52%(2) 17.94%(2)
Health Care Fund...................... 28.90% 29.62% 17.91% 18.25% 14.59%(3) 18.50%(4)
Infrastructure Fund................... 8.37% 8.14% n/a n/a 9.93%(5) 10.17%(5)
Resources Fund........................ 7.91% 7.80% n/a n/a 9.00%(6) 9.24%(6)
Telecommunications Fund............... 36.09% 37.17% 14.34% 14.64% 13.67%(7) 14.85%(8)
</TABLE>
Past performance of the Underlying Theme Funds is not a guarantee of future
results for either the Underlying Theme Funds or the Fund. Further information
about each Underlying Theme Fund's performance is contained in its Annual Report
to Shareholders, which may be obtained without charge by calling (800) 824-1580
or contacting your financial adviser.
(1) The Consumer Products and Services Fund commenced operations on December 30,
1994.
(2) The Financial Services Fund commenced operations on May 31, 1994.
(3) Class A shares of the Health Care Fund were initially offered on August 7,
1989.
(4) Class B shares of the Health Care Fund were initially offered on April 1,
1993.
(5) The Infrastructure Fund commenced operations on May 31, 1994.
(6) The Resources Fund commenced operations on May 31, 1994.
(7) Class A Shares of the Telecommunications Fund were initially offered on
January 27, 1992.
(8) Class B shares of the Telecommunications Fund were initially offered on
April 1, 1993.
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
INVESTMENT OBJECTIVE. The Fund seeks long-term growth of capital. Unlike a
typical mutual fund, which invests directly in securities, the Fund invests,
under normal circumstances, substantially all of its assets in the following
Underlying Theme Funds: Con-
7
<PAGE> 53
sumer Products and Services Fund; Financial Services Fund; Health Care Fund;
Infrastructure Fund; Resources Fund and Telecommunications Fund.
INVESTMENT POLICIES. The Sub-advisor exercises no discretion in investing the
Fund's assets. Rather, the Sub-advisor periodically determines the allocation of
the Fund's assets to the Underlying Theme Funds according to the industry
weightings of the companies composing the Morgan Stanley Capital International
All Country (AC) World Index ("MSCI"). (The MSCI is a broad unmanaged index of
global stock prices, comprising approximately 2,483 different issuers, located
in 48 countries including both developed and developing countries as of April
30, 1998. Each of the 2,483 stocks is placed into one of 38 MSCI industry
sectors.) The Sub-advisor assesses which of the Underlying Theme Funds can
invest, as part of its primary focus, in each of these industries. For example,
industries in the MSCI in which the Financial Services Fund invests include the
Banking, Financial Services, Insurance and Real Estate industries. The
percentage that those industries compose in the MSCI is the initial weighting
assigned to the Financial Services Fund. Where two or more Underlying Theme
Funds can invest in an industry, the weighting of that industry in the MSCI is
split equally among each qualifying Underlying Theme Fund. See the Appendix for
the allocation of the 38 industries to the Underlying Theme Funds. Of course,
the Underlying Theme Funds do not invest necessarily in the same industries or
the same companies that compose the MSCI. Because the percentage weight assigned
to each industry in the MSCI changes over time and because the percentage of the
Fund's assets invested in each Underlying Theme Fund will change over time, the
Sub-advisor will rebalance the Fund's assets among the Underlying Theme Funds at
least semi-annually. In addition, the Sub-advisor will invest incoming money in,
and satisfy redemption requests by redeeming shares of, each Underlying Theme
Fund according to the MSCI weighting as of the last business day of the
preceding month.
As of April 30, 1998, the allocation of the Fund's assets to the Underlying
Theme Funds was as follows:
<TABLE>
<S> <C>
Consumer Products and Services Fund......................... 30.8%
Financial Services Fund..................................... 21.5%
Health Care Fund............................................ 10.4%
Infrastructure Fund......................................... 16.4%
Resources Fund.............................................. 11.1%
Telecommunications Fund..................................... 9.7%
</TABLE>
These percentages do not include cash or money market instruments held by the
Fund and do not necessarily reflect the current allocation of the Fund's assets
to the Underlying Theme Funds or the allocation of the Fund's assets on any
other date.
The Fund is a more diversified investment than any single Underlying Theme
Fund. However, because the Underlying Theme Funds are actively managed without
any attempt to reflect the country, industry or company weightings of the MSCI,
the Underlying Theme Funds will perform differently than the corresponding
industry components of the MSCI, and the Underlying Theme Funds will perform
differently than the overall MSCI. While the Fund does not therefore represent
the performance of the MSCI, it does represent a globally diversified portfolio,
with allocations among developed and emerging countries, industries and
companies intended to achieve long-term growth of capital.
The Fund is designed to meet the needs of investors who seek professional
money management services and who appreciate the advantages of diversification.
The Fund by itself should not be considered a complete investment program. As a
recently organized entity, the Fund has a limited operating history.
OTHER INFORMATION. The investment objective of the Fund may not be changed
without the approval of a majority of its outstanding voting securities. As
defined in the Investment Company Act of 1940, as amended ("1940 Act"), and as
used in this Prospectus, a "majority of the Fund's outstanding voting
securities" means the lesser of (i) 67% of the Fund's shares represented at a
meeting at which more than 50% of the outstanding shares are represented, or
(ii) more than 50% of the outstanding shares. In addition, the Fund has adopted
certain investment limitations as fundamental policies that also may not be
changed without shareholder approval. See "Investment Limitations" in the
Statement of Additional Information. Unless specifically noted, the Fund's
investment policies described in this Prospectus, and in the Statement of
Additional Information, are not fundamental policies and may be changed by the
Trust's Board of Trustees without shareholder approval.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE UNDERLYING THEME FUNDS
The following descriptions summarize the investment objectives and policies of
the Underlying Theme Funds. There is no assurance that any Underlying Theme Fund
will achieve its investment objective. The Statement of Additional Information
includes more information about the investment policies of the Underlying Theme
Funds. Investors desiring more information on an Underlying Theme Fund should
call (800) 347-4246 or contact their financial adviser for the Underlying Theme
Fund's prospectus.
CONSUMER PRODUCTS AND SERVICES FUND. The Consumer Products and Services Fund's
investment objective is long-term capital growth. It seeks its objective by
investing all of its investable assets in the Consumer Products and Services
Portfolio, that, in turn, invests primarily in equity securities of companies
throughout the world that manufacture, market, retail or distribute consumer
products and services. The Consumer Products and Services Portfolio's investment
objective is identical to that of the Consumer Products and Services Fund.
8
<PAGE> 54
At least 65% of the Consumer Products and Services Portfolio's total assets
normally will be invested in common and preferred stocks and warrants to acquire
such securities issued by consumer products and services companies. A "consumer
products or services" company is an entity in which (i) at least 50% of either
the revenues or earnings was derived from activities relating to consumer
products or services, or (ii) at least 50% of the assets was devoted to such
activities, based on the company's most recent fiscal year. The remainder of the
Consumer Products and Services Portfolio's assets may be invested in debt
securities issued by consumer products or services companies and/or equity and
debt securities of companies outside the consumer products or services
industries, which, in the opinion of the Sub-adviser, stand to benefit from
developments in such industries.
FINANCIAL SERVICES FUND. The Financial Services Fund's investment objective is
long-term capital growth. It seeks its objective by investing all of its
investable assets in the Financial Services Portfolio, that, in turn, invests
primarily in equity securities of companies throughout the world that operate in
the financial services industries. The Financial Services Portfolio's investment
objective is identical to that of the Financial Services Fund.
At least 65% of the Financial Services Portfolio's total assets normally will
be invested in common and preferred stocks and warrants to acquire such
securities issued by financial services companies. A "financial services"
company is an entity in which (i) at least 50% of either the revenues or
earnings was derived from financial services activities, or (ii) at least 50% of
the assets was devoted to such activities, based on the company's most recent
fiscal year. The remainder of the Financial Services Portfolio's assets may be
invested in debt securities issued by financial services companies and/or equity
and debt securities of companies outside of the financial services industries,
which, in the opinion of the Sub-adviser, stand to benefit from developments in
the financial services industries.
HEALTH CARE FUND. The Health Care Fund's investment objective is long-term
capital appreciation. It seeks its objective by investing primarily in equity
securities of health care companies throughout the world.
At least 65% of the Health Care Fund's total assets normally will be invested
in common and preferred stocks and warrants to acquire such securities issued by
health care companies. A "health care" company is an entity in which (i) at
least 50% of either the revenues or earnings was derived from health care
activities, or (ii) at least 50% of the assets was devoted to such activities,
based on the company's most recent fiscal year. The remainder of the Health Care
Fund's assets may be invested in debt securities issued by health care companies
and/or equity and debt securities of companies outside of the health care
industry, which, in the opinion of the Sub-adviser, stand to benefit from
developments in the health care industries.
INFRASTRUCTURE FUND. The Infrastructure Fund's investment objective is
long-term capital growth. It seeks its objective by investing all of its
investable assets in the Infrastructure Portfolio, that, in turn, invests
primarily in equity securities of companies throughout the world that design,
develop or provide products and services significant to a country's
infrastructure. The Infrastructure Portfolio's investment objective is identical
to that of the Infrastructure Fund.
At least 65% of the Infrastructure Portfolio's total assets normally will be
invested in common and preferred stocks and warrants to acquire such securities
issued by infrastructure companies. An "infrastructure" company is an entity in
which (i) at least 50% of either the revenues or earnings was derived from
infrastructure activities, or (ii) at least 50% of the assets was devoted to
such activities, based on the company's most recent fiscal year. The remainder
of the Infrastructure Portfolio's assets may be invested in debt securities
issued by infrastructure companies and/or equity and debt securities of
companies outside of the infrastructure industries, which, in the opinion of the
Sub-adviser, stand to benefit from developments in the infrastructure
industries.
RESOURCES FUND. The Resources Fund's investment objective is long-term capital
growth. It seeks its objective by investing all of its investable assets in the
Resources Portfolio, that, in turn, invests primarily in equity securities of
companies throughout the world that own, explore or develop natural resources
and other basic commodities, or supply goods and services to such companies. The
Resources Portfolio's investment objective is identical to that of the Resources
Fund.
At least 65% of the Resources Portfolio's total assets will normally be
invested in common and preferred stocks and warrants to acquire such securities
issued by natural resource companies. A "natural resource" company is an entity
in which (i) at least 50% of either the revenues or earnings was derived from
natural resource activities, or (ii) at least 50% of the assets was devoted to
such activities, based upon the company's most recent fiscal year. The remainder
of the Resources Portfolio's assets may be invested in debt securities issued by
natural resource companies and/or equity and debt securities of companies
outside of the natural resource industries, which, in the opinion of the
Sub-adviser, stand to benefit from developments in the natural resource
industries.
TELECOMMUNICATIONS FUND. The Telecommunications Fund's investment objective is
long-term growth of capital. It seeks its objective by investing primarily in
equity securities of companies throughout the world engaged in the development,
manufacture or sale of telecommunications services or equipment.
At least 65% of the Telecommunications Fund's total assets normally will be
invested in common and preferred stocks and warrants to acquire such securities
issued by telecommunications companies. A "telecommunications" company is an
entity in which (i) at least 50% of either its revenues or earnings was derived
from telecommunications activities, or (ii) at least 50% of its assets was
devoted to telecommunications activities, based on the company's most recent
fiscal year. The remainder of the assets of the Telecommunications Fund may be
invested in debt securities issued by telecommunications companies and/or equity
and debt securities of companies outside of the telecommunications industry
which, in the opinion of the Sub-adviser, stand to benefit from developments in
the telecommunications industries.
9
<PAGE> 55
- --------------------------------------------------------------------------------
RISK FACTORS AND SPECIAL CONSIDERATIONS
INVESTING IN THE UNDERLYING THEME FUNDS. The investments of the Fund are
concentrated in the Underlying Theme Funds, so the Fund's investment performance
is directly related to the investment performance of the Underlying Theme Funds.
The ability of the Fund to meet its investment objective is directly related to
the allocation among those Underlying Theme Funds as well as the ability of the
Underlying Theme Funds to meet their objectives. There is no assurance that the
investment objective of the Fund or any Underlying Theme Fund will be achieved.
The value of the Underlying Theme Funds' domestic and foreign investments varies
in response to many factors. The value of equity securities held by an
Underlying Theme Fund will fluctuate in response to general market and economic
developments, as well as developments affecting the particular issuers of such
securities. In addition, the value of debt securities held by an Underlying
Theme Fund generally will fluctuate with changes in the perceived
creditworthiness of the issuers of such securities and interest rates.
Because each Underlying Theme Fund focuses its investments on particular
industries, an investment in each may be more volatile than that of other
investment companies that do not concentrate their investments in such a manner.
The value of the shares of each Underlying Theme Fund will be especially
susceptible to factors affecting the industries in which it focuses. In
particular, each of the industries is subject to governmental regulation that
may have a material effect on the products and services offered by companies in
these industries.
UNDERLYING THEME FUNDS' INVESTMENT ALLOCATION. The Sub-advisor allocates each
Underlying Theme Fund's (or its corresponding Portfolio's) assets among
securities of countries and in currency denominations where opportunities for
meeting each Underlying Theme Fund's investment objective are expected to be the
most attractive. Each Underlying Theme Fund may invest substantially in
securities denominated in foreign currencies or in multinational currency units
(such as euros). Under normal conditions, each Underlying Theme Fund invests in
the securities of issuers located in at least three countries, including the
United States; investments in securities of issuers in any one country, other
than the United States, will represent no more than 40% of the Financial
Services Portfolio's and the Telecommunication Fund's total assets, and no more
than 50% of the Infrastructure Portfolio's, the Resources Portfolio's, the
Health Care Fund's and the Consumer Products and Services Portfolio's total
assets.
In analyzing specific companies for possible investment the Sub-advisor, on
behalf of the Underlying Theme Funds, ordinarily looks 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. In assessing companies for the
Resources Portfolio, the Sub-adviser will also evaluate, among other factors,
their capabilities for expanded exploration and production, superior exploration
programs and production techniques and facilities, current inventories, expected
production and demand levels and the potential to accumulate new resources.
FOREIGN INVESTMENTS. The Underlying Theme Funds' investments in foreign
securities may involve risks in addition to those of U.S. investments, including
increased political and economic risk, as well as exposure to currency
fluctuations. By investing in foreign securities, the Underlying Theme Funds
also have increased economic and political risks as they are exposed to events
and factors in the various world markets. This is especially true of an
Underlying Theme Fund that invests in emerging markets. Many investments in
emerging markets are considered speculative and therefore may offer greater
return potential, but have significantly greater risk. Also, to the extent that
an Underlying Theme Fund's investments are denominated in foreign currencies,
changes in the value of foreign currencies can significantly affect the Fund's
share price.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, and Spain are members of the European Economic and
Monetary Union (the "EEMU"). The EEMU intends to establish a common European
currency for participating countries which will be known as the "euro." It is
anticipated that each participating country will supplement its existing
currency with the euro on January 1, 1999, and will replace its existing
currency with the euro on July 1, 2002. Any other European country which is a
member of the EEMU may elect to participate in the EEMU and may supplement its
existing currency with the euro after January 1, 1999.
The expected introduction of the euro presents unique risks and uncertainties,
including whether the payment and operational systems of banks and other
financial institutions will be ready by January 1, 1999; how outstanding
financial contracts will be treated after January 1, 1999; the establishment of
exchange rates for existing currencies and the euro; and the creation of
suitable clearing and settlement systems for the euro. These and other factors
could cause market disruptions before or after the introduction of the euro and
could adversely affect the value of securities held by the Fund.
LOWER QUALITY DEBT SECURITIES. The Fund may invest in an Underlying Theme Fund
that invests in high yield, high risk securities, commonly known as "junk
bonds." As a result, the Fund may be subject to some of the risks resulting from
high yield investing. The Fund also may invest in Underlying Theme Funds that
invest in medium grade bonds. Lower quality debt instruments generally offer a
higher current yield than that available from higher grade issues, but typically
involve greater risk. Lower rated and comparable unrated securities are
especially subject to adverse changes in general economic conditions, to changes
in the financial condition of their issuers, and to price fluctuation in
response to changes in interest rates. During periods of economic downturn or
rising inter-
10
<PAGE> 56
est rates, issuers of these instruments may experience financial stress that
could adversely affect their ability to make payments of principal and interest
and increase the possibility of default.
ILLIQUID SECURITIES. The Underlying Theme Funds may invest in securities for
which no readily available market exists, so-called "illiquid securities."
Illiquid securities may be more difficult to value than liquid securities and
the sale of illiquid securities generally will require more time and result in
higher brokerage charges or dealer discounts and other selling expenses than the
sale of liquid securities. Moreover, illiquid securities often sell at prices
lower than similar securities that are liquid.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Each Underlying Theme Fund
is authorized to enter into options, futures and forward currency transactions,
although they might not enter into such transactions. Options, futures and
forward currency transactions involve certain risks, which include: (1)
dependence on the Sub-advisor's ability to predict movements in the prices of
individual securities, fluctuations in the general securities markets or in the
appropriate market sector and movements in interest rates and currency markets;
(2) imperfect correlation, or even no correlation, between movements in the
price of options, forward contracts, futures contracts or options thereon and
movements in the price of the currency or security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are different from
those needed to select the securities in which an Underlying Theme Fund invests;
(4) lack of assurance that a liquid secondary market will exist for any
particular option, futures contract or option thereon at any particular time;
(5) the possible loss of principal under certain conditions; and (6) the
possible inability of an Underlying Theme Fund to purchase or sell a portfolio
security at a time when it would otherwise be favorable for it to do so, or the
possible need for an Underlying Theme Fund to sell a security at a
disadvantageous time, due to the need for the Underlying Theme Fund to maintain
"cover" or to set aside securities in connection with hedging transactions.
INVESTING IN SMALLER COMPANIES. Each Underlying Theme Fund may invest in
smaller companies that may present greater opportunities for capital
appreciation, but may also involve greater risks than large, established
issuers. Such smaller companies may have limited resources, and their securities
may trade less frequently and in more limited volume than the securities of
larger, more established companies. As a result, the prices of the securities of
such smaller companies may fluctuate to a greater degree than the prices of the
securities of other issuers.
OTHER INVESTMENT PRACTICES OF THE UNDERLYING THEME FUNDS. In addition to the
investment practices described in this Prospectus, the Underlying Theme Funds
may engage in certain other investment practices, including lending their
portfolio securities; purchasing securities on a when-issued or delayed delivery
basis; entering into repurchase or reverse repurchase agreements; and borrowing
money. Further information on the investment policies, practices and risks of
the Underlying Theme Funds can be found in the Statement of Additional
Information as well as the Underlying Theme Funds' prospectus and statement of
additional information.
PURCHASES AND REDEMPTIONS. From time to time, the Underlying Theme Funds may
experience relatively large purchases or redemptions due to rebalancing of the
Fund by the Sub-advisor. This may have a material effect on the Underlying Theme
Funds, because Underlying Theme Funds that experience redemptions as a result of
the rebalancing may have to sell portfolio securities and because Underlying
Theme Funds that receive additional cash will have to invest it. While it is
impossible to predict the overall impact of these transactions over time, there
could be adverse effects on portfolio management to the extent that Underlying
Theme Funds may be required to sell securities at times when they would not
otherwise do so, or receive cash that cannot be invested in an expeditious
manner. There may be tax consequences associated with purchases and sales of
securities, and such sales also may increase transaction costs.
MASTER-FEEDER STRUCTURE OF CERTAIN UNDERLYING THEME FUNDS. The Financial
Services Fund, Infrastructure Fund, Resources Fund and Consumer Products and
Services Fund, unlike mutual funds that directly acquire and manage their own
portfolios of securities, each seeks its investment objective by investing all
of its investable assets in the Financial Services Portfolio, Infrastructure
Portfolio, Resources Portfolio and Consumer Products and Services Portfolio
(each a "Portfolio"), respectively. Each Portfolio is a separate investment
company. Because each such Underlying Theme Fund will invest only in its
corresponding Portfolio, that Underlying Theme Fund's shareholders will acquire
only an indirect interest in the investments of that Portfolio.
TEMPORARY DEFENSIVE STRATEGIES. The Underlying Theme Funds retain the
flexibility to respond promptly to changes in market and economic conditions.
Accordingly, in the interest of preserving shareholders' capital the Sub-advisor
may employ a temporary defensive investment strategy if it determines such a
strategy to be warranted due to market, economic or political conditions. Under
a defensive strategy, the Underlying Theme Funds may invest up to 100% of their
total assets in cash and/or high quality debt securities and money market
instruments. To the extent an Underlying Theme Fund adopts a temporary defensive
posture, it will not be invested so as to achieve directly its investment
objective.
In addition, pending investment of proceeds from new sales of the shares or to
meet its ordinary daily cash needs, the Underlying Theme Funds may hold cash
and/or may invest in high quality debt instruments and money market instruments.
The Fund may hold cash and/or may invest in money market instruments under
similar circumstances. Money market instruments in which the Underlying Theme
Funds and the Fund may invest include, but are not limited to, United States
government securities; high-grade commercial paper; bank certificates of
deposit; bankers' acceptances and repurchase agreements related to any of the
foregoing. "High-grade commercial paper" refers to commercial paper rated A-1 by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc., or P-1 by
Moody's Investors Service, Inc. or, if not rated, determined by the Sub-adviser
to be of comparable quality.
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<PAGE> 57
PORTFOLIO TURNOVER. The Fund's portfolio turnover rate is expected to be low
and is not anticipated to exceed 20% annually. The portfolio turnover rates of
the Underlying Theme Funds and their corresponding Portfolios have ranged from
35% to 392% during their most recent fiscal years. There is no assurance that
the turnover rates of the Underlying Theme Funds and their corresponding
Portfolios will remain within this range during subsequent fiscal years. Higher
turnover rates may result in higher expenses being incurred by the Underlying
Theme Funds.
AFFILIATED PERSONS. The officers and trustees of the Trust currently serve as
officers and trustees of the Underlying Theme Funds. AIM and the Sub-advisor
also serves as investment advisor and/or administrator and sub-advisor and/or
sub-administrator, respectively, to the Underlying Theme Funds. Therefore,
conflicts may arise as these persons fulfill their fiduciary responsibilities to
the Fund and the Underlying Theme Funds.
- --------------------------------------------------------------------------------
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Fund. The Trust's Board of Trustees has approved all significant agreements
between the Trust on the one side and persons or companies furnishing services
to the Fund on the other, including the investment management and administration
agreement with AIM, the investment sub-advisory and sub-administration agreement
between AIM and the Sub-advisor, the agreements with AIM Distributors regarding
distribution of the Fund's shares, the custody agreement and the transfer agency
agreement. The day-to-day operations of the Fund are delegated to the officers
of the Trust, subject always to the investment objective and policies of the
Fund and to the general supervision of the Trust's Board of Trustees. See
"Trustees and Executive Officers" in the Statement of Additional Information for
information on the Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Subject to the supervision and
direction of the Trust's Board of Trustees, AIM and the Sub-advisor will ensure
that the Fund's assets are invested in the Underlying Theme Funds according to
the formula and pre-determined percentages described in the "Investment
Objective and Policies" section of this Prospectus. AIM and the Sub-advisor will
determine how the Fund's assets will be invested in short-term investments and
place all purchase and sale orders for such instruments and for the Underlying
Theme Funds. AIM and the Sub-advisor provide the following administration
services to the Fund: furnishing corporate officers and clerical staff;
providing office space, services and equipment; and supervising all matters
relating to the Fund's operation. The Sub-advisor also serves as the Fund's
pricing and accounting agent. Finally, AIM and the Sub-advisor will initially
assume all costs of the Fund's operation, except for service and distribution
fees described below and non-recurring and extraordinary expenses. The Fund, as
a shareholder in the Underlying Theme Funds, indirectly will bear its
proportionate share of any investment management fees and other expenses paid by
the Underlying Theme Funds. The investment management and administration fees
paid by the Underlying Theme Funds are higher than those paid by most mutual
funds.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment manager to the Fund pursuant to a master investment management and
administration agreement (the "Advisory Agreement"). AIM was organized in 1976
and, together with its subsidiaries, manages or advises approximately 90
investment company portfolios encompassing a broad range of investment
objectives. The Sub-advisor, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-advisor to the Fund pursuant to an investment sub-advisory and
sub-administration agreement. Prior to May 29, 1998, the Sub-advisor was known
as Chancellor LGT Asset Management, Inc. On May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of the Sub-advisor,
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included the Sub-advisor and
certain other affiliates. As a result of this transaction, the Sub-advisor is
now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to the sale, the
Sub-advisor and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
AIM and the Sub-advisor and their worldwide asset management affiliates
provide investment management and/or administrative services to institutional,
corporate and individual clients around the world. AIM and the Sub-advisor are
both indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and
New York offices, AIM and the Sub-advisor draw upon the expertise, personnel,
data and systems of other offices in Atlanta, Boston, Dallas, Denver,
Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong, London, Singapore,
Sydney, Tokyo and Toronto. In managing the Fund, the Sub-advisor employs a team
approach, taking advantage of its investment resources around the world.
While the Fund will not be actively managed or have a portfolio manager, the
Underlying Theme Funds are actively managed by teams of investment
professionals. At least semi-annually the Fund will rebalance the Fund's assets
among the Underlying Theme Funds according to the MSCI weighting as of the last
business day of the preceding month.
DISTRIBUTOR. The Trust has entered into a Master Distribution Agreement (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of the Advisor Class
shares of the Fund. Certain Trustees and officers of the Trust are affiliated
with AIM Distributors.
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<PAGE> 58
The Distribution Agreement provides AIM Distributors with the exclusive right
to distribute Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
- --------------------------------------------------------------------------------
OTHER INFORMATION
SPECIAL SERVICING AGREEMENT. Until the Special Servicing Agreement described
below its entered into, AIM and the Sub-advisor will pay all the expenses of the
Fund, excluding service and distribution fees and certain non-recurring and
extraordinary expenses. Expenses initially paid by AIM and the Sub-advisor will
include fees and expenses of the Fund's accounting agent; legal, auditing and
accounting expenses; taxes; fees and expenses of A I M Fund Services, Inc. (the
"Transfer Agent"); fees and expenses of registering or qualifying the Fund's
shares for sale; fees and expenses of Trustees, officers and employees of the
Trust who are not affiliated with AIM or the Sub-advisor; the cost of printing
and distributing reports and notices to existing shareholders; and fees and
expenses incurred in connection with membership in investment company
organizations.
An exemptive application has been filed with the SEC requesting relief from
certain provisions of the 1940 Act to permit the Fund, AIM, the Sub-advisor, the
Underlying Theme Funds and the Transfer Agent to enter into a Special Servicing
Agreement ("Agreement"). If exemptive relief is obtained, all the Fund's
expenses except for service and distribution fees and certain non-recurring and
extraordinary expenses will be paid for in accordance with the Agreement. Under
the Agreement, to the extent that the aggregate expenses of the Fund are less
than the estimated savings to the Underlying Theme Funds from the operation of
the Fund, each Underlying Theme Fund will bear those expenses in proportion to
the average daily value of its shares owned by the Fund and/or the number of
shareholder accounts at the Fund. The estimated savings are expected to result
from the reduction of the Underlying Theme Funds' shareholder servicing costs
due to the elimination of separate shareholder accounts that either currently
are or have potential to be invested in the Underlying Theme Funds. The
estimated savings produced by the operation of the Fund may offset most, if not
all, the expenses incurred by the Fund other than service and distribution fees.
To the extent that the Fund's expenses exceed the aggregate financial benefits
to the Underlying Theme Funds, AIM and the Sub-advisor will pay that excess.
ORGANIZATION OF THE TRUST. The Trust was organized as a Delaware business
trust on May 7, 1998. On May 29, 1998, the Trust acquired the assets of and
assumed the liabilities of GT Global Series Trust, a Massachusetts business
trust organized on August 26, 1996. The Trust currently consists of one series.
From time to time, the Trust may establish other series, each holding a distinct
investment portfolio and issuing a distinct series of the Trust's shares of
beneficial interest. Shares of each series are entitled to one vote per share
(with proportional voting for fractional shares) and are transferable.
Shareholders have no preemptive rights. Other than the automatic conversion of
Class B shares to Class A shares, there are no conversion rights.
If any additional series of the Trust are established, on any matter submitted
to a vote of shareholders, shares of each series will be voted by its
shareholders individually when the matter affects the specific interest of that
series only, such as approval of its investment management arrangements. The
shares of the Trust's series would be voted in the aggregate on other matters,
such as the election of Trustees and ratification of the selection by the Board
of Trustees of the Trust's independent accountants.
Normally there will be no annual meeting of shareholders in any year, except
as required under the 1940 Act. Fund shares do not have cumulative voting
rights, which means that the holders of a majority of the shares voting for the
election of Trustees can elect all the Trustees. A Trustee may be removed at any
meeting of the shareholders of the Trust by a vote of the shareholders owning at
least two-thirds of the outstanding shares. Any Trustee may call a special
meeting of shareholders for any purpose. Furthermore, Trustees shall promptly
call a meeting of shareholders solely for the purpose of removing one or more
Trustees when requested in writing to do so by shareholders holding 10% of the
Trust's outstanding shares.
Pursuant to the Trust's Declaration of Trust, the Trust may issue an unlimited
number of shares of the Fund. Each share of the Fund represents an interest in
the Fund only, has a par value of $0.01 per share, represents an equal
proportionate interest in the Fund with other Fund shares and is entitled to
such dividends and other distributions out of the income earned and gain
realized on the assets belonging to the Fund as may be declared at the
discretion of the Board of Trustees. Each share of the Fund is equal in
earnings, assets and voting privileges, except that each class normally has
exclusive voting rights with respect to its distribution plan and bears the
expenses, if any, related to the distribution of its shares. Fund shares, when
issued, are fully paid and nonassessable.
LEGAL COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800 acts as counsel to the Trust and the
Fund.
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<PAGE> 59
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
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HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
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 be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
A-1
<PAGE> 60
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number
OBI: (70 character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
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TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
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<PAGE> 61
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
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<PAGE> 62
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance to $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
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<PAGE> 63
Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), 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. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class 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 Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but 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.
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HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
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REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but 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 taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
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 in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
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<PAGE> 65
as certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client
Services Department of AFS.
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DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
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DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
- ---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
A-8
<PAGE> 67
TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
A-9
<PAGE> 68
AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 69
APPENDIX
- --------------------------------------------------------------------------------
The chart below shows the allocation of the 38 industries comprising the MSCI
to the Underlying Theme Funds as of April 30, 1998.
<TABLE>
<CAPTION>
CONSUMER
PRODUCTS AND FINANCIAL HEALTH TELECOM-
MSCI AC WORLD INDEX INDUSTRY SERVICES SERVICES CARE INFRASTRUCTURE RESOURCES MUNICATIONS
- ---------------------------- ------------ --------- ------ -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Aerospace and Military
Technology.................. X
Appliances & Household
Durables.................... X
Automobiles................... X
Banking....................... X
Beverages & Tobacco........... X
Broadcasting & Publishing..... X
Building Materials &
Components.................. X
Business & Public Services.... X
Chemicals..................... X
Construction & Housing........ X
Data Processing &
Reproduction................ X
Electrical Components,
Instruments.................
Electrical & Electronics...... X
Energy Equipment & Service.... X
Energy Sources................ X
Financial Services............ X
Food & Household Products..... X
Forest Products & Paper....... X
Gold Mines.................... X
Health & Personal Care........ X
Industrial Components......... X
Insurance..................... X
Leisure & Tourism............. X
Machinery & Engineering....... X
Merchandising................. X
Metals -- Non Ferrous......... X
Metals -- Steel............... X
Misc. Materials &
Commodities................. X
Multi-Industry................ X
Real Estate................... X
Recreation, Consumer Goods.... X
Telecommunications............ X
Textiles & Apparel............ X
Transportation -- Airlines.... X
Transportation -- Road &
Rail........................ X
Transportation -- Shipping.... X
Utilities Electrical & Gas.... X
Wholesale & International
Trade....................... X
</TABLE>
A-11
<PAGE> 70
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for the Requester of Form W-9 (which can be obtained
from the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding 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.
MCF-07/98
B-1
<PAGE> 71
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney-in-fact to surrender for redemption any and all unissued
shares held by the Transfer Agent in the designated account(s), or in any other
account with any of the AIM Funds, present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and
mailing address of the shares to be purchased are identical to the registration
of the shares being redeemed. An investor acknowledges by signing the form that
he understands and agrees that the Transfer Agent and AIM Distributors may not
be liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. 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 transaction. The Transfer Agent
reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone 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 (see the
applicable Fund's prospectus under the caption "Exchange Privilege -- Exchanges
by Mail").
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by the Transfer Agent in the designated account(s), present
or future, with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption. An investor acknowledges by signing the
form that he understands and agrees that the Transfer Agent and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any redemptions must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "How to Redeem
Shares -- Redemptions by Mail").
MCF-07/98
B-2
<PAGE> 72
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
Investment Manager
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Sub-Advisor
INVESCO (NY), Inc.
50 California Street, 27th Floor
San Francisco, CA 94111
Principal Underwriter
A I M Distributors, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Independent Accountants
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
For more complete information about any other fund in The AIM Family of
Funds--Registered Trademark--, including charges and expenses, please call (800)
347-4246 or write to A I M Distributors, Inc. and request a free prospectus.
Please read the prospectus carefully before you invest or send money.
NDM-PRO-2
<PAGE> 73
STATEMENT OF
ADDITIONAL INFORMATION
CLASS A, CLASS B, AND CLASS C SHARES OF
AIM GLOBAL TRENDS FUND
(A SERIES PORTFOLIO OF
AIM SERIES TRUST)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
---------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF THE
ABOVE-NAMED FUND, A COPY OF WHICH MAY BE OBTAINED FREE
OF CHARGE FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 347-4246
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 8, 1998
RELATING TO THE AIM GLOBAL TRENDS FUND PROSPECTUS DATED SEPTEMBER 8, 1998
<PAGE> 74
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE TRUST......................... 4
The Trust and Its Shares.................................. 4
INVESTMENT OBJECTIVE AND POLICIES........................... 5
Investment Policies of the Fund........................... 5
Investment Policies of the Underlying Theme Funds......... 5
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................... 9
Special Risks of Options, Futures and Currency
Strategies............................................. 9
Writing Call Options...................................... 10
Writing Put Options....................................... 11
Purchasing Put Options.................................... 11
Purchasing Call Options................................... 11
Index Options............................................. 13
Interest Rate, Currency and Stock Index Futures
Contracts.............................................. 13
Options on Futures Contracts.............................. 15
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies.......................... 16
Forward Contracts......................................... 16
Foreign Currency Strategies -- Special Considerations..... 17
Cover..................................................... 17
RISK FACTORS OF THE UNDERLYING THEME PORTFOLIOS............. 18
Debt Securities........................................... 18
Illiquid Securities....................................... 19
Foreign Securities........................................ 20
INVESTMENT LIMITATIONS...................................... 23
Investment Limitations of the Fund........................ 23
Investment Limitations of the Underlying Theme Funds and
Portfolios............................................. 24
Feeder Funds........................................... 24
Health Care Fund....................................... 26
Telecommunications Fund................................ 27
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 28
MANAGEMENT.................................................. 30
Management Services Relating to the Fund.................. 30
Trustees and Executive Officers........................... 30
THE DISTRIBUTION PLANS...................................... 32
The Class A and C Plan.................................... 32
The Class B Plan.......................................... 32
Both Plans................................................ 33
THE DISTRIBUTOR............................................. 35
NET ASSET VALUE DETERMINATION............................... 36
HOW TO PURCHASE AND REDEEM SHARES........................... 37
QUALIFYING FOR A REDUCED FRONT-END SALES CHARGE............. 38
PROGRAMS AND SERVICES FOR SHAREHOLDERS...................... 38
DIVIDEND ORDER.............................................. 38
</TABLE>
2
<PAGE> 75
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
TAXES....................................................... 39
Taxation of the Fund...................................... 39
Taxation of the Funds' Shareholders....................... 39
MISCELLANEOUS INFORMATION................................... 40
Special Servicing Agreement............................... 40
Custodian................................................. 40
Transfer Agency and Accounting Agency Services............ 40
Independent Accountants................................... 40
Shareholder Liability..................................... 41
Name...................................................... 41
Control Persons and Principal Holders of Securities....... 41
INVESTMENT RESULTS.......................................... 42
Total Return Quotations................................... 42
Performance Information................................... 43
General Information about the Underlying Theme
Portfolios............................................. 44
Health Care Fund.......................................... 44
Information about the Global Health Care Industries....... 45
Telecommunications Fund................................... 45
Deregulation in the United States......................... 46
Consumer Products and Services Fund....................... 46
Infrastructure Fund....................................... 46
Financial Services Fund................................... 47
Resources Fund............................................ 47
APPENDIX.................................................... 48
Description of Commercial Paper Ratings................... 48
Description of Bond Ratings............................... 48
Absence of Rating......................................... 49
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 76
INTRODUCTION
This Statement of Additional Information relates to the Class A, Class B and
Class C shares of AIM Global Trends Fund, formerly known as GT New Dimension
Fund (the "Fund"). The Fund is a diversified series of AIM Series Trust (the
"Trust"), an open-end management investment company organized as a Delaware
business trust. The Fund seeks its investment objective by investing
substantially all of its assets in shares of the AIM Global Theme Funds: AIM
Global Consumer Products and Services Fund; AIM Global Financial Services Fund;
AIM Global Health Care Fund; AIM Global Infrastructure Fund; AIM Global
Resources Fund; and AIM Global Telecommunications Fund (collectively, the
"Underlying Theme Funds"). A I M Advisors, Inc. ("AIM") serves as the investment
manager of and administrator for the Fund. INVESCO (NY), Inc. (the
"Sub-advisor") serves as the investment sub-advisor of and sub-administrator for
the Fund.
The Trust is a series mutual fund. The rules and regulations of the Securities
and Exchange Commission (the "SEC") require all mutual funds to furnish
prospective investors certain information concerning the activities of a fund
being considered for investment. This information is included in a Prospectus
(the "Prospectus"), dated September 8, 1998, which relates to the Class A, Class
B and Class C shares of the Fund. Copies of the Prospectus and additional copies
of this Statement of Additional Information may be obtained without charge by
writing the principal distributor of the Funds' shares, A I M Distributors, Inc.
("AIM Distributors"), P.O. Box 4739, Houston, TX 77210-4739, or by calling (800)
347-4246. Investors must receive a Prospectus before they invest in the Fund.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Fund. Some of the
information required to be in this Statement of Additional Information is also
included in the Fund's current Prospectus, and in order to avoid repetition,
reference will be made herein to sections of the Prospectus. Additionally, the
Prospectus and this Statement of Additional Information omit certain information
contained in the Trust's Registration Statement filed with the SEC. Copies of
the Registration Statement, including items omitted from the Prospectus and this
Statement of Additional Information, may be obtained from the SEC by paying the
charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust was previously organized as a Massachusetts business trust named "GT
Global Series Trust," which was established on August 26, 1996 and which had one
series named "GT Global New Dimension Fund." On May 29, 1998, the Trust was
reorganized into a Delaware business trust, which was initially established on
May 7, 1998. The Trust currently consists of one series, the Fund. The Fund
currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and Advisor Class shares. From time to time the Board of
Trustees of the Trust may create new series of shares without the necessity of a
vote of the shareholders of the Trust. All historical financial and other
information contained in this Statement of Additional Information for periods
prior to May 29, 1998 relating to the Fund is that of GT Global New Dimension
Fund.
This Statement of Additional Information relates solely to the Class A, Class
B and Class C shares of the Fund.
The term "majority of the outstanding shares" of the Trust, of the Fund or of
a particular class of the Fund means, respectively, the vote of the lesser of
(a) 67% or more of the shares of the Trust, Fund or such class present at a
meeting of the Trust's shareholders, if the holders of more than 50% of the
outstanding shares of the Trust, the Fund or such class are present or
represented by proxy, or (b) more than 50% of the outstanding shares of the
Trust, the Fund or such class.
Class A, Class B, Class C and Advisor Class shares of each Fund have equal
rights and privileges. Each share of a particular class is entitled to one vote,
to participate equally in dividends and distributions declared by the Trust's
Board of Trustees with respect to the class of the Fund and, upon liquidation of
the Fund, to participate proportionately in the net assets of the Fund allocable
to such class remaining after satisfaction of outstanding liabilities of the
Fund allocable to such class. Fund shares are fully paid, non-assessable and
fully transferable when issued and have no preemptive rights and have such
conversion and exchange rights as set forth in the Prospectus and this Statement
of Additional Information. Fractional shares have proportionately the same
rights, including voting rights, as are provided for a full share.
Shareholders of the Fund do not have cumulative voting rights, and therefore
the holders of more than 50% of the outstanding shares of the Fund voting
together for election of trustees may elect all of the members of the Board of
Trustees of the Trust. In such event, the remaining holders cannot elect any
trustees of the Trust.
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INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT POLICIES OF THE FUND
The following supplements the information contained in the Prospectus
concerning the investment policies of the Fund.
U.S. GOVERNMENT SECURITIES. The Fund may invest in various direct obligations
of the U.S. Treasury and obligations issued or guaranteed by the U.S. government
or one of its agencies or instrumentalities (collectively, "U.S. government
securities"). Among the U.S. government securities that may be held by the Fund
are securities that are supported by the full faith and credit of the United
States; securities that are supported by the right of the issuer to borrow from
the U.S. Treasury; and securities that are supported solely by the credit of the
instrumentality.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. A
repurchase agreement is a transaction in which the Fund purchases securities
from a bank or recognized securities dealer and simultaneously commits to resell
the securities to the bank or dealer on an agreed-upon date or upon demand and
at a price reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased securities. The Fund maintains custody of the
underlying securities prior to their repurchase; thus, the obligation of the
bank or dealer to pay the repurchase price on the date agreed to is, in effect,
secured by such securities. If the value of these securities is less than the
repurchase price, plus any agreed-upon additional amount, the other party to the
agreement must provide additional collateral so that at all times the collateral
is at least equal to the repurchase price, plus any agreed-upon additional
amount. The difference between the total amount to be received upon repurchase
of the securities and the price that was paid by the Fund upon acquisition is
accrued as interest and included in its net investment income. Repurchase
agreements carry certain risks not associated with direct investments in
securities, including possible declines in the market value of the underlying
securities and delays and costs to the Fund if the other party to a repurchase
agreement becomes insolvent.
INVESTMENT POLICIES OF THE UNDERLYING THEME FUNDS
The following supplements the information contained in the Prospectus
concerning the investment policies and limitations of the Underlying Theme
Funds. More information about the investment policies and restrictions and the
investment limitations of each Underlying Theme Fund is set forth in the
Underlying Theme Funds' prospectus and statement of additional information.
The Underlying Theme Funds are diversified series of AIM Investment Funds (the
"Underlying Trust"), a registered open-end management investment company. The
AIM Global Consumer Products and Services Fund ("Consumer Products and Services
Fund"), AIM Global Financial Services Fund ("Financial Services Fund"), AIM
Global Infrastructure Fund ("Infrastructure Fund"), and AIM Global Resources
Fund ("Resources Fund") (each, a "Feeder Fund," and, collectively, the "Feeder
Funds") each invests all of its investable assets in the Global Consumer
Products and Services Portfolio, Global Financial Services Portfolio, Global
Infrastructure Portfolio, and Global Resources Portfolio (each, a "Portfolio,"
and, collectively, the "Portfolios"), respectively.
Each Portfolio is a subtrust (a "series") of Global Investment Portfolio (an
open-end management investment company) with an investment objective that is
identical to that of its corresponding Underlying Theme Fund. Whenever the
phrase "all of the Underlying Theme Fund's investable assets" is used herein, it
means that the only investment securities held by a Feeder Fund will be its
interest in its corresponding Portfolio. A Feeder Fund may withdraw its
investment in its corresponding Portfolio at any time, if the Underlying Trust's
Board of Trustees determines that it is in the best interests of the Feeder Fund
and its shareholders to do so. Upon any such withdrawal, a Feeder Fund's assets
would be invested in accordance with the investment policies of its
corresponding Portfolio described below and in the Underlying Theme Funds'
prospectus.
The investment objective of each Feeder Fund is long-term capital growth. The
investment objectives of the AIM Global Health Care Fund ("Health Care Fund")
and the AIM Global Telecommunications Fund ("Telecommunications Fund") are
long-term capital appreciation and long-term capital growth, respectively. The
Portfolios and the Health Care Fund and the Telecommunications Fund, together,
are referred to herein as the "Underlying Theme Portfolios."
SELECTION OF EQUITY INVESTMENTS. With respect to the Global Resources
Portfolio, the Sub-advisor has identified four areas that it expects will create
investment opportunities: (i) improving supply/demand fundamentals, which may
result in higher commodity prices; (ii) privatization of state-owned natural
resource businesses; (iii) management which can improve production efficiencies
without correspondingly increasing commodity prices; and (iv) service companies
with emerging technologies that can enhance productivity or reduce production
costs. Of course, there is no certainty that these factors will produce the
anticipated results.
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With respect to the Telecommunications Fund, the Sub-advisor has identified
four areas that it expects will create investment opportunities: (i)
deregulation of companies in the industry, which will allow competition to
promote greater efficiencies; (ii) privatization of state-owned
telecommunications businesses; (iii) development of infrastructure in
underdeveloped countries and upgrading of services in other countries; and (iv)
emerging technologies that will enhance productivity and reduce costs in the
telecommunications industry. Of course, there is no certainty that these factors
will produce the anticipated results.
There may be times when, in the opinion of the Sub-advisor, prevailing market,
economic or political conditions warrant reducing the proportion of the
Underlying Theme Portfolios' assets invested in equity securities and increasing
the proportion held in cash (U.S. dollars, foreign currencies or multinational
currency units) or invested in debt securities or high quality money market
instruments issued by corporations, or the United States, or a foreign
government. A portion of each Underlying Theme Portfolio's assets normally will
be held in cash (U.S. dollars, foreign currencies or multinational currency
units) or invested in foreign or domestic high quality money market instruments
pending investment of proceeds from new sales of Underlying Theme Fund shares to
provide for ongoing expenses and to satisfy redemptions.
For each Underlying Theme Portfolio's investment purposes, an issuer is
typically considered as located in a particular country if it (a) is organized
under the laws of or has its principal office in a particular country, or (b)
normally derives 50% or more of its total revenues from business in that
country, provided that, in the Sub-advisor's view, the value of such issuer's
securities will tend to reflect such country's development to a greater extent
than developments elsewhere. However, these are not absolute requirements, and
certain companies incorporated in a particular country and considered by the
Sub-advisor to be located in that country may have substantial foreign
operations or subsidiaries and/or export sales exceeding in size the assets or
sales in that country.
In certain countries, governmental restrictions and other limitations on
investment may affect a Underlying Theme Portfolio's ability to invest in such
countries. In addition, in some instances only special classes of securities may
be purchased by foreigners and the market prices, liquidity and rights with
respect to those securities may vary from shares owned by nationals. The
Sub-advisor is not aware at this time of the existence of any investment or
exchange control regulations which might substantially impair the operations of
the Underlying Theme Portfolios as described in the Underlying Theme Funds'
prospectus and statement of additional information. Restrictions may in the
future, however, make it undesirable to invest in certain countries. None of the
Underlying Theme Portfolios has a present intention of making any significant
investment in any country or stock market in which the Sub-advisor considers the
political or economic situation to threaten an Underlying Theme Portfolio with
substantial or total loss of its investment in such country or market.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each Underlying Theme Portfolio may
invest in the securities of investment companies within the limitations of the
Investment Company Act of 1940, as amended (the "1940 Act"). These limitations
currently provide that, in general, an Underlying Theme Portfolio may purchase
shares of an investment company unless (a) such a purchase would cause an
Underlying Theme Portfolio to own in the aggregate more than 3% of the total
outstanding voting stock of the investment company or (b) such a purchase would
cause the Underlying Theme Portfolio to have more than 5% of its assets invested
in the investment company or more than 10% of its assets invested in an
aggregate of all such investment companies. The foregoing restrictions do not
apply to the investment of the Feeder Funds in their corresponding Portfolios.
Investment in closed-end investment companies may involve the payment of
substantial premiums above the value of such companies' portfolio securities.
Each Underlying Theme Portfolio does not intend to invest in such investment
companies unless, in the judgment of the Sub-advisor, the potential benefits of
such investments justify the payment of any applicable premiums. The return on
such securities will be reduced by operating expenses of such companies,
including payments to the investment managers of those investment companies.
DEPOSITARY RECEIPTS. An Underlying Theme Portfolio may hold securities of
foreign issuers in the form of American Depositary Receipts ("ADRs"), American
Depositary Shares ("ADSs") and European Depositary Receipts ("EDRs") or other
securities convertible into securities of eligible foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. ADRs and ADSs are typically issued
by an American bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. EDRs, which are sometimes referred
to as Continental Depositary Receipts ("CDRs"), are issued in Europe typically
by foreign banks and trust companies and evidence ownership of either foreign or
domestic securities. Generally, ADRs and ADSs in registered form are designed
for use in U.S. securities markets and EDRs in bearer form are designed for use
in European securities markets. For purposes of each Underlying Theme
Portfolio's investment policies, an Underlying Theme Portfolio's investments in
ADRs, ADSs and EDRs will be deemed to be investments in the equity securities
representing securities of foreign issuers into which they may be converted.
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ADR facilities may be established as either "unsponsored" or "sponsored."
While ADRs issued under these two types of facilities are in some respects
similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depositary requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depositary usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into U.S. dollars, the disposition of non-cash distributions, and
the performance of other services. The depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass-through voting
rights to ADR holders in respect of the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositaries agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Underlying Theme Portfolios may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS. Warrants or rights may be acquired by an Underlying Theme
Portfolio in connection with other securities or separately and provide the
Underlying Theme Portfolio with the right to purchase at a later date other
securities of the issuer. Warrants are securities permitting, but not
obligating, their holder to subscribe for other securities or commodities.
Warrants do not carry with them the right to dividends or voting rights with
respect to the securities that they entitle their holder to purchase, and they
do not represent any rights in the assets of the issuer. As a result, warrants
may be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities and a warrant ceases to have value if it is not
exercised prior to its expiration date.
LENDING OF UNDERLYING THEME PORTFOLIO SECURITIES. For the purpose of realizing
additional income, each Underlying Theme Portfolio may make secured loans of its
securities holdings amounting to not more than 30% of its total assets.
Securities loans are made to broker/dealers or institutional investors pursuant
to agreements requiring that the loans be continuously secured by collateral at
least equal at all times to the value of the securities lent plus any accrued
interest, "marked to market" on a daily basis. The Underlying Theme Portfolios
may pay reasonable administrative and custodial fees in connection with the loan
of their securities. While the securities loan is outstanding, an Underlying
Theme Portfolio will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the
investment of the collateral or a fee from the borrower. An Underlying Theme
Portfolio will have a right to call each loan and obtain the securities within
the stated settlement period. An Underlying Theme Portfolio will not have the
right to vote equity securities while they are being lent, but it may call in a
loan in anticipation of any important vote. Loans will only be made to firms
deemed by the Sub-advisor to be of good standing and will not be made unless, in
the judgment of the Sub-advisor, the consideration to be earned from such loans
would justify the risk. The risks in lending Underlying Theme Portfolio
securities, as with other extensions of secured credit, consist of possible
delays in receiving additional collateral or in recovery of the securities and
possible loss of rights in the collateral should the borrower fail financially.
COMMERCIAL BANK OBLIGATIONS. For the purposes of each Underlying Theme
Portfolio's investment policies with respect to bank obligations, obligations of
foreign branches of U.S. banks and of foreign banks are obligations of the
issuing bank and may be general obligations of the parent bank. Such obligations
may, however, be limited by the terms of a specific obligation and by government
regulation. As with investments in non-U.S. securities in general, investments
in the obligations of foreign branches of U.S. banks and of foreign banks may
subject each Underlying Theme Portfolio to investment risks that are different
in some respects from those of investments in obligations of U.S. issuers.
Although each Underlying Theme Portfolio will typically acquire obligations
issued and supported by the credit of U.S. or foreign banks having total assets
at the time of purchase of $1 billion or more, this $1 billion figure is not an
investment policy or restriction of each Underlying Theme Portfolio. For the
purposes of calculation with respect to the $1 billion figure, the assets of a
bank will be deemed to include the assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS. A repurchase agreement is a transaction in which an
Underlying Theme Portfolio purchases securities from a bank or recognized
securities dealer and simultaneously commits to resell the securities to the
bank or dealer on an agreed-upon date or upon demand and at a price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased securities. Although repurchase agreements carry certain risks not
associated
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with direct investments in securities, including possible decline in the market
value of the underlying securities and delays and costs to the Underlying Theme
Portfolio if the other party to the repurchase agreement becomes bankrupt, the
Underlying Theme Portfolios intend to enter into repurchase agreements only with
banks and dealers believed by the Sub-advisor to present minimal credit risks in
accordance with guidelines established by the Underlying Trust's or Global
Investment Portfolio's Board of Trustees (each a "Board" and, collectively, the
"Boards"), as applicable. The Sub-advisor will review and monitor the
creditworthiness of such institutions under the applicable Board's general
supervision.
Each Underlying Theme Portfolio will invest only in repurchase agreements
collateralized at all times in an amount at least equal to the repurchase price
plus accrued interest. To the extent that the proceeds from any sale of such
collateral upon a default in the obligation to repurchase were less than the
repurchase price, an Underlying Theme Portfolio would suffer a loss. If the
financial institution that is party to the repurchase agreement petitions for
bankruptcy or otherwise becomes subject to bankruptcy or other liquidation
proceedings, there may be restrictions on an Underlying Theme Portfolio's
ability to sell the collateral and it could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, each Underlying Theme Portfolio intends to
comply with provisions under such code that would allow the immediate resale of
such collateral. Each Underlying Theme Portfolio will not enter into a
repurchase agreement with a maturity of more than seven days if, as a result,
more than 15% of the value of its net assets (except for the Health Care Fund,
more than 10% of the value of its total assets) would be invested in such
repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS. Each
Underlying Theme Portfolio's borrowings will not exceed 33 1/3% of its total
assets, i.e., the Underlying Theme Portfolio's total assets at all times will
equal at least 300% of the amount of outstanding borrowings. If market
fluctuations in the value of an Underlying Theme Portfolio's securities holdings
or other factors cause the ratio of its total assets to outstanding borrowings
to fall below 300%, within three days (excluding Sundays and holidays) of such
event that Underlying Theme Portfolio may be required to sell portfolio
securities to restore the 300% asset coverage, even though from an investment
standpoint such sales might be disadvantageous. Each Underlying Theme Portfolio
may also borrow up to 5% of its total assets for temporary or emergency purposes
other than to meet redemptions. Any borrowing by an Underlying Theme Portfolio
may cause greater fluctuation in the value of its shares than would be the case
if it did not borrow.
Each Underlying Theme Portfolio's fundamental investment limitations permit it
to borrow money for leveraging purposes. However, each Underlying Theme
Portfolio (except the Health Care Fund) is currently prohibited, pursuant to a
non-fundamental investment policy, from borrowing money in order to purchase
securities. Nevertheless, this policy may be changed in the future by the
applicable Board. If an Underlying Theme Portfolio employs leverage in the
future, it would be subject to certain additional risks. Use of leverage creates
an opportunity for greater growth of capital but would exaggerate any increases
or decreases in the net asset value of a Feeder Fund or an Underlying Theme
Portfolio. When the income and gains on securities purchased with the proceeds
of borrowings exceed the costs of such borrowings, an Underlying Theme
Portfolio's earnings or a Feeder Fund's net asset value will increase faster
than otherwise would be the case; conversely, if such income and gains fail to
exceed such costs, an Underlying Theme Portfolio's earnings or a Feeder Fund's
net asset value would decline faster than would otherwise be the case.
Each Underlying Theme Portfolio may enter into reverse repurchase agreements.
A reverse repurchase agreement is a borrowing transaction in which the
Underlying Theme Portfolio transfers possession of securities to another party,
such as a bank or broker/dealer, in return for cash, and agrees to repurchase
the securities in the future at an agreed upon price, which includes an interest
component. Each Underlying Theme Portfolio may also engage in "roll" borrowing
transactions, which involve the sale of Government National Mortgage Association
certificates or other securities together with a commitment (for which the
Underlying Theme Portfolio may receive a fee) to purchase similar, but not
identical, securities at a future date. Each Underlying Theme Portfolio will
segregate cash or liquid securities in an amount sufficient to cover its
obligations under "roll" transactions and reverse repurchase agreements with
broker/dealers. No segregation is required for reverse repurchase agreements
with banks.
SHORT SALES. Each Underlying Theme Portfolio may make short sales of
securities. A short sale is a transaction in which an Underlying Theme Portfolio
sells a security in anticipation that the market price of that security will
decline. An Underlying Theme Portfolio may make short sales (i) as a form of
hedging to offset potential declines in long positions in securities it owns, or
anticipates acquiring, or in similar securities, and (ii) in order to maintain
flexibility in its securities holdings.
When an Underlying Theme Portfolio makes a short sale of a security it does
not own, it must borrow the security sold short and deliver it to the
broker/dealer or other intermediary through which it made the short sale. The
Underlying Theme Portfolio may have to pay a fee to borrow particular securities
and will often be obligated to pay over any payments received on such borrowed
securities.
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An Underlying Theme Portfolio's obligation to replace the borrowed security
when the borrowing is called or expires will be secured by collateral deposited
with the intermediary. The Underlying Theme Portfolio will also be required to
deposit collateral with its custodian to the extent, if any, necessary so that
the value of both collateral deposits in the aggregate is at all times equal to
at least 100% of the current market value of the security sold short. Depending
on arrangements made with the intermediary from which it borrowed the security
regarding payment of any amounts received by it on such security, an Underlying
Theme Portfolio may not receive any payments (including interest) on its
collateral deposited with such intermediary.
If the price of the security sold short increases between the time of the
short sale and the time an Underlying Theme Portfolio replaces the borrowed
security, it will incur a loss; conversely, if the price declines, the
Underlying Theme Portfolio will realize a gain. Any gain will be decreased, and
any loss increased, by the transaction costs associated with the transaction.
Although an Underlying Theme Portfolio's gain is limited by the price at which
it sold the security short, its potential loss theoretically is unlimited.
No Underlying Theme Portfolio will make a short sale if, after giving effect
to the sale, the market value of the securities sold short exceeds 25% of the
value of its total assets or its aggregate short sales of the securities of any
one issuer exceed the lesser of 2% of its net assets or 2% of the securities of
any class of the issuer. Moreover, an Underlying Theme Portfolio may engage in
short sales only with respect to securities listed on a national securities
exchange.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use by the Underlying Theme Portfolios of options, futures contracts and
forward currency contracts ("Forward Contracts") involves special considerations
and risks, as described below. Risks pertaining to particular instruments are
described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Sub-advisor's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes
in the prices of individual securities. While the Sub-advisor is
experienced in the use of these instruments, there can be no assurance that
any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used
in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(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. For example, if an
Underlying Theme Portfolio entered into a short hedge because the
Sub-advisor projected a decline in the price of a security in the
Underlying Theme Portfolio's portfolio, and the price of that security
increased instead, the gain from that increase might be wholly or partially
offset by a decline in the price of the hedging instrument. Moreover, if
the price of the hedging instrument declined by more than the increase in
the price of the security, the Underlying Theme Portfolio could suffer a
loss. In either such case, the Underlying Theme Portfolio would have been
in a better position had it not hedged at all.
(4) As described below, an Underlying Theme Portfolio 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 (i.e., instruments other than purchased
options). If the Underlying Theme Portfolio 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 the Underlying Theme Portfolio'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 Underlying
Theme Portfolio sell a portfolio security at a disadvantageous time. The
Underlying Theme Portfolio's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability
and willingness of the other party to the transaction ("contra party") to
enter into a transaction closing out the position. Therefore, there
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is no assurance that any position can be closed out at a time and price
that is favorable to the Underlying Theme Portfolio.
WRITING CALL OPTIONS
Each Underlying Theme Portfolio may write (sell) call options on securities,
indices and currencies. Call options generally will be written on securities and
currencies that, in the opinion of the Sub-advisor, are not expected to make any
major price moves in the near future but that, over the long term, are deemed to
be attractive investments for the Underlying Theme Portfolios.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he or she may be
assigned an exercise notice, requiring him or her to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by purchasing an option
identical to that previously sold.
Portfolio securities or currencies on which call options may be written will
be purchased solely on the basis of investment considerations consistent with
each Underlying Theme Portfolio's investment objective. When writing a call
option, an Underlying Theme Portfolio, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security or
currency above the exercise price, and retains the risk of loss should the price
of the security or currency decline. Unlike one who owns securities or
currencies not subject to an option, an Underlying Theme Portfolio has no
control over when it may be required to sell the underlying securities or
currencies, since most options may be exercised at any time prior to the
option's expiration. If a call option that an Underlying Theme Portfolio 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 or currency during the option period. If the call option is exercised,
the Underlying Theme Portfolio will realize a gain or loss from the sale of the
underlying security or currency, which will be increased or offset by the
premium received. The Underlying Theme Portfolios do not consider a security or
currency covered by a call option to be "pledged" as that term is used in their
policies that limit the pledging or mortgaging of their assets.
Writing call options can serve as a limited short hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and an Underlying Theme Portfolio
will be obligated to sell the security or currency at less than its market
value.
The premium that an Underlying Theme Portfolio receives for writing a call
option is deemed to constitute the market value of an option. The premium the
Underlying Theme Portfolio will receive from writing a call option will reflect,
among other things, the current market price of the underlying investment, the
relationship of the exercise price to such market price, the historical price
volatility of the underlying investment, and the length of the option period. In
determining whether a particular call option should be written, the Sub-advisor
will consider the reasonableness of the anticipated premium and the likelihood
that a liquid secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit an Underlying Theme
Portfolio to write another call option on the underlying security or currency
with either a different exercise price or expiration date, or both.
Each Underlying Theme Portfolio will pay transaction costs in connection with
the writing of options and in entering into closing purchase contracts.
Transaction costs relating to options activity are normally higher than those
applicable to purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, an Underlying Theme Portfolio may
purchase an underlying security or currency for delivery in accordance with the
exercise of an option, rather than delivering such security or currency from its
portfolio. In such cases, additional costs will be incurred.
An Underlying Theme Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more,
respectively, than the premium received from writing the option. Because
increases in the market price of a call option generally will reflect increases
in the market price of the underlying security or currency, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security or currency owned by an Underlying
Theme Portfolio.
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WRITING PUT OPTIONS
Each Underlying Theme Portfolio may write put options on securities, indices
and currencies. A put option gives the purchaser of the option the right to
sell, and the writer (seller) the obligation to buy, the underlying security or
currency at the exercise price at any time until (American style) or on
(European style) the expiration date. The operation of put options in other
respects, including their related risks and rewards, is substantially identical
to that of call options.
An Underlying Theme Portfolio generally would write put options in
circumstances where the Sub-advisor wishes to purchase the underlying security
or currency for the Underlying Theme Portfolio's holdings at a price lower than
the current market price of the security or currency. In such event, an
Underlying Theme Portfolio would write a put option at an exercise price that,
reduced by the premium received on the option, reflects the lower price it is
willing to pay. Since the Underlying Theme Portfolio would also receive interest
on debt securities or currencies maintained to cover the exercise price of the
option, this technique could be used to enhance current return during periods of
market uncertainty. The risk in such a transaction would be that the market
price of the underlying security or currency would decline below the exercise
price less the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and an Underlying Theme
Portfolio will be obligated to purchase the security or currency at greater than
its market value.
PURCHASING PUT OPTIONS
Each Underlying Theme Portfolio may purchase put options on securities,
indices and currencies. As the holder of a put option, an Underlying Theme
Portfolio would have the right to sell the underlying security or currency at
the exercise price at any time until (American style) or on (European style) the
expiration date. An Underlying Theme Portfolio may enter into closing sale
transactions with respect to such options, exercise such option or permit such
option to expire.
Each Underlying Theme Portfolio may purchase a put option on an underlying
security or currency ("protective put") owned by the Underlying Theme Portfolio
in order to protect against an anticipated decline in the value of the security
or currency. Such hedge protection is provided only during the life of the put
option when the Underlying Theme Portfolio, as the holder of the put option, is
able to sell the underlying security or currency at the put exercise price
regardless of any decline in the underlying security's market price or
currency's exchange value. The premium paid for the put option and any
transaction costs would reduce any profit otherwise available for distribution
when the security or currency is eventually sold.
An Underlying Theme Portfolio may also purchase put options at a time when it
does not own the underlying security or currency. By purchasing put options on a
security or currency it does not own, that Underlying Theme Portfolio seeks to
benefit from a decline in the market price of the underlying security or
currency. If the put option is not sold when it has remaining value, and if the
market price of the underlying security or currency remains equal to or greater
than the exercise price during the life of the put option, the Underlying Theme
Portfolio will lose its entire investment in the put option. In order for the
purchase of a put option to be profitable, the market price of the underlying
security or currency must decline sufficiently below the exercise price to cover
the premium and transaction costs, unless the put option is sold in a closing
sale transaction.
PURCHASING CALL OPTIONS
Each Underlying Theme Portfolio may purchase call options on securities,
indices and currencies. As the holder of a call option, an Underlying Theme
Portfolio would have the right to purchase the underlying security or currency
at the exercise price at any time until (American style) or on (European style)
the expiration date. An Underlying Theme Portfolio may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
Call options may be purchased by an Underlying Theme Portfolio for the purpose
of acquiring the underlying security or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable an Underlying Theme
Portfolio to acquire the security or currency at the exercise price of the call
option plus the premium paid. At times, the net cost of acquiring the security
or currency in this manner may be less than the cost of acquiring the security
or currency directly. This technique may also be useful to an Underlying Theme
Portfolio in purchasing a large block of securities that would be more difficult
to acquire by direct market purchases. So long as it holds such a call option,
rather than the underlying security or currency itself, the Underlying Theme
Portfolio is partially protected from any unexpected
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decline in the market price of the underlying security or currency and, in such
event, could allow the call option to expire, incurring a loss only to the
extent of the premium paid for the option.
An Underlying Theme Portfolio may also purchase call options on underlying
securities or currencies it owns to avoid realizing losses that would result in
a reduction of its current return. For example, where an Underlying Theme
Portfolio has written a call option on an underlying security or currency having
a current market value below the price at which it purchased the security or
currency, an increase in the market price could result in the exercise of the
call option written by the Underlying Theme Portfolio and the realization of a
loss on the underlying security or currency. Accordingly, the Underlying Theme
Portfolio could purchase a call option on the same underlying security or
currency, which could be exercised to fulfill its delivery obligations under its
written call (if it is exercised). This strategy could allow the Underlying
Theme Portfolio to avoid selling the portfolio security or currency at a time
when it has an unrealized loss; however, the Underlying Theme Portfolio would
have to pay a premium to purchase the call option plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of each
Underlying Theme Portfolio's total assets at the time of each purchase.
An Underlying Theme Portfolio may attempt to accomplish objectives similar to
those involved in using Forward Contracts by purchasing put or call options on
currencies. A put option gives an Underlying Theme Portfolio as purchaser the
right (but not the obligation) to sell a specified amount of currency at the
exercise price at any time until (American style) or on (European style) the
expiration date of the option. A call option gives an Underlying Theme Portfolio
as purchaser the right (but not the obligation) to purchase a specified amount
of currency at the exercise price at any time until (American style) or on
(European style) the expiration date of the option. An Underlying Theme
Portfolio might purchase a currency put option, for example, to protect itself
against a decline in the dollar value of a currency in which it holds or
anticipates holding securities. If the currency's value should decline against
the dollar, the loss in currency value should be offset, in whole or in part, by
an increase in the value of the put. If the value of the currency instead should
rise against the dollar, any gain to an Underlying Theme Portfolio would be
reduced by the premium it had paid for the put option. A currency call option
might be purchased, for example, in anticipation of, or to protect against, a
rise in the value against the dollar of a currency in which an Underlying Theme
Portfolio anticipates purchasing securities.
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. An Underlying Theme Portfolio will not purchase an OTC option unless it
believes that daily valuations for such options are readily obtainable. OTC
options differ from exchange-traded options in that OTC options are transacted
with dealers directly and not through a clearing corporation (which guarantees
performance). Consequently, there is a risk of non-performance by the dealer.
Since no exchange is involved, OTC options are valued on the basis of an average
of the last bid prices obtained from dealers, unless a quotation from only one
dealer is available, in which case only that dealer's price will be used. In the
case of OTC options, there can be no assurance that a liquid secondary market
will exist for any particular option at any specific time.
The staff of the SEC considers purchased OTC options to be illiquid
securities. An Underlying Theme Portfolio may also sell OTC options and, in
connection therewith, segregate assets or cover its obligations with respect to
OTC options written by it. The assets used as cover for OTC options written by
an Underlying Theme Portfolio will be considered illiquid unless the OTC options
are sold to qualified dealers who agree that the Underlying Theme Portfolio may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC option written
subject to this procedure would be considered illiquid only to the extent that
the maximum repurchase price under the formula exceeds the intrinsic value of
the option.
An Underlying Theme Portfolio's ability to establish and close out positions
in exchange-listed options depends on the existence of a liquid market. Each
Underlying Theme Portfolio intends to purchase or write only those
exchange-traded options for which there appear to be liquid secondary markets.
However, there can be no assurance that such a market will exist at any
particular time. Closing transactions can be made for OTC options only by
negotiating directly with the contra party or by a transaction in the secondary
market if any such market exists. Although an Underlying Theme Portfolio will
enter into OTC options only with contra parties that are expected to be capable
of entering into closing transactions with it, there is no assurance that the
Underlying Theme Portfolio 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 contra party, the Underlying Theme Portfolio might be unable to close out an
OTC option position at any time prior to its expiration.
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INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or
futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. When an Underlying
Theme Portfolio writes a call on an index, it receives a premium and agrees
that, prior to the expiration date, the purchaser of the call, upon exercise of
the call, will receive from the Underlying Theme Portfolio an amount of cash if
the closing level of the index upon which the call is based is greater than the
exercise price of the call. The amount of cash is equal to the difference
between the closing price of the index and the exercise price of the call times
a specified multiple (the "multiplier"), which determines the total dollar value
for each point of such difference. When an Underlying Theme Portfolio buys a
call on an index, it pays a premium and has the same rights as to such call as
are indicated above. When an Underlying Theme Portfolio buys a put on an index,
it pays a premium and has the right, prior to the expiration date, to require
the seller of the put, upon the Underlying Theme Portfolio's exercise of the
put, to deliver to the Underlying Theme Portfolio an amount of cash if the
closing level of the index upon which the put is based is less than the exercise
price of the put, which amount of cash is determined by the multiplier, as
described above for calls. When the Underlying Theme Portfolio writes a put on
an index, it receives a premium and the purchaser has the right, prior to the
expiration date, to require the Underlying Theme Portfolio to deliver to it an
amount of cash equal to the difference between the closing level of the index
and the exercise price times the multiplier, if the closing level is less than
the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when an Underlying Theme
Portfolio writes a call on an index it cannot provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. An Underlying Theme Portfolio 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, an Underlying
Theme Portfolio cannot, as a practical matter, acquire and hold a portfolio
containing exactly the same securities as underlie the index and, as a result,
bears a risk that the value of the securities held will vary from the value of
the index.
Even if an Underlying Theme Portfolio could assemble a securities portfolio
that exactly reproduced the composition of the underlying index, it still would
not be fully covered from a risk standpoint because of the "timing risk"
inherent in writing index options. When an index option is exercised, the amount
of cash that the holder is entitled to receive is determined by the difference
between the exercise price and the closing index level on the date when the
option is exercised. As with other kinds of options, the Underlying Theme
Portfolio, as the call writer, will not know that it has been assigned until the
next business day at the earliest. The time lag between exercise and notice of
assignment poses no risk for the writer of a covered call on a specific
underlying security, such as common stock, because there the writer's obligation
is to deliver the underlying security, not to pay its value as of a fixed time
in the past. So long as the writer already owns the underlying security, it can
satisfy its settlement obligations by simply delivering it, and the risk that
its value may have declined since the exercise date is borne by the exercising
holder. In contrast, even if the writer of an index call holds securities that
exactly match the composition of the underlying index, it will not be able to
satisfy its assignment obligations by delivering those securities against
payment of the exercise price. Instead, it will be required to pay cash in an
amount based on the closing index value on the exercise date; and by the time it
learns that it has been assigned, the index may have declined, with a
corresponding decline in the value of its securities portfolio. This "timing
risk" is an inherent limitation on the ability of index call writers to cover
their risk exposure by holding securities positions.
If an Underlying Theme Portfolio purchases an index option and exercises it
before the closing index value for that day is available, it runs the risk that
the level of the underlying index may subsequently change. If such a change
causes the exercised option to fall out-of-the-money, the Underlying Theme
Portfolio will be required to pay the difference between the closing index value
and the exercise price of the option (times the applicable multiplier) to the
assigned writer.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each Underlying Theme Portfolio may enter into interest rate, currency or
stock index futures contracts (collectively, "Futures" or "Futures Contracts")
as a hedge against changes in prevailing levels of interest rates, currency
exchange rates or stock price levels, respectively, in order to establish more
definitely the effective return on securities or currencies held or intended to
be acquired by it. An Underlying Theme Portfolio's hedging may include sales of
Futures 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 as an offset against the effect of expected declines in interest rates,
and increases in currency exchange rates or stock prices.
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Each Underlying Theme Portfolio only will enter into Futures Contracts that
are traded 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 by the Commodity
Futures Trading Commission ("CFTC"). Futures are exchanged in London at the
London International Financial Futures Exchange.
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce an Underlying Theme Portfolio's exposure to interest rate,
currency exchange rate and stock market fluctuations, an Underlying Theme
Portfolio may be able to hedge its exposure more effectively and at a lower cost
through using Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (security
or currency) for a specified price at a designated date, time and place. A stock
index Futures Contract provides for the delivery, at a designated date, time and
place, of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of trading on the contract
and the price at which the Futures Contract is originally struck; 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 the Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment
for financial instruments or currencies, Futures Contracts usually are closed
out before the delivery date. Closing out an open Futures Contract sale or
purchase is effected by entering into an offsetting Futures Contract purchase or
sale, respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Underlying Theme Portfolio
realizes a gain; if it is more, the Underlying Theme Portfolio realizes a loss.
Conversely, if the offsetting sale price is more than the original purchase
price, the Underlying Theme Portfolio realizes a gain; if it is less, the
Underlying Theme Portfolio realizes a loss. The transaction costs must also be
included in these calculations. There can be no assurance, however, that an
Underlying Theme Portfolio will be able to enter into an offsetting transaction
with respect to a particular Futures Contract at a particular time. If an
Underlying Theme Portfolio is not able to enter into an offsetting transaction,
it will continue to be required to maintain the margin deposits on the Futures
Contract.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one Futures Contract of September Deutschemarks on an
exchange may be fulfilled at any time before delivery under the Futures Contract
is required (i.e., on a specified date in September, the "delivery month") by
the purchase of another Futures Contract of September Deutschemarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Underlying
Theme Portfolio.
Each Underlying Theme Portfolio's Futures transactions will be entered into
for hedging purposes only; that is, Futures Contracts will be sold to protect
against a decline in the price of securities or currencies that an Underlying
Theme Portfolio owns, or Futures Contracts will be purchased to protect an
Underlying Theme Portfolio against an increase in the price of securities or
currencies it has committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by an Underlying Theme Portfolio in order to initiate Futures trading
and maintain its open positions in Futures Contracts. A margin deposit made when
the Futures Contract is entered into ("initial margin") is intended to ensure
the Underlying Theme Portfolio'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," to and from the futures
commission merchant through which the Underlying Theme Portfolio 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.
Risks of Using Futures Contracts. The prices of Futures Contracts are volatile
and are influenced by, among other things, actual and anticipated changes in
interest rates and currency exchange rates, and in stock market movements, which
in turn are affected by fiscal and monetary policies and national and
international political and economic events.
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the securities or currencies in an Underlying Theme
Portfolio's portfolio being hedged. The degree of imperfection of correlation
depends upon circumstances such as variations in speculative market demand for
Futures and for securities or currencies, including technical influences in
Futures trading; and differences between the financial instruments being hedged
and the instruments underlying the standard Futures Contracts available for
trading. A decision of whether, when and how to
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hedge involves skill and judgment, and even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or interest or
currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in
Futures Contract and options on Futures Contracts prices during a single trading
day. The daily limit establishes the maximum amount that the price of a Futures
Contract or option may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular type of Futures Contract or option, no trades may be made on that
day at a price beyond that limit. The daily limit governs only price movement
during a particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions. Futures
Contracts and option prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of positions and subjecting some traders to substantial
losses.
If an Underlying Theme Portfolio were unable to liquidate a Futures or option
on Futures position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Underlying
Theme Portfolio would continue to be subject to market risk with respect to the
position. In addition, except in the case of purchased options, the Underlying
Theme Portfolio would continue to be required to make daily variation margin
payments and might be required to maintain the position being hedged by the
Future or option or to maintain cash or securities in a segregated account.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
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 position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account,
which represents the amount by which the market price of the Futures Contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the Futures Contract. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the securities, currencies
or index upon which the Futures Contract is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If an Underlying Theme Portfolio writes an option on a Futures Contract, it
will be required to deposit initial and variation margin pursuant to
requirements similar to those applicable to Futures Contracts. Premiums received
from the writing of an option on a Futures Contract are included in the initial
margin deposit.
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An Underlying Theme Portfolio may seek to close out an option position by
selling an option covering the same Futures Contract and having the same
exercise price and expiration date. The ability to establish and close out
positions on such options is subject to the maintenance of a liquid secondary
market.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that an Underlying Theme Portfolio 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 liquidation value of the Underlying
Theme Portfolio, after taking into account unrealized profits and unrealized
losses on any contracts it has entered into. In general, a call option on a
Futures Contract is "in-the-money" if the value of the underlying Futures
Contract exceeds the strike, i.e., exercise, price of the call; a put option on
a Futures Contract is "in-the-money" if the value of the underlying Futures
Contract is exceeded by the strike price of the put. This guideline may be
modified by the applicable Board, without a shareholder vote. This limitation
does not limit the percentage of an Underlying Theme Portfolio's assets at risk
to 5%.
FORWARD CONTRACTS
A Forward 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. An Underlying
Theme Portfolio either may accept or make delivery of the currency at the
maturity of the Forward Contract. An Underlying Theme Portfolio may also, if its
contra party agrees prior to maturity, enter into a closing transaction
involving the purchase or sale of an offsetting contract.
An Underlying Theme Portfolio engages in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates.
An Underlying Theme Portfolio might sell a particular foreign currency forward,
for example, when it holds bonds denominated in a foreign currency but
anticipates, and seeks to be protected against, a decline in the currency
against the U.S. dollar. Similarly, an Underlying Theme Portfolio might sell the
U.S. dollar forward when it holds bonds denominated in U.S. dollars but
anticipates, and seeks to be protected against, a decline in the U.S. dollar
relative to other currencies. Further, an Underlying Theme Portfolio might
purchase a currency forward to "lock in" the price of securities denominated in
that currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
Forward Contract generally has no deposit requirement, and no commissions are
charged at any stage for trades. Each Underlying Theme Portfolio will enter into
such Forward Contracts with major U.S. or foreign banks and securities or
currency dealers in accordance with guidelines approved by the applicable Board.
An Underlying Theme Portfolio may enter into Forward Contracts either with
respect to specific transactions or with respect to overall investments of that
Underlying Theme Portfolio. The precise matching of the Forward Contract amounts
and the value of specific securities generally will not be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the Forward Contract is entered into and the date it matures. Accordingly,
it may be necessary for that Underlying Theme Portfolio to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Underlying Theme Portfolio is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency the Underlying Theme Portfolio is obligated to deliver. The projection
of short-term currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly uncertain.
Forward Contracts involve the risk that anticipated currency movements will not
be predicted accurately, causing an Underlying Theme Portfolio to sustain losses
on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring an Underlying Theme
Portfolio to sell a currency, it either may sell a security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which it will obtain, on the same maturity date, the same amount of
the currency that it is obligated to deliver. Similarly, an Underlying Theme
Portfolio may close out a Forward Contract requiring it to purchase a specified
currency by entering into a second contract, if its contra party agrees,
entitling it to sell the same amount of the same currency on the maturity date
of the first contract. An Underlying Theme Portfolio would realize a gain or
loss as a result of entering into such an offsetting Forward Contract under
either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
the offsetting contract.
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The cost to an Underlying Theme Portfolio of engaging in Forward Contracts
varies with factors such as the currencies involved, the length of the contract
period and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are involved.
The use of Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities an Underlying Theme Portfolio owns or intends to
acquire, but it does establish a rate of exchange in advance. In addition, while
Forward 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.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
An Underlying Theme Portfolio may use options on foreign currencies, Futures
on foreign currencies, options on Futures on foreign currencies and Forward
Contracts to hedge against movements in the values of the foreign currencies in
which the Underlying Theme Portfolio's securities are denominated. Such currency
hedges can protect against price movements in a security that the Underlying
Theme Portfolio owns or intends to acquire that are attributable to changes in
the value of the currency in which it is denominated. Such hedges do not,
however, protect against price movements in the securities that are attributable
to other causes.
An Underlying Theme Portfolio might seek to hedge against changes in the value
of a particular currency when no Futures Contract, Forward Contract or option
involving that currency is available or one of such contracts is more expensive
than certain other contracts. In such cases, the Underlying Theme Portfolio may
hedge against price movements in that currency by entering into a contract on
another currency or basket of currencies, the values of which the Sub-advisor
believes will have a positive correlation to the value of the currency being
hedged. The risk that movements in the price of the contract will not correlate
perfectly with movements in the price of the currency being hedged is magnified
when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward
Contracts and options on foreign currencies depends on the value of the
underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of Futures Contracts, Forward
Contracts or options, the Underlying Theme Portfolio could be disadvantaged by
dealing in the odd lot market (generally consisting of transactions of less than
$1 million) for the underlying foreign currencies at prices that are less
favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving
foreign currencies might be required to take place within the country issuing
the underlying currency. Thus, an Underlying Theme Portfolio might be required
to accept or make delivery of the underlying foreign currency in accordance with
any U.S. or foreign regulations regarding the maintenance of foreign banking
arrangements by U.S. residents and might be required to pay any fees, taxes and
charges associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other
than options purchased by an Underlying Theme Portfolio) expose the Underlying
Theme Portfolio to an obligation to another party. An Underlying Theme Portfolio
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, currencies, or other options,
Forward Contracts or Futures Contracts or (2) cash, receivables and short-term
debt securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Underlying Theme
Portfolio will comply with SEC guidelines regarding cover for these instruments
and, if the guidelines so require, set aside cash or liquid securities.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Forward Contract, Futures Contract or option is
open, unless they are replaced with other appropriate assets. If a large portion
of an Underlying Theme Portfolio's assets is used for cover or otherwise set
aside, it could affect portfolio management or the Underlying Theme Portfolio's
ability to meet redemption requests or other current obligations.
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RISK FACTORS OF THE UNDERLYING THEME PORTFOLIOS
DEBT SECURITIES
The value of the debt securities held by each Underlying Theme Portfolio
generally will vary conversely with market interest rates. If interest rates in
a market fall, the value of the debt securities held by each Underlying Theme
Portfolio ordinarily will rise. If market interest rates increase, however, the
debt securities owned by each Underlying Theme Portfolio in that market will be
likely to decrease in value.
The Global Consumer Products and Services Portfolio, Global Infrastructure
Portfolio and Global Resources Portfolio may each invest up to 20% of its total
assets in debt securities rated below investment grade. Such investments involve
a high degree of risk. However, those Portfolios will not invest in debt
securities that are in default as to payment of principal and interest.
Debt rated Baa by Moody's Investors Service, Inc. ("Moody") is considered by
Moody's to have speculative characteristics. Debt rated BB, B, CCC, CC or C by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), and
debt rated Ba, B, Caa, Ca or C by Moody's is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. For S&P, BB
indicates the lowest degree of speculation for such lower quality debt and C the
highest degree of speculation. For Moody's, Baa indicates the lowest degree of
speculation for such lower quality debt and C the highest degree of speculation.
While such lower quality debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Debt rated C by Moody's or S&P is the lowest
rated debt that is not in default as to principal or interest, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing. Lower quality debt securities also are generally
considered to be subject to greater risk than securities with higher ratings
with regard to a deterioration of general economic conditions. These lower
quality debt securities are the equivalent of high yield, high risk bonds,
commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features that permit the issuer to call or repurchase the security from
an Underlying Theme Portfolio. If an issuer exercises these provisions in a
declining interest rate market, the Underlying Theme Portfolio may have to
replace the security with a lower yielding security, resulting in a decreased
return for investors. In addition, the Underlying Theme Portfolios may have
difficulty disposing of lower quality securities because they may have a thin
trading market. There may be no established retail secondary market for many of
these securities, and each Underlying Theme Portfolio anticipates that such
securities could be sold only to a limited number of dealers or institutional
investors. The lack of a liquid secondary market also may have an adverse impact
on market prices of such instruments and may make it more difficult for the
Underlying Theme Portfolios to obtain accurate market quotations for purposes of
valuing their portfolio investments. The Underlying Theme Portfolios may also
acquire lower quality debt securities during an initial underwriting or which
are sold without registration under applicable securities laws. Such securities
involve special considerations and risks.
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower quality debt securities in which the Underlying Theme
Portfolios may invest include: (i) potential adverse publicity; (ii) heightened
sensitivity to general economic or political conditions; and (iii) the likely
adverse impact of a major economic recession. An Underlying Theme Portfolio may
also incur additional expenses to the extent it is required to seek recovery
upon a
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default in the payment of principal or interest on portfolio holdings, and the
Underlying Theme Portfolio may have limited legal recourse in the event of a
default.
The Sub-advisor attempts to minimize the speculative risks associated with
investments in lower quality securities through credit analysis and by carefully
monitoring current trends in interest rates, political developments and other
factors.
ILLIQUID SECURITIES
Each Underlying Theme Portfolio may invest up to 15% of its net assets in
illiquid securities. Securities may be considered illiquid if an Underlying
Theme Portfolio cannot reasonably expect within seven days to sell the
securities for approximately the amount at which it values such securities. See
"Investment Limitations of the Underlying Theme Funds and Portfolios." The sale
of illiquid securities, if they can be sold at all, generally will require more
time and result in higher brokerage charges or dealer discounts and other
selling expenses than will the sale of liquid securities such as securities
eligible for trading on U.S. securities exchanges or in OTC markets. Moreover,
restricted securities, which may be illiquid for purposes of this limitation,
often sell, if at all, at a price lower than similar securities that are liquid.
Illiquid securities include those that are subject to restrictions contained
in the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, an Underlying Theme Portfolio may be obligated to pay
all or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time the Underlying Theme
Portfolio may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
the Underlying Theme Portfolio might obtain a less favorable price than
prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended (the "1933 Act"),
including private placements, repurchase agreements, commercial paper, foreign
securities and corporate bonds and notes. These instruments are often restricted
securities because the securities are sold in transactions not requiring
registration. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend either on an
efficient institutional market in which such unregistered securities can be
readily resold or on an issuer's ability to honor a demand for repayment.
Therefore, the fact that there are contractual or legal restrictions on resale
to the general public or certain institutions is not dispositive of the
liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
an Underlying Theme Portfolio, however, could affect adversely the marketability
of such portfolio securities, and the Underlying Theme Portfolio might be unable
to dispose of such securities promptly or at favorable prices.
With respect to liquidity determinations generally, the applicable Board has
the ultimate responsibility for determining whether specific securities,
including restricted securities pursuant to Rule 144A under the 1933 Act, are
liquid or illiquid. Each Board has delegated the function of making day-to-day
determinations of liquidity to the Sub-advisor, in accordance with procedures
approved by that Board. The Sub-advisor takes into account a number of factors
in reaching liquidity decisions, including (i) the frequency of trading in the
security, (ii) the number of dealers that make quotes for the security, (iii)
the number of dealers that have undertaken to make a market in the security,
(iv) the number of other potential purchasers and (v) the nature of the security
and how trading is effected (e.g., the time needed to sell the security, how
offers are solicited and the mechanics of transfer). The Sub-advisor monitors
the liquidity of securities held by each Underlying Theme Portfolio and
periodically reports such determinations to the applicable Board. If the
liquidity percentage restriction of an Underlying Theme Portfolio is satisfied
at the time of investment, a later increase in the percentage of illiquid
securities held by the Underlying Theme Portfolio resulting from a change in
market value or assets will not constitute a violation of that restriction. If
as a result of a change in market value or assets, the percentage of illiquid
securities held by the Underlying Theme Portfolio increases above the applicable
limit, the Sub-advisor will take appropriate steps to bring the aggregate amount
of illiquid assets back within the prescribed limitations as soon as reasonably
practicable, taking into account the effect of any disposition on the Underlying
Theme Portfolio. The Sub-advisor believes that carefully selected investments in
joint ventures, cooperatives, partnerships and state enterprises that
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are illiquid (collectively, "Special Situations") could enable an Underlying
Theme Portfolio to achieve capital appreciation substantially exceeding the
appreciation it would realize if it did not make such investments. However, in
order to attempt to limit investment risk, each Underlying Theme Portfolio will
invest no more than 5% of its total assets in Special Situations.
FOREIGN SECURITIES
Political, Social and Economic Risks. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment convertibility of currencies into U.S. dollars and on repatriation of
capital invested. In the event of such expropriation, nationalization or other
confiscation by any country, an Underlying Theme Portfolio could lose its entire
investment in any such country.
Religious, Political and Ethnic Instability. Certain countries in which an
Underlying Theme Portfolio may invest may have groups that advocate radical
religious or revolutionary philosophies or support ethnic independence. Any
disturbance on the part of such individuals could carry the potential for
widespread destruction or confiscation of property owned by individuals and
entities foreign to such country and could cause the loss of an Underlying Theme
Portfolio's investment in those countries. Instability may also result from,
among other things, (i) authoritarian governments or military involvement in
political and economic decision-making, including changes in government through
extra-constitutional means, (ii) popular unrest associated with demands for
improved political, economic and social conditions; and (iii) hostile relations
with neighboring or other countries. Such political, social and economic
instability could disrupt the principal financial markets in which an Underlying
Theme Portfolio invests and adversely affect the value of its assets.
Foreign Investment Restrictions. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as an Underlying Theme Portfolio.
These restrictions or controls may at times limit or preclude investments in
certain securities and may increase the cost and expenses of an Underlying Theme
Portfolio. For example, certain countries require prior governmental approval
before investments by foreign persons may be made or may limit the amount of
investment by foreign persons in a particular company or limit the investment by
foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals. Moreover, the national policies of certain countries may
restrict investment opportunities in issuers or industries deemed sensitive to
national interests. In addition, some countries require governmental approval
for the repatriation of investment income, capital or the proceeds of securities
sales by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
restrictions on foreign capital remittances abroad. An Underlying Theme
Portfolio could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investments.
Non-Uniform Corporate Disclosure Standards and Governmental
Regulation. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the foreign securities held by an
Underlying Theme Portfolio will not be registered with the SEC or regulators of
any foreign country, nor will the issuers thereof be subject to the SEC's
reporting requirements. Thus, there will be less available information
concerning most foreign issuers of securities held by an Underlying Theme
Portfolio than is available concerning U.S. issuers. In instances where the
financial statements of an issuer are not deemed to reflect accurately the
financial situation of the issuer, the Sub-advisor will take appropriate steps
to evaluate the proposed investment, which may include on-site inspection of the
issuer, interviews with its management and consultations with accountants,
bankers and other specialists. There is substantially less publicly available
information about foreign companies than there are reports and ratings published
about U.S. companies. In addition, where public information is available, it may
be less reliable than such information regarding U.S. issuers. Issuers of
securities in foreign jurisdictions are generally not subject to the same degree
of regulation as are U.S. issuers with respect to such matters as restrictions
on market manipulation, insider trading rules, shareholder proxy requirements
and timely disclosure of information.
Currency Fluctuations. Because each Underlying Theme Portfolio, under normal
circumstances, will invest a substantial portion of its total assets in the
securities of foreign issuers that are denominated in foreign currencies, the
strength or weakness of the U.S. dollar against such foreign currencies will
account for part of an Underlying Theme Portfolio's investment performance. A
decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of an Underlying Theme Portfolio's
holdings of securities and cash denominated in that currency and, therefore,
will cause an overall decline in its and its corresponding Feeder Fund's net
asset value (as
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applicable) and any net investment income and capital gains derived from such
securities to be distributed in U.S. dollars to the shareholders thereof.
Moreover, if the value of the foreign currencies in which an Underlying Theme
Portfolio receives its income falls relative to the U.S. dollar between receipt
of the income and the making of distributions, the Underlying Theme Portfolio
may be required to liquidate securities if it has insufficient cash in U.S.
dollars to meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the relative
movement of interest rates and the pace of business activity in the other
countries and the United States, and other economic and financial conditions
affecting the world economy.
Although each Underlying Theme Portfolio values its assets daily in terms of
U.S. dollars, the Underlying Theme Portfolios do not intend to convert their
holdings of foreign currencies into U.S. dollars on a daily basis. Each
Underlying Theme Portfolio will do so, from time to time, and investors should
be aware of the costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to an Underlying
Theme Portfolio at one rate, while offering a lesser rate of exchange should an
Underlying Theme Portfolio desire to sell that currency to the dealer.
Adverse Market Characteristics. Securities of many foreign issuers may be less
liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions usually are subject to fixed
commissions, which generally are higher than negotiated commissions on U.S.
transactions. In addition, foreign securities transactions may be subject to
difficulties associated with the settlement of such transactions. Delays in
settlement could result in temporary periods when assets of an Underlying Theme
Portfolio are uninvested and no return is earned thereon. The inability of an
Underlying Theme Portfolio to make intended security purchases due to settlement
problems could cause it to miss attractive investment opportunities. Inability
to dispose of a portfolio security due to settlement problems either could
result in losses to an Underlying Theme Portfolio due to subsequent declines in
value of the portfolio security or, if that Underlying Theme Portfolio has
entered into a contract to sell the security, could result in possible liability
to the purchaser. The Sub-advisor will consider such difficulties when
determining the allocation of an Underlying Theme Portfolio's assets, although
the Sub-advisor does not believe that such difficulties will have a material
adverse effect on an Underlying Theme Portfolio's portfolio trading activities.
Each Underlying Theme Portfolio may use foreign custodians, which may involve
risks in addition to those related to its use of U.S. custodians. Such risks
include uncertainties relating to (1) determining and monitoring the foreign
custodian's financial strength, reputation and standing, (2) maintaining
appropriate safeguards concerning an Underlying Theme Portfolio's investments,
and (3) possible difficulties in obtaining and enforcing judgments against such
custodians.
Withholding Taxes. Each Underlying Theme Portfolio's net investment income
from securities of foreign issuers may be subject to withholding taxes by the
foreign issuer's country, thereby reducing that income or delaying the receipt
of income when those taxes may be recaptured. See "Taxes."
Concentration. To the extent an Underlying Theme Portfolio invests a
significant portion of its assets in securities of issuers located in a
particular country or region of the world, it may be subject to greater risks
and may experience greater volatility than a fund that is more broadly
diversified geographically.
Special Considerations Affecting Western European Countries. The countries
that are members of the European Economic Community ("Common Market")
(Australia, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom)
eliminated certain import tariffs and quotas and other trade barriers with
respect to one another over the past several years. The Sub-advisor believes
that this deregulation should improve the prospects for economic growth in many
Western European countries. Among other things, the deregulation could enable
companies domiciled in one country to avail themselves of lower labor costs
existing in other countries. In addition, this deregulation could benefit
companies domiciled in one country by opening additional markets for their goods
and services in other countries. Since, however, it is not clear what the exact
form or effect of these Common Market reforms will be on business in Western
Europe, it is impossible to predict the long-term impact of the implementation
of these programs on the securities owned by an Underlying Theme Portfolio.
Special Considerations Affecting Russia and Eastern European
Countries. Investing in Russia and Eastern European countries involves a high
degree of risk and special considerations not typically associated with
investing in the U.S. securities markets and should be considered highly
speculative. Such risks include the following: (1) delays in settling portfolio
transactions and risk of loss arising out of the system of share registration
and custody; (2) the risk that it may
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be impossible or more difficult than in other countries to obtain and/or enforce
a judgment; (3) pervasiveness of corruption and crime in the economic system;
(4) currency exchange rate volatility and the lack of available currency hedging
instruments; (5) higher rates of inflation (including the risk of social unrest
associated with periods of hyper-inflation) and high unemployment; (6) controls
on foreign investment and local practices disfavoring foreign investors and
limitations on repatriation of invested capital, profits and dividends, and on a
fund's ability to exchange local currencies for U.S. dollars; (7) political
instability and social unrest and violence; (8) the risk that the governments of
Russia and Eastern European countries may decide not to continue to support the
economic reform programs implemented recently and could follow radically
different political and/or economic policies to the detriment of investors,
including non-market-oriented policies such as the support of certain industries
at the expense of other sectors or investors, or a return to the centrally
planned economy that existed when such countries had a communist form of
government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt which may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
Special Considerations Affecting Japan. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the United States. In general, however, reported net income in
Japan is understated relative to U.S. accounting standards and this is one
reason why price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the United States,
both factors which tend to result in lower discount rates and higher
price-earnings ratios in Japan than in the United States.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
Special Considerations Affecting Pacific Region Countries. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also exist between South Korea and North Korea. In
addition, the Underlying Theme Portfolios may invest in Hong Kong, which
reverted to Chinese administration on July 1, 1997. Investments in Hong Kong may
be subject to expropriation, nationalization or confiscation, in which case an
Underlying Theme Portfolio could lose its entire investment in Hong Kong. In
addition, the reversion of Hong Kong also presents a risk that the Hong Kong
dollar will be devalued and a risk of possible loss of investor confidence in
Hong Kong's currency, stock market and assets.
Special Considerations Affecting Latin American Countries. Most Latin American
countries have experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have very negative effects on the economies
and securities markets of certain Latin American countries. Certain Latin
American countries are also among the largest debtors to commercial banks and
foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are
maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the
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currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
Special Considerations Affecting Emerging Markets. Investing in the securities
of companies in emerging markets may entail special risks relating to potential
political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, an Underlying Theme Portfolio could lose its
entire investment in any such country.
Emerging securities markets are substantially smaller, less developed, less
liquid and more volatile than the major securities markets. The limited size of
emerging securities markets and limited trading value in issuers compared to the
volume of trading in U.S. securities could cause prices to be erratic for
reasons apart from factors that affect the quality of the securities. For
example, limited market size may cause prices to be unduly influenced by traders
who control large positions. Adverse publicity and investors' perceptions,
whether or not based on fundamental analysis, may decrease the value and
liquidity of portfolio securities, especially in these markets. In addition,
securities traded in certain emerging markets may be subject to risks due to the
inexperience of financial intermediaries, a lack of modern technology, the lack
of a sufficient capital base to expand business operations, and the possibility
of permanent or temporary termination of trading.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities there may
be share registration and delivery delays or failures.
Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain emerging market countries.
Privatizations. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-advisor believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Underlying Theme Portfolios in privatizations in
appropriate circumstances. In certain foreign countries, the ability of foreign
entities such as the Underlying Theme Portfolios to participate in
privatizations may be limited by local law, or the terms on which the Underlying
Theme Portfolios 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.
INVESTMENT LIMITATIONS
INVESTMENT LIMITATIONS OF THE FUND
FUNDAMENTAL LIMITATIONS. The following fundamental limitations of the Fund
cannot be changed without the affirmative vote of a majority of the outstanding
shares of the Fund.
The Fund will not:
(1) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
(2) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
restriction, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(4) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating
23
<PAGE> 96
to such securities, including the right to enforce security interests and
to hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(5) Purchase or sell physical commodities unless acquired as a result
of owning securities or other instruments, but the Fund may purchase, sell
or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments; or
(6) Purchase securities of any one issuer if, as a result, more than
5% of the Fund's total assets would be invested in securities of that
issuer or the Fund would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Fund's total
assets may be invested without regard to this limitation, and except that
this limitation does not apply to securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities or to securities issued
by other investment companies.
Because of its investment objective and policies, the Fund will concentrate
more than 25% of its assets in the mutual fund industry. In accordance with the
Fund's investment program set forth in the Prospectus, the Fund may invest more
than 25% of its assets in the Underlying Theme Funds.
NON-FUNDAMENTAL LIMITATIONS. The following investment limitations of the Fund
are non-fundamental and may be changed by the vote of the Trust's Board of
Trustees without shareholder approval.
The Fund will not:
(1) Invest more than 15% of its net assets in illiquid securities, a
term which means securities that cannot be disposed of within seven days in
the ordinary course of business at approximately the amount at which the
Fund has valued the securities and includes, among other things, repurchase
agreements maturing in more than seven days;
(2) Purchase portfolio securities while borrowings in excess of 5% of
its total assets are outstanding;
(3) Purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the Fund
may make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contract or derivative instruments;
(4) Engage in short sales of securities or maintain a short position,
except that the Fund may maintain short positions in connection with its
use of financial options and futures, forward and spot currency contracts,
swap transactions and other financial contracts or derivative instruments;
or
(5) Purchase securities of other investment companies, except to the
extent permitted by the 1940 Act or under the terms of any exemptive order
granted by the SEC and except that this limitation does not apply to
securities received or acquired as dividends, through offers of exchange,
or as a result of reorganization, consolidation, or merger.
If a percentage restriction on investment or utilization of assets is adhered
to at the time of an investment or transaction, a later change in percentage
ownership of a security or kind of securities resulting from changing market
values or a similar type of event will not be considered a violation of the
Fund's policies or restrictions.
Notwithstanding the forgoing investment limitations, the Fund may invest in
Underlying Theme Funds that have adopted investment limitations that may be more
or less restrictive than those listed above. As a result, the Fund may engage
indirectly in investment strategies that are prohibited under the investment
limitations listed above. The investment limitations and other investment
policies and restrictions of each Underlying Theme Fund are described in its
prospectus and statement of additional information.
Pursuant to Section 12(d)(1)(G) of the 1940 Act, the Fund may invest
substantially all of its assets in the Underlying Theme Funds.
INVESTMENT LIMITATIONS OF THE UNDERLYING THEME FUNDS AND PORTFOLIOS
FEEDER FUNDS
The Financial Services Fund, Infrastructure Fund, Resources Fund and Consumer
Products and Services Fund (each, a "Feeder Fund," and collectively, the "Feeder
Funds") each has the following fundamental investment policy to enable it
24
<PAGE> 97
to invest in the Financial Services Portfolio, Infrastructure Portfolio,
Resources Portfolio and Consumer Products and Services Portfolio (each a
"Portfolio," and collectively, the "Portfolios"), respectively:
Notwithstanding any other investment policy of the Fund, the Fund may invest
all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
All other fundamental investment policies, and the non-fundamental investment
policies, of each Feeder Fund and its corresponding Portfolio are identical.
Therefore, although the following discusses the investment policies of each
Portfolio and its Board of Trustees, it applies equally to each Feeder Fund and
its Board of Trustees.
Each Portfolio has adopted the following investment limitations as fundamental
policies that may not be changed without the affirmative vote of a majority of
the outstanding shares of the Portfolio. Whenever a Feeder Fund is requested to
vote on a change in the investment limitations of its corresponding Portfolio,
the Fund will hold a meeting of its shareholders and will cast its votes as
instructed by its shareholders.
No Portfolio may:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Portfolio may exercise rights under agreements relating
to such securities, including the right to enforce security interests and
to hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Portfolio may
purchase, sell or enter into financial options and futures, forward and
spot currency contracts, swap transactions and other financial contracts or
derivative instruments;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Portfolio might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Portfolio's total
assets (including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the
Portfolio may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than
5% of the Portfolio's total assets would be invested in securities of that
issuer or the Portfolio would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Portfolio's
total assets may be invested without regard to this limitation, and except
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities or to securities
issued by other investment companies.
The following investment policies of each Portfolio are not fundamental
policies and may be changed by vote of the Portfolios' Board of Trustees without
shareholder approval. No Portfolio may:
(1) Invest in securities of an issuer if the investment would cause
the Portfolio to own more than 10% of any class of securities of any one
issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a
readily available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of
those positions (excluding the amount by which options are "in-the-money")
exceeds 5% of the liquidation value of the Portfolio's portfolio, after
taking into account unrealized profits and unrealized losses on any
contracts the Portfolio has entered into;
25
<PAGE> 98
(5) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the Portfolio's
total assets, the Portfolio will not make any additional investments;
(6) Invest more than 10% of its total assets in shares of other
investment companies and may not invest more than 5% of its total assets in
any one investment company or acquire more than 3% of the outstanding
voting securities of any one investment company;
(7) Purchase securities on margin, provided that each Portfolio may
obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Portfolio
may make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments; or
(8) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Investors should refer to the applicable Prospectus for further information
with respect to the investment objective of each Feeder Fund, which may not be
changed without the approval of Fund shareholders, and its corresponding
Portfolio's investment objective, which may be changed without the approval of
its shareholders, and other investment policies, techniques and limitations,
which may or may not be changed without shareholder approval.
HEALTH CARE FUND
The Health Care Fund has adopted the following investment limitations as
fundamental policies, which may not be changed without the affirmative vote of a
majority of the outstanding shares of the Health Care Fund.
The Health Care Fund may not:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Health Care Fund may exercise rights under agreements
relating to such securities, including the right to enforce security
interests and to hold real estate acquired by reason of such enforcement
until that real estate can be liquidated in an orderly manner;
(2) Engage in the business of underwriting securities of other
issuers, except to the extent that the Health Care Fund might be considered
an underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(3) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(4) Purchase or sell physical commodities, but the Health Care Fund
may purchase, sell or enter into financial options and futures, forward and
spot currency contracts, swap transactions and other financial contracts or
derivative instruments;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Health Care Fund's
total assets (including the amount borrowed but reduced by any liabilities
not constituting borrowings) at the time of the borrowing, except that the
Health Care Fund may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than
5% of the Health Care Fund's total assets would be invested in securities
of that issuer or the Health Care Fund would own or hold more than 10% of
the outstanding voting securities of that issuer, except that up to 25% of
the Health Care Fund's total assets may be invested without regard to this
limitation, and except that this limitation does not apply to securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities or to securities issued by other investment companies.
Notwithstanding any other investment policy of the Health Care Fund, the
Health Care Fund may invest all of its investable assets (cash, securities and
receivables related to securities) in an open-end management investment company
having substantially the same investment objective, policies and limitations as
the Fund.
26
<PAGE> 99
The following investment policies of the Health Care Fund are not fundamental
policies and may be changed by vote of the Underlying Trust's Board of Trustees
without shareholder approval. The Health Care Fund will not:
(1) Purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits
maturing in more than seven days, or purchase OTC options or hold assets
set aside to cover OTC options written by the Health Care Fund, if
immediately after and as a result, the value of such securities would
exceed, in the aggregate, 15% of the Health Care Fund's net assets;
(2) Purchase securities on margin, provided that the Health Care Fund
may obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Health
Care Fund may make margin deposits in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments; or
(3) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities; or
(4) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the Health Care
Fund's total assets it will not make any additional investments.
Investors should refer to the Prospectus of the Health Care Fund for further
information with respect to the Health Care Fund's investment objective, which
may not be changed without the approval of its shareholders, and other
investment policies, techniques and limitations, which may be changed without
shareholder approval.
TELECOMMUNICATIONS FUND
The Telecommunications Fund has adopted the following investment limitations
as fundamental policies, which may not be changed without the affirmative vote
of a majority of the outstanding shares of the Telecommunications Fund.
The Telecommunications Fund may not:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Telecommunications Fund may exercise rights under
agreements relating to such securities, including the right to enforce
security interests and to hold real estate acquired by reason of such
enforcement until that real estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Telecommunications
Fund may purchase, sell or enter into financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Telecommunications Fund might be
considered an underwriter under the federal securities laws in connection
with its disposition of portfolio securities;
(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Telecommunications
Fund's total assets (including the amount borrowed but reduced by any
liabilities not constituting borrowings) at the time of the borrowing,
except that the Telecommunications Fund may borrow up to an additional 5%
of its total assets (not including the amount borrowed) for temporary or
emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than
5% of the Telecommunications Fund's total assets would be invested in
securities of that issuer or the Telecommunications Fund would own or hold
more than 10% of the outstanding voting securities of that issuer, except
that up to 25% of the Telecommunications Fund's total assets may be
invested without regard to this limitation, and except that this limitation
does not apply to securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities or to securities issued by other
investment companies.
27
<PAGE> 100
Notwithstanding any other investment policy of the Telecommunications Fund,
the Telecommunications Fund may invest all of its investable assets (cash,
securities and receivables related to securities) in an open-end management
investment company having substantially the same investment objective, policies
and limitations as the Fund.
The following investment policies of the Telecommunications Fund are not
fundamental policies and may be changed by vote of the Underlying Trust's Board
of Trustees without shareholder approval. The Telecommunications Fund may not:
(1) Invest in securities of an issuer if the investment would cause
the Telecommunications Fund to own more than 10% of any class of securities
of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a
readily available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of
those positions (excluding the amount by which options are "in-the-money")
exceeds 5% of the liquidation value of the Fund's portfolio, after taking
into account unrealized profits and unrealized losses on any contracts the
Fund has entered into;
(5) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the
Telecommunications Fund's total assets, it will not make any additional
investments;
(6) Purchase securities on margin, provided that the
Telecommunications Fund may obtain short-term credits as may be necessary
for the clearance of purchases and sales of securities, and further
provided that the Telecommunications Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Investors should refer to the Prospectus of the Telecommunications Fund for
further information with respect to the Telecommunications Fund's investment
objective, which may not be changed without the approval of shareholders, and
other investment policies, techniques and limitations, which may be changed
without shareholder approval.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Fund's or Portfolio's investment policies or
restrictions. A Fund or Portfolio may exchange securities, exercise conversion
or subscription rights, warrants or other rights to purchase common stock or
other equity securities and may hold, except to the extent limited by the 1940
Act, any such securities so acquired without regard to the Fund's or Portfolio's
investment policies and restrictions. The original cost of the securities so
acquired will be included in any subsequent determination of a Fund's or
Portfolio's compliance with the investment percentage limitations referred to
above and in the Prospectus.
EXECUTION OF PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities for the Fund
(normally shares of the Underlying Theme Funds) are placed on behalf of the Fund
by the Sub-advisor. As stated in the Prospectus, the Sub-advisor will exercise
no discretion in investing the assets of the Fund other than to make investments
in money market instruments and to rebalance the percentage of the Fund's assets
in each Underlying Theme Fund.
Subject to policies established by the applicable Board, the Sub-advisor is
responsible for the execution of each Underlying Theme Portfolio's securities
transactions and the selection of broker/dealers who execute such transactions
on behalf of each Underlying Theme Portfolio. In executing transactions, the
Sub-advisor seeks the best net results for each Underlying Theme Portfolio,
taking into account such factors as the price (including the applicable
brokerage commission or dealer spread), size of the order, difficulty of
execution and operational facilities of the firm involved. Although the
Sub-advisor generally seeks reasonably competitive commission rates and spreads,
payment of the lowest commission or spread is not necessarily consistent with
the best net results. While each Underlying Theme Portfolio may engage in soft
dollar arrangements for research services, as described below, it has no
obligation to deal with any broker/dealer or group of broker/dealers in the
execution of portfolio transactions.
28
<PAGE> 101
Consistent with the interests of each Underlying Theme Portfolio, the
Sub-advisor may select broker/dealers to execute that Underlying Theme
Portfolio's portfolio transactions on the basis of the research and brokerage
services they provide to the Sub-advisor for its use in managing that Underlying
Theme Portfolio and its other advisory accounts. Such services may include
furnishing analyses, reports and information concerning issuers, industries,
securities, geographic regions, economic factors and trends, portfolio strategy,
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement).
Research and brokerage services received from such broker are in addition to,
and not in lieu of, the services required to be performed by the Sub-advisor
under investment management and administration contracts. A commission paid to
such broker may be higher than that which another qualified broker would have
charged for effecting the same transaction, provided that the Sub-advisor
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-advisor to
the Underlying Theme Portfolio and its other clients and that the total
commissions paid by that Underlying Theme Portfolio will be reasonable in
relation to the benefits it receive over the long term. Research services may
also be received from dealers who execute portfolio transactions in OTC markets.
The Sub-advisor may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by an Underlying Theme Portfolio toward payment of its
expenses, such as custodian fees.
Investment decisions for an Underlying Theme Portfolio and for other
investment accounts managed by the Sub-advisor are made independently of each
other in light of differing conditions. However, the same investment decision
occasionally may be made for two or more of such accounts, including an
Underlying Theme Portfolio. In such cases, simultaneous transactions may occur.
Purchases or sales are then allocated as to price or amount in a manner deemed
fair and equitable to all accounts involved. While in some cases this practice
could have a detrimental effect upon the price or value of the security as far
as an Underlying Theme Portfolio is concerned, in other cases the Sub-advisor
believes that coordination and the ability to participate in volume transactions
will be beneficial to that Underlying Theme Portfolio.
Under a policy adopted by the applicable Board, and subject to the policy of
obtaining the best net results, the Sub-advisor may consider a broker/dealer's
sale of the shares of the Underlying Theme Funds and the other portfolios for
which the Sub-advisor serves as investment manager or administrator in selecting
broker/dealers for the execution of portfolio transactions. This policy does not
imply a commitment to execute portfolio transactions through all broker/ dealers
that sell shares of the Underlying Theme Funds and such other portfolios.
Each Underlying Theme Portfolio contemplates purchasing most foreign equity
securities in OTC markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. The fixed commissions paid in
connection with most such foreign stock transactions generally are higher than
negotiated commissions on U.S. transactions. There generally is less government
supervision and regulation of foreign stock exchanges and brokers than in the
United States. Foreign security settlements may in some instances be subject to
delays and related administrative uncertainties.
Foreign equity securities may be held by an Underlying Theme Portfolio in the
form of ADRs, ADSs, EDRs, CDRs or securities convertible into foreign equity
securities. ADRs, ADSs, EDRs and CDRs may be listed on stock exchanges, or
traded in the OTC markets in the United States or Europe, as the case may be.
ADRs, like other securities traded in the United States, will be subject to
negotiated commission rates. The foreign and domestic debt securities and money
market instruments in which an Underlying Theme Portfolio may invest are
generally traded in the OTC markets.
An Underlying Theme Portfolio does not have any obligation to deal with any
broker/dealer or group of broker/dealers in the execution of securities
transactions. Each Underlying Theme Portfolio contemplates that, consistent with
the policy of obtaining the best net results, brokerage transactions may be
conducted through certain companies that are affiliated with AIM or the
Sub-advisor. Both Boards have adopted procedures in conformity with Rule 17e-1
under the 1940 Act to ensure that all brokerage commissions paid to such
affiliates are reasonable and fair in the context of the market in which they
are operating. Any such transactions will be effected and related compensation
paid only in accordance with applicable SEC regulations.
The Fund may engage in certain principal and agency transactions with banks
and their affiliates that own 5% or more of the outstanding voting securities of
the Fund, provided the conditions of an exemptive order received by the Funds
from the SEC are met. In addition, a Fund may purchase or sell a security from
or to another AIM Fund provided the Fund follows procedures adopted by the
Boards of Directors/Trustees 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.
29
<PAGE> 102
MANAGEMENT
MANAGEMENT SERVICES RELATING TO THE FUND
AIM serves as the investment manager and administrator to the Fund under an
investment management and administration contract ("Management Contract")
between the Trust and AIM. The Sub-advisor serves as the sub-advisor and
sub-administrator to the Fund under a Sub-Advisory and Sub-Administration
Contract between AIM and the Sub-advisor ("Sub-Management Contract," and
together with the Management Contract, the "Management Contracts"). Neither AIM
nor the Sub-advisor receives a fee for providing management services to the
Fund.
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below. Unless otherwise
indicated, the address of each Executive Officer is 11 Greenway Plaza, Suite
100, Houston, Texas 77046.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
--------------------- ------------------- ------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM, (51) Trustee, Chairman of the Board Director, President and Chief
and President Executive Officer, A I M Management
Group Inc.; Director and President,
A I M Advisors, Inc.; Director and
Senior Vice President, A I M Capital
Management, Inc., A I M
Distributors, Inc., A I M Fund
Services, Inc. and Fund Management
Company; and Director, AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------
C. DEREK ANDERSON, (57) Trustee President, Plantagenet Capital
220 Sansome Street Management, LLC (an investment
Suite 400 partnership); Chief Executive
San Francisco, CA 94104 Officer, Plantagenet Holdings, Ltd.
(an investment banking firm);
Director, Anderson Capital
Management, Inc. since 1988;
Director, PremiumWear, Inc.
(formerly Munsingwear, Inc.) (a
casual apparel company); Director,
"R" Homes, Inc. and various other
companies; and Trustee, each of the
other investment companies
registered under the 1940 Act that
is sub-advised or sub-administered
by the Sub-advisor.
- ----------------------------------------------------------------------------------------------------
FRANK S. BAYLEY, (59) Trustee Partner, law firm of Baker &
Two Embarcadero Center McKenzie; Director and Chairman,
Suite 2400 C.D. Stimson Company (a private
San Francisco, CA 94111 investment company); and Trustee,
each of the other investment
companies registered under the 1940
Act that is sub-advised or
sub-administered by the Sub-advisor.
- ----------------------------------------------------------------------------------------------------
ARTHUR C. PATTERSON, (54) Trustee Managing Partner, Accel Partners (a
428 University Avenue venture capital firm); Director,
Palo Alto, CA 94301 Viasoft and PageMart, Inc. (both
public software companies) and
several other privately held
software and communications
companies; and Trustee, each of the
other investment companies
registered under the 1940 Act that
is sub-advised or sub-administered
by the Sub-advisor.
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* A trustee who is an "interested person" of the Trust and A I M Advisors, Inc. as defined in the
1940 Act.
</TABLE>
30
<PAGE> 103
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
--------------------- ------------------- ------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
RUTH H. QUIGLEY, (63) Trustee Private investor; President, Quigley
1055 California Street Friedlander & Co., Inc. (a financial
San Francisco, CA 94108 advisory services firm) from 1984 to
1986; and Trustee, each of the other
investment companies registered
under the 1940 Act that is
sub-advised or sub-administered by
the Sub-advisor.
- ----------------------------------------------------------------------------------------------------
+JOHN J. ARTHUR, (53) Vice President Director, Senior Vice President and
Treasurer, A I M Advisors, Inc.;
Vice President and Treasurer, A I M
Management Group Inc., A I M Capital
Management, Inc., A I M
Distributors, Inc., A I M Fund
Services, Inc. and Fund Management
Company.
- ----------------------------------------------------------------------------------------------------
KENNETH W. CHANCEY, (53) Vice President and Principal Senior Vice President -- Mutual Fund
50 California Street Accounting Officer Accounting, the Sub-advisor since
San Francisco, CA 94111 1997; Vice President -- Mutual Fund
Accounting, the Sub-advisor from
1992-1997.
- ----------------------------------------------------------------------------------------------------
MELVILLE B. COX, (54) Vice President Vice President and Chief Compliance
Officer, A I M Advisors, Inc., A I M
Capital Management, Inc., A I M
Distributors, Inc., A I M Fund
Services, Inc. and Fund Management
Company.
- ----------------------------------------------------------------------------------------------------
GARY T. CRUM, (50) Vice President Director and President, A I M
Capital Management, Inc.; Director
and Senior Vice President, A I M
Management Group Inc. and A I M
Advisors, Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------
HELGE K. LEE, (52) Vice President and Secretary Chief Legal and Compliance
50 California Street Officer -- North America, the
San Francisco, CA 94111 Sub-advisor since October 1997;
Secretary and Chief Legal and
Compliance Officer, INVESCO (NY)
Asset Management, Inc., INVESCO
(NY), Inc., GT Global Investor
Services, Inc. and G.T. Insurance
since August 1997; Secretary and
Chief Legal and Compliance Officer,
GT Global from August 1997 to April
1998; Executive Vice President of
the Asset Management Division of
Liechtenstein GlobalTrust AG, from
October 1996 to May 1998; Senior
Vice President, General Counsel and
Secretary of INVESCO (NY) Asset
Management, Inc., INVESCO (NY),
Inc., GT Global, GT Global Investor
Services, Inc. and G.T. Insurance
from May 1994 to October 1996; and
Senior Vice President, General
Counsel and Secretary of
Strong/Corneliuson Management, Inc.
and Secretary of each of the Strong
Funds from October 1991 to May 1994.
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
+ Mr. Arthur and Ms. Relihan are married to each other.
</TABLE>
31
<PAGE> 104
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
--------------------- ------------------- ------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
+CAROL F. RELIHAN, (43) Vice President Director, Senior Vice President,
General Counsel and Secretary, A I M
Advisors, Inc.; Vice President,
General Counsel and Secretary, A I M
Management Group Inc.; Director,
Vice President and General Counsel,
Fund Management Company; Vice
President and General Counsel, A I M
Fund Services, Inc.; and Vice
President, A I M Capital Management,
Inc. and A I M Distributors, Inc.
- ----------------------------------------------------------------------------------------------------
DANA R. SUTTON, (39) Vice President and Assistant Vice President and Fund Controller,
Treasurer A I M Advisors, Inc.; and Assistant
Vice President and Assistant
Treasurer, Fund Management Company.
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
+ Mr. Arthur and Ms. Relihan are married to each other.
The Board of Trustees has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and its
funds and recommending firms to serve as independent auditors of the Trust. All
of the Trust's Trustees also serve as directors or trustees of some or all of
the other investment companies managed, administered or advised by AIM. All of
the Trust's executive officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM. Each Trustee
who is not a director, officer or employee of the Sub-advisor or any other
affiliated company is paid aggregate fees of $5,000 a year, plus $300 per Fund
for each meeting of the Board attended, and reimbursed travel and other expenses
incurred in connection with attendance at such meetings. Other Trustees and
Officers receive no compensation or expense reimbursement from the Trust.
THE DISTRIBUTION PLANS
THE CLASS A AND C PLAN
The Trust has adopted a Master Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act relating to the Class A and Class C shares of the Fund (the "Class
A and C Plan"). The Class A and C Plan provides that the Class A shares pay
0.50% per annum of their average daily net assets as compensation to AIM
Distributors for the purpose of financing any activity which is primarily
intended to result in the sale of Class A shares. Under the Class A and C Plan,
Class C shares of the Fund pay compensation to AIM Distributors at an annual
rate of 1.00% of the average daily net assets attributable to Class C shares. Of
such amounts, the Fund pays a service fee of 0.25% of the average daily net
assets attributable to Class A and Class C shares to selected dealers and other
institutions which furnish continuing personal shareholder services to their
customers who purchase and own Class A and Class C shares. Activities
appropriate for financing under the Class A and C Plan 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 the Class A and C Plan.
THE CLASS B PLAN
The Trust has also adopted a Master Distribution Plan pursuant to Rule 12b-1
under the 1940 Act relating to Class B shares of the Fund (the "Class B Plan,"
and collectively with the Class A and C Plan, the "Plans"). Under the Class B
Plan, the Fund pays compensation to AIM Distributors at an annual rate of 1.00%
of the average daily net assets attributable to Class B shares. Of such amount,
the Fund pays a service fee of 0.25% of the average daily net assets
attributable to Class B shares to selected dealers and other institutions which
furnish continuing personal shareholder services to their customers who purchase
and own Class B shares. Amounts paid in accordance with the Class B Plan may be
used to finance any activity primarily intended to result in the sale of Class B
shares, including but not limited to printing of prospectuses and statements of
additional information and reports for other than existing shareholders;
32
<PAGE> 105
overhead; preparation and distribution of advertising material and sales
literature; expenses of organizing and conducting sales seminars; supplemental
payments to dealers and other institutions such as asset-based sales charges or
as payments of service fees under shareholder service arrangements; and costs of
administering the Class B Plan. AIM Distributors may transfer and sell its
rights to payments under the Class B Plan in order to finance distribution
expenditures in respect of Class B shares.
BOTH PLANS
Pursuant to an incentive program, AIM Distributors may enter into agreements
("Shareholder Service Agreements") with investment dealers selected from time to
time by AIM Distributors for the provision of distribution assistance in
connection with the sale of the Fund's shares to such dealers' customers, and
for the provision of continuing personal shareholder services to customers who
may from time to time directly or beneficially own shares of the Funds. The
distribution assistance and continuing personal shareholder services to be
rendered by dealers under the Shareholder Service Agreements may include, but
shall not be limited to, the following: distributing sales literature; answering
routine customer inquiries concerning the Fund; assisting customers in changing
dividend options, account designations and addresses, and in enrolling in any of
the several special investment plans offered in connection with the purchase of
the Fund's shares; assisting in the establishment and maintenance of customer
accounts and records and in the processing of purchase and redemption
transactions; investing dividends and any capital gains distributions
automatically in the Fund's shares; and providing such other information and
services as the Fund or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements authorizing
payments to selected dealers, banks may enter into Shareholder Service
Agreements authorizing payments under the Plans to be made to banks which
provide services to their customers who have purchased shares. Services provided
pursuant to Shareholder Service Agreements with banks may include some or all of
the following: answering shareholder inquiries regarding the Fund, performing
sub-accounting; establishing and maintaining shareholder accounts and records;
processing customer purchase and redemption transactions; providing periodic
statements showing a shareholder's account balance and the integration of such
statements with those of other transactions and balances in the shareholder's
other accounts serviced by the bank; forwarding applicable prospectuses, proxy
statements, reports and notices to bank clients who hold Fund shares; and such
other administrative services as the Fund reasonably may request, to the extent
permitted by applicable statute, rule or regulation. Similar agreements may be
permitted under the Plans for institutions which provide recordkeeping for and
administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one particular class over another.
Under a Shareholder Service Agreement, the 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 generally will be calculated at the end of each payment period for
each business day of the Fund during such period at the annual rate of 0.25% of
the average daily net asset value of the Fund's shares purchased or acquired
through exchange. Fees calculated in this manner shall be paid only to those
selected dealers or other institutions who are dealers or institutions of record
at the close of business on the last business day of the applicable payment
period for the account in which the Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable limitations
imposed by rules of the National Association of Securities Dealers, Inc.
("NASD"). The Plans conform to rules of the NASD by limiting payments made to
dealers and other financial institutions who provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund
to no more than 0.25% per annum of the average daily net assets of the funds
attributable to the customers of such dealers or financial institutions, and by
imposing a cap on the total sales charges, including asset based sales charges,
that may be paid by the Fund and its respective classes.
AIM Distributors does not act as principal, but rather as agent for the Fund,
in making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Fund and not of AIM Distributors.
Prior to June 1, 1998, the Fund had adopted a different Rule 12b-1 plan, that
operated as a "reimbursement-type" plan (the "Prior Plan"). The information
provided below related to payments made under the Prior Plan, which provided for
payments to GT Global Inc., the distributor of the Fund at the time the Prior
Plan was in effect.
33
<PAGE> 106
For the fiscal period ended December 31, 1997, the Fund paid the following
amounts under the Prior Plan:
<TABLE>
<CAPTION>
% OF CLASS AVERAGE
DAILY NET ASSETS
--------------------
CLASS A CLASS B CLASS A CLASS B
- ------- ------- ------- -------
<S> <C> <C> <C>
$11,800 $27,856 0.50% 1.00%
</TABLE>
Actual fees by category paid by the Fund with regard to the Class A shares
during the fiscal period ended December 31, 1997 follows:
<TABLE>
<S> <C>
CLASS A
Compensation to Underwriters to partially offset other
marketing expenses..................................... $ 2,360
Compensation to Dealers including finder's fees........... $ 9,440
</TABLE>
Actual fees by category paid by the Fund with regard to the Class B shares
during the fiscal period ended December 31, 1997 as follows:
<TABLE>
<S> <C>
CLASS B
Compensation to Underwriters to partially offset upfront
dealer commissions
and other marketing costs.............................. $20,892
Compensation to Dealers................................... $ 6,964
</TABLE>
The Fund began offering Class C shares January 1, 1998. There are no actual
fees by category paid by the Fund with regard to the Class C shares during the
year ended December 31, 1997.
The Plans require AIM Distributors to provide the Board of Trustees at least
quarterly with a written report of the amounts expended pursuant to the Plans
and the purposes for which such expenditures were made. The Board of Trustees
reviews these reports in connection with their decisions with respect to the
Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder Service
Agreements were approved by the Board of Trustees, 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 ("Qualified 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 Fund and their
respective shareholders.
The Plans do not obligate the Fund to reimburse AIM Distributors for the
actual expenses AIM Distributors may incur in fulfilling its obligations under
the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Fund will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Unless terminated earlier in accordance with their terms, the Plans continue
in effect until May 29, 1999, and each year thereafter, as long as such
continuance is specifically approved at least annually by the Board of Trustees,
including a majority of the Qualified Trustees.
The Plans may be terminated by the vote of a majority of the Qualified
Trustees, or, with respect to a particular class, by the vote 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,
it may be amended by the Trustees, including a majority of the Qualified
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 Qualified Trustees is committed to the discretion of the
Qualified Trustees. In the event the Class A and C Plan is amended in a manner
which the Board of Trustees determines would materially increase the charges
paid under the Class A and C Plan, the Class B shares of the Fund will no longer
convert into Class A shares of the same Fund unless the Class B shares, voting
separately, approve such amendment. If the Class B shareholders do not approve
such amendment, the Board of Trustees will (i) create a new class of shares of
the Fund which is identical in all material respects to the Class A shares as
they existed prior to the implementation of the amendment and (ii) ensure that
the existing Class B shares of the Fund will be exchanged or converted into such
new class of shares no later than the date the Class B shares were scheduled to
convert into Class A shares.
The principal differences between the Class A and C Plan, on the one hand, and
the Class B Plan, on the other hand, are: (i) the Class A and C Plan allows
payment to AIM Distributors or to dealers or financial institutions of up to
0.50% of
34
<PAGE> 107
average daily net assets of the Class A shares of the Fund, as compared
to 1.00% of such assets of the Fund's Class B shares; (ii) the Class B Plan
obligates the 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 and its predecessor, GT Global, Inc. unless there has been a
complete termination of the Class B Plan (as defined in such Plan) and (iii) the
Class B Plan expressly authorizes AIM Distributors to assign, transfer or pledge
its rights to payments pursuant to the Class B Plan.
THE DISTRIBUTOR
Information concerning AIM Distributors and the continuous offering of the
Fund's shares is set forth in the Prospectus under the headings "How to Purchase
Shares" and "Terms and Conditions of Purchase of the AIM Funds." Master
Distribution Agreements with AIM Distributors relating to the Class A, Class B
and Class C shares of the Funds were approved by the Board of Directors on May
7, 1998. Both such Master Distribution Agreements are hereinafter collectively
referred to as the "Distribution Agreements."
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing the Fund's
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Fund), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of the Fund's shares, including expenses
of advertising in connection with such public offerings. AIM Distributors has
not undertaken to sell any specified number of shares of any classes of the
Fund.
AIM Distributors expects to pay sales commissions from its own resources to
dealers and institutions who sell Class B and Class C shares of the Funds at the
time of such sales. Payments with respect to Class B shares will equal 4.0% 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. AIM Distributors anticipates that it will
require a number of years to recoup from Class B Plan payments the sales
commissions paid to dealers and institutions in connection with sales of Class B
shares. 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 Fund at the time of such sales. Payments with respect
to Class C shares will equal 1.00% of the purchase price of the Class C shares
sold by the dealer or institution, and will consist of a sales commission of
0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. After the first full year, AIM Distributors will make such
payments quarterly to dealers and institutions based on the average net asset
value of Class C shares which are attributable to shareholders for whom the
dealers and institutions are designated as dealers of record.
The Trust (on behalf of any class of the Fund) or AIM Distributors may
terminate the Distribution Agreements on sixty (60) days' written notice without
penalty. The Distribution Agreements will terminate automatically in the event
of their assignment. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset based
distribution fees in respect of the outstanding Class B shares attributable to
the distribution efforts of AIM Distributors and its predecessor; provided,
however, that a complete termination of the Class B Plan (as defined in such
Plan) would terminate all payments by the Fund of asset based distribution fees
and service fees to AIM Distributors. Termination of the Class B Plan or
Distribution Agreement does not affect the obligation of the Class B
shareholders to pay contingent deferred sales charges.
35
<PAGE> 108
The following chart reflects the total sales charges paid in connection with
the sale of Class A shares of the Fund and the amount retained by GT Global,
Inc., the Fund's distributor prior to June 1, 1998, for the fiscal period ended
December 31, 1997.
<TABLE>
<CAPTION>
SALES AMOUNT
CHARGES RETAINED
------- --------
1997
----
<S> <C> <C>
AIM Global Trends Fund...................................... $6,174 $6,174
</TABLE>
The following chart reflects the contingent deferred sales charges paid by
Class A and Class B shareholders for the fiscal period ended December 31, 1997:
<TABLE>
<CAPTION>
1997
------
<S> <C>
AIM Global Trends Fund...................................... $1,902
</TABLE>
NET ASSET VALUE DETERMINATION
The net asset value per share of the Fund is normally determined daily as of
the close of trading of the New York Stock Exchange ("NYSE") (generally 4:00
p.m. Eastern time) on each business day of the Fund. In the event the NYSE
closes early (i.e., before 4:00 p.m. Eastern time) on a particular day, the net
asset value of the Fund is determined as of the close of the NYSE on such day.
Net asset value per share is determined by dividing the value of the Fund's
interests in the Underlying Theme Funds attributable to a class, less all its
liabilities attributable to that class, by the total number of shares
outstanding of that class. The value of the Fund's interests in the Underlying
Theme Funds is determined in accordance with the procedures and methodologies
described in the prospectus and statement of additional information of the
Underlying Theme Funds. Determination of the Fund's net asset value per share is
made in accordance with generally accepted accounting principles.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner in which shares of the Fund may be
purchased appears in the Fund's Prospectus under the headings "How to Purchase
Shares," "Terms and Conditions of Purchase of the AIM Funds" and "Special
Plans."
The sales charge normally deducted on purchases of Class A shares is used to
compensate AIM Distributors and participating dealers for their expenses
incurred in connections with the distribution of the Fund's Class A shares.
Since there is little expense associated with unsolicited orders placed directly
with AIM Distributors by persons who, because of their relationship with the
Fund or with AIM and its affiliates, are familiar with the Fund, or whose
programs for purchase involve little expense (e.g., because of the size of the
transaction and shareholder records required), AIM Distributors believes that it
is appropriate and in the Fund's best interests that such persons, and certain
other persons whose purchases result in relatively low expenses of distribution,
be permitted to purchase Class A shares of the Fund through AIM Distributors
without payment of a sales charge. The persons who may purchase Class A shares
of the Fund without a sales charge are set forth in the Fund's Prospectus. In
addition, the Fund offers programs such as Right of Accumulation and Letter of
Intent, which are described in the Prospectus, that are designed to permit
investors to aggregate purchases of different funds, or separate purchases over
time, in order to qualify for a lower sales charge rate. See "Terms and
Conditions of Purchase of the AIM Funds -- Reductions in Initial Sales Charges"
in the Prospectus.
Class A shares that are subject to a contingent deferred sales charge and that
were purchased before June 1, 1998 are entitled to the following waivers from
the contingent deferred sales charge otherwise due upon redemption: (1) 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; (2) total or partial redemptions resulting from a
distribution following retirement in the case of a tax-qualified
employer-sponsored retirement plan; (3) when a redemption results from a
tax-free return of an excess contribution pursuant to Section 408(d)(4) or (5)
of the Code or from the death or disability of the employee; (4) redemptions
pursuant to a Fund's right to liquidate a shareholder's account involuntarily;
(5) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in AIM 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
AIM Funds; (6) redemptions made in connection with participant-directed
exchanges between options in an employer-sponsored benefit plan; (7) redemptions
made for the purpose of providing cash to fund a loan to a participant in a
tax-qualified retirement plan; (8) redemptions made in
36
<PAGE> 109
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; (9) redemptions made in connection with
a distribution from any retirement plan or account that involves the return of
an excess deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of
the Code; (10) 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 (11) 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.
Class B and Class C shares purchased before June 1, 1998 are subject to the
following waivers from the contingent deferred sales charge otherwise due upon
redemption in addition to the waivers provided for redemptions of currently
issued Class B and Class C shares as described in the Prospectus: (1) total or
partial redemptions resulting from a distribution following retirement in the
case of a tax-qualified employer-sponsored retirement; (2) 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; (3) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in AIM 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
AIM Funds; (4) redemptions made in connection with participant-directed
exchanges between options in an employer-sponsored benefit plan; (5) redemptions
made for the purpose of providing cash to fund a loan to a participant in a tax-
qualified retirement plan; (6) 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; (7) 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 (8) 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.
For purposes of a Letter of Intent entered into prior to June 1, 1998, any
registered investment advisor, trust company or bank trust department which
exercises investment discretion and which intends within thirteen months to
invest $500,000 or more can be treated as a single purchaser, provided further
that such entity places all purchases and redemption orders. Such entities
should be prepared to establish their qualifications for such treatment.
Complete information concerning the method of exchanging shares of the Fund
for shares of the other AIM Funds is set forth in the Prospectus under the
heading "Exchange Privilege."
Information concerning redemption of the Fund's shares is set forth in the
Prospectus under the heading "How to Redeem Shares." In addition to the Fund's
obligation to redeem shares, AIM Distributors may also repurchase shares as an
accommodation to shareholders. To effect a repurchase, those dealers who have
executed Selected Dealer Agreements with AIM Distributors must phone orders to
the order desk of the Fund 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 Fund next determined after the repurchase order is
received. Such an arrangement is subject to timely receipt by A I M Fund
Services, Inc. ("AFS"), the Fund's 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 the Fund or by AIM Distributors (other than any applicable
contingent deferred sales charge) when shares are redeemed or repurchased,
dealers may charge a fair service fee for handling the transaction.
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the 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.
QUALIFYING FOR A REDUCED FRONT-END SALES CHARGE
As described in the Prospectus, the front-end sales charge for Class A shares
is calculated by multiplying an investor's total investment by the applicable
sales charge rate. The applicable rate varies with the amount invested. The Fund
offers programs such as Right of Accumulation and Letter of Intent, which are
described in the Prospectus, and are designed to permit investors to aggregate
purchases of different funds, or separate purchases over time, in order to
qualify for a lower
37
<PAGE> 110
sales charge rate. See "Terms and Conditions of Purchase of
the AIM Funds -- Reductions In Initial Sales Charges" in the Prospectus.
PROGRAMS AND SERVICES FOR SHAREHOLDERS
The Funds provide certain services for shareholders and certain investment or
redemption programs. See "Exchange Privilege" and "How to Redeem Shares" in the
Prospectus. All inquiries concerning these programs should be made directly to
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, toll free
at (800) 959-4246.
DIVIDEND ORDER
Dividends may be paid to someone other than the registered owner, or sent to
an address other than the address of record. (Please note that signature
guarantees are required to effect this option.) An investor also may direct that
his or her dividends be invested in one of the other AIM Funds and there is no
sales charge for these investments; Initial Investment minimums apply. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" in the
Prospectus. To effect this option, please contact your authorized dealer. For
more information concerning AIM Funds other than the Fund, please obtain a
current prospectus by contacting your authorized dealer, by writing to A I M
Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, or by calling
toll free (800) 959-4246.
38
<PAGE> 111
TAXES
TAXATION OF THE FUND
To continue to qualify for treatment as a regulated investment company ("RIC")
under the Code, the Fund must distribute to its shareholders for each taxable
year at least 90% of its investment company taxable income (consisting generally
of net investment income and net short-term capital gain) ("Distribution
Requirement") and must meet several additional requirements. These requirements
include the following: (1) the Fund must derive at least 90% of its gross income
each taxable year from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of securities, or other
income derived with respect to its business of investing in securities; and (2)
the Diversification Requirements.
The Fund will invest its assets in shares of the Underlying Theme Funds, cash
and money market instruments. Accordingly, the Fund's income will consist of
distributions from the Underlying Theme Funds, net gains realized from the
disposition of Underlying Theme Fund shares and interest. If an Underlying Theme
Fund qualifies for treatment as a RIC under the Code -- each has done so for its
past taxable years and intends to continue to do so for its current and future
taxable years -- (1) dividends paid to the Fund from the Underlying Theme Fund's
investment company taxable income (which may include net gains from certain
foreign currency transactions) will be taxable to the Fund as ordinary income to
the extent of the Underlying Theme Fund's earnings and profits and (2)
distributions paid to the Fund from the Underlying Theme Fund's net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
when designated as such, will be taxable to the Fund as long-term capital gains,
regardless of how long the Fund has held the Underlying Theme Fund's shares. If
shares of an Underlying Theme Fund are purchased within 30 days before or after
redeeming at a loss, other shares of that Underlying Theme Fund (whether
pursuant to a rebalancing of the Fund's portfolio or otherwise) all or a part of
the loss will not be deductible by the Fund and instead will increase its basis
for the newly purchased shares.
Although an Underlying Theme Fund will be eligible to elect to "pass-through"
to its shareholders (including the Fund) the benefit of the foreign tax credit
with respect to any foreign and U.S. possessions income taxes it pays if more
than 50% in the value of its total assets at the close of any taxable year
consists of securities of foreign corporations, the Fund will not qualify to
pass that benefit through to its shareholders because of its inability to
satisfy that asset test.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
TAXATION OF THE FUND'S SHAREHOLDERS
Dividends and other distributions declared by the Fund, and payable to
shareholders of record as of a date, in October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation or foreign partnership ("foreign shareholder") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by the Fund to a foreign
shareholder that is "effectively connected with the conduct of a U.S. trade or
business," in which case the reporting and withholding requirements applicable
to domestic shareholders will apply. A distribution of net capital gain by the
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Fund and its shareholders. Investors are urged to
consult their own tax advisors for more detailed information and for information
regarding any foreign, state and local taxes applicable to distributions
received from the Fund.
39
<PAGE> 112
MISCELLANEOUS INFORMATION
SPECIAL SERVICING AGREEMENT
Subject to the receipt of an exemptive order from the Securities and Exchange
Commission, a Special Servicing Agreement (the "Service Agreement") will be
entered into among AIM, the Sub-advisor, the Underlying Theme Funds, AFS, and
the Trust. The Service Agreement will provide that, if the officers of any
Underlying Theme Fund, at the direction of the Trust's Board of Trustees,
determine that the aggregate expenses of the Fund are less than the estimated
savings to the Underlying Theme Fund from the operation of the Fund, the
Underlying Theme Fund will bear those expenses in proportion to the average
daily value of its shares owned by the Fund and/or the number of shareholder
accounts at the Fund. No Underlying Theme Fund will bear such expenses in excess
of the estimated savings to it. Such savings are expected to result primarily
from the elimination of numerous separate shareholder accounts which are or
would have been invested directly in the Underlying Theme Funds and the
resulting reduction in shareholder servicing costs. In this regard, the
shareholder servicing costs to any Underlying Theme Fund for servicing one
account registered to the Trust would be significantly less than the cost to
that same Underlying Theme Fund of servicing the same pool of assets contributed
in the typical fashion by a large group of individual shareholders owning small
accounts in each Underlying Theme Fund. If the Fund's costs exceed the aggregate
estimated savings to the Underlying Theme Funds, the Sub-advisor will pay the
excess on behalf of the Fund.
Rule 12b-1 distribution and service fees will not be paid in accordance with
the Service Agreement. Nor will certain non-recurring and extraordinary expenses
be payable in accordance therewith including: the fees and costs of actions,
suits or proceedings and any penalties or damages in connection therewith, to
which the Trust and/or the Fund may incur directly, or may incur as a result of
its legal obligation to provide indemnification to its officers, trustees and
agents; the fees and costs of any governmental investigation and any fines or
penalties in connection therewith; and any federal, state or local tax, or
related interest penalties or additions to tax, incurred, for example, as a
result of the Trust's failure to distribute all of its income and gains, its
failure to qualify as a RIC under the Code, or failure to timely file any
required tax returns or other filings. Amounts not payable pursuant to the
Service Agreement will be paid by the Fund.
AIM was organized in 1976, and along with its subsidiaries, manages or advises
approximately 90 investment company portfolios encompassing a broad range of
investment objectives. AIM is a direct, wholly owned subsidiary of A I M
Management Group Inc. ("AIM Management"), a holding company that has been
engaged in the financial services business since 1976. AIM is the sole
shareholder of the Funds' principal underwriter, AIM Distributors. AIM
Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire
Square, London, EC2M 4YR, England. AMVESCAP PLC and its subsidiaries are
independent investment management groups that have a significant presence in the
institutional and retail segment of the investment management industry in North
America and Europe, and a growing presence in Asia.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, acts as custodian of the Fund's and the Underlying Theme
Portfolios' assets.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agency and Service Agreement between the Trust and A I M Fund
Services, Inc. ("AFS"), a registered transfer agent and wholly-owned subsidiary
of AIM, provides that AFS will perform certain shareholder services for the Fund
for a fee per account serviced. The Transfer Agency and Service Agreement
provides that AFS will receive a per account fee plus out-of-pocket expenses to
process orders for purchases, redemptions and exchanges of shares; prepare and
transmit payments for dividends and distributions declared by the Fund; maintain
shareholder accounts and provide shareholders with information regarding the
Fund and their accounts. The Transfer Agency and Service Agreement became
effective on September 8, 1998. The Transfer Agent is also reimbursed for its
out-of-pocket expenses for such items as postage, forms, telephone charges,
stationery and office supplies. The Sub-advisor also serves as the Fund's
pricing and accounting agent.
INDEPENDENT ACCOUNTANTS
The Trust's independent accountants are PricewaterhouseCoopers LLP.
PricewaterhouseCoopers LLP conducts annual audits of the Fund's financial
statements, assists in the preparation of the Fund's federal and state income
tax returns and consults with the Trust as to matters of accounting, regulatory
filings, and federal and state income taxation.
40
<PAGE> 113
The audited financial statements of the Trust included in this Statement of
Additional Information have been examined by PricewaterhouseCoopers LLP, as
stated in their opinion appearing herein, and are included in reliance upon such
opinion given upon the authority of that firm as experts in accounting and
auditing.
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of the Trust enjoy the same limitations
of liability extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
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 a
trustee. If a shareholder is held personally liable for the obligations of the
Trust, the Trust Agreement provides that the shareholder shall be entitled out
of the assets belonging to the applicable Fund (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 Trust's Bylaws and applicable
law. Thus, the risk of a shareholder incurring financial loss on account of such
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations and where the other party was held not to be bound by
the disclaimer.
NAME
Prior to May 29, 1998, the Fund operated under the name of GT Global New
Dimension Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of August 10, 1998, the trustees and officers of the Trust, as a group,
owned less than 1% of all classes of outstanding shares of the Trust.
To the best knowledge of the Trust, the names and addresses of the holders of
5% or more of the outstanding shares of each class of the Trust's equity
securities as of August 10, 1998, and the percentage of the outstanding shares
held by such holders are set forth below.
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
- ------------------------- -------- ------------
<S> <C> <C>
CLASS C
- ------------------------------------------------------------
MLPF& S For the Sole Benefit of its Customers, Security 21.79% -0-
#97R61
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246-6484
</TABLE>
- ---------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return, as described in the
Prospectus, is as follows:
P(1+T)(n)=ERV
<TABLE>
<S> <C> <C> <C>
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 1, 5, or 10
year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the 1, 5, or 10 year periods (or fractional
portion of such period).
</TABLE>
41
<PAGE> 114
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:
P(1+U)(n)=ERV
<TABLE>
<S> <C> <C> <C>
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only a
stated portion of, or none of, the applicable maximum sales
load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.
</TABLE>
Cumulative total return across a stated period may be calculated as follows:
P(1+V)(n)=ERV
<TABLE>
<S> <C> <C> <C>
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.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.
</TABLE>
The cumulative total returns for the Class A and Class B shares of the Fund
for the period shown, were:
<TABLE>
<CAPTION>
PERIOD CLASS A CLASS B
------ ------- -------
<S> <C> <C>
Fiscal period ended December 31, 1997.................. -22.80% -23.29%
</TABLE>
PERFORMANCE INFORMATION
Total return and yield figures for the Fund are neither fixed nor guaranteed,
and the Fund's principal is not insured. Performance quotations reflect
historical information and should not be considered representative of the Fund's
performance for any period in the future. Performance is a function of a number
of factors which can be expected to fluctuate. The Fund may provide performance
information in reports, sales literature and advertisements. The Fund may also,
from time to time, quote information about the Fund published or aired by
publications or other media entities which contain articles or segments relating
to investment results or other data about the Fund. Such publications or media
entities may include the following, among others:
Advertising Age
Barron's
Best's Review
Broker World
Business Week
Changing Times
Christian Science Monitor
CNBC
CNN
Consumer Reports
Economist
EuroMoney
FACS of the Week
Financial Planning
Financial Product News
Financial Services Week
Financial World
Forbes
Fortune
Global Finance
Hartford Courant Inc.
Insurance Forum
Institutional Investor
Insurance Week
Investor's Daily
Journal of the American
Society of CLU & ChFC
Kiplinger Letter
Money
Mutual Fund Forecaster
Mutual Fund Magazine
Nation's Business
New York Times
PBS
Pension World
Pensions & Investments
Personal Investor
Philadelphia Inquirer
Smart Money
USA Today
U.S. News & World Report
Wall Street Journal
Washington Post
42
<PAGE> 115
The Fund and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Fund with the following, or compare the Fund's performance to performance
data of similar mutual funds as published in the following, among others:
Bank Rate National Monitor Index
Bear Stearns Foreign Bond Index
Bond Buyer Index
CDA/Wiesenberger Investment Company Services
(data and mutual fund rankings and
comparisons)
CNBC/Financial News Composite Index
COFI
Consumer Price Index
Datastream
Donoghue's
Dow Jones Industrial Average
EAFE Index
First Boston High Yield Index
Fitch (publications)
Ibbotson Associates International Bond Index
International Bank for Reconstruction and
Development (publications)
International Finance Corporation Emerging
Markets Database
International Financial Statistics
Lehman Bond Indices
Lipper Analytical Data Services, Inc. (data and
mutual fund rankings and comparisons)
Micropal, Inc. (data and mutual fund rankings
and comparisons)
Moody's Investors Service (publications)
Morgan Stanley Capital International All
Country (AC) World Index
Morgan Stanley Capital International World
Indices
Morningstar, Inc. (data and mutual fund rankings
and comparisons)
NASDAQ
Organization for Economic Cooperation and
Development (publications)
Salomon Brothers Global Telecommunications
Index
Salomon Brothers World Government Bond
Index -- Non-U.S.
Salomon Brothers World Government Bond Index
Standard & Poor's (publications)
Standard & Poor's 500 Composite Stock Price
Index
Stangar
Wilshire Associates
World Bank (publications and reports)
The World Bank Publication of Trends in
Developing Countries
Worldscope
The Fund may also compare its performance to rates on Certificates of Deposit
and other fixed rate investments such as the following:
10-year Treasuries
30-year Treasuries
30-day Treasury Bills
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. Advertising for the Fund may from time to time include discussions
of general economic conditions and interest rates. Advertising for the Fund may
also include reference to the use of the Fund as part of an individual's overall
retirement investment program. From time to time, sales literature and/or
advertisements for the Fund may disclose (i) the largest holdings in the Fund's
portfolio, (ii) certain selling group members and/or (iii) certain institutional
shareholders.
From time to time, the Fund's 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, variable annuities, dollar-cost averaging, stocks, bonds, money markets,
certificates of deposit, retirement, retirement plans, asset allocation,
tax-free investing, college planning, and inflation.
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.
GENERAL INFORMATION ABOUT THE UNDERLYING THEME PORTFOLIOS
Each Underlying Theme Portfolio may invest worldwide across industries within
the Portfolio's area of concentration without national or regional restrictions.
The ability of each Underlying Theme Portfolio to invest worldwide may allow the
portfolio managers to select industries in different economic cycles and varying
stages of development, though there is no assurance that the managers will be
successful in this selection.
43
<PAGE> 116
Each Underlying Theme Portfolio's area of concentration reflects the
underlying theme of the Portfolio. AIM Distributors believes that there are
certain social, political and economic trends that may benefit one or more
industries within an Underlying Theme Portfolio's area of concentration. Of
course, there is no assurance that any of the Funds will benefit as a result.
HEALTH CARE FUND
From time to time the Fund and AIM Distributors will quote information
including data regarding:
- Trading volume, number of listed companies and the largest companies of the
global health care industry
- Expenditures by various countries, regions and age groups on health care
- Population of countries, regions and age groups
- Natality and mortality rates in various regions, countries and age groups
- Life expectancy rates in various regions, countries and age groups
- New health care products and products seeking approval
- Health maintenance organizations (HMOs) and their enrollment growth
- Studies from, but not limited to, the American Medical Association showing
the effectiveness of using drugs to cure illness
- Medical technology and devices in use or in development
- Regulatory environment of health care industries
- Consolidation in the health care industries
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Research firms such as Mehta and Isaly which publishes Pharmaceutical
Portfolio Recommendations
- OECD and its publications such as the OECD Health Data, as supplemented
annually
- Morgan Stanley Capital International stock market industry indices such as
Health & Personal Care
- The World Bank and its publications such as The World Development Report, as
supplemented annually
- IFC and publications such as the Emerging Stock Markets Factbook
INFORMATION ABOUT THE GLOBAL HEALTH CARE INDUSTRIES
The Fund and the Sub-advisor believe that certain market and demographic
factors merit an investor's consideration when making a health care investment.
Worldwide standards of living and life expectancy have increased at a
substantial rate. The Sub-advisor, the investment advisor to the AIM Funds,
expects this growth, which works to the general benefit of the global health
care industry, to continue at a roughly comparable rate in the future, although
no assurances can be given in this regard. Moreover, according to the
Sub-advisor, the health care industry historically has proven to be a relatively
non-cyclical industry that continues to provide goods and services to the public
in periods of economic weakness as well as economic strength.
The Sub-advisor believes that the anticipated increase in the world's elderly
population could increase demand for health care products and services. For
example, according to data compiled by the Sub-advisor, in Japan the number of
people age 65 and older is expected to grow over 100% by the year 2025; in
Germany, France and the U.S., the same age group should grow 40%. Similarly, the
U.S. Census Bureau predicts the number of Americans 85 and older to double in
the next 30 years. From time to time, the Fund and AIM Distributors will quote
information including, but not limited to, international data regarding
populations, birth rates, mortality rates, life expectancy, health care
expenditures, and gross domestic product vs. life expectancy. The information
quoted has not been independently verified by the Fund or AIM Distributors and
will be based on data that is believed to be reliable and accurate.
44
<PAGE> 117
TELECOMMUNICATIONS FUND
From time to time the Fund and AIM Distributors will quote information
including data regarding:
- Increased usage of new technologies such as, but not limited to, cellular
and wireless communications in emerging and established countries around the
world
- Supply and demand of telephone equipment and services
- Regulatory environment of telecommunications industries
- Revenue, price and usage of telecommunications products and services
- Privatization and/or deregulation of telecommunications companies
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Salomon Brothers World Equity Telecommunications Index, which includes stock
market data about the telecommunications industry in established and
developing markets
- OECD and other publications from its subsidiaries such as the International
Telecommunications Union
- Morgan Stanley Capital International stock market industry indices such as
Telecommunications, Broadcasting & Publishing and Data Processing &
Reproduction
- International Technology Consultants, a Washington D.C. based firm which
publishes reports such as Eastern European & Soviet Telecom Report and Latin
American Telecom Report
- Telegeography and other publications
DEREGULATION IN THE UNITED STATES
The United States has been the bellwether for deregulation of the telephone
industry. The divestiture of the Bell System from American Telephone and
Telegraph has produced competing companies in the United States. Such U.S.
market-driven competition has, for example, led to lower costs for consumers
which in turn led to greater consumer usage and to higher industrywide revenues.
The Sub-advisor expects this scenario to continue to benefit such companies in
the U.S. and similarly to be realized by the established telecommunications
companies in established economies, although no assurances can be made in this
regard.
CONSUMER PRODUCTS AND SERVICES FUND
From time to time the Fund and AIM Distributors will quote information
including data regarding:
- Trading volume, number of listed companies and the largest companies located
around the world in the consumer products and services industries
- Expenditures, demand and consumption by various countries, regions, income
classes and age groups of consumer products and services
- Population of countries, regions and age groups
- Life expectancy rates in various regions, countries and age groups
- New consumer products and services in the development or manufacturing
stages
- Income of various regions, countries and age groups
- Sales and sales growth of consumer products and services companies in their
own country and abroad
- Sales, supply and demand of consumer products and services
- Parent companies and the products and services they distribute
- Regulatory environment of consumer products industries
45
<PAGE> 118
The information quoted will not be independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including, but not limited to, the following:
- Consumer and trade groups
- Fortune magazine and other periodicals
- The World Bank and its publications
- The International Monetary Fund (IMF) and its publications
- IFC and its publications
- OECD and its publications
INFRASTRUCTURE FUND
From time to time the Fund and AIM Distributors may quote information
including:
- Supply and demand of telephone equipment and services, electricity, water,
transportation, construction materials and other infrastructure related
products and services
- Regulatory environment of infrastructure industries
- Quantity and costs of current and projected infrastructure projects
- Privatization of industries and companies
- New technologies, products and services used in infrastructure industries
- Infrastructure Finance Magazine and other periodicals
FINANCIAL SERVICES FUND
From time to time the Fund and AIM Distributors may quote information
including:
- Supply and demand of financial services
- Regulatory environment of financial service industries
- Credit ratings of U.S. and non-U.S. banks
- New technologies, products and services used in the financial services
industries
- Consolidation in the financial services industries
RESOURCES FUND
From time to time the Fund and AIM Distributors may quote information
including:
- Supply, demand and prices of natural resources
- Regulatory environment of natural resources
- Supply, demand and prices of products manufactured from natural resources
- New technologies, products and services used in the natural resources
industries
46
<PAGE> 119
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's Investors, Inc. ("Moody's") employs the designations "Prime-1" and
"Prime-2" to indicate commercial paper having the highest capacity for timely
repayment. Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt 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.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This normally will 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.
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") rates
commercial paper in four categories ranging from "A-1" for the highest quality
obligations to "D" for the lowest. 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 will be 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 S&P believes that such payments
will be made during such grace period.
DESCRIPTION OF BOND RATINGS
Moody's rates the long-term debt securities issued by various entities from
"Aaa" to "C." Investment Grade Ratings are the first four categories:
Aaa -- Best quality. These securities 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 -- High quality by all standards. Together with the
Aaa group they comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the Aaa securities.
A -- 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 -- 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 -- Have
speculative elements and 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 -- 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 -- Poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca -- Speculative in a high degree. Such issues are often in default or have
other marked shortcomings. C -- Lowest rated class of bonds. Issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
S&P rates the securities debt of various entities in categories ranging from
"AAA" to "D" according to quality. Investment grade ratings are the first four
categories: AAA -- Highest rating. Capacity to pay interest and repay principal
is extremely strong. AA -- Very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.
A -- Has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. BBB -- Regarded as
having adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" is
regarded, on balance, as predominantly speculative with
47
<PAGE> 120
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. "BB" indicates the lowest degree of speculation and "C"
the highest degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions. BB -- Has less near-term
vulnerability to default than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely interest and
principal payments. The "BB" rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied "BBB-" rating. B -- Has a
greater vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The "B" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB-" rating. CCC -- Has a
currently identifiable vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely payment of interest
and repayment of principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay interest and
repay principal. The "CCC" rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "B" or "B-" rating.
CC -- Typically applied to debt subordinated to senior debt that is assigned an
actual or implied "CCC" rating. C -- Typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued. C1 -- Reserved for income bonds
on which no interest is being paid. D -- In payment default. The "D" 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 S&P believes that
such payments will be made during such grace period. This rating will also be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
ABSENCE OF RATING
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B in its corporate bond rating system. The modifier 1
indicates that the company 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 rating category.
48
<PAGE> 121
FINANCIAL STATEMENTS
FS
<PAGE> 122
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADVISOR
CLASS VALUE % OF NET
AIM GLOBAL THEME FUNDS SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
AIM Global Consumer Products and Services Fund ............. 686,284 $17,953,178 32.0
AIM Global Financial Services Fund ......................... 595,333 12,186,465 21.7
AIM Global Infrastructure Fund ............................. 556,903 9,122,071 16.3
AIM Global Health Care Fund ................................ 267,601 5,954,114 10.6
AIM Global Telecommunications Fund ......................... 269,653 5,519,803 9.8
AIM Global Resources Fund .................................. 402,064 5,484,152 9.8
----------- -----
TOTAL THEME FUND INVESTMENTS (cost $53,855,420) .............. 56,219,783 100.2
----------- -----
TOTAL INVESTMENTS (cost $53,855,420) * ...................... 56,219,783 100.2
Other Assets and Liabilities ................................. (106,206) (0.2)
----------- -----
NET ASSETS ................................................... $56,113,577 100.0
----------- -----
----------- -----
</TABLE>
- --------------
* For Federal income tax purposes, cost is $53,893,162 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 4,401,304
Unrealized depreciation: (2,074,683)
-------------
Net unrealized appreciation: $ 2,326,621
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-1
<PAGE> 123
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments at value (cost $53,855,420) (Note 1)........................................... $ 56,219,783
U.S. currency.............................................................................. 9,174
Receivable for Fund shares sold............................................................ 72,825
------------
Total assets............................................................................. 56,301,782
------------
Liabilities:
Payable for Fund shares repurchased........................................................ 145,699
Payable for service and distribution expenses (Note 2)..................................... 33,332
Payable for investments purchased.......................................................... 9,174
------------
Total liabilities........................................................................ 188,205
------------
Net assets................................................................................... $ 56,113,577
------------
------------
Class A:
Net asset value and redemption price per share ($23,947,333 DIVIDED BY 2,021,670 shares
outstanding)................................................................................ $ 11.85
------------
------------
Maximum offering price per share (100/95.25 of $11.85) *..................................... $ 12.44
------------
------------
Class B:+
Net asset value and offering price per share ($30,479,961 DIVIDED BY 2,582,072 shares
outstanding)................................................................................ $ 11.80
------------
------------
Class C:+
Net asset value and offering price per share ($266,957 DIVIDED BY 22,624 shares
outstanding)................................................................................ $ 11.80
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,419,326 DIVIDED
BY 119,492 shares outstanding).............................................................. $ 11.88
------------
------------
Net assets consist of:
Paid in capital (Note 4)................................................................... $ 53,469,758
Accumulated net investment loss............................................................ (148,422)
Accumulated net realized gain on investments............................................... 427,878
Net unrealized appreciation of investments................................................. 2,364,363
------------
Total -- representing net assets applicable to capital shares outstanding.................... $ 56,113,577
------------
------------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-2
<PAGE> 124
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
STATEMENT OF OPERATIONS
Six months ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income.............................................................................. $ 3,426
----------
Total investment income.................................................................... 3,426
----------
Expenses:
Service and distribution expenses: (Note 2)
Class A........................................................................ $ 50,681
Class B........................................................................ 129,149
Class C........................................................................ 728
----------
Total expenses............................................................................. 180,558
----------
Net investment loss............................................................................ (177,132)
----------
Net realized and unrealized gain (loss) on investments: (Note 1)
Net realized loss on investments................................................. (77,682)
Capital gain distributions received.............................................. --
----------
Net realized loss during the period........................................................ (77,682)
Net change in unrealized appreciation during the period.................................... 5,158,759
----------
Net realized and unrealized gain on investments................................................ 5,081,077
----------
Net increase in net assets resulting from operations........................................... $4,903,945
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-3
<PAGE> 125
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SEPTEMBER 15,
1997
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED TO
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
- ---------------------------------------------------------------------------- -------------- ---------------
Increase in net assets
Operations:
Net investment loss....................................................... $ (177,132) $ (31,440)
Net realized gain (loss) on investments................................... (77,682) 1,983,653
Net change in unrealized appreciation (depreciation) of investments....... 5,158,759 (2,794,396)
-------------- ---------------
Net increase (decrease) in net assets resulting from operations......... 4,903,945 (842,183)
-------------- ---------------
Class A:
Distributions to shareholders: (Note 1)
In excess of net investment income........................................ -- (583,714)
Class B:
Distributions to shareholders: (Note 1)
In excess of net investment income........................................ -- (781,183)
Class C:+
Distributions to shareholders: (Note 1)
In excess of net investment income........................................ -- N/A
Advisor Class: (Note 1)
Distributions to shareholders:
In excess of net investment income........................................ -- (53,046)
-------------- ---------------
Total distributions..................................................... -- (1,417,943)
-------------- ---------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested.......................... 22,460,467 41,029,628
Decrease from capital shares repurchased.................................. (6,819,849) (3,300,488)
-------------- ---------------
Net increase from capital share transactions............................ 15,640,618 37,729,140
-------------- ---------------
Total increase in net assets................................................ 20,544,563 35,469,014
Net assets:
Beginning of period....................................................... 35,569,014 100,000
-------------- ---------------
End of period *........................................................... $56,113,577 $35,569,014
-------------- ---------------
-------------- ---------------
* Includes undistributed/accumulated net investment income (loss).......... $ (148,422) $ 28,710
-------------- ---------------
-------------- ---------------
</TABLE>
- --------------
+ Commencing January 1, 1998, the Fund began offering Class C shares.
The accompanying notes are an integral part of the financial statements.
FS-4
<PAGE> 126
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.
<TABLE>
<CAPTION>
CLASS A
----------------------------------
SIX MONTHS SEPTEMBER 15, 1997
ENDED (COMMENCEMENT
JUNE 30, OF OPERATIONS)
1998 (D) TO DECEMBER 31,
(UNAUDITED) 1997 (D)
----------- ---------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.63 $ 11.43
----------- ----------
Income from investment operations:
Net investment income (loss).......... (0.02) (0.01)
Net realized and unrealized loss on
investments.......................... 1.24 (0.31)
----------- ----------
Net increase (decrease) from
investment operations.............. 1.22 (0.32)
----------- ----------
Distributions to shareholders:
In excess of net investment income.... -- (0.48)
----------- ----------
Total distributions................. -- (0.48)
----------- ----------
Net asset value, end of period.......... $ 11.85 $ 10.63
----------- ----------
----------- ----------
Total investment return (c)............. 11.48%(b) (2.68)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 23,947 $ 15,145
Ratio of net investment income (loss) to
average net assets..................... (0.49)%(a) (0.35)%(a)
Ratio of operating expenses to average
net assets: (Note 2)................... 0.50%(a) 0.50% (a)
Portfolio turnover rate++............... 8%(a) 1% (a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) Calculated based upon average shares outstanding during the period.
+ Commencing January 1, 1998, the Fund began offering Class C shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-5
<PAGE> 127
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.
<TABLE>
<CAPTION>
CLASS B CLASS C+ ADVISOR CLASS
---------------------------------- ------------ ------------------------------------
SIX MONTHS SEPTEMBER 15, 1997 SIX MONTHS SIX MONTHS SEPTEMBER 15, 1997
ENDED (COMMENCEMENT ENDED ENDED (COMMENCEMENT
JUNE 30, OF OPERATIONS) JUNE 30, JUNE 30, OF OPERATIONS)
1998 (D) TO DECEMBER 31, 1998 (D) 1998 (D) TO DECEMBER 31,
(UNAUDITED) 1997 (D) (UNAUDITED) (UNAUDITED) 1997 (D)
----------- --------------------- ------------ ------------ ----------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.62 $ 11.43 $ 10.62 $ 10.64 $ 11.43
----------- ---------- ------------ ------------ --------
Income from investment operations:
Net investment income (loss).......... (0.05) (0.02) (0.05) 0.00 0.01
Net realized and unrealized loss on
investments.......................... 1.23 (0.32) 1.23 1.24 (0.31)
----------- ---------- ------------ ------------ --------
Net increase (decrease) from
investment operations.............. 1.18 (0.34) 1.18 1.24 (0.30)
----------- ---------- ------------ ------------ --------
Distributions to shareholders:
In excess of net investment income.... -- (0.47) -- -- (0.49)
----------- ---------- ------------ ------------ --------
Total distributions................. -- (0.47) -- -- (0.49)
----------- ---------- ------------ ------------ --------
Net asset value, end of period.......... $ 11.80 $ 10.62 $ 11.80 $ 11.88 $ 10.64
----------- ---------- ------------ ------------ --------
----------- ---------- ------------ ------------ --------
Total investment return (c)............. 11.11% (b) (2.83)%(b) 11.11% (b) 11.65%(b) (2.51)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 30,480 $ 19,184 $ 267 $ 1,419 $ 1,241
Ratio of net investment income (loss) to
average net assets..................... (0.99)%(a) (0.85)%(a) (0.99)%(a) 0.01% 0.15% (a)
Ratio of operating expenses to average
net assets: (Note 2)................... 1.00% (a) 1.00% (a) 1.00% (a) 0.00%(a) 0.00% (a)
Portfolio turnover rate++............... 8% (a) 1% (a) 8% (a) 8%(a) 1% (a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) Calculated based upon average shares outstanding during the period.
+ Commencing January 1, 1998, the Fund began offering Class C shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-6
<PAGE> 128
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
NOTES TO
FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM New Dimension Fund (the "Fund", formerly GT Global New Dimension Fund) is a
diversified series of AIM Series Trust (the "Trust", formerly GT Global Series
Trust ). The Trust is organized as a Delaware business trust and is registered
under the Investment Company Act of 1940, as amended ("1940 Act"), as an
open-end management investment company. The Fund invests substantially all of
its assets in Advisor Class shares of the AIM theme mutual funds: AIM Global
Consumer Products and Services Fund; AIM Global Financial Services Fund; AIM
Global Health Care Fund; AIM Global Infrastructure Fund; AIM Global Resources
Fund; and AIM Global Telecommunications Fund (collectively, the "Underlying
Theme Funds").
The Fund offers Class A, Class B, Class C, and Advisor Class shares, each of
which has equal rights as to assets and voting privileges. Class A, Class B, and
Class C, each have exclusive voting rights with respect to its distribution
plan. Investment income, realized and unrealized capital gains and losses of the
Fund are allocated on a pro rata basis to each class based on the relative net
assets of each class to the total net assets of the Fund. Each class of shares
differs in its respective service and distribution expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Investments in the Fund are valued at the closing net asset value of Advisor
Class shares of each Underlying Theme Fund on the day of valuation, and
short-term investments with a maturity of 60 days or less are valued at
amortized cost.
(B) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(C) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains.
(D) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investments held by the Fund and timing differences.
(E) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager, has a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allow the Fund and certain other funds
to borrow, on a first come, first serve basis, an aggregate maximum amount of
$250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of the
Fund's total assets. On June 30, 1998, the Fund had no loans outstanding.
2. RELATED PARTIES
A I M Advisors, Inc. ("AIM" or the "Manager") is the Fund's investment manager
and administrator, and INVESCO (NY), Inc., (formerly, Chancellor LGT Asset
Management, Inc.) is the Fund's investment sub-adviser and/or sub-administrator.
As of the close of business on May 29, 1998, Liechtenstein Global Trust AG
("LGT"), the former indirect parent organization of Chancellor LGT Asset
Management, Inc. ("Chancellor LGT"), consummated a purchase agreement with
AMVESCAP PLC pursuant to which AMVESCAP PLC acquired LGT's Asset Management
Division, which included Chancellor LGT and certain other affiliates. As a
result of this transaction, Chancellor LGT was renamed INVESCO (NY), Inc., and
is now an indirect wholly-owned subsidiary of AMVESCAP PLC. In connection with
this transaction, A I M Advisors, Inc., an indirect wholly-owned subsidiary of
AMVESCAP PLC, became the investment manager and administrator of the Fund and
INVESCO (NY), Inc. became the sub-adviser and sub-administrator of the Fund.
A I M Distributors, Inc. ("AIM Distributors") became the Fund's distributor.
Finally, the Trust was reorganized from a Massachusetts business trust into a
Delaware business trust. All of the changes became effective as of the close of
business on May 29, 1998.
AIM Distributors, an affiliate of the Manager, serves as the Fund's distributor.
For the period ended May 29, 1998, GT Global, Inc. ("GT Global"), an affiliate
of the investment sub-advisor, served as the
FS-7
<PAGE> 129
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
Fund's distributor. The Fund offers Class A, Class B, Class C, and Advisor Class
shares for purchase.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and AIM Distributors, is the transfer agent of the Fund. For performing
shareholder servicing, reporting, and general transfer agent services, GT
Services receives an annual maintenance fee of $17.50 per account, a new account
fee of $4.00 per account, a per transaction fee of $1.75 for all transactions
other than exchanges and a per exchange fee of $2.25. GT Services is also
reimbursed by the Fund its out-of-pocket expenses for such items as postage,
forms, telephone charges, stationery and office supplies.
The Manager is also the pricing and accounting agent for the Fund. The Manager
will initially assume all costs of the Fund's operation, except for service and
distribution fees as described below and non-recurring and extraordinary
expenses, if any. The Fund, as a shareholder in the Underlying Theme Funds,
indirectly will bear its proportionate share of any investment management fees
and other expenses paid by the Underlying Theme Funds. Subject to receipt of a
pending exemptive order from the Securities and Exchange Commission, the Trust,
on behalf of the Fund, will enter into a Special Servicing Agreement
("Agreement") with the Underlying Theme Funds, the Manager and GT Services. If
the Board of Trustees of the Underlying Theme Funds makes certain findings, each
Underlying Theme Fund will pay certain nondistribution-related expenses of the
Fund to the extent such expenses are less than the estimated savings to the
Underlying Theme Funds from the operation of the Fund. The Manager and AIM
Distributors also voluntarily have undertaken to limit the Underlying Theme
Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the maximum annual rate of 1.50% of the average daily
net assets of the Underlying Theme Fund's Advisor Class shares.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the period ended June 30, 1998, AIM Distributors and GT
Global retained $1,378 and $14,589, respectively, of such sales charges.
Purchases of Class A shares exceeding $500,000 may be subject to a contingent
deferred sales charge ("CDSC") upon redemption, in accordance with the Fund's
current prospectus. No CDSC's were collected during the period ended June 30,
1998. In addition, AIM Distributors also makes ongoing shareholder servicing and
trail commission payments to dealers whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, AIM Distributors from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. During the period ended June 30, 1998, AIM Distributors and
GT Global collected such CDSCs in the amount of $11,697 and $29,522,
respectively. In addition, AIM Distributors makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
Class C shares are not subject to initial sales charges. When Class C shares are
sold, AIM Distributors from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class C shares made
within one year of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. During the period ended June 30, 1998, AIM Distributors
collected no CDSCs. In addition, AIM Distributors makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class C
shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Class A Plan"), Class B
shares ("Class B Plan") and Class C shares ("Class C Plan"), the Fund reimbursed
GT Global for a portion of its shareholder servicing and distribution expenses.
Under the Class A Plan, the Fund was permitted to pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and was permitted to pay GT Global a
distribution fee at the annualized rate of up to 0.50% of the average daily net
assets of the Fund's Class A shares, less any amounts paid by the Fund as the
aforementioned service fee, for GT Global's expenditures incurred in providing
services as distributor. All expenses for which GT Global was reimbursed under
the Class A Plan would have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Class B Plan and Class C
Plan, the Fund was permitted to pay GT Global a service fee at the annualized
rate of up to 0.25% of the average daily net assets of the Fund's Class B and
Class C shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and was permitted to pay GT Global a
distribution fee at the annualized rate of up to 0.75% of the average daily net
assets of the Fund's Class B and Class C shares for GT Global's expenditures
incurred in providing services as distributor. Expenses incurred under the Class
B Plan and Class C Plan in excess of 1.00% annually were permitted to be carried
forward for reimbursement in subsequent years as long as that Plan continues in
effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1 under
the 1940 Act, the Trust's Board of Trustees has adopted a Master Distribution
Plan applicable to the Fund's Class A and Class C shares (the "Class A and Class
C Plan") and Class B shares ("Class B Plan"), pursuant to which a Fund
compensates AIM Distributors for the purpose of financing any activity that is
intended to result in the sale of Class A, Class B, and Class C shares of the
Funds. Under the Class A and Class C Plan, a Fund compensates AIM Distributors
at the annualized rate of 0.50% of the average daily net assets of the Fund's
Class A shares and an aggregated amount of 1.00% of the average daily net assets
of Class C shares of the Fund.
FS-8
<PAGE> 130
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
Pursuant to the Fund's Class B Plan, the Fund compensates AIM Distributors at an
annualized rate of 1.00% of the average daily net assets of the Fund's Class B
shares.
Subject to the receipt of a pending exemptive order from the Securities and
Exchange Commission, the Trust will pay each of its Trustees who is not an
employee, officer or director of the Manager, AIM Distributors or GT Services
$5,000 per year plus $300 for each meeting of the board or any committee thereof
attended by the Trustees. Until such order is received, the Manager and/or the
sub-adviser pay(s) to the Trustees such fees.
3. PURCHASES AND SALES
For the period ended June 30, 1998, purchases and sales, other than short-term
investments, of the Underlying Theme Funds by the Fund, are as follows:
<TABLE>
<CAPTION>
AIM GLOBAL PURCHASES SALES
- -------------------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Consumer Products and Services Fund............................................. $5,179,719 $1,089,057
Telecommunications Fund......................................................... 1,641,048 85,582
Financial Services Fund......................................................... 3,617,497 416,342
Resources Fund.................................................................. 2,525,006 107,153
Health Care Fund................................................................ 2,302,078 95,138
Infrastructure Fund............................................................. 2,847,442 190,249
</TABLE>
4. CAPITAL SHARES
At June 30, 1998, there were an unlimited number of shares of beneficial
interest authorized, at no par value. Transactions in capital shares of the Fund
were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 15, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 1998 OPERATIONS)
(UNAUDITED) TO DECEMBER 31, 1997
--------------------- ---------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Shares sold.......................................................... 845,570 $9,536,511 1,560,835 $17,768,084
Shares issued in connection with reinvestment of distributions....... -- -- 54,891 563,181
--------- ---------- --------- ----------
845,570 9,536,511 1,615,726 18,331,265
Shares repurchased................................................... (248,048) (2,841,185) (194,494) (2,190,806)
--------- ---------- --------- ----------
Net increase......................................................... 597,522 $6,695,326 1,421,232 $16,140,459
--------- ---------- --------- ----------
--------- ---------- --------- ----------
SEPTEMBER 15, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 1998 OPERATIONS)
(UNAUDITED) TO DECEMBER 31, 1997
--------------------- ---------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------- --------- ---------- --------- ----------
Shares sold.......................................................... 1,102,205 $12,382,297 1,832,668 $20,681,472
Shares issued in connection with reinvestment of distributions....... -- -- 67,039 687,825
--------- ---------- --------- ----------
1,102,205 12,382,297 1,899,707 21,369,297
Shares repurchased................................................... (325,914) (3,715,229) (96,841) (1,061,266)
--------- ---------- --------- ----------
Net increase......................................................... 776,291 $8,667,068 1,802,866 $20,308,031
--------- ---------- --------- ----------
--------- ---------- --------- ----------
NOT APPLICABLE
(THE FUND BEGAN
SIX MONTHS ENDED OFFERING CLASS C
JUNE 30, 1998 SHARES ON JANUARY 1,
(UNAUDITED) 1998)
--------------------- ---------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------- --------- ---------- --------- ----------
Shares sold.......................................................... 25,666 $ 288,227 -- $ --
Shares issued in connection with reinvestment of distributions....... -- -- -- --
--------- ---------- --------- ----------
25,666 288,227 -- --
Shares repurchased................................................... (3,042) (34,523) -- --
--------- ---------- --------- ----------
Net increase......................................................... 22,624 $ 253,704 -- $ --
--------- ---------- --------- ----------
--------- ---------- --------- ----------
SEPTEMBER 15, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 1998 OPERATIONS)
(UNAUDITED) TO DECEMBER 31, 1997
--------------------- ---------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------- --------- ---------- --------- ----------
Shares sold.......................................................... 23,229 $ 253,432 113,102 $1,276,664
Shares issued in connection with reinvestment of distributions....... -- -- 5,102 52,402
--------- ---------- --------- ----------
23,229 253,432 118,204 1,329,066
Shares repurchased................................................... (20,324) (228,912) (4,533) (48,416)
--------- ---------- --------- ----------
Net increase......................................................... 2,905 $ 24,520 113,671 $1,280,650
--------- ---------- --------- ----------
--------- ---------- --------- ----------
</TABLE>
FS-9
<PAGE> 131
GT GLOBAL NEW DIMENSION FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of GT Global New Dimension Fund and
Board of Trustees of GT Global Series Trust:
We have audited the accompanying statement of assets and liabilities of GT
Global New Dimension Fund (the "Fund"), including the portfolio of investments,
as of December 31, 1997, the related statement of operations, the statement of
changes in net assets, and the financial highlights for the period from
September 15, 1997 (commencement of operations) to December 31, 1997. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global New Dimension Fund as of December 31, 1997, the results of its
operations, the changes in its net assets, and the financial highlights for the
period from September 15, 1997 (commencement of operations) to December 31,
1997, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
FEBRUARY 17, 1998
FS-10
<PAGE> 132
GT GLOBAL NEW DIMENSION FUND
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADVISOR
CLASS VALUE % OF NET
GT GLOBAL THEME FUNDS SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
GT Global Consumer Products and Services Fund ............. 515,881 $ 11,204,937 31.5
GT Global Financial Services Fund ......................... 426,322 7,499,007 21.1
GT Global Infrastructure Fund ............................. 388,281 5,886,334 16.6
GT Global Natural Resources Fund .......................... 240,790 4,054,907 11.4
GT Global Health Care Fund ................................ 162,161 3,278,897 9.2
GT Global Telecommunications Fund ......................... 185,442 3,089,470 8.7
------------ -----
TOTAL THEME FUND INVESTMENTS (cost $37,807,948) ............. 35,013,552 98.5
------------ -----
<CAPTION>
REPURCHASE AGREEMENT
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Dated December 31, 1997, with State Street Bank & Trust
Co., due January 2, 1998, for an effective yield of 5.80%,
collateralized by $445,000 U.S. Treasury Notes, 5.75% due
12/31/98 (market value of collateral is $445,417,
including accrued interest). (cost $432,000) ............ 432,000 1.2
------------ -----
TOTAL INVESTMENTS (cost $38,239,948) * ..................... 35,445,552 99.7
Other Assets and Liabilities ................................ 123,462 0.3
------------ -----
NET ASSETS .................................................. $ 35,569,014 100.0
------------ -----
------------ -----
</TABLE>
- --------------
* For Federal income tax purposes, cost is $38,277,690 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ --
Unrealized depreciation: (2,832,138)
-------------
Net unrealized depreciation: $ (2,832,138)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-11
<PAGE> 133
GT GLOBAL NEW DIMENSION FUND
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments at value (cost $38,239,948) (Note 1).................................................. $35,445,552
U.S. currency..................................................................................... 113
Receivable for Fund shares sold................................................................... 929,466
Interest receivable............................................................................... 70
----------
Total assets.................................................................................... 36,375,201
----------
Liabilities:
Payable for investments purchased................................................................. 432,113
Payable for Fund shares repurchased............................................................... 352,532
Payable for service and distribution expenses (Note 2)............................................ 21,542
----------
Total liabilities............................................................................... 806,187
----------
Net assets.......................................................................................... $35,569,014
----------
----------
Class A:
Net asset value and redemption price per share ($15,144,662 DIVIDED BY 1,424,148 shares
outstanding)....................................................................................... $ 10.63
----------
----------
Maximum offering price per share (100/95.25 of $10.63) *............................................ $ 11.16
----------
----------
Class B:+
Net asset value and offering price per share ($19,183,648 DIVIDED BY 1,805,781 shares
outstanding)....................................................................................... $ 10.62
----------
----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,240,704 DIVIDED BY
116,587 shares outstanding)........................................................................ $ 10.64
----------
----------
Net assets consist of:
Paid in capital (Note 4).......................................................................... $37,829,140
Undistributed net investment income............................................................... 28,710
Accumulated net undistributed gain................................................................ 505,560
Net unrealized depreciation of investments........................................................ (2,794,396)
----------
Total -- representing net assets applicable to capital shares outstanding........................... $35,569,014
----------
----------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-12
<PAGE> 134
GT GLOBAL NEW DIMENSION FUND
STATEMENT OF OPERATIONS
September 15, 1997 (commencement of operations) to December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income............................................................................ $ 8,216
----------
Total investment income.................................................................. 8,216
----------
Expenses:
Service and distribution expenses: (Note 2)
Class A...................................................................... $ 11,800
Class B...................................................................... 27,856
----------
Total expenses............................................................................. 39,656
----------
Net investment loss.......................................................................... (31,440)
----------
Net realized and unrealized gain (loss) on investments: (Note 1)
Net realized loss on investments............................................... (37,742)
Capital gain distributions received............................................ 2,021,395
----------
Net realized gain during the period...................................................... 1,983,653
Net change in unrealized depreciation during the period.................................. (2,794,396)
----------
Net realized and unrealized loss on investments.............................................. (810,743)
----------
Net decrease in net assets resulting from operations......................................... $ (842,183)
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-13
<PAGE> 135
GT GLOBAL NEW DIMENSION FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
SEPTEMBER 15,
1997
(COMMENCEMENT
OF OPERATIONS)
TO
DECEMBER 31,
1997
--------------
Increase in net assets
Operations:
Net investment loss..................................................................... $ (31,440)
Net realized gain on investments........................................................ 1,983,653
Net change in unrealized depreciation of investments.................................... (2,794,396)
--------------
Net decrease in net assets resulting from operations.................................. (842,183)
--------------
Class A:
Distributions to shareholders: (Note 1)
In excess of net investment income...................................................... (583,714)
Class B:
Distributions to shareholders: (Note 1)
In excess of net investment income...................................................... (781,183)
Advisor Class:
Distributions to shareholders: (Note 1)
In excess of net investment income...................................................... (53,046)
--------------
Total distributions................................................................... (1,417,943)
--------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested........................................ 41,029,628
Decrease from capital shares repurchased................................................ (3,300,488)
--------------
Net increase from capital share transactions.......................................... 37,729,140
--------------
Total increase in net assets.............................................................. 35,469,014
Net assets:
Beginning of period..................................................................... 100,000
--------------
End of period *......................................................................... $ 35,569,014
--------------
--------------
* Includes undistributed net investment income of........................................ $ 28,710
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-14
<PAGE> 136
GT GLOBAL NEW DIMENSION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.
<TABLE>
<CAPTION>
SEPTEMBER 15, 1997
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1997
------------------------------------------------
CLASS A (D) CLASS B (D) ADVISOR CLASS(D)
------------- ------------- ----------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.43 $ 11.43 $11.43
------------- ------------- --------
Income from investment operations:
Net investment income (loss).......... (0.01) (0.02) 0.01
Net realized and unrealized loss on
investments.......................... (0.31) (0.32) (0.31)
------------- ------------- --------
Net decrease from investment
operations......................... (0.32) (0.34) (0.30)
------------- ------------- --------
Distributions to shareholders:
In excess of net investment income.... (0.48) (0.47) (0.49)
------------- ------------- --------
Total distributions................. (0.48) (0.47) (0.49)
------------- ------------- --------
Net asset value, end of period.......... $ 10.63 $ 10.62 $10.64
------------- ------------- --------
------------- ------------- --------
Total investment return (c)............. (2.68)% (b) (2.83)% (b) (2.51)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $15,145 $19,184 $1,241
Ratio of net investment income (loss) to
average net assets..................... (0.35)% (a) (0.85)% (a) 0.15% (a)
Ratio of expenses to average net assets
(Notes 1 & 5).......................... 0.50% (a) 1.00% (a) 0.00% (a)
Portfolio turnover rate+................ 1% (b) 1% (b) 1% (b)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-15
<PAGE> 137
GT GLOBAL NEW DIMENSION FUND
NOTES TO
FINANCIAL STATEMENTS
December 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global New Dimension Fund ("Fund") is a diversified series of GT Global
Series Trust (the "Trust"). The Trust is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended
("1940 Act"), as an open-end management investment company. The Fund invests
substantially all of its assets in Advisor Class shares of the GT Global theme
mutual funds: GT Global Consumer Products and Services Fund; GT Global Financial
Services Fund; GT Global Health Care Fund; GT Global Infrastructure Fund; GT
Global Natural Resources Fund; and GT Global Telecommunications Fund
(collectively, the "Underlying Theme Funds").
The Fund offers Class A, Class B and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses of the Fund are
allocated on a pro rata basis to each Class based on the relative net assets of
each Class to the total net assets of the Fund. Each Class of shares differs in
its respective service and distribution expenses. Beginning January 1, 1998, the
Fund will also offer Class C shares.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Investments in the Underlying Funds are valued at the closing net asset value
per Advisor Class share of each Underlying Fund on the day of valuation.
Short-term investments with a maturity of 60 days or less are valued at
amortized cost.
(B) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(C) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains.
(D) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(E) LINE OF CREDIT
The Fund, along with certain other funds ("GT Funds") advised and/or
administered by the Manager, has a line of credit with BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the Fund and
the GT Funds to borrow an aggregate maximum amount of $250,000,000. The Fund is
limited to borrowing up to 33 1/3% of the value of the Fund's total assets. For
the period ended December 31, 1997, the Fund had no outstanding loan balance.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Fund's investment manager and
administrator. The Manager is also the pricing and accounting agent for the
Fund. The Manager will initially assume all costs of the Fund's operation,
except for service and distribution fees as described below and non-recurring
and extraordinary expenses. The Fund, as a shareholder in the Underlying Theme
Funds, indirectly will bear its proportionate share of any investment management
fees and other expenses paid by the Underlying Theme Funds. Subject to receipt
of a pending exemptive order from the Securities and Exchange Commission, the
Trust, on behalf of the Fund, will enter into a Special Servicing Agreement
("Agreement") with the Underlying Theme Funds, the Manager and GT Global
Investor Services, Inc., the transfer agent. If the Board of Trustees of the
Underlying Theme Funds makes certain findings, each Underlying Theme Fund will
pay certain nondistribution-related expenses of the Fund to the extent such
expenses are less than the estimated savings to the Underlying Theme Funds from
the operation of the Fund. The Manager and GT Global also voluntarily have
undertaken to limit the Underlying Theme Fund's expenses (exclusive of brokerage
commissions, taxes, interest, and extraordinary expenses) to the maximum annual
rate of 1.50% of the average daily net assets of the Underlying Theme Fund's
Advisor Class shares.
FS-16
<PAGE> 138
GT GLOBAL NEW DIMENSION FUND
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Fund's
distributor. The Fund offers Class A, Class B and Advisor Class shares for
purchase and will offer Class C shares for purchase beginning January 1, 1998.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the period from September 15, 1997 (commencement of
operations) to December 31, 1997, GT Global retained $6,174 of such sales
charges. Purchases of Class A shares exceeding $500,000 may be subject to a
contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Fund's current prospectus. GT Global collected no CDSCs for the period from
September 15, 1997 (commencement of operations) to December 31, 1997. GT Global
also makes ongoing shareholder servicing and trail commission payments to
dealers whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the period from September 15, 1997 (commencement of operations)
to December 31, 1997, GT Global collected CDSCs in the amount of $1,902. In
addition, GT Global makes ongoing shareholder servicing and trail commission
payments to dealers whose clients hold Class B shares.
Class C shares will not be subject to initial sales charges. However, certain
redemptions of Class C shares made within one year of purchase will be subject
to CDSCs. In addition, GT Global will make ongoing shareholder servicing and
trail commission payments to dealers whose clients hold Class C shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Trust's Board of Trustees has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect. Class C shares will also be subject to a separate
distribution plan adopted by the Trust's Board of Trustees pursuant to Rule
12b-1 under the 1940 Act.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services receives
an annual maintenance fee of $17.50 per account, a new account fee of $4.00 per
account, a per transaction fee of $1.75 for all transactions other than
exchanges and a per exchange fee of $2.25. GT Services is also reimbursed for
its out-of-pocket expenses for such items as postage, forms, telephone charges,
stationery and office supplies.
The Trust pays each of its Trustees who is not an employee, officer or director
of the Manager, GT Global or GT Services $5,000 per year plus $300 for each
meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES
For the period from September 15, 1997 (commencement of operations) to December
31, 1997, purchases and sales, other than short-term investments, of the
Underlying Theme Funds by the Fund, are as follows:
<TABLE>
<CAPTION>
GT GLOBAL PURCHASES SALES
- -------------------------------------------------------------------------------- --------------- ----------
<S> <C> <C>
Consumer Products and Services Fund............................................. $ 11,777,579 $ 80,882
Telecommunications Fund......................................................... 3,462,408 23,798
Financial Services Fund......................................................... 7,690,319 53,175
Natural Resources Fund.......................................................... 4,847,276 32,530
Health Care Fund................................................................ 4,192,022 26,247
Infrastructure Fund............................................................. 6,136,745 44,025
</TABLE>
FS-17
<PAGE> 139
GT GLOBAL NEW DIMENSION FUND
4. CAPITAL SHARES
At December 31, 1997, there were an unlimited number of shares of beneficial
interest authorized, at no par value. Transactions in capital shares of the Fund
were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SEPTEMBER 15, 1997
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1997
-----------------------------------
CLASS A SHARES AMOUNT
- ---------------------------------------- --------------- ------------------
<S> <C> <C>
Shares sold............................. 1,560,835 $ 17,768,084
Shares issued in connection with
reinvestment of distributions......... 54,891 563,181
--------------- ------------------
1,615,726 18,331,265
Shares repurchased...................... (194,494) (2,190,806)
--------------- ------------------
Net increase............................ 1,421,232 $ 16,140,459
--------------- ------------------
--------------- ------------------
<CAPTION>
SEPTEMBER 15, 1997
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1997
-----------------------------------
CLASS B SHARES AMOUNT
- ---------------------------------------- --------------- ------------------
<S> <C> <C>
Shares sold............................. 1,832,668 $ 20,681,472
Shares issued in connection with
reinvestment of distributions......... 67,039 687,825
--------------- ------------------
1,899,707 21,369,297
Shares repurchased...................... (96,841) (1,061,266)
--------------- ------------------
Net increase............................ 1,802,866 $ 20,308,031
--------------- ------------------
--------------- ------------------
<CAPTION>
SEPTEMBER 15, 1997
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1997
-----------------------------------
ADVISOR CLASS SHARES AMOUNT
- ---------------------------------------- --------------- ------------------
<S> <C> <C>
Shares sold............................. 113,102 $ 1,276,664
Shares issued in connection with
reinvestment of distributions......... 5,102 52,402
--------------- ------------------
118,204 1,329,066
Shares repurchased...................... (4,533) (48,416)
--------------- ------------------
Net increase............................ 113,671 $ 1,280,650
--------------- ------------------
--------------- ------------------
</TABLE>
5. SUBSEQUENT EVENT
On January 30, 1998, Liechtenstein Global Trust ("LGT") and AMVESCAP PLC
("AMVESCAP") entered into an agreement by which AMVESCAP will acquire LGT's
Asset Management Division, including Chancellor LGT Asset Management, Inc.
AMVESCAP is the holding company of the AIM and INVESCO asset management
businesses.
FS-18
<PAGE> 140
STATEMENT OF
ADDITIONAL INFORMATION
ADVISOR CLASS SHARES OF
AIM GLOBAL TRENDS FUND
(A SERIES PORTFOLIO OF
AIM SERIES TRUST)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
---------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF THE
ABOVE-NAMED FUND, A COPY OF WHICH MAY BE OBTAINED FREE
OF CHARGE FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 347-4246
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 8, 1998
RELATING TO PROSPECTUS DATED SEPTEMBER 8, 1998
<PAGE> 141
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE TRUST......................... 4
The Trust and Its Shares.................................. 4
INVESTMENT OBJECTIVE AND POLICIES........................... 5
Investment Policies of the Fund........................... 5
U.S. Government Securities................................ 5
Repurchase Agreements..................................... 5
Investment Policies of the Underlying Theme Funds......... 5
Selection of Equity Investments........................... 6
Investment In Other Investment Companies.................. 6
Depositary Receipts....................................... 7
Warrants or Rights........................................ 7
Lending of Underlying Theme Portfolio Securities.......... 7
Commercial Bank Obligations............................... 8
Repurchase Agreements..................................... 8
Borrowing, Reverse Repurchase Agreements and "Roll"
Transactions........................................... 8
Short Sales............................................... 9
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................... 9
Special Risks of Options, Futures and Currency
Strategies............................................. 9
Writing Call Options...................................... 10
Writing Put Options....................................... 11
Purchasing Put Options.................................... 11
Purchasing Call Options................................... 12
Index Options............................................. 13
Interest Rate, Currency and Stock Index Futures
Contracts.............................................. 14
Options on Futures Contracts.............................. 16
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies.......................... 16
Forward Contracts......................................... 16
Foreign Currency Strategies -- Special Considerations..... 17
Cover..................................................... 18
RISK FACTORS OF THE UNDERLYING THEME PORTFOLIOS............. 18
Debt Securities........................................... 18
Illiquid Securities....................................... 19
Foreign Securities........................................ 20
INVESTMENT LIMITATIONS...................................... 24
Investment Limitations of the Fund........................ 24
Investment Limitations of Underlying Theme Funds and
Portfolios............................................. 25
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 29
MANAGEMENT.................................................. 30
Trustees and Executive Officers........................... 30
Management Services Relating to the Fund.................. 32
Distribution Services Relating to the Fund................ 32
NET ASSET VALUE DETERMINATION............................... 33
</TABLE>
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<TABLE>
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HOW TO PURCHASE AND REDEEM SHARES........................... 33
PROGRAMS AND SERVICES FOR SHAREHOLDERS...................... 33
DIVIDEND ORDER.............................................. 33
TAXES....................................................... 34
Taxation of the Fund...................................... 34
Taxation of the Fund's Shareholders....................... 34
MISCELLANEOUS INFORMATION................................... 35
Custodian................................................. 35
Transfer Agency and Accounting Agency Services............ 35
Independent Accountants................................... 35
Shareholder Liability..................................... 35
Name...................................................... 35
Special Servicing Agreement............................... 35
Control Persons and Principal Holders of Securities....... 36
INVESTMENT RESULTS.......................................... 36
Total Return Quotations................................... 36
Performance Information................................... 37
General Information About Underlying Theme Portfolios..... 38
APPENDIX.................................................... 42
Description of Commercial Paper Ratings................... 42
Description of Bond Ratings............................... 43
Absence of Ratings........................................ 43
FINANCIAL STATEMENTS........................................ FS
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INTRODUCTION
This Statement of Additional Information relates to the Advisor Class shares
of AIM Global Trends Fund (the "Fund"). The Fund is a diversified series of AIM
Series Trust (the "Trust"), an open-end management investment company organized
as a Delaware business trust. The Fund seeks its investment objective by
investing substantially all of its assets in shares of the AIM Global Theme
Funds: AIM Global Consumer Products and Services Fund; AIM Global Financial
Services Fund; AIM Global Health Care Fund; AIM Global Infrastructure Fund; AIM
Global Resources Fund; and AIM Global Telecommunications Fund (collectively, the
"Underlying Theme Funds"). A I M Advisors, Inc. ("AIM") serves as the investment
manager of and administrator for the Fund. INVESCO (NY), Inc. (the
"Sub-advisor") serves as the sub-advisor of and sub-administrator for the Fund.
The Trust is a series mutual fund. The rules and regulations of the Securities
and Exchange Commission (the "SEC") require all mutual funds to furnish
prospective investors certain information concerning the activities of a fund
being considered for investment. This information is included in a Prospectus
(the "Prospectus"), dated September 8, 1998, which relates to the Advisor Class
shares of the Fund. Copies of the Prospectus and additional copies of this
Statement of Additional Information may be obtained without charge by writing
the principal distributor of the Fund's shares, A I M Distributors, Inc. ("AIM
Distributors"), P.O. Box 4739, Houston, Texas 77210-4739, or by calling (800)
347-4246. Investors must receive a Prospectus before they invest in the Fund.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Fund. Some of the
information required to be in this Statement of Additional Information is also
included in the Fund's current Prospectus, and in order to avoid repetition,
reference will be made herein to sections of the Prospectus. Additionally, the
Prospectus and this Statement of Additional Information omit certain information
contained in the Trust's Registration Statement filed with the SEC. Copies of
the Registration Statement, including items omitted from the Prospectus and this
Statement of Additional Information, may be obtained from the SEC by paying the
charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust was previously organized as a Massachusetts business trust named "GT
Global Series Trust," which was established on August 26, 1996 and which had one
series named "GT Global New Dimension Fund." On May 29, 1998, the Trust was
reorganized into a Delaware business trust, which was initially established on
May 7, 1998. The Trust currently consists of one series, the Fund. The Fund
currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and Advisor Class shares. From time to time the Board of
Trustees of the Trust may create new series of shares without the necessity of a
vote of the shareholders of the Trust. All historical financial and other
information contained in this Statement of Additional Information for periods
prior to May 29, 1998 relating to the Fund is that of GT Global New Dimension
Fund.
This Statement of Additional Information relates solely to the Advisor Class
shares of the Fund.
The term "majority of the outstanding shares" of the Trust, of the Fund or of
a particular class of the Fund means, respectively, the vote of the lesser of
(a) 67% or more of the shares of the Trust, Fund or such class present at a
meeting of the Trust's shareholders, if the holders of more than 50% of the
outstanding shares of the Trust, the Fund or such class are present or
represented by proxy, or (b) more than 50% of the outstanding shares of the
Trust, the Fund or such class.
Class A, Class B, Class C and Advisor Class shares of the Fund have equal
rights and privileges. Each share of a particular class is entitled to one vote,
to participate equally in dividends and distributions declared by the Trust's
Board of Trustees with respect to the class of the Fund and, upon liquidation of
the Fund, to participate proportionately in the net assets of the Fund allocable
to such class remaining after satisfaction of outstanding liabilities of the
Fund allocable to such class. Fund shares are fully paid, non-assessable and
fully transferable when issued and have no preemptive rights and have such
conversion and exchange rights as set forth in the Prospectus and this Statement
of Additional Information. Fractional shares have proportionately the same
rights, including voting rights, as are provided for a full share.
Shareholders of the Fund do not have cumulative voting rights, and therefore
the holders of more than 50% of the outstanding shares of the Fund voting
together for election of trustees may elect all of the members of the Board of
Trustees of the Trust. In such event, the remaining holders cannot elect any
trustees of the Trust.
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INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT POLICIES OF THE FUND
The following supplements the information contained in the Prospectus
concerning the investment policies of the Fund.
U.S. GOVERNMENT SECURITIES
The Fund may invest in various direct obligations of the U.S. Treasury and
obligations issued or guaranteed by the U.S. government or one of its agencies
or instrumentalities (collectively, "U.S. government securities"). Among the
U.S. government securities that may be held by the Fund are securities that are
supported by the full faith and credit of the United States; securities that are
supported by the right of the issuer to borrow from the U.S. Treasury; and
securities that are supported solely by the credit of the instrumentality.
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements. A repurchase agreement is a
transaction in which the Fund purchases securities from a bank or recognized
securities dealer and simultaneously commits to resell the securities to the
bank or dealer on an agreed-upon date or upon demand and at a price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased securities. The Fund maintains custody of the underlying securities
prior to their repurchase; thus, the obligation of the bank or dealer to pay the
repurchase price on the date agreed to is, in effect, secured by such
securities. If the value of these securities is less than the repurchase price,
plus any agreed-upon additional amount, the other party to the agreement must
provide additional collateral so that at all times the collateral is at least
equal to the repurchase price, plus any agreed-upon additional amount. The
difference between the total amount to be received upon repurchase of the
securities and the price that was paid by the Fund upon acquisition is accrued
as interest and included in its net investment income. Repurchase agreements
carry certain risks not associated with direct investments in securities,
including possible declines in the market value of the underlying securities and
delays and costs to the Fund if the other party to a repurchase agreement
becomes insolvent.
INVESTMENT POLICIES OF THE UNDERLYING THEME FUNDS
The following supplements the information contained in the Prospectus
concerning the investment policies and limitations of the Underlying Theme
Funds. More information about the investment policies and restrictions and the
investment limitations of each Underlying Theme Fund is set forth in the
Underlying Theme Funds' Prospectus and Statement of Additional Information.
The Underlying Theme Funds are diversified series of AIM Investment Funds (the
"Underlying Trust"), a registered open-end management investment company. The
AIM Global Consumer Products and Services Fund ("Consumer Products and Services
Fund"), AIM Global Financial Services Fund ("Financial Services Fund"), AIM
Global Infrastructure Fund ("Infrastructure Fund"), and AIM Global Resources
Fund ("Resources Fund") (each, a "Feeder Fund," and, collectively, the "Feeder
Funds") each invests all of its assets in the Global Consumer Products and
Services Portfolio, Global Financial Services Portfolio, Global Infrastructure
Portfolio and Global Resources Portfolio (each, a "Portfolio," and,
collectively, the "Portfolios"), respectively.
Each Portfolio is a subtrust (a "series") of Global Investment Portfolio (an
open-end management investment company) with an investment objective that is
identical to that of its corresponding Underlying Theme Fund. Whenever the
phrase "all of the Underlying Theme Fund's investable assets" is used herein, it
means that the only investment securities held by a Feeder Fund will be its
interest in its corresponding Portfolio. A Feeder Fund may withdraw its
investment in its corresponding Portfolio at any time, if the Underlying Trust's
Board of Trustees determines that it is in the best interests of the Feeder Fund
and its shareholders to do so. Upon any such withdrawal, a Feeder Fund's assets
would be invested in accordance with the investment policies of its
corresponding Portfolio described below and in the Underlying Theme Funds'
Prospectus.
The investment objective of each Feeder Fund is long-term capital growth. The
investment objectives of the AIM Global Health Care Fund ("Health Care Fund")
and the AIM Global Telecommunications Fund ("Telecommunications Fund") are
long-term capital appreciation and long-term capital growth, respectively. The
Portfolios and the Health Care Fund and the Telecommunications Fund, together,
are referred to herein as the "Underlying Theme Portfolios."
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SELECTION OF EQUITY INVESTMENTS
With respect to the Global Resources Portfolio, the Sub-advisor has identified
four areas that it expects will create investment opportunities: (i) improving
supply/demand fundamentals, which may result in higher commodity prices; (ii)
privatization of state-owned natural resource businesses; (iii) management which
can improve production efficiencies without correspondingly increasing commodity
prices; and (iv) service companies with emerging technologies that can enhance
productivity or reduce production costs. Of course, there is no certainty that
these factors will produce the anticipated results.
With respect to the Telecommunications Fund, the Sub-advisor has identified
four areas that it expects will create investment opportunities: (i)
deregulation of companies in the industry, which will allow competition to
promote greater efficiencies; (ii) privatization of state-owned
telecommunications businesses; (iii) development of infrastructure in
underdeveloped countries and upgrading of services in other countries; and (iv)
emerging technologies that will enhance productivity and reduce costs in the
telecommunications industry. Of course, there is no certainty that these factors
will produce the anticipated results.
There may be times when, in the opinion of the Sub-advisor, prevailing market,
economic or political conditions warrant reducing the proportion of the
Underlying Theme Portfolios' assets invested in equity securities and increasing
the proportion held in cash (U.S. dollars, foreign currencies or multinational
currency units) or invested in debt securities or high quality money market
instruments issued by corporations, or the United States, or a foreign
government. A portion of each Underlying Theme Portfolio's assets normally will
be held in cash (U.S. dollars, foreign currencies or multinational currency
units) or invested in foreign or domestic high quality money market instruments
pending investment of proceeds from new sales of Underlying Theme Fund shares,
to provide for ongoing expenses and to satisfy redemptions.
For each Underlying Theme Portfolio's investment purposes, an issuer is
typically considered as located in a particular country if it (a) is organized
under the laws of or has its principal office in a particular country, or (b)
normally derives 50% or more of its total revenues from business in that
country, provided that, in the Sub-advisor's view, the value of such issuer's
securities will tend to reflect such country's development to a greater extent
than developments elsewhere. However, these are not absolute requirements, and
certain companies incorporated in a particular country and considered by the
Sub-advisor to be located in that country may have substantial foreign
operations or subsidiaries and/or export sales exceeding in size the assets or
sales in that country.
In certain countries, governmental restrictions and other limitations on
investment may affect an Underlying Theme Portfolio's ability to invest in such
countries. In addition, in some instances only special classes of securities may
be purchased by foreigners and the market prices, liquidity and rights with
respect to those securities may vary from shares owned by nationals. The
Sub-advisor is not aware at this time of the existence of any investment or
exchange control regulations which might substantially impair the operations of
the Underlying Theme Portfolios as described in the Underlying Theme Funds'
Prospectus and Statement of Additional Information. Restrictions may in the
future, however, make it undesirable to invest in certain countries. None of the
Underlying Theme Portfolios has a present intention of making any significant
investment in any country or stock market in which the Sub-advisor considers the
political or economic situation to threaten an Underlying Theme Portfolio with
substantial or total loss of its investment in such country or market.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
Each Underlying Theme Portfolio may invest in the securities of investment
companies within the limitations of the Investment Company Act of 1940, as
amended (the "1940 Act"). These limitations currently provide that, in general,
an Underlying Theme Portfolio may purchase shares of an investment company
unless (a) such a purchase would cause an Underlying Theme Portfolio to own in
the aggregate more than 3% of the total outstanding voting stock of the
investment company or (b) such a purchase would cause the Underlying Theme
Portfolio to have more than 5% of its assets invested in the investment company
or more than 10% of its assets invested in an aggregate of all such investment
companies. The foregoing restrictions do not apply to the investment of the
Feeder Funds in their corresponding Portfolios. Investment in closed-end
investment companies may involve the payment of substantial premiums above the
value of such companies' portfolio securities. Each Underlying Theme Portfolio
does not intend to invest in such investment companies unless, in the judgment
of the Sub-advisor, the potential benefits of such investments justify the
payment of any applicable premiums. The return on such securities will be
reduced by operating expenses of such companies, including payments to the
investment managers of those investment companies.
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DEPOSITARY RECEIPTS
An Underlying Theme Portfolio may hold securities of foreign issuers in the
form of American Depositary Receipts ("ADRs"), American Depositary Shares
("ADSs") and European Depositary Receipts ("EDRs") or other securities
convertible into securities of eligible foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities for which
they may be exchanged. ADRs and ADSs are typically issued by an American bank or
trust company and evidence ownership of underlying securities issued by a
foreign corporation. EDRs, which are sometimes referred to as Continental
Depositary Receipts ("CDRs"), are issued in Europe typically by foreign banks
and trust companies and evidence ownership of either foreign or domestic
securities. Generally, ADRs and ADSs in registered form are designed for use in
U.S. securities markets and EDRs in bearer form are designed for use in European
securities markets. For purposes of each Underlying Theme Portfolio's investment
policies, an Underlying Theme Portfolio's investments in ADRs, ADSs and EDRs
will be deemed to be investments in the equity securities representing
securities of foreign issuers into which they may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored."
While ADRs issued under these two types of facilities are in some respects
similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depository usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into U.S. dollars, the disposition of non-cash distributions, and
the performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass-through voting
rights to ADR holders in respect of the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Underlying Theme Portfolios may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by an Underlying Theme Portfolio in
connection with other securities or separately and provide the Underlying Theme
Portfolio with the right to purchase at a later date other securities of the
issuer. Warrants are securities permitting, but not obligating, their holder to
subscribe for other securities or commodities. Warrants do not carry with them
the right to dividends or voting rights with respect to the securities that they
entitle their holder to purchase, and they do not represent any rights in the
assets of the issuer. As a result, warrants may be considered more speculative
than certain other types of investments. In addition, the value of a warrant
does not necessarily change with the value of the underlying securities and a
warrant ceases to have value if it is not exercised prior to its expiration
date.
LENDING OF UNDERLYING THEME PORTFOLIO SECURITIES
For the purpose of realizing additional income, each Underlying Theme
Portfolio may make secured loans of its securities holdings amounting to not
more than 30% of its total assets. Securities loans are made to broker/dealers
or institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral at least equal at all times to the value of
the securities lent plus any accrued interest, "marked to market" on a daily
basis. The Underlying Theme Portfolios may pay reasonable administrative and
custodial fees in connection with the loan of their securities. While the
securities loan is outstanding, an Underlying Theme Portfolio will continue to
receive the equivalent of the interest or dividends paid by the issuer on the
securities, as well as interest on the investment of the collateral or a fee
from the borrower. An Underlying Theme Portfolio will have a right to call each
loan and obtain the securities within the stated settlement period. An
Underlying Theme Portfolio will not have the right to vote equity securities
while they are being lent, but it may call in a loan in anticipation of any
important vote. Loans will only be made to firms deemed by the Sub-advisor to be
of good standing and will not be made unless, in the judgment of the
Sub-advisor, the consideration to be earned from such loans would justify the
risk. The risks in lending portfolio securities, as with other extensions of
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secured credit, consist of possible delays in receiving additional collateral or
in recovery of the securities and possible loss of rights in the collateral
should the borrower fail financially.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each Underlying Theme Portfolio's investment policies with
respect to bank obligations, obligations of foreign branches of U.S. banks and
of foreign banks are obligations of the issuing bank and may be general
obligations of the parent bank. Such obligations may, however, be limited by the
terms of a specific obligation and by government regulation. As with investments
in non-U.S. securities in general, investments in the obligations of foreign
branches of U.S. banks and of foreign banks may subject each Underlying Theme
Portfolio to investment risks that are different in some respects from those of
investments in obligations of U.S. issuers. Although each Underlying Theme
Portfolio will typically acquire obligations issued and supported by the credit
of U.S. or foreign banks having total assets at the time of purchase of $1
billion or more, this $1 billion figure is not an investment policy or
restriction of each Underlying Theme Portfolio. For the purposes of calculation
with respect to the $1 billion figure, the assets of a bank will be deemed to
include the assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction in which an Underlying Theme Portfolio
purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to the bank or dealer on an
agreed-upon date or upon demand and at a price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased securities.
Although repurchase agreements carry certain risks not associated with direct
investments in securities, including possible decline in the market value of the
underlying securities and delays and costs to the Underlying Theme Portfolio if
the other party to the repurchase agreement becomes bankrupt, the Underlying
Theme Portfolios intend to enter into repurchase agreements only with banks and
dealers believed by the Sub-advisor to present minimal credit risks in
accordance with guidelines established by the Underlying Trust's or Global
Investment Portfolio's Board of Trustees (each a "Board" and, collectively, the
"Boards"), as applicable. The Sub-advisor will review and monitor the
creditworthiness of such institutions under the applicable Board's general
supervision.
Each Underlying Theme Portfolio will invest only in repurchase agreements
collateralized at all times in an amount at least equal to the repurchase price
plus accrued interest. To the extent that the proceeds from any sale of such
collateral upon a default in the obligation to repurchase were less than the
repurchase price, an Underlying Theme Portfolio would suffer a loss. If the
financial institution that is party to the repurchase agreement petitions for
bankruptcy or otherwise becomes subject to bankruptcy or other liquidation
proceedings, there may be restrictions on an Underlying Theme Portfolio's
ability to sell the collateral and it could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, each Underlying Theme Portfolio intends to
comply with provisions under such code that would allow the immediate resale of
such collateral. Each Underlying Theme Portfolio will not enter into a
repurchase agreement with a maturity of more than seven days if, as a result,
more than 15% of the value of its net assets (except for the Health Care Fund,
more than 10% of the value of its total assets) would be invested in such
repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
Each Underlying Theme Portfolio's borrowings will not exceed 33 1/3% of its
total assets, i.e., the Underlying Theme Portfolio's total assets at all times
will equal at least 300% of the amount of outstanding borrowings. If market
fluctuations in the value of an Underlying Theme Portfolio's securities holdings
or other factors cause the ratio of its total assets to outstanding borrowings
to fall below 300%, within three days (excluding Sundays and holidays) of such
event that Underlying Theme Portfolio may be required to sell portfolio
securities to restore the 300% asset coverage, even though from an investment
standpoint such sales might be disadvantageous. Each Underlying Theme Portfolio
may also borrow up to 5% of its total assets for temporary or emergency purposes
other than to meet redemptions. Any borrowing by an Underlying Theme Portfolio
may cause greater fluctuation in the value of its shares than would be the case
if it did not borrow.
Each Underlying Theme Portfolio's fundamental investment limitations permit it
to borrow money for leveraging purposes. However, each Underlying Theme
Portfolio (except the Health Care Fund) is currently prohibited, pursuant to a
non-fundamental investment policy, from borrowing money in order to purchase
securities. Nevertheless, this policy may be changed in the future by the
applicable Board. If an Underlying Theme Portfolio employs leverage in the
future, it would be subject to certain additional risks. Use of leverage creates
an opportunity for greater growth of capital but would exaggerate any increases
or decreases in the net asset value of a Feeder Fund or an Underlying Theme
Portfolio. When the income and gains on securities purchased with the proceeds
of borrowings exceed the costs of such borrowings, an
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Underlying Theme Portfolio's earnings or a Feeder Fund's net asset value will
increase faster than otherwise would be the case; conversely, if such income and
gains fail to exceed such costs, an Underlying Theme Portfolio's earnings or a
Feeder Fund's net asset value would decline faster than would otherwise be the
case.
Each Underlying Theme Portfolio may enter into reverse repurchase agreements.
A reverse repurchase agreement is a borrowing transaction in which the
Underlying Theme Portfolio transfers possession of securities to another party,
such as a bank or broker/dealer, in return for cash, and agrees to repurchase
the securities in the future at an agreed upon price, which includes an interest
component. Each Underlying Theme Portfolio may also engage in "roll" borrowing
transactions, which involve the sale of Government National Mortgage Association
certificates or other securities together with a commitment (for which the
Underlying Theme Portfolio may receive a fee) to purchase similar, but not
identical, securities at a future date. Each Underlying Theme Portfolio will
segregate liquid assets in an amount sufficient to cover its obligations under
"roll" transactions and reverse repurchase agreements with broker/dealers. No
segregation is required for reverse repurchase agreements with banks.
SHORT SALES
Each Underlying Theme Portfolio may make short sales of securities. A short
sale is a transaction in which an Underlying Theme Portfolio sells a security in
anticipation that the market price of that security will decline. An Underlying
Theme Portfolio may make short sales (i) as a form of hedging to offset
potential declines in long positions in securities it owns, or anticipates
acquiring, or in similar securities, and (ii) in order to maintain flexibility
in its securities holdings.
When an Underlying Theme Portfolio makes a short sale of a security it does
not own, it must borrow the security sold short and deliver it to the
broker/dealer or other intermediary through which it made the short sale. The
Underlying Theme Portfolio may have to pay a fee to borrow particular securities
and will often be obligated to pay over any payments received on such borrowed
securities.
An Underlying Theme Portfolio's obligation to replace the borrowed security
when the borrowing is called or expires will be secured by collateral deposited
with the intermediary. The Underlying Theme Portfolio will also be required to
deposit collateral with its custodian to the extent, if any, necessary so that
the value of both collateral deposits in the aggregate is at all times equal to
at least 100% of the current market value of the security sold short. Depending
on arrangements made with the intermediary from which it borrowed the security
regarding payment of any amounts received by it on such security, an Underlying
Theme Portfolio may not receive any payments (including interest) on its
collateral deposited with such intermediary.
If the price of the security sold short increases between the time of the
short sale and the time an Underlying Theme Portfolio replaces the borrowed
security, it will incur a loss; conversely, if the price declines, the
Underlying Theme Portfolio will realize a gain. Any gain will be decreased, and
any loss increased, by the transaction costs associated with the transaction.
Although an Underlying Theme Portfolio's gain is limited by the price at which
it sold the security short, its potential loss theoretically is unlimited.
No Underlying Theme Portfolio will make a short sale if, after giving effect
to the sale, the market value of the securities sold short exceeds 25% of the
value of its total assets or its aggregate short sales of the securities of any
one issuer exceed the lesser of 2% of its net assets or 2% of the securities of
any class of the issuer. Moreover, an Underlying Theme Portfolio may engage in
short sales only with respect to securities listed on a national securities
exchange.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use by the Underlying Theme Portfolios of options, futures contracts and
forward currency contracts ("Forward Contracts") involves special considerations
and risks, as described below. Risks pertaining to particular instruments are
described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Sub-advisor's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes
in the prices of individual securities. While the Sub-advisor is
experienced in the use of these instruments, there can be no assurance that
any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used
in a short
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hedge increased by less than the decline in value of the hedged investment,
the hedge would not be fully successful. Such a lack of correlation might
occur due to factors unrelated to the value of the investments being
hedged, such as speculative or other pressures on the markets in which the
hedging instrument is traded. The effectiveness of hedges using hedging
instruments on indices will depend on the degree of correlation between
price movements in the index and price movements in the investments being
hedged.
(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. For example, if an
Underlying Theme Portfolio entered into a short hedge because the
Sub-advisor projected a decline in the price of a security in the
Underlying Theme Portfolio's portfolio, and the price of that security
increased instead, the gain from that increase might be wholly or partially
offset by a decline in the price of the hedging instrument. Moreover, if
the price of the hedging instrument declined by more than the increase in
the price of the security, the Underlying Theme Portfolio could suffer a
loss. In either such case, the Underlying Theme Portfolio would have been
in a better position had it not hedged at all.
(4) As described below, an Underlying Theme Portfolio 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 (i.e., instruments other than purchased
options). If the Underlying Theme Portfolio 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 the Underlying Theme Portfolio'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 Underlying
Theme Portfolio sell a portfolio security at a disadvantageous time. The
Underlying Theme Portfolio's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability
and willingness of the other party to the transaction ("contra party") to
enter into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Underlying Theme Portfolio.
WRITING CALL OPTIONS
Each Underlying Theme Portfolio may write (sell) call options on securities,
indices and currencies. Call options generally will be written on securities and
currencies that, in the opinion of the Sub-advisor, are not expected to make any
major price moves in the near future but that, over the long term, deemed to be
attractive investments for the Underlying Theme Portfolios.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he or she may be
assigned an exercise notice, requiring him or her to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by purchasing an option
identical to that previously sold.
Portfolio securities or currencies on which call options may be written will
be purchased solely on the basis of investment considerations consistent with
each Underlying Theme Portfolio's investment objective. When writing a call
option, an Underlying Theme Portfolio, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security or
currency above the exercise price, and retains the risk of loss should the price
of the security or currency decline. Unlike one who owns securities or
currencies not subject to an option, an Underlying Theme Portfolio has no
control over when it may be required to sell the underlying securities or
currencies, since most options may be exercised at any time prior to the
option's expiration. If a call option that an Underlying Theme Portfolio 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 or currency during the option period. If the call option is exercised,
the Underlying Theme Portfolio will realize a gain or loss from the sale of the
underlying security or currency, which will be increased or offset by the
premium received. The Underlying Theme Portfolios do not consider a security or
currency covered by a call option to be "pledged" as that term is used in their
policies that limit the pledging or mortgaging of their assets.
Writing call options can serve as a limited short hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a
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price higher than the exercise price of the call option, it can be expected that
the option will be exercised and an Underlying Theme Portfolio will be obligated
to sell the security or currency at less than its market value.
The premium that an Underlying Theme Portfolio receives for writing a call
option is deemed to constitute the market value of an option. The premium the
Underlying Theme Portfolio will receive from writing a call option will reflect,
among other things, the current market price of the underlying investment, the
relationship of the exercise price to such market price, the historical price
volatility of the underlying investment, and the length of the option period. In
determining whether a particular call option should be written, the Sub-advisor
will consider the reasonableness of the anticipated premium and the likelihood
that a liquid secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit an Underlying Theme
Portfolio to write another call option on the underlying security or currency
with either a different exercise price or expiration date, or both.
Each Underlying Theme Portfolio will pay transaction costs in connection with
the writing of options and in entering into closing purchase contracts.
Transaction costs relating to options activity are normally higher than those
applicable to purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, an Underlying Theme Portfolio may
purchase an underlying security or currency for delivery in accordance with the
exercise of an option, rather than delivering such security or currency from its
portfolio. In such cases, additional costs will be incurred.
An Underlying Theme Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more,
respectively, than the premium received from writing the option. Because
increases in the market price of a call option generally will reflect increases
in the market price of the underlying security or currency, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security or currency owned by an Underlying
Theme Portfolio.
WRITING PUT OPTIONS
Each Underlying Theme Portfolio may write put options on securities, indices
and currencies. A put option gives the purchaser of the option the right to
sell, and the writer (seller) the obligation to buy, the underlying security or
currency at the exercise price at any time until (American style) or on
(European style) the expiration date. The operation of put options in other
respects, including their related risks and rewards, is substantially identical
to that of call options.
An Underlying Theme Portfolio generally would write put options in
circumstances where the Sub-advisor wishes to purchase the underlying security
or currency for the Underlying Theme Portfolio's holdings at a price lower than
the current market price of the security or currency. In such event, an
Underlying Theme Portfolio would write a put option at an exercise price that,
reduced by the premium received on the option, reflects the lower price it is
willing to pay. Since the Underlying Theme Portfolio would also receive interest
on debt securities or currencies maintained to cover the exercise price of the
option, this technique could be used to enhance current return during periods of
market uncertainty. The risk in such a transaction would be that the market
price of the underlying security or currency would decline below the exercise
price less the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and an Underlying Theme
Portfolio will be obligated to purchase the security or currency at greater than
its market value.
PURCHASING PUT OPTIONS
Each Underlying Theme Portfolio may purchase put options on securities,
indices and currencies. As the holder of a put option, an Underlying Theme
Portfolio would have the right to sell the underlying security or currency at
the exercise price at any time until (American style) or on (European style) the
expiration date. An Underlying Theme Portfolio may enter into closing sale
transactions with respect to such options, exercise such option or permit such
option to expire.
Each Underlying Theme Portfolio may purchase a put option on an underlying
security or currency ("protective put") owned by the Underlying Theme Portfolio
in order to protect against an anticipated decline in the value of the security
or currency. Such hedge protection is provided only during the life of the put
option when the Underlying Theme Portfolio, as the holder of the put option, is
able to sell the underlying security or currency at the put exercise price
regardless of
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any decline in the underlying security's market price or currency's exchange
value. The premium paid for the put option and any transaction costs would
reduce any profit otherwise available for distribution when the security or
currency is eventually sold.
An Underlying Theme Portfolio may also purchase put options at a time when it
does not own the underlying security or currency. By purchasing put options on a
security or currency it does not own, that Underlying Theme Portfolio seeks to
benefit from a decline in the market price of the underlying security or
currency. If the put option is not sold when it has remaining value, and if the
market price of the underlying security or currency remains equal to or greater
than the exercise price during the life of the put option, the Underlying Theme
Portfolio will lose its entire investment in the put option. In order for the
purchase of a put option to be profitable, the market price of the underlying
security or currency must decline sufficiently below the exercise price to cover
the premium and transaction costs, unless the put option is sold in a closing
sale transaction.
PURCHASING CALL OPTIONS
Each Underlying Theme Portfolio may purchase call options on securities,
indices and currencies. As the holder of a call option, an Underlying Theme
Portfolio would have the right to purchase the underlying security or currency
at the exercise price at any time until (American style) or on (European style)
the expiration date. An Underlying Theme Portfolio may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
Call options may be purchased by an Underlying Theme Portfolio for the purpose
of acquiring the underlying security or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable an Underlying Theme
Portfolio to acquire the security or currency at the exercise price of the call
option plus the premium paid. At times, the net cost of acquiring the security
or currency in this manner may be less than the cost of acquiring the security
or currency directly. This technique may also be useful to an Underlying Theme
Portfolio in purchasing a large block of securities that would be more difficult
to acquire by direct market purchases. So long as it holds such a call option,
rather than the underlying security or currency itself, the Underlying Theme
Portfolio is partially protected from any unexpected decline in the market price
of the underlying security or currency and, in such event, could allow the call
option to expire, incurring a loss only to the extent of the premium paid for
the option.
An Underlying Theme Portfolio may also purchase call options on underlying
securities or currencies it owns to avoid realizing losses that would result in
a reduction of its current return. For example, where an Underlying Theme
Portfolio has written a call option on an underlying security or currency having
a current market value below the price at which it purchased the security or
currency, an increase in the market price could result in the exercise of the
call option written by the Underlying Theme Portfolio and the realization of a
loss on the underlying security or currency. Accordingly, the Underlying Theme
Portfolio could purchase a call option on the same underlying security or
currency, which could be exercised to fulfill its delivery obligations under its
written call (if it is exercised). This strategy could allow the Underlying
Theme Portfolio to avoid selling the portfolio security or currency at a time
when it has an unrealized loss; however, the Underlying Theme Portfolio would
have to pay a premium to purchase the call option plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of each
Underlying Theme Portfolio's total assets at the time of each purchase.
An Underlying Theme Portfolio may attempt to accomplish objectives similar to
those involved in using Forward Contracts by purchasing put or call options on
currencies. A put option gives an Underlying Theme Portfolio as purchaser the
right (but not the obligation) to sell a specified amount of currency at the
exercise price at any time until (American style) or on (European style) the
expiration date of the option. A call option gives an Underlying Theme Portfolio
as purchaser the right (but not the obligation) to purchase a specified amount
of currency at the exercise price at any time until (American style) or on
(European style) the expiration date of the option. An Underlying Theme
Portfolio might purchase a currency put option, for example, to protect itself
against a decline in the dollar value of a currency in which it holds or
anticipates holding securities. If the currency's value should decline against
the dollar, the loss in currency value should be offset, in whole or in part, by
an increase in the value of the put. If the value of the currency instead should
rise against the dollar, any gain to an Underlying Theme Portfolio would be
reduced by the premium it had paid for the put option. A currency call option
might be purchased, for example, in anticipation of, or to protect against, a
rise in the value against the dollar of a currency in which an Underlying Theme
Portfolio anticipates purchasing securities.
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. An Underlying Theme Portfolio will not purchase an OTC option unless it
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believes that daily valuations for such options are readily obtainable. OTC
options differ from exchange-traded options in that OTC options are transacted
with dealers directly and not through a clearing corporation (which guarantees
performance). Consequently, there is a risk of non-performance by the dealer.
Since no exchange is involved, OTC options are valued on the basis of an average
of the last bid prices obtained from dealers, unless a quotation from only one
dealer is available, in which case only that dealer's price will be used. In the
case of OTC options, there can be no assurance that a liquid secondary market
will exist for any particular option at any specific time.
The staff of the SEC considers purchased OTC options to be illiquid
securities. An Underlying Theme Portfolio may also sell OTC options and, in
connection therewith, segregate assets or cover its obligations with respect to
OTC options written by it. The assets used as cover for OTC options written by
an Underlying Theme Portfolio will be considered illiquid unless the OTC options
are sold to qualified dealers who agree that the Underlying Theme Portfolio may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC option written
subject to this procedure would be considered illiquid only to the extent that
the maximum repurchase price under the formula exceeds the intrinsic value of
the option.
An Underlying Theme Portfolio's ability to establish and close out positions
in exchange-listed options depends on the existence of a liquid market. Each
Underlying Theme Portfolio intends to purchase or write only those
exchange-traded options for which there appear to be liquid secondary markets.
However, there can be no assurance that such a market will exist at any
particular time. Closing transactions can be made for OTC options only by
negotiating directly with the contra party or by a transaction in the secondary
market if any such market exists. Although an Underlying Theme Portfolio will
enter into OTC options only with contra parties that are expected to be capable
of entering into closing transactions with it, there is no assurance that the
Underlying Theme Portfolio 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 contra party, the Underlying Theme Portfolio might be unable to close out an
OTC option position at any time prior to its expiration.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or
futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. When an Underlying
Theme Portfolio writes a call on an index, it receives a premium and agrees
that, prior to the expiration date, the purchaser of the call, upon exercise of
the call, will receive from the Underlying Theme Portfolio an amount of cash if
the closing level of the index upon which the call is based is greater than the
exercise price of the call. The amount of cash is equal to the difference
between the closing price of the index and the exercise price of the call times
a specified multiple (the "multiplier"), which determines the total dollar value
for each point of such difference. When an Underlying Theme Portfolio buys a
call on an index, it pays a premium and has the same rights as to such call as
are indicated above. When an Underlying Theme Portfolio buys a put on an index,
it pays a premium and has the right, prior to the expiration date, to require
the seller of the put, upon the Underlying Theme Portfolio's exercise of the
put, to deliver to the Underlying Theme Portfolio an amount of cash if the
closing level of the index upon which the put is based is less than the exercise
price of the put, which amount of cash is determined by the multiplier, as
described above for calls. When the Underlying Theme Portfolio writes a put on
an index, it receives a premium and the purchaser has the right, prior to the
expiration date, to require the Underlying Theme Portfolio to deliver to it an
amount of cash equal to the difference between the closing level of the index
and the exercise price times the multiplier, if the closing level is less than
the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when an Underlying Theme
Portfolio writes a call on an index it cannot provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. An Underlying Theme Portfolio 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, an Underlying
Theme Portfolio cannot, as a practical matter, acquire and hold a portfolio
containing exactly the same securities as underlie the index and, as a result,
bears a risk that the value of the securities held will vary from the value of
the index.
Even if an Underlying Theme Portfolio could assemble a securities portfolio
that exactly reproduced the composition of the underlying index, it still would
not be fully covered from a risk standpoint because of the "timing risk"
inherent in writing index options. When an index option is exercised, the amount
of cash that the holder is entitled to receive is determined by the difference
between the exercise price and the closing index level on the date when the
option is exercised. As with other kinds of options, the Underlying Theme
Portfolio, as the call writer, will not know that it has been assigned until the
next business day at the earliest. The time lag between exercise and notice of
assignment poses no risk for the writer of a covered call on a specific
underlying security, such as common stock, because there the writer's
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obligation is to deliver the underlying security, not to pay its value as of a
fixed time in the past. So long as the writer already owns the underlying
security, it can satisfy its settlement obligations by simply delivering it, and
the risk that its value may have declined since the exercise date is borne by
the exercising holder. In contrast, even if the writer of an index call holds
securities that exactly match the composition of the underlying index, it will
not be able to satisfy its assignment obligations by delivering those securities
against payment of the exercise price. Instead, it will be required to pay cash
in an amount based on the closing index value on the exercise date; and by the
time it learns that it has been assigned, the index may have declined, with a
corresponding decline in the value of its securities portfolio. This "timing
risk" is an inherent limitation on the ability of index call writers to cover
their risk exposure by holding securities positions.
If an Underlying Theme Portfolio purchases an index option and exercises it
before the closing index value for that day is available, it runs the risk that
the level of the underlying index may subsequently change. If such a change
causes the exercised option to fall out-of-the-money, the Underlying Theme
Portfolio will be required to pay the difference between the closing index value
and the exercise price of the option (times the applicable multiplier) to the
assigned writer.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each Underlying Theme Portfolio may enter into interest rate, currency or
stock index futures contracts (collectively, "Futures" or "Futures Contracts")
as a hedge against changes in prevailing levels of interest rates, currency
exchange rates or stock price levels, respectively, in order to establish more
definitely the effective return on securities or currencies held or intended to
be acquired by it. An Underlying Theme Portfolio's hedging may include sales of
Futures 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 as an offset against the effect of expected declines in interest rates,
and increases in currency exchange rates or stock prices.
Each Underlying Theme Portfolio only will enter into Futures Contracts that
are traded 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 by the Commodity
Futures Trading Commission ("CFTC"). Futures are exchanged in London at the
London International Financial Futures Exchange.
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce an Underlying Theme Portfolio's exposure to interest rate,
currency exchange rate and stock market fluctuations, an Underlying Theme
Portfolio may be able to hedge its exposure more effectively and at a lower cost
through using Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (security
or currency) for a specified price at a designated date, time and place. A stock
index Futures Contract provides for the delivery, at a designated date, time and
place, of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of trading on the contract
and the price at which the Futures Contract is originally struck; 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 the Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment
for financial instruments or currencies, Futures Contracts usually are closed
out before the delivery date. Closing out an open Futures Contract sale or
purchase is effected by entering into an offsetting Futures Contract purchase or
sale, respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Underlying Theme Portfolio
realizes a gain; if it is more, the Underlying Theme Portfolio realizes a loss.
Conversely, if the offsetting sale price is more than the original purchase
price, the Underlying Theme Portfolio realizes a gain; if it is less, the
Underlying Theme Portfolio realizes a loss. The transaction costs must also be
included in these calculations. There can be no assurance, however, that an
Underlying Theme Portfolio will be able to enter into an offsetting transaction
with respect to a particular Futures Contract at a particular time. If an
Underlying Theme Portfolio is not able to enter into an offsetting transaction,
it will continue to be required to maintain the margin deposits on the Futures
Contract.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one Futures Contract of September Deutschemarks on an
exchange may be fulfilled at any time before delivery under the Futures Contract
is required (i.e., on a specified date in September, the "delivery month") by
the purchase of another Futures Contract of September Deutschemarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Underlying
Theme Portfolio.
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Each Underlying Theme Portfolio's Futures transactions will be entered into
for hedging purposes only, that is, Futures Contracts will be sold to protect
against a decline in the price of securities or currencies that an Underlying
Theme Portfolio owns, or Futures Contracts will be purchased to protect an
Underlying Theme Portfolio against an increase in the price of securities or
currencies it has committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by an Underlying Theme Portfolio in order to initiate Futures trading
and maintain its open positions in Futures Contracts. A margin deposit made when
the Futures Contract is entered into ("initial margin") is intended to ensure
the Underlying Theme Portfolio'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," to and from the futures
commission merchant through which the Underlying Theme Portfolio 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.
Risks of Using Futures Contracts. The prices of Futures Contracts are volatile
and are influenced by, among other things, actual and anticipated changes in
interest rates and currency exchange rates, and in stock market movements, which
in turn are affected by fiscal and monetary policies and national and
international political and economic events.
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the securities or currencies in an Underlying Theme
Portfolio's portfolio being hedged. The degree of imperfection of correlation
depends upon circumstances such as variations in speculative market demand for
Futures and for securities or currencies, including technical influences in
Futures trading; and differences between the financial instruments being hedged
and the instruments underlying the standard Futures Contracts available for
trading. A decision of whether, when and how to hedge involves skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in
Futures Contract and options on Futures Contracts prices during a single trading
day. The daily limit establishes the maximum amount that the price of a Futures
Contract or option may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular type of Futures Contract or option, no trades may be made on that
day at a price beyond that limit. The daily limit governs only price movement
during a particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions. Futures
Contracts and option prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of positions and subjecting some traders to substantial
losses.
If an Underlying Theme Portfolio were unable to liquidate a Futures or option
on Futures position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Underlying
Theme Portfolio would continue to be subject to market risk with respect to the
position. In addition, except in the case of purchased options, the Underlying
Theme Portfolio would continue to be required to make daily variation margin
payments and might be required to maintain the position being hedged by the
Future or option or to maintain cash or securities in a segregated account.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price
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distortions. In addition, activities of large traders in both the Futures and
securities markets involving arbitrage, "program trading" and other investment
strategies might result in temporary price distortions.
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 position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account,
which represents the amount by which the market price of the Futures Contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the Futures Contract. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the securities, currencies
or index upon which the Futures Contract is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If an Underlying Theme Portfolio writes an option on a Futures Contract, it
will be required to deposit initial and variation margin pursuant to
requirements similar to those applicable to Futures Contracts. Premiums received
from the writing of an option on a Futures Contract are included in the initial
margin deposit.
An Underlying Theme Portfolio may seek to close out an option position by
selling an option covering the same Futures Contract and having the same
exercise price and expiration date. The ability to establish and close out
positions on such options is subject to the maintenance of a liquid secondary
market.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that an Underlying Theme Portfolio 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 liquidation value of the Underlying
Theme Portfolio, after taking into account unrealized profits and unrealized
losses on any contracts it has entered into. In general, a call option on a
Futures Contract is "in-the-money" if the value of the underlying Futures
Contract exceeds the strike, i.e., exercise, price of the call; a put option on
a Futures Contract is "in-the-money" if the value of the underlying Futures
Contract is exceeded by the strike price of the put. This guideline may be
modified by the applicable Board, without a shareholder vote. This limitation
does not limit the percentage of an Underlying Theme Portfolio's assets at risk
to 5%.
FORWARD CONTRACTS
A Forward 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. An Underlying
Theme Portfolio either may accept or make delivery of the currency at the
maturity of the Forward Contract. An Underlying Theme Portfolio may also, if its
contra party agrees prior to maturity, enter into a closing transaction
involving the purchase or sale of an offsetting contract.
An Underlying Theme Portfolio engages in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates.
An Underlying Theme Portfolio might sell a particular foreign currency forward,
for example, when it holds bonds denominated in a foreign currency but
anticipates, and seeks to be protected against, a decline in the currency
against the U.S. dollar. Similarly, an Underlying Theme Portfolio might sell the
U.S. dollar forward when it holds bonds denominated in U.S. dollars but
anticipates, and seeks to be protected against, a decline in the U.S. dollar
relative to other currencies. Further, an Underlying Theme Portfolio might
purchase a currency forward to "lock in" the price of securities denominated in
that currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
Forward Contract generally has no deposit requirement, and no commissions
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are charged at any stage for trades. Each Underlying Theme Portfolio will enter
into such Forward Contracts with major U.S. or foreign banks and securities or
currency dealers in accordance with guidelines approved by the applicable Board.
An Underlying Theme Portfolio may enter into Forward Contracts either with
respect to specific transactions or with respect to overall investments of that
Underlying Theme Portfolio. The precise matching of the Forward Contract amounts
and the value of specific securities generally will not be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the Forward Contract is entered into and the date it matures. Accordingly,
it may be necessary for that Underlying Theme Portfolio to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Underlying Theme Portfolio is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency the Underlying Theme Portfolio is obligated to deliver. The projection
of short-term currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly uncertain.
Forward Contracts involve the risk that anticipated currency movements will not
be predicted accurately, causing an Underlying Theme Portfolio to sustain losses
on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring an Underlying Theme
Portfolio to sell a currency, it either may sell a security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which it will obtain, on the same maturity date, the same amount of
the currency that it is obligated to deliver. Similarly, an Underlying Theme
Portfolio may close out a Forward Contract requiring it to purchase a specified
currency by entering into a second contract, if its contra party agrees,
entitling it to sell the same amount of the same currency on the maturity date
of the first contract. An Underlying Theme Portfolio would realize a gain or
loss as a result of entering into such an offsetting Forward Contract under
either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
the offsetting contract.
The cost to an Underlying Theme Portfolio of engaging in Forward Contracts
varies with factors such as the currencies involved, the length of the contract
period and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are involved.
The use of Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities an Underlying Theme Portfolio owns or intends to
acquire, but it does establish a rate of exchange in advance. In addition, while
Forward 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.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
An Underlying Theme Portfolio may use options on foreign currencies, Futures
on foreign currencies, options on Futures on foreign currencies and Forward
Contracts to hedge against movements in the values of the foreign currencies in
which the Underlying Theme Portfolio's securities are denominated. Such currency
hedges can protect against price movements in a security that the Underlying
Theme Portfolio owns or intends to acquire that are attributable to changes in
the value of the currency in which it is denominated. Such hedges do not,
however, protect against price movements in the securities that are attributable
to other causes.
An Underlying Theme Portfolio might seek to hedge against changes in the value
of a particular currency when no Futures Contract, Forward Contract or option
involving that currency is available or one of such contracts is more expensive
than certain other contracts. In such cases, the Underlying Theme Portfolio may
hedge against price movements in that currency by entering into a contract on
another currency or basket of currencies, the values of which the Sub-advisor
believes will have a positive correlation to the value of the currency being
hedged. The risk that movements in the price of the contract will not correlate
perfectly with movements in the price of the currency being hedged is magnified
when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward
Contracts and options on foreign currencies depends on the value of the
underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of Futures Contracts, Forward
Contracts or options, the Underlying Theme Portfolio could be disadvantaged by
dealing in the odd lot market (generally consisting of transactions of less than
$1 million) for the underlying foreign currencies at prices that are less
favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot
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transactions where rates might be less favorable. The interbank market in
foreign currencies is a global, round-the-clock market. To the extent the U.S.
options or Futures markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements might take place in
the underlying markets that cannot be reflected in the markets for the Futures
contracts or options until they reopen.
Settlement of Futures Contracts, Forward Contracts and options involving
foreign currencies might be required to take place within the country issuing
the underlying currency. Thus, an Underlying Theme Portfolio might be required
to accept or make delivery of the underlying foreign currency in accordance with
any U.S. or foreign regulations regarding the maintenance of foreign banking
arrangements by U.S. residents and might be required to pay any fees, taxes and
charges associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other
than options purchased by an Underlying Theme Portfolio) expose the Underlying
Theme Portfolio to an obligation to another party. An Underlying Theme Portfolio
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, currencies, or other options,
Forward Contracts or Futures Contracts or (2) cash, receivables and short-term
debt securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Underlying Theme
Portfolio will comply with SEC guidelines regarding cover for these instruments
and, if the guidelines so require, set aside cash or liquid securities.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Forward Contract, Futures Contract or option is
open, unless they are replaced with other appropriate assets. If a large portion
of an Underlying Theme Portfolio's assets is used for cover or otherwise set
aside, it could affect portfolio management or the Underlying Theme Portfolio's
ability to meet redemption requests or other current obligations.
RISK FACTORS OF THE UNDERLYING THEME PORTFOLIOS
DEBT SECURITIES
The value of the debt securities held by each Underlying Theme Portfolio
generally will vary conversely with market interest rates. If interest rates in
a market fall, the value of the debt securities held by each Underlying Theme
Portfolio ordinarily will rise. If market interest rates increase, however, the
debt securities owned by each Underlying Theme Portfolio in that market will be
likely to decrease in value.
The Global Consumer Products and Services Portfolio, Global Infrastructure
Portfolio and Global Resources Portfolio may each invest up to 20% of its total
assets in debt securities rated below investment grade. Such investments involve
a high degree of risk. However, those Portfolios will not invest in debt
securities that are in default as to payment of principal and interest.
Debt rated Baa by Moody's Investors Service, Inc. ("Moody") is considered by
Moody's to have speculative characteristics. Debt rated BB, B, CCC, CC or C by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), and
debt rated Ba, B, Caa, Ca or C by Moody's is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. For S&P, BB
indicates the lowest degree of speculation for such lower quality debt and C the
highest degree of speculation. For Moody's, Baa indicates the lowest degree of
speculation for such lower quality debt and C the highest degree of speculation.
While such lower quality debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Debt rated C by Moody's or S&P is the lowest
rated debt that is not in default as to principal or interest, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing. Lower quality debt securities also are generally
considered to be subject to greater risk than securities with higher ratings
with regard to a deterioration of general economic conditions. These lower
quality debt securities are the equivalent of high yield, high risk bonds,
commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have
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available to them more traditional methods of financing. For example, during an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of lower quality securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific developments affecting
the issuer, such as the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. The risk of loss due to
default by the issuer is significantly greater for the holders of lower quality
securities because such securities are generally unsecured and may be
subordinated to the claims of other creditors of the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features that permit the issuer to call or repurchase the security from
an Underlying Theme Portfolio. If an issuer exercises these provisions in a
declining interest rate market, the Underlying Theme Portfolio may have to
replace the security with a lower yielding security, resulting in a decreased
return for investors. In addition, the Underlying Theme Portfolios may have
difficulty disposing of lower quality securities because they may have a thin
trading market. There may be no established retail secondary market for many of
these securities, and each Underlying Theme Portfolio anticipates that such
securities could be sold only to a limited number of dealers or institutional
investors. The lack of a liquid secondary market also may have an adverse impact
on market prices of such instruments and may make it more difficult for the
Underlying Theme Portfolios to obtain accurate market quotations for purposes of
valuing their portfolio investments. The Underlying Theme Portfolios may also
acquire lower quality debt securities during an initial underwriting or which
are sold without registration under applicable securities laws. Such securities
involve special considerations and risks.
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower quality debt securities in which the Underlying Theme
Portfolios may invest include: (i) potential adverse publicity; (ii) heightened
sensitivity to general economic or political conditions; and (iii) the likely
adverse impact of a major economic recession. An Underlying Theme Portfolio may
also incur additional expenses to the extent it is required to seek recovery
upon a default in the payment of principal or interest on portfolio holdings,
and the Underlying Theme Portfolio may have limited legal recourse in the event
of a default.
The Sub-advisor attempts to minimize the speculative risks associated with
investments in lower quality securities through credit analysis and by carefully
monitoring current trends in interest rates, political developments and other
factors.
ILLIQUID SECURITIES
Each Underlying Theme Portfolio may invest up to 15% of its net assets in
illiquid securities. Securities may be considered illiquid if an Underlying
Theme Portfolio cannot reasonably expect within seven days to sell the
securities for approximately the amount at which it values such securities. See
"Investment Limitations of the Underlying Theme Funds and Portfolios." The sale
of illiquid securities, if they can be sold at all, generally will require more
time and result in higher brokerage charges or dealer discounts and other
selling expenses than will the sale of liquid securities such as securities
eligible for trading on U.S. securities exchanges or in OTC markets. Moreover,
restricted securities, which may be illiquid for purposes of this limitation,
often sell, if at all, at a price lower than similar securities that are liquid.
Illiquid securities include those that are subject to restrictions contained
in the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, an Underlying Theme Portfolio may be obligated to pay
all or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time the Underlying Theme
Portfolio may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
the Underlying Theme Portfolio might obtain a less favorable price than
prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended (the "1933 Act"),
including private placements, repurchase agreements, commercial paper, foreign
securities and corporate bonds and notes. These instruments are often restricted
securities because the securities are sold in transactions not requiring
registration. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend either on an
efficient institutional market in which such unregistered securities can be
readily resold or on an issuer's ability to honor a demand for repayment.
Therefore, the fact that there are contractual or legal restrictions on resale
to the general public or certain institutions is not dispositive of the
liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an
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investment to satisfy share redemption orders. Such markets include automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the
National Association of Securities Dealers, Inc. An insufficient number of
qualified institutional buyers interested in purchasing Rule 144A-eligible
restricted securities held by an Underlying Theme Portfolio, however, could
affect adversely the marketability of such portfolio securities, and the
Underlying Theme Portfolio might be unable to dispose of such securities
promptly or at favorable prices.
With respect to liquidity determinations generally, the applicable Board has
the ultimate responsibility for determining whether specific securities,
including restricted securities pursuant to Rule 144A under the 1933 Act, are
liquid or illiquid. Each Board has delegated the function of making day-to-day
determinations of liquidity to the Sub-advisor, in accordance with procedures
approved by that Board. The Sub-advisor takes into account a number of factors
in reaching liquidity decisions, including (i) the frequency of trading in the
security, (ii) the number of dealers that make quotes for the security, (iii)
the number of dealers that have undertaken to make a market in the security,
(iv) the number of other potential purchasers and (v) the nature of the security
and how trading is effected (e.g., the time needed to sell the security, how
offers are solicited and the mechanics of transfer). The Sub-advisor monitors
the liquidity of securities held by each Underlying Theme Portfolio and
periodically reports such determinations to the applicable Board. The
Sub-advisor believes that carefully selected investments in joint ventures,
cooperatives, partnerships and state enterprises that are illiquid
(collectively, "Special Situations") could enable an Underlying Theme Portfolio
to achieve capital appreciation substantially exceeding the appreciation it
would realize if it did not make such investments. However, in order to attempt
to limit investment risk, each Underlying Theme Portfolio will invest no more
than 5% of its total assets in Special Situations. If the liquidity percentage
restriction of a Underlying Theme Portfolio is satisfied at the time of
investment, a later increase in the percentage of illiquid securities held by
the Underlying Theme Portfolio resulting from a change in market value or assets
will not constitute a violation of that restriction. If as a result of a change
in market value or assets, the percentage of illiquid securities held by the
Underlying Theme Portfolio increases above the applicable limit, the Sub-
advisor will take appropriate steps to bring the aggregate amount of illiquid
assets back within the prescribed limitations as soon as reasonably practicable,
taking into account the effect of any disposition on the Underlying Theme
Portfolio.
FOREIGN SECURITIES
Political, Social and Economic Risks. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment convertibility of currencies into U.S. dollars and on repatriation of
capital invested. In the event of such expropriation, nationalization or other
confiscation by any country, an Underlying Theme Portfolio could lose its entire
investment in any such country.
Religious, Political and Ethnic Stability. Certain countries in which an
Underlying Theme Portfolio may invest may have groups that advocate radical
religious or revolutionary philosophies or support ethnic independence. Any
disturbance on the part of such individuals could carry the potential for
widespread destruction or confiscation of property owned by individuals and
entities foreign to such country and could cause the loss of an Underlying Theme
Portfolio's investment in those countries. Instability may also result from,
among other things, (i) authoritarian governments or military involvement in
political and economic decision-making, including changes in government through
extra-constitutional means, (ii) popular unrest associated with demands for
improved political, economic and social conditions, and (iii) hostile relations
with neighboring or other countries. Such political, social and economic
instability could disrupt the principal financial markets in which an Underlying
Theme Portfolio invests and adversely affect the value of its assets.
Foreign Investment Restrictions. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as an Underlying Theme Portfolio.
These restrictions or controls may at times limit or preclude investments in
certain securities and may increase the cost and expenses of an Underlying Theme
Portfolio. For example, certain countries require prior governmental approval
before investments by foreign persons may be made or may limit the amount of
investment by foreign persons in a particular company or limit the investment by
foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals. Moreover, the national policies of certain countries may
restrict investment opportunities in issuers or industries deemed sensitive to
national interests. In addition, some countries require governmental approval
for the repatriation of investment income, capital or the proceeds of securities
sales by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
restrictions on foreign capital remittances abroad. An Underlying Theme
Portfolio could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investments.
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Non-Uniform Corporate Disclosure Standards and Governmental
Regulation. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the foreign securities held by an
Underlying Theme Portfolio will not be registered with the SEC or regulators of
any foreign country, nor will the issuers thereof be subject to the SEC's
reporting requirements. Thus, there will be less available information
concerning most foreign issuers of securities held by an Underlying Theme
Portfolio than is available concerning U.S. issuers. In instances where the
financial statements of an issuer are not deemed to reflect accurately the
financial situation of the issuer, the Sub-advisor will take appropriate steps
to evaluate the proposed investment, which may include on-site inspection of the
issuer, interviews with its management and consultations with accountants,
bankers and other specialists. There is substantially less publicly available
information about foreign companies than there are reports and ratings published
about U.S. companies. In addition, where public information is available, it may
be less reliable than such information regarding U.S. issuers. Issuers of
securities in foreign jurisdictions are generally not subject to the same degree
of regulation as are U.S. issuers with respect to such matters as restrictions
on market manipulation, insider trading rules, shareholder proxy requirements
and timely disclosure of information.
Currency Fluctuations. Because each Underlying Theme Portfolio, under normal
circumstances, will invest a substantial portion of its total assets in the
securities of foreign issuers that are denominated in foreign currencies, the
strength or weakness of the U.S. dollar against such foreign currencies will
account for part of an Underlying Theme Portfolio's investment performance. A
decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of an Underlying Theme Portfolio's
holdings of securities and cash denominated in that currency and, therefore,
will cause an overall decline in its and its corresponding Feeder Fund's net
asset value (as applicable) and any net investment income and capital gains
derived from such securities to be distributed in U.S. dollars to the
shareholders thereof. Moreover, if the value of the foreign currencies in which
an Underlying Theme Portfolio receives its income falls relative to the U.S.
dollar between receipt of the income and the making of distributions, the
Underlying Theme Portfolio may be required to liquidate securities if it has
insufficient cash in U.S. dollars to meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the relative
movement of interest rates and the pace of business activity in the other
countries and the United States, and other economic and financial conditions
affecting the world economy.
Although each Underlying Theme Portfolio values its assets daily in terms of
U.S. dollars, the Underlying Theme Portfolios do not intend to convert their
holdings of foreign currencies into U.S. dollars on a daily basis. Each
Underlying Theme Portfolio will do so, from time to time, and investors should
be aware of the costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to an Underlying
Theme Portfolio at one rate, while offering a lesser rate of exchange should an
Underlying Theme Portfolio desire to sell that currency to the dealer.
Adverse Market Characteristics. Securities of many foreign issuers may be less
liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions usually are subject to fixed
commissions, which generally are higher than negotiated commissions on U.S.
transactions. In addition, foreign securities transactions may be subject to
difficulties associated with the settlement of such transactions. Delays in
settlement could result in temporary periods when assets of an Underlying Theme
Portfolio are uninvested and no return is earned thereon. The inability of an
Underlying Theme Portfolio to make intended security purchases due to settlement
problems could cause it to miss attractive investment opportunities. Inability
to dispose of a portfolio security due to settlement problems either could
result in losses to an Underlying Theme Portfolio due to subsequent declines in
value of the portfolio security or, if that Underlying Theme Portfolio has
entered into a contract to sell the security, could result in possible liability
to the purchaser. The Sub-advisor will consider such difficulties when
determining the allocation of an Underlying Theme Portfolio's assets, although
the Sub-advisor does not believe that such difficulties will have a material
adverse effect on an Underlying Theme Portfolio's portfolio trading activities.
Each Underlying Theme Portfolio may use foreign custodians, which may involve
risks in addition to those related to its use of U.S. custodians. Such risks
include uncertainties relating to (1) determining and monitoring the foreign
custodian's financial strength, reputation and standing, (2) maintaining
appropriate safeguards concerning an Underlying Theme Portfolio's investments,
and (3) possible difficulties in obtaining and enforcing judgments against such
custodians.
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Withholding Taxes. Each Underlying Theme Portfolio's net investment income
from securities of its foreign issuers may be subject to withholding taxes by
the foreign issuer's country, thereby reducing that income or delaying the
receipt of income when those taxes may be recaptured. See "Taxes."
Concentration. To the extent an Underlying Theme Portfolio invests a
significant portion of its assets in securities of issuers located in a
particular country or region of the world, it may be subject to greater risks
and may experience greater volatility than a fund that is more broadly
diversified geographically.
Special Considerations Affecting Western European Countries. The countries
that are members of the European Economic Community ("Common Market")
(Australia, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom)
eliminated certain import tariffs and quotas and other trade barriers with
respect to one another over the past several years. The Sub-advisor believes
that this deregulation should improve the prospects for economic growth in many
Western European countries. Among other things, the deregulation could enable
companies domiciled in one country to avail themselves of lower labor costs
existing in other countries. In addition, this deregulation could benefit
companies domiciled in one country by opening additional markets for their goods
and services in other countries. Since, however, it is not clear what the exact
form or effect of these Common Market reforms will be on business in Western
Europe, it is impossible to predict the long-term impact of the implementation
of these programs on the securities owned by an Underlying Theme Portfolio.
Special Considerations Affecting Russia and Eastern European
Countries. Investing in Russia and Eastern European countries involves a high
degree of risk and special considerations not typically associated with
investing in the U.S. securities markets and should be considered highly
speculative. Such risks include the following: (1) delays in settling portfolio
transactions and risk of loss arising out of the system of share registration
and custody; (2) the risk that it may be impossible or more difficult than in
other countries to obtain and/or enforce a judgement; (3) pervasiveness of
corruption and crime in the economic system; (4) currency exchange rate
volatility and the lack of available currency hedging instruments; (5) higher
rates of inflation (including the risk of social unrest associated with periods
of hyper-inflation) and high unemployment; (6) controls on foreign investment
and local practices disfavoring foreign investors and limitations on
repatriation of invested capital, profits and dividends, and on a fund's ability
to exchange local currencies for U.S. dollars; (7) political instability and
social unrest and violence; (8) the risk that the governments of Russia and
Eastern European countries may decide not to continue to support the economic
reform programs implemented recently and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed when such countries had a communist form of government; (9)
the financial condition of companies in these countries, including large amounts
of inter-company debt which may create a payments crisis on a national scale;
(10) dependency on exports and the corresponding importance of international
trade; (11) the risk that the tax system in these countries will not be reformed
to prevent inconsistent, retroactive and/or exorbitant taxation; and (12) the
underdeveloped nature of the securities markets.
Special Considerations Affecting Japan. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the United States. In general, however, reported net income in
Japan is understated relative to U.S. accounting standards and this is one
reason why price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the United States,
both factors which tend to result in lower discount rates and higher
price-earnings ratios in Japan than in the United States.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
Special Considerations Affecting Pacific Region Countries. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
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region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also exist between South Korea and North Korea. In
addition, the Underlying Theme Portfolios may invest in Hong Kong, which
reverted to Chinese administration on July 1, 1997. Investments in Hong Kong may
be subject to expropriation, nationalization or confiscation, in which case an
Underlying Theme Portfolio could lose its entire investment in Hong Kong. In
addition, the reversion of Hong Kong also presents a risk that the Hong Kong
dollar will be devalued and a risk of possible loss of investor confidence in
Hong Kong's currency, stock market and assets.
Special Considerations Affecting Latin American Countries. Most Latin American
countries have experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have very negative effects on the economies
and securities markets of certain Latin American countries. Certain Latin
American countries are also among the largest debtors to commercial banks and
foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are
maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the currency which, in turn, can have a disruptive and negative
effect on foreign investors. For example, in late 1994, the value of the Mexican
peso lost more than one-third of its value relative to the U.S. dollar.
Special Considerations Affecting Emerging Markets. Investing in the securities
of companies in emerging markets may entail special risks relating to potential
political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, an Underlying Theme Portfolio could lose its
entire investment in any such country.
Emerging securities markets are substantially smaller, less developed, less
liquid and more volatile than the major securities markets. The limited size of
emerging securities markets and limited trading value in issuers compared to the
volume of trading in U.S. securities could cause prices to be erratic for
reasons apart from factors that affect the quality of the securities. For
example, limited market size may cause prices to be unduly influenced by traders
who control large positions. Adverse publicity and investors' perceptions,
whether or not based on fundamental analysis, may decrease the value and
liquidity of portfolio securities, especially in these markets. In addition,
securities traded in certain emerging markets may be subject to risks due to the
inexperience of financial intermediaries, a lack of modern technology, the lack
of a sufficient capital base to expand business operations, and the possibility
of permanent or temporary termination of trading.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities there may
be share registration and delivery delays or failures.
Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain emerging market countries.
Privatizations. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-advisor believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Underlying Theme Portfolios in privatizations in
appropriate circumstances. In certain foreign countries, the ability of foreign
entities such as the Underlying Theme Portfolios to participate in
privatizations may be limited by local law, or the terms on which the Underlying
Theme Portfolios 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.
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INVESTMENT LIMITATIONS
INVESTMENT LIMITATIONS OF THE FUND
The following fundamental limitations of the Fund cannot be changed without
the affirmative vote of a majority of the outstanding shares of the Fund.
The Fund will not:
(1) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
(2) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
restriction, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(4) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(5) Purchase or sell physical commodities unless acquired as a result
of owning securities or other instruments, but the Fund may purchase, sell
or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments; or
(6) Purchase securities of any one issuer if, as a result, more than
5% of the Fund's total assets would be invested in securities of that
issuer or the Fund would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Fund's total
assets may be invested without regard to this limitation, and except that
this limitation does not apply to securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities or to securities issued
by other investment companies.
Because of its investment objective and policies, the Fund will concentrate
more than 25% of its assets in the mutual fund industry. In accordance with the
Fund's investment program set forth in the Prospectus, the Fund may invest more
than 25% of its assets in the Underlying Theme Funds.
The following investment limitations of the Fund are non-fundamental and may
be changed by the vote of the Trust's Board of Trustees without shareholder
approval.
The Fund will not:
(1) Invest more than 15% of its net assets in illiquid securities, a
term which means securities that cannot be disposed of within seven days in
the ordinary course of business at approximately the amount at which the
Fund has valued the securities and includes, among other things, repurchase
agreements maturing in more than seven days;
(2) Purchase portfolio securities while borrowings in excess of 5% of
its total assets are outstanding;
(3) Purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the Fund
may make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contract or derivative instruments;
(4) Engage in short sales of securities or maintain a short position,
except that the Fund may maintain short positions in connection with its
use of financial options an futures, forward and spot currency contracts,
swap transactions and other financial contracts or derivative instruments;
or
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(5) Purchase securities of other investment companies, except to the
extent permitted by the 1940 Act or under the terms of any exemptive order
granted by the SEC and except that this limitation does not apply to
securities received or acquired as dividends, through offers of exchange,
or as a result of reorganization, consolidation, or merger.
If a percentage restriction on investment or utilization of assets is adhered
to at the time of an investment or transaction, a later change in percentage
ownership of a security or kind of securities resulting from changing market
values or a similar type of event will not be considered a violation of the
Fund's policies or restrictions.
Notwithstanding the forgoing investment limitations, the Fund may invest in
Underlying Theme Funds that have adopted investment limitations that may be more
or less restrictive than those listed above. As a result, the Fund may engage
indirectly in investment strategies that are prohibited under the investment
limitations listed above. The investment limitations and other investment
policies and restrictions of each Underlying Theme Fund are described in its
Prospectus and Statement of Additional Information.
Pursuant to Section 12(d)(1)(G) of the 1940 Act, the Fund may invest
substantially all of its assets in the Underlying Theme Funds.
INVESTMENT LIMITATIONS OF THE UNDERLYING THEME FUNDS AND PORTFOLIOS
Feeder Funds. The Financial Services Fund, Infrastructure Fund, Resources Fund
and Consumer Products and Services Fund (each, a "Feeder Fund," and
collectively, the "Feeder Funds") each has the following fundamental investment
policy to enable it to invest in the Financial Services Portfolio,
Infrastructure Portfolio, Resources Portfolio and Consumer Products and Services
Portfolio (each a "Portfolio," and collectively, the "Portfolios"),
respectively:
Notwithstanding any other investment policy of the Fund, the Fund may invest
all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
All other fundamental investment policies, and the non-fundamental investment
policies, of each Feeder Fund and its corresponding Portfolio are identical.
Therefore, although the following discusses the investment policies of each
Portfolio and its Board of Trustees, it applies equally to each Feeder Fund and
its Board of Trustees.
Each Portfolio has adopted the following investment limitations as fundamental
policies that may not be changed without the affirmative vote of a majority of
the outstanding shares of the Portfolio. Whenever a Feeder Fund is requested to
vote on a change in the investment limitations of its corresponding Portfolio,
the Fund will hold a meeting of its shareholders and will cast its votes as
instructed by its shareholders.
No Portfolio may:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Portfolio may exercise rights under agreements relating
to such securities, including the right to enforce security interests and
to hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Portfolio may
purchase, sell or enter into financial options and futures, forward and
spot currency contracts, swap transactions and other financial contracts or
derivative instruments;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Portfolio might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Portfolio's total
assets (including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the
Portfolio may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes; or
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(6) Purchase securities of any one issuer if, as a result, more than
5% of the Portfolio's total assets would be invested in securities of that
issuer or the Portfolio would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Portfolio's
total assets may be invested without regard to this limitation, and except
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities or to securities
issued by other investment companies.
The following investment policies of each Portfolio are not fundamental
policies and may be changed by vote of the Portfolios' Board of Trustees without
shareholder approval. No Portfolio may:
(1) Invest in securities of an issuer if the investment would cause
the Portfolio to own more than 10% of any class of securities of any one
issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a
readily available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of
those positions (excluding the amount by which options are "in-the-money")
exceeds 5% of the liquidation value of the Portfolio's portfolio, after
taking into account unrealized profits and unrealized losses on any
contracts the Portfolio has entered into;
(5) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the Portfolio's
assets, the Portfolio will not make any additional investments;
(6) Invest more than 10% of its total assets in shares of other
investment companies and may not invest more than 5% of its total assets in
any one investment company or acquire more than 3% of the outstanding
voting securities of any one investment company;
(7) Purchase securities on margin, provided that each Portfolio may
obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Portfolio
may make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments; or
(8) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Investors should refer to the applicable Prospectus for further information
with respect to the investment objective of each Feeder Fund, which may not be
changed without the approval of Fund shareholders, and its corresponding
Portfolio's investment objective, which may be changed without the approval of
its shareholders, and other investment policies, techniques and limitations,
which may or may not be changed without shareholder approval.
Health Care Fund. The Health Care Fund has adopted the following investment
limitations as fundamental policies, which may not be changed without the
affirmative vote of a majority of the outstanding shares of the Health Care
Fund.
The Health Care Fund may not:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Health Care Fund may exercise rights under agreements
relating to such securities, including the right to enforce security
interests and to hold real estate acquired by reason of such enforcement
until that real estate can be liquidated in an orderly manner;
(2) Engage in the business of underwriting securities of other
issuers, except to the extent that the Health Care Fund might be considered
an underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(3) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
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(4) Purchase or sell physical commodities, but the Health Care Fund
may purchase, sell or enter into financial options and futures, forward and
spot currency contracts, swap transactions and other financial contracts or
derivative instruments;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Health Care Fund's
total assets (including the amount borrowed but reduced by any liabilities
not constituting borrowings) at the time of the borrowing, except that the
Health Care Fund may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than
5% of the Health Care Fund's total assets would be invested in securities
of that issuer or the Health Care Fund would own or hold more than 10% of
the outstanding voting securities of that issuer, except that up to 25% of
the Health Care Fund's total assets may be invested without regard to this
limitation, and except that this limitation does not apply to securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities or to securities issued by other investment companies.
Notwithstanding any other investment policy of the Health Care Fund, the
Health Care Fund may invest all of its investable assets (cash, securities and
receivables related to securities) in an open-end management investment company
having substantially the same investment objective, policies and limitations as
the Fund.
The following investment policies of the Health Care Fund are not fundamental
policies and may be changed by vote of the Underlying Trust's Board of Trustees
without shareholder approval. The Health Care Fund will not:
(1) Purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits
maturing in more than seven days, or purchase OTC options or hold assets
set aside to cover OTC options written by the Health Care Fund, if
immediately after and as a result, the value of such securities would
exceed, in the aggregate, 15% of the Health Care Fund's net assets;
(2) Purchase securities on margin, provided that the Health Care Fund
may obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Health
Care Fund may make margin deposits in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments; or
(3) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities; or
(4) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the Health Care
Fund's total assets it will not make any additional investments.
Investors should refer to the Health Care Fund's Prospectus for further
information with respect to the Health Care Fund's investment objective, which
may not be changed without the approval of its shareholders, and other
investment policies, techniques and limitations, which may be changed without
shareholder approval.
Telecommunications Fund. The Telecommunications Fund has adopted the following
investment limitations as fundamental policies, which may not be changed without
the affirmative role of a majority of the outstanding shares of the
Telecommunications Fund.
The Telecommunications Fund may not:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Telecommunications Fund may exercise rights under
agreements relating to such securities, including the right to enforce
security interests and to hold real estate acquired by reason of such
enforcement until that real estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Telecommunications
Fund may purchase, sell or enter into financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Telecommunications Fund might be
considered an underwriter under the federal securities laws in connection
with its disposition of portfolio securities;
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(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Telecommunications
Fund's total assets (including the amount borrowed but reduced by any
liabilities not constituting borrowings) at the time of the borrowing,
except that the Telecommunications Fund may borrow up to an additional 5%
of its total assets (not including the amount borrowed) for temporary or
emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than
5% of the Telecommunications Fund's total assets would be invested in
securities of that issuer or the Telecommunications Fund would own or hold
more than 10% of the outstanding voting securities of that issuer, except
that up to 25% of the Telecommunications Fund's total assets may be
invested without regard to this limitation, and except that this limitation
does not apply to securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities or to securities issued by other
investment companies.
Notwithstanding any other investment policy of the Telecommunications Fund,
the Telecommunications Fund may invest all of its investable assets (cash,
securities and receivables related to securities) in an open-end management
investment company having substantially the same investment objective, policies
and limitations as the Fund.
The following investment policies of the Telecommunications Fund are not
fundamental policies and may be changed by vote of the Underlying Trust's Board
of Trustees without shareholder approval. The Telecommunications Fund may not:
(1) Invest in securities of an issuer if the investment would cause
the Telecommunications Fund to own more than 10% of any class of securities
of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a
readily available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of
those positions (excluding the amount by which options are "in-the-money")
exceeds 5% of the liquidation value of the Fund's portfolio, after taking
into account unrealized profits and unrealized losses on any contracts the
Fund has entered into;
(5) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the
Telecommunications Fund's total assets, it will not make any additional
investments;
(6) Purchase securities on margin, provided that the
Telecommunications Fund may obtain short-term credits as may be necessary
for the clearance of purchases and sales of securities, and further
provided that the Telecommunications Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Investors should refer to the Telecommunications Fund's Prospectus for further
information with respect to the Telecommunications Fund's investment objective,
which may not be changed without the approval of its shareholders, and other
investment policies, techniques and limitations, which may be changed without
shareholder approval.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Fund's or Portfolio's investment policies or
restrictions. A Fund or Portfolio may exchange securities, exercise conversion
or subscription rights, warrants or other rights to purchase common stock or
other equity securities and may hold, except to the extent limited by the 1940
Act, any such securities so acquired without regard to the Fund's or Portfolio's
investment policies and restrictions.
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The original cost of the securities so acquired will be included in any
subsequent determination of a Fund's or Portfolio's compliance with the
investment percentage limitations referred to above and in the Prospectus.
EXECUTION OF PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities for the Fund
(normally shares of the Underlying Theme Funds) are placed on behalf of the Fund
by the Sub-advisor. As stated in the Prospectus, the Sub-advisor will exercise
no discretion in investing the assets of the Fund other than to make investments
in money market instruments and to rebalance the percentage of the Fund's assets
in each Underlying Theme Fund.
Subject to policies established by the applicable Board, the Sub-advisor is
responsible for the execution of each Underlying Theme Portfolio's securities
transactions and the selection of broker/dealers who execute such transactions
on behalf of each Underlying Theme Portfolio. In executing transactions, the
Sub-advisor seeks the best net results for each Underlying Theme Portfolio,
taking into account such factors as the price (including the applicable
brokerage commission or dealer spread), size of the order, difficulty of
execution and operational facilities of the firm involved. Although the
Sub-advisor generally seeks reasonably competitive commission rates and spreads,
payment of the lowest commission or spread is not necessarily consistent with
the best net results. While each Underlying Theme Portfolio may engage in soft
dollar arrangements for research services, as described below, it has no
obligation to deal with any broker/dealer or group of broker/dealers in the
execution of portfolio transactions.
Consistent with the interests of each Underlying Theme Portfolio, the
Sub-advisor may select broker/dealers to execute that Underlying Theme
Portfolio's portfolio transaction, on the basis of the research and brokerage
services they provide to the Sub-advisor for its use in managing that Underlying
Theme Portfolio and its other advisory accounts. Such services may include
furnishing analyses, reports and information concerning issuers, industries,
securities, geographic regions, economic factors and trends, portfolio strategy,
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement).
Research and brokerage services received from such broker are in addition to,
and not in lieu of, the services required to be performed by the Sub-advisor
under investment management and administration contracts. A commission paid to
such broker may be higher than that which another qualified broker would have
charged for effecting the same transaction, provided that the Sub-advisor
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-advisor to
the Underlying Theme Portfolio and its other clients and that the total
commissions paid by that Underlying Theme Portfolio will be reasonable in
relation to the benefits it receive over the long term. Research services may
also be received from dealers who execute portfolio transactions in OTC markets.
The Sub-advisor may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by an Underlying Theme Portfolio toward payment of its
expenses, such as custodian fees.
Investment decisions for an Underlying Theme Portfolio and for other
investment accounts managed by the Sub-advisor are made independently of each
other in light of differing conditions. However, the same investment decision
occasionally may be made for two or more of such accounts, including an
Underlying Theme Portfolio. In such cases, simultaneous transactions may occur.
Purchases or sales are then allocated as to price or amount in a manner deemed
fair and equitable to all accounts involved. While in some cases this practice
could have a detrimental effect upon the price or value of the security as far
as an Underlying Theme Portfolio is concerned, in other cases the Sub-advisor
believes that coordination and the ability to participate in volume transactions
will be beneficial to that Portfolio.
Under a policy adopted by the applicable Board, and subject to the policy of
obtaining the best net results, the Sub-advisor may consider a broker/dealer's
sale of the shares of the Underlying Theme Funds and the other portfolios for
which AIM or the Sub-advisor serves as investment manager or administrator in
selecting broker/dealers for the execution of portfolio transactions. This
policy does not imply a commitment to execute portfolio transactions through all
broker/dealers that sell shares of the Underlying Theme Funds and such other
portfolios.
Each Underlying Theme Portfolio contemplates purchasing most foreign equity
securities in OTC markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. The fixed commissions paid in
connection with most such foreign stock transactions generally are higher than
negotiated commissions on U.S. transactions. There generally is less government
supervision and regulation of foreign stock exchanges and brokers than in the
United States. Foreign security settlements may in some instances be subject to
delays and related administrative uncertainties.
Foreign equity securities may be held by an Underlying Theme Portfolio in the
form of ADRs, ADSs, EDRs, CDRs or securities convertible into foreign equity
securities. ADRs, ADSs, EDRs and CDRs may be listed on stock exchanges, or
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traded in the OTC markets in the United States or Europe, as the case may be.
ADRs, like other securities traded in the United States, will be subject to
negotiated commission rates. The foreign and domestic debt securities and money
market instruments in which an Underlying Theme Portfolio may invest are
generally traded in the OTC markets.
An Underlying Theme Portfolio does not have any obligation to deal with any
broker/dealer or group of broker/dealers in the execution of securities
transactions. Each Underlying Theme Portfolio contemplates that, consistent with
the policy of obtaining the best net results, brokerage transactions may be
conducted through certain companies that are affiliated with AIM or the
Sub-advisor. Both Boards have adopted procedures in conformity with Rule 17e-1
under the 1940 Act to ensure that all brokerage commissions paid to such
affiliates are reasonable and fair in the context of the market in which they
are operating. Any such transactions will be effected and related compensation
paid only in accordance with applicable SEC regulations.
The Funds may engage in certain principal and agency transactions with banks
and their affiliates that own 5% or more of the outstanding voting securities of
a Fund, provided the conditions of an exemptive order received by the Funds from
the SEC are met. In addition, a Fund may purchase or sell a security from or to
another AIM Fund provided the Funds follow procedures adopted by the Boards of
Directors/Trustees 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.
MANAGEMENT
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below. Unless otherwise
indicated, the address of each Executive Officer is 11 Greenway Plaza, Suite
100, Houston, Texas 77046.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT
NAME, ADDRESS AND AGE WITH REGISTRANT LEAST THE PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (51) Trustee, Chairman of the Director, President and Chief Executive Officer,
Board and President A I M Management Group Inc.; Director and President,
A I M Advisors, Inc.; Director and Senior Vice
President, A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc. and
Fund Management Company; and Director, AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------------
C. DEREK ANDERSON (57) Trustee Mr. Anderson is President, Plantagenet Capital
220 Sansome Street Management, LLC (an investment partnership); Chief
Suite 400 Executive Officer, Plantagenet Holdings, Ltd. (an
San Francisco, CA 94104 investment banking firm); Director, Anderson Capital
Management, Inc. since 1988; Director, PremiumWear,
Inc. (formerly Munsingwear, Inc.) (a casual apparel
company) and Director, "R" Homes, Inc. and various
other companies. Mr. Anderson is also a trustee of
each of the other investment companies registered
under the 1940 Act that is sub-advised or
sub-administered by the Sub-advisor.
- ----------------------------------------------------------------------------------------------------------
FRANK S. BAYLEY (59) Trustee Mr. Bayley is a partner of the law firm of Baker &
Two Embarcadero Center McKenzie, and serves as a Director and Chairman of
Suite 2400 C.D. Stimson Company (a private investment company).
San Francisco, CA 94111 Mr. Bayley is also a trustee of each of the other
investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-
advisor.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* A trustee who is an "interested person" of the Trust and A I M Advisors, Inc.
as defined in the 1940 Act.
30
<PAGE> 170
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT
NAME, ADDRESS AND AGE WITH REGISTRANT LEAST THE PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ARTHUR C. PATTERSON (54) Trustee Mr. Patterson is Managing Partner of Accel Partners
428 University Avenue (a venture capital firm). He also serves as a
Palo Alto, CA 94301 director of Viasoft and PageMart, Inc. (both public
software companies), as well as several other
privately held software and communications companies.
Mr. Patterson is also a trustee of each of the other
investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the
Sub-advisor.
- ----------------------------------------------------------------------------------------------------------
RUTH H. QUIGLEY (63) Trustee Miss Quigley is a private investor. From 1984 to
1055 California Street 1986, she was President of Quigley Friedlander & Co.,
San Francisco, CA 94108 Inc. (a financial advisory services firm). Miss
Quigley is also a trustee of each of the other
investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the
Sub-advisor.
- ----------------------------------------------------------------------------------------------------------
+JOHN J. ARTHUR (53) Vice President Director, Senior Vice President and Treasurer, A I M
Advisors, Inc.; Vice President and Treasurer, A I M
Management Group Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund Services,
Inc. and Fund Management Company.
- ----------------------------------------------------------------------------------------------------------
KENNETH W. CHANCEY (52) Vice President and Senior Vice President -- Mutual Fund Accounting, the
50 California Street Principal Accounting Sub-advisor since 1992; Vice President -- Mutual Fund
San Francisco, CA 94111 Officer Accounting, the Sub-advisor from 1992 - 1997.
- ----------------------------------------------------------------------------------------------------------
MELVILLE B. COX (54) Vice President Vice President and Chief Compliance Officer, A I M
Advisors, Inc., A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc. and
Fund Management Company.
- ----------------------------------------------------------------------------------------------------------
GARY T. CRUM (50) Vice President Director and President, A I M Capital Management,
Inc.; Director and Senior Vice President, A I M
Management Group Inc. and A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------------
HELGE K. LEE (52) Vice President & Chief Legal and Compliance Officer -- North America,
50 California Street Secretary the Sub-advisor since October 1997; Executive Vice
San Francisco, CA 94111 President of the Asset Management Division of
Liechtenstein Global Trust since October 1996; Senior
Vice President, General Counsel and Secretary of LGT
Asset Management, Inc., INVESCO (NY), Inc., GT
Global, GT Global Investor Services, Inc. and G.T.
Insurance from May 1994 to October 1996; Senior Vice
President, General Counsel and Secretary of
Strong/Corneliuson Management, Inc. and Secretary of
each of the Strong Funds from October 1991 through
May 1994.
- ----------------------------------------------------------------------------------------------------------
+CAROL F. RELIHAN (43) Vice President Director, Senior Vice President, General Counsel and
Secretary, A I M Advisors, Inc.; Vice President,
General Counsel and Secretary, A I M Management Group
Inc.; Director, Vice President and General Counsel,
Fund Management Company; Vice President and General
Counsel, A I M Fund Services, Inc.; and Vice
President, A I M Capital Management, Inc. and A I M
Distributors, Inc.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
+ Mr. Arthur and Ms. Relihan are married to each other.
</TABLE>
31
<PAGE> 171
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT
NAME, ADDRESS AND AGE WITH REGISTRANT LEAST THE PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
DANA R. SUTTON (39) Vice President and Vice President and Fund Controller, A I M Advisors,
Assistant Treasurer Inc.; and Assistant Vice President and Assistant
Treasurer, Fund Management Company.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
+ Mr. Arthur and Ms. Relihan are married to each other.
The Board of Trustees has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and its
funds and recommending firms to serve as independent auditors of the Trust. All
of the Trust's Trustees also serve as directors or trustees of some or all of
the other investment companies managed, administered or advised by AIM. All of
the Trust's Executive Officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM. Each Trustee
who is not a director, officer or employee of the Sub-advisor or any other
affiliated company is paid aggregate fees of $5,000 a year, plus $300 per Fund
for each meeting of the Board attended, and reimbursed travel and other expenses
incurred in connection with attendance at such meetings. Other Trustees and
Officers receive no compensation or expense reimbursement from the Trust. As of
June 26, 1998, the Officers and Trustees and their families as a group owned in
the aggregate beneficially or of record less than 1% of the shares of the Fund.
MANAGEMENT SERVICES RELATING TO THE FUND
AIM serves as the investment manager and administrator to the Fund under an
investment management and administration contract ("Management Contract")
between the Trust and AIM. The Sub-advisor serves as the sub-advisor and
sub-administrator to the Fund under a Sub-Advisory and Sub-Administration
Contract between AIM and the Sub-advisor ("Sub-Management Contract," and
together with the Management Contract, the "Management Contracts"). Neither AIM
nor the Sub-advisor receives a fee for providing management services to the
Fund.
DISTRIBUTION SERVICES RELATING TO THE FUND
The Fund's Advisor Class shares are offered continuously through the Fund's
principal underwriter and distributor, AIM Distributors, on a "best efforts"
basis pursuant to a distribution contract between the Company and AIM
Distributors without a front-end sales charge or contingent deferred sales
charge.
32
<PAGE> 172
NET ASSET VALUE DETERMINATION
The net asset value per share of the Fund is normally determined daily as of
the close of trading of the New York Stock Exchange ("NYSE") (generally 4:00
p.m. Eastern time) on each business day of the Fund. In the event the NYSE
closes early (i.e., before 4:00 p.m. Eastern time) on a particular day, the net
asset value of the Fund is determined as of the close of the NYSE on such day.
Net asset value per share is determined by dividing the value of the Fund's
interests in the Underlying Theme Funds attributable to a class, less all its
liabilities attributable to that class, by the total number of shares
outstanding of that class. The value of the Fund's interests in the Underlying
Theme Funds is determined in accordance with the procedures and methodologies
described in the prospectus and statement of additional information of the
Underlying Theme Funds. Determination of the Fund's net asset value per share is
made in accordance with generally accepted accounting principles.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner in which shares of the Fund may be
purchased appears in the Fund's Prospectus under the headings "How to Purchase
Shares," and "Terms and Conditions of Purchases of the AIM Funds."
Complete information concerning the method of exchanging shares of the Fund
for shares of the other AIM Funds is set forth in the Prospectus under the
heading "Exchange Privilege."
Information concerning redemption of the Fund's shares is set forth in the
Prospectus under the heading "How to Redeem Shares." In addition to the Fund's
obligation to redeem shares, AIM Distributors may also repurchase shares as an
accommodation to shareholders. To effect a repurchase, those dealers who have
executed Selected Dealer Agreements with AIM Distributors must phone orders to
the order desk of the Fund 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 Fund next determined after the repurchase order is
received. Such an arrangement is subject to timely receipt by A I M Fund
Services, Inc. ("AFS"), of all required documents in good order. If such
documents are not received within a reasonable time after the order is placed,
the order is subject to cancellation. While there is no charge imposed by the
Fund or by AIM Distributors (other than any applicable contingent deferred sales
charge) when shares are redeemed or repurchased, dealers may charge a fair
service fee for handling the transaction.
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the 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.
PROGRAMS AND SERVICES FOR SHAREHOLDERS
The Fund provides certain services for shareholders and certain investment or
redemption programs. See "Exchange Privilege" and "How to Redeem Shares" in the
Prospectus. All inquiries concerning these programs should be made directly to
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, or call
toll free (800) 959-4246.
DIVIDEND ORDER
Dividends may be paid to someone other than the registered owner, or sent to
an address other than the address of record. (Please note that signature
guarantees are required to effect this option.) An investor also may direct that
his or her dividends be invested in one of the other AIM Funds and there is no
sales charge for these investments; initial investment minimums apply. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" in the
Prospectus. To effect this option, please contact your authorized dealer. For
more information concerning AIM Funds other than the Fund, please obtain a
current Prospectus by contacting your authorized dealer, by writing to A I M
Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, or by calling
toll free (800) 959-4246.
33
<PAGE> 173
TAXES
TAXATION OF THE FUND
To continue to qualify for treatment as a regulated investment company ("RIC")
under the Code, the Fund must distribute to its shareholders for each taxable
year at least 90% of its investment company taxable income (consisting generally
of net investment income and net short-term capital gain) ("Distribution
Requirement") and must meet several additional requirements. These requirements
include the following: (1) the Fund must derive at least 90% of its gross income
each taxable year from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of securities, or other
income derived with respect to its business of investing in securities; and (2)
the Diversification Requirements.
The Fund will invest its assets in shares of the Underlying Theme Funds, cash
and money market instruments. Accordingly, the Fund's income will consist of
distributions from the Underlying Theme Funds, net gains realized from the
disposition of Underlying Theme Fund shares and interest. If an Underlying Theme
Fund qualifies for treatment as a RIC under the Code -- each has done so for its
past taxable years and intends to continue to do so for its current and future
taxable years -- (1) dividends paid to the Fund from the Underlying Theme Fund's
investment company taxable income (which may include net gains from certain
foreign currency transactions) will be taxable to the Fund as ordinary income to
the extent of the Underlying Theme Fund's earnings and profits and (2)
distributions paid to the Fund from the Underlying Theme Fund's net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
when designated as such, will be taxable to the Fund as long-term capital gains,
regardless of how long the Fund has held the Underlying Theme Fund's shares. If
shares of an Underlying Theme Fund are purchased within 30 days before or after
redeeming at a loss, other shares of that Underlying Theme Fund (whether
pursuant to a rebalancing of the Fund's portfolio or otherwise) all or a part of
the loss will not be deductible by the Fund and instead will increase its basis
for the newly purchased shares.
Although an Underlying Theme Fund will be eligible to elect to "pass-through"
to its shareholders (including the Fund) the benefit of the foreign tax credit
with respect to any foreign and U.S. possessions income taxes it pays if more
than 50% in the value of its total assets at the close of any taxable year
consists of securities of foreign corporations, the Fund will not qualify to
pass that benefit through to its shareholders because of its inability to
satisfy that asset test.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
TAXATION OF THE FUND'S SHAREHOLDERS
Dividends and other distributions declared by the Fund, and payable to
shareholders of record as of a date, in October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual, or nonresident alien fiduciary of a trust or
estate, foreign corporation or foreign partnership ("foreign shareholder")
generally will be subject to U.S. withholding tax (at a rate of 30% or lower
treaty rate). Withholding will not apply, however, to a dividend paid by the
Fund to a foreign shareholder that is "effectively connected with the conduct of
a U.S. trade or business," in which case the reporting and withholding
requirements applicable to domestic shareholders will apply. A distribution of
net capital gain by the Fund to a foreign shareholder generally will be subject
to U.S. federal income tax (at the rates applicable to domestic persons) only if
the distribution is "effectively connected" or the foreign shareholder is
treated as a resident alien individual for federal income tax purposes.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Fund and its shareholders. Investors are urged to
consult their own tax advisors for more detailed information and for information
regarding any foreign, state and local taxes applicable to distributions
received from the Fund.
34
<PAGE> 174
MISCELLANEOUS INFORMATION
SPECIAL SERVICING AGREEMENT
Subject to the receipt of an exemptive order from the Securities and Exchange
Commission, a Special Servicing Agreement (the "Service Agreement") will be
entered into among AIM, a Sub-Advisor, the Underlying Theme Funds, AFS and the
Trust. The Service Agreement will provide that, if the officers of any
Underlying Theme Fund, at the direction of the Trust's Board of Trustees,
determine that the aggregate expenses of the Fund are less than the estimated
savings to the Underlying Theme Fund from the operation of the Fund, the
Underlying Theme Fund will bear those expenses in proportion to the average
daily value of its shares owned by the Fund and/or the number of shareholder
accounts at the Fund. No Underlying Theme Fund will bear such expenses in excess
of the estimated savings to it. Such savings are expected to result primarily
from the elimination of numerous separate shareholder accounts which are or
would have been invested directly in the Underlying Theme Funds and the
resulting reduction in shareholder servicing costs. In this regard, the
shareholder servicing costs to any Underlying Theme Fund for servicing one
account registered to the Trust would be significantly less than the cost to
that same Underlying Theme Fund of servicing the same pool of assets contributed
in the typical fashion by a large group of individual shareholders owning small
accounts in each Underlying Theme Fund. If the Fund's costs exceed the aggregate
estimated savings to the Underlying Theme Funds, the Manager will pay the excess
on behalf of the Fund.
Certain non-recurring and extraordinary expenses will not be paid in
accordance with the Service Agreement including: the fees and costs of actions,
suits or proceedings and any penalties or damages in connection therewith, to
which the Trust and/or the Fund may incur directly, or may incur as a result of
its legal obligation to provide indemnification to its officers, trustees and
agents; the fees and costs of any governmental investigation and any fines or
penalties in connection therewith; and any federal, state or local tax, or
related interest penalties or additions to tax, incurred, for example, as a
result of the Trust's failure to distribute all of its income and gains, its
failure to qualify as a RIC under the Code, or failure to timely file any
required tax returns or other filings. Amounts not payable pursuant to the
Service Agreement will be paid by the Fund.
AIM was organized in 1976, and along with its subsidiaries, manages or advises
approximately 90 investment company portfolios encompassing a broad range of
investment objectives. AIM is a direct, wholly owned subsidiary of A I M
Management Group Inc. ("AIM Management"), a holding company that has been
engaged in the financial services business since 1976. AIM is the sole
shareholder of the Funds' principal underwriter, AIM Distributors. AIM
Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire
Square, London, EC2M 4YR, England. AMVESCAP PLC and its subsidiaries are
independent investment management groups that have a significant presence in the
institutional and retail segment of the investment management industry in North
America and Europe, and a growing presence in Asia.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, acts as custodian of the Fund's and the Underlying Theme
Portfolios' assets.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agency and Service Agreement between the Trust and AFS, a
registered transfer agent and wholly-owned subsidiary of AIM, provides that AFS
will perform certain shareholder services for the Fund for a fee per account
serviced. The Transfer Agency and Service Agreement provides that AFS will
receive a per account fee plus out-of-pocket expenses to process orders for
purchases, redemptions and exchanges of shares; prepare and transmit payments
for dividends and distributions declared by the Fund; maintain shareholder
accounts and provide shareholders with information regarding the Fund and their
accounts. The Transfer Agency and Service Agreement became effective on
September 8, 1998. See "Additional Information -- Special Servicing Agreement."
INDEPENDENT ACCOUNTANTS
The Trust's independent accountants are PricewaterhouseCoopers LLP.
PricewaterhouseCoopers LLP conducts annual audits of the Fund's financial
statements, assists in the preparation of the Fund's federal and state income
tax returns and consults with the Trust as to matters of accounting, regulatory
filings, and federal and state income taxation.
35
<PAGE> 175
The audited financial statements of the Trust included in this Statement of
Additional Information have been examined by PricewaterhouseCoopers LLP as
stated in their opinion appearing herein, and are included in reliance upon such
opinion given upon the authority of that firm as experts in accounting and
auditing.
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of the Trust enjoy the same limitations
of liability extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
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 a
trustee. If a shareholder is held personally liable for the obligations of the
Trust, the Trust Agreement provides that the shareholder shall be entitled out
of the assets belonging to the applicable Fund (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 Trust's Bylaws and applicable
law. Thus, the risk of a shareholder incurring financial loss on account of such
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations and where the other party was held not to be bound by
the disclaimer.
NAME
Prior to May 29, 1998, the Fund operated under the name of GT Global New
Dimension Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of August 10, 1998, the Trustees and officers of the Trust, as a group,
owned less than 1% of the outstanding shares of any class of the Trust.
To the best knowledge of the Trust, the names and addresses of the holders of
5% or more of the outstanding shares of any class of the Trust's equity
securities as of August 10, 1998, and the percentage of the outstanding shares
held by such holders are set forth below:
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
------------------------- -------- ------------
<S> <C> <C>
CLASS C 21.79% -0-
MLPF&S for the Sole Benefit of
its Customers, Security #9,7R61
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Fl.
Jacksonville, Florida 32246-6484
</TABLE>
- ---------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return, as described in the
Prospectus, is as follows:
P(1+T)(n)=ERV
<TABLE>
<S> <C> <C> <C>
P = a hypothetical initial payment of $1,000.
Where
T = average annual total return (assuming the applicable maximum
sales load is deducted at the beginning of the 1, 5, or 10
year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the 1, 5, or 10 year periods (or fractional
portion of such period).
</TABLE>
36
<PAGE> 176
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:
P(1+U)(n)=ERV
<TABLE>
<S> <C> <C> <C>
P = a hypothetical initial payment of $1,000.
Where
U = average annual total return assuming payment of only a
stated portion of, or none of, the applicable maximum sales
load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.
</TABLE>
Cumulative total return across a stated period may be calculated as follows:
P(1+V)(n)=ERV
<TABLE>
<S> <C> <C> <C>
P = a hypothetical initial payment of $1,000.
Where
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.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.
</TABLE>
The cumulative total return for Advisor Class shares of the Fund for the
period September 15, 1997 to December 31, 1997 was (2.51)%.
PERFORMANCE INFORMATION
Total return and yield figures for the Fund are neither fixed nor guaranteed,
and the Fund's principal is not insured. Performance quotations reflect
historical information and should not be considered representative of the Fund's
performance for any period in the future. Performance is a function of a number
of factors which can be expected to fluctuate. The Fund may provide performance
information in reports, sales literature and advertisements. The Fund may also,
from time to time, quote information about the Fund published or aired by
publications or other media entities which contain articles or segments relating
to investment results or other data about the Fund. Such publications or media
entities may include the following, among others:
Advertising Age
Barron's
Best's Review
Broker World
Business Week
Changing Times
Christian Science Monitor
CNBC
CNN
Consumer Reports
Economist
EuroMoney
FACS of the Week
Financial Planning
Financial Product News
Financial Services Week
Financial World
Forbes
Fortune
Global Finance
Hartford Courant Inc.
Insurance Forum
Institutional Investor
Insurance Week
Investor's Daily
Journal of the American
Society of CLU & ChFC
Kiplinger Letter
Money
Mutual Fund Forecaster
Mutual Fund Magazine
Nation's Business
New York Times
PBS
Pension World
Pensions & Investments
Personal Investor
Philadelphia Inquirer
Smart Money
USA Today
U.S. News & World Report
Wall Street Journal
Washington Post
37
<PAGE> 177
The Fund and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Fund with the following, or compare the Fund's performance to performance
data of similar mutual funds as published in the following, among others:
Bank Rate National Monitor Index
Bear Stearns Foreign Bond Index
Bond Buyer Index
CDA/Wiesenberger Investment Company Services
(data and mutual fund rankings and
comparisons)
CNBC/Financial News Composite Index
COFI
Consumer Price Index
Datastream
Donoghue's
Dow Jones Industrial Average
EAFE Index
First Boston High Yield Index
Fitch (publications)
Ibbotson Associates International Bond Index
International Bank for Reconstruction and
Development (publications)
International Finance Corporation Emerging
Markets Database
International Financial Statistics
Lehman Bond Indices
Lipper Analytical Data Services, Inc. (data and
mutual fund rankings and comparisons)
Micropal, Inc. (data and mutual fund rankings
and comparisons)
Moody's Investors Service (publications)
Morgan Stanley Capital International All
Country (AC) World Index
Morgan Stanley Capital International World
Indices
Morningstar, Inc. (data and mutual fund rankings
and comparisons)
NASDAQ
Organization for Economic Cooperation and
Development (publications)
Salomon Brothers Global Telecommunications
Index
Salomon Brothers World Government Bond
Index-Non-U.S.
Salomon Brothers World Government Bond Index
Standard & Poor's (publications)
Standard & Poor's 500 Composite Stock Price
Index
Stangar
Wilshire Associates
World Bank (publications and reports)
The World Bank Publication of Trends in
Developing Countries
Worldscope
The Fund may also compare its performance to rates on Certificates of Deposit
and other fixed rate investments such as the following:
10-year Treasuries
30-year Treasuries
30-day Treasury Bills
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. Advertising for the Fund may from time to time include discussions
of general economic conditions and interest rates. Advertising for the Fund may
also include reference to the use of the Fund as part of an individual's overall
retirement investment program. From time to time, sales literature and/or
advertisements for the Fund may disclose (i) the largest holdings in the Fund's
portfolio, (ii) certain selling group members and/or (iii) certain institutional
shareholders.
From time to time, the Fund's 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, variable annuities, dollar-cost averaging, stocks, bonds, money markets,
certificates of deposit, retirement, retirement plans, asset allocation,
tax-free investing, college planning, and inflation.
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.
GENERAL INFORMATION ABOUT THE UNDERLYING THEME PORTFOLIOS
Each Underlying Theme Portfolio may invest worldwide across industries within
the Portfolio's area of concentration without national or regional restrictions.
The ability of each Underlying Theme Portfolio to invest worldwide may allow the
portfolio managers to select industries in different economic cycles and varying
stages of development, though there is no assurance that the managers will be
successful in this selection.
38
<PAGE> 178
Each Underlying Theme Portfolio's area of concentration reflects the
underlying theme of the Portfolio. AIM Distributors believes that there are
certain social, political and economic trends that may benefit one or more
industries within an Underlying Theme Portfolio's area of concentration. Of
course, there is no assurance that any of the Funds will benefit as a result.
Health Care Fund. From time to time the Fund and AIM Distributors will quote
information including data regarding:
- Trading volume, number of listed companies and the largest companies of the
global health care industry
- Expenditures by various countries, regions and age groups on health care
- Population of countries, regions and age groups
- Natality and mortality rates in various regions, countries and age groups
- Life expectancy rates in various regions, countries and age groups
- New health care products and products seeking approval
- Health maintenance organizations (HMOs) and their enrollment growth
- Studies from, but not limited to, the American Medical Association showing
the effectiveness of using drugs to cure illness
- Medical technology and devices in use or in development
- Regulatory environment of health care industries
- Consolidation in the health care industries
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Research firms such as Mehta and Isaly which publishes Pharmaceutical
Portfolio Recommendations
- OECD and its publications such as the OECD Health Data, as supplemented
annually
- Morgan Stanley Capital International stock market industry indices such as
Health & Personal Care
- The World Bank and its publications such as The World Development Report, as
supplemented annually
- IFC and publications such as the Emerging Stock Markets Factbook
Information About the Global Health Care Industries. The Fund and the
Sub-advisor believe that certain market and demographic factors merit an
investor's consideration when making a health care investment. Worldwide
standards of living and life expectancy have increased at a substantial rate.
The Sub-advisor, the investment advisor to the AIM/GT Funds, expects this
growth, which works to the general benefit of the global health care industry,
to continue at a roughly comparable rate in the future, although no assurances
can be given in this regard. Moreover, according to the Sub-advisor, the health
care industry historically has proven to be a relatively non-cyclical industry
that continues to provide goods and services to the public in periods of
economic weakness as well as economic strength.
The Sub-advisor believes that the anticipated increase in the world's elderly
population could increase demand for health care products and services. For
example, according to data compiled by the Sub-advisor, in Japan the number of
people age 65 and older is expected to grow over 100% by the year 2025; in
Germany, France and the U.S., the same age group should grow 40%. Similarly, the
U.S. Census Bureau predicts the number of Americans 85 and older to double in
the next 30 years. From time to time, the Fund and AIM Distributors will quote
information including, but not limited to, international data regarding
populations, birth rates, mortality rates, life expectancy, health care
expenditures, and gross domestic product vs. life expectancy. The information
quoted has not been independently verified by the Fund or AIM Distributors and
will be based on data that is believed to be reliable and accurate.
Telecommunications Fund. From time to time the Fund and AIM Distributors will
quote information including data regarding:
- Increased usage of new technologies such as, but not limited to, cellular
and wireless communications in emerging and established countries around the
world
- Supply and demand of telephone equipment and services
39
<PAGE> 179
- Regulatory environment of telecommunications industries
- Revenue, price and usage of telecommunications products and services
- Privatization and/or deregulation of telecommunications companies
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Salomon Brothers World Equity Telecommunications Index, which includes stock
market data about the telecommunications industry in established and
developing markets
- OECD and other publications from its subsidiaries such as the International
Telecommunications Union
- Morgan Stanley Capital International stock market industry indices such as
Telecommunications, Broadcasting & Publishing and Data Processing &
Reproduction
- International Technology Consultants, a Washington D.C. based firm which
publishes reports such as Eastern European & Soviet Telecom Report and Latin
American Telecom Report
- Telegeography and other publications
Deregulation in the United States. The United States has been the bellwether
for deregulation of the telephone industry. The divestiture of the Bell System
from American Telephone and Telegraph has produced competing companies in the
United States. Such U.S. market-driven competition has, for example, led to
lower costs for consumers which in turn led to greater consumer usage and to
higher industrywide revenues. The Sub-advisor expects this scenario to continue
to benefit such companies in the U.S. and similarly to be realized by the
established telecommunications companies in established economies, although no
assurances can be made in this regard.
Consumer Products and Services Fund. From time to time the Fund and AIM
Distributors will quote information including data regarding:
- Trading volume, number of listed companies and the largest companies located
around the world in the consumer products and services industries
- Expenditures, demand and consumption by various countries, regions, income
classes and age groups of consumer products and services
- Population of countries, regions and age groups
- Life expectancy rates in various regions, countries and age groups
- New consumer products and services in the development or manufacturing
stages
- Income of various regions, countries and age groups
- Sales and sales growth of consumer products and services companies in their
own country and abroad
- Sales, supply and demand of consumer products and services
- Parent companies and the products and services they distribute
- Regulatory environment of consumer products industries
The information quoted will not be independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including, but not limited to, the following:
- Consumer and trade groups
- Fortune magazine and other periodicals
- The World Bank and its publications
- The International Monetary Fund (IMF) and its publications
- IFC and its publications
- OECD and its publications
40
<PAGE> 180
Infrastructure Fund. From time to time the Fund and AIM Distributors may quote
information including:
- Supply and demand of telephone equipment and services, electricity, water,
transportation, construction materials and other infrastructure related
products and services
- Regulatory environment of infrastructure industries
- Quantity and costs of current and projected infrastructure projects
- Privatization of industries and companies
- New technologies, products and services used in infrastructure industries
- Infrastructure Finance Magazine and other periodicals
Financial Services Fund. From time to time the Fund and AIM Distributors may
quote information including:
- Supply and demand of financial services
- Regulatory environment of financial service industries
- Credit ratings of U.S. and non-U.S. banks
- New technologies, products and services used in the financial services
industries
- Consolidation in the financial services industries
Resources Fund. From time to time the Fund and AIM Distributors may quote
information including:
- Supply, demand and prices of natural resources
- Regulatory environment of natural resources
- Supply, demand and prices of products manufactured from natural resources
- New technologies, products and services used in the natural resources
industries
41
<PAGE> 181
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc. ("Moody's") employs the designations "Prime-1"
and "Prime-2" to indicate commercial paper having the highest capacity for
timely repayment. Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt 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. Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt obligations. This
normally will 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.
Standard & Poor's, a division of the McGraw-Hill Companies, Inc. ("S&P") rates
commercial paper in four categories ranging from "A-1" for the highest quality
obligations to "D" for the lowest. 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 will be 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 S&P believes that such payments
will be made during such grace period.
S&P rates the securities debt of various entities in categories ranging from
"AAA" to "D" according to quality. Investment grade ratings are the first four
categories: AAA -- Highest rating. Capacity to pay interest and repay principal
is extremely strong. AA -- Very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.
A -- Has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. BBB -- Regarded as
having adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" is
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. BB -- Has less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BBB-" rating. B -- Has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The "B" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB-" rating. CCC -- Has a
currently identifiable vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely payment of interest
and repayment of principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay interest and
repay principal. The "CCC" rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "B" or "B-" rating.
CC -- Typically applied to debt subordinated to senior debt that is assigned an
actual or implied "CCC" rating. C -- Typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued. C1 -- Reserved for income bonds
on which no interest is being paid. D -- In payment default. The "D" 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 S&P believes that
such payments will be made during such grace period. This rating will also be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
42
<PAGE> 182
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
DESCRIPTION OF BOND RATINGS
Moody's rates the long-term debt securities issued by various entities from
"Aaa" to "C." Investment Grade Ratings are the first four categories:
Aaa -- Best quality. These securities 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 -- High quality by all standards. Together with the
Aaa group they comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the Aaa securities.
A -- 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 -- 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 -- Have
speculative elements and 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 -- 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 -- Poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca -- Speculative in a high degree. Such issues are often in default or have
other marked shortcomings. C -- Lowest rated class of bonds. Issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
ABSENCE OF RATING
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B in its corporate bond rating system. The modifier 1
indicates that the company 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 rating category.
43
<PAGE> 183
FINANCIAL STATEMENTS
FS
<PAGE> 184
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADVISOR
CLASS VALUE % OF NET
AIM GLOBAL THEME FUNDS SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
AIM Global Consumer Products and Services Fund ............. 686,284 $17,953,178 32.0
AIM Global Financial Services Fund ......................... 595,333 12,186,465 21.7
AIM Global Infrastructure Fund ............................. 556,903 9,122,071 16.3
AIM Global Health Care Fund ................................ 267,601 5,954,114 10.6
AIM Global Telecommunications Fund ......................... 269,653 5,519,803 9.8
AIM Global Resources Fund .................................. 402,064 5,484,152 9.8
----------- -----
TOTAL THEME FUND INVESTMENTS (cost $53,855,420) .............. 56,219,783 100.2
----------- -----
TOTAL INVESTMENTS (cost $53,855,420) * ...................... 56,219,783 100.2
Other Assets and Liabilities ................................. (106,206) (0.2)
----------- -----
NET ASSETS ................................................... $56,113,577 100.0
----------- -----
----------- -----
</TABLE>
- --------------
* For Federal income tax purposes, cost is $53,893,162 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 4,401,304
Unrealized depreciation: (2,074,683)
-------------
Net unrealized appreciation: $ 2,326,621
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-1
<PAGE> 185
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments at value (cost $53,855,420) (Note 1)........................................... $ 56,219,783
U.S. currency.............................................................................. 9,174
Receivable for Fund shares sold............................................................ 72,825
------------
Total assets............................................................................. 56,301,782
------------
Liabilities:
Payable for Fund shares repurchased........................................................ 145,699
Payable for service and distribution expenses (Note 2)..................................... 33,332
Payable for investments purchased.......................................................... 9,174
------------
Total liabilities........................................................................ 188,205
------------
Net assets................................................................................... $ 56,113,577
------------
------------
Class A:
Net asset value and redemption price per share ($23,947,333 DIVIDED BY 2,021,670 shares
outstanding)................................................................................ $ 11.85
------------
------------
Maximum offering price per share (100/95.25 of $11.85) *..................................... $ 12.44
------------
------------
Class B:+
Net asset value and offering price per share ($30,479,961 DIVIDED BY 2,582,072 shares
outstanding)................................................................................ $ 11.80
------------
------------
Class C:+
Net asset value and offering price per share ($266,957 DIVIDED BY 22,624 shares
outstanding)................................................................................ $ 11.80
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,419,326 DIVIDED
BY 119,492 shares outstanding).............................................................. $ 11.88
------------
------------
Net assets consist of:
Paid in capital (Note 4)................................................................... $ 53,469,758
Accumulated net investment loss............................................................ (148,422)
Accumulated net realized gain on investments............................................... 427,878
Net unrealized appreciation of investments................................................. 2,364,363
------------
Total -- representing net assets applicable to capital shares outstanding.................... $ 56,113,577
------------
------------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-2
<PAGE> 186
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
STATEMENT OF OPERATIONS
Six months ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income.............................................................................. $ 3,426
----------
Total investment income.................................................................... 3,426
----------
Expenses:
Service and distribution expenses: (Note 2)
Class A........................................................................ $ 50,681
Class B........................................................................ 129,149
Class C........................................................................ 728
----------
Total expenses............................................................................. 180,558
----------
Net investment loss............................................................................ (177,132)
----------
Net realized and unrealized gain (loss) on investments: (Note 1)
Net realized loss on investments................................................. (77,682)
Capital gain distributions received.............................................. --
----------
Net realized loss during the period........................................................ (77,682)
Net change in unrealized appreciation during the period.................................... 5,158,759
----------
Net realized and unrealized gain on investments................................................ 5,081,077
----------
Net increase in net assets resulting from operations........................................... $4,903,945
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-3
<PAGE> 187
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SEPTEMBER 15,
1997
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED TO
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
- ---------------------------------------------------------------------------- -------------- ---------------
Increase in net assets
Operations:
Net investment loss....................................................... $ (177,132) $ (31,440)
Net realized gain (loss) on investments................................... (77,682) 1,983,653
Net change in unrealized appreciation (depreciation) of investments....... 5,158,759 (2,794,396)
-------------- ---------------
Net increase (decrease) in net assets resulting from operations......... 4,903,945 (842,183)
-------------- ---------------
Class A:
Distributions to shareholders: (Note 1)
In excess of net investment income........................................ -- (583,714)
Class B:
Distributions to shareholders: (Note 1)
In excess of net investment income........................................ -- (781,183)
Class C:+
Distributions to shareholders: (Note 1)
In excess of net investment income........................................ -- N/A
Advisor Class: (Note 1)
Distributions to shareholders:
In excess of net investment income........................................ -- (53,046)
-------------- ---------------
Total distributions..................................................... -- (1,417,943)
-------------- ---------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested.......................... 22,460,467 41,029,628
Decrease from capital shares repurchased.................................. (6,819,849) (3,300,488)
-------------- ---------------
Net increase from capital share transactions............................ 15,640,618 37,729,140
-------------- ---------------
Total increase in net assets................................................ 20,544,563 35,469,014
Net assets:
Beginning of period....................................................... 35,569,014 100,000
-------------- ---------------
End of period *........................................................... $56,113,577 $35,569,014
-------------- ---------------
-------------- ---------------
* Includes undistributed/accumulated net investment income (loss).......... $ (148,422) $ 28,710
-------------- ---------------
-------------- ---------------
</TABLE>
- --------------
+ Commencing January 1, 1998, the Fund began offering Class C shares.
The accompanying notes are an integral part of the financial statements.
FS-4
<PAGE> 188
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.
<TABLE>
<CAPTION>
CLASS A
----------------------------------
SIX MONTHS SEPTEMBER 15, 1997
ENDED (COMMENCEMENT
JUNE 30, OF OPERATIONS)
1998 (D) TO DECEMBER 31,
(UNAUDITED) 1997 (D)
----------- ---------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.63 $ 11.43
----------- ----------
Income from investment operations:
Net investment income (loss).......... (0.02) (0.01)
Net realized and unrealized loss on
investments.......................... 1.24 (0.31)
----------- ----------
Net increase (decrease) from
investment operations.............. 1.22 (0.32)
----------- ----------
Distributions to shareholders:
In excess of net investment income.... -- (0.48)
----------- ----------
Total distributions................. -- (0.48)
----------- ----------
Net asset value, end of period.......... $ 11.85 $ 10.63
----------- ----------
----------- ----------
Total investment return (c)............. 11.48%(b) (2.68)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 23,947 $ 15,145
Ratio of net investment income (loss) to
average net assets..................... (0.49)%(a) (0.35)%(a)
Ratio of operating expenses to average
net assets: (Note 2)................... 0.50%(a) 0.50% (a)
Portfolio turnover rate++............... 8%(a) 1% (a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) Calculated based upon average shares outstanding during the period.
+ Commencing January 1, 1998, the Fund began offering Class C shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-5
<PAGE> 189
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.
<TABLE>
<CAPTION>
CLASS B CLASS C+ ADVISOR CLASS
---------------------------------- ------------ ------------------------------------
SIX MONTHS SEPTEMBER 15, 1997 SIX MONTHS SIX MONTHS SEPTEMBER 15, 1997
ENDED (COMMENCEMENT ENDED ENDED (COMMENCEMENT
JUNE 30, OF OPERATIONS) JUNE 30, JUNE 30, OF OPERATIONS)
1998 (D) TO DECEMBER 31, 1998 (D) 1998 (D) TO DECEMBER 31,
(UNAUDITED) 1997 (D) (UNAUDITED) (UNAUDITED) 1997 (D)
----------- --------------------- ------------ ------------ ----------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.62 $ 11.43 $ 10.62 $ 10.64 $ 11.43
----------- ---------- ------------ ------------ --------
Income from investment operations:
Net investment income (loss).......... (0.05) (0.02) (0.05) 0.00 0.01
Net realized and unrealized loss on
investments.......................... 1.23 (0.32) 1.23 1.24 (0.31)
----------- ---------- ------------ ------------ --------
Net increase (decrease) from
investment operations.............. 1.18 (0.34) 1.18 1.24 (0.30)
----------- ---------- ------------ ------------ --------
Distributions to shareholders:
In excess of net investment income.... -- (0.47) -- -- (0.49)
----------- ---------- ------------ ------------ --------
Total distributions................. -- (0.47) -- -- (0.49)
----------- ---------- ------------ ------------ --------
Net asset value, end of period.......... $ 11.80 $ 10.62 $ 11.80 $ 11.88 $ 10.64
----------- ---------- ------------ ------------ --------
----------- ---------- ------------ ------------ --------
Total investment return (c)............. 11.11% (b) (2.83)%(b) 11.11% (b) 11.65%(b) (2.51)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 30,480 $ 19,184 $ 267 $ 1,419 $ 1,241
Ratio of net investment income (loss) to
average net assets..................... (0.99)%(a) (0.85)%(a) (0.99)%(a) 0.01% 0.15% (a)
Ratio of operating expenses to average
net assets: (Note 2)................... 1.00% (a) 1.00% (a) 1.00% (a) 0.00%(a) 0.00% (a)
Portfolio turnover rate++............... 8% (a) 1% (a) 8% (a) 8%(a) 1% (a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) Calculated based upon average shares outstanding during the period.
+ Commencing January 1, 1998, the Fund began offering Class C shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-6
<PAGE> 190
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
NOTES TO
FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM New Dimension Fund (the "Fund", formerly GT Global New Dimension Fund) is a
diversified series of AIM Series Trust (the "Trust", formerly GT Global Series
Trust ). The Trust is organized as a Delaware business trust and is registered
under the Investment Company Act of 1940, as amended ("1940 Act"), as an
open-end management investment company. The Fund invests substantially all of
its assets in Advisor Class shares of the AIM theme mutual funds: AIM Global
Consumer Products and Services Fund; AIM Global Financial Services Fund; AIM
Global Health Care Fund; AIM Global Infrastructure Fund; AIM Global Resources
Fund; and AIM Global Telecommunications Fund (collectively, the "Underlying
Theme Funds").
The Fund offers Class A, Class B, Class C, and Advisor Class shares, each of
which has equal rights as to assets and voting privileges. Class A, Class B, and
Class C, each have exclusive voting rights with respect to its distribution
plan. Investment income, realized and unrealized capital gains and losses of the
Fund are allocated on a pro rata basis to each class based on the relative net
assets of each class to the total net assets of the Fund. Each class of shares
differs in its respective service and distribution expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Investments in the Fund are valued at the closing net asset value of Advisor
Class shares of each Underlying Theme Fund on the day of valuation, and
short-term investments with a maturity of 60 days or less are valued at
amortized cost.
(B) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(C) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains.
(D) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investments held by the Fund and timing differences.
(E) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager, has a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allow the Fund and certain other funds
to borrow, on a first come, first serve basis, an aggregate maximum amount of
$250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of the
Fund's total assets. On June 30, 1998, the Fund had no loans outstanding.
2. RELATED PARTIES
A I M Advisors, Inc. ("AIM" or the "Manager") is the Fund's investment manager
and administrator, and INVESCO (NY), Inc., (formerly, Chancellor LGT Asset
Management, Inc.) is the Fund's investment sub-adviser and/or sub-administrator.
As of the close of business on May 29, 1998, Liechtenstein Global Trust AG
("LGT"), the former indirect parent organization of Chancellor LGT Asset
Management, Inc. ("Chancellor LGT"), consummated a purchase agreement with
AMVESCAP PLC pursuant to which AMVESCAP PLC acquired LGT's Asset Management
Division, which included Chancellor LGT and certain other affiliates. As a
result of this transaction, Chancellor LGT was renamed INVESCO (NY), Inc., and
is now an indirect wholly-owned subsidiary of AMVESCAP PLC. In connection with
this transaction, A I M Advisors, Inc., an indirect wholly-owned subsidiary of
AMVESCAP PLC, became the investment manager and administrator of the Fund and
INVESCO (NY), Inc. became the sub-adviser and sub-administrator of the Fund.
A I M Distributors, Inc. ("AIM Distributors") became the Fund's distributor.
Finally, the Trust was reorganized from a Massachusetts business trust into a
Delaware business trust. All of the changes became effective as of the close of
business on May 29, 1998.
AIM Distributors, an affiliate of the Manager, serves as the Fund's distributor.
For the period ended May 29, 1998, GT Global, Inc. ("GT Global"), an affiliate
of the investment sub-advisor, served as the
FS-7
<PAGE> 191
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
Fund's distributor. The Fund offers Class A, Class B, Class C, and Advisor Class
shares for purchase.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and AIM Distributors, is the transfer agent of the Fund. For performing
shareholder servicing, reporting, and general transfer agent services, GT
Services receives an annual maintenance fee of $17.50 per account, a new account
fee of $4.00 per account, a per transaction fee of $1.75 for all transactions
other than exchanges and a per exchange fee of $2.25. GT Services is also
reimbursed by the Fund its out-of-pocket expenses for such items as postage,
forms, telephone charges, stationery and office supplies.
The Manager is also the pricing and accounting agent for the Fund. The Manager
will initially assume all costs of the Fund's operation, except for service and
distribution fees as described below and non-recurring and extraordinary
expenses, if any. The Fund, as a shareholder in the Underlying Theme Funds,
indirectly will bear its proportionate share of any investment management fees
and other expenses paid by the Underlying Theme Funds. Subject to receipt of a
pending exemptive order from the Securities and Exchange Commission, the Trust,
on behalf of the Fund, will enter into a Special Servicing Agreement
("Agreement") with the Underlying Theme Funds, the Manager and GT Services. If
the Board of Trustees of the Underlying Theme Funds makes certain findings, each
Underlying Theme Fund will pay certain nondistribution-related expenses of the
Fund to the extent such expenses are less than the estimated savings to the
Underlying Theme Funds from the operation of the Fund. The Manager and AIM
Distributors also voluntarily have undertaken to limit the Underlying Theme
Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the maximum annual rate of 1.50% of the average daily
net assets of the Underlying Theme Fund's Advisor Class shares.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the period ended June 30, 1998, AIM Distributors and GT
Global retained $1,378 and $14,589, respectively, of such sales charges.
Purchases of Class A shares exceeding $500,000 may be subject to a contingent
deferred sales charge ("CDSC") upon redemption, in accordance with the Fund's
current prospectus. No CDSC's were collected during the period ended June 30,
1998. In addition, AIM Distributors also makes ongoing shareholder servicing and
trail commission payments to dealers whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, AIM Distributors from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. During the period ended June 30, 1998, AIM Distributors and
GT Global collected such CDSCs in the amount of $11,697 and $29,522,
respectively. In addition, AIM Distributors makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
Class C shares are not subject to initial sales charges. When Class C shares are
sold, AIM Distributors from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class C shares made
within one year of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. During the period ended June 30, 1998, AIM Distributors
collected no CDSCs. In addition, AIM Distributors makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class C
shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Class A Plan"), Class B
shares ("Class B Plan") and Class C shares ("Class C Plan"), the Fund reimbursed
GT Global for a portion of its shareholder servicing and distribution expenses.
Under the Class A Plan, the Fund was permitted to pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and was permitted to pay GT Global a
distribution fee at the annualized rate of up to 0.50% of the average daily net
assets of the Fund's Class A shares, less any amounts paid by the Fund as the
aforementioned service fee, for GT Global's expenditures incurred in providing
services as distributor. All expenses for which GT Global was reimbursed under
the Class A Plan would have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Class B Plan and Class C
Plan, the Fund was permitted to pay GT Global a service fee at the annualized
rate of up to 0.25% of the average daily net assets of the Fund's Class B and
Class C shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and was permitted to pay GT Global a
distribution fee at the annualized rate of up to 0.75% of the average daily net
assets of the Fund's Class B and Class C shares for GT Global's expenditures
incurred in providing services as distributor. Expenses incurred under the Class
B Plan and Class C Plan in excess of 1.00% annually were permitted to be carried
forward for reimbursement in subsequent years as long as that Plan continues in
effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1 under
the 1940 Act, the Trust's Board of Trustees has adopted a Master Distribution
Plan applicable to the Fund's Class A and Class C shares (the "Class A and Class
C Plan") and Class B shares ("Class B Plan"), pursuant to which a Fund
compensates AIM Distributors for the purpose of financing any activity that is
intended to result in the sale of Class A, Class B, and Class C shares of the
Funds. Under the Class A and Class C Plan, a Fund compensates AIM Distributors
at the annualized rate of 0.50% of the average daily net assets of the Fund's
Class A shares and an aggregated amount of 1.00% of the average daily net assets
of Class C shares of the Fund.
FS-8
<PAGE> 192
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
Pursuant to the Fund's Class B Plan, the Fund compensates AIM Distributors at an
annualized rate of 1.00% of the average daily net assets of the Fund's Class B
shares.
Subject to the receipt of a pending exemptive order from the Securities and
Exchange Commission, the Trust will pay each of its Trustees who is not an
employee, officer or director of the Manager, AIM Distributors or GT Services
$5,000 per year plus $300 for each meeting of the board or any committee thereof
attended by the Trustees. Until such order is received, the Manager and/or the
sub-adviser pay(s) to the Trustees such fees.
3. PURCHASES AND SALES
For the period ended June 30, 1998, purchases and sales, other than short-term
investments, of the Underlying Theme Funds by the Fund, are as follows:
<TABLE>
<CAPTION>
AIM GLOBAL PURCHASES SALES
- -------------------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Consumer Products and Services Fund............................................. $5,179,719 $1,089,057
Telecommunications Fund......................................................... 1,641,048 85,582
Financial Services Fund......................................................... 3,617,497 416,342
Resources Fund.................................................................. 2,525,006 107,153
Health Care Fund................................................................ 2,302,078 95,138
Infrastructure Fund............................................................. 2,847,442 190,249
</TABLE>
4. CAPITAL SHARES
At June 30, 1998, there were an unlimited number of shares of beneficial
interest authorized, at no par value. Transactions in capital shares of the Fund
were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 15, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 1998 OPERATIONS)
(UNAUDITED) TO DECEMBER 31, 1997
--------------------- ---------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Shares sold.......................................................... 845,570 $9,536,511 1,560,835 $17,768,084
Shares issued in connection with reinvestment of distributions....... -- -- 54,891 563,181
--------- ---------- --------- ----------
845,570 9,536,511 1,615,726 18,331,265
Shares repurchased................................................... (248,048) (2,841,185) (194,494) (2,190,806)
--------- ---------- --------- ----------
Net increase......................................................... 597,522 $6,695,326 1,421,232 $16,140,459
--------- ---------- --------- ----------
--------- ---------- --------- ----------
SEPTEMBER 15, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 1998 OPERATIONS)
(UNAUDITED) TO DECEMBER 31, 1997
--------------------- ---------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------- --------- ---------- --------- ----------
Shares sold.......................................................... 1,102,205 $12,382,297 1,832,668 $20,681,472
Shares issued in connection with reinvestment of distributions....... -- -- 67,039 687,825
--------- ---------- --------- ----------
1,102,205 12,382,297 1,899,707 21,369,297
Shares repurchased................................................... (325,914) (3,715,229) (96,841) (1,061,266)
--------- ---------- --------- ----------
Net increase......................................................... 776,291 $8,667,068 1,802,866 $20,308,031
--------- ---------- --------- ----------
--------- ---------- --------- ----------
NOT APPLICABLE
(THE FUND BEGAN
SIX MONTHS ENDED OFFERING CLASS C
JUNE 30, 1998 SHARES ON JANUARY 1,
(UNAUDITED) 1998)
--------------------- ---------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------- --------- ---------- --------- ----------
Shares sold.......................................................... 25,666 $ 288,227 -- $ --
Shares issued in connection with reinvestment of distributions....... -- -- -- --
--------- ---------- --------- ----------
25,666 288,227 -- --
Shares repurchased................................................... (3,042) (34,523) -- --
--------- ---------- --------- ----------
Net increase......................................................... 22,624 $ 253,704 -- $ --
--------- ---------- --------- ----------
--------- ---------- --------- ----------
SEPTEMBER 15, 1997
SIX MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 1998 OPERATIONS)
(UNAUDITED) TO DECEMBER 31, 1997
--------------------- ---------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------- --------- ---------- --------- ----------
Shares sold.......................................................... 23,229 $ 253,432 113,102 $1,276,664
Shares issued in connection with reinvestment of distributions....... -- -- 5,102 52,402
--------- ---------- --------- ----------
23,229 253,432 118,204 1,329,066
Shares repurchased................................................... (20,324) (228,912) (4,533) (48,416)
--------- ---------- --------- ----------
Net increase......................................................... 2,905 $ 24,520 113,671 $1,280,650
--------- ---------- --------- ----------
--------- ---------- --------- ----------
</TABLE>
FS-9
<PAGE> 193
GT GLOBAL NEW DIMENSION FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of GT Global New Dimension Fund and
Board of Trustees of GT Global Series Trust:
We have audited the accompanying statement of assets and liabilities of GT
Global New Dimension Fund (the "Fund"), including the portfolio of investments,
as of December 31, 1997, the related statement of operations, the statement of
changes in net assets, and the financial highlights for the period from
September 15, 1997 (commencement of operations) to December 31, 1997. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global New Dimension Fund as of December 31, 1997, the results of its
operations, the changes in its net assets, and the financial highlights for the
period from September 15, 1997 (commencement of operations) to December 31,
1997, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
FEBRUARY 17, 1998
FS-10
<PAGE> 194
GT GLOBAL NEW DIMENSION FUND
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADVISOR
CLASS VALUE % OF NET
GT GLOBAL THEME FUNDS SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
GT Global Consumer Products and Services Fund ............. 515,881 $ 11,204,937 31.5
GT Global Financial Services Fund ......................... 426,322 7,499,007 21.1
GT Global Infrastructure Fund ............................. 388,281 5,886,334 16.6
GT Global Natural Resources Fund .......................... 240,790 4,054,907 11.4
GT Global Health Care Fund ................................ 162,161 3,278,897 9.2
GT Global Telecommunications Fund ......................... 185,442 3,089,470 8.7
------------ -----
TOTAL THEME FUND INVESTMENTS (cost $37,807,948) ............. 35,013,552 98.5
------------ -----
<CAPTION>
REPURCHASE AGREEMENT
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Dated December 31, 1997, with State Street Bank & Trust
Co., due January 2, 1998, for an effective yield of 5.80%,
collateralized by $445,000 U.S. Treasury Notes, 5.75% due
12/31/98 (market value of collateral is $445,417,
including accrued interest). (cost $432,000) ............ 432,000 1.2
------------ -----
TOTAL INVESTMENTS (cost $38,239,948) * ..................... 35,445,552 99.7
Other Assets and Liabilities ................................ 123,462 0.3
------------ -----
NET ASSETS .................................................. $ 35,569,014 100.0
------------ -----
------------ -----
</TABLE>
- --------------
* For Federal income tax purposes, cost is $38,277,690 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ --
Unrealized depreciation: (2,832,138)
-------------
Net unrealized depreciation: $ (2,832,138)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-11
<PAGE> 195
GT GLOBAL NEW DIMENSION FUND
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments at value (cost $38,239,948) (Note 1).................................................. $35,445,552
U.S. currency..................................................................................... 113
Receivable for Fund shares sold................................................................... 929,466
Interest receivable............................................................................... 70
----------
Total assets.................................................................................... 36,375,201
----------
Liabilities:
Payable for investments purchased................................................................. 432,113
Payable for Fund shares repurchased............................................................... 352,532
Payable for service and distribution expenses (Note 2)............................................ 21,542
----------
Total liabilities............................................................................... 806,187
----------
Net assets.......................................................................................... $35,569,014
----------
----------
Class A:
Net asset value and redemption price per share ($15,144,662 DIVIDED BY 1,424,148 shares
outstanding)....................................................................................... $ 10.63
----------
----------
Maximum offering price per share (100/95.25 of $10.63) *............................................ $ 11.16
----------
----------
Class B:+
Net asset value and offering price per share ($19,183,648 DIVIDED BY 1,805,781 shares
outstanding)....................................................................................... $ 10.62
----------
----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,240,704 DIVIDED BY
116,587 shares outstanding)........................................................................ $ 10.64
----------
----------
Net assets consist of:
Paid in capital (Note 4).......................................................................... $37,829,140
Undistributed net investment income............................................................... 28,710
Accumulated net undistributed gain................................................................ 505,560
Net unrealized depreciation of investments........................................................ (2,794,396)
----------
Total -- representing net assets applicable to capital shares outstanding........................... $35,569,014
----------
----------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-12
<PAGE> 196
GT GLOBAL NEW DIMENSION FUND
STATEMENT OF OPERATIONS
September 15, 1997 (commencement of operations) to December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income............................................................................ $ 8,216
----------
Total investment income.................................................................. 8,216
----------
Expenses:
Service and distribution expenses: (Note 2)
Class A...................................................................... $ 11,800
Class B...................................................................... 27,856
----------
Total expenses............................................................................. 39,656
----------
Net investment loss.......................................................................... (31,440)
----------
Net realized and unrealized gain (loss) on investments: (Note 1)
Net realized loss on investments............................................... (37,742)
Capital gain distributions received............................................ 2,021,395
----------
Net realized gain during the period...................................................... 1,983,653
Net change in unrealized depreciation during the period.................................. (2,794,396)
----------
Net realized and unrealized loss on investments.............................................. (810,743)
----------
Net decrease in net assets resulting from operations......................................... $ (842,183)
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-13
<PAGE> 197
GT GLOBAL NEW DIMENSION FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
SEPTEMBER 15,
1997
(COMMENCEMENT
OF OPERATIONS)
TO
DECEMBER 31,
1997
--------------
Increase in net assets
Operations:
Net investment loss..................................................................... $ (31,440)
Net realized gain on investments........................................................ 1,983,653
Net change in unrealized depreciation of investments.................................... (2,794,396)
--------------
Net decrease in net assets resulting from operations.................................. (842,183)
--------------
Class A:
Distributions to shareholders: (Note 1)
In excess of net investment income...................................................... (583,714)
Class B:
Distributions to shareholders: (Note 1)
In excess of net investment income...................................................... (781,183)
Advisor Class:
Distributions to shareholders: (Note 1)
In excess of net investment income...................................................... (53,046)
--------------
Total distributions................................................................... (1,417,943)
--------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested........................................ 41,029,628
Decrease from capital shares repurchased................................................ (3,300,488)
--------------
Net increase from capital share transactions.......................................... 37,729,140
--------------
Total increase in net assets.............................................................. 35,469,014
Net assets:
Beginning of period..................................................................... 100,000
--------------
End of period *......................................................................... $ 35,569,014
--------------
--------------
* Includes undistributed net investment income of........................................ $ 28,710
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-14
<PAGE> 198
GT GLOBAL NEW DIMENSION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.
<TABLE>
<CAPTION>
SEPTEMBER 15, 1997
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1997
------------------------------------------------
CLASS A (D) CLASS B (D) ADVISOR CLASS(D)
------------- ------------- ----------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.43 $ 11.43 $11.43
------------- ------------- --------
Income from investment operations:
Net investment income (loss).......... (0.01) (0.02) 0.01
Net realized and unrealized loss on
investments.......................... (0.31) (0.32) (0.31)
------------- ------------- --------
Net decrease from investment
operations......................... (0.32) (0.34) (0.30)
------------- ------------- --------
Distributions to shareholders:
In excess of net investment income.... (0.48) (0.47) (0.49)
------------- ------------- --------
Total distributions................. (0.48) (0.47) (0.49)
------------- ------------- --------
Net asset value, end of period.......... $ 10.63 $ 10.62 $10.64
------------- ------------- --------
------------- ------------- --------
Total investment return (c)............. (2.68)% (b) (2.83)% (b) (2.51)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $15,145 $19,184 $1,241
Ratio of net investment income (loss) to
average net assets..................... (0.35)% (a) (0.85)% (a) 0.15% (a)
Ratio of expenses to average net assets
(Notes 1 & 5).......................... 0.50% (a) 1.00% (a) 0.00% (a)
Portfolio turnover rate+................ 1% (b) 1% (b) 1% (b)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-15
<PAGE> 199
GT GLOBAL NEW DIMENSION FUND
NOTES TO
FINANCIAL STATEMENTS
December 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global New Dimension Fund ("Fund") is a diversified series of GT Global
Series Trust (the "Trust"). The Trust is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended
("1940 Act"), as an open-end management investment company. The Fund invests
substantially all of its assets in Advisor Class shares of the GT Global theme
mutual funds: GT Global Consumer Products and Services Fund; GT Global Financial
Services Fund; GT Global Health Care Fund; GT Global Infrastructure Fund; GT
Global Natural Resources Fund; and GT Global Telecommunications Fund
(collectively, the "Underlying Theme Funds").
The Fund offers Class A, Class B and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses of the Fund are
allocated on a pro rata basis to each Class based on the relative net assets of
each Class to the total net assets of the Fund. Each Class of shares differs in
its respective service and distribution expenses. Beginning January 1, 1998, the
Fund will also offer Class C shares.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Investments in the Underlying Funds are valued at the closing net asset value
per Advisor Class share of each Underlying Fund on the day of valuation.
Short-term investments with a maturity of 60 days or less are valued at
amortized cost.
(B) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(C) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains.
(D) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(E) LINE OF CREDIT
The Fund, along with certain other funds ("GT Funds") advised and/or
administered by the Manager, has a line of credit with BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the Fund and
the GT Funds to borrow an aggregate maximum amount of $250,000,000. The Fund is
limited to borrowing up to 33 1/3% of the value of the Fund's total assets. For
the period ended December 31, 1997, the Fund had no outstanding loan balance.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Fund's investment manager and
administrator. The Manager is also the pricing and accounting agent for the
Fund. The Manager will initially assume all costs of the Fund's operation,
except for service and distribution fees as described below and non-recurring
and extraordinary expenses. The Fund, as a shareholder in the Underlying Theme
Funds, indirectly will bear its proportionate share of any investment management
fees and other expenses paid by the Underlying Theme Funds. Subject to receipt
of a pending exemptive order from the Securities and Exchange Commission, the
Trust, on behalf of the Fund, will enter into a Special Servicing Agreement
("Agreement") with the Underlying Theme Funds, the Manager and GT Global
Investor Services, Inc., the transfer agent. If the Board of Trustees of the
Underlying Theme Funds makes certain findings, each Underlying Theme Fund will
pay certain nondistribution-related expenses of the Fund to the extent such
expenses are less than the estimated savings to the Underlying Theme Funds from
the operation of the Fund. The Manager and GT Global also voluntarily have
undertaken to limit the Underlying Theme Fund's expenses (exclusive of brokerage
commissions, taxes, interest, and extraordinary expenses) to the maximum annual
rate of 1.50% of the average daily net assets of the Underlying Theme Fund's
Advisor Class shares.
FS-16
<PAGE> 200
GT GLOBAL NEW DIMENSION FUND
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Fund's
distributor. The Fund offers Class A, Class B and Advisor Class shares for
purchase and will offer Class C shares for purchase beginning January 1, 1998.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the period from September 15, 1997 (commencement of
operations) to December 31, 1997, GT Global retained $6,174 of such sales
charges. Purchases of Class A shares exceeding $500,000 may be subject to a
contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Fund's current prospectus. GT Global collected no CDSCs for the period from
September 15, 1997 (commencement of operations) to December 31, 1997. GT Global
also makes ongoing shareholder servicing and trail commission payments to
dealers whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the period from September 15, 1997 (commencement of operations)
to December 31, 1997, GT Global collected CDSCs in the amount of $1,902. In
addition, GT Global makes ongoing shareholder servicing and trail commission
payments to dealers whose clients hold Class B shares.
Class C shares will not be subject to initial sales charges. However, certain
redemptions of Class C shares made within one year of purchase will be subject
to CDSCs. In addition, GT Global will make ongoing shareholder servicing and
trail commission payments to dealers whose clients hold Class C shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Trust's Board of Trustees has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect. Class C shares will also be subject to a separate
distribution plan adopted by the Trust's Board of Trustees pursuant to Rule
12b-1 under the 1940 Act.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services receives
an annual maintenance fee of $17.50 per account, a new account fee of $4.00 per
account, a per transaction fee of $1.75 for all transactions other than
exchanges and a per exchange fee of $2.25. GT Services is also reimbursed for
its out-of-pocket expenses for such items as postage, forms, telephone charges,
stationery and office supplies.
The Trust pays each of its Trustees who is not an employee, officer or director
of the Manager, GT Global or GT Services $5,000 per year plus $300 for each
meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES
For the period from September 15, 1997 (commencement of operations) to December
31, 1997, purchases and sales, other than short-term investments, of the
Underlying Theme Funds by the Fund, are as follows:
<TABLE>
<CAPTION>
GT GLOBAL PURCHASES SALES
- -------------------------------------------------------------------------------- --------------- ----------
<S> <C> <C>
Consumer Products and Services Fund............................................. $ 11,777,579 $ 80,882
Telecommunications Fund......................................................... 3,462,408 23,798
Financial Services Fund......................................................... 7,690,319 53,175
Natural Resources Fund.......................................................... 4,847,276 32,530
Health Care Fund................................................................ 4,192,022 26,247
Infrastructure Fund............................................................. 6,136,745 44,025
</TABLE>
FS-17
<PAGE> 201
GT GLOBAL NEW DIMENSION FUND
4. CAPITAL SHARES
At December 31, 1997, there were an unlimited number of shares of beneficial
interest authorized, at no par value. Transactions in capital shares of the Fund
were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SEPTEMBER 15, 1997
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1997
-----------------------------------
CLASS A SHARES AMOUNT
- ---------------------------------------- --------------- ------------------
<S> <C> <C>
Shares sold............................. 1,560,835 $ 17,768,084
Shares issued in connection with
reinvestment of distributions......... 54,891 563,181
--------------- ------------------
1,615,726 18,331,265
Shares repurchased...................... (194,494) (2,190,806)
--------------- ------------------
Net increase............................ 1,421,232 $ 16,140,459
--------------- ------------------
--------------- ------------------
<CAPTION>
SEPTEMBER 15, 1997
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1997
-----------------------------------
CLASS B SHARES AMOUNT
- ---------------------------------------- --------------- ------------------
<S> <C> <C>
Shares sold............................. 1,832,668 $ 20,681,472
Shares issued in connection with
reinvestment of distributions......... 67,039 687,825
--------------- ------------------
1,899,707 21,369,297
Shares repurchased...................... (96,841) (1,061,266)
--------------- ------------------
Net increase............................ 1,802,866 $ 20,308,031
--------------- ------------------
--------------- ------------------
<CAPTION>
SEPTEMBER 15, 1997
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1997
-----------------------------------
ADVISOR CLASS SHARES AMOUNT
- ---------------------------------------- --------------- ------------------
<S> <C> <C>
Shares sold............................. 113,102 $ 1,276,664
Shares issued in connection with
reinvestment of distributions......... 5,102 52,402
--------------- ------------------
118,204 1,329,066
Shares repurchased...................... (4,533) (48,416)
--------------- ------------------
Net increase............................ 113,671 $ 1,280,650
--------------- ------------------
--------------- ------------------
</TABLE>
5. SUBSEQUENT EVENT
On January 30, 1998, Liechtenstein Global Trust ("LGT") and AMVESCAP PLC
("AMVESCAP") entered into an agreement by which AMVESCAP will acquire LGT's
Asset Management Division, including Chancellor LGT Asset Management, Inc.
AMVESCAP is the holding company of the AIM and INVESCO asset management
businesses.
FS-18
<PAGE> 202
PART C
OTHER INFORMATION
Item 24. (a) Financial Statements:
Class A, Class B, Class C and Advisor Class shares of AIM New
Dimension Fund
In Part A: Financial Highlights
In Part B: (1) Reports of Independent Accountants
(2) Portfolios of Investments as of December 31,
1997 (audited), and June 30, 1998 (unaudited)
(3) Statements of Assets and Liabilities as of
December 31, 1997 (audited), and June 30,
1998 (unaudited)
(4) Statements of Operations for the year ended
December 31, 1997 (audited), and June 30,
1998 (unaudited)
(5) Statements of Changes in Net Assets for the
period beginning September 15, 1997
(Commencement of Operations) and ending
December 31, 1997.
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C> <C>
(1) - Agreement and Declaration of Trust of the Registrant dated
May 7, 1998 was filed as an Exhibit to Post-Effective
Amendment No. 4 to the Registration Statement on Form
N-1A, filed on June 1, 1998, and is hereby incorporated by
reference.
(2) - By-Laws of the Registrant dated May 7, 1998 was filed as
an Exhibit to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed on June 1,
1998, and is hereby incorporated by reference.
(3) - Voting Trust Agreements - None.
(4) - Provisions of instruments defining the rights of holders
of Registrant's securities contained in the Agreement and
Declaration of Trust Articles II, VI, VII, VIII and IX and
By-laws Articles IV, V, VI, VII and VIII were filed as
Exhibits to Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A, filed July 7, 1998,
and are hereby incorporated by reference.
(5) (a) - Investment Management and Administration Contract, dated
May 29, 1998, between Registrant and A I M Advisors, Inc.
is filed herewith electronically.
(b) - Sub-Advisory and Sub-Administration Contract, dated May
29, 1998, between A I M Advisors, Inc. and INVESCO (NY),
Inc. with respect to Registrant is filed herewith
electronically.
(6) (a) - Distribution Agreement, dated May 29, 1998, between
Registrant and A I M Distributors, Inc. with respect to
Class A and Class C shares is filed herewith
electronically.
(b) - Distribution Agreement, dated May 29, 1998, between
Registrant and A I M Distributors, Inc. with respect to
Class B shares is filed herewith electronically.
(c) - Distribution Agreement, dated May 29, 1998, between
Registrant and A I M Distributors, Inc. with respect to
Advisor Class shares is filed herewith electronically.
(7) - Agreements Concerning Officers and Directors/Trustees
Benefits - None.
</TABLE>
C-1
<PAGE> 203
<TABLE>
<S> <C> <C> <C>
(8) - Custodian Agreement, dated June 1, 1998, between
Registrant and State Street Bank and Trust Company is
filed herewith electronically.
(9) (a) - (1) Form of Transfer Agency and Service Agreement between
Registrant and A I M Fund Services, Inc. is filed herewith
electronically.
- (2) Remote Access and Related Services Agreement, dated as
of December 23, 1994, between the Registrant and First
Data Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.) is filed herewith
electronically.
- (3) Amendment No. 1, dated October 4, 1995, to the Remote
Access and Related Services Agreement, dated as of
December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly, The Shareholder
Services Group, Inc.) is filed herewith electronically.
- (4) Addendum No. 2, dated October 12, 1995, to the Remote
Access and Related Services Agreement, dated as of
December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly, The Shareholder
Services Group, Inc.) is filed herewith electronically.
- (5) Amendment No. 3, dated February 1, 1997, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. (formerly, The Shareholder Services Group,
Inc.) is filed herewith electronically.
- (6) Exhibit 1, effective as of August 4, 1997, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly, The Shareholder
Services Group, Inc.) is filed herewith electronically.
- (7) Preferred Registration Technology Escrow Agreement,
dated September 10, 1997, between Registrant and First
Data Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.) is filed herewith
electronically.
(b) - Form of Fund Accounting and Pricing Agent Agreement,
between Registrant and INVESCO (NY), Inc. is filed herewith
electronically.
(c) - (1) Selected Dealer Agreement was filed as an Exhibit to
Post-Effective Amendment No. 4 to the Registration
Statement on Form N-1A, filed June 1, 1998, and is hereby
incorporated by reference.
- (2) Bank Sales Contract was filed as an Exhibit to Post-
Effective Amendment No. 4 to the Registration Statement
on Form N-1A, filed June 1, 1998, and is hereby
incorporated by reference.
- (3) Shareholder Service Agreement was filed as an Exhibit
to Post-Effective Amendment No. 4 to the Registration
Statement on Form N-1A, filed June 1, 1998, and is hereby
incorporated by reference.
- (4) Bank Shareholder Service Agreement was filed as an
Exhibit to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed June 1, 1998,
and is hereby incorporated by reference.
- (5) Service Agreement for Bank Trust Department and for
Broker is filed herewith electronically.
(10) (a) - Opinion and Consent of Kirkpatrick & Lockhart LLP was filed
as an Exhibit to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed on June 1, 1998,
and is hereby incorporated by reference.
(b) - Opinion and Consent of Delaware Counsel was filed as an
Exhibit to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed on June 1,
1998, and is hereby incorporated by reference.
</TABLE>
C-2
<PAGE> 204
<TABLE>
<S> <C> <C>
(11) (a) - Consent of PricewaterhouseCoopers LLP is filed herewith
electronically.
(b) - Consent of Kirkpatrick & Lockhart is filed herewith
electronically.
(12) - Financial Statements - None.
(13) - Letter of Investment Intent was filed as an Exhibit to
Pre-Effective Amendment No. 1 to Registration Statement on
Form N-1A, filed August 22, 1997, and is hereby
incorporated by reference.
(14) (a) - IRA Application was filed as an Exhibit to Post-Effective
Amendment No. 4 to the Registration Statement on Form
N-1A, filed on June 1, 1998, and is hereby incorporated by
reference.
(b) - SEP and SARSEP IRA Adoption Agreement was filed as an
Exhibit to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed on June 1,
1998, and is hereby incorporated by reference.
(c) - Profit Sharing/Money Purchase Pension Plan was filed as an
Exhibit to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed on June 1,
1998, and is hereby incorporated by reference.
(d) - 403(b) Plan was filed as an Exhibit to Post-Effective
Amendment No. 4 to the Registration Statement on Form
N-1A, filed on June 1, 1998, and is hereby incorporated by
reference.
(e) - SIMPLE IRA Application was filed as an Exhibit to Post-
Effective Amendment No. 4 to the Registration Statement on
Form N-1A, filed on June 1, 1998, and is hereby
incorporated by reference.
(f) - Roth IRA Application was filed as an Exhibit to Post-
Effective Amendment No. 4 to the Registration Statement on
Form N-1A, filed on June 1, 1998, and is hereby
incorporated by reference.
(15) (a) - Form of Distribution Plan adopted pursuant to Rule 12b-1
with respect to Class A shares was filed as an Exhibit to
Post-Effective Amendment No. 4 to the Registration
Statement on Form N-1A, filed on June 1, 1998, and is
hereby incorporated by reference.
(b) - Form of Distribution Plan adopted pursuant to Rule 12b-1
with respect to Class B shares was filed as an Exhibit to
Post-Effective Amendment No. 4 to the Registration
Statement on Form N-1A, filed on June 1, 1998, and is
hereby incorporated by reference.
(16) - Computation of Performance Quotations - None.
(18) - Rule 18f-3 Multiple Class Plan is filed herewith
electronically.
(27) - Financial Data Schedule was filed as an Exhibit to Post-
Effective Amendment No. 2 to the Registration Statement on
Form N-1A, filed on March 4, 1998, and is hereby
incorporated by reference.
Other Exhibits:
(a) - Power of Attorney for Helge K. Lee and Michael A. Silver
for AIM Series Trust was filed as an Exhibit to Post-
Effective Amendment No. 4 to the Registration Statement on
Form N-1A, filed on June 1, 1998, and is hereby
incorporated by reference.
</TABLE>
C-3
<PAGE> 205
Item 25. Persons Controlled by or Under Common Control with Registrant
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each such
person indicate (1) if a company, the state or other sovereign power under the
laws of which it is organized, and (2) the percentage of voting securities
owned or other basis of control by the person, if any, immediately controlling
it.
None.
Item 26. Number of Holders of Securities
State in substantially the tabular form indicated, as of a specified
date within 90 days prior to the date of filing, the number of record holders
of each class of securities of the Registrant.
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of August 13, 1998
-------------- ------------------------
<S> <C>
Shares of beneficial interest in:
AIM New Dimension Fund - Class A.................2,161
AIM New Dimension Fund - Class B.................2,586
AIM New Dimension Fund - Class C....................80
AIM New Dimension Fund - Advisor Class.............148
</TABLE>
Item 27. Indemnification
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any director,
officer, affiliated person or underwriter for their own protection.
The Registrant's Agreement and Declaration of Trust (the "Agreement"),
dated May 7, 1998, provides, among other things (1) that a Trustee shall
not be liable for any act or omission, or obligation of the Registrant
or any Trustee (except for liability to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the Trustee's duties); (2) that the
Trustees and Officers shall be indemnified by the Registrant to the
fullest extent permitted by the Delaware Business Trust Act and other
applicable law; and (3) that the shareholders and former shareholders of
the Registrant shall be held harmless by the Registrant (or applicable
portfolio or class) from personal liability arising from their status as
such, and shall be indemnified by the Registrant (or applicable
portfolio or class) against all loss and expense arising from such
personal liability in accordance with the Registrant's By-Laws and
applicable law.
Item 28. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment advisor of the Registrant, and each
director, officer or partner of any such investment advisor, is or has been, at
any time during the past two fiscal years, engaged for his own account or in
the capacity of director, officer, employee, partner, or trustee.
See the material under the heading "Management" included in Part A
(Prospectus) of this Amendment and the material appearing under the
headings "Trustees and Executive Officers" and "Management" included in
Part B (Statement of Additional Information) of this Amendment.
Information as to the
C-4
<PAGE> 206
Directors and Officers of A I M Advisors, Inc. and INVESCO (NY), Inc. is
included in Schedule A and Schedule D of Part I of each entity's Form
ADV (File No. 801-12313 and File No. 801-10254, respectively), filed
with the Securities and Exchange Commission, which are incorporated
herein by reference thereto.
Item 29. Principal Underwriters
(a) A I M Distributors, Inc., the Registrant's principal underwriter,
also acts as a principal underwriter to the following investment
companies:
AIM Advisor Funds, Inc.
AIM Equity Funds, Inc. (Retail Classes)
AIM Funds Group
AIM Growth Series
AIM International Funds, Inc.
AIM Investment Funds, Inc.
AIM Investment Portfolios, Inc.
AIM Investment Securities Funds
AIM Summit Fund, Inc.
AIM Tax-Exempt Funds, Inc.
AIM Variable Insurance Funds, Inc.
GT Global Floating Rate Fund, Inc. d/b/a AIM Floating Rate Fund
(b)
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ---------------- -------------------------- ---------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors None
Michael J. Cemo President & Director None
Gary T. Crum Director Vice President
Robert H. Graham Senior Vice President & Director Vice President
William G. Littlepage Senior Vice President & Director None
John Caldwell Senior Vice President None
Marilyn M. Miller Senior Vice President None
James L. Salners Senior Vice President None
Gordon J. Sprague Senior Vice President None
Michael C. Vessels Senior Vice President None
B.J. Thompson First Vice President None
James R. Anderson Vice President None
John J. Arthur Vice President & Treasurer Vice President
Mary K. Coleman Vice President None
</TABLE>
- ------------------------------
*Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-5
<PAGE> 207
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ---------------- -------------------------- ---------------
<S> <C> <C>
Melville B. Cox Vice President & Chief Vice President
Compliance Officer
Charles R. Dewey Vice President None
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
William H. Kleh Vice President None
Ofelia M. Mayo Vice President, General Counsel None
& Assistant Secretary
Terri L. Ransdell Vice President None
Carol F. Relihan Vice President Vice President
Kamala C. Sachidanandan Vice President None
Frank V. Serebrin Vice President None
Christopher T. Simutis Vice President None
Robert D. Van Sant, Jr. Vice President None
Gary K. Wendler Vice President None
David E. Hessel Assistant Vice President, None
Assistant Treasurer
& Controller
Kathleen J. Pflueger Secretary None
Luke P. Beausoleil Assistant Vice President None
Tisha B. Christopher Assistant Vice President None
Glenda A. Dayton Assistant Vice President None
Kathleen M. Douglas Assistant Vice President None
Terri N. Fiedler Assistant Vice President None
Mary E. Gentempo Assistant Vice President None
Jeffrey L. Horne Assistant Vice President None
Melissa E. Hudson Assistant Vice President None
Jodie L. Johnson Assistant Vice President None
</TABLE>
- ------------------------------
*Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-6
<PAGE> 208
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ---------------- -------------------------- ---------------
<S> <C> <C>
Kathryn A. Jordan Assistant Vice President None
Wayne W. LaPlante Assistant Vice President None
Kim T. Lankford Assistant Vice President None
Ivy B. McLemore Assistant Vice President None
David B. O'Neil Assistant Vice President None
Patricia M. Shyman Assistant Vice President None
Nicholas D. White Assistant Vice President None
Norman W. Woodson Assistant Vice President None
Nancy L. Martin Assistant General Counsel None
& Assistant Secretary
Samuel D. Sirko Assistant General Counsel Assistant Secretary
& Assistant Secretary
Stephen I. Winer Assistant Secretary None
Dana S. Sutton None Vice President and
Assistant Treasurer
Mary Benson None Assistant Treasurer
</TABLE>
- ------------------------------
*Greenway Plaza, Suite 100, Houston, Texas 77046-1173
(c) - Not Applicable
Item 30. Location of Accounts and Records
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to
31a-3) promulgated thereunder, furnish the name and address of each person
maintaining physical possession of each such account, book or other document.
Accounts, books and other records required by Rules 31a-1 and 31a-2
under the Investment Company Act of 1940, as amended, are maintained and
held in the offices of the Registrant and its sub-advisor, INVESCO (NY),
Inc., 50 California Street, 27th Floor, San Francisco, CA 94111, and its
custodian, State Street Bank and Trust Company, 225 Franklin Street,
Boston, MA 02110.
Records covering shareholder accounts and portfolio transactions are
also maintained and kept by the Registrant's Transfer Agent, A I M Fund
Services, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046, and
by the Registrant's custodian, State Street Bank and Trust Company, 225
Franklin Street, Boston, MA 02110.
C-7
<PAGE> 209
Item 31. Management Services
Furnish a summary of the substantive provisions of any management-
related service contract not discussed in Part A or Part B of this Form
(because the contract was not believed to be of interest to a purchaser of
securities of the Registrant) under which services are provided to the
Registrant, indicating the parties to the contract, the total dollars paid and
by whom, for the last three fiscal years.
None.
Item 32. Undertakings
None
C-8
<PAGE> 210
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant hereby
certifies that it meets all of the requirements for effectiveness of this
Amendment pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment to this Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of San
Francisco, and State of California, on the 26th day of August, 1998.
AIM SERIES TRUST
By: Robert H. Graham*
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in the
capacities indicated on the 26th day of August, 1998.
Robert H. Graham* President, Trustee
and Chairman of the Board
(Principal Executive Officer)
/s/ KENNETH W. CHANCEY Vice President and
- ------------------------------- Principal Accounting Officer
Kenneth W. Chancey
C. Derek Anderson* Trustee
Arthur C. Patterson* Trustee
Frank S. Bayley* Trustee
Ruth H. Quigley* Trustee
*By: /s/ MICHAEL A. SILVER
-------------------------------------
Michael A. Silver
Attorney-in-Fact, pursuant to
Power of Attorney filed herewith
<PAGE> 211
INDEX TO EXHIBITS
AIM SERIES TRUST
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
5(a) Investment Management and Administration Contract, dated May 29,
1998, between Registrant and A I M Advisors, Inc.
5(b) Sub-Advisory and Sub-Administration Contract, dated May 29, 1998,
between A I M Advisors, Inc. and INVESCO (NY), Inc. with respect
to Registrant
6(a) Distribution Agreement, dated May 29, 1998, between Registrant
and A I M Distributors, Inc. with respect to Class A and Class C
shares
6(b) Distribution Agreement, dated May 29, 1998, between Registrant
and A I M Distributors, Inc. with respect to Class B shares
6(c) Distribution Agreement, dated May 29, 1998, between Registrant
and A I M Distributors, Inc. with respect to Advisor Class shares
8 Custodian Agreement, dated June 1, 1998, between Registrant and
State Street Bank and Trust Company
9(a)(1) Form of Transfer Agency and Service Agreement between Registrant
and A I M Fund Services, Inc.
9(a)(2) Remote Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services Group,
Inc.
9(a)(3) Amendment No. 1, dated October 4, 1995, to the Remote Access and
Related Services Agreement, dated December 23, 1994, between
Registrant and First Data Investor Services Group, Inc.
9(a)(4) Addendum No. 2, dated October 12,1995, to the Remote Access and
Related Services Agreement, dated December 23, 1994, between
Registrant and First Data Investor Services Group, Inc.
9(a)(5) Amendment No. 3, dated February 1, 1997, to the Remote Access and
Related Services Agreement, dated December 23, 1994, between
Registrant and First Data Investor Services Group, Inc.
9(a)(6) Exhibit 1, effective as of August 4, 1997, to the Remote Access
and Related Services Agreement, dated December 23, 1994, between
the Registrant and First Data Investor Services Group, Inc.
9(a)(7) Preferred Registration Technology Escrow Agreement, dated
September 10, 1997, between the Registrant and First Data
Investor Services Group, Inc.
9(b) Form of Fund Accounting and Pricing Agent Agreement between
Registrant and INVESCO (NY), INC.
9(c)(5) Service Agreement for Bank Trust Department and for Broker
11(a) Consent of PricewaterhouseCoopers LLP
11(b) Opinion and Consent of Kirkpatrick & Lockhart LLP
18 Multiple Class Plan (Rule 18f-3)
</TABLE>
<PAGE> 1
EXHIBIT 5(a)
AIM SERIES TRUST
INVESTMENT MANAGEMENT AND ADMINISTRATION CONTRACT
BETWEEN
AIM SERIES TRUST
AND
A I M ADVISORS, INC.
Contract made as of May 29, 1998, between AIM Series Trust, a Delaware
business trust ("Company), and A I M Advisors, Inc., a Delaware corporation (the
"Adviser").
WHEREAS the Company is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company, and
intends to offer for public sale shares of AIM New Dimension Fund, a series of
the Company's shares of beneficial interest; and
WHEREAS the Company hereafter may establish additional series of its
shares of beneficial interest (any such additional series, together with the
series named in the paragraph immediately preceding, are collectively referred
to herein as the "Funds," and singly may be referred to as a "Fund"); and
WHEREAS the Company desires to retain Adviser as investment manager and
administrator to furnish certain investment advisory, portfolio management and
administration services to the Company and the Funds, and Adviser is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints Adviser as investment manager and
administrator of each Fund for the period and on the terms set forth in this
Contract. Adviser accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided.
2. Duties as Investment Manager.
(a) The Adviser will be responsible for the daily allocation and
periodic rebalancing of the Fund's assets among the investment companies in
which the Fund invests ("Underlying Funds"). Such allocation and rebalancing
shall be made in accordance with the Company's Registration Statement. The
Adviser will be responsible for placing all trades on behalf of the Fund. The
Adviser also will determine from time to time what other securities, if any,
will be purchased, retained or sold by the Fund and what cash, if any, will be
retained by the Fund.
(b) Adviser will oversee the maintenance of all books and records with
respect to the securities transactions of the Funds, and will furnish the Board
with such periodic and
<PAGE> 2
special reports as the Board reasonably may request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, Adviser hereby agrees that all
records which it maintains for the Company are the property of the Company,
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any records which it maintains for the Company and which are required to be
maintained by Rule 31a-1 under the 1940 Act, and further agrees to surrender
promptly to the Company any records which it maintains for the Company upon
request by the Company.
3. Duties as Administrator. Adviser will administer the affairs of each Fund
subject to the supervision of the Board and the following understandings:
(a) Adviser will supervise all aspects of the operations of each Fund,
including the oversight of transfer agency and custodial services, except as
hereinafter set forth; provided, however, that nothing herein contained shall be
deemed to relieve or deprive the Board of its responsibility for control of the
conduct of the affairs of the Funds.
(b) At Adviser's expense, Adviser will provide the Company and the
Funds with such corporate, administrative and clerical personnel (including
officers of the Company) and services as are reasonably deemed necessary or
advisable by the Board.
(c) Adviser will arrange, but not pay, for the periodic preparation,
updating, filing and dissemination (as applicable) of each Fund's prospectus,
statement of additional information, proxy material, tax returns and required
reports with or to the Fund's shareholders, the Securities and Exchange
Commission and other appropriate federal or state regulatory authorities.
(d) Adviser will provide the Company and the Funds with, or obtain for
them, adequate office space and all necessary office equipment and services,
including telephone service, heat, utilities, stationery supplies and similar
items.
4. Further Duties. In all matters relating to the performance of this Contract,
Adviser will act in conformity with the Agreement and Declaration of Trust,
By-Laws and Registration Statement of the Company and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules thereunder, and all other applicable federal and state laws and
regulations.
5. Delegation of Adviser's Duties as Investment Manager and Administrator. With
respect to one or more of the Funds, Adviser may enter into one or more
contracts ("Sub-Advisory or Sub-Administration Contract") with a sub-adviser or
sub-administrator in which Adviser delegates to such sub-adviser or
sub-administrator the performance of any or all of the services specified in
Paragraphs 2 and 3 of this Contract, provided that: (i) each Sub-Advisory and
Sub-Administration Contract imposes on the sub-adviser or sub-administrator
bound thereby all the duties and conditions to which Adviser is subject with
respect to the services under Paragraphs 2, 3 and 4 of this Contract; (ii) each
Sub-Advisory and Sub-Administration Contract meets all requirements of the 1940
Act and
<PAGE> 3
rules thereunder, and (iii) Adviser shall not enter into a Sub-Advisory or
Sub-Administration Contract unless it is approved by the Board prior to
implementation.
6. Services Not Exclusive. The services furnished by Adviser hereunder are not
to be deemed exclusive and Adviser shall be free to furnish similar services to
others so long as its services under this Contract are not impaired thereby.
Nothing in this Contract shall limit or restrict the right of any director,
officer or employee of Adviser, who may also be a Trustee, officer or employee
of the Company, to engage in any other business or to devote his or her time and
attention in part to the management or other aspects of any other business,
whether of a similar nature or a dissimilar nature.
7. Expenses.
(a) During the term of this Contract, the Adviser shall bear all expenses
of the Fund (other than expenses reimbursed pursuant to the Fund's Rule 12b-1
plans of distribution and non-recurring and extraordinary expenses of the Fund)
until such time as the Fund enters into a special servicing or similar agreement
among the Company, the Adviser, AIM Investment Funds, Inc. and GT Global
Investor Services, Inc. ("Special Servicing Agreement"). Once the Company enters
into the Special Servicing Agreement, all expenses of the Fund (other than
expenses reimbursed pursuant to the Fund's Rule 12b-1 plans of distribution and
non-recurring and extraordinary expenses of the Fund) shall be paid for pursuant
to that agreement. Without limiting the generality of the foregoing, such
expenses include the following: (i) the cost (including brokerage commissions,
if any) of securities purchased or sold by the Fund and any losses incurred in
connection therewith; (ii) expenses of organizing the Fund; (iii) filing fees
and expenses relating to the registration and qualification of the Fund's shares
and the Company under federal and/or state securities law and maintaining such
registrations and qualifications; (iv) fees and salaries payable to the
Company's Trustees who are not parties to this Agreement or interested persons
of any such party ("Independent Trustees"); (v) all expenses incurred in
connection with the Independent Trustees' services, including travel expenses;
(vi) costs of any liability, uncollectible items of deposit and other insurance
and fidelity bonds; (vii) legal, accounting and auditing expenses, including
legal fees of special counsel for the Independent Trustees; (viii) charges of
custodians, transfer agents, pricing agents and other agents; (ix) costs of
preparing share certificates; (x) expenses of setting in type, printing and
mailing prospectuses and supplements thereto, statements of additional
information, reports and proxy materials for existing shareholders; (xi) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations; (xii) costs of mailing and tabulating
proxies and costs of meetings of shareholders, the Board and any committees
thereof; (xiii) the cost of investment company literature and other publications
provided by the Company to its Trustees and officers; and (xiv) costs of
mailing, stationery and communications equipment.
(b) During the term of this Contract, the Fund shall bear any non-recurring
and extraordinary expenses incurred in its operations. Such non-recurring and
extraordinary expenses include: (i) the fees and costs of actions, suits or
proceedings, and any penalties,
<PAGE> 4
damages or payments in settlement in connection therewith, for which the Company
and/or the Fund may be liable directly, or which they may incur as a result of
their legal obligation to provide indemnification to their officers, trustees
and agents; (ii) the fees and costs of any governmental investigation and any
fines or penalties in connection therewith; and (iii) any federal, state or
local tax, or related interest, penalties or additions to tax for which the
Company or the Fund may be liable.
(c) The payment or assumption by the Adviser of any expense of the Fund
prior to the effective date of the Special Servicing Agreement shall not
obligate the Adviser to pay or assume the same or any similar expense of the
Fund after the effective date of the Special Servicing Agreement.
8. Compensation. The Adviser will not be paid any special compensation for the
services provided by it hereunder. However, the Adviser may receive fees for
performing investment management and other services on behalf of the Underlying
Funds and may receive further fees from the Underlying Funds pursuant to the
Special Servicing Agreement.
9. Limitation of Liability of Adviser and Indemnification. Adviser shall not be
liable and each Fund shall indemnify Adviser and its directors, officers and
employees, for any costs or liabilities arising from any error of judgment or
mistake of law or any loss suffered by the Fund or the Company in connection
with the matters to which this Contract relates except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Adviser in the
performance by Adviser of its duties or from reckless disregard by Adviser of
its obligations and duties under this Contract. Any person, even though also an
officer, partner, employee, or agent of Adviser, who may be or become an
officer, Trustee, employee or agent of the Company shall be deemed, when
rendering services to a Fund or the Company or acting with respect to any
business of a Fund or the Company, to be rendering such service to or acting
solely for the Fund or the Company and not as an officer, partner, employee, or
agent or one under the control or direction of Adviser even though paid by it.
10. Duration and Termination.
(a) This Contract shall become effective upon the date hereabove written,
provided that this Contract shall not take effect with respect to any Fund
unless it has first been approved (i) by a vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by vote of a majority of that Fund's outstanding voting
securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, with respect to each Fund this Contract shall continue automatically
for successive periods not to exceed twelve months each, provided that such
continuance is specifically approved at least annually (i) by a vote of a
majority of the Independent Trustees, cast in person at a meeting
<PAGE> 5
called for the purpose of voting on such approval, and (ii) by the Board or by
vote of a majority of the outstanding voting securities of that Fund.
(c) Notwithstanding the foregoing, with respect to any Fund this Contract
may be terminated at any time, without the payment of any penalty, by vote of
the Board or by a vote of a majority of the outstanding voting securities of the
Fund on sixty days' written notice to Adviser or by Adviser at any time, without
the payment of any penalty, on sixty days' written notice to the Company.
Termination of this Contract with respect to one Fund shall not affect the
continued effectiveness of this Contract with respect to any other Fund. This
Contract will automatically terminate in the event of its assignment.
11. Amendment of this Contract. No provision of this Contract may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, and no amendment of this Contract shall be effective
until approved by vote of a majority of the Fund's outstanding voting
securities, when required by the 1940 Act.
12. Governing Law. This Contract shall be construed in accordance with the laws
of the State of Delaware (without regard to Delaware conflict or choice of law
provisions) and the 1940 Act. To the extent that the applicable laws of the
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
13. License Agreement. The Company shall have the non-exclusive right to use the
name "AIM" to designate any current or future series of shares only so long as
A I M Advisors, Inc. serves as investment manager or adviser to the Company with
respect to such series of shares.
14. Limitation of Shareholder Liability. It is expressly agreed that the
obligations of the Company hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Company
personally, but shall only bind the assets and property of the Funds, as
provided in the Company's Agreement and Declaration of Trust. The execution and
delivery of this Contract have been authorized by the Trustees of the Company
and shareholders of the Funds, and this Contract has been executed and delivered
by an authorized officer of the Company acting as such; neither such
authorization by such Trustees and shareholders nor such execution and delivery
by such officer shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
assets and property of the Funds, as provided in the Company's Agreement and
Declaration of Trust.
15. Miscellaneous. The captions in this Contract are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this Contract
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Contract shall not be affected thereby. This Contract
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors. As used in this Contract, the terms "majority of
the
<PAGE> 6
outstanding voting securities," "interested person," "assignment," "broker,"
"dealer," "investment adviser," "national securities exchange," "net assets,"
"prospectus," "sale," "sell" and "security" shall have the same meaning as such
terms have in the 1940 Act, subject to such exemption as may be granted by the
Securities and Exchange Commission by any rule, regulation or order. Where the
effect of a requirement of the 1940 Act reflected in any provision of this
Contract is made less restrictive by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
Attest: AIM SERIES TRUST
By: /s/ MICHAEL A. SILVER By: /s/ HELGE K. LEE
------------------------------ -----------------------------
Name: Michael A. Silver Name: Helge K. Lee
Title: Assistant Secretary Title: Vice President and Secretary
Attest: A I M ADVISORS, INC.
By: /s/ KATHLEEN J. PFLUEGER By: /s/ CAROL F. RELIHAN
------------------------------ ------------------------------
Name: Kathleen J. Pflueger Name: Carol F. Relihan
Title: Assistant Secretary Title: Senior Vice President
<PAGE> 1
EXHIBIT 5(b)
AIM SERIES TRUST
SUB-ADVISORY AND SUB-ADMINISTRATION CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO (NY), INC.
Contract made as of May 29, 1998, between A I M Advisors, Inc., a
Delaware corporation ("Adviser"), and INVESCO (NY), INC., a California
corporation ("Sub-Adviser").
WHEREAS Adviser has entered into an Investment Management and
Administration Contract with AIM Series Trust ("Company"), an open-end
management investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"), with respect to AIM New Dimension Fund (the
"Fund"), the Fund being a series of the Company's shares of beneficial
interest; and
WHEREAS Adviser desires to retain Sub-Adviser as sub-adviser and
sub-administrator to furnish certain advisory and administrative services to the
Fund, and Sub-Adviser is willing to furnish such services;
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser as sub-adviser and
sub-administrator of the Fund for the period and on the terms set forth in this
Contract. Sub-Adviser accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided.
2. Duties as Sub-Adviser.
(a) The Sub-Adviser will be responsible for the daily allocation and
periodic rebalancing of the Fund's assets among the investment companies in
which the Fund invests ("Underlying Funds"). Such allocation and rebalancing
shall be made in accordance with the Company's Registration Statement. The
Sub-Adviser will be responsible for placing all trades on behalf of the Fund.
The Sub-Adviser also will determine from time to time what other securities, if
any, will be purchased, retained or sold by the Fund and what cash, if any, will
be retained by the Fund.
(b) The Sub-Adviser will maintain all books and records with respect to
the securities transactions of the Funds, and will furnish the Board and Adviser
with such periodic and special reports as the Board or Adviser reasonably may
request. In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Sub-Adviser hereby agrees that all records which it
<PAGE> 2
maintains for the Company are the property of the Company, agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act any records which it
maintains for the Company and which are required to be maintained by Rule 31a-1
under the 1940 Act, and further agrees to surrender promptly to the Company any
records which it maintains for the Company upon request by the Company.
3. Duties as Sub-Administrator. Sub-Adviser will administer the affairs of the
Fund subject to the supervision of the Company's Board of Trustees ("Board"),
the Adviser and the following understandings:
(a) Sub-Adviser will supervise all aspects of the operations of the
Fund, including the oversight of transfer agency and custodial services except
as hereinafter set forth; provided, however, that nothing herein contained shall
be deemed to relieve or deprive the Board of its responsibility for control of
the conduct of the affairs of the Fund.
(b) At Sub-Adviser's expense, Sub-Adviser will provide the Company and
the Fund with such corporate, administrative and clerical personnel (including
officers of the Company) and services as are reasonably deemed necessary or
advisable by the Board.
(c) Sub-Adviser will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the Fund's
prospectus, statement of additional information, proxy material, tax returns and
required reports with or to the Fund's shareholders, the Securities and Exchange
Commission and other appropriate federal or state regulatory authorities.
(d) Sub-Adviser will provide the Company and the Fund with, or obtain
for them, adequate office space and all necessary office equipment and services,
including telephone service, heat, utilities, stationery supplies and similar
items.
4. Further Duties. In all matters relating to the performance of this Contract,
Sub-Adviser will act in conformity with the Agreement and Declaration of Trust,
By-Laws and Registration Statement of the Company and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules thereunder, and all other applicable federal and state laws and
regulations.
5. Services Not Exclusive. The services furnished by Sub-Adviser hereunder are
not to be deemed exclusive and Sub-Adviser shall be free to furnish similar
services to others so long as its services under this Contract are not impaired
thereby. Nothing in this Contract shall limit or restrict the right of any
director, officer or employee of Sub-Adviser, who may also be a Trustee, officer
or employee of the Company, to engage in any other business or to devote his or
her time and attention in part to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature.
6. Expenses.
(a) During the term of this Agreement, the Sub-Adviser shall bear all
expenses of the Fund (other than expenses reimbursed pursuant to the Fund's Rule
12b-1 plans of
<PAGE> 3
distribution and non-recurring and extraordinary expenses of the Fund) until
such time as the Fund enters into a special servicing or similar agreement among
the Company, the Sub-Adviser, AIM Investment Funds, Inc. and GT Global Investor
Services, Inc. ("Special Servicing Agreement"). Once the Company enters into the
Special Servicing Agreement, all expenses of the Fund (other than expenses
reimbursed pursuant to the Fund's Rule 12b-1 plans of distribution and
non-recurring and extraordinary expenses of the Fund) shall be paid for pursuant
to that agreement. Without limiting the generality of the foregoing, such
expenses include the following: (i) the cost (including brokerage commissions,
if any) of securities purchased or sold by the Fund and any losses incurred in
connection therewith; (ii) expenses of organizing the Fund; (iii) filing fees
and expenses relating to the registration and qualification of the Fund's shares
and the Company under federal and/or state securities law and maintaining such
registrations and qualifications; (iv) fees and salaries payable to the
Company's Trustees who are not parties to this Agreement or interested persons
of any such party ("Independent Trustees"); (v) all expenses incurred in
connection with the Independent Trustees' services, including travel expenses;
(vi) costs of any liability, uncollectible items of deposit and other insurance
and fidelity bonds; (vii) legal, accounting and auditing expenses, including
legal fees of special counsel for the Independent Trustees; (viii) charges of
custodians, transfer agents, pricing agents and other agents; (ix) costs of
preparing share certificates; (x) expenses of setting in type, printing and
mailing prospectuses and supplements thereto, statements of additional
information, reports and proxy materials for existing shareholders; (xi) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations; (xii) costs of mailing and tabulating
proxies and costs of meetings of shareholders, the Board and any committees
thereof; (xiii) the cost of investment company literature and other publications
provided by the Company to its Trustees and officers; and (xiv) costs of
mailing, stationery and communications equipment.
(b) During the term of this Agreement, the Fund shall bear any
non-recurring and extraordinary expenses incurred in its operations. Such
non-recurring and extraordinary expenses include: (i) the fees and costs of
actions, suits or proceedings, and any penalties, damages or payments in
settlement in connection therewith, for which the Company and/or the Fund may be
liable directly, or which they may incur as a result of their legal obligation
to provide indemnification to their officers, trustees and agents; (ii) the fees
and costs of any governmental investigation and any fines or penalties in
connection therewith; (iii) and any federal, state or local tax, or related
interest, penalties or additions to tax for which the Company or the Fund may be
liable.
(c) The payment or assumption by the Sub-Adviser of any expense of the
Fund prior to the effective date of the Special Servicing Agreement shall not
obligate the Sub-Adviser to pay or assume the same or any similar expense of the
Fund after the effective date of the Special Servicing Agreement.
7. Compensation. The Sub-Adviser will not be paid any special compensation for
the services provided by it hereunder. However, the Sub-Adviser may receive fees
for performing investment management and other services on behalf of the
Underlying Funds
<PAGE> 4
and may receive further fees from the Underlying Funds pursuant to the Special
Servicing Agreement.
8. Limitation of Liability of Sub-Adviser and Indemnification. Sub-Adviser shall
not be liable for any costs or liabilities arising from any error of judgment or
mistake of law or any loss suffered by the Fund or the Company in connection
with the matters to which this Contract relates except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Sub-Adviser in
the performance by Sub-Adviser of its duties or from reckless disregard by
Sub-Adviser of its obligations and duties under this Contract. Any person, even
though also an officer, partner, employee, or agent of Sub-Adviser, who may be
or become a Trustee, officer, employee or agent of the Company, shall be deemed,
when rendering services to a Fund or the Company or acting with respect to any
business of a Fund or the Company to be rendering such service to or acting
solely for the Fund or the Company and not as an officer, partner, employee, or
agent or one under the control or direction of Sub-Adviser even though paid by
it.
9. Duration and Termination.
(a) This Contract shall become effective upon the date hereabove
written, provided that this Contract shall not take effect with respect to the
Fund unless it has first been approved (i) by a vote of a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by vote of a majority of the Fund's
outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated this Contract shall continue automatically for successive periods not
to exceed twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board or by vote of a majority of the outstanding
voting securities of the Fund.
(c) Notwithstanding the foregoing, this Contract may be terminated at
any time, without the payment of any penalty, by vote of the Board or by a vote
of a majority of the outstanding voting securities of the Fund on sixty days'
written notice to Sub-Adviser or by Sub-Adviser at any time, without the payment
of any penalty, on sixty days' written notice to the Company. This Contract will
automatically terminate in the event of its assignment.
10. Amendment. No provision of this Contract may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Contract shall be effective until approved by
vote of a majority of the Fund's outstanding voting securities, when required by
the 1940 Act.
<PAGE> 5
11. Governing Law. This Contract shall be construed in accordance with the laws
of the State of Delaware (without regard to Delaware conflict or choice of law
provisions) and the 1940 Act. To the extent that the applicable laws of the
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. Miscellaneous. The captions in this Contract are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this Contract
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Contract shall not be affected thereby. This Contract
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors. As used in this Contract, the terms "majority of
the outstanding voting securities," "interested person," "assignment," "broker,"
"dealer," "investment adviser," "national securities exchange," "net assets,"
"prospectus," "sale," "sell" and "security" shall have the same meaning as such
terms have in the 1940 Act, subject to such exemption as may be granted by the
Securities and Exchange Commission by any rule, regulation or order. Where the
effect of a requirement of the 1940 Act reflected in any provision of this
Contract is made less restrictive by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.
A I M ADVISORS, INC.
Attest: /s/ KATHLEEN J. PFLUEGER By: /s/ CAROL F. RELIHAN
------------------------ ------------------------------
Name: Kathleen J. Pflueger Name: Carol F. Relihan
Title: Assistant Secretary Title: Senior Vice President &
Secretary
INVESCO (NY), INC.
Attest: /s/ MICHAEL A. SILVER By: /s/ HELGE K. LEE
---------------------- -------------------------------
Michael A. Silver Name: Helge K. Lee
Title: Chief Legal and Compliance
Officer and Secretary
<PAGE> 1
EXHIBIT 6(a)
DISTRIBUTION AGREEMENT
BETWEEN
AIM SERIES TRUST
AND
A I M DISTRIBUTORS, INC.
CLASS A AND CLASS C SHARES
THIS AGREEMENT made this 29th day of May, 1998, by and between AIM
Series Trust, a Delaware business trust (the "Company"), with respect to the
series of beneficial interest set forth on Appendix A to this Agreement, and any
applicable classes thereof, (the "Portfolios"), and A I M Distributors, Inc., a
Delaware corporation (the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby acknowledged,
the parties hereto agree as follows:
FIRST: The Company on behalf of the Portfolios hereby appoints the
Distributor as its exclusive agent for the sale of shares of the Portfolios to
the public directly and through investment dealers and financial institutions
in the United States and throughout the world.
SECOND: The Company shall not sell any shares of the Portfolios except
through the Distributor and under the terms and conditions set forth in
paragraph FOURTH below. Notwithstanding the provisions of the foregoing
sentence, however:
(A) the Company may issue shares of the Portfolios to any other
investment company or personal holding company, or to the shareholders thereof,
in exchange for all or a majority of the shares or assets of any such company;
and
(B) the Company may issue shares of the Portfolios at their net asset
value in connection with certain classes of transactions or to certain classes
of persons, in accordance with Rule 22d-1 under the Investment Company Act of
1940, as amended (the "1940 Act"), provided that any such class is specified in
the then current prospectus of the applicable Portfolio.
THIRD: The Distributor hereby accepts appointment as exclusive agent
for the sale of the shares of the Portfolios and agrees that it will use its
best efforts to sell such shares; provided, however, that:
(A) the Distributor may, and when requested by the Company on behalf
of a Portfolio shall, suspend its efforts to effectuate such sales at any time
when, in the opinion of the Distributor or of the
<PAGE> 2
Company, no sales should be made because of market or other economic
considerations or abnormal circumstances of any kind; and
(B) the Company may withdraw the offering of the shares of a
Portfolio (i) at any time with the consent of the Distributor, or (ii) without
such consent when so required by the provisions of any statute or of any order,
rule or regulation of any governmental body having jurisdiction. It is mutually
understood and agreed that the Distributor does not undertake to sell any
specific amount of the shares of the Portfolios. The Company shall have the
right to specify minimum amounts for initial and subsequent orders for the
purchase of shares of any Portfolio.
FOURTH:
(A) The public offering price of Class A shares of a Portfolio (the
"offering price") shall be the net asset value per share of the applicable
Portfolio plus a sales charge, if any. Net asset value per share shall be
determined in accordance with the provisions of the then current prospectus and
statement of additional information of the applicable Portfolio. The sales
charge shall be established by the Distributor, may reflect scheduled
variations in, or the elimination of, sales charges on sales of a Portfolio's
Class A shares either generally to the public, or to any specified class of
investors or in connection with any specified class of transactions, in
accordance with Rule 22d-1 and as set forth in the then current prospectus and
statement of additional information of the applicable Portfolio. The
Distributor shall apply any scheduled variation in, or elimination of, the
selling commission uniformly to all offerees in the class specified. The
Distributor shall be entitled to receive the amount of any applicable
contingent deferred sales charge that has been subtracted from gross redemption
proceeds (the "CDSC"), provided that the Shares being redeemed were (i) issued
by a Portfolio during the term of this Agreement and any predecessor Agreement
between the Company and the Distributor or Distributor's predecessor, GT
Global, Inc. ("GT Global"), or (ii) issued by a Portfolio during or after the
term of this Agreement or any predecessor Agreement between the Company and the
Distributor or GT Global in one or a series of free exchanges of Shares for
shares of the same class of another portfolio, which can be traced to Shares or
shares of the same class of another portfolio initially issued by a Portfolio
or such other portfolio during the term of this Agreement, any predecessor
Agreement or any other distribution agreement with the Distributor or GT Global
with respect to such other portfolio (the "Distributor's Earned CDSC"). The
Company shall pay or cause the Company's transfer agent to pay the
Distributor's Earned CDSC to the Distributor on the date net redemption
proceeds are payable to the redeeming shareholder.
The public offering price of the Class C shares of a Portfolio shall
be the net asset value per share of the applicable Class C shares. Net asset
value per share shall be determined in accordance with the provisions of the
then current prospectus and statement of additional information of the
applicable Portfolio. The Distributor may establish a schedule of contingent
deferred sales charges to be imposed at the time of redemption of the shares,
and such schedule shall be disclosed in the current prospectus of each
Portfolio. Such schedule of contingent deferred sales charges may reflect
variations in or waivers of such charges on redemptions of Class C shares,
either generally to the public or to any specified class of shareholders and/or
in connection with any specified class of transactions, in accordance with
applicable rules and regulations and exemptive relief granted by the Securities
and Exchange Commission, and as set forth in the current prospectus of the
applicable Portfolio. The Distributor and the Company shall apply any then
applicable scheduled variation in or waiver of contingent deferred sales
charges uniformly to all shareholders and/or all transactions belonging to a
specified class. The Company shall pay or cause the Company's transfer agent to
pay the Distributor's Earned CDSC to the Distributor on the date net redemption
proceeds are payable to the redeeming shareholder.
2
<PAGE> 3
(B) The Company shall allow directly to investment dealers and other
financial institutions through whom Class A shares of the Portfolios are sold
such portion of the sales charge as may be payable to them and specified by the
Distributor, up to but not exceeding the amount of the total sales charge. The
difference between any commissions so payable and the total sales charges
included in the offering price shall be paid to the Distributor.
The Distributor may pay to investment dealers and other financial
institutions through whom Class C shares are sold, such sales commission as the
Distributor may specify from time to time. Payment of any such sales
commissions shall be the sole obligation of the Distributor.
(C) No provision of this Agreement shall be deemed to prohibit any
payments by a Portfolio to the Distributor or by a Portfolio or the Distributor
to investment dealers, financial institutions and 401(k) plan service providers
where such payments are made under a distribution plan adopted by the Company
on behalf of a Portfolio pursuant to Rule 12b-1 under the 1940 Act.
FIFTH: The Distributor shall act as agent of the Company on behalf of
the Portfolios in connection with the sale and repurchase of shares of the
Portfolios. Except with respect to such sales and repurchases, the Distributor
shall act as principal in all matters relating to the promotion of the sale of
shares of the Portfolios and shall enter into all of its own engagements,
agreements and contracts as principal on its own account. The Distributor shall
enter into agreements with investment dealers and financial institutions
selected by the Distributor, authorizing such investment dealers and financial
institutions to offer and sell shares of the Portfolios to the public upon the
terms and conditions set forth therein, which shall not be inconsistent with
the provisions of this Agreement. Each agreement shall provide that the
investment dealer and financial institution shall act as a principal, and not
as an agent, of the Company on behalf of the Portfolios.
SIXTH: The Portfolios shall bear:
(A) the expenses of qualification of shares of the Portfolios for
sale in connection with such public offerings in such states as shall be
selected by the Distributor, and of continuing the qualification therein until
the Distributor notifies the Company that it does not wish such qualification
continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH:
(A) The Distributor shall bear the expenses of printing from the
final proof and distributing the Portfolios' prospectuses and statements of
additional information (including supplements thereto) relating to public
offerings made by the Distributor pursuant to this Agreement (which shall not
include those prospectuses and statements of additional information, and
supplements thereto, to be distributed to shareholders of the Portfolios), and
any other promotional or sales literature used by the Distributor or furnished
by the Distributor to dealers in connection with such public offerings, and
expenses of advertising in connection with such public offerings.
(B) The Distributor may be reimbursed for all or a portion of such
expenses, or may receive reasonable compensation for distribution related
services, to the extent permitted by a distribution plan adopted by the Company
on behalf of a Portfolio pursuant to Rule 12b-1 under the 1940 Act.
3
<PAGE> 4
EIGHTH: The Distributor will accept orders for the purchase of shares
of the Portfolios only to the extent of purchase orders actually received and
not in excess of such orders, and it will not avail itself of any opportunity
of making a profit by expediting or withholding orders. It is mutually
understood and agreed that the Company may reject purchase orders where, in the
judgment of the Company, such rejection is in the best interest of the Company.
NINTH: The Company, on behalf of the Portfolios, and the Distributor
shall each comply with all applicable provisions of the 1940 Act, the
Securities Act of 1933 and all other federal and state laws, rules and
regulations governing the issuance and sale of shares of the Portfolios.
TENTH:
(A) In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Distributor, the Company on behalf of the Portfolios agrees to indemnify
the Distributor against any and all claims, demands, liabilities and expenses
which the Distributor may incur under the Securities Act of 1933, or common law
or otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of a
Portfolio, or any omission to state a material fact therein, the omission of
which makes any statement contained therein misleading, unless such statement
or omission was made in reliance upon, and in conformity with, information
furnished to the Company or a Portfolio in connection therewith by or on behalf
of the Distributor. The Distributor agrees to indemnify the Company and the
Portfolios against any and all claims, demands, liabilities and expenses which
the Company or a Portfolio may incur arising out of or based upon any act or
deed of the Distributor or its sales representatives which has not been
authorized by the Company or a Portfolio in its prospectus or in this
Agreement.
(B) The Distributor agrees to indemnify the Company and the
Portfolios against any and all claims, demands, liabilities and expenses which
the Company or the Portfolios may incur under the Securities Act of 1933, or
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in any registration statement or
prospectus of a Portfolio, or any omission to state a material fact therein if
such statement or omission was made in reliance upon, and in conformity with,
information furnished to the Company or a Portfolio in connection therewith by
or on behalf of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the Portfolios' transfer
agent(s), or for any failure of any such transfer agent to perform its duties.
ELEVENTH: Nothing herein contained shall require the Company to take
any action contrary to any provision of its Agreement and Declaration of Trust,
or to any applicable statute or regulation.
TWELFTH: This Agreement shall become effective with respect to each
Portfolio as of the date hereof, shall continue in force and effect for two
years from the date hereof, and shall continue in force and effect from year to
year thereafter, provided, that such continuance is specifically approved with
respect to such Portfolio at least annually (a)(i) by the Board of Trustees of
the Company or (ii) by the vote of a majority of the outstanding voting
securities (as defined in Section 2(a)(42) of the 1940 Act), and (b) by vote of
a majority of the Company's trustees who are not parties to this Agreement or
"interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of any
party to this Agreement cast in person at a meeting called for such purpose.
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<PAGE> 5
THIRTEENTH:
(A) This Agreement may be terminated with respect to any Portfolio at
any time, without the payment of any penalty, by vote of the Board of Trustees
of the Company or by vote of a majority of the outstanding voting securities of
the applicable Portfolio, or by the Distributor, on sixty (60) days' written
notice to the other party.
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act.
FOURTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, it is agreed that the addresses of both the
Company and the Distributor shall be 11 Greenway Plaza, Suite 100, Houston,
Texas 77046.
FIFTEENTH: Notice is hereby given that, as provided by applicable law,
the obligations of or arising out of this Agreement are not binding upon any of
the shareholders of the Company individually, but are binding only upon the
assets and property of the Company and that the shareholders shall be entitled,
to the fullest extent permitted by applicable law, to the same limitation on
personal liability as stockholders of private corporations for profit.
SIXTEENTH: This Agreement shall be deemed to be a contract made in the
State of Delaware and governed by, construed in accordance with and enforced
pursuant to the internal laws of the State of Delaware without reference to its
conflicts of laws rules.
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<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
AIM SERIES TRUST
By: /s/ WILLIAM J. GUILFOYLE
-----------------------------
Name: William J. Guilfoyle
Title: President
Attest:
/s/ MICHAEL A. SILVER
- -----------------------------
Name: Michael A. Silver
Title: Assistant Secretary
A I M DISTRIBUTORS, INC.
By: /s/ JOHN CALDWELL
-----------------------------
Name: John Caldwell
Title: Senior Vice President
Attest:
/s/ KATHLEEN J. PFLUEGER
- -----------------------------
Name: Kathleen J. Pflueger
Title: Secretary
6
<PAGE> 7
APPENDIX A
TO
DISTRIBUTION AGREEMENT
OF
AIM SERIES TRUST
CLASS A SHARES
AIM New Dimension Fund
CLASS C SHARES
AIM New Dimension Fund
7
<PAGE> 1
EXHIBIT 6(b)
DISTRIBUTION AGREEMENT
BETWEEN
AIM SERIES TRUST
AND
A I M DISTRIBUTORS, INC.
CLASS B SHARES
THIS AGREEMENT made this 29th day of May, 1998, by and between AIM
Series Trust, a Delaware business trust (the "Company"), with respect to each of
the Class B shares (the "Shares") of each series of shares of beneficial
interest set forth on Schedule A to this agreement (the "Portfolios"), and A I M
Distributors, Inc., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby acknowledged,
the parties hereto agree as follows:
FIRST: The Company hereby appoints the Distributor as its
exclusive agent for the sale of the Shares to the public directly and through
investment dealers in the United States and throughout the world. If subsequent
to the termination of the Distributor's services to the Company pursuant to
this Agreement, the Company retains the services of another distributor, the
distribution agreement with such distributor shall contain provisions
comparable to Clauses FOURTH and SEVENTH hereof and Exhibit A hereto, and
without limiting the generality of the foregoing, will require such distributor
to maintain and make available to the Distributor records regarding sales,
redemptions and reinvestments of Shares necessary to implement the terms of
Clauses FOURTH, SEVENTH and EIGHTH hereof.
SECOND: The Company shall not sell any Shares except through
the Distributor and under the terms and conditions set forth in paragraph FOURTH
below. Notwithstanding the provisions of the foregoing sentence, however:
(A) the Company may issue Shares to any other investment
company or personal holding company, or to the shareholders thereof, in exchange
for all or a majority of the shares or assets of any such company;
(B) the Company may issue Shares at their net asset value in
connection with certain classes of transactions or to certain classes of
persons, in accordance with Rule 22d-1 under the Investment Company Act of
1940, as amended (the "1940 Act"), provided that any such class is specified in
the then current prospectus of the applicable Shares; and
(C) the Company shall have the right to specify minimum
amounts for initial and subsequent orders for the purchase of Shares.
<PAGE> 2
THIRD: The Distributor hereby accepts appointment as
exclusive agent for the sale of the Shares and agrees that it will use its best
efforts to sell such Shares; provided, however, that:
(A) the Distributor may, and when requested by the Company
on behalf of the Shares shall, suspend its efforts to effectuate such sales at
any time when, in the opinion of the Distributor or of the Company, no sales
should be made because of market or other economic considerations or abnormal
circumstances of any kind;
(B) the Company may withdraw the offering of the Shares
(i) at any time with the consent of the Distributor, or (ii) without such
consent when so required by the provisions of any statute or of any order, rule
or regulation of any governmental body having jurisdiction; and
(C) the Distributor, as agent, does not undertake to sell any
specific amount of the Shares.
FOURTH:
(A) The public offering price of the Shares shall be the
net asset value per share of the applicable Shares. Net asset value per share
shall be determined in accordance with the provisions of the then current
prospectus and statement of additional information of the applicable Portfolio.
The Distributor may establish a schedule of contingent deferred sales charges
to be imposed at the time of redemption of the Shares, and such schedule shall
be disclosed in the current prospectus of each Portfolio. Such schedule of
contingent deferred sales charges may reflect variations in or waivers of such
charges on redemptions of Shares, either generally to the public or to any
specified class of shareholders and/or in connection with any specified class
of transactions, in accordance with applicable rules and regulations and
exemptive relief granted by the Securities and Exchange Commission, and as set
forth in the Portfolios' current prospectus(es). The Distributor and the
Company shall apply any then applicable scheduled variation in or waiver of
contingent deferred sales charges uniformly to all shareholders and/or all
transactions belonging to a specified class.
(B) The Distributor may pay to investment dealers and other
financial institutions through whom Shares are sold, such sales commission as
the Distributor may specify from time to time. Payment of any such sales
commissions shall be the sole obligation of the Distributor.
(C) No provision of this Agreement shall be deemed to
prohibit any payments by the Company to the Distributor or by the Company or
the Distributor to investment dealers, financial institutions and 401(k) plan
service providers where such payments are made under a distribution plan
adopted by the Company pursuant to Rule 12b-1 under the 1940 Act.
(D) The Company shall redeem the Shares from shareholders in
accordance with the terms set forth from time to time in the current prospectus
and statement of additional information of each Portfolio. The price to be paid
to a shareholder to redeem the Shares shall be equal to the net asset value of
the Shares being redeemed ("gross redemption proceeds"), less any applicable
contingent deferred sales charge, calculated pursuant to the then applicable
schedule of contingent deferred sales charges ("net redemption proceeds"). The
Distributor shall be entitled to receive the amount of the contingent deferred
sales charge that has been subtracted from gross redemption proceeds (the
"CDSC"), provided that the Shares being redeemed were (i) issued by a Portfolio
during the term of this Agreement and any predecessor Agreement between the
Company and the Distributor or Distributor's predecessor, GT Global, Inc. ("GT
Global"), or (ii) issued by a Portfolio during or after the term of this
Agreement or any predecessor Agreement between the Company and the Distributor
or GT Global in one or a series of free
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<PAGE> 3
exchanges of Shares for Class B shares of another portfolio, which can be
traced to Shares or Class B shares of another portfolio initially issued by a
Portfolio or such other portfolio during the term of this Agreement, any
predecessor Agreement or any other distribution agreement with the Distributor
or GT Global with respect to such other portfolio (the "Distributor's Earned
CDSC"). The Company shall pay or cause the Company's transfer agent to pay the
Distributor's Earned CDSC to the Distributor on the date net redemption
proceeds are payable to the redeeming shareholder.
(E) The Distributor shall maintain adequate books and records
to identify Shares (i) issued by a Portfolio during the term of this Agreement
and any predecessor Agreement between the Company and the Distributor or GT
Global or (ii) issued by a Portfolio during or after the term of this Agreement
or any predecessor Agreement between the Company and the Distributor or GT
Global in one or a series of free exchanges of Shares for class B shares of
another portfolio, which can be traced to Shares or class B shares of another
portfolio initially issued by a Portfolio or such other portfolio during the
term of this Agreement, any predecessor Agreement or any other distribution
agreement with the Distributor or GT Global with respect to such other
portfolio and shall calculate the Distributor's Earned CDSC, if any, with
respect to such Shares, upon their redemption. The Company shall be entitled to
rely on Distributor's books, records and calculations with respect to
Distributor's Earned CDSC.
FIFTH: The Distributor shall act as an agent of the Company
in connection with the sale and redemption of Shares. Except with respect to
such sales and redemptions, the Distributor shall act as principal in all
matters relating to the promotion of the sale of Shares and shall enter into
all of its own engagements, agreements and contracts as principal on its own
account. The Distributor shall enter into agreements with investment dealers
and financial institutions selected by the Distributor, authorizing such
investment dealers and financial institutions to offer and sell the Shares to
the public upon the terms and conditions set forth therein, which shall not be
inconsistent with the provisions of this Agreement. Each agreement shall
provide that the investment dealer or financial institution shall act as a
principal, and not as an agent, of the Company.
SIXTH: The Shares shall bear:
(A) the expenses of qualification of Shares for sale in
connection with such public offerings in such states as shall be selected by
the Distributor, and of continuing the qualification therein until the
Distributor notifies the Company that it does not wish such qualification
continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH:
(A) The Distributor shall bear the expenses of printing from
the final proof and distributing the prospectuses and statements of additional
information for the Shares (including supplements thereto) relating to public
offerings made by the Company pursuant to such prospectuses (which shall not
include those prospectuses and statements of additional information, and
supplements thereto, to be distributed to existing shareholders of the Shares),
and any other promotional or sales literature used by the Distributor or
furnished by the Distributor to dealers in connection with such public
offerings, and expenses of advertising in connection with such public
offerings.
(B) Subject to the limitations, if any, of applicable law
including the NASD Conduct Rules (formerly, the NASD Rules of Fair Practice)
regarding asset-based sales charges, the Company shall pay to the Distributor
as a reimbursement for all or a portion of such expenses, or as reasonable
3
<PAGE> 4
compensation for distribution of the Shares, an asset-based sales charge in an
amount equal to 0.75% per annum of the average daily net asset value of the
Shares of each Portfolio from time to time (the "Distributor's 12b-1 Share"),
such sales charge to be payable pursuant to the distribution plan adopted
pursuant to Rule 12b-1 under the 1940 Act (the "Plan"). The Distributor's 12b-1
Share shall be a percentage, which shall be recomputed periodically (but not
less than monthly) in accordance with Exhibit A to this Agreement. The
Distributor's 12b-1 Share shall accrue daily and be paid to the Distributor as
soon as practicable after the end of each calendar month within which it
accrues but in any event within 10 business days after the end of each such
calendar month (unless the Distributor shall specify a later date in written
instructions to the Company) provided, however, that any notices and
calculation required by Section EIGHTH: (B) and (C) have been received by the
Company.
(C) The Distributor shall maintain adequate books and records
to permit calculations periodically (but not less than monthly) of, and shall
calculate on a monthly basis, the Distributor's 12b-1 Share to be paid to the
Distributor. The Company shall be entitled to rely on Distributor's books,
records and calculations relating to Distributor's 12b-1 Share.
EIGHTH:
(A) The Distributor may, from time to time, assign, transfer
or pledge ("Transfer") to one or more designees (each an "Assignee"), its
rights to all or a designated portion of (i) the Distributor's 12b-1 Share (but
not the Distributor's duties and obligations pursuant hereto or pursuant to the
Plan), and (ii) the Distributor's Earned CDSC, free and clear of any offsets or
claims the Company may have against the Distributor. Each such Assignee's
ownership interest in a Transfer of a designated portion of a Distributor's
12b-1 Share and a Distributor's Earned CDSC is hereinafter referred to as an
"Assignee's 12b-1 Portion" and an "Assignee's CDSC Portion," respectively. A
Transfer pursuant to this Section EIGHTH: (A) shall not reduce or extinguish
any claim of the Company against the Distributor.
(B) The Distributor shall promptly notify the Company in
writing of each Transfer pursuant to Section EIGHTH: (A) by providing the
Company with the name and address of each such Assignee.
(C) The Distributor may direct the Company to pay directly to
an Assignee such Assignee's 12b-1 Portion and Assignee's CDSC Portion. In such
event, Distributor shall provide the Company with a monthly calculation of (i)
the Distributor's Earned CDSC and Distributor's 12b-1 Share and (ii) each
Assignee's 12b-1 Portion and Assignee's CDSC Portion, if any, for such month
(the "Monthly Calculation"). The Monthly Calculation shall be provided to the
Company by the Distributor promptly after the close of each month or such other
time as agreed to by the Company and the Distributor which allows timely
payment of the Distributor's 12b-1 Share and Distributor's Earned CDSC and/or
the Assignee's 12b-1 Portion and Assignee's CDSC Portion. The Company shall not
be liable for any interest on such payments occasioned by delayed delivery of
the Monthly Calculation by the Distributor. In such event following receipt
from the Distributor of (i) notice of Transfer referred to in Section EIGHTH:
(B) and (ii) each Monthly Calculation, the Company shall make all payments
directly to the Assignee or Assignees in accordance with the information
provided in such notice and Monthly Calculation, on the same terms and
conditions as if such payments were to be paid directly to the Distributor. The
Company shall be entitled to rely on Distributor's notices, and Monthly
Calculations in respect of amounts to be paid pursuant to this Section EIGHTH:
(B).
(D) Alternatively, in connection with a Transfer the
Distributor may direct the Company to pay all of such Distributor's 12b-1 Share
and Distributor's Earned CDSC from time to time to a depository or collection
agent designated by any Assignee, which depository or collection agent may be
4
<PAGE> 5
delegated the duty of dividing such Distributor's 12b-1 Share and Distributor's
Earned CDSC between the Assignee's 12b-1 Portion and Assignee's CDSC Portion
and the balance of the Distributor's 12b-1 Share (such balance, when
distributed to the Distributor by the depository or collection agent, the
"Distributor's 12b-1 Portion") and of the Distributor's Earned CDSC (such
balance, when distributed to the Distributor by the depository or collection
agent, the "Distributor's Earned CDSC Portion"), in which case only the
Distributor's 12b-1 Portion and Distributor's Earned CDSC Portion may be
subject to offsets or claims the Company may have against the Distributor.
(E) The Company shall not amend the Plan to reduce the amount
payable to the Distributor or any Assignee under Section SEVENTH: (B) hereof
with respect to the Shares for any Shares which have been issued prior to the
date of such amendment.
NINTH: The Distributor will accept orders for the purchase of
Shares only to the extent of purchase orders actually received and not in
excess of such orders, and it will not avail itself of any opportunity of
making a profit by expediting or withholding orders.
TENTH:
(A) Pursuant to the Plan and this Agreement, the Distributor,
as agent, shall enter into Shareholder Service Agreements with investment
dealers, financial institutions and certain 401(K) plan service providers
(collectively "Service Providers") selected by the Distributor for the
provision of certain continuing personal services to customers of such Service
Providers who have purchased Shares. Such agreements shall authorize Service
Providers to provide continuing personal shareholder services to their
customers upon the terms and conditions set forth therein, which shall not be
inconsistent with the provisions of this Agreement. Each Shareholder Service
Agreement shall provide that the Service Provider shall act as principal, and
not as an agent of the Company.
(B) Shareholder Service Agreements may provide that the
Service Providers may receive a service fee in the amount of 0.25% of the
average daily net assets of the Shares held by customers of such Service
Providers provided that such Service Providers furnish continuing personal
shareholder services to their customers in respect of such Shares. The
continuing personal services to be rendered by Service Providers under the
Shareholder Service Agreements may include, but shall not be limited to, some
or all of the following: distributing sales literature; answering routine
customer inquiries concerning the Company; assisting customers in changing
dividend elections, options, account designations and addresses, and in
enrolling in any of several special investment plans offered in connection with
the purchase of Shares; assisting in the establishment and maintenance of or
establishing and maintaining customer accounts and records and the processing
of purchase and redemption transactions; performing subaccounting; investing
dividends and any capital gains distributions automatically in the Company's
shares; providing periodic statements showing a customer's account balance and
the integration of such statements with those of other transactions and
balances in the customer's account serviced by the Service Provider; forwarding
applicable prospectus, proxy statements, reports and notices to customers who
hold Shares and providing such other information and services as the Company or
the customers may reasonably request.
(C) The Distributor may advance service fees payable to
Service Providers pursuant to the Plan or any other distribution plan adopted
by the Company with respect to Shares of one or more of the Portfolios pursuant
to Rule 12b-1 under the 1940 Act; and thereafter the Distributor may be
reimbursed for such advances through retention of service fee payments during
the period for which the service fees were advanced.
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<PAGE> 6
ELEVENTH: The Company and the Distributor shall each comply
with all applicable provisions of the 1940 Act, the Securities Act of 1933, as
amended, and of all other federal and state laws, rules and regulations
governing the issuance and sale of the Shares.
TWELFTH:
(A) In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Distributor, the Company shall indemnify the Distributor against any and
all claims, demands, liabilities and expenses which the Distributor may incur
under the Securities Act of 1933, or common law or otherwise, arising out of or
based upon any alleged untrue statement of a material fact contained in any
registration statement or prospectus of the Shares, or any omission to state a
material fact therein, the omission of which makes any statement contained
therein misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Company in
connection therewith by or on behalf of the Distributor. The Distributor shall
indemnify the Company and the Shares against any and all claims, demands,
liabilities and expenses which the Company or the Shares may incur arising out
of or based upon (i) any act or deed of the Distributor or its sales
representatives which has not been authorized by the Company in its prospectus
or in this Agreement and (ii) the Company's reliance on the Distributor's
books, records, calculations and notices in Sections FOURTH: (E), SEVENTH: (C),
EIGHTH: (B), EIGHTH: (C) and EIGHTH: (D).
(B) The Distributor shall indemnify the Company and the
Shares against any and all claims, demands, liabilities and expenses which the
Company or the Shares may incur under the Securities Act of 1933, as amended,
or common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in any registration statement or
prospectus of the Shares, or any omission to state a material fact therein if
such statement or omission was made in reliance upon, and in conformity with,
information furnished to the Company in connection therewith by or on behalf of
the Distributor.
(C) Notwithstanding any other provision of this Agreement,
the Distributor shall not be liable for any errors of the transfer agent(s) of
the Shares, or for any failure of any such transfer agent to perform its
duties.
THIRTEENTH: Nothing herein contained shall require the
Company to take any action contrary to any provision of its Agreement and
Declaration of Trust, as amended, or to any applicable statute or regulation.
FOURTEENTH: This Agreement shall become effective with
respect to the Shares of each Portfolio upon its approval by the Board of
Trustees of the Company and by vote of a majority of the Company's trustees who
are not interested parties to this Agreement or "interested persons" (as
defined in Section 2(a)(19) of the 1940 Act) of any party to this Agreement
cast in person at a meeting called for such purpose, shall continue in force
and effect for two years from the date hereof, and from year to year
thereafter, provided, that such continuance is specifically approved with
respect to the Shares of each Portfolio at least annually (a)(i) by the Board
of Trustees of the Company or (ii) by the vote of a majority of the outstanding
Shares of such class of such Portfolio, and (b) by vote of a majority of the
Company's trustees who are not parties to this Agreement or "interested
persons" (as defined in Section 2(a)(19) of the 1940 Act) of any party to this
Agreement cast in person at a meeting called for such purpose.
6
<PAGE> 7
FIFTEENTH:
(A) This Agreement may be terminated with respect to the
Shares of any Portfolio, at any time, without the payment of any penalty, by
vote of the Board of Trustees of the Company or by vote of a majority of the
outstanding Shares of such Portfolio, or by the Distributor, on sixty (60)
days' written notice to the other party; and
(B) This Agreement shall also automatically terminate in the
event of its assignment, the term "assignment" having the meaning set forth in
Section 2(a)(4) of the 1940 Act; provided, that, subject to the provisions of
the following sentence, if this Agreement is terminated for any reason, the
obligations of the Company and the Distributor pursuant to Sections FOURTH:
(D), FOURTH: (E), SEVENTH: (B), SEVENTH: (C), EIGHTH: (A) through (E) and
TWELFTH: (A) of this Agreement will continue and survive any such termination.
Notwithstanding the foregoing, upon Complete Termination of the Plan (as such
term is defined in Section 8 of the Plan in effect at the date of this
Agreement), the obligations of the Company pursuant to the terms of Sections
SEVENTH: (B), EIGHTH: (A), EIGHTH: (C), EIGHTH: (D) and EIGHTH: (E) (with
respect to payments of Distributor's 12b-1 Share and Assignee's 12b-1 Portion)
of this Agreement shall terminate. A termination of the Plan with respect to
any or all Shares of any or all Portfolios shall not affect the obligations of
the Company pursuant to Sections FOURTH: (D), EIGHTH: (A), EIGHTH: (C), EIGHTH:
(D) and EIGHTH: (E) (with respect to payments of Distributor's Earned CDSC or
Assignee's CDSC Portion) hereof or of the obligations of the Distributor
pursuant to Section FOURTH: (E) or EIGHTH: (B) hereof.
(C) The Transfer of the Distributor's rights to Distributor's
12b-1 Share or Distributor's Earned CDSC shall not cause a termination of this
Agreement or be deemed to be an assignment for purposes of Section FIFTEENTH:
(B) above.
SIXTEENTH: Any notice under this Agreement shall be in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at such address as the other party may designate for the receipt of notices.
Until further notice to the other party, the addresses of both the Company and
the Distributor shall be 11 Greenway Plaza, Suite 100, Houston. Texas
77046-1173.
SEVENTEENTH: Notice is hereby given that, as provided by
applicable law, the obligations of or arising out of this Agreement are not
binding upon any of the shareholders of the Company or any Portfolio
individually, but are binding only upon the assets and property of the Company
or such Portfolio and that the shareholders shall be entitled, to the fullest
extent permitted by applicable law, to the same limitation on personal
liability as stockholders of private corporations for profit.
EIGHTEENTH: This Agreement shall be deemed to be a contract
made in the State of Delaware and governed by, construed in accordance with and
enforced pursuant to the internal laws of the State of Delaware without
reference to its conflicts of laws rules.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
AIM SERIES TRUST
By: /s/ WILLIAM J. GUILFOYLE
-----------------------------
Name: William J. Guilfoyle
Title: President
Attest:
/s/ MICHAEL A. SILVER
- -----------------------------------
Name: Michael A. Silver
Title: Assistant Secretary
A I M DISTRIBUTORS, INC.
By: /s/ JOHN CALDWELL
------------------------------
Name: John Caldwell
Title: Senior Vice President
Attest:
/s/ KATHLEEN J. PFLUEGER
- -----------------------------------
Name: Kathleen J. Pflueger
Title: Secretary
8
<PAGE> 9
SCHEDULE A
TO
DISTRIBUTION AGREEMENT
OF
AIM SERIES TRUST
CLASS B SHARES
AIM New Dimension Fund
9
<PAGE> 10
EXHIBIT A
The Distributor's 12b-1 Share in respect of each Portfolio shall be
100 percent until such time as the Distributor shall cease to serve as
exclusive distributor of the Shares of such Portfolio and thereafter shall be a
percentage, recomputed first on the date of any termination of the
Distributor's services as exclusive distributor of Shares of any Portfolio and
thereafter periodically (but not less than monthly), representing the
percentage of Shares of such Portfolio outstanding on each such computation
date allocated to the Distributor in accordance with the following rules:
1. DEFINITIONS. For purposes of this Exhibit A defined terms used
herein shall have the meaning assigned to such terms in the Distribution
Agreement and the following terms shall have the following meanings:
"Commission Shares" shall mean shares of the Portfolio or another
portfolio the redemption of which would, in the absence of the application of
some standard waiver provision, give rise to the payment of a CDSC and shall
include Commission Shares which due to the expiration of the CDSC period no
longer bear a CDSC.
"Distributor" shall mean the Distributor and the Distributor's
predecessor, GT Global, Inc.
"Other Distributor" shall mean each person appointed as the
exclusive distributor for the Shares of the Portfolio after the Distributor
ceases to serve in that capacity.
2. ALLOCATION RULES. In determining the Distributor's 12b-1 Share in
respect of a particular Portfolio:
(a) There shall be allocated to the Distributor and each Other
Distributor all Commission Shares of such Portfolio which were sold while such
Distributor or such Other Distributor, as the case may be, was the exclusive
distributor for the Shares of the Portfolio, determined in accordance with the
transfer records maintained for such Portfolio.
(b) Reinvested Shares: On the date that any Shares are issued
by a Portfolio as a result of the reinvestment of dividends or other
distributions, whether ordinary income, capital gains or exempt-interest
dividend or distributions ("Reinvested Shares"), Reinvested Shares shall be
allocated to the Distributor and each Other Distributor in a number obtained by
multiplying the total number of Reinvested Shares issued on such date by a
fraction, the numerator of which is the total number of all Shares outstanding
in such Fund as of the opening of business on such date and allocated to the
Distributor or Other Distributor as of such date of determination pursuant to
these allocation procedures and the denominator is the total number of Shares
outstanding as of the opening of business on such date.
(c) Exchange Shares: There shall be allocated to the
Distributor and each Other Distributor, as the case may be, all Commission
Shares of such Portfolio which were issued during or after the period referred
to in (a) as a consequence of one or more free exchanges of Commission Shares of
the Portfolio or of another portfolio (other than Free Appreciation Shares) (the
"Exchange Shares"), which in accordance with the transfer records maintained for
such Portfolio can be traced to Commission Shares of the Portfolio or another
portfolio initially issued by the Company or such other
A-1
<PAGE> 11
portfolio during the time the Distributor or such Other Distributor, as the case
may be, was the exclusive distributor for the Shares of the Portfolio or such
other portfolio.
(d) Free Appreciation Shares: Shares (other than Exchange
Shares) that were acquired by the holders of such Shares in a free exchange of
Shares of any other Portfolio, which represent the appreciated value of the
Shares of the exiting portfolio over the initial purchase price paid for the
Shares being redeemed and exchanged and for which the original purchase date and
the original purchase price are not identified on an on-going basis, shall be
allocated to the Distributor and each Other Distributor ("Free Appreciation
Shares") daily in a number obtained by multiplying the total number of Free
Appreciation Shares issued by the exiting portfolio on such date by a fraction,
the numerator of which is the total number of all Shares outstanding as of the
opening of business on such date allocated to the Distributor or such Other
Distributor as of such date of determination pursuant to these allocation
procedures and the denominator is the total number of Shares outstanding as of
the opening of business on such date.
(e) Redeemed Shares: Shares (other than Reinvested Shares and
Free Appreciation Shares) that are redeemed will be allocated to the Distributor
and each Other Distributor to the extent such Share was previously allocated to
the Distributor or such Other Distributor in accordance with the rules set forth
in 2(a) or (c) above. Reinvested Shares and Free Appreciation Shares that are
redeemed will be allocated to the Distributor and each Other Distributor daily
in an amount equal to the number of Free Appreciation Shares and Reinvested
Shares of such Portfolio being redeemed on such date, which amount is obtained
by multiplying the total number of Free Appreciation Shares and Reinvested
Shares being redeemed by such Portfolio on such date by a fraction, the
numerator of which is the total number of all Free Appreciation Shares and
Reinvested Shares of such Portfolio outstanding as of the opening of business on
such date allocated to the Distributor or to such Other Distributor as of such
date of determination and the denominator is the total number of Free
Appreciation Shares and Reinvested Shares of such Portfolio outstanding as of
the opening of business on such date.
The Fund shall use its best efforts to assure that the transfer agents
and sub-transfer agents for each Portfolio maintain the data necessary to
implement the foregoing rules. If, notwithstanding the foregoing, the transfer
agents or sub-transfer agents for such Portfolio are unable to maintain the
data necessary to implement the foregoing rules as written, and if the
Distributor shall cease to serve as exclusive distributor of the Shares of the
Portfolio, the Distributor and the Portfolio agree to negotiate in good faith
with each other, with the transfer agents and sub-transfer agents for such
Portfolio and with any third party that has obtained an interest in the
Distributor's 12b-1 Share in respect of such Portfolio with a view to arriving
at mutually satisfactory modifications to the foregoing rules designed to
accomplish substantially identical results on the basis of data which can be
made available.
A-2
<PAGE> 1
EXHIBIT 6(c)
DISTRIBUTION AGREEMENT
BETWEEN
AIM SERIES TRUST
AND
A I M DISTRIBUTORS, INC.
ADVISOR CLASS SHARES
THIS AGREEMENT made this 29th day of May, 1998, by and between AIM
Series Trust, a Delaware business trust (the "Company"), with respect to the
Advisor Class shares (the "Shares") of each series of beneficial interest set
forth on Appendix A to this Agreement (the "Portfolios"), and A I M
Distributors, Inc., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto agree as follows:
FIRST: The Company on behalf of the Portfolios hereby appoints the
Distributor as its exclusive agent for the sale of Shares to the public directly
and through investment dealers and financial institutions in the United States
and throughout the world.
SECOND: The Company shall not sell any Shares except through the
Distributor and under the terms and conditions set forth in paragraph FOURTH
below. Notwithstanding the provisions of the foregoing sentence, however:
(A) the Company may issue Shares to any other investment company or
personal holding company, or to the shareholders thereof, in exchange for all or
a majority of the shares or assets of any such company; and
(B) the Company shall have the right to specify minimum amounts for
initial and subsequent orders for the purchase of Shares in connection with
certain classes of transactions or to certain classes of persons, in accordance
with Rule 22d-1 under the Investment Company Act of 1940, as amended (the "1940
Act"), provided that any such class is specified in the then current prospectus
of the applicable Portfolio.
THIRD: The Distributor hereby accepts appointment as exclusive agent
for the sale of the Shares and agrees that it will use its best efforts to sell
such Shares; provided, however, that:
<PAGE> 2
(A) the Distributor may, and when requested by the Company on behalf of
the Shares shall, suspend its efforts to effectuate such sales at any time when,
in the opinion of the Distributor or of the Company, no sales should be made
because of market or other economic considerations or abnormal circumstances of
any kind;
(B) the Company may withdraw the offering of the Shares (i) at any time
with the consent of the Distributor, or (ii) without such consent when so
required by the provisions of any statute or of any order, rule or regulation of
any governmental body having jurisdiction; and
(C) the Distributor, as agent, does not undertake to sell any specific
amount of the Shares.
FOURTH:
(A) The public offering price of Shares (the "offering price") shall be
the net asset value per share of the applicable Portfolio. Net asset value per
share shall be determined in accordance with the provisions of the then current
prospectus and statement of additional information of the applicable Portfolio.
FIFTH: The Distributor shall act as agent of the Company in connection
with the sale and repurchase of Shares. Except with respect to such sales and
repurchases, the Distributor shall act as principal in all matters relating to
the promotion of the sale of Shares and shall enter into all of its own
engagements, agreements and contracts as principal on its own account. The
Distributor shall enter into agreements with investment dealers and financial
institutions selected by the Distributor, authorizing such investment dealers
and financial institutions to offer and sell the Shares to the public upon the
terms and conditions set forth therein, which shall not be inconsistent with the
provisions of this Agreement. Each agreement shall provide that the investment
dealer and financial institution shall act as a principal, and not as an agent,
of the Company.
SIXTH: The Shares shall bear:
(A) the expenses of qualification of Shares for sale in connection with
such public offerings in such states as shall be selected by the Distributor,
and of continuing the qualification therein until the Distributor notifies the
Company that it does not wish such qualification continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH: The Distributor shall bear the expenses of printing from the
final proof and distributing the prospectuses and statements of additional
information for the Shares (including supplements thereto) relating to public
offerings made by the Company pursuant to such prospectuses (which shall not
include those prospectuses and statements of additional information, and
supplements thereto, to be distributed to existing shareholders of the Shares),
and any other promotional or sales literature used by the Distributor or
furnished by the
2
<PAGE> 3
Distributor to dealers in connection with such public offerings, and expenses of
advertising in connection with such public offerings.
EIGHTH: The Distributor will accept orders for the purchase of Shares
only to the extent of purchase orders actually received and not in excess of
such orders, and it will not avail itself of any opportunity of making a profit
by expediting or withholding orders. It is mutually understood and agreed that
the Company may reject purchase orders where, in the judgment of the Company,
such rejection is in the best interest of the Company.
NINTH: The Company, on behalf of the Portfolios, and the Distributor
shall each comply with all applicable provisions of the 1940 Act, the Securities
Act of 1933 and all other federal and state laws, rules and regulations
governing the issuance and sale of Shares.
TENTH:
(A) In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company on behalf of the Portfolios agrees to indemnify the
Distributor against any and all claims, demands, liabilities and expenses which
the Distributor may incur under the Securities Act of 1933, or common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of a
Portfolio, or any omission to state a material fact therein, the omission of
which makes any statement contained therein misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Company or a Portfolio in connection therewith by or on behalf
of the Distributor. The Distributor agrees to indemnify the Company and the
Portfolios against any and all claims, demands, liabilities and expenses which
the Company or a Portfolio may incur arising out of or based upon any act or
deed of the Distributor or its sales representatives which has not been
authorized by the Company or a Portfolio in its prospectus or in this Agreement.
(B) The Distributor agrees to indemnify the Company and the Portfolios
against any and all claims, demands, liabilities and expenses which the Company
or the Portfolios may incur under the Securities Act of 1933, or common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of a
Portfolio, or any omission to state a material fact therein if such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Company or a Portfolio in connection therewith by or on behalf
of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the Portfolios' transfer
agent(s), or for any failure of any such transfer agent to perform its duties.
ELEVENTH: Nothing herein contained shall require the Company to take
any action contrary to any provision of its Agreement and Declaration of Trust,
or to any applicable statute or regulation.
3
<PAGE> 4
TWELFTH: This Agreement shall become effective with respect to the
Shares of each Portfolio as of the date hereof, shall continue in force and
effect for two years from the date hereof, and shall continue in force and
effect from year to year thereafter, provided, that such continuance is
specifically approved with respect to such Portfolio at least annually (a)(i) by
the Board of Trustees of the Company or (ii) by the vote of a majority of the
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act),
and (b) by vote of a majority of the Company's trustees who are not parties to
this Agreement or "interested persons" (as defined in Section 2(a)(19) of the
1940 Act) of any party to this Agreement cast in person at a meeting called for
such purpose.
THIRTEENTH:
(A) This Agreement may be terminated with respect to the Shares of any
Portfolio at any time, without the payment of any penalty, by vote of the Board
of Trustees of the Company or by vote of a majority of the outstanding voting
securities of the applicable Portfolio, or by the Distributor, on sixty (60)
days' written notice to the other party.
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act.
FOURTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, it is agreed that the addresses of both the
Company and the Distributor shall be 11 Greenway Plaza, Suite 100, Houston,
Texas 77046.
FIFTEENTH: Notice is hereby given that, as provided by applicable law,
the obligations of or arising out of this Agreement are not binding upon any of
the shareholders of the Company individually, but are binding only upon the
assets and property of the Company and that the shareholders shall be entitled,
to the fullest extent permitted by applicable law, to the same limitation on
personal liability as stockholders of private corporations for profit.
SIXTEENTH: This Agreement shall be deemed to be a contract made in the
State of Delaware and governed by, construed in accordance with and enforced
pursuant to the internal laws of the State of Delaware without reference to its
conflicts of laws rules.
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
AIM SERIES TRUST
By: /s/ WILLIAM J. GUILFOYLE
-----------------------------
Name: William J. Guilfoyle
Title: President
Attest:
/s/ MICHAEL A. SILVER
- -----------------------------
Name: Michael A. Silver
Title: Assistant Secretary
A I M DISTRIBUTORS, INC.
By: /s/ JOHN CALDWELL
-----------------------------
Name: John Caldwell
Title: Senior Vice President
Attest:
/s/ KATHLEEN J. PFLUEGER
- -----------------------------
Name: Kathleen J. Pflueger
Title: Secretary
5
<PAGE> 6
APPENDIX A
TO
DISTRIBUTION AGREEMENT
OF
SERIES TRUST
ADVISOR CLASS SHARES
- --------------------
AIM New Dimension Fund
6
<PAGE> 1
EXHIBIT 8
CUSTODIAN CONTRACT
Between
AIM Series Trust
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Employment of Custodian and Property to be Held By It 1
2. Duties of the Custodian with Respect to Property of the Fund Held by the
Custodian in the United States 3
2.1 Holding Securities 3
2.2 Delivery of Securities 3
2.3 Registration of Securities 8
2.4 Bank Accounts 8
2.5 Availability of Federal Funds 9
2.6 Collection of Income 9
2.7 Payment of Fund Monies 10
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased 13
2.9 Appointment of Agents 13
2.10 Deposit of Fund Assets in Securities System 13
2.10A Fund Assets Held in the Custodian's Direct Paper System 16
2.10B Deposit of Fund Assets with the AIM Global Transfer Agent 17
2.11 Segregated Account 19
2.12 Ownership Certificates for Tax Purposes 20
2.13 Proxies 20
2.14 Communications Relating to Portfolio Securities 21
3. Duties of Custodian With Respect to Property of the Fund Held
Outside of the United States 21
3.1 Appointment of Foreign Sub-Custodians 21
3.2 Assets to be Held 22
3.3 Foreign Securities Depositories 22
3.4 Segregation of Securities 23
3.5 Agreements with Foreign Banking Institutions 23
3.6 Access of Independent Accountants of the Fund 24
3.7 Reports by Custodian 24
3.8 Transactions in Foreign Custody Account 25
3.9 Liability of Foreign Sub-Custodian 25
3.10 Liability of Custodian 26
3.11 Reimbursement for Advances 26
3.12 Monitoring Responsibilities 27
3.13 Branches of U.S. Banks 27
3.14 Tax Law 28
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
4. Payments for Sales or Repurchase or Redemptions of Shares
of the Fund 28
5. Proper Instructions 29
6. Actions Permitted Without Express Authority 30
7. Evidence of Authority 31
7A. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income 31
8. Records 32
9. Opinion of Fund's Independent Accountants 32
10. Reports to Fund by Independent Public Accountants 32
11. Compensation by Custodian 33
12. Responsibility of Custodian 33
13. Effective Period, Termination and Amendment 34
14. Successor Custodian 36
15. Interpretive and Additional Provisions 37
16. Additional Funds 38
17. Limitation of Shareholder Liability 38
18. Massachusetts Law to Apply 38
19. Prior Contracts 39
20. Shareholder Communications Election 39
</TABLE>
<PAGE> 4
CUSTODIAN CONTRACT
This Contract between AIM Series Trust, a business trust organized and
existing under the laws of Delaware, having its principal place of business at
50 California Street, San Francisco, California 94111, "Fund", and State Street
Bank and Trust Company, a Massachusetts trust company, having its principal
place of business at 225 Franklin Street, Boston, Massachusetts, 02110,
hereinafter called the "Custodian."
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in one series, the
AIM New Dimension Fund (such series together with all other series subsequently
established by the Fund and made subject to this Contract in accordance with
Article 16, being herein referred to as the "Portfolio(s)");
NOW THEREFOR, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets
of the Portfolio(s) of the Fund, including securities which the Fund, on behalf
of the applicable Portfolio(s), desires to be held in places within the United
States ("domestic securities") and securities it desires to be held outside the
United States ("foreign securities") pursuant to the provisions of the Fund's
Agreement and Declaration of Trust. The Fund, on behalf of the Portfolio(s),
agrees to deliver to the Custodian all securities and cash of
1
<PAGE> 5
the Portfolio(s), and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the
Portfolio(s) from time to time, and the cash consideration received by it for
such new or treasury shares of beneficial interest of the Fund representing
interests in the Portfolio(s) ("Shares"), as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of a Portfolio
held or received by the Portfolio and not delivered to the Custodian. With
respect to uncertificated shares (the "Underlying Shares") of registered
investment companies in the same "group of investment companies" (as defined in
Section 12(d)(1)(G) of the Investment Company Act of 1940, as amended (the
"1940 Act")) (the "AIM Global Funds") the holding of confirmation statements
that identify the shares as being recorded in the Custodian's name on behalf of
the Portfolios will be deemed custody for purposes hereof.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States but only
in accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2
<PAGE> 6
2. Duties of the Custodian with Respect to Property of the Fund Held by
the Custodian in the United States
2.1 Holding Securities.
The Custodian shall hold and physically segregate for the account of
each Portfolio all non-cash property, to be held by it in the United
States including all domestic securities owned by such Portfolio,
other than (a) securities which are maintained pursuant to Section
2.10 in a clearing agency registered with the Securities and Exchange
Commission (the "SEC") under Section 17A of the Securities Exchange
Act of 1934 (the "1934 Act"), which acts as a securities depository or
in a book-entry system authorized by the U. S. Department of the
Treasury, collectively referred to herein as "Securities System"; (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the
Custodian (the "Direct Paper System") pursuant to Section 2.10A; and
(c) the Underlying Shares owned by the Fund which are maintained
pursuant to Section 2.10B in an account with GT Global Investor
Services, Inc. or such other entity which may from time to time act as
a transfer agent for the AIM Global Funds and with respect to which
the Custodian is provided with Proper Instructions (the "AIM Global
Transfer Agent").
2.2 Delivery of Securities.
The Custodian shall release and deliver domestic securities owned by a
Portfolio held by the Custodian, in a Securities System account of the
Custodian (a "Securities System Account"), in the Custodian's Direct
Paper System account
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<PAGE> 7
(the "Direct Paper System Account") or in an account at the AIM Global
Transfer Agent only upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Portfolio;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section
2.10 hereof;
4) To the depository agent in connection with tender or
other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Portfolio or into the name of
any nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed pursuant
to Section 2.9 or into the name or nominee name of
any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number
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<PAGE> 8
of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of
the Portfolio, to the broker or its clearing agent,
against a receipt, for examination in accordance with
"street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of
such securities prior to receiving payment for such
securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities
and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Portfolio, but only against
receipt of adequate collateral as agreed upon from
time to time by the Custodian and the Fund on behalf
of
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<PAGE> 9
the Portfolio, which may be in the form of cash or
obligations issued by the United States government,
its agencies or instrumentalities, except that in
connection with any loans for which collateral is to
be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department
of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities
owned by the Portfolio prior to the receipt of such
collateral;
11) For delivery as security in connection with any
borrowings by the Fund on behalf of the Portfolio
requiring a pledge of assets by the Fund on behalf of
the Portfolio, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio,
the Custodian and a broker-dealer registered under
the 1934 Act and a member of The National Association
of Securities Dealers, Inc. (the "NASD"), relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or
organizations regarding escrow or other arrangements
in connection with transactions by the Fund on behalf
of a Portfolio;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of a Portfolio,
the Custodian, and a
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<PAGE> 10
Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with
the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar
organization or organizations, regarding account
deposits in connection with transactions by the Fund
on behalf of a Portfolio;
14) Upon receipt of instructions from a Portfolio's
transfer agent, (each, a "Transfer Agent"), for
delivery to such Transfer Agent or to the holders of
shares of that Portfolio in connection with
distributions in kind, as may be described from time
to time in the then-currently effective prospectus
and statement of additional information of the Fund,
related to such Portfolio (each, a "Prospectus"), in
satisfaction of requests by holders of Shares for
repurchase or redemption;
15) In the case of a sale processed through the AIM
Global Transfer Agent of Underlying Shares, in
accordance with Section 2.10B hereof; and
16) For any other proper trust purpose, but only upon
receipt of, in addition to Proper Instructions from
the Fund on behalf of the respective Portfolio, a
certified copy of a resolution of the Board of
Trustees or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or
an Assistant Secretary, specifying the securities of
the Portfolio to be delivered, setting
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<PAGE> 11
forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper trust
purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities.
Domestic Securities held by the Custodian (other than bearer
securities) shall be registered in the name of the Portfolio or in the
name of any nominee of the Fund on behalf of the Portfolio or of any
nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, unless the Fund has authorized in writing the
appointment of a nominee to be used in common with other registered
investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed
pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Portfolio under the terms
of this Contract shall be in "street name" or other good delivery
from.
2.4 Bank Accounts.
The Custodian shall open and maintain a separate bank account or
accounts in the United States in the name of each Portfolio of the
Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained
by the Portfolio in a bank account established and used in accordance
with Rule
8
<PAGE> 12
17f-3 under the 1940 Act. Funds held by the Custodian for a Portfolio
may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies
as it may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be qualified to
act as a custodian under the 1940 Act and that each such bank or trust
company and the funds to be deposited with each such bank or trust
company shall on behalf of each applicable Portfolio be approved by
vote of a majority of the Board of Trustees of the Fund. Such funds
shall be deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds.
Upon mutual agreement between the Fund on behalf of each applicable
Portfolio and the Custodian, the Custodian shall, upon the receipt of
Proper Instructions from the Fund on behalf of a Portfolio, make
federal funds available to such Portfolio as of specified times agreed
upon from time to time by the Fund and the Custodian in the amount of
checks received in payment for Shares of such Portfolio which are
deposited into the Portfolio's account.
2.6 Collection of Income.
The Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder
to which each Portfolio shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities
9
<PAGE> 13
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Portfolio's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when due on securities held hereunder. Income due each Portfolio on
securities loaned pursuant to the provisions of Section 2.2 (10) shall
be the responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund
in arranging for the timely delivery to the Custodian of the income to
which the Portfolio is properly entitled.
2.7 Payment of Fund Monies.
Upon receipt of Proper Instructions from the Fund on behalf of the
applicable Portfolio, which may be continuing instructions when deemed
appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of securities, options, futures
contracts or options on futures contracts for the
account of the Portfolio but only (a) against the
delivery of such securities or evidence of title to
such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States
or abroad which is qualified under the 1940 Act to
act as a custodian and has been designated by the
10
<PAGE> 14
Custodian as its agent for this purpose) registered
in the name of the Portfolio or in the name of a
nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the
case of a purchase effected through a Securities
System, in accordance with the conditions set forth
in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with
the conditions set forth in Section 2.10A; (d) in the
case of a purchase of Underlying Shares, in
accordance with the conditions set forth in Section
2.10B hereof; (e) in the case of repurchase
agreements entered into between the Fund on behalf of
the Portfolio and the Custodian, or another bank, or
a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in
certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to
repurchase such securities from the Portfolio or (f)
for transfer to a time deposit account of the Fund in
any bank, whether domestic or foreign; such transfer
may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in
Article 5;
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<PAGE> 15
2) In connection with conversion, exchange or surrender
of securities owned by the Portfolio as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by
the Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred
by the Portfolio, including but not limited to the
following payments for the account of the Portfolio:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Fund whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing
documents of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short; and
7) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund
on behalf of the Portfolio, a certified copy of a
resolution of the Board of Trustees or of the
Executive Committee of the Fund signed by an officer
of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such
payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to
whom such payment is to be made.
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<PAGE> 16
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received
by the Custodian.
2.9 Appointment of Agents.
The Custodian may at any time or times in its discretion appoint (and
may at any time remove) any other bank or trust company which is
itself qualified under 1940 Act to act as a custodian, as its agent to
carry out such of the provisions of this Article 2 as the Custodian
may from time to time direct; provided, however, that the appointment
of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder. The AIM Global Transfer Agent shall not be
deemed an agent or subcustodian of the Custodian for purposes of this
Section 2.9 or any other provision of this Agreement.
2.10 Deposit of Fund Assets in Securities Systems.
The Custodian may deposit and/or maintain securities owned by a
Portfolio in a Securities System in accordance with applicable Federal
Reserve Board and SEC rules and regulations, if any, and subject to
the following provisions:
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<PAGE> 17
1) The Custodian may keep securities of the Portfolio in
a Securities System provided that such securities are
represented in an account ("Account") of the
Custodian in the Securities System which accounts
shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to
securities of the Portfolio which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for
the account of the Portfolio upon (i) receipt of
advice from the Securities System that such
securities have been transferred to the Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for
the account of the Portfolio. The Custodian shall
transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the
Securities System that payment for such securities
has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of
the Portfolio. Copies of all advises from the
Securities System of transfer of securities for the
account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request.
Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the
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<PAGE> 18
account of the Portfolio in the form of a written
advice or notice and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's
transactions in the Securities System for the account
of the Portfolio.
4) The Custodian shall provide the Fund for the
Portfolio with any report obtained by the Custodian
on the Securities System's accounting system,
internal accounting control and procedures for
safeguarding securities deposited in the Securities
System;
5) The Custodian shall have received from the Fund on
behalf of the Portfolio the initial or annual
certificate, as the case may be, required by Article
13 hereof; and
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Fund for the benefit of the Portfolio for any loss or
damage to the Portfolio resulting from use of the
Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of
its agents or of any of its or their employees or
from failure of the Custodian or any such agent to
enforce effectively such rights as it may have
against the Securities System; at the election of the
Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim
against the Securities System or any other person
which the Custodian may have as a consequence of any
such loss or damage
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<PAGE> 19
if and to the extent that the Portfolio has not been
made whole for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System.
The Custodian may deposit and/or maintain securities owned by a
Portfolio in the Direct Paper System of the Custodian subject to the
following provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of
Proper Instructions from the Fund on behalf of the
Portfolio;
2) The Custodian may keep securities of the Portfolio in
the Direct Paper System only if such securities are
represented in an account ("Account") of the
Custodian in the Direct Paper System which shall not
include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to
securities of the Portfolio which are maintained in
the Direct Paper System shall identify by book-entry
those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for
the account of the Portfolio upon the making of an
entry on the records of the Custodian to reflect such
payment and transfer of securities to the account of
the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon
the making of an entry on the records of the
Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
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5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from
the account of the Portfolio, in the form of a
written advice or notice, of Direct Paper on the next
business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies
of daily transaction sheets reflecting each day's
transaction in the Securities System for the account
of the Portfolio; and
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal
accounting control as the Fund may reasonably request
from time to time.
2.10B Deposit of Fund Assets with the AIM Global Transfer Agent.
Underlying Shares shall be deposited and/or maintained in an account
or accounts maintained with the AIM Global Transfer Agent. The AIM
Global Transfer Agent shall be deemed to be acting as if it is a
"securities depository" for purposes of Rule 17f-4 under the 1940 Act.
The Fund hereby directs the Custodian to deposit and/or maintain such
securities with the AIM Global Transfer Agent, subject to the
following provisions:
1) The Custodian shall keep Underlying Shares owned by a
Portfolio with the AIM Global Transfer Agent provided that
such securities are maintained in an account or accounts on
the books and records of the AIM Global Transfer Agent in the
name of the Custodian as custodian for the Portfolio.
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<PAGE> 21
2) The records of the Custodian with respect to Underlying Shares
which are maintained with the AIM Global Transfer Agent shall
identify by book-entry those Underlying Shares belonging to
each Portfolio.
3) The Custodian shall pay for Underlying Shares purchased for
the account of a Portfolio upon (i) receipt of advice from the
Portfolio's investment adviser that such Underlying Shares
have been purchased and will be transferred to the account of
the Custodian, on behalf of the Portfolio, on the books and
records of the AIM Global Transfer Agent, and (ii) the making
of an entry on the records of the Custodian to reflect such
payment and transfer for the account of the Portfolio. The
Custodian shall receive confirmation from the AIM Global
Transfer Agent of the purchase of such securities and the
transfer of such securities to the Custodian's account with
the AIM Global Transfer Agent only after such payment is made.
The Custodian shall transfer Underlying Shares redeemed for
the account of a Portfolio (i) upon receipt of an advice from
the Portfolio's investment adviser that such securities have
been redeemed and that payment for such securities will be
transferred to the Custodian and (ii) the making of an entry
of the records of the Custodian to reflect such transfer and
payment for the account of the Portfolio. The Custodian will
receive confirmation from the AIM Global Transfer Agent of the
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<PAGE> 22
redemption of such securities and payment therefor only after
such securities are redeemed. Copies of all advices from the
Portfolio's investment adviser of purchases and sales of
Underlying Shares for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian, and be provided to the investment adviser at its
request.
4) The Custodian shall not be liable to the Fund or any Portfolio
for any loss or damage to the Fund or any Portfolio resulting
from maintenance of Underlying Shares with AIM Global
Transfer Agent except for losses resulting directly from the
negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees.
2.11 Segregated Account.
The Custodian shall upon receipt of Proper Instructions from the Fund
on behalf of each applicable Portfolio establish and maintain a
segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with
the provisions of any agreement among the Fund on behalf of the
Portfolio, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity
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<PAGE> 23
Futures Trading Commission or any registered contract market), or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio, (ii)
for purposes of segregating cash, or government securities or other
U.S. securities in connection with options purchased, sold or written
by the Portfolio or commodity futures contracts or options thereon
purchased or sold by the Portfolio, (iii) for the purposes of
compliance by the Portfolio with the procedures required by Investment
Company Act Release No. 10666, or any subsequent release or
interpretive position of the SEC relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
other proper trust purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper trust purposes.
2.12 Ownership Certificates for Tax Purposes.
The Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection with
receipt of income or other payments with respect to domestic
securities of each Portfolio held by it and in connection with
transfers of securities.
2.13 Proxies.
The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the
20
<PAGE> 24
securities are registered otherwise than in the name of the Portfolio
or a nominee of the Portfolio, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly
deliver to the Fund such proxies, all proxy soliciting materials and
all notices relating to such securities.
2.14 Communications Relating to Portfolio Securities.
The Custodian shall transmit promptly to the Fund for each Portfolio
all written information (including, without limitation, pendency of
calls and maturities of domestic securities and expirations of rights
in connection therewith and notices of exercise of call and put
options written by the Fund of behalf of the Portfolio and the
maturity of futures contracts purchased or sold by the Fund on behalf
of the Portfolio) received by the Custodian from issuers of the
securities being held for the Portfolio. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Fund desires
to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Fund shall notify the Custodian at
least three business days prior to the date on which the Custodian is
to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians.
The Fund hereby authorizes and instructs the Custodian to employ as
sub-custodians for the Portfolio's securities and other assets
maintained outside the
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<PAGE> 25
United States the foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined
in Section 5 of this Contract, together with a certified resolution of
the Fund's Board of Trustees, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate additional
foreign banking institutions and foreign securities depositories to
act as sub-custodian. Upon receipt of Proper Instructions, the Fund
may instruct the Custodian to cease the employment of any one or more
such sub-custodians for maintaining custody of the Portfolio's assets.
3.2 Assets to be Held.
The Custodian shall limit the securities and other assets maintained
in the custody of the foreign sub- custodians to: (a) "foreign
securities," as defined in paragraph (c)(1) of Rule 17f-5 under the
1940 Act and (b) cash and cash equivalents in such amounts as the
Custodian or the Fund may determine to be reasonably necessary to
effect the Portfolio's foreign securities transactions.
3.3 Foreign Securities Depositories.
Except as may otherwise be agreed upon in writing by the Custodian and
the Fund, assets of the Portfolios shall be maintained in foreign
securities depositories only through arrangements implemented by the
foreign banking institutions serving as sub-custodians pursuant to the
terms hereof. Where possible, such arrangements shall include entry
into agreements containing the provisions set forth in Section 3.5
hereof.
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3.4 Holding Securities.
(a) The Custodian shall identify on its books as belonging to each
applicable Portfolio of the Fund, the foreign securities of such
Portfolios held by each foreign sub-custodian.
(b) Notwithstanding any provisions of this Contract to the contrary,
the Custodian may hold securities and other non-cash property for all
of its customers, including the Fund, with a foreign sub-custodian in
a single account that is identified as belonging to the Custodian for
the benefit of its customers provided however, that (i) the records of
the Custodian with respect to securities and other non-cash property
of the Fund which are maintained in such account shall identify by
book-entry those securities and other non-cash property belonging to
each Portfolio and (ii) the Custodian shall require that securities
and other non-cash property so held by the foreign sub-custodian be
held separately from any assets of the foreign sub-custodian or of
others.
3.5 Agreements with Foreign Banking Institutions.
Each agreement with a foreign banking institution shall provide that:
(a) the assets of each Portfolio will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the
foreign banking institution or its creditors or agent, except a claim
of payment for their safe custody or administration; (b) beneficial
ownership for the assets of each Portfolio will be freely transferable
without the payment of money or value other than for custody or
administration; (c) adequate records will be maintained identifying
the assets as belonging to each applicable Portfolio; (d) officers of
or auditors employed by, or other
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<PAGE> 27
representatives of the Custodian, including to the extent permitted
under applicable law the independent public accountants for the Fund,
will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the
Custodian or its agents.
3.6 Access of Independent Accountants of the Fund.
Upon request of the Fund, the Custodian will use its best efforts to
arrange for the independent accountants of the Fund to be afforded
access to the books and records of any foreign banking institution
employed as a foreign sub-custodian insofar as such books and records
relate to the performance of such foreign banking institution under
its agreement with the Custodian.
3.7 Reports by Custodian.
The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets
of the Portfolio(s) held by foreign sub-custodians, including but not
limited to an identification of entities having possession of the
Portfolio(s) securities and other assets and advices or notifications
of any transfers of securities to or from each custodial account
maintained by a foreign banking institution for the Custodian on
behalf of each applicable Portfolio indicating, as to securities
acquired for a Portfolio, the identity of the entity having physical
possession of such securities.
24
<PAGE> 28
3.8 Transactions in Foreign Custody Account.
(a) Except as otherwise provided in paragraph (b) of this Section
3.8, the provision of Sections 2.2 and 2.7 of this Contract shall
apply, mutatis mutandis, to the foreign securities of the Fund held
outside the United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance
with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian
may be maintained in the name of such entity's nominee to the same
extent as set forth in Section 2.3 of this Contract, and the Fund
agrees to hold any such nominee harmless from any liability as a
holder of record of such securities.
3.9 Liability of Foreign Sub-Custodians.
Each agreement pursuant to which the Custodian employs a foreign
banking institution as a foreign sub-custodian shall require the
institution to exercise reasonable care in the performance of its
duties and to indemnify, and hold harmless, the Custodian and each
Fund from and against any loss, damage, cost, expense, liability or
claim arising out of or in connection with the institution's
25
<PAGE> 29
performance of such obligations. At the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian with
respect to any claims against a foreign banking institution as a
consequence of any such loss, damage, cost, expense, liability or
claim if and to the extent that the Fund has not been made whole for
any such loss, damage, cost, expense, liability or claim.
3.10 Liability of Custodian.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
sub-custodians generally in this Contract, and, regardless of whether
assets are maintained in the custody of a foreign banking institution,
a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.13 hereof, the Custodian shall not be
liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care.
3.11 Reimbursement for Advances.
If the Fund requires the Custodian to advance cash or securities for
any purpose for the benefit of a Portfolio including the purchase or
sale of foreign exchange or of contracts for foreign exchange, or in
the event that the Custodian or its nominee shall incur or be assessed
any taxes (excluding any corporate tax liability of the Custodian),
charges, expenses, assessments, claims or liabilities in connection
with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or
willful misconduct, any property at any time held for the account of
the applicable Portfolio shall be
26
<PAGE> 30
security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall after five business days written notice
be entitled to utilize available cash and to dispose of such
Portfolios assets to the extent necessary to obtain reimbursement.
3.12 Monitoring Responsibilities.
The Custodian shall furnish annually to the Fund, during the month of
June, information concerning the foreign sub-custodians employed by
the Custodian. Such information shall be similar in kind and scope to
that furnished to the Fund in connection with the initial approval of
this Contract. In addition, the Custodian will promptly inform the
Fund in the event that the Custodian learns of a material adverse
change in the financial condition of a foreign sub-custodian or any
material loss of the assets of the Fund or in the case of any foreign
sub-custodian not the subject of an exemptive order from the SEC is
notified by such foreign sub- custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline
below $200 million (U.S. dollars or the equivalent thereof) or that
its shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting
principles).
3.13 Branches of U.S. Banking.
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of the Portfolio's assets are
maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the 1940 Act meeting the
qualification set forth in Section 26(a) of said Act. The
27
<PAGE> 31
appointment of any such branch as a sub-custodian shall be governed by
paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom
shall be maintained in an interest bearing account established for the
Fund with the Custodian's London branch, which account shall be
subject to the direction of the Custodian, State Street London Ltd. or
both.
3.14 Tax Law.
The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America
or any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the
tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist
the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such
information.
4. Payment for Sales or Repurchases or Redemptions of Shares of the Fund.
The Custodian shall receive from the distributor for the Shares or
from the Transfer Agent of the Fund and deposit into the account of the
appropriate Portfolio such payments as are received for Shares of that
Portfolio issued or sold from time to time by
28
<PAGE> 32
the Fund. The Custodian will provide timely notification to the Fund on behalf
of each such Portfolio and the Transfer Agent of any receipt by it of payments
for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Agreement and Declaration of Trust and any applicable votes
of the Board of Trustees of the Fund pursuant thereto, the Custodian shall,
upon receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the
redemption or repurchase of shares of a Portfolio, the Custodian is authorized
upon receipt of instructions from the Transfer Agent to wire funds to or
through a commercial bank designated by the redeeming shareholders. In
connection with the redemption or repurchase of Shares of the Fund, the
Custodian shall honor checks drawn on the Custodian by a holder of Shares,
which checks have been furnished by the Fund to the holder of Shares, when
presented to the Custodian in accordance with such procedures and controls as
are mutually agreed upon from time to time between the Fund and the Custodian.
5. Proper Instructions.
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give such
29
<PAGE> 33
instructions with respect to the transaction involved. The Fund shall cause
all oral instructions to be confirmed in writing or through electronic devices.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the instructions are
consistent with any security procedures agreed to by the Fund and the
Custodian, including, but not limited to, the security procedures selected by
the Fund on the Funds Transfer Addendum to this Contract. For purposes of this
Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which requires a segregated
asset account in accordance with Section 2.11.
6. Actions Permitted without Express Authority.
The Custodian may in its discretion, without express authority from
the Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to the Fund on
behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as otherwise
directed by the Board of Trustees of the Fund.
30
<PAGE> 34
7. Evidence of Authority.
The Custodian shall be protected in acting upon any instructions,
notice, request, consent , certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of a vote of the
Board of Trustees of the Fund as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any determination or
of any action by the Board of Trustees pursuant to the Agreement and
Declaration of Trust as described in such vote, and such vote may be considered
as in full force and effect until receipt by the Custodian of written notice to
the contrary.
7A. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Fund to keep
the books of account of each Portfolio and/or compute the net asset value per
share of the outstanding shares of each Portfolio or, if directed in writing to
do so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of the Portfolio as
described in the Fun's currently effective prospectus related to such Portfolio
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value
per share and the daily income of each Portfolio shall be made at the time or
times described from time to time in the Fund's currently effective prospectus
related to such Portfolio.
31
<PAGE> 35
8. Records
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder. All such records shall be the property of the Fund and shall at
all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the SEC. The Custodian shall, at the Fund's request,
supply the Fund with a tabulation of securities owned by each Portfolio and
held by the Custodian and shall, when requested to do so by the Fund and for
such compensation as shall be agreed upon between the Fund and the Custodian,
include certificate numbers in such tabulations.
9. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A, and Form N-SAR or other annual reports to the SEC and with respect
to any other requirements of such Commission.
10. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding
32
<PAGE> 36
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
11. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund on behalf of each applicable Portfolio and the Custodian.
12. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in good faith without negligence. It shall
be entitled to rely on and may act upon advice of counsel (who may be counsel
for the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
33
<PAGE> 37
If the Fund on behalf of a Portfolio requires the Custodian to take
any action with respect to securities, which action involves the payment of
money or which action may, in the opinion of the Custodian, result in the
Custodian or its nominee assigned to the Fund or the Portfolio being liable for
the payment of money or incurring liability of some other form, the Fund on
behalf of the Portfolio, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for
any purpose for the benefit of a Portfolio including the purchase or sale of
foreign exchange or of contracts for foreign exchange or in the event that the
Custodian or its nominee shall incur or be assessed any taxes (excluding any
corporate tax liability of the Custodian), charges, expenses, assessments,
claims or liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time held
for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall upon
five business days written notice be entitled to utilize available cash and to
dispose of such Portfolio's assets to the extent necessary to obtain
reimbursement.
13. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party with respect to one or more Portfolios by an
instrument in writing delivered or mailed, postage prepaid
34
<PAGE> 38
to the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10 hereof
in the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary of the Fund that the Board of Trustees of the Fund has
approved the initial use of a particular Securities System by such Portfolio
and the receipt of an annual certificate of the Secretary or an Assistant
Secretary of the Fund that the Board of Trustees has reviewed the use by such
Portfolio of such Securities System, as required in each case by Rules 17f-4
and 17f-5 under the 1940 Act, as amended and that the Custodian shall not with
respect to a Portfolio act under Section 2.10A hereof in the absence of receipt
of an initial certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has approved the initial use of the Direct Paper System by
such Portfolio and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has reviewed the use by such
Portfolio of the Direct Paper System; provided further, however, that the Fund
shall not amend or terminate this Contract with respect to one or more
Portfolios in contravention of any applicable federal or state regulations, or
any provision of the Fund's Agreement and Declaration of Trust, and further
provided, that the Fund on behalf of one or more of the Portfolios may at any
time by action of its Board of Trustees (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Contract in the event of the appointment of
a conservator or receiver for the Custodian by the Comptroller of the Currency
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
35
<PAGE> 39
Upon termination of this Contract with respect to one or more
Portfolios, the Fund on behalf of each applicable Portfolio shall pay to the
Custodian such compensation as may be due as of the date of such termination
and shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
14. Successor Custodian
If a successor custodian of the Fund or of one or more of the
Portfolios shall be appointed by the Board of Trustees of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for transfer, all
securities of each applicable Portfolio then held by it hereunder and shall
transfer to an account of the successor custodian all of the securities of each
such Portfolio held in a Securities System or at the AIM Global Transfer Agent
and shall transfer to such successor Custodian all records relating to that
Portfolio.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Trustees of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of Trustees shall have been delivered
to the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or
trust company, which is a "bank' as defined in the 1940 Act, doing business in
Boston, Massachusetts, of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last published report, of not
less than $25,000,000, all securities, funds and other properties held by the
Custodian
36
<PAGE> 40
on behalf of each applicable Portfolio and all instruments held by the
Custodian relative thereto and all other property held by it under this
Contract on behalf of each applicable Portfolio and to transfer to an account
of such successor custodian all the securities of each such Portfolio held in
any Securities System or at the AIM Global Transfer Agent. Thereafter, such
bank or trust company shall be the successor of the Custodian under this
Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
15. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Contract as may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Agreement and Declaration
of Trust of the Fund. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment of this
Contract.
37
<PAGE> 41
16. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to AIM New Dimension Fund with respect to which it desires to have the
Custodian render services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio
hereunder.
17. Limitation of Shareholder Liability
It is expressly agreed that the obligations of the Fund hereunder
shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Fund personally, but shall only bind the
assets and property of the Fund, as provided in the Fund's Agreement and
Declaration of Trust. The execution and delivery of this Contract have been
authorized by the Trustees of the Company, and this Contract has been executed
and delivered by an authorized officer of the Company acting as such; neither
such authorization by such Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the assets
and property of the Fund, as provided in the Fund's Agreement and Declaration
of Trust.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
38
<PAGE> 42
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
20. Shareholder Communications Election.
SEC Rule 14b-2 requires banks which hold securities for an account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held
by the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the
Fund to indicate whether it authorizes the Custodian to provide the Fund's
name, address, and share position to requesting companies whose securities the
Fund owns. If the Fund tells the Custodian "no", the Custodian will not
provide this information to requesting companies. If the Fund tells the
Custodian "yes" or does not check either "yes" or "no" below, the Custodian is
required by the rule to treat the Fund as consenting to disclosure of this
information for all securities owned by the Fund or any funds or accounts
established by the Fund. For the Fund's protection, the Rule prohibits the
requesting company from using the Fund's name and address for any purpose other
than corporate communications. Please indicate below whether the Fund consents
or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address,
and share positions.
39
<PAGE> 43
NO [ X ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
40
<PAGE> 44
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the first day of June, 1998.
ATTEST: AIM SERIES TRUST
/s/ MICHAEL A. SILVER /s/ KENNETH W. CHANCEY
- -------------------------------- ------------------------------------
Michael A. Silver Kenneth W. Chancey
Assistant Secretary Vice President, Principal Accounting
Officer and (Acting) CFO
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ MARC L. PARSONS /s/ RONALD E. LOGUE
- -------------------------------- ------------------------------------
Marc L. Parsons Ronald E. Logue
Associate Counsel Executive Vice President
41
<PAGE> 45
SCHEDULE A
The following foreign banking institutions and foreign securities depositories
have been approved by the Board of Trustees for use as sub-custodians for the
Fund's securities and other assets:
NONE HAVE BEEN APPROVED.
<PAGE> 1
EXHIBIT 9(a)(1)
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
AIM SERIES TRUST
AND
A I M FUND SERVICES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT . . . . . . . . . . . . . . . . . . . 3
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 5 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 6 COVENANTS OF THE FUND AND THE TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 7 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 8 ADDITIONAL FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 9 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 10 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 11 TEXAS LAW TO APPLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 12 MERGER OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 13 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 14 LIMITATION OF SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the _______ day of __________, 1998, by and
between AIM SERIES TRUST, as Delaware business trust, having its principal
office and place of business at 11 Greenway Plaza, Suite 100, Houston, Texas
77046 (the "Fund"), and A I M Fund Services, Inc., a Delaware corporation
having its principal office and place of business at 11 Greenway Plaza, Suite
100, Houston, Texas 77046 (the "Transfer Agent").
WHEREAS, the Transfer Agent is registered as such with the Securities
and Exchange Commission (the "SEC"); and
WHEREAS, the Fund is authorized to issue shares in separate series and
classes, with each such series representing interests in a separate portfolio
of securities and other assets and each such class having different
distribution arrangements; and
WHEREAS, the Fund on behalf of each portfolio thereof (the
"Portfolios") desires to appoint the Transfer Agent as its transfer agent, and
agent in connection with certain other activities, with respect to the
Portfolios, and the Transfer Agent desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE 1
TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints the Transfer Agent to act as,
and the Transfer Agent agrees to act as, its transfer agent for the authorized
and issued shares of beneficial interest of the Fund representing interests of
each of the respective Portfolios ("Shares"), dividend disbursing agent, and
agent in connection with any accumulation or similar plans provided to
shareholders of each of the Portfolios (the "Shareholders"), including without
limitation any periodic investment plan or periodic withdrawal program, as
provided in the currently effective prospectus and statement of additional
information (the "Prospectus") of the Fund on behalf of the Portfolios.
1.02 The Transfer Agent agrees that it will perform the following
services:
(a) The Transfer Agent shall, in accordance with procedures
established from time to time by agreement between the Fund on behalf of each
of the Portfolios, as applicable, and the Transfer Agent:
(i) receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian of the Fund
authorized pursuant to the Agreement and Declaration
of Trust and Bylaws of the Fund (the "Custodian");
(ii) pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the
appropriate Shareholder account;
1
<PAGE> 4
(iii) receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
(iv) at the appropriate time as and when it receives
monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over in
the appropriate manner such monies as instructed by
the Fund;
(v) effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
Shares;
(vii) maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(viii) record the issuance of Shares of the Fund and
maintain pursuant to SEC Rule 17Ad-10(e) a record of
the total number of Shares which are authorized,
based upon data provided to it by the Fund, and
issued and outstanding.
The Transfer Agent shall also provide the Fund on a regular basis with
the total number of Shares which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of Shares, to monitor the
issuance of such Shares or to take cognizance of any laws relating to the issue
or sale of such Shares, which function shall be the sole responsibility of the
Fund.
(b) In addition to the services set forth in the above paragraph
(a), the Transfer Agent shall: (I) perform the customary services of a transfer
agent, including but not limited to: maintaining all Shareholder accounts,
mailing Shareholder reports and prospectuses to current Shareholders, preparing
and mailing confirmation forms and statements of accounts to Shareholders for
all purchases and redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information.
(c) Procedures as to who shall provide certain of these services
in Article 1 may be established from time to time by agreement between the Fund
on behalf of each Portfolio and the Transfer Agent. The Transfer Agent may at
times perform only a portion of these services and the Fund or its agent may
perform these services on the Fund's behalf.
ARTICLE 2
FEES AND EXPENSES
2.01 For performance by the Transfer Agent pursuant to this
Agreement, the Fund agrees on behalf of each of the Portfolios to pay the
Transfer Agent fees as set out in the initial fee schedule attached hereto.
Such fees and out-of-pocket expenses and advances identified under Section 2.02
below may be changed from time to time subject to mutual written agreement
between the Fund and the Transfer Agent.
2
<PAGE> 5
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse the Transfer Agent for out-of-pocket expenses or advances
incurred by the Transfer Agent for the items set out in the fee schedule
attached hereto. In addition, any other expenses incurred by the Transfer
Agent at the request or with the consent of the Fund, will be reimbursed by the
Fund on behalf of the applicable Shares.
2.03 The Fund agrees on behalf of each of the Portfolios to pay all
fees and reimbursable expenses following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to the Transfer Agent by
the Fund at least seven (7) days prior to the mailing date of such materials.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the state of Delaware.
3.02 It is duly qualified to carry on its business in Delaware and
in Texas.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
3.06 It is registered as a Transfer Agent as required by the
federal securities laws.
3.07 This Agreement is a legal, valid and binding obligation to it.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
4.01 It is a business trust duly organized and existing and in good
standing under the laws of Delaware.
4.02 It is empowered under applicable laws and by its Agreement and
Declaration of Trust and Bylaws to enter into and perform this Delaware.
4.03 All corporate proceedings required by said Agreement and
Declaration of Trust and Bylaws have been taken to authorize it to enter into
and perform this Agreement.
3
<PAGE> 6
4.04 It is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended on behalf of each of the Portfolios is currently effective and will
remain effective, with respect to all Shares of the Fund being offered for
sale.
ARTICLE 5
INDEMNIFICATION
5.01 The Transfer Agent shall not be responsible for, and the Fund
shall on behalf of the applicable Portfolio, indemnify and hold the Transfer
Agent harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) all actions of the Transfer Agent or its agents or
subcontractors required to be taken pursuant to this Agreement, provided that
such actions are taken in good faith and without negligence or willful
misconduct;
(b) the Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder;
(c) the reliance on or use by the Transfer Agent or its agents or
subcontractors of information, records and documents or services which (I) are
received or relied upon by the Transfer Agent or its agents or subcontractors
and/or furnished to it or performed by on behalf of the Fund, and (ii) have
been prepared, maintained and/or performed by the Fund or any other person or
firm on behalf of the Fund; provided such actions are taken in good faith and
without negligence or willful misconduct;
(d) the reliance on, or the carrying out by the Transfer Agent or
its agents or subcontractors of any instructions or requests of the Fund on
behalf of the applicable Portfolio; provided such actions are taken in good
faith and without negligence or willful misconduct; or
(e) the offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
5.02 The Transfer Agent shall indemnify and hold the Fund harmless
from and against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to any action
or failure or omission to act by the Transfer Agent as result of the Transfer
Agent's lack of good faith, negligence or willful misconduct.
5.03 At any time the Transfer Agent may apply to any officer of the
Fund for instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Transfer
Agent under this Agreement, and the Transfer Agent and its agents or
subcontractors shall not be liable to and shall be indemnified by the Fund on
behalf
4
<PAGE> 7
of the applicable Portfolio for any action taken or omitted by it in reliance
upon such instructions or upon the opinion of such counsel. The Transfer Agent
shall be protected and indemnified in acting upon any paper or document
furnished by or on behalf of the Fund, reasonably believed to be genuine and to
have been signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided to the Transfer Agent or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have
notice of any change of authority of any person, until receipt of written
notice thereof from the Fund.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to
the other for any damages resulting from such failure to perform or otherwise
from such causes.
5.05 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for
any consequential damages arising out of any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim. The party
seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent.
ARTICLE 6
COVENANTS OF THE FUND AND THE TRANSFER AGENT
6.01 The Fund shall, upon request, on behalf of each of the
Portfolios promptly furnish to the Transfer Agent the following:
(a) a certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of the Transfer Agent and the execution
and delivery of this Agreement; and
(b) a copy of the Agreement and Declaration of Trust and Bylaws of
the Fund and all amendments thereto.
6.02 The Transfer Agent shall keep records relating to the services
to be performed hereunder, in the form and manner as it may deem advisable. To
the extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the Rules thereunder, the Transfer Agent agrees that all such
records prepared or maintained by the Transfer Agent relating to the services
to be performed by the Transfer Agent hereunder are the property of the Fund
and will be preserved, maintained and made available in accordance with such
Section and Rules, and will be surrendered promptly to the Fund on and in
accordance with its request.
5
<PAGE> 8
6.03 The Transfer Agent and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.04 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund and to secure instructions from an authorized officer of the Fund as to
such inspection. The Transfer Agent reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder records
to such person.
ARTICLE 7
TERMINATION OF AGREEMENT
7.01 This Agreement may be terminated by either party upon sixty
(60) days written notice to the other.
7.02 Should the Fund exercise its right to terminate this
Agreement, all out-of-pocket expenses associated with the movement of records
and material will be borne by the Fund on behalf of the applicable Portfolios.
Additionally, the Transfer Agent reserves the right to charge for any other
reasonable expenses associated with such termination and/or a charge equivalent
to the average of three (3) months' fees.
ARTICLE 8
ADDITIONAL FUNDS
8.01 In the event that the Fund establishes one or more series of
Shares in addition to the Portfolios with respect to which it desires to have
the Transfer Agent render services as transfer agent under the terms hereof, it
shall so notify the Transfer Agent in writing, and if the Transfer Agent agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
ARTICLE 9
ASSIGNMENT
9.01 Except as provided in Section 9.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
9.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
9.03 The Transfer Agent may, without further consent on the part of
the Fund, subcontract for the performance hereof with any entity which is duly
registered as a transfer agent pursuant to Section 17A(c)(1) of the Securities
Exchange Act of 1934 as amended ("Section 17A(c)(1)"); provided, however, that
the Transfer Agent shall be as fully responsible to the Fund for the acts and
omissions of any subcontractor as it is for its own acts and omissions.
6
<PAGE> 9
ARTICLE 10
AMENDMENT
10.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution
of the Board of Trustees of the Fund.
ARTICLE 11
TEXAS LAW TO APPLY
11.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Texas.
ARTICLE 12
MERGER OF AGREEMENT
12.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
ARTICLE 13
COUNTERPARTS
13.01 This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
ARTICLE 14
LIMITATION OF SHAREHOLDER LIABILITY
14.01 Notice is hereby given that this Agreement is being executed
by the Fund by a duly authorized officer thereof acting as such and not
individually. The obligations of this Agreement are not binding upon any of
the Trustees, officers, shareholders or the investment advisor of the Fund
individually but are binding only upon the assets and property belonging to the
Fund, on its own behalf or on behalf of a Portfolio, for the benefit of which
the Trustees or officers have caused this Agreement to be executed.
7
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
<TABLE>
<S> <C>
AIM SERIES TRUST
By:
----------------------------------------
President
ATTEST:
- -------------------------------------------------
Assistant Secretary
A I M FUND SERVICES, INC.
By:
----------------------------------------
President
ATTEST:
- -------------------------------------------------
Assistant Secretary
</TABLE>
8
<PAGE> 11
FEE SCHEDULE
1. For performance by the Transfer Agent pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Transfer Agent an
annualized fee for shareholder accounts that are open during any monthly
period as set forth below, and an annualized fee of $.70 per shareholder
account that is closed during any monthly period. Both fees shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of
1/12 of the annualized fee for all such accounts.
<TABLE>
<CAPTION>
Per Account Fee
Fund Type Annualized
--------- ----------
<S> <C>
Class A Annual/Semi-Annual Dividends $15.15
Class A Quarterly & Monthly Dividend 17.15
Class A Daily Accrual 19.65
Class B 19.65
Class C 19.65
Advisor Class 19.65
</TABLE>
2. The Transfer Agent shall provide the various mutual funds that are advised
by A I M Advisors, Inc. Or its affiliates and distributed by A I M
Distributors, Inc. (the "AIM Funds") with an annualized credit to the
monthly billings of (a) $1.50 for each open account in excess of 100,000
open AIM Funds Accounts up to and including 125,000 open AIM Funds
Accounts; (b) $1.75 for each open account in excess of 125,000 open AIM
Funds Accounts up to and including 150,000 open AIM Funds Accounts; 8
$2.00 for each open AIM Funds Account in excess of 150,000 open AIM Funds
Accounts up to and including 200,000 open AIM Funds Accounts; (d) $2.25
for each open AIM Funds Account in excess of 200,000 open AIM Funds
Accounts up to and including 500,000 open AIM Funds Accounts; (e) $2.50
for each open AIM Funds Account in excess of 500,000 open AIM Funds
Accounts up to and including 1,000,000 open AIM Funds Accounts; and (f)
$3.00 for each open AIM Funds Account in excess of 1,000,000 open AIM
Funds Accounts.
3. In addition, beginning on the anniversary date of the execution of the
Remote Services Agreement with The Shareholder Services Group, Inc., and
on each subsequent anniversary date, the per account fees shall each be
increased by a percentage amount equal to the percentage increase in the
then current Consumer Price Index (all urban consumers) or its successor
index, though in no event shall such increase be greater than a 7%
increase over the previous fees.
4. Other Fees
<TABLE>
<S> <C>
IRA Annual Maintenance Fee $10 per IRA account per year (paid by investor per tax I.D.
number).
Balance Credit The total fees due to the Transfer Agent from all funds
affiliated with the Fund shall be reduced by an amount equal
to one half of investment income earned by the Transfer
Agent on the DDA balances of the disbursement accounts for
those funds.
</TABLE>
9
<PAGE> 12
<TABLE>
<S> <C>
Remote Services Fee $3.60 per open account per year, payable monthly and $1.80
per closed account per year, payable monthly.
</TABLE>
5. OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
<TABLE>
<S> <C>
- Microfiche/microfilm production & equipment
- Magnetic media tapes and freight
- Printing costs, including, without limitation, certificates, envelopes, checks, stationery, confirmations
and statements
- Postage (bulk, pre-sort, ZIP+4, bar coding, first class) direct pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all lease, maintenance and line costs
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment and any expenses incurred in connection with
such terminals and lines
- Duplicating services
- Courier services
- Banking charges, including without limitation incoming and outgoing wire charges @ $8.00 per wire
- Rendering fees as billed
- Federal Reserve charges for check clearance
- Record retention, retrieval and destruction costs, including, but not limited to exit fees charged by
third party record keeping vendors
- Third party audit reviews
- All client specific Systems enhancements will be at the Funds' cost.
- Certificate Insurance
- Such other miscellaneous expenses reasonably incurred by the Transfer Agent in performing its duties and
responsibilities under this Agreement
- Check writing fee of $.75 per check redemption.
</TABLE>
The Fund agrees that postage and mailing expenses will be paid on the day
of or prior to mailing. In addition, the Fund will promptly reimburse the
Transfer Agent for any other unscheduled expenses incurred by the Transfer
Agent whenever the Fund and the Transfer Agent mutually agree that such
expenses are not otherwise properly borne by the Transfer Agent as part of
its duties and obligations under the Agreement.
10
<PAGE> 1
EXHIBIT 9(a)(2)
REMOTE ACCESS
-------------
AND
---
RELATED SERVICES AGREEMENT
--------------------------
AGREEMENT dated as December 23, 1994 between each registered investment
company listed on the signature pages hereof, either for itself or, with respect
to each such company that is a series investment company, on behalf of each of
the series or class named on the signature pages hereof (the "Fund") and THE
SHAREHOLDER SERVICES GROUP, INC. ("TSSG"), a Massachusetts corporation with
principal offices at One Exchange Place, Boston, Massachusetts 02109.
W I T N E S S E T H
-------------------
That for and in consideration of the mutual promises hereinafter set forth,
the Fund and TSSG agree as follows:
1. Appointment of TSSG. The Fund appoints TSSG as servicing agent to provide
and support remote terminal access through dedicated transmission lines to
its computerized data processing record keeping system for Fund shareholder
accounting more fully described on the attached Schedule A (the "TSSG
System") installed on TSSG computer hardware and using TSSG software ("TSSG
Facilities") to provide and support remote terminal access to the TSSG
System and the TSSG Facilities for the maintenance of Fund shareholder
records, processing of information and generation of information with
respect thereto. TSSG hereby accepts such appointment for the compensation
described below.
2. Oral and Written Instructions. "Written Instructions" shall mean a written
communication signed by a person reasonably believed by TSSG to be a person
named on the list of authorized persons as it may be amended by amendment
provided by the Fund to TSSG from time to time ("Schedule B"). "Oral
Instructions" shall mean instructions, other than Written Instructions,
actually received by TSSG from a person reasonably believed by TSSG to be
an Authorized Person listed on Schedule B. Written communication shall
include manually executed originals and authorized electronic
transmissions, including telefacsimile of a manually executed original or
other process.
3. Compensation.
(a) The Fund will compensate TSSG for the performance of its obligations
hereunder in accordance with the Fee Schedule attached hereto as
Schedule C. Such fees may be adjusted from time to time by attaching
to or substituting for Schedule C a revised Fee Schedule, dated and
signed by an authorized officer of each party hereto.
<PAGE> 2
(b) In addition to the fees payable pursuant to Schedule C, the Fund will
pay all out-of-pocket expenses incurred by TSSG in performing its
duties hereunder. Out-of-pocket expenses shall include the items
specified in the written schedule of out-of-pocket charges attached
hereto as Schedule D. Upon written approval of the Fund, Schedule D
may be modified by TSSG. The Fund agrees to approve all reasonable
changes in Schedule D. Unscheduled out-of-pocket expenses shall be
limited to those out-of-pocket expenses directly related to TSSG's
performance of its obligations hereunder.
(c) TSSG will provide an invoice as soon as practicable after the end of
each calendar month detailed in accordance with Schedule C and
Schedule D. The Fund will pay to TSSG the amount so billed within
fifteen (15) days after the Fund's receipt of the invoice.
4. Duties of TSSG.
(a) Subject to the provisions of this Agreement, the Fund hereby agrees to
use or employ the TSSG System and the TSSG Facilities to maintain
certain Fund shareholder records and generate output with respect to
the Fund's shareholders, and subject to the provisions of this
Agreement, TSSG will provide the use of the TSSG System and the TSSG
Facilities to maintain Fund shareholder records and generate such
output with respect to the Fund's shareholders.
(b) TSSG agrees to provide to the Fund at its facility located at Eleven
Greenway Plaza, Suite 1919, Houston, Texas 77046 or at such other
location as may be mutually agreed upon in writing by TSSG and the
Fund (the "Fund Facility") remote access to the use of information
processing capabilities of the TSSG System as it may be modified from
time to time by TSSG.
5. Changes and Modifications.
(a) During the term of this Agreement, TSSG will make available for Fund
use, without additional costs, all modifications and improvements to
the TSSG System (excluding those modifications and improvements TSSG
views as additional products and/or those developed exclusively for
other TSSG clients) made in the ordinary course of business. In
addition, TSSG will use its best efforts to make reasonable changes to
the TSSG System requested by the Fund, subject to payment of
additional fees as mutually agreed upon in writing and as reflected in
Schedule C.
(b) TSSG shall have the right, at any time, and from time to time, to
alter and modify any systems, programs, procedures or facilities used
or employed in performing its duties and obligations hereunder (a
"System Modification"), provided that no
2
<PAGE> 3
System Modification shall, without the consent of the Fund, materially
adversely change or affect the operations and procedures of the Fund
in using or employing the TSSG System or the TSSG Facilities
hereunder. TSSG will use its best efforts to notify the Fund in
writing at least five business days prior to implementing any System
Modification which impacts or effects AFS' day to day operations, and
in any event by 8 a.m. CST the following business day.
(c) TSSG agrees to make any System Modifications necessary to meet
federal, state or local government or self-regulatory organization
requirements ("Regulatory Adherence Enhancements") in a timely
fashion. TSSG agrees to advise the Fund promptly upon notification of
any change in or receipt of any information or advice concerning any
change in the requirements of any federal, state, local or
self-regulatory organization which might require such System
Modifications. The Fund shall obtain any additional software required
to comply with such changes in federal, state, and local government or
self regulatory organization requirements. Regulatory Adherence
Enhancements shall be limited to technically and commercially
practical System modifications which are within the scope of the
functions, capabilities and any database of the TSSG System. TSSG will
provide Regulatory Adherence Enhancements only after final
specification, agreed upon by TSSG, the Fund and affected third
parties, have been established and delivered to TSSG.
(d) During the term of this Agreement TSSG shall expend no less than
$1,000,000 (one million dollars) per calendar year for the enhancement
and maintenance of TSSG's recordkeeping and associated system that are
utilized by TSSG to provide services to the Fund under this Agreement
(or a successor Remote Service Agreement). At least once each calendar
year, TSSG shall provide the Fund with a schedule of the enhancements
planned by the TSSG for the succeeding 12 month period.
6. Duties of the Fund.
(a) The Fund will transmit all information and data required by TSSG
hereunder to the TSSG Facilities in the format and form specified by
TSSG, so that the output produced by the Fund shall be complete and
accurate when it is generated by the TSSG System and the TSSG
Facilities. The Fund shall be responsible and liable for the costs and
expenses of regenerating any output if the Fund provides nonconforming
or erroneous data or shall have failed to transmit any such data or
information or verify any such data and information when it is
generated by the TSSG System and the TSSG Facilities.
(b) In the event the Fund shall erroneously transmit information or shall
transmit incorrect information or data to the TSSG System or the TSSG
Facilities, the Fund
3
<PAGE> 4
shall correct such information and data and retransmit the same to the
TSSG System or to the TSSG Facilities. Upon consent of the Fund, which
shall not be unreasonably withheld, TSSG shall take the necessary
steps at Fund expense to correct any files affected by the original
incorrect transmission.
(c) In the event the TSSG System malfunctions or a TSSG programming error
(other than programming changes made pursuant to paragraph 5(a)
above), causes an error or mistake in any of the output generated by
the TSSG System under the terms of this Agreement, TSSG will, at its
expense, correct and retransmit such output so long as the Fund has
notified TSSG of such error or mistake within five (5) business days
of its discovery and the data used to generate such output is
available as set forth in Schedule E attached hereto.
If such data is available as set forth in Schedule E, the Fund shall
take reasonable necessary steps to manually correct any records due to
a TSSG system malfunction or programming error that TSSG is unable to
correct systematically and the parties shall mutually agree upon the
allocation of expenses related to such manual processing.
7. System Access and Training.
(a) TSSG shall provide the Fund on-line access as provided for and set
forth in the attached Schedule F, and agrees to meet the performance
standards set forth therein. Additional access to the TSSG System may
be arranged by mutual agreement of the parties.
(b) The Fund will reimburse TSSG for any reasonable costs and expenses
incurred for training hereunder. All travel and other out-of-pocket
expenses incurred by Fund personnel in connection with and during the
training periods shall be borne by the Fund.
8. Indemnification. TSSG shall not be responsible for and the Fund shall
indemnify and hold TSSG harmless from and against any and all claims,
costs, expenses (including reasonable attorneys' fees), losses, damages,
charges, payments and liabilities of any sort or kind which may be asserted
against TSSG or for which TSSG may be held to be liable (a "Claim")
arising out of or attributable to any of the following:
(a) Any actions of TSSG required to be taken pursuant to this Agreement
unless such Claim resulted from a negligent act or omission to act or
bad faith by TSSG in the performance of its duties hereunder.
(b) The Fund's failure to use and employ the TSSG System and the TSSG
Facilities in accordance with the procedures set forth in any on-line
documentation made
4
<PAGE> 5
available to the Fund, the Fund's failure to utilize the control
procedures set forth and described in the on-line user documentation,
or the Fund's failure to verify promptly reports or output received
through use of the TSSG System and the TSSG Facilities.
(c) The Fund's errors and mistakes in the use of the TSSG System, TSSG
Facilities and control procedures.
(d) TSSG's reasonable reliance on, or reasonable use of information, data,
records and documents received by TSSG from the Fund in the
performance of TSSG's duties and obligations hereunder.
(e) The reliance on, or the implementation of, any Written or Oral
Instructions or any other instructions or requests of the Fund.
(f) The Fund's refusal or failure to comply with the terms of this
Agreement, or any Claim which arises out of the Fund's negligence or
misconduct or the breach of any representation or warranty of the Fund
made herein.
(g) Unavailability of communications or utilities facilities or other
equipment failures provided TSSG has maintained such equipment
appropriately, Acts of God, acts of the public enemy,
governmentally-mandated priorities in allocating its services, labor
disputes, fires, floods, strikes, riots or war or other causes beyond
its control.
9. Standard of Care.
(a) TSSG shall at all times act in good faith and agrees to use its best
efforts within commercially reasonable standards to insure the
accuracy of all services performed under this Agreement, but assumes
no responsibility and shall not be liable for loss or damage due to
errors unless said errors are caused by its negligence, bad faith, or
willful misconduct or that of its employees.
(b) Notwithstanding the foregoing Section 9(a) or anything else contained
in this Agreement to the contrary, TSSG's liability hereunder shall,
in no event exceed four million dollars ($4,000,000.00).
The parties agree to review the limitation of liability provision set
forth in this Section 9(b) on an annual basis.
10. Instructions. TSSG may apply at any time to a person listed as an
Authorized Person identified on Schedule B for instructions with respect to
any matter arising in connection with this Agreement. TSSG may also consult
with legal counsel for the Fund or, at
5
<PAGE> 6
TSSG's expense, its own legal counsel with respect to actions to be taken
hereunder. TSSG shall not be liable for, and shall be indemnified by the
Fund against, any Claim arising from any action taken or omitted to be
taken by TSSG in good faith in reliance upon such instruction from the
Fund or upon the advice of such legal counsel.
11. Consequential Damages. In no event and under no circumstances shall either
party under this Agreement be liable to the other party for consequential
or indirect loss of profits, reputation or business or any other special
damages under any provision of this Agreement or for any act or failure to
act hereunder.
12. Covenants of TSSG.
(a) TSSG shall maintain the appropriate computer files of all required
information and data transmitted to the TSSG Facilities by the Fund,
provided, however, that TSSG shall not be responsible or liable for
any damage, alterations, modifications thereto or failure to maintain
the same if the Fund made, or TSSG made at the Fund's request, such
changes, alterations or modifications or if the Fund causes the
failure. It is expressly understood that all such shareholder records
transmitted by the Fund and maintained by TSSG remain the exclusive
property of the Fund.
(b) All information furnished by the Fund to TSSG is confidential and TSSG
agrees that it shall not disclose such information to any third party
except pursuant to Written or Oral Instructions received from the Fund
or to the extent that TSSG is required by law to make such disclosure.
13. Covenants of the Fund. The Fund shall utilize and employ all reasonable
control procedures available under the TSSG System of which the Fund may be
advised. The Fund will promptly advise TSSG of any errors or mistakes in
the data or information transmitted to the TSSG Facilities or in the
records maintained by TSSG or output generated hereunder. The Fund will
verify the accuracy of all output it receives consistent with industry
custom and practice by utilizing proper auditing procedures.
All information furnished to or obtained by the Fund pertaining to the TSSG
Facilities, the TSSG System, or TSSG procedures, data bases and programs is
confidential and proprietary to TSSG. The Fund shall not disclose such
information to any third party except to the extent that the Fund is
required by law to make such disclosures.
14. Term and Termination.
(a) This Agreement shall become effective on the date first set forth
above and shall continue in effect through December 31, 1997 ("Initial
Term").
6
<PAGE> 7
(b) Unless it is the intention of either party for this Agreement to
terminate upon the expiration of the Initial Term, within six (6)
months prior to the end of the Initial Term but no later than such
date, AIM and TSSG will negotiate diligently and in good faith and
either (i) enter into an agreement extending the term of this
Agreement; or (ii) enter into a new agreement for TSSG to provide
remote services substantially similar to those contemplated hereunder.
(c) Notwithstanding the foregoing, if a party hereto is guilty of a
material failure to perform its duties and obligations hereunder
(a "Defaulting Party") the other party (the "Non-Defaulting Party")
may give written notice thereof to the Defaulting Party, and if such
material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may
terminate this Agreement by giving thirty (30) days written notice of
such termination to the Defaulting Party. If TSSG is the
Non-Defaulting Party, its termination of this Agreement shall not
constitute a waiver of any other rights or remedies of TSSG with
respect to services performed prior to such termination or rights of
TSSG to be reimbursed for out-of-pocket expenses. In all cases,
termination by the Non-Defaulting Party shall not constitute a
waiver by the Non-Defaulting Party of any other rights it might have
under this Agreement or otherwise against the Defaulting Party.
15. Post-Termination Procedures. Upon termination for any reason by either
party to this Agreement TSSG shall promptly, at the Fund's expense, provide
immediate and full access to the Fund data files on magnetic tape in
machine readable form and shall cooperate with the Fund in its efforts to
transfer all such data files to another person chosen by the Fund. In
addition, TSSG agrees to return, at the expense of the terminating party,
all backup tapes and other storage media upon which Fund data is then
stored.
16. Amendment. This Agreement may only be amended or modified by written
agreement executed by both parties.
17. Assignment. This Agreement and any interest hereunder shall inure to
the benefit of and be binding upon the Parties and their respective
successors, legal representatives and permitted assigns including the
successor entity in any merger or reorganization of the Funds. Except as
otherwise expressly provided for in this Agreement, neither Party may
assign or delegate this Agreement or any of its rights or obligations
without the other Party's prior approval which shall not be unreasonably
withheld. Upon prior notice to the Fund, TSSG may assign this Agreement to
(i) any person in connection with the merger or consolidation of TSSG into
such person, or the sale of all or substantially all of the assets of TSSG
to such person or (ii) any direct or indirect subsidiary of First Data
Corporation in connection with any corporate reorganization. Any attempt to
assign, delegate or otherwise transfer this Agreement in violation of this
Section will be voidable by the other party.
7
<PAGE> 8
18. Subcontracting. TSSG may subcontract to agents the services required to be
performed pursuant to this Agreement and the Schedules hereto, if any. The
appointment of any such agent shall not relieve TSSG of its
responsibilities hereunder.
19. Use of TSSG's Name. The Fund shall not use TSSG's name in any Prospectus,
Statement of Additional Information, Shareholders's Report, sales
literature or other material relating to the Fund without TSSG's prior
written approval unless such use is required by law or merely refers in
accurate terms to the services rendered hereunder. Any reference to TSSG
shall include a statement to the effect that it is an indirect, wholly
owned subsidiary of First Data Corporation.
20. Use of the Fund's Name. Except as provided herein, TSSG shall not use the
name of the Fund, its Advisor or material relating to any of them on any
documents or forms (other than internal documents) without the Fund's prior
written approval unless such use is required by law or merely refers in
accurate terms to the services rendered hereunder.
21. Security.
(a) TSSG will provide the Fund with a User Identifier (also known as
"User I.D.") and a User Password. TSSG will also assign the initial
Operator Password to each of the Fund's employees who are authorized
to access the TSSG System. The Operator Passwords may be changed at
any time in the discretion of the Fund without any notice to or
knowledge of TSSG by using procedures set forth in the user manual.
(b) The Fund agrees that it is responsible for selection, use and
protection of the confidentiality of passwords; however, TSSG may for
security reasons at any time and from time to time, upon seven days
written notice to the Fund (or immediately upon notice by telephone,
confirmed in writing, in the event of an emergency), deny access to
the TSSG System until one or more User I.D.s is changed by the Fund.
(c) TSSG will provide the Fund with online procedures enabling the Fund to
reset passwords, correct password violations and add/change/delete
User I.D.s within existing security profiles.
(d) TSSG will use its best efforts to ensure that the Fund's data files
which are input into the TSSG System will remain confidential and
protected from unauthorized access by third persons. Specifically,
TSSG will adhere to its normal security procedures for protection of
computer-stored files or programs from unauthorized access. It is
agreed that such procedures will be subject to review by the Fund and
audit by its independent accountants and that TSSG will take under
advisement
8
<PAGE> 9
recommendations of such independent accountants concerning changes to
such procedures.
(e) The Fund or duly authorized independent auditors will have the right
upon 5 business days' notice under this Agreement to perform on-site
audits of records and accounts directly pertaining to Fund shareholder
accounts serviced by TSSG facilities in accordance with reasonable
procedures and at reasonable frequencies.
(f) The parties agree that all tapes, books, user manuals, instructions,
records, information and data pertaining to the business of the other
party, the TSSG System and the Fund clients services by the Fund which
are exchanged or received pursuant to the negotiation of or carrying
out of this Agreement shall remain confidential except to the extent
required by applicable laws, and shall not be voluntarily disclosed to
any other person and that all such tapes, books, reference manuals,
instructions, records, information and data in the possession of each
of the parties hereto shall be returned to the party from whom it was
obtained upon the termination or expiration of this Agreement.
(g) The Fund acknowledges that TSSG has proprietary rights in and to the
TSSG System and any other TSSG programs, data basis, supporting
documentation or procedures ("TSSG Protected Information") of which
the Fund or its employees or agents become aware as a result of the
Fund's access to the TSSG System or TSSG Facilities and that the TSSG
Protected Information constitutes confidential material and trade
secrets of TSSG. The Fund agrees to maintain the confidentiality of
the TSSG Protected Information. The Fund acknowledges that any
unauthorized use, misuse, disclosure or taking of TSSG Protected
Information which is confidential or which is a trade secret, whether
residing or existing internally or externally to a computer, computer
system or computer network, or the knowing and unauthorized accessing
or causing to be accessed of any computer, computer system or computer
network, may be subject to civil liabilities and criminal penalties
under applicable law. The Fund will advise all of its employees and
agents who have access to any TSSG Protected Information or to any
computer equipment capable of accessing TSSG Facilities of the
foregoing.
22. Additional Funds. In the event that additional funds, within the same family
as the Funds, are established ("Additional Funds") and such Additional Funds
desire to avail themselves of the benefits of and become a party to this
Agreement, the Additional Funds shall notify TSSG in writing, and if TSSG agrees
in writing, such Additional Funds shall become a party to this Agreement.
9
<PAGE> 10
23. Miscellaneous.
(a) Notices. Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or TSSG shall be
sufficiently given if addressed to that party and received by it at
its office set forth below or at such other place as it may from time
to time designate in writing.
To: AIM Family of Funds
c/o John Caldwell, President
AIM Fund Services, Inc.
Eleven Greenway Plaza, Suite 1919
Houston, Texas 77046
Attention: William Kleh, Secretary
with a copy to:
Fund Legal Department at the same address
Attention: Carol Relihan, VP and General Counsel
To: The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Attention: Robert F. Radin, President
with a copy to:
General Counsel at the same address
(b) Successors. This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors upon the parties
hereto, and their respective successors and assigns; provided,
however, that this Agreement may not be assigned without the written
consent of the other party.
(c) Governing Law. This Agreement shall be governed exclusively by and
interpreted in accordance with the internal substantive laws of the
Commonwealth of Massachusetts without reference to the choice of the
law provisions thereof.
(d) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated.
10
<PAGE> 11
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all
of which together will constitute only one instrument.
(f) Captions. The captions of this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(g) Sole Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof.
(h) Specific Performance. Each of the parties hereto agrees that the other
party would be irreparably damaged by breaches of this Agreement
relating to confidential or proprietary information and accordingly
each agrees that each of them is entitled, without bond or other
security, to an injunction or injunctions to prevent breaches of the
provisions of this Agreement relating to such information.
(i) It is understood and agreed that all services performed hereunder by
TSSG shall be as an independent contractor and not as an employee,
joint venturer, or partner of the Fund. This Agreement is between the
Fund and TSSG, and there are no third party beneficiaries hereto.
(j) Limitation of Shareholder Liability. Notice is hereby given that the
Declaration of Trust of each Fund which is a Delaware business trust,
is on file with the Secretary of State of Delaware, and this Agreement
was executed on behalf of each such Trust by a duly authorized officer
thereof acting as such and not individually. The obligations of this
Agreement are not binding upon any of the Trustees, officers or
Shareholders of any such Trust individually but are binding only upon
the assets and property of the respective portfolio of each such Trust
for the benefit of which the Trustees have caused this Agreement to be
executed.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
AIM EQUITY FUNDS, INC.
on behalf of the Retail Classes of its AIM Charter
Fund, AIM Constellation Fund, AIM Weingarten Fund
and AIM Aggressive Growth Fund Portfolios
By: /s/ ROBERT H. GRAHAM
------------------
Title: President
---------------
AIM FUNDS GROUP,
on behalf of the Class A and Class B Shares of its
AIM Balanced Fund, AIM Government Securities Fund,
AIM Growth Fund, AIM High Yield Fund, AIM Income
Fund, AIM Municipal Bond Fund, AIM Utilities Fund
and AIM Value Fund portfolios and on behalf of the
Class A, Class B and Class C Shares of its AIM
Money Market Fund Portfolio
By: /s/ ROBERT H. GRAHAM
------------------
Title: President
---------------
AIM INTERNATIONAL FUNDS, INC.,
on behalf of the Class A and Class B shares of its
AIM International Equity Fund, AIM Global
Aggressive Growth Fund, AIM Global Growth Fund and
AIM Global Income Fund Portfolios
By: /s/ ROBERT H. GRAHAM
---------------------
Title: President
------------------
12
<PAGE> 13
AIM INVESTMENT SECURITIES FUNDS,
on behalf of its AIM Adjustable Rate Government
Fund portfolio and the AIM Limited Maturity
Treasury Shares class of its Limited Maturity
Treasury Portfolio
By: /s/ ROBERT H. GRAHAM
---------------------
Title: President
------------------
AIM TAX-EXEMPT FUNDS, INC.,
on behalf of its AIM Tax-Exempt Cash Fund and AIM
Tax-Exempt Bond Fund of Connecticut portfolios and
the AIM Tax-Free Intermediate Shares class of its
Intermediate Portfolio
By: /s/ ROBERT H. GRAHAM
---------------------
Title: President
------------------
THE SHAREHOLDER SERVICES GROUP, INC.
By: /s/ JACK PUTNER
----------------
Title: EVP - COO
-------------
13
<PAGE> 14
SCHEDULE A
SYSTEM FEATURES AND CAPABILITIES
The FSR System consists of computer hardware, operating system software and
application software which contains functions as defined below. The operating
environment configuration consists of IBM-compatible mainframe computers
running on an MVS operating system. The configuration includes controllers,
direct access storage devices, tape drives, security access software and other
operating system hardware and software that enable TSSG to meet the contractual
commitments herein.
The Transfer Agent Application includes Job Control Language (JCL), Catalog
Procedures (PROCS) and program modules written primarily in COBOL.
The FSR Transfer Agency System supports the following subsystems and third
party systems:
NSCC (National Securities Clearing Corporation) support:
- FundSERV
- Networking
- Commissions
- Exchanges
- ACATS (Automated Customer Account Transfer System)
- TNET
Cost basis accounting
UNISYS Interface
Sales file download
Price Waterhouse Blue Sky download
File downloads to support DDA (Demand Deposit Account) Reconciliation
<PAGE> 15
Year-End Statements and Tax Reporting:
- 1099D
- 1099R
- 1042S
- 5498
- 1099B
Transmission send/receive functionality for broker/dealers and other third
parties
Electronic Funds Transfer processing to move in and out of funds using automated
clearing house facilities
KMS Microfilm Interface
Third part interfaces with:
Applied Mailing Systems for print/mail support
Microdata for checkbook production
Mellon and Texas Commerce for banking services
Other third party software packages i.e. ACE/DISC
<PAGE> 16
SCHEDULE B
AIM FAMILY OF FUNDS - LIST OF AUTHORIZED PERSONS
/s/ ROBERT H. GRAHAM
-----------------------
Robert Graham
President, A I M Management Group Inc.
/s/ JOHN CALDWELL (JACK)
------------------------
Jack Caldwell
President, A I M Fund Services, Inc.
/s/ CAROL F. RELIHAN
-----------------------
Carol Relihan
Secretary and General Counsel,
A I M Management Group Inc.
/s/ NANCY MARTIN
-----------------------
Nancy Martin
Counsel, A I M Management Group Inc.
<PAGE> 17
SCHEDULE C
FEE SCHEDULE
I. SHAREHOLDER ACCOUNT FEES. The fund shall pay the following fees
("Shareholder Account Fees"):
For the period beginning on the date of this Agreement, and continuing through
December 31, 1997, the Fund shall pay TSSG an annualized fee of $3.60 per
shareholder account that is open during any monthly period ("Open Account
Fee"). The Fund also shall pay TSSG an annualized fee of $1.80 per shareholder
account that is closed during any monthly period ("Closed Account Fee") (The
Open Account Fees and the Closed Account Fees hereafter collectively referred
to as "Shareholder Account Fees"). The Shareholder Account Fees shall be billed
by TSSG monthly in arrears on a prorated basis of 1/12 of the annualized fee
for all such accounts.
In addition, beginning on the one year anniversary date of this Agreement, and
on each yearly anniversary date thereafter, the Shareholder Account fees may be
increased by TSSG in an amount equal to the lesser of (i) the cumulative
percentage increase in the Consumer Price Index for all Urban Consumers (CPI-U)
U.S. City Average, All Items (unadjusted -- (1982-84 + 100), published by the
U.S. Department of Labor, or (ii) seven percent (7%) of the Shareholder Account
Fees charged by TSSG to the Fund for the preceding twelve (12) month period.
II. FEES FOR DEDICATED PROGRAMMING SUPPORT
TSSG and the Fund will jointly determine the level of dedicated system
resources required to meet the Fund's enhancement priorities. At the Fund's
expense, TSSG agrees to use reasonable efforts to make dedicated programming
support available for all projects required by the Fund. The amount of the
resources required and the projects to be worked on shall be determined jointly
based upon joint periodic review of project requirements; however, the Fund
will decide the priorities which will be assigned to each project and will
determine what projects the dedicated resources are to work on. Such resources
will be charged to the Fund at the rates set forth below. All enhancement,
improvements, modifications or new features added to the TSSG System shall be,
and shall remain, the confidential, exclusive property of, and proprietary to,
TSSG. Request for software changes may be initiated by those representatives of
the Fund identified in Exhibit 1 of this Schedule C. The Fund will use its best
efforts to notify TSSG in writing of requests for software changes within 72
hours of an initial verbal request. TSSG reserves the right to stop work on a
request for which written specifications have not been received.
1
<PAGE> 18
a. SUPPORT TO BE PROVIDED TO THE FUND FREE OF CHARGE. TSSG will provide
the following support at no additional cost to the fund:
1. Coding to correct deficiencies in the system, unless such deficiencies
are included in item (II)(b)(9) below in which event the Fund will be
charged for such services. A system deficiency is defined as a system
process which does not operate according to the design of the computer
application or system specifications. To correct system deficiencies,
TSSG will, at its own expense, expend whatever resources are necessary
to analyze the deficiency and apply an appropriate remedy, in the form
of corrected application code as expeditiously as possible. An
alternate process, in the form of a functional work around, may be a
suitable substitute for the actual system fix, if the level of effort
to develop the system fix is deemed to be impractical or the elapsed
time to develop and apply the fix extends beyond the reasonable time
needed. For deficiencies identified by the Fund, the use of a
functional work around as an alternate process shall be mutually agreed
upon by the parties.
TSSG will evaluate all reported referrals, to validate deficiency
status or reclassify as a system enhancement, based on the above
definition.
2. Simple Maintenance determined to be core processing.
3. TSSG generated (i.e., internal) requests to extend system
functionality and ensure industry competitiveness.
4. Enhancements required to comply with regulatory changes; provided,
however, TSSG will only make such changes to the extent that they are
technically and commercially practical and are within the scope of the
software functions, capabilities and database.
b. SUPPORT TO BE PROVIDED TO THE FUND, BUT WHICH WILL BE BILLED AS
"DEDICATED PROGRAMING SUPPORT": The following activities are examples
of "dedicated programming support" which will be billed to the Fund:
1. Customized form output (i.e., statements, confirmation statements,
commission statements).
2. Customized reports.
3. Addition of new features (enhancements) requested by the Fund.
4. Addition of existing features not used by the Fund.
5. Addition of new funds to the fund group.
6. Customized year-end processing.
7. Conversions from other systems to FSR subsequent to initial funds
being live.
(continued on next page)
2
<PAGE> 19
8. Clean-up/Recovery project resulting from Fund error or causes beyond
the reasonable control of either party.
9. System "fixes" - coding to correct errors attributable to code
developed, and currently maintained by the dedicated teams.
10. Customization of existing functions specific to the Fund.
11. Program documentation as requested by the Fund.
Software Exclusivity. The Fund may choose to have exclusive use of
enhancement software developed by its dedicated programming staff. Such
exclusivity would extend for a period of nine (9) months from the date the
enhancement is placed into the production libraries. Software exclusivity
would be waived if the Fund accepts either of the following conditions:
a). If prior to implementation, TSSG or other TSSG clients agree to share
in the expense of the enhancements.
b). At any time during the 9 months following implementation, TSSG or
other TSSG clients agree to share the expense for the enhancements.
Access and Capability. The Funds' dedicated programmers will have access
and capability to update any part of the System. However, depending on the
skill set of the programmers, as well as the scope of the requested
enhancement, it may be in the best interest of both the Fund and TSSG to
utilize non-dedicated programmers to address certain enhancements. In
addition, because many programs are shared by multiple clients, some
enhancements may require approval from those clients. These enhancements
should be handled on an item by item basis.
c. FEES FOR DEDICATED PERSONNEL WHICH WILL BE BILLED TO THE FUND. TSSG
will bill the Fund monthly in arrears on a prorated basis of 1/12 of
the following annualized charges for each person dedicated to the
following positions:
<TABLE>
<S> <C>
Manager $100,000
Programmer $ 90,000
Business System Analyst/Tester $ 85,000
Non-dedicated programmer-hourly charge $100 per hour
</TABLE>
TSSG may adjust these salaries on the anniversary date of this agreement to
reflect salary increases, provided that they do not exceed seven percent (7%)
of the fees charged to the Fund for the identical positions during the
immediately preceding twelve (12) month period.
3
<PAGE> 20
SCHEDULE C
EXHIBIT 1
AIM FAMILY OF FUNDS
AUTHORIZED PERSONS REQUESTING
SYSTEM MODIFICATIONS
/s/ JOHN CALDWELL
-------------------------
John Caldwell
/s/ RICHARD SNYDER
---------------------
Richard Snyder
/s/ JOSEPH CHARPENTIER
----------------------
Joseph Charpentier
/s/ MARC VARGAS
---------------------
Marc Vargas
4
<PAGE> 21
SCHEDULED
OUT-OF-POCKET EXPENSES
The Fund shall reimburse TSSG monthly for applicable out-of-pocket expenses,
including, but not limited to the following items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Telephone and telecommunication cost, including all lease, maintenance
and line costs
- NSCC transaction charges at $.15/per financial transaction
- Shipping, Certified and Overnight mail and insurance
- Year-End form production and mailings
- Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
- Duplicating services, as per-approved by the Fund
- Courier services
- Due Diligence Mailings
- Rendering fees as billed
- Overtime, as pre-approved by the Fund
- Temporary staff, as pre-approved by the Fund
- Travel and entertainment, as pre-approved by the Fund
- Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
- Third party audit review
- All conversion costs: including System start up costs, but excluding
costs associated with conversations between TSSG systems.
- Such other miscellaneous expenses reasonably incurred by TSSG in
performing its duties and responsibilities under this Agreement. Such
expenses incurred with consent of the Fund, not to be unreasonably
withheld.
- The costs associated with the Year-End Support Services set forth on
the attached Exhibit 1 of this Schedule D.
- The costs associated with the Broker Dealer Support Services set forth
on the attached Exhibit 2 of this Schedule D.
<PAGE> 22
EXHIBIT 1 OF SCHEDULE D
Year-End Support Services: Flat rate of $.12/per shareholder account open as of
December 31, 1994.
The services listed below will be performed by TSSG for the Fund in support of
reporting for tax year 1994 and compliance mailings for calendar year 1994.
TSSG assumes responsibility for performing the services in compliance with
current IRS rules and regulations.
(a) Up-front year-end planning and communication of year-end related system
modifications.
(b) Production of IRS required tax forms and amended/corrected tax forms as
requested by the Fund.
(c) Production of IRS required 1099 magnetic tape filings.
(d) Production of tax forms on microfiche.
(e) Maintenance of year-end data files and the handling of transaction code
updates to those files.
(f) Submission of year-end jobs.
(g) B-notice processing as follows:
- receipt of B-notice listing from IRS or
- AFS upload of data entry of all accounts to B-Notice subsystem
- execution and generation of B-Notice defense reports
- analysis of B-Notice Defense Reports to ensure accurate coding
- coordination of mailings with vendor, including generation of vendor
tapes
- notification to Client Services of anticipated and actual mailing
dates, including volume, sample letters and confirmation of the date
backup withholding will be imposed if no response is received
- systematic upload of W-9 responses as volumes warrant
(h) Correction processing resulting from the monthly review of the year-end
files - "balancing."
(i) Production of cost basis information on 1099B forms.
(j) All required state filings as requested by the Fund.
(k) All IRS required mailings requested by the Fund: B-Notice, Safe Harbor,
W-9, TEFRA election, IRS Penalty Notice, and TIN solicitation.
<PAGE> 23
EXHIBIT 1 OF SCHEDULE D (cont'd)
(1) C-Notice processing as follows:
o receipt of C-Notice; imposition and release letters as received
from Fund or IRS
o performance of search function to identify all accounts associated
with the notice
o provide written instructions to Fund for proper account coding
(m) Initialization of Fund File in support of balancing tax reporting data
<PAGE> 24
EXHIBIT 2 OF SCHEDULE D
Broker/Dealer Support: Annualized fee of $.03/per shareholder account open
during any monthly period.
(a) NSCC Testing
(b) Back-up for NSCC redemption release
(c) Research and Problem Resolution
(d) Compliance and Support
<PAGE> 25
SCHEDULE E
DATA RETENTION AND RECOVERY STANDARDS
Data files included in the System are backed up according to a defined
retention schedule. This ensures availability of data for processing and
application recovery as well as compliance with regulatory requirements.
Critical files that are included in the retention process:
Shareholder Master
Shareholder History
Fund File
Dealer File
Global File
Certificate File
Broker/Client Cross Reference File
Additional Address File
Maintenance History File
Blue Sky Master
Price File
Rate File
Order Clearance File
These files are backed up as follows: daily and retained for six generations;
weekly and retained for 5 generations. The Shareholder Master, Shareholder
History and Fund Files are also backed up annually and retained for 7
generations.
In addition, the Acceptance File containing post-processing daily activity, and
the Daily File containing pre-processing transaction input, are backed up daily
and retained for six generations.
<PAGE> 26
SCHEDULE F
SYSTEM AVAILABILITY STANDARDS
These systems standards shall apply on business days.
<TABLE>
<S> <C>
o On-line systems availability between 7:00 a.m. and 7:00 p.m. CST - 95% measured monthly.
o Average response time (7:00 a.m. to 7:00 p.m. CST) of 3 seconds or less, in response to the system
employed by A I M Fund Services, Inc. as of September 1. 1994 - 95% measured monthly.
o Daily report bundles in queue for transmission no later than 7:00 a.m. CST each business day - 95%
measured monthly each bundle measured separately.
o Daily job PFSRXOED containing the Acceptance File download in queue for transmission no later than 4:00
a.m. CST each business day - 95% measured monthly.
o Daily job PFSRXCAD containing the Cap Stock File download in queue for transmission no later than 6:30
a.m. CST each business day - 95% measured monthly.
o Weekly job PFSXOHW containing the Dealer File download in queue for transmission no later than 9:00
a.m. CST each Saturday - 95% measured quarterly.
</TABLE>
<PAGE> 1
EXHIBIT 9(a)(3)
AMENDMENT NUMBER 1 TO THE REMOTE
ACCESS AND RELATED SERVICES AGREEMENT
This Amendment Number 1 effective October 4, 1995 is made to the
Remote Access and Related Services Agreement dated December 23, 1994 (the
"Remote Agreement") by and between each registered investment company listed on
the signature pages hereof, either for itself or, with respect to each such
company that is a series investment company, on behalf of each of the series or
class named on the signature pages hereof (the "Fund") and THE SHAREHOLDER
SERVICES GROUP, INC. ("TSSG"), a Massachusetts corporation with principal
offices at One Exchange Place, Boston, Massachusetts 02109.
WHEREAS, the Fund desires to incorporate any changes or deletions to
those registered investment companies listed on the signature page of the
Remote Agreement as set forth on the signature page hereof;
WHEREAS, the Fund in connection with its access to the TSSG System,
desires to access and use TSSG's proprietary software known as the Structured
Query Language Application Programming Interface Product Release 5.0 (the
"SQL/API Product"); and
WHEREAS, TSSG desires to provide such access to the Fund solely in
conjunction with the Fund's use of the TSSG System.
In consideration of their mutual promises contained herein, the Fund
and TSSG agree to modify the Remote Access and Related Services Agreement (the
"Remote Agreement") as follows:
1. TSSG grants to the Fund a non-transferable and non-exclusive license
to access and use TSSG's SQL/API Product, maintained on the TSSG
System at the TSSG Facility, solely to process data with respect to
the Fund's internal business. The Fund is authorized to use the
SQL/API product only in connection with the Fund's remote use of the
TSSG System. The Fund shall be prohibited from the further sale,
lease, transfer, license or sub-license, assignment or marketing in
any manner of the SQL/API Product, or any other proprietary software
used in conjunction with the TSSG System. The Fund shall also be
prohibited from the sale, lease, transfer, license, sub-license,
assignment, or marketing in any manner of any software product
developed in conjunction with the SQL/API Product.
2. It is acknowledged that the Fund acquires only the right to use the
SQL/API Product while the Remote Agreement is in effect between the
parties and such right and said license shall terminate upon
termination of the Remote Agreement. The Fund acknowledges that it
does not acquire any rights of ownership in the SQL/API Product. This
Agreement and the license granted pursuant hereto may not be assigned,
sublicensed or transferred.
<PAGE> 2
3. The Fund shall not have the right to use the SQL/API Product other
than in connection with the use of the TSSG System in compliance with
the Remote Agreement. The Fund may use the SQL/API Product to access
the TSSG System using only TSSG Proprietary Software or software
developed internally by the Fund.
4. EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS AMENDMENT, TSSG MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, TO THE FUND OR ANY
OTHER PERSON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING
QUALITY, SUITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR OTHERWISE (IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR
USAGE OF TRADE) OR ANY SERVICES PROVIDED UNDER THIS AGREEMENT.
5. Infringement Indemnity TSSG shall defend, at its expense, any action
brought against the Fund to the extent that is based on a claim that
the SQL/API Product infringes a United States copyright or duly issued
patent, or misappropriates the trade secrets of a third party. TSSG
shall indemnify and hold harmless the Fund against damages and costs
(including penalties, interest and reasonable attorney's fees) finally
awarded against the Fund directly attributable to such claim provided
that the Fund gives TSSG prompt written notice of such claim,
reasonable assistance and sole authority to defend or settle such
claim. If the SQL/API Product becomes, or in TSSG's opinion is likely
to become, the subject of such a claim then TSSG may, at its option:
(a) procure for the Fund the right to use the SQL/API Product free of
any liability for infringement or (b) replace or modify the SQL/API
Product to make it noninfringing. If TSSG is unable or determines
that it is commercially impracticable to undertake clause (a) or (b)
of this Section 5, the Fund will cease to use the directly affected
portion of the SQL/API Product, and if such SQL/API Product is in the
Fund's control, the Fund shall return or destroy it, and (c) TSSG will
grant to the Fund a pro-rata credit for the annual maintenance fee
that the Fund paid computed by dividing such fee by the total number
of months in the then current term of the license for the SQL/API
Product and multiplying the result by the number of months left in the
unexpired license term for the SQL/API Product.
TSSG shall have no obligation under this Section 5 if the alleged
infringement or violation is based upon the use of the SQL/API Product
in combination with other equipment or other software not furnished by
TSSG or if such claim arises from TSSG's compliance with the Fund's
designs, specifications or instructions or from the Fund's
modification of the SQL/API Product.
THIS SECTION STATES THE ENTIRE LIABILITY OF TSSG CONCERNING PATENT,
COPYRIGHT, TRADE SECRET OR OTHER PROPRIETARY RIGHTS INFRINGEMENT.
2
<PAGE> 3
6. Notwithstanding anything in this Amendment to the contrary, the Fund's
license to use the SQL/API Product will automatically terminate upon
termination of the Remote Agreement. This Amendment will terminate
automatically in the event of a breach of the sublicense.
7. TSSG shall take reasonable measures to enforce appropriate compliance
with the foregoing restrictions up to and including the institution
and diligent prosecution of proper legal proceedings.
8. The Fund will agree to compensate TSSG for all fees as referenced on
the attached Schedule #1 to this Amendment, and such other schedules
as may be agreed upon between the parties from time to time.
The Agreement as modified by this Amendment ("Modified Agreement") constitutes
the entire agreement between the parties with respect to the subject matter
hereof. The Modified Agreement supersedes all prior and contemporaneous
agreements between the parties in connection with the subject matter hereof.
No officer, employee, servant or other agent of either party is authorized to
make any representation, warranty or other promise not expressly contained
herein with respect to the subject matter hereof.
<PAGE> 4
The parties to this Amendment have caused it to be executed by their
duly authorized officers as of the date and year referenced above.
<TABLE>
<S> <C>
AIM EQUITY FUNDS, INC. AIM INVESTMENT SECURITIES FUNDS,
on behalf of the Class A and B Shares of on behalf of its AIM Limited Maturity
the Retail Classes of its AIM Charter Fund Treasury Shares
and AIM Weingarten Fund, and on behalf of the
Class A Shares of the Retail Classes
of AIM Constellation Fund and AIM By: /s/ ROBERT H. GRAHAM
Aggressive Growth Fund Portfolios -----------------------------------------------
Title: President
By: /s/ ROBERT H. GRAHAM ---------------------------------------------
-----------------------------------------------
Title: President AIM TAX-EXEMPT FUNDS, INC.,
--------------------------------------------- on behalf of its AIM Tax-Exempt Cash Fund and AIM
Tax-Exempt Bond Fund of Connecticut Portfolios and
the AIM Tax-Free Intermediate Shares of its
AIM FUNDS GROUP, Intermediate Portfolio
on behalf of the Class A and Class B
Shares of its AIM Balanced Fund, AIM
Intermediate Government Fund, AIM Growth By: /s/ ROBERT H. GRAHAM
Fund, AIM High Yield Fund, AIM Income -----------------------------------------------
Fund, AIM Municipal Bond Fund, AIM Global
Utilities Fund and AIM Value Fund Portfolios Title: President
and on behalf of the Class A, Class B and Class C ---------------------------------------------
Shares of its AIM Money Market Fund Portfolio
By: /s/ ROBERT H. GRAHAM THE SHAREHOLDER SERVICES
----------------------------------------------- GROUP, INC.
Title: President
--------------------------------------------- By: /s/ JACK P. KUTNER
------------------------------------------------
AIM INTERNATIONAL FUNDS, INC., Title: EVP - COO
of its AIM International Equity Fund, AIM Global ---------------------------------------------
Aggressive Growth Fund, AIM Global Growth Fund and
AIM Global Income Fund Portfolios
By: /s/ ROBERT H. GRAHAM
-----------------------------------------------
Title: President
---------------------------------------------
</TABLE>
4
<PAGE> 5
SCHEDULE #1 TO AMENDMENT NUMBER 1
SQL/API FEES
Listed below are TSSG's License Fees for the SQL/API Product
o One Time License Fee $30,000
o Annual Maintenance Fee(1) billed $15,000
quarterly in advance beginning the
first month of the Agreement
o On-Going Development Cost(2) $ 125 per hour
o Out of Pocket Expenses Per the existing
Remote Agreement
dated 12/23/94.
The Fund and TSSG intend to implement initially Release 5.0 of the SQL/API
Product on 150 Workstations. For additional workstations beyond the 150
licensed, the Fund shall pay TSSG the then-current license, usage and support
fees for each additional Workstation
__________________________________
(1) The increase in the maintenance fee after the first year will be
equal to the lesser of (i) the previous year's 12 month average increase in the
Consumer Price Index (CPI) or (ii) seven percent (7%) of the maintenance fee
charged by TSSG for the preceding twelve month period.
(2) Development work includes product installation, customization and
enhancements requested by the Fund.
<PAGE> 1
EXHIBIT 9(a)(4)
ADDENDUM NUMBER 2 TO THE REMOTE
ACCESS AND RELATED SERVICES AGREEMENT
This Amendment Number 2 effective October 12, 1995 is made to the
Remote Access and Related Services Agreement dated December 23, 1994 (the
"Remote Agreement") by and between each registered investment company listed on
the signature pages hereof, either for itself or, with respect to each such
company that is a series investment company, on behalf of each of the series or
class named on the signature pages hereof (the "Fund") and THE SHAREHOLDER
SERVICES GROUP, INC. ("TSSG"), a Massachusetts corporation with principal
offices at One Exchange Place, Boston, Massachusetts 02109.
WHEREAS, the Fund desires to incorporate any changes or deletions to
those registered investment companies listed on the signature page of the
Remote Agreement as set forth on the signature page hereof;
WHEREAS, the Fund desires to use an additional product to the TSSG
System known as the Price Rate Capture System (the "PRAT Application"); and
WHEREAS, TSSG desires to provide the PRAT Application to the Fund
solely in conjunction with the Fund's use of the TSSG System;
In consideration of their mutual promises contained herein, the Fund
and TSSG agree to modify the Remote Access and Related Services Agreement (the
"Remote Agreement") as follows:
1. Modify Schedule D to include the attached Exhibit 3 to Schedule D
The Agreement as modified by this Addendum ("Modified Agreement")
constitutes the entire agreement between the parties with respect to the
subject matter hereof. The Modified Agreement supersedes all prior and
contemporaneous agreements between the parties in connection with the subject
matter hereof. No officer, employee, servant or other agent of either party is
authorized to make any representation, warranty or other promise not expressly
contained herein with respect to the subject matter hereof.
The parties to this Addendum have caused it to be executed by their
duly authorized officers as of the date and year referenced above.
<TABLE>
<CAPTION>
<S> <C>
AIM EQUITY FUNDS, INC. AIM FUNDS GROUP,
on behalf of the Class A and B Shares of the Retail on behalf of the Class A and Class B Shares of its
Classes of its AIM Charter Fund and AIM AIM Balanced Fund, AIM Intermediate Government
Weingarten Fund, and on behalf of the Class A Fund, AIM Growth Fund, AIM High Yield Fund,
Shares of the Retail Classes of AIM Constellation AIM Income Fund, AIM Municipal Bond Fund,
Fund and AIM Aggressive Growth Fund Portfolios AIM Global Utilities Fund and AIM Value Fund
Portfolios and on behalf of the Class A, Class B and
BY:/s/ Robert H. Graham Class C Shares of its AIM Money Market Fund Portfolio
--------------------------
Title: President By:/s/ Robert H. Graham
----------------------- --------------------------
Title: President
----------------------
AIM INTERNATIONAL FUNDS, INC.
on behalf of the Class A and Class B Shares of its
AIM International Equity Fund, AIM Global
Aggressive Growth Fund, AIM Global Growth Fund
and AIM Global Income Fund Portfolios
By:/s/ Robert H. Graham
--------------------------
Title: President
-----------------------
</TABLE>
<PAGE> 2
AIM INVESTMENT SECURITIES FUNDS,
on behalf of its AIM Limited Maturity Treasury
Shares
By:/s/ Robert H. GRAHAM
--------------------------
Title: President
-----------------------
AIM TAX-EXEMPT FUNDS, INC.,
on behalf of its AIM Tax-Exempt Cash Fund and
AIM Tax-Exempt Bond Fund of Connecticut
Portfolios and the AIM Tax-Free Intermediate Shares
of its Intermediate Portfolio
By:/s/ Robert H. GRAHAM
--------------------------
Title: President
-----------------------
THE SHAREHOLDER SERVICES GROUP,
INC.
By:/s/ JACK PUTNER
--------------------------
Title: COO - EVP
-----------------------
<PAGE> 3
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse TSSG monthly for applicable out-of-pocket expenses,
including, but not limited to the following items:
o Microfiche/microfilm production
o Magnetic media tapes and freight
o Telephone and telecommunication costs, including all lease,
maintenance and line costs
o NSCC transaction charges at $.15/per financial transaction
o Shipping, Certified and Overnight mail and insurance
o Year-End form production and mailings
o Terminals, communication lines, printers and other equipment and
any expenses incurred in connection with such terminals and lines
o Duplicating services, as pre-approved by the Fund
o Courier services
o Due Diligence Mailings
o Rendering fees as billed
o Overtime, as pre-approved by the Fund
o Temporary staff, as pre-approved by the Fund
o Travel and entertainment, as pre-approved by the Fund
o Record retention, retrieval and destruction costs, including,
but not limited to exit fees charged by third party record
keeping vendors
o Third party audit review
o All conversion costs: including System start up costs, but
excluding costs associated with conversations between TSSG
systems.
o Such other miscellaneous expenses reasonably incurred by TSSG in
performing its duties and responsibilities under this Agreement.
Such expenses incurred with consent of the Fund, not to be
unreasonably withheld.
o The costs associated with the Year-End Support Services set
forth on the attached Exhibit 1 of this Schedule D.
o The costs associated with the Broker Dealer Support Services set
forth on the attached Exhibit 2 of this Schedule D.
o The costs associated with the Price Rate Transmission Services
set forth on the attached Exhibit 3 of this Schedule D.
<PAGE> 4
EXHIBIT 3 TO SCHEDULE D
Price Rate Capture System Services (PRAT)
- - -----------------------------------------
The PRAT Application will accept prices and dividend rates from the Fund
Accounting Department of A I M Advisors, Inc. electronically and post them to
the TSSG Pricing System. The PRAT Application will run interconnected via
Local Area Network hardware and software.
The fees for the PRAT Service shall be as follows:
o One Time Set Up Fee $5,000.
o Annual Fee* $7,500.
*The annual fee provides system and personnel resources required to support a
maximum average of 50 transmissions per month. A charge of $30.00 per
transmission will be assessed for all transmissions incurred in excess of the
average 2 per day per month.
<PAGE> 1
EXHIBIT 9(a)(5)
AMENDMENT NUMBER 3 TO THE REMOTE
ACCESS AND RELATED SERVICES AGREEMENT
THIS AMENDMENT, dated as of February 1, 1997 is made to the Remote
Access and Related Services Agreement dated December 23, 1994, as amended (the
"Agreement") between each registered investment company listed on the attached
Exhibit 1 hereof, (the "Fund") and The Shareholder Services Group, Inc., now
known as First Data Investor Services Group, Inc. ("FDISG").
WITNESSETH
WHEREAS, the Fund and FDISG desire to further amend the Agreement to
reflect certain changes thereto.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree that as of the date first referenced above, the
Agreement shall be amended as follows:
1. All references to "THE SHAREHOLDER SERVICES GROUP, INC." are hereby
deleted and replaced with "FIRST DATA INVESTOR SERVICES GROUP, INC." and all
references to "TSSG" are hereby deleted and replaced with "FDISG".
2. Delete the second sentence from Section 3(c) and replace with the
following:
"The Fund will pay to FDISG the amount so billed by Federal Funds Wire
within fifteen (15) business days after the Fund's receipt of the
invoice."
3. Section 4(b) of the Agreement is hereby deleted in its entirety and
replaced with the following new Section 4(b):
"FDISG agrees to provide to the Fund at its facilities located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046, 12 Greenway Plaza,
Houston, Texas 77046, 301 Congress Street, Suite 1700, Austin, Texas
78701 and 12503 East Euclid Drive, Suite 250, Englewood, CO 80111 or
at such other locations as may be mutually agreed upon in writing by
FDISG and the Fund (the "Fund Facility") remote access to the use of
information processing capabilities of the FDISG System as it may be
modified from time to time by FDISG."
4. Section 12 of the Agreement is hereby amended by adding the following
new Sections 12(c), through 12(i):
"(c) FDISG shall retain title to and ownership of the FDISG System,
including any and all data bases, computer programs, screen
formats, report formats, interactive design techniques,
derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents,
copyrights, trade secrets, and
<PAGE> 2
other related legal rights utilized in connection with the
services provided by FDISG to the Fund hereunder other than
shareholder account and transaction information which shall
remain the exclusive property of the Fund.
(d) FDISG hereby grants to the Fund and the Fund accepts a limited
license to the FDISG System for the sole and limited purpose
of having FDISG provide the services contemplated hereunder
and nothing contained in this Agreement shall be construed or
interpreted otherwise and subject to Section 15 such license
shall immediately terminate with the termination of this
Agreement.
(e) The transmission of account inquiry and transaction
information, including but not limited to maintenances,
exchanges, purchases and redemptions, shall be limited to
direct entry to the FDISG System by means of on-line mainframe
terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of
information to the FDISG System is strictly prohibited without
the prior written consent of FDISG.
(f) FDISG warrants that the FDISG System shall include, at no
additional cost to the Fund, design and performance
capabilities so that prior to, during, and after the calendar
year 2000, the FDISG System will not malfunction, produce
invalid or incorrect results, or abnormally cease to function
due to the year 2000 date change. In connection with the
foregoing, FDISG agrees to provide the Fund with periodic
quarterly updates with respect to FDISG compliance with this
provision.
(g) Other than CPU Authorization Passwords, FDISG represents and
warrants to the Fund the software products provided by FDISG
hereunder (the "Products") do not contain any "back door" or
concealed access devices, any block or protection feature
which prevents the Fund from making additional copies of such
Products as permitted by this Agreement or any "self-help"
code, "Unauthorized Code", "software locks" or any other
similar devices which, upon the occurrence of a certain date
or event, the passage of a certain amount of time, or taking
of any action (or failure to take action) by or on behalf of
FDISG, will cause such Products or any software or system with
such Products are used to be destroyed, erased, damaged, or
otherwise made inoperable. "Unauthorized Code" shall mean any
virus, Trojan horse, worm, or other software routines designed
to permit unauthorized access: to disable, or otherwise harm
software, hardware, or data; or to perform any other such
actions.
(h) Provided the Fund gives FDISG reasonable written notice,
reasonable assistance, including assistance from the Fund's
employees, agents, affiliates and to the extent possible
independent contractors (collectively, "FUND'S AGENTS"), and
sole authority to defend or settle the action, then FDISG
shall do the following ("INFRINGEMENT INDEMNIFICATION"): (a)
defend or settle, at its expense, any action brought against
the Fund or the Fund's Agents to the extent the action is
based on a claim that the Fund's use of the FDISG System
infringes a duly issued United
<PAGE> 3
States' patent or copyright or violates a third party's
proprietary trade secrets or other similar intellectual
property rights ("INFRINGEMENT"); and (b) pay damages and
costs finally awarded against the Fund or the Fund's Agents
directly attributable to such claim. FDISG shall have no
Infringement Indemnification obligation if the alleged
Infringement is based upon the Fund's use of the FDISG System
with equipment or software not furnished or approved by FDISG
or if such claim arises from FDISG's compliance with the Fund's
designs, or from the Fund's modifications of the Software.
The Infringement Indemnification states FDISG's entire
liability for Infringement and shall be the Fund's sole and
exclusive remedy for such claims.
(i) Within sixty (60) days after the execution of this Amendment,
FDISG and the Fund shall enter into an escrow agreement
relating to the source code for (i) the FDISG proprietary
software used in connection with the FDISG System (as defined
in Section 1 of the Agreement: (ii) the "Software" (as that
term is defined in Schedule G), including the Third Party
Software set forth in Sections 2.1.1 and 2.1.2 of Exhibit 1 of
Schedule G; and (iii) the "FDISG Software" as that term is
defined in Schedule H (collectively, the "Source Code")
substantially in the form attached as Exhibit 2 of this
Amendment Number 3 ("Exhibit 2"). Promptly after signing the
escrow agreement, FDISG shall forward the agreement to the
escrow agent with a copy of the Source Code to be deposited
into escrow. FDISG agrees to update the Source Code held by
the escrow agent on a quarterly basis. The Fund shall be
responsible and pay for all fees of the escrow agent. The
Source Code may be released to the Fund only if (i) FDISG
ceases to do business, makes an assignment for the benefit of
creditors, becomes insolvent (as revealed by its books and
records or otherwise), is generally unable to pay its debts as
such debts become due, or commences, or has commenced against
it a case under any chapter of state or federal bankruptcy
laws; and FDISG fails to cure any such event within sixty (60)
days after receiving notice from the Fund; and (ii) the Fund
has paid all amounts due to FDISG under this Agreement. Upon
receipt of the Source Code from the escrow agent, the Fund
shall a have license to use the Software solely as set forth
herein for the remaining current term of the Agreement subject
to Section 15, which use shall be expanded to include the
right to modify the software solely in connection with support,
maintenance and operation of the software and not for any
other purpose or person."
5. Sections 14(a) and (b) of the Agreement are hereby deleted from the
Agreement and replaced with the following new Sections 14(a) and (b):
(a) This Agreement which became effective as of December 23, 1994
is hereby extended effective February 1, 1997 and shall
continue through January 31, 2000 (the "Initial Term"). Upon
the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year
("Renewal Terms") each, unless the Fund or FDISG provides
written notice to the other of its intent not to
<PAGE> 4
renew. Such notice must be received not less than one-hundred
and eighty (180) days prior to the expiration of the Initial
Term or the then current Renewal Term.
(b) Notwithstanding the foregoing Section 14(a), in the event the
Fund provides notice of its intent to terminate as set forth in
Section 14(a), the Fund may extend the term of the Agreement
for up to an additional one-hundred and eighty (180) days (the
"Extension Period") by providing FDISG with written notice of
its intent to do so. Such notice must be received no later
than one-hundred and eighty (180) days prior to the expiration
of the Initial Term. During the Extension Period, the Fund may
terminate this Agreement at any time on thirty (30) days
written notice.
6. Section 15 is hereby amended by adding the following sentence to the
end of the paragraph:
"FDISG agrees to provide reasonable, supervised system access until
the Fund's conversion to another provider is complete".
7. Section 23(a) is hereby amended by deleting the information regarding
notices and inserting the following
To: The AIM Family of Funds
c/o A I M Fund Services, Inc.
Eleven Greenway Plaza, Suite 100
Houston, Texas 77046
Attention: John Caldwell, President
with copy to:
Fund Legal Counsel at same address
Attention: Carol F. Relihan, Senior Vice President &
General Counsel
To: First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, MA 02109
Attention: President
with copy to : General Counsel (same address)
8. Section 23 is hereby amended by adding the following new sub-section
(k):
"(k) Notwithstanding the indemnity provided by the Fund in Section
8(g), FDISG agrees to use commercially reasonable efforts to
maintain a Disaster Recovery Plan, at no cost to the Fund,
designed to minimize the impact of any unforeseen business
interruption or outage that renders the FDISG System or FDISG
Facility inoperable, a summary of which is attached hereto as
Schedule I."
<PAGE> 5
9. Schedule C is hereby deleted in its entirety and replaced with the
attached revised Schedule C.
10. Exhibit 1 and Exhibit 2 of Schedule D are hereby deleted in their
entirety.
11. Schedule F is hereby deleted in its entirety and replaced with the
attached revised Schedule F.
12. Addendum Number 2 to the Agreement is hereby deleted in its entirety
and the new revised Schedule D - Out of Pocket Expenses as referenced in
Section 3(b) is hereby added to the Agreement.
13. In addition to the foregoing, FDISG shall provide the Fund with a
software license to FDISG's proprietary IMPRESS Plus software and system in
accordance with the terms of and as more fully described in IMPRESS Plus
Software and Support Terms annexed hereto as Schedule G and incorporated
herein.
14. In addition to the foregoing, FDISG shall provide the Fund with a
software license to FDISG's proprietary Accounting Control Environment +
("ACE +") software in accordance with the terms of and as more fully described
in the ACE + Software and Support Terms annexed hereto as Schedule H and
incorporated herein.
The Agreement, as previously amended and as amended by this Amendment,
("Modified Agreement") constitutes the entire agreement between the parties
with respect to the subject matter hereof. The Modified Agreement supersedes all
prior and contemporaneous agreements between the parties in connection with the
subject matter hereof. No officer, employee, servant or other agent of either
party is authorized to make any representation, warranty, or other promises not
expressly contained herein with respect to the subject matter hereof.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their duly authorized officers, as of the day and year first
above written.
On behalf of the Funds and respective Portfolios and Classes set forth in
Exhibit 1 attached hereto as may be amended from time to time.
By: /s/ ROBERT H. GRAHAM
-------------------------------------
Title: President
----------------------------------
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/ GERALD G. KOKOS
-------------------------------------
Title: Executive Vice President
----------------------------------
<PAGE> 7
EXHIBIT 1
LIST OF FUNDS
<TABLE>
<S> <C>
AIM EQUITY FUNDS, INC.
Portfolios: Classes:
AIM Blue Chip Fund Class A and B Shares
AIM Capital Development Fund Class A and B Shares
AIM Charter Fund Class A and B Shares
AIM Weingarten Fund Class A and B Shares
AIM Aggressive Growth Fund Class A Shares
AIM Constellation Fund Class A Shares
AIM FUNDS GROUP
Portfolios: Classes:
AIM Balanced Fund Class A and Class B Shares
AIM Global Utilities Fund Class A and Class B Shares
AIM Growth Fund Class A and Class B Shares
AIM High Yield Fund Class A and Class B Shares
AIM Income Fund Class A and Class B Shares
AIM Intermediate Government Fund Class A and Class B Shares
AIM Municipal Bond Fund Class A and Class B Shares
AIM Value Fund Class A and Class B Shares
AIM Money Market Fund Class A, Class B, and
AIM Cash Reserve Shares
AIM INTERNATIONAL FUNDS, INC.
Portfolios: Classes:
AIM International Equity Fund Class A and Class B Shares
AIM Global Aggressive Growth Fund Class A and Class B Shares
AIM Global Growth Fund Class A and Class B Shares
AIM Global Income Fund Class A and Class B Shares
AIM INVESTMENT SECURITIES FUNDS
Portfolios: Classes:
Limited Maturity Treasury Portfolio AIM Limited Maturity Treasury Shares
AIM TAX-EXEMPT FUNDS, INC.
Portfolios: Classes:
AIM Tax-Exempt Cash Fund n/a
AIM Tax-Exempt Bond Fund of Connecticut n/a
Intermediate Portfolio AIM Tax-Free Intermediate Shares
</TABLE>
<PAGE> 8
EXHIBIT 2
PREFERRED REGISTRATION
TECHNOLOGY ESCROW AGREEMENT
Account Number __________
Recitals
This Preferred Registration Technology Escrow Agreement including any
Exhibits ("Agreement") is effective this ______ day of _____ 1997, by and among
Data Securities International, Inc. ("DSI"), a Delaware corporation, First Data
Investor Services Group, Inc. ("Depositor"), and each registered investment
company listed on the attached Schedule A hereof ("Preferred Registrant").
WHEREAS, Depositor has entered into a certain Remote Access and
Related Services Agreement dated December 23, 1994, as amended by Amendment
Number 3 dated as of February 1, 1997 (the "Remote Agreement") with the
Preferred Registrant which pursuant thereto certain proprietary software, as
described in Section 12(i) of the Remote Agreement, in object-code form and
other materials of Depositor have been licensed to Preferred Registrant (the
"Software");
WHEREAS, Depositor and Preferred Registrant desire the Agreement to be
supplementary to said contract pursuant to 11 United States Code Section
365(n);
WHEREAS, availability of or access to the source code and other
proprietary data related to the Software is critical to Preferred Registrant in
the conduct of its business;
WHEREAS, Depositor has deposited or will deposit with DSI such source
code and other proprietary data to provide for retention, administration and
controlled access for Preferred Registration under conditions specified herein;
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in consideration of the promises, mutual
covenants and conditions contained herein, the parties hereto agree as follows:
1. Deposit Account. Following the delivery of the executed Agreement, DSI
shall open a deposit account ("Deposit Account") for Depositor. The
opening of the Deposit Account means that DSI shall establish an account
ledger in the name of Depositor, assign a deposit account number
("Deposit Account Number"), calendar renewal notices to be sent to
Depositor as provided in Section 30, and request the initial deposit
("Initial Deposit") from Depositor. Depositor has an obligation to make
the Initial Deposit. In the event that Depositor has not made the
Initial Deposit within sixty (60) days of the execution of this
1
<PAGE> 9
Agreement, DSI shall request the initial Deposit from Depositor and
notify Preferred Registrant that such Initial Deposit has not been
received.
2. Preferred Registration Account. Following the execution and delivery of
the Agreement, DSI shall open a registration account ("Registration
Account") for Preferred Registrant. The opening of the Registration
Account means that DSI shall establish under the Deposit Account an
account ledger with a unique registration number ("Registration Number")
in the name of Preferred Registrant, calendar renewal notices to be sent
to Preferred Registrant as provided in Section 30, and request the
Initial Deposit from Depositor. DSI shall notify Preferred Registrant
upon receipt of Initial Deposit.
3. Term of Agreement. The Agreement will commence on the effective date
and continue through January 31, 2000, unless terminated earlier as
provided in the Agreement. The Agreement may be extended for one (1)
year terms.
4. Exhibit A, Notices and Communications. Notices and invoices to
Depositor, Preferred Registrant or DSI should be sent to the parties at
the addresses identified in the Exhibit A.
Documents, payment of fees, deposits of material, and any written
communication should be sent to the DSI offices as identified in the
Exhibit A.
Depositor and Preferred Registrant agree to each name their respective
designated contact ("Designated Contact") to receive notices from DSI
and to act on their behalf in the performance of their obligations as
set forth in the Agreement. Depositor and Preferred Registrant agree to
notify DSI immediately in the event of a change of their Designated
Contact in the manner stipulated in Exhibit A.
5. Exhibit B and Deposit Material. Depositor will submit proprietary data
and related material ("Deposit Material") to DSI for retention and
administration in the Deposit Account.
The Deposit Material will be submitted together with a completed
document called a "Description of Deposit Material", hereinafter
referred to as Exhibit B. Each Exhibit B should be signed by Depositor
prior to submission to DSI and will be signed by DSI upon completion of
the Deposit Material inspection.
Depositor represents and warrants that it lawfully possesses all Deposit
Material, can transfer Deposit Material to DSI and has the authority to
store Deposit Material in accordance with the terms of the Agreement.
6. Deposit Material Inspection. Upon receipt of an Exhibit B and Deposit
Material, DSI will be responsible only for reasonably matching the
labeling of the materials to the item descriptions listed on the Exhibit
B and validating the count of the materials to the quantity listed on
the Exhibit B. DSI will not be responsible for any other claims made by
2
<PAGE> 10
the Depositor on the Exhibit B. Acceptance will occur when DSI concludes
that the Deposit Material Inspection is complete. Upon acceptance DSI
will sign the Exhibit B and assign it the next Exhibit B number. DSI
shall issue a copy of the Exhibit B to Depositor and Preferred
Registrant within ten (10) days of acceptance.
7. Initial Deposit. The Initial Deposit will consist of all material
initially supplied by Depositor to DSI.
8. Deposit Changes. Depositor may desire or may be obligated to update the
Deposit Account with supplemental or replacement Deposit Material of
technology releases.
Supplemental Deposit ("Supplemental") is Deposit Material which is to be
added to the Deposit Account.
Replacement Deposit ("Replacement") is Deposit Material which will
replace existing Deposit Material as identified by any one or more
Exhibit B(s) in the Deposit Account. Replaced Deposit Material will be
destroyed or returned to Depositor.
9. Deposit. The existing deposit ("Deposit") means all Exhibit B(s) and
their associated Deposit Material currently in DSI's possession.
Destroyed or returned Deposit Material is not part of the Deposit;
however, DSI shall keep records of the destruction or return of Deposit
Material.
10. Replacement Option. Within ten (10) days of receipt of Replacement from
Depositor, DSI will send a letter to Preferred Registrant stating that
Depositor requests to replace existing Deposit Material, and DSI will
include a copy of the new Exhibit B(s) listing the new Deposit Material.
Preferred Registrant has twenty (20) days from the mailing of such
letter by DSI to instruct DSI to retain the existing Deposit Material
held by DSI, and if so instructed, DSI will change the Replacement to a
Supplemental. Conversion to Supplemental may cause an additional
storage unit fee as specified by DSI's Fee and Services Schedule.
If Preferred Registrant does not instruct DSI to retain the existing
Deposit Material, DSI shall permit such Deposit Material to be replaced
with the Replacement. Within ten (10) days of acceptance of the
Replacement by DSI, DSI shall issue a copy of the executed Exhibit B(s)
to Depositor and Preferred Registrant. DSI will either destroy or
return to Depositor all Deposit Material replaced by the Replacement.
11. Storage Unit. DSI will store the Deposit in defined units of space,
called storage units. The cost of the first storage unit will be
included in the annual Deposit Account fee.
12. Deposit Obligations of Confidentiality. DSI agrees to establish a locked
receptacle in which it shall place the Deposit and shall put the
receptacle under the administration of
3
<PAGE> 11
one or more of its officers, selected by DSI, whose identity shall be
available to Depositor at all times. DSI shall exercise a
professional level of care in carrying out the terms of the Agreement.
DSI acknowledges Depositor's assertion that the Deposit shall contain
proprietary data and that DSI has an obligation to preserve and
protect the confidentiality of the Deposit.
Except as provided for in the Agreement, DSI agrees that it shall not
divulge, disclose, make available to third parties, or make any use
whatsoever of the Deposit.
13. Audit Rights. DSI agrees to keep records of the activities undertaken
and materials prepared pursuant to the Agreement. DSI may issue to
Depositor and Preferred Registrant an annual report profiling the
Deposit Account. Such annual report will identify the Depositor,
Preferred Registrant, the current Designated Contacts, selected
special services, and the Exhibit B history, which includes Deposit
Material acceptance and destruction or return dates.
Upon reasonable notice, during normal business hours and during the
term of the Agreement, Depositor or Preferred Registrant will be
entitled to inspect the records of DSI pertaining to the Agreement,
and accompanied by an employee of DSI, inspect the physical status and
condition of the Deposit. The Deposit may not be changed during the
audit.
14. Renewal Period of Agreement. Upon payment of the initial fee or
renewal fee, the Agreement will be in full force and will have an
initial period of at least one (1) year unless otherwise specified.
The Agreement may be renewed for additional periods upon receipt by
DSI of the specified renewal fees prior to the last day of the period
("Expiration Date"). DSI may extend the period of the Agreement to
cover the processing of any outstanding instruction made during any
period of the Agreement.
Preferred Registrant has the right to pay renewal fees and other
related fees. In the event Preferred Registrant pays the renewal fees
and Depositor is of the opinion that any necessary condition for
renewal is not met, Depositor may so notify DSI and Preferred
Registrant in writing. The resulting dispute will be resolved
pursuant to the dispute resolution process defined in Section 25.
15. Expiration. If the Agreement is not renewed, or is otherwise
terminated, all duties and obligations of DSI to Depositor and
Preferred Registrant will terminate. If Depositor requests the return
of the Deposit, DSI shall return the Deposit to Depositor only after
any outstanding invoices and the Deposit return fee are paid. If the
fees are not received by the Expiration Date of the Agreement, DSI, at
its option, may destroy the Deposit.
16. Certification by Depositor. Depositor represents to Preferred
Registrant that:
4
<PAGE> 12
a. The Deposit delivered to DSI consists of the following: source
code deposited on computer magnetic media; all necessary and
available information, proprietary information, and technical
documentation which will enable a reasonably skilled
programmer of Preferred Registrant to create, maintain and/or
enhance the Software without the aid of Depositor or any other
person or reference to any other materials; maintenance tools
(test programs and program specifications); proprietary or
third party system utilities (compiler and assembler
descriptions); description of the system/program generation;
descriptions and locations of programs not owned by Depositor
but required for use and/or support; and names of key
developers for the technology on Depositor's staff.
b. The Deposit will be defined in the Exhibit B(s).
These representations shall be deemed to be made continuously
throughout the term of the Agreement.
17. Indemnification. Depositor and Preferred Registrant agree to defend
and indemnify DSI and hold DSI harmless from and against any and all
claims, actions and suits, whether in contract or in tort, and from
and against any and all liabilities, losses, damages, costs, charges,
penalties, counsel fees, and other expenses of any nature (including,
without limitation, settlement costs) incurred by DSI as a result of
performance of the Agreement except in the event of a judgment which
specifies that DSI acted with gross negligence or willful misconduct.
18. Filing for Release of Deposit by Preferred Registrant. Upon notice to
DSI by Preferred Registrant of the occurrence of a release condition
as defined in Section 21 and payment of the release request fee, DSI
shall notify Depositor by certified mail or commercial express mail
service with a copy of the notice from Preferred Registrant. If
Depositor provides contrary instruction within ten (1O) days of the
mailing of the notice to Depositor, DSI shall not deliver a copy of
the Deposit to Preferred Registrant.
19. Contrary Instruction. "Contrary Instruction" is the filing of an
instruction with DSI by Depositor stating that a Contrary Instruction
is in effect. Such Contrary Instruction means an officer of Depositor
warrants that a release condition has not occurred or has been cured.
DSI shall send a copy of the instruction by certified mail or
commercial express mail service to Preferred Registrant. DSI shall
notify both Depositor and Preferred Registrant that there is a dispute
to be resolved pursuant to Section 25. Upon receipt of Contrary
Instruction, DSI shall continue to store the Deposit pending Depositor
and Preferred Registrant joint instruction, resolution pursuant to
Section 25, order by a court of competent jurisdiction, or termination
by non-renewal of the Agreement.
20. Release of Deposit to Preferred Registrant. Pursuant to Section 18, if
DSI does not receive Contrary Instruction from Depositor, DSI is
authorized to release the Deposit, or if more than one Preferred
Registrant is registered to the Deposit, a copy of the Deposit,
5
<PAGE> 13
to the Preferred Registrant filing for release following receipt of
any fees due to DSI including Deposit copying and delivery fees.
21. Release Conditions of Deposit to Preferred Registrant.
Release conditions are:
a. Depositor ceases to do business, makes an assignment for the
benefit of creditors, becomes insolvent (as revealed by its
books and records or otherwise), is generally unable to pay
its debts as such debts become due, or commences, or has
commenced against it a case under any chapter of state or
federal bankruptcy laws; and Depositor fails to cure any such
event within 60 days after receiving notice from Preferred
Registrant; and
b. Preferred Registrant has paid all amounts due Depositor under
the Remote Agreement.
22. Grant of Use License. Subject to the terms and conditions of the
Agreement, Depositor hereby transfers and upon execution by DSI, DSI
hereby accepts a non-exclusive, nontransferable, royalty-free license
("Use License") for the unexpired term of the Remote Agreement subject
to Section 15 thereof which DSI will transfer to Preferred Registrant
upon controlled release of the Deposit as described in the Agreement.
The Use License will be solely for Preferred Registrant's internal
purposes in connection with support, maintenance, and operation of the
Software solely as set forth in the Remote Agreement and not for any
other purpose or person.
23. Use License Representation. Depositor represents and warrants to
Preferred Registrant and DSI that it has no knowledge of any
incumbrance or infringement of the Deposit, or that any claim has been
made that the Deposit infringes any patent, trade secret, copyright or
other proprietary right of any third party. Depositor warrants that it
has the full right, power, and ability to enter into and perform the
Agreement, to grant the foregoing Use License, and to permit the
Deposit to be placed with DSI.
24. Conditions Following Release. Following a release and subject to
payment to DSI of all outstanding fees, DSI shall transfer the Use
License to Preferred Registrant. Additionally Preferred Registrant
shall be required to maintain the confidentiality of the released
Deposit.
25. Disputes. In the event of a dispute, DSI shall so notify Depositor and
Preferred Registrant in writing. Upon agreement of the parties at the
time of a dispute, such dispute will be settled by arbitration in
accordance with the commercial rules of the American Arbitration
Association ("AAA"). Unless otherwise agreed to by Depositor and
Preferred Registrant, arbitration will take place in San Diego,
California, USA.
6
<PAGE> 14
26. Verification Rights. Depositor grants to Preferred Registrant the
option to verify the Deposit for accuracy, completeness and
sufficiency. Depositor agrees to permit DSI and at least one employee
of Preferred Registrant to be present at Depositor's facility to
verify, audit and inspect of the Deposit for the benefit of Preferred
Registrant. If DSI is present or is selected to perform the
verification, DSI will be paid according to DSI's then current
verification service hourly rates and any out of pocket expenses.
27. General. DSI may act in reliance upon any instruction, instrument, or
signature believed to be genuine and may assume that any employee
giving any written notice, request, advice or instruction in
connection with or relating to the Agreement has apparent authority
and has been duly authorized to do so. DSI may provide copies of the
Agreement or account history information to any employee of Depositor
or Preferred Registrant upon their request. For purposes of
termination or replacement, Deposit Material shall be returned only to
Depositor's Designated Contact, unless otherwise instructed by
Depositor's Designated Contact.
DSI is not responsible for failure to fulfill its obligations under the
Agreement due to causes beyond DSI's control.
The Agreement is to be governed by and construed in accordance with
the laws of the State of California.
The Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes all previous
communications, representations, understandings, and agreements,
either oral or written, between the parties. The Agreement may be
amended only in a writing signed by the parties.
If any provision of the Agreement is held by any court to be invalid
or unenforceable, that provision will be severed from the Agreement
and any remaining provisions will continue in full force.
28. Title to Media. Subject to the terms of the Agreement, title to the
media, upon which the proprietary data is written or stored, is and
shall be irrevocably vested in DSI. Notwithstanding the foregoing,
Depositor will retain ownership of the proprietary data contained on
the media including all copyright, trade secret, patent or other
intellectual property ownership rights subsisting in such proprietary
data.
29. Termination of Rights. The Use License as described above will
terminate in the event that the Agreement is terminated without the
Use License transferring to Preferred Registrant.
30. Fees. Fees are due upon receipt of signed contract, receipt of Deposit
Material, or when service is requested, whichever is earliest. If
invoiced fees are not paid within sixty (60) days of the date of the
invoice, DSI may terminate the Agreement. If the payment is not
7
<PAGE> 15
timely received by DSI, DSI shall have the right to accrue and collect
interest at the rate of one and one-half percent per month (18% per
annum) from the date of the invoice for all late payments.
Renewal fees will be due in full upon the receipt of invoice unless
otherwise specified by the invoice. In the event that renewal fees are
not received thirty (30) days prior to the Expiration Date, DSI shall
so notify Depositor and Preferred Registrant. If the renewal fees are
not received by the Expiration Date, DSI may terminate the Agreement
without further notice and without liability of DSI to Depositor or
Preferred Registrant.
DSI shall not be required to process any request for service unless
the payment for such request shall be made or provided for in a manner
satisfactory to DSI.
All service fees and renewal fees will be those specified in DSI's Fee
and Services Schedule in effect at the time of renewal or request for
service, except as otherwise agreed. For any increase in DSI's
standard fees, DSI shall notify Depositor and Preferred Registrant at
least ninety (90) days prior to the renewal of the Agreement. For any
service not listed on the Fee and Services Schedule, DSI shall provide
a quote prior to rendering such service.
Fees invoiced by DSI are the responsibility of the Preferred
Registrant and as such all invoices in accordance with this Agreement
are to be sent to the Preferred Registrant.
8
<PAGE> 16
On behalf of the Investment Companies
and respective Portfolios and Classes
set forth in Schedule A attached
hereto as may be amended from
time to time.
<TABLE>
<S> <C>
By: FIRST DATA INVESTOR SERVICES
--------------------------------- GROUP, INC.
Name:
------------------------------- By:
Title: ---------------------------------
------------------------------ Name:
-------------------------------
Title:
------------------------------
DATA SECURITIES
INTERNATIONAL, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
</TABLE>
<PAGE> 17
SCHEDULE A
LIST OF FUNDS
AIM EQUITY FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Blue Chip Fund Class A and B Shares
AIM Capital Development Fund Class A and B Shares
AIM Charter Fund Class A and B Shares
AIM Weingarten Fund Class A and B Shares
AIM Aggressive Growth Fund Class A Shares
AIM Constellation Fund Class A Shares
</TABLE>
AIM FUNDS GROUP
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Balanced Fund Class A and Class B Shares
AIM Global Utilities Fund Class A and Class B Shares
AIM Growth Fund Class A and Class B Shares
AIM High Yield Fund Class A and Class B Shares
AIM Income Fund Class A and Class B Shares
AIM Intermediate Government Fund Class A and Class B Shares
AIM Municipal Bond Fund Class A and Class B Shares
AIM Value Fund Class A and Class B Shares
AIM Money Market Fund Class A, Class B and AIM Cash Reserve Shares
</TABLE>
AIM INTERNATIONAL FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM International Equity Fund Class A and Class B Shares
AIM Global Aggressive Growth Fund Class A and Class B Shares
AIM Global Growth Fund Class A and Class B Shares
AIM Global Income Fund Class A and Class B Shares
</TABLE>
AIM INVESTMENT SECURITIES FUNDS
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
Limited Maturity Treasury Portfolio AIM Limited Maturity Treasury Shares
</TABLE>
AIM TAX-EXEMPT FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Tax-Exempt Cash Fund n/a
AIM Tax-Exempt Bond Fund of Connecticut n/a
Intermediate Portfolio AIM Tax-Free Intermediate Shares
</TABLE>
<PAGE> 18
EXHIBIT A
DESIGNATED CONTACT
Account Number: __________
<TABLE>
<S> <C>
NOTICES, DEPOSIT MATERIAL RETURNS AND INVOICES TO DEPOSITOR SHOULD BE ADDRESSED TO:
COMMUNICATION, INCLUDING DELINQUENCIES TO
DEPOSITOR SHOULD BE ADDRESSED TO: ------------------------------------------------
[Company Name/Address] ------------------------------------------------
- ----------------------------------------
------------------------------------------------
- ----------------------------------------
------------------------------------------------
- ----------------------------------------
Invoice Contact:
- ---------------------------------------- --------------------------------
Designated Contact:
---------------------
Telephone:
------------------------------
Facsimile:
------------------------------
State of Incorporation:
-----------------
NOTICES AND COMMUNICATION, INCLUDING INVOICES TO PREFERRED REGISTRANT SHOULD BE
DELINQUENCIES TO PREFERRED REGISTRANT ADDRESSED TO:
SHOULD BE ADDRESSED TO:
-----------------------------------------------
First Data Investor Services Group, Inc.
4400 Computer Drive -----------------------------------------------
Westborough, MA 01581
-----------------------------------------------
-----------------------------------------------
Designated Contact: Invoice Contact:
--------------------- -------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
Requests from Depositor or Preferred Registrant INVOICE INQUIRIES AND FEE REMITTANCES TO DSI
Contact should be given Contact or authorized SHOULD BE ADDRESSED TO:
employee Registrant.
DSI
CONTRACTS, DEPOSIT MATERIAL AND NOTICES TO DSI Attn: Accounts Receivable
SHOULD BE ADDRESSED TO:
DSI
Attn: Contract Administration
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
Date:
-----------------------------------
</TABLE>
<PAGE> 19
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIAL
Deposit Account Number:
--------------------------------------------------------
Depositor Company Name:
--------------------------------------------------------
DEPOSIT TYPE:
Initial Supplemental Replacement
- ------ ------ ------
If Replacement: Destroy Deposit Return Deposit
------ ------
ENVIRONMENT:
Host System CPU/OS:
------------------------------------------------------------
Version:
-----------------------------------------------------------------------
Backup:
------------------------------------------------------------------------
Source System CPU/OS:
----------------------------------------------------------
Version:
-----------------------------------------------------------------------
Compiler:
----------------------------------------------------------------------
Special Instructions:
----------------------------------------------------------
DEPOSIT MATERIAL:
Exhibit B Name: Version:
----------------- ------------------------------------
<TABLE>
<CAPTION>
Item Label Description Media Quantity
<S> <C> <C>
</TABLE>
<TABLE>
<S> <C>
For Depositor, I certify that the above For DSI, I received the above described
described Deposit Material was sent to DSI: Deposit Material subject to the terms on
the reverse side of this Exhibit:
By: By:
--------------------------------------- ---------------------------------------
Print Name: Print Name:
------------------------------- -------------------------------
Date: Date of Acceptance:
------------------------------------- -----------------------
ISE: EXHIBIT B#:
--------- ---------------
</TABLE>
<PAGE> 20
SCHEDULE C
FEE SCHEDULE
I. SHAREHOLDER ACCOUNT FEES. The Fund shall pay the following fees:
("Shareholder Account Fees"):
For the period beginning on the date of this Agreement, and continuing through
January 31, 2000, the Fund shall pay FDISG an annualized fee for shareholder
accounts open during any monthly period ("Open Account Fee") as follows:
<TABLE>
<CAPTION>
Account Volume Fee
<S> <C>
1-1.5 million $3.60/shareholder account
Exceeding 1.5 million $2.25/shareholder account
</TABLE>
The Fund also shall pay FDISG an annualized fee of $1.80 per shareholder
account that is closed during any monthly period ("Closed Account Fee") (The
Open Account Fees and Closed Account Fees hereafter collectively referred to as
"Shareholder Account Fees"). The Shareholder Account Fees shall be billed by
FDISG monthly in arrears on a prorated basis of 1/12 of the annualized fee for
all such accounts.
FDISG will provide a credit to the Shareholder Account Fees of one million
dollars in the years 1998 and 1999. The credit shall be applied as a reduction
of $83,333.33 on each monthly fee bill in 1998 and 1999.
In addition, on January 1 of the years 1998, 1999, and 2000 the Shareholder
Account fees may be increased by FDISG in an amount equal to the lesser of (i)
the cumulative percentage increase in the Consumer Price Index for all Urban
Consumers (CPI-U) U.S. City Average, All Items (unadjusted - (1982-84 + 100),
published by the U.S. Department of Labor, or (ii) seven percent (7%) of the
Shareholder Account Fees charged by FDISG to the Fund for the preceding twelve
(12) month period.
In return for the Shareholder Account Fees, FDISG agrees to provide the
following to the Fund:
o Remote Access to FDISG's FSR System
o License for 512 IMPRESS Plus software installations valued at 2.5
million dollars. Includes six weeks of technical and user training
(train-the-trainer).
o License for up to 10 copies of FDISG's ACE+ (Automate Control
Environment) software as further defined in Schedule H
o Dedicated Programming Support equivalent to I Systems Manager, 4
Programmers, and 2 Business Systems Analysts
o Implementation of a Separate FSR processing cycle by September 15,
1997, as more fully described in the attached Exhibit 3 of this
Schedule C.
o Implementation of the core TA system functionality identified in
Exhibit 1 of this Schedule C.
<PAGE> 21
o Implementation of IWT functionality as identified in Exhibit 2 of this
Schedule C
o Continued use of FDISG's Price/Rate Transmission (PRAT) application.
The PRAT Application will accept prices and dividend rates from the
Fund Accounting Department of the Fund electronically and post them to
the FDISG Pricing System. The PRAT application will run interconnected
via Local Area Network hardware and software.
II. DEDICATED PROGRAMMING SUPPORT
FDISG and the Fund will jointly determine the level of dedicated system
resources required to meet the Fund's enhancement priorities. FDISG agrees to
use reasonable efforts to make dedicated programming support available for all
projects required by the Fund. The amount of the resources required and the
projects to be worked on shall be determined jointly based upon joint periodic
review of project requirements; however, the Fund will decide the priorities
which will be assigned to each project and will determine what projects the
dedicated resources are to work on. All enhancements, improvements,
modifications or new features added to the FDISG System shall be, and shall
remain, the confidential, exclusive property of, and proprietary to, FDISG. The
parties agree to use best efforts to ensure that all enhancements to FDISG's
System, whether made by the Dedicated Team or otherwise, shall be made in a
manner that will not adversely effect the operational efficiency or
functionality of the FDISG System. Request for software changes may be
initiated by those representatives of the Fund identified in Exhibit 4 of this
Schedule C. The Fund will use its best efforts to notify FDISG in writing of
requests for software changes within 72 hours of an initial verbal request.
FDISG reserves the right to stop work on a request for which written
specifications have not been received.
a. SUPPORT PROVIDED TO THE FUND PERFORMED IN GROUPS OTHER
THAN THE DEDICATED PROGRAMMING TEAM
1. Coding to correct deficiencies in the system, unless such
deficiencies are included in item (II)(b)(9) below in which
event the Fund will be charged for such services. A system
deficiency is defined as a system process which does not
operate according to the design of the computer application or
system specifications. To correct system deficiencies, FDISG
will, at its own expense, expend whatever resources are
necessary to analyze the deficiency and apply an appropriate
remedy, in the form of corrected application code as
expeditiously as possible. An alternate process, in the form
of a functional work around, may be a suitable substitute for
the actual system fix, if the level of effort to develop the
system fix is deemed to be impractical or the elapsed time to
develop and apply the fix extends beyond the reasonable time
needed. For deficiencies identified by the Fund, the use of a
functional work around as an alternate process shall be
mutually agreed upon by the parties.
FDISG will evaluate all reported referrals, to validate
deficiency status or reclassify as a system enhancement, based
on the above definition.
2. Simple Maintenance determined to be core processing.
<PAGE> 22
3. FDISG generated (i.e., internal) requests to extend system
functionality and ensure industry competitiveness.
4. Enhancements required to comply with regulatory changes;
provided, however, FDISG will make such changes to the extent
that they are technically and commercially practical and are
within the scope of the software functions, capabilities and
database. FDISG agrees to use good faith in determining
whether such changes are technically and commercially
reasonable and agrees to negotiate with the Fund in good faith
to resolve any such issues.
b. EXAMPLES OF ACTIVITY TO BE PROVIDED TO THE FUND WHICH WILL
BE PERFORMED BY THE DEDICATED PROGRAMMING TEAM:
1. Customized form output (i.e., statements, confirmation
statements, commission statements).
2. Customized reports.
3. Addition of new features (enhancements) requested by the Fund.
4. Addition of existing features not used by the Fund.
5. Addition of new funds to the fund group.
6. Customized year-end processing.
7. Conversions from other systems to FSR subsequent to initial
funds being live.
8. Clean-up/Recovery project resulting from Fund error or causes
beyond the reasonable control of either party.
9. System "fixes" - coding to correct errors attributable to
code developed and currently maintained by the dedicated
teams.
10. Customization of existing functions specific to the Fund
11. Program documentation as requested by the Fund.
Software Exclusivity. The Fund may choose to have exclusive use of
enhancement software developed by its dedicated programming staff. Such
exclusivity would extend for a period of nine (9) months from the date
the enhancement is placed into the production libraries. Software
exclusivity would be waived if the Fund accepts either of the
following conditions:
a) If prior to implementation, FDISG or other FDISG clients agree
to share in the expense of the enhancements.
b) At any time during the 9 months following implementation,
FDISG or other FDISG clients agree to share the expense for
the enhancements.
Access and Capability. The Funds' dedicated programmers will have
access and capability to update any part of the System. However,
depending on the skill set of the programmers, as well as the scope of
the requested enhancement, it may be in the best interest of both the
Fund and FDISG to utilize non-dedicated programmers to address
<PAGE> 23
certain enhancements. In addition, because many programs are shared by
multiple clients, some enhancements may require approval from those
clients. These enhancements should be handled on an item by item
basis.
III. ADDITIONAL FEES
a. If the Fund chooses to use resources in addition to the
Dedicated Programming Team to accomplish work as outlined in
Section II.b, the following rates will apply:
<TABLE>
<CAPTION>
Annual Hourly
------ ------
<S> <C> <C>
Programmer $100,000 $135/hr
Business Systems Analyst $ 90,000 $100/hr
Acceptance Tester $ 85,000 $ 90/hr
</TABLE>
These rates apply to development and customization on all
software covered under this agreement (i.e. core TA system,
IMPRESS Plus, ACE+).
b. IMPRESS Plus Maintenance and Support Fees - The Fund will be
billed a monthly fee of $64,000 (fee based on $1500 per
workstation per year for 512 workstation license). Billing to
commence on the earlier of a) first production usage of
IMPRESS Plus software or b) August 1, 1997. Maintenance and
Support Fees include:
o All third party software maintenance charges from
software licensed in Exhibit 1 of Schedule G
o Full IMPRESS Plus applications support (bug fixes,
application assistance, etc.)
o Remote Dial-in IMPRESS Plus application support (if
needed)
o Subsequent interim and major releases for all
licensed IMPRESS Plus products
o 7x24 Help Desk Support for IMPRESS Plus applications
o Full support through First Data for third party
applications licensed in Exhibit 1 of Schedule G
o Participation in IMPRESS Plus User Group
c. IMPRESS Plus Installation Fees - Billable to the Fund at
$135/hr. (Estimate for 512 IMPRESS Plus workstations is 1100
hours). Installation includes:
o IMPRESS Plus application installation
o IMPRESS Plus third party software installation
o Network Design Assistance
o Hardware Configuration Assistance
o Workflow analysis
<PAGE> 24
o Project Management
o Post Installation Support
d. On each anniversary date of this Agreement, FDISG may adjust
the hourly and annual rates to reflect salary increases
and/or to maintain competitive rates in attracting qualified
personnel. Such annual increase will not exceed seven percent
(7%).
e. IMPRESS Plus Maintenance and Support and EMPRESS Plus
Installation Fees do not include the following:
o Hardware
o Network and Server Software not listed in Exhibit 1
of Schedule G
o Customization or application integration
o Support for IMPRESS Plus applications customized or
built by the Fund (see Section 3 of Exhibit 3 of
Schedule G)
o Installation, Integration and On-going Support of
hardware, network, and software components not
included in Schedule G
o Travel Expenses for install and support staff for
on-site visits (billed separately per Schedule D)
o Application Source Code
f. IMPRESS Plus Maintenance and Support and IMPRESS Plus
Installation Fees for Separate Test or Training System.
Maintenance and Support Fees - The Fund will be billed a
monthly fee of $2,666.66 (based on $1000 per workstation per
year with a minimum 32 workstation license). Billing to
commence on first production usage of IMPRESS Plus software in
the Training or Test environment. Maintenance and Support
includes items listed in Section III.b above.
Installation Fees - Billable to the Fund at $135/hr. (Estimate
for 32 IMPRESS Plus workstations is 200 hours). Installation
includes items listed in Section III.c above.
<PAGE> 25
g. Fees for IMPRESS Plus workstations in excess of 512:
<TABLE>
<CAPTION>
o Number of workstations ordered One-time License Fee
<S> <C>
32 $1300/workstation
64 $1000/workstation
128 waived
256 waived
</TABLE>
o Maintenance and Support - $1500 per workstation per
year; billable on first production usage of IMPRESS
Plus software; includes items listed in Section III.b
above
o Installation Fees - Billable to the Fund at $135/hr;
includes items listed in Section III.c above
The Fund agrees to pay a minimum of 18 months Maintenance and
Support for each workstation in excess of 512.
<PAGE> 26
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOI SYSTEMMATIC Specs
1 26610 DEFAULT/RECALCULATION PROBLEM Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
*Recalc does not include all
purchases applied to the LOI.*
Dealer comm credit not posted in
recalc.* No adjustment code to
adjust underwriter. * Trades
outside LOI period included in
recalc.* No ability to turn off
systematic recalc.
====================================================================================================================================
====================================================================================================================================
PRODUCE CHECKS ON NT2 ACCOUNTS Specs
2 19164 WITH DIRECT REDEMPTIONS Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Checks should be produced for
direct reds on NT2 accounts.
Transactions post to history, yet
no checks are produced. Update
DRDM0750 to allow.
====================================================================================================================================
====================================================================================================================================
3 25276 WIRE ORDER PROCESSING PROBLEM Specs
Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Wire order cancel/replacements
(OPR/OPC) do not update master
controls if not double Qc'd. If not
double Qc'd both trades appear
as new purchase orders.
====================================================================================================================================
====================================================================================================================================
Specs
4 24262 CERTIFICATE REPORT MISSING DATA Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
PFSR135D-R12 does not include
the work of several days in 1996.
Unable to reconcile certificate
issues without adhocs to identify
missing data.
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 27
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NSCC REPORT PNSC802D - Specs
INCORRECT COMMISSIONS ON Received
5 26768 SPLIT REPS
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
This report overestimates the
commission paid to split reps.
NSCC regulation requires
settlement by this report,
resulting in overpayments.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NSCC REJECT REPORT PNSCSPSD- Specs
R01 - MULTI PAGE REJECT RECEIVED
6 26769 DELETIONS AND TRUNCATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
NSCC rejects for a dealer that
run for more than one page are
dropping accounts, resulting in
inconsistancies from one page to
the next. Also truncation pro-
blems with Settlement Value,
Commission Amount and Fund Owes
Dealer amount.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ONLINE EDIT PREVENTING USE OF Specs
7 26772 CDSC EXEMPT OPTION 3. Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Exempt option 3 grosses up
CDSC on SWiPs, ensuring
consistent dollar amount
swips. For funds allowing
CDSC-free SWIPs, edit pre-
venting a shareholder
redeeming an amount
greater than 12% annually
from having a SWIP with a set
dollar amount.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 28
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOIMNT DELETING Specs
BROKER CLIENT Received
8 23849 NUMBER
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Systematic completion
of an LOI removes the
Broker Client Number
form the account in
error. Absence of the
BRCN causes problems
for the dealer.
Maintenance journals
are reviewed to
identify these accounts
and re-add the BRCN.
====================================================================================================================================
====================================================================================================================================
NET INDICATOR NOT Specs
CARRYING TO QC SCREEN Received
9 26155 AND NO MISMATCH WARNING
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
When entering a wire
order redemption as a
"net" amount trade, the
net indicator is not
carried forward in the
QC process, and does not
provide a mismatch
warning. The trade then
processes as "gross",
the default.
====================================================================================================================================
====================================================================================================================================
ASSIGNMENT OF CLOSED Specs
11 26770 ACCOUNTS ON QA RECORD Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
If a QA record is
manually created and
the master account is
not designated, FSR
assigns the first
account entered. If
this account is
closed, a consolidated
statement will not
print. Results in
additional phone calls
andduplicate statement
requests.
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 29
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REASSIGNMENT OF MASTER ACCOUNT Specs
12 26771 NUMBER Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
When a master account closes
AIM would like the master
account status to be reassigned
systematically to an open account
within the QA cluster. Currently
this is a time consuming manual
process.
====================================================================================================================================
====================================================================================================================================
Specs
13 26611 DIVIDEND CONTROL REPORT PROBLEMS Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
The Dividend and Capital Gain
reports do not match the
summary reports.
====================================================================================================================================
====================================================================================================================================
DUPLICATE STATEMENTS BY DBR NOT Specs
14 26612 AVAILABLE Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
AFS would like the ability to
request duplicate statements by
dealer, dealer/branch,
dealer/branch/rep. Current
functionality is by fund/account.
====================================================================================================================================
====================================================================================================================================
PAC'S NOT RUNNING ON CAPITAL Specs
16 26154 DEVELOPMENT ACCOUNTS Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Accounts opened via merger
subscription with converted PAC
information, when the PAC is
turned on, do not run. Deletion
and reestablishment of the PAC
data does not resolve the issue.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 30
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUNDSERV REDEMPTION SHOWS
INCORRECT SHARE AMOUNT ON Specs
17 25763 HISTORY Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Several examples of FundSERV
reds where the less than the
full amount of shares appear
redeemed in the line of
history, but the account is
left with a zero balance. The
correct amount is paid through
the NSCC. Control balancing
problems result.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
EXHIBIT 2 OF SCHEDULE C
IWT FUNCTIONALITY
<TABLE>
<CAPTION>
- ---------------------------- ----------------------------
NEW ACCOUNT FINANCIALS
- ---------------------------- ----------------------------
<S> <C>
CASHIERING REPORT
- ---------------------------- ----------------------------
ACCOUNT OPTIONS EXCEPTION WAIVER
- ---------------------------- ----------------------------
AUTO EXCHANGE ENHANCED QC
- ---------------------------- ----------------------------
BANK ADDRESS
- ---------------------------- ----------------------------
AIP FINANCIAL QC
- ---------------------------- ----------------------------
BANK WIRE IMBALANCE REPORT
- ---------------------------- ----------------------------
BENEFICIARY INTERNAL ASSET MOVE
- ---------------------------- ----------------------------
CHECKWRITING EXCHANGE
- ---------------------------- ----------------------------
DIVIDENDS/CAPGAIN TRANSFER
- ---------------------------- ----------------------------
SWP PURCHASES
- ---------------------------- ----------------------------
TELEPHONE RED REDEMPTIONS
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
ACCOUNT SEARCH
- ---------------------------- ----------------------------
ACCOUNT SETUP
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
DEALER
- ---------------------------- ----------------------------
DEALER OFFICE REP LIST
- ---------------------------- ----------------------------
DEALER ALPHA SEARCH
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
FINANCIAL INQUIRY
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
GROUP MASTER ADD
- ---------------------------- ----------------------------
LOI/ROA
- ---------------------------- ----------------------------
ACCOUNT LINK/UNLINK
- ---------------------------- ----------------------------
IWT ACCOUNT LIST
- ---------------------------- ----------------------------
PROCESSED ITEM LIST
- ---------------------------- ----------------------------
</TABLE>
<PAGE> 32
EXHIBIT 3 OF SCHEDULE C
AIM SEPARATE CYCLE OVERVIEW
This project removes AIM from all FSR regions, files, jobstreams, control
cards, etc. and establishes them with their own. It will allow AIM to have more
control over their processing and removes any unexpected complications caused
by dependency on the activities of other management companies.
VOLUME
o 1700+ Jobstreams (JCL, Procs, and Control Cards) to evaluate
o Approximately 70% of these will qualify for processing
(create new AIM and modify FSR)
o * Files to convert
o * GDGs
o * additional Tapes/Cartridges
o * additional DASD required
o * additional Tape Mounts
* These figures are currently being researched.
AFFECTED AREAS/DEPARTMENTS
o AIM Client Services - John Corey
o Atest - Kathy McNeil, Steve Carlson
o BOSS Application - Tom Farnsworth (B)
o Capacity Planning - Ron Larue
o Corporate Actions - Joe Viens
o DASD - John Dryer, Janet Rose (B)
o Database Administration (DBA) for On-line - Steve Powers (B)
o DCX - Linda Messore, Ann Stadtherr
o ESG - Connie Ciulla, Arthur Roy
o Express Delivery - Don Morgan
o FSR - Tom Woislow, Bill VonHandorf, Bill Quigley, Bob Reilly,
Ray Bennison
o NSCC - Carl Damelio
o Print Mail - Helene Grunes (B)
o Tape Operations - Don Chappell
o SCE - Ed Oelerich, Ellen Rhode
o Tax/CBA - Ed Boyle
o Transmissions - Frank Pitzi
Because of the large volume of work to be done and the number of departments
involved we are developing a "phased in" development and implementation
approach. This will cause the least impact to both our client and our own
internal departments. It will require tight project management and dedicated
point people both from AIM and our own departments. Each phase will migrate up
through test, acceptance and production.
<PAGE> 33
PHASE 1 - START-UP FILES
The foundation of this approach is to create six basic files with an AIM
high-level qualifier on a daily basis from the FSR system which can be used by
jobs which read them but not update them (see Phase 2). They would be deleted
at the beginning of the next day's cycle and recreated by the FSR cycle. These
files are:
P03AIM.PRIV.MASTER.DATE
P03AIM.PRIV.BATCH.DATE
P03AIM.PRIV.MASTER.FUND
P03AIM.PRIV.BATCH.FUND
P03AIM.PRIV.TRANS.ACCEPT1
P03AIM.PRIV.TRANS.DIVIDEND
The first four files would be copied from FSR files to AIM files in a new
temporary AIM job which would run daily.
The last two files, trans.accept1 and trans.dividend, currently exist with
different names in FSR. Job PFSR13DD (FSR/FED WIRE) now creates
P03FSR.TEMP.XMITOUT.ACCEPT1.AIM which contains all accept records for AIM. Job
PFSR13ED (FSR/FED WIRE) now creates P03FSR.TEMP.XMITOUT.DIV.AIM which contains
all dividend records for AIM. These files are input to AIM transmission jobs
(PFSRXCGD and PFSRXCLD) and the FSR/POST BACKUPS job (PFSR71HD).
We would rename P03FSR.PRIV.TRANS.ACCEPT1 and P03FSR.PRIV.TRANS.DIVIDEND to
P03AIM.PRIV.TRANS.ACCEPT1 and P03AIM.PRIV.TRANS.DIVIDEND in jobs PFSR13DD and
PFSR13ED. We would rename the transmission jobs to PAIMxxxx modify them
replacing FSR references with AIM, set up the appropriate schedule and move
them up the regions. We would place an override in PFSR71HD which would now
reference the PO3AIM file for backup. Once tested and QA'd by us and AIM we
would replace the FSR transmission jobs with the new AIM jobs.
RESULT OF PHASE 1
We now have three production jobs running in the AIM region and we have set up
the 6 basic AIM files which will be the basis for Phase 2.
<PAGE> 34
PHASE 2 - REPORTS, TRANSMISSIONS, AND AIM-ONLY JOBS
This phase involves converting jobs which do not update any of the master files.
They may read them and create temporary files but updating will wait for phase
3. Phase 2 jobstreams will include mainly report and transmission jobs as well
as any AIM-only jobs. We will be adding new schedule entries (CA-7) for AIM and
modifying existing FSR schedules where needed paying special attention to
triggers, requirements and dependencies. We will add new Express Delivery
entries for AIM reports and delete the AIM entries from the FSR system.
The actual migration of reports and transmission files from the FSR cycle to
the AIM cycle will be on a specific schedule. As we introduce reports to the
AIM cycle they will be available in SAR from both FSR and AIM cycles for a week
to allow AIM to review them. They will then be turned off in SAR for FSR. We
will provide AIM with a report schedule each week to aid this process.
Transmission files will be tested using record counts and selective file
compares. AIM-only jobs will also parallel for a week where feasible.
An example of a Phase 2 job is PFSR143D (FSR/AUTOEX). This job reads the batch
fund file, the batch date file and the trans.accept1 file to produce reports.
All these files are available in the AIM region.
Phase 2 work to be done described in a programmer's template includes (but is
not limited to):
Copy and rename the JCL jobs.
Modify procs and/or control cards if necessary for the test/acpt/prod
regions.
Verify that JCL, procs and control cards follow our current standards.
Create high-level overrides for FSR read-only files.
Change Express Delivery for AIM output and set up the FSR RID entry to
be deleted in n days.
Schedule the new AIM jobs with the same requirements and dependencies
as the FSR jobs but using the appropriate high level qualifier. This
requires tight control on the status of all jobs.
Change the schedules of any jobs which are dependent upon the FSR job
to be dependent upon the new AIM job. Note: this will not be the case
with all AIM jobs.
Move it up the regions testing at appropriate points.
Review the output (First Data and AIM).
After a week inhibit AIM output from FSR jobs from going to SAR. Only
AIM output from AIM jobs will be available in SAR.
The key to the success of this phase is an aggressive implementation schedule
and active participation by AIM representatives in checking and validating the
output.
RESULT OF PHASE 2
We now have report-only jobs (not associated with the actual updating of
files), most of the transmission jobs and all AIM-only jobs which are not
associated with updating files in AIM production. All converted reports and
files have been signed off by AIM. These AIM activities are also being
processed in FSR. We have gone as far as possible without updating files.
<PAGE> 35
PHASE 3 - ANCILLARY FILES AND SYSTEMS
This phase includes updating ancillary files and their associated jobstreams.
Examples of this type may include Bluesky, history, cert or check files, etc.
These files are not mainstream and tend to be localized in how they are
updated. In order to qualify for Phase 3 the Management Company must be the
high order sort key field.
There are two approaches we will use depending upon the main file's on-line
considerations. The first approach involves converting the main file once along
with all associated jobs and the other involves splitting out AIM from FSR at
the start of the cycle, updating it in AIM jobs and merging it back in FSR at
the end. Either approach will involve multiple jobs per master file.
For example, The Bluesky File is only used by 3 jobs: PFSRS07D which creates
the batch file, PFSR190D which updates the file and does an AIM-only extract,
and PFSR194D which does reports. In this case, we would split the FSR Bluesky
File into AIM-only and all other. The FSR Bluesky subsystem would then be
cloned for AIM and the result would be two separate Bluesky subsystems. Online
would access the appropriate Bluesky file.
Other subsystems may be too routed in our core to fully separate out and would
be better served breaking out AIM at the beginning of its cycle, updating in
AIM-only jobs and remerging it at the end of the cycle. Any special jobs used
for splitting out files or merging them after update will have to be backed out
in Phase 4.
All activities described in Phase 2 apply here as well.
RESULT OF PHASE 3
We have now isolated and converted any subsystems not bound to core processing.
Most AIM reports and transmissions are being produced in the AIM region. We are
updating some master files and have done everything possible surrounding the
core without touching it. We are ready for Phase 4.
<PAGE> 36
PHASE 4 - THE CORE
This phase deals with updates to our core master files, our functional
processes, converting large volume files (ShareA and its splits, history, lots,
global, etc.) and includes all jobstreams that have not yet been converted.
Additionally, it includes backing out any special split or merge jobs as well
as special overrides introduced in earlier phases. This will be the largest
phase. On-line will now access all AIM-only files.
Many of the activities done in the previous phases will be performed here as
well. Because so many programs interact with the core modules there is no easy
way to break this activity up. As always we will need our AIM partners to help
in the QA activities for this hefty stage.
It is possible to combine Phases 3 and 4 if it were felt to be desirable.
However, it is our intention to have all peripheral completed before attacking
the core so there will be no unnecessary distractions. Additionally, for
development contention reasons, we would like to turn these modules over as
expeditiously as possible.
All AIM-related activities, programs, control cards, overrides, splits, merges,
etc. will be removed from all FSR jobs.
RESULT OF PHASE 4
All AIM processing is now contained in its own region and runs under its own
schedule. On-line accesses AIM-only files. FSR no longer has any AIM
processing relationship with the exception of any files which are to be merged
from both regions for transmission or system reasons.
<PAGE> 37
EXHIBIT 4 of SCHEDULE C
AUTHORIZED PERSONS REQUESTING SYSTEM MODIFICATIONS
---------------------------------------------------
John Caldwell
President, A I M Fund Services, Inc.
---------------------------------------------------
Joseph Charpentier
Assistant Vice President, A I M Fund Services, Inc.
---------------------------------------------------
Tony D. Green
Senior Vice President, A I M Fund Services, Inc.
---------------------------------------------------
Jean Miller, Director of Applications
Information Technology Services
A I M Advisors, Inc.
<PAGE> 38
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse FDISG monthly for applicable out-of-pocket expenses,
including, but not limited to the following items:
o Microfiche/microfilm production
o Magnetic media tapes and freight
o Telephone and telecommunication costs, including all lease,
maintenance and line costs
o NSCC transaction charges at $.15/per financial transaction,
$.10/per same day trade confirmations
o Shipping, Certified and Overnight mail and insurance
o Year-End form production and mailings
o Terminals, communication lines, printers and other equipment
and any expenses incurred in connection with such terminals
and lines
o Duplicating services, as pre-approved by the Fund
o Courier services
o Due Diligence Mailings
o Rendering fees as billed
o Overtime, as pre-approved by the Fund
o Temporary staff, as pre-approved by the Fund
o Travel and related expenses, as pre-approved by the Fund
o System training, as pre-approved by the Fund
o Record retention, retrieval and destruction costs, including,
but not limited to exit fees charged by third party record
keeping vendors
o Third party audit review
o All conversion costs: including System start up costs, but
excluding costs associated with conversions between FDISG
systems
o Such other miscellaneous expenses reasonably incurred by FDISG
in performing its duties and responsibilities under this
Agreement
<PAGE> 39
SCHEDULE F
PERFORMANCE STANDARDS
I STANDARDS FOR RESOLUTION OF SYSTEM DEFICIENCIES
"SYSTEM DEFICIENCY" - A system process which does not operate according to the
design of the computer application or system specifications, and is not a
result of any act or failure to act by the Fund.
1. FIRE CALL - A System Deficiency with at least one of the following
characteristics:
1. Potential or real financial exposure in excess of $100,000, or
2. Causes the Fund to be out of compliance with a major
regulatory requirement, or
3. Causes incorrect transaction processing and/or shareholder
confirmations with no reasonable manual workaround available
either at the Fund or in FDISG's systems
FDISG Response: Analysis and resolution within 36 hours or 2 nightly
processing cycles
2. CRITICAL DEFICIENCY - A System Deficiency with at least one of the
following characteristics:
o Potential or real financial exposure estimated from
$25,000-$100,000 or,
o Manual workaround requires substantial manual effort and
carries a high potential for error
FDISG Response: Impact Analysis within 3 business days of initial
notification; Determination of problem cause within 5 business days of
initial notification; Problem resolution within an average of 30
business days of initial notification
3. NON-CRITICAL DEFICIENCY - All other System Deficiencies
FDISG Response: Impact Analysis within 3 business days of initial
notification; Determination of problem cause within an average of 15
business days of initial notification; Problem resolution and target
dates to be determined on an item-by-item basis jointly by the Fund
and FDISG.
<PAGE> 40
II STANDARDS FOR ON-LINE SYSTEMS AVAILABILITY AND RESPONSE TIME
These standards shall apply on business days of the Funds.
o On-line systems availability between 7:00 a.m. and 7:00 p.m
Central Time ("CT") - 99% of hours available measured monthly.
o Average response time (7:00 a.m. to 7:00 p.m. CT) of 3 seconds
or less, measured end-to-end, in response to the system
employed by A I M Fund Services, Inc. as of September 1, 1994
- 99% measured monthly.
III STANDARDS FOR DELIVERY OF SYSTEM REPORTS
o CRITICAL REPORTS - The following report bundles in queue and
ready to begin transmission no later than 7:00 a.m. CT each
business day - a cumulative of two late bundles permitted per
month:
EFSR047H
EFSR601H
Changes to critical report bundles must be jointly approved by
an FDISG Client Service Officer and an authorized requestor of
the Fund as listed in Exhibit 4 of Schedule C.
o All other nightly report bundles in queue and ready to begin
transmission no later than 7:00 a.m. CT each business day -
95% measured monthly.
<PAGE> 41
IV STANDARDS FOR DELIVERY OF FILE TRANSMISSIONS
o CRITICAL FILES - The following jobs in queue and ready to
begin transmission no later than 4:30 CT each business day of
the Fund - a cumulative of two late files permitted per month:
<TABLE>
<CAPTION>
JOB NAME FREQUENCY APPLICATION
-------- --------- -----------
<S> <C> <C>
PFSRXCAD Daily Cap Stock File
PFSRXCYD Daily DISC Cap Stock File
PFSRXCTD Daily DISC ACH File
PFSRXCVD Daily DISC NSCC Green Sheets File
</TABLE>
o The following jobs in queue and ready to begin transmission no
later than 4:30 CT each business day of the Fund - 95%
measured monthly
<TABLE>
<CAPTION>
JOB NAME FREQUENCY APPLICATION
-------- --------- -----------
<S> <C> <C>
PFSRXCGD Daily Acceptance File
PFSRXCKD Daily Dealer File
PFSRXCHD Daily Order File
PFSRXCID Daily ShareA Master File
PFSRXCJD Daily Fund File
PFSRXCMD Daily Lot History File
PFSRXCND Daily Lot Maintenance File
PFSRXCLD Periodic. Dividend Activity
</TABLE>
The standards will not apply on business days with the
following activity: Processing of Year-end Dividend and
Capital Gain Activity, Annual Trustee Fee Payment; Year-end
File Initialization.
V STANDARDS FOR THE FUND
All inbound transmissions (i.e. SIAC, various third parties) and fund prices in
receipt by FDISG by 8:00 p.m. CT
VI RIGHT TO AUDIT
The Fund shall have the option, on an annual basis, to audit the reports used
to measure the standards listed in this Schedule F. Notice of an audit will be
given 14 days in advance, and the audit will not last more than one day.
<PAGE> 42
VII PENALTIES/INCENTIVES
FDISG agrees to achieve the performance levels specified in Schedule F,
Sections II, III, and IV, and semiannually (as of each June 30th and December
31st) to adjust the monthly Account Fee Invoice to reflect any
penalties/incentives as outlined below. Penalties for a given business day will
be applied only if the Standards of the Fund in Section V are achieved.
ON-LINE SYSTEMS AVAILABILITY - MONTHLY
For each one-tenth of 1% under 99%, the monthly Account Fees will be reduced by
the same percentage. The monthly maximum percentage penalty reduction will be
3% of the monthly bill. For each one-tenth of 1% in excess of 99% up to a
maximum of 1%, the monthly Account Fees will be increased by the same
percentage.
ON-LINE SYSTEMS AVAILABILITY - DAILY
If systems availability on any given business day is less than 80%, the monthly
account Fees will be reduced by the percentage of systems availability below
80% for that day times 1/30 of the monthly Account Fees.
REPORT AVAILABILITY - CRITICAL REPORTS
Monthly Account Fees will be reduced by $250.00 for each late instance greater
than the allowable error rate, up to a maximum of $500.00 per day. For each
month within the allowable error rate, monthly Account Fees shall be increased
by $1,000.
FILE TRANSMISSIONS - CRITICAL FILES
Monthly Account Fees will be reduced by $500.00 for each late instance greater
than the allowable error rate with a maximum penalty of $10,000 per month. For
each month within the allowable error rate, monthly Account Fees shall be
increased by $1,000.
The Performance Standards and related penalties set forth in this Schedule F
shall not apply in the event of any occurrence defined in Section 8(g) of the
Agreement.
<PAGE> 43
SCHEDULE G
IMPRESS PLUS SOFTWARE AND SUPPORT TERMS
ARTICLE 1 - SYSTEM, SUPPORT AND IMPLEMENTATION
1.1 Software and Support. FDISG shall provide or has previously provided
to the Fund and the Fund shall acquire from FDISG the right to use the computer
software programs set forth in Exhibit 1 of this Schedule G (the "Software"),
for the fees indicated in Schedule C of Amendment Number 3 to the Agreement.
Software includes related user manuals and reference guides (collectively,
"DOCUMENTATION"). One copy of the Documentation shall be provided to the Fund
at no additional cost. FDISG shall provide only the machine readable object
version of the Software and not source code. Additional terms and conditions
concerning the Software are set forth in Exhibits 1 of Schedule G ("EXHIBIT 1")
and Exhibit 1.1 of Schedule G ("EXHIBIT 1.1") (collectively, the "SOFTWARE
EXHIBITS"). Subject to the terms and conditions set forth in this Schedule G,
FDISG grants to the Fund and the Fund accepts from FDISG the non-exclusive,
non-transferable license to use the Software during the term of the Agreement
("LICENSE"). Some software components ("THIRD PARTY SOFTWARE") required to be
used with the Software were developed by a third party ("THIRD PARTY VENDOR").
Third Party Software is licensed to the Fund only pursuant to: (a) shrink
wrapped or other agreements between the Third Party Vendor and the Fund and (b)
the specifically indicated terms and conditions in this Schedule G. The
Software Exhibits shall indicate which Third Party Software the Fund is
required to obtain and license from FDISG and which Third Party Software the
Fund shall be solely responsible to obtain and license. As part of the
Software, FDISG shall provide the Fund with the interfaces set forth in Exhibit
1, between the Software and Third Party Software ("INTERFACES"). FDISG shall
provide the software support services ("SOFTWARE SUPPORT") so designated in
Exhibit 3 of Schedule G ("EXHIBIT 3"). Software Support shall include a
License to error corrections, minor enhancements and interim upgrades to the
Software which are made generally available to FDISG client's of the Software
under Software Support, but shall not include a License to substantial added
functionality, new interfaces, new architecture, new platforms or other major
software development efforts, as determined solely by FDISG.
1.2 Ownership. FDISG or its licensors shall retain tide to and ownership
of the Software, copies, derivative works, inventions, discoveries, patentable
or copyrightable matter, concepts, expertise, techniques, patents, copyrights,
trade secrets and other related legal rights ("PROPRIETARY INFORMATION"). FDISG
reserves all rights in the Proprietary Information not expressly granted to the
Fund in this Schedule G. Upon FDISG's reasonable request, the Fund shall inform
FDISG in writing of the quantity and location of any Software.
1.3 Equipment, System Implementation and Access. Fund is responsible for
acquiring, installing and maintaining the data processing and related equipment
("EQUIPMENT") set forth in Exhibit 2.1 of Schedule G with respect to production
equipment and Exhibit 2.2 of Schedule G with respect to Test/Training equipment
(collectively, ("EXHIBIT 2"). Additional terms and conditions concerning the
Equipment are set forth in Exhibit 2. The Equipment identified in Exhibit 2
represents the minimum equipment configuration required to properly operate the
Software. FDISG disclaims responsibility for the performance of the Software in
the event that the Fund utilizes equipment different than that which is set
forth in Exhibit 2. FDISG and the Fund shall (a) within a reasonable time after
the Effective Date, agree upon the tasks required to implement the Software,
Third Party Software and Equipment ("SYSTEM") and the party responsible and
time frames for each task ("SCOPE OF WORK"); (b) perform their respective
assigned tasks according to the Scope of Work; and (c) if not the party
assigned to a task, cooperate with the responsible party. To the extent the
Scope of Work is incomplete, FDISG shall follow its reasonable and customary
practices. Upon prior notice by FDISG to the Fund, the Fund shall give
reasonable access to the System to FDISG, FDISG's employees. affiliates,
representatives, agents, contractors, licensors and suppliers ("FDISG'S
AGENTS") who are providing services under the Agreement or auditing adherence
to the Agreement.
1.4 Use of Software. Fund may use the Software during the term of this
Agreement only on the Equipment and only to process the Fund's data for
internal business purposes (which shall not, for purposes of this Agreement,
include use by Fund to provide services to its customers on a service bureau
basis) and solely in connection with the Fund's use of the FDISG System and
only at the locations identified in the Agreement. If the Equipment is
inoperative due to malfunction, the license grant shall, upon written notice to
FDISG, be temporarily extended to authorize the Fund to use the Software on any
other equipment approved in writing by FDISG until the Equipment is returned to
operable condition. FDISG, in its reasonable discretion, may suspend any
Software Support while the Software is being used on such other Equipment. No
right is granted for use of the Software by any third party or by the Fund to
process for any third party, or for any other purpose whatsoever, except as
expressly provided in this paragraph. Except as otherwise specifically stated
herein, the Fund shall not modify, re-engineer, decompile or reverse engineer
the Software or otherwise attempt to obtain any source code without FDISG's
prior written consent.
<PAGE> 44
1.5 Software Installation and Acceptance. FDISG shall advise the Fund that
the Software as listed in Exhibit 1 is installed and functioning on the
Equipment ("Software Installation Date") so that implementation and training
activities can proceed. The Fund shall be deemed to have accepted the Software
sixty (60) days after Software Installation Date or sixty (60) days after the
Fund's first use of any Software component to process live production data
("SOFTWARE ACCEPTANCE DATE").
1.6 Copies of Software. The Fund may not copy the software except for
backup and archival purposes only, and the Fund shall include on all copies of
the Software all copyright and other proprietary notices or legends included on
the Software. The provisions of this Paragraph do not apply to Fund data files
in machine-readable form.
1.7 No-Export. The Software shall not be shipped or used by the Fund
outside the United States. The Fund shall comply with all applicable export and
re-export restrictions and regulations of the U.S. Department of Commerce or
other U.S. agency or authority. The Software shall not be transferred to a
prohibited country or otherwise in violation of any such restrictions or
regulations.
1.8 Termination. Terms and conditions of this Schedule G which require
their performance after the termination of the Agreement, including but not
limited to the License and Software use restrictions, limitations of liability,
indemnification, and confidentiality obligations, shall survive and be
enforceable despite the termination of the Agreement.
ARTICLE 2 - WARRANTIES AND REPRESENTATIONS
2.1 Software Warranties and Remedies. For the term of the Agreement, FDISG
warrants ("PERFORMANCE WARRANTY") that the Software shall perform on the
Equipment substantially in accordance with the Documentation and shall enable
the Funds to meet the requirements set forth in Section 240.17a-4 of the
Securities Exchange Act of 1934, except for Directly Obtained Third Party
Software as set forth in Section 2.2 below. The timely correction of errors
and deficiencies in the Software pursuant to Software Support shall be Fund's
sole and exclusive remedy for the Performance Warranty. FDISG warrants ("RIGHTS
WARRANTY") it has the right to license the Software in accordance with the
Agreement. Provided the Fund gives FDISG timely written notice, reasonable
assistance, including assistance from the Fund's employees, agents, independent
contractors and affiliates (collectively, "FUND'S AGENTS"), and sole authority
to defend or settle the action, then FDISG shall do the following
("INFRINGEMENT INDEMNIFICATION"): (a) defend or settle, at its expense, any
action brought against the Fund or the Fund's Agents to the extent the action is
based on a claim that the Software infringes a duly issued United States'
patent or copyright or violates a third party's proprietary trade secrets or
other similar intellectual property rights ("INFRINGEMENT"); and (b) pay
damages and costs finally awarded against the Fund or the Fund's Agents
directly attributable to such claim. FDISG shall have no Infringement
Indemnification obligation if the alleged Infringement is based upon the Fund's
use of the Software with equipment or software not furnished or approved by
FDISG or if such claim arises from FDISG's compliance with the Fund's designs,
or from the Fund's modifications of the Software. The Infringement
Indemnification states FDISG's entire liability for Infringement and shall be
the Fund's sole and exclusive remedy for the Rights Warranty.
2.2 Directly Obtained Third Party Software Warranties. All warranties for
the Directly Obtained Third Party Software identified Section 2.2 of Exhibit 1,
if any, are specifically set forth in the applicable agreements supplied by the
Third Party Vendors of such products.
2.3 Exclusion of Warranties. THE WARRANTIES SET FORTH IN PARAGRAPH 2.1
ABOVE AS TO THE SOFTWARE AND IN PARAGRAPH 2.2 ABOVE AS TO THIRD PARTY SOFTWARE
ARE IN LIEU OF ALL OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, ARISING
OUT OF OR RELATED TO THIS SCHEDULE G. FDISG SPECIFICALLY DISCLAIMS ALL OTHER
WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY,
NONINFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
2.4 Fund Responsibility. The System is an information system only,
designed to assist the Fund and the Fund's Agents in performing their
professional activities and is not intended to replace the professional skill
and judgment of the Fund's Agents. Fund shall be solely responsible for: (a)
acts or omissions of the Fund's Agents in entering data into the System,
including its accuracy and adequacy; (b) checking the correctness and accuracy
of the System output and data; and (c) any use of or reliance upon the System
output by the Fund's Agents. Except for the Infringement Indemnification and as
limited by applicable law, the Fund shall indemnify, defend and hold FDISG and
FDISG's Agents harmless from any losses, costs, damages, and liabilities,
including without limitation, reasonable attorneys' fees and court costs,
relating to any claim by any third party arising from or related to the Fund's
and the Fund's Agents' use of the System or System output.
ARTICLE 3 - MISCELLANEOUS
<PAGE> 45
3.1 Confidentiality Obligations. Each party shall keep confidential any
information relating to the other party's business which is clearly designated
or described in writing to be confidential ("CONFIDENTIAL INFORMATION"). Each
party shall keep and instruct its employees and agents to keep such information
confidential by using at least the same care and discretion as used with that
party's own confidential information. Information shall not be subject to such
confidentiality obligations if it is: (a) in the public domain, (b) known to a
party prior to the time of disclosure by the other party, (c) lawfully and
rightfully disclosed to a party by a third party on a non-confidential basis,
(d) developed by a party without reference to Confidential Information or (e)
required to be disclosed by law. If either party, its employees or agents
breaches or threatens to breach the obligations relating to use of the
Confidential Information, the other party may obtain injunctive relief, in
addition to its other remedies, inadequate monetary damages and irreparable
harm being acknowledged.
3.2 Confidential and Privileged Information. The Proprietary Information,
other FDISG software and related information, and the Agreement are
Confidential Information of FDISG and FDISG's Agents. Absent FDISG's written
permission, Fund shall not duplicate FDISG's Confidential Information. Fund
accepts full responsibility for complying with all laws, rules and regulations
concerning use and disclosure of privileged data regarding any information
placed or stored in the System or output from the System.
<PAGE> 46
EXHIBIT 1 OF SCHEDULE G
SOFTWARE
1. FDISG Software.
1.1 FDISG Software includes the following IMPRESS Plus products which are
further described in Exhibit 1.1 ("Specifications"):
IMPRESS Plus Workflow/Image Release 5.3
IMPRESS Plus Intelligent Workstations (IWT) Release 5.3 for FSR
IMPRESS Plus Customer Service System Release 5.3
1.2 Interfaces. Except as agreed in writing, FDISG shall not be required
to modify the Software or the Interfaces to accommodate changes made by the
Fund's vendor to its portion of the interface. If the Fund's vendor needs
information about the Software, then the vendor must first execute a
nondisclosure agreement in form and content reasonably acceptable to FDISG.
FDISG shall not be liable for any delay or degradation to the Software or
Equipment attributable to the Fund's use of Interfaces.
1.3 Customization. The listed products are licensed for IMPRESS Plus use
and customization only. Use of these tools to develop or customize non-IMPRESS
Plus applications is not permitted without the express written authorization of
FDISG.
2. Third Party Software.
2.1 FDISG Provided Third Party Software. The following Third Party
Software is licensed to the Fund directly by FDISG subject to the terms of the
Agreement:
2.1.1 BancTec Software. The following Third Party Software is licensed
directly to the Fund by FDISG subject to the mandatory BancTec ("BancTec")
terms and conditions set forth in Attachment 1 of this Exhibit 1 of Schedule G
("Attachment 1"), attached and incorporated by reference. To the extent that
the terms of Attachment 1 conflict with or differ from the other terms and
conditions in the Agreement, the terms of Attachment 1 shall prevail with
respect to the following BancTec Software ("BancTec Software"):
Informix Multi-User with 512 maximum users
XDP Storage Manager Multi-User with 512 maximum users
FloWare Multi-User with 512 maximum users
Application Designer Single-User with 512 maximum users
2.1.2 Pegasystems Software. The following Third Party Software is licensed
directly to the Fund by FDISG subject to the mandatory Pegasystems
("Pegasystems") terms and conditions set forth in Attachment 2 of this Exhibit
1 of Schedule G ("Attachment 2"), attached and incorporated by reference. To
the extent that the terms of Attachment 2 conflict with or differ from the
other terms and conditions in the Agreement, the terms of Attachment 2 shall
prevail with respect to the following Pegasystems Software ("Pegasystems
Software"):
Product Name Version Function
PegaSHARES RES 6.2 Workflow Engine
PegaENVIRONMENT ENV 4.2 Operating Shell
PegaPRISM Prism 5.1 Image Viewer
PegaStorage Manager Stor 2.1 Image Librarian
PegaREACH Real.0 Desktop Graphical Interface
2.2 Directly Obtained Third Party Software. The following Third Party,
Software is separately licensed by the Third Party Vendor directly to the Fund
subject to the respective terms and conditions of any "shrink-wrapped" or
<PAGE> 47
other agreements between the Third Party Vendor and the Fund. The Third Party
Software in the Required Column must be obtained by the Fund. The Third Party
Software in the Optional column is helpful but not required unless the
indicated features are being used. The Fund accepts the provisions of such
agreements, including the warranty provisions, if any, and agrees to comply
with the terms set forth in such agreements:
<TABLE>
<CAPTION>
Required: Optional:
<S> <C>
- - Microsoft DOS 6.2 or higher - ALCOM LanFax Redirector V2.15gl or greater
- - Microsoft Windows 95 or NT 4.0 (required if using fax)
- - Microsoft Office 95 or better - HiJaak PRO 2.0 or greater for Windows
- - Microsoft NT Server 3.5 (required if using fax)
- - Microsoft NTSQL Database 4.x and client - Word for Windows 6.Oc or greater (required if
Licenses using fax)
- - Microsoft TCP/IP Stack - Quarterdeck QEMM 7.X or greater (required if
- - Novell NetWare 3.11 or greater using fax)
- - SNA Server 3.0 or higher - CGS Computer Associates, Inc. Scanlib software
- - UNIX for selected Image Server platform (required for Ricoh scanners)
- - UNIX ESQL/C Compiler for selected - Powersoft PowerViewer (required for adhoc
UNIX platform reports)
- - MDI Gateway for DB2 by - 3270 Windows emulation package
MicroDecisionware Inc., A Sybase client (usually Rumba for Windows by WaUData)
- - Sybase Open Client NetLibrary for the
selected TCP/IP stack
</TABLE>
<PAGE> 48
ATTACHMENT 1 OF EXHIBIT 1 OF SCHEDULE G
TERMS AND CONDITIONS
BANCTEC
1. Each BancTec Software Package listed in Exhibit 1 of Schedule G
("Program") which is identified as "Multi-User Program" is licensed for
installation on a single network server computer which is supplied by BancTec,
FDISG, or a third party, and which is electronically linked with one or more
workstations having access to the Program. If Section 2.1.1 of Exhibit 1 of
Schedule G ("Exhibit 1") designates a maximum number of users authorized to
simultaneously access the Multi-User Program, no access will be permitted in
excess of such maximum number. In all other cases, Multi-User Program is
authorized to be accessed by all workstations which are configured to
communicate with that network server computer.
2. Each Program listed in Exhibit 1 identified as "Single-User Software"
is licensed for installation and use on a single computer.
3. Each Program listed in Exhibit 1 identified as an "Unlimited User
Program" is licensed for use by Client after ordering a copy of the Program.
Once ordered, the Fund may make unlimited copies of such Programs at no
additional charge.
4. Each Program listed in Exhibit 1 identified as a "Device Program" is
licensed for use solely to facilitate the operation of the corresponding
equipment device. If a Device Program is used for more than one device, the
license must be upgraded in accordance with Exhibit 1.
5. Each Program listed in Exhibit 1 identified as a "Development-User
Program" is licensed for installation and use on a single computer for
development and testing purposes. The license for Development-User Programs
also includes a license for production use on a single computer.
6. Each Program listed in Exhibit 1 identified as a "Production-User
Program" consists of necessary runtime modules and associated link libraries
for inclusion with custom software applications. Production-User Programs are
not licensed for use in the development of custom software applications and may
be either Multi-User or Single-User Programs.
7. Only a nontransferable, nonexclusive, perpetual license to use the
Programs and related BancTec documentation for its own internal use (including,
without limitation, providing processing services to third parties in a service
bureau or facilities management environment) is granted to the Fund.
8. BancTec or its vendors retain all title to the Programs, and all
copies thereof, and no title to the Programs, or any intellectual property in
the Programs, is being transferred; provided, however, nothing contained herein
shall give BancTec or its vendors any right, title or interest in the Software.
9. The Programs shall not be copied, except as specifically authorized
under an Exhibit to this Agreement and except for backup or archival purposes.
All such copies shall contain all copyright and other proprietary notices or
legends of BancTec or its vendors contained in the Programs delivered under
this Agreement.
10. The Programs shall not be modified, reverse assembled or decompiled by
the Fund. No attempt shall be made by the Fund to derive source code from the
Programs.
11. The Programs will not be shipped or used by FDISG or the Fund to
Africa or the Middle East. All applicable export and re-export restrictions and
regulations of the U.S. Department of Commerce or other U.S. agency or
<PAGE> 49
authority shall be complied with. The Programs shall not be transferred to a
prohibited country or otherwise in violation of any such restrictions or
regulations.
12. Each Program is copyrighted and contains proprietary and confidential
trade secret information of BancTec and its vendors. Each sublicensee of the
Programs shall protect the confidentiality of the Programs with at least the
same standard of care used to protect the Fund's own similar confidential
information.
13. BancTec and its vendors are each a direct and intended beneficiary of
the sublicenses granted for the Programs and may enforce such sublicenses
directly against sublicenses of the Programs.
14. Neither BancTec nor its vendors shall be liable to the Fund for any
general, special, direct, indirect, consequential, incidental, or other damages
arising out of the sublicense of the Programs.
15. The license granted to the Fund of the Programs may be terminated,
either immediately or after a notice period not exceeding thirty (30) days,
upon violation by the Fund of any of the terms or conditions of the Agreement,
including but not limited to Attachment 1.
16. Upon termination of the license grant to the Fund to use the Program
or the Agreement, the Fund shall return all copies of the Programs to FDISG.
<PAGE> 50
ATTACHMENT 2 OF EXHIBIT 1 OF SCHEDULE G
PEGASYSTEMS TERMS AND CONDITIONS
In addition to the terms of the Agreement, the following terms shall apply with
respect to the Pegasystems Software:
1. The Fund is prohibited from assigning, timesharing, renting, or
hypothecating any of the Pegasystems Software, without prior written approval
of Pegasystems.
2. The Fund is prohibited from passing or transferring any right, title,
or interest to the Pegasystems Software to any third party.
3. The Fund is prohibit from publicizing or disseminating any results of
any benchmark or other testing of the Pegasystems Software.
4. To the fullest extent permitted by applicable law, (i) Pegasystems
shall have no liability to the Fund for damages and claims, whether direct,
indirect, incidental, consequential, or punitive, and all attorneys' fees and
costs, arising from the Fund's use of the Pegasystems Software, and (ii) the
Fund shall have no rights to assert claims for damages against Pegasystems,
including claims against Pegasystems as a third party beneficiary of this
agreement.
5. Pegasystems, Inc. is a third party beneficiary of this agreement to
the extent permitted by applicable law.
<PAGE> 51
IMPRESSive Technology, IMPRESSive Results
EXHIBIT 1.1 OF SCHEDULE G
SPECIFICATIONS
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. PRODUCT OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . Page 1
II. PRODUCT BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . Page 3
III. TECHNICAL OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . Page 5
IV. HIGH LEVEL OVERVIEW OF IMPRESS Plus FUNCTIONALITY . . . . . . . Page 6
A. Workflow Management
B. Image Processing
C. Intelligent Workstation Processing
D. Customer Service System
</TABLE>
This item is the property of First Data Investor Services Group (First Data) of
Boston, Massachusetts, and contains confidential and trade secret information.
This item may not be transferred from the custody or control of First Data
except as authorized by, and then only by way of loan for limited purposes. It
must be returned to First Data upon request and, in all events, upon completion
of the purpose of the loan. Neither this item nor the information it contains
may be used or disclosed to persons not having a need for such use or
disclosure consistent with the purpose of the loan, without the prior written
consent of First Data.
Copyright First Data Investor Services Group
1994, 1995, 1996
ALL RIGHTS RESERVED
This media contains unpublished, confidential, and proprietary information of
First Data Investor Services Group. No disclosure or use of any portion of
these materials may be made without the express written consent of First Data
Investor Services Group.
<PAGE> 52
IMPRESSive Technology, IMPRESSive Results
I. PRODUCT OVERVIEW
IMPRESS Plus is First Data's workstation product. Designed to be a
cost-effective customer service and workflow management solution, it
takes an integrated approach to transfer agent service and processing
applications. IMPRESS Plus uses an open, three-tiered, client/server
architecture that provides both the flexibility and scalability to
address client's customization and growth needs.
IMPRESS Plus's valuable benefits include:
o Extensive management tools and employee empowerment via
intelligent workstation technologies.
o A lower cost of processing delivery through workflow routing
and document imaging.
o Efficient customer service through reduced research time,
automated inquiry tracking and correspondence tracking.
o State-of-the-art three-tiered client/server architecture
backed by relational databases and open systems.
o Client configurable screens, dialogue scripts, and workflow
rules for those components which use the Pegaysystems
technology.
o Automated correspondence generation.
IMPRESS Plus consists of these major components:
1.) A SOPHISTICATED MANAGEMENT WORKFLOW TOOL that contributes to
streamlining the flow of information on an enterprise-wide
basis. Automated workflow processes are systematically created
and the user's process is automatically documented at the same
time. Product users can continuously examine and redesign
their current processes, managing them interactively, focusing
on improving organizational productivity and quality.
2.) AN IMAGE PROCESSING SYSTEM that has the ability to scan
incoming documents, store them digitally and automatically
route them to the appropriate processing department thereby
eliminating paper from the workflow. This system also allows
for long term storage of documents and document retrieval.
Users can modify workflow and business rules on site.
3.) AN INTELLIGENT WORKSTATION APPLICATION (IWT) that improves
data entry speed and service quality by using graphical user
interface tools that seamlessly connect the user's desktop to
First Data's transfer agent processing systems, office
automation tools, correspondence/service tracking and
policy/procedure access systems.
4.) A CUSTOMER SERVICE SYSTEM that automates and enhances the
correspondence and customer servicing areas in mutual fund
operations. Customer Service staff can log all activity, such
as phone calls, letters, transactions, etc., while interacting
with customers. The system enables the service representative
to perform transactions over the phone, create "electronic
forms" consisting of instructions for other processors, and
dynamically sends work items to other staff electronically.
The Customer Service System is designed to enhance the quality
and efficiency of the service provided to customers through
the use of state-of-the-art client/server technology.
<PAGE> 53
IMPRESSive Technology, IMPRESSive Results
II. PRODUCT BENEFITS
o Allows clients to process transactions and customer
correspondence quickly and efficiently.
o Allows clients to be at the leading edge of technology to
maintain competitiveness and to effectively deliver quality
service.
o IMPRESS Plus enables the organization to:
- enhance service responsiveness and quality
- streamline workflow and improve document control by
eliminating paper
- increase employee productivity and participation
- have access to real-time production statistics
- enhance organization cohesion and effectiveness
- reduce manual tasks
- increase accuracy by using intelligent rules-based
applications
- reduce processing costs
- Tie Customer Service Reps to sales
o The IMPRESS Plus workflow tools allow business/operational
workflows to be set up. Automated workflow processes are
created and the user's process is automatically documented at
the same time. Product users can continuously examine and
redesign their business processes and manage them
interactively, focusing on improving organizational
productivity and quality.
o IMPRESS Plus is a scaleable and flexible solution that allows
the user to choose an enterprise-wide or a departmental
solution. It allows the client to determine an implementation
strategy that meets their strategic plans and goals.
o The IMPRESS Plus product platform allows the user to build
upon and utilize future First Data services such as
information delivery of shareholder/investor data, sales and
marketing data and customer service processing.
o IMPRESS Plus is modular to support increasing volumes,
increasing numbers of users and future advances in component
technologies. This allows for functional as well as
enterprise-wide solution.
o The IMPRESS Plus product's UNIX and NT-based platform allows
for the flexibility and growth needed to market position and
grow in the '90s to meet the demands of the mutual fund
industry.
o IMPRESS Plus is developed to run in an open systems
environment, so that the application has the ability to
incorporate diverse hardware choices, such as servers,
scanners and printers.
Additional benefits that can be provided through customization of
certain products include:
o Ability for AIM Funds operations associates to customize
interfaces, rules, scripts, etc. based on predefined "levels"
of operators. Levels may range from entire organization right
down to the individual CSR.
o Creation of an Integrated Service Backbone within the AIM
organization designed to allow consistent processing of
service items, documents, correspondence, etc. regardless of
where they originated. (Internet, scan mail, fax, phone,
etc.)
o Optional ability to link VRU to the desktop via CTI and
related technologies for more efficiency and quality in
servicing.
<PAGE> 54
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
o Ability for AIM Funds operations associates to change workflow rules,
scripts, menus, screens, etc. associated with the front end servicing
applications as they see fit to effectively run their business efficiently
and with highest regard to quality.
o Ability for AIM Funds to introduce intelligent, 'point of contact'
scripting for service associates in the front end selling process.
Through the customized rules capability, AIM Funds can set up random
sales, campaigns, or promotions. In addition, IMPRESS Plus can be told
when to prompt CSR's that selected promotions apply to the customer at
hand based on data points in the customer's profile, recent activity, or
the like.
<PAGE> 55
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
III. TECHNICAL OVERVIEW
First Data's combined Customer Service, Workflow, Image and
Intelligent Workstation (IWT) technologies enable users to display the
digitized image of a shareholder form on the workstation along with
other service, data entry and office automation applications. This
allows a user to enter information directly from the image without
having to look away from the screen or handle paper. IMPRESS Plus
will have access to First Data's transfer agent processing system,
office automation tools, and correspondence tracking and
policy/procedure access systems. First Data has developed the
workflow and image capabilities of the system to meet the needs of the
financial industry.
The Customer Service and Intelligent Workstation applications improve
data entry speed and quality by using graphical user interface tools
and LAN/WAN topologies to seamlessly connect the users desktop to the
mainframe servers. These tools and technologies will significantly
off-load transactions and query processing from the mainframe by
putting these capabilities on the desktops and empowering the
end-user.
IMPRESS Plus is designed to run in an open systems environment. It has
the ability to incorporate various workstation platforms due to a
common set of access routines and open communication architecture.
IMPRESS Plus supports high-performance networking architectures
including Novell's SPX/IPX as well as the UNIX TCP/IP standard. SNA
connectivity is supported for LU6.2, 3270, and 5250 communications.
The application supports Microsoft Windows 3.11, Windows 95, and NT
client workstations, multiple UNIX server back-end platforms, and the
latest client/server database technologies offered by the INFORMIX and
Microsoft database systems.
IMPRESS Plus contains a state-of-the-art integration API (application
programming interface) that allows other applications, including
customer-specific applications, to be seamlessly integrated into
IMPRESS Plus.
The Customer Service and IWT applications have been designed with an
object-based architecture that allows one common application to
support First Data's multiple back-end transfer agent systems. They
are designed around First Data's newly defined and implemented
corporate data model. This model represents the future data source
for First Data's common transfer agent application. This object-based
architecture allows for a high level of client customization and
integration.
<PAGE> 56
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
IV. HIGH LEVEL OVERVIEW OF IMPRESS PLUS FUNCTIONALITY
WORKFLOW MANAGEMENT FUNCTIONALITY OVERVIEW
WORKFLOW DYNAMIC WORKFLOW DESIGN AND MONITORING
MANAGEMENT
IMPRESS Plus provides a set of client/server based tools that
allow designers and authorized system users to build workflow
rules to be implemented on the work floor. These rules can be
built and implemented, then changed as required by trained
administrators.
GENERIC WORKFLOW AVAILABLE FOR ALL TRANSACTIONS
IMPRESS Plus offers a generic wordflow that can be used for
any transaction type that is designated in an operation.
Liquidations, correspondence, new accounts, etc. are just some
examples of transactions that can be processed through this
generic workflow. Should the workflow need to be customized or
altered, it can be.
WORK FLOW MONITORING
IMPRESS Plus provides the following work flow monitoring
activities in a real time mode:
o Allow users with the proper security access to
monitor the status of workflow activities or entire
work flow maps
o Monitor work-in-process items via a graphical display
which produces bar graphs in a variety of
presentation formats
o Monitor multiple statistics simultaneously on a
graphical display.
PRIORITIZATION OF WORK
IMPRESS Plus allows the setting of a default priority of items
during workflow design, and, in addition, dynamically during
work in process. During work in process, an item's priority
is based on its transaction type, its default or subsequently
manually altered priority setting, as well as its age in the
activity queue.
<PAGE> 57
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
WORKFLOW MANUAL ROUTING OF ITEMS
MANAGEMENT
(CONTINUED) IMPRESS Plus allows items to be manually routed to
workflow map destinations, or, in some cases, to
specific end users by those users with authorization
to do so.
AUTOMATIC ROUTING OF WORK
IMPRESS Plus routes work items to the next
destination on a pre-defined set of workflow rules.
These rules can be overridden by the user when
necessary.
ITEM COPY ROUTING
IMPRESS Plus allows users to make "copies" of items
within the workflow and route them to other workflow
activities. This is commonly used when an individual
processing the work determines that an item must be
forwarded to another processing department or review
the steps because it is actually two or more
transactions.
ENHANCED QUALITY CONTROL
IMPRESS Plus allows for random or pre-determined QC,
statistical QC, or other more intelligent or
selective QC means.
ENHANCED QUALITY ASSURANCE
IMPRESS Plus allows for random or pre-determined QA,
statistical QA, or other more intelligent or
selective QA means.
<PAGE> 58
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
IMAGE FUNCTIONALITY OVERVIEW
IMAGE DOCUMENT SCAN, STORE, ROUTE, AND RETRIEVE
PROCESSING
IMPRESS Plus captures, through scanning, electronic
images OF documents, stores these electronic images
on magnetic disk, and subsequently allows for
retrieval of the electronic images. IMPRESS Plus
allows images to be accessed for image quality review
and provides for the rescanning of images determined
to be of unacceptable quality. Following the
completion of scanning and any image quality review,
items are automatically routed to subsequent
activities, based on a predefined set of workflow
rules.
ELECTRONIC DOCUMENT IMAGE PRESENTATION AND
MANIPULATION
IMPRESS Plus allows images to be viewed on image-
enabled workstations. Multi-page documents can be
scrolled through, and selected portions of an image
can be magnified.
IMAGE CROSS-REFERENCE TO PHYSICAL DOCUMENT LOCATION
TRACKING
AND RETRIEVAL IMPRESS Plus is designed so that the image database
stores the location of the physical document for each
document image. This location - known as a storage
box - is entered into the system while scanning
documents.
INDEXING OF IMAGES
IMPRESS Plus automatically assigns a unique indexing
number to each document that is created through
scanning. The unique indexing number consists of a
system-generated number that can subsequently be used
to cross-reference an item to a mainframe transfer
agent system. In addition, IMPRESS Plus allows for
the alternate indexing of documents by other user-
entered fields such as fund/account.
SOURCE KEY GENERATION AND DISPLAY
Each transaction type processed within IMPRESS Plus
receives a unique identifier that can be used to link
an item to the First Data transfer agent system.
This key may also be used for document retrieval.
IMAGE SCANNING, INDEXING, AND STORAGE OF DOCUMENTS
TRACKING PROCESSED PRIOR TO IMAGE WORKFLOW
AND RETRIEVAL
(CONTINUED) Through the IMPRESS Plus merge facility, users can
scan documents processed prior to the installation of
IMPRESS Plus. The merge facility allows you to
associate documents with existing, already scanned
and indexed documents, making them available for
future inquiry using IMPRESS Plus.
IMAGE ARCHIVAL AND SUBSEQUENT RETRIEVAL FROM OPTICAL
STORAGE
IMPRESS Plus provides storage and backup functions
for data objects, is designed to handle media
management, and communicates with the database
management system. IMPRESS Plus supports archival of
items to magnetic or selected WORM (Write Once
<PAGE> 59
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
Read Many) optical media. Archival from magnetic to
optical media criteria are set during installation
time.
PRINTING OF IMAGES
IMPRESS Plus allows you to print copies of document
images at LAN-based printers equipped with the
appropriate print server components.
REAL-TIME ADMINISTRATION TOOLS
IMPRESS Plus offers an administration function that
allows authorized users to add and maintain user
profiles, funds, transaction types, locations, and
other client site-specific data. This tool also
allows authorized users to change courier status,
determine the status of work that may have been
affected by an environmental mishap, and perform
other administrative tasks.
DOCUMENT/ACTIVITY HISTORY AND AUTOMATIC UPDATE
IMPRESS Plus automatically records and stores
document/activity history statistics on audit trail
logs during workflow activities, and produces
standard reports for such items as:
o Workflow activity type
o Date/time/user of each activity
o Beginning/ending date/time of each activity
o Last update user/date/time
ADMINISTRATIVE IMPRESS Plus allows much of this activity history to
FUNCTIONS be viewed on-line in various portions of the
(CONTINUED) application.
PRODUCTIVITY REPORTING AND QUALITY/TIMELINESS
REPORTING
IMPRESS Plus logs document/activity history
statistics to produce standard productivity reports
that can be run at the client's request.
ADHOC REPORTING
IMPRESS Plus provides a suite of standard reports
that can be customized. A client can also create
their own additional reports.
QUALITY CONTROL PROCESSING
IMPRESS Plus currently allows for processing
activities to be reviewed for quality by routing them
to a Quality Control queue. Authorized users can
then QC work items. Future IMPRESS Plus releases
will include various rule-based options for selective
quality control. IMPRESS Plus prevents users from
quality control checking their own work.
ACCESS SECURITY
IMPRESS Plus image processing provides security
access in the form of user logons and user profiles.
Users must have a user ID to access the system and
are further constrained by their user profile. The
client assigns user IDs for staff to access the
system and specifies the parameters of each user
profile. These profiles limit users to performing
<PAGE> 60
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
only those specific activities for which they have
been given permission (e.g. processing, scan, etc.).
It is recommended that the logon IDs match the user's
logon ID from the First Data transfer agent system.
VALUE-ADDED SHAREHOLDER ACCOUNTING SYSTEM ACCESS
FUNCTIONALITY
IMPRESS Plus allows workstation access to First
Data's transfer agent recordkeeping system. 3270
terminal emulation is accomplished through a
Windows-based software application. Keyboard mapping
is limited to the technical capabilities of the
emulation software and/or hardware.
DYNAMIC DATA EXCHANGE (DDE) FUNCTIONALITY
IMPRESS Plus will allow for Dynamic Data Exchange at
selected points in application modules when necessary
to transfer data between processes. An example would
be the passing of a source key stored on a transfer
agent system history line to the imaging inquiry
screen for a customer service operator.
ON-LINE HELP FOR USERS
IMPRESS Plus offers a comprehensive on-line help
system that follows Microsoft Windows help system
conventions. It is designed to serve both new users
learning how to use the system and more experienced
users who may occasionally need assistance or
additional information.
SYSTEM ADMINISTRATION PROCEDURES
IMPRESS Plus System Administration is made easier for
designated IMPRESS Plus technical support staff due
to the IMPRESS Plus Systems Administration and
Procedures manual and related documentation.
<PAGE> 61
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
INTELLIGENT WORKSTATION PROCESSING
(IWT) FUNCTIONALITY OVERVIEW
INTELLIGENT IWT is designed with a graphic interface ("GUI")
WORKSTATION which will provide an intelligent real-time interface
PROCESSING to the First Data transfer agent system for the
(IWT) following transaction activity:
NEW ACCOUNT SETUP
The IWT new account setup application is designed to
provide a MS/Windows graphic interface ("GUI") to
allow an intelligent real-time interface to the First
Data transfer agent system. New account setup
functionality includes:
o new account setup entry
o dealer/rep list
o TIN list for shareholder list
o systematic city and state population based on
entry of a 5 digit zip code
o dividend/cap gain addresses
o beneficiary addresses
o statement addresses
o ABA lookup and validation
o fund list
o wire and ACH bank addresses
Financial Transactions
The IWT financial transaction entry application is
designed to provide a MS/Windows graphic interface
("GUI") to allow an intelligent real-time interface
to the First Data transfer agent system. Financial
transaction entry functionality includes:
o telephone redemptions
o telephone exchange
o exchange processing
o transfer processing
o redemption processing
o subscription processing
Group
o linking and linking of accts by ROA, confirm,
L01, plan
<PAGE> 62
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
CUSTOMER SERVICE & ENHANCED INQUIRY SYSTEMS
FUNCTIONALITY OVERVIEW
CUSTOMER The Customer Service System is a client/server based,
SERVICE graphical user interface (GUI) system designed to
SYSTEM provide an intelligent real-time application to
enable clients to improve the quality of the service
provided to both shareholders and broker dealers.
This system provides functionality in the following
areas:
CONTACT TRACKING AND MANAGEMENT
A key feature of the Customer Service System will be
the ability to track and report on all interaction
with an end customer, be it a shareholder or
broker/dealer. Designed for ease of use by a
customer service representative, this system will
allow for the logging of telephone calls and
correspondence, the creation and updating of service
items, the processing and resolution of customer
issues to insure customer satisfaction at the end of
any contact. In addition, via reason codes and aging
information, management is empowered with the use of
statistical and trending reports regarding contact
made with their customer base .
CORRESPONDENCE GENERATION AND TRACKING
The Customer Service System is closely integrated to
word processing to allow for the automatic generation
of outgoing correspondence related to service items.
A service representative can choose from customized
pre-defined letters to generate high quality customer
correspondence.
TELEPHONE TRADING
Authorized customer service system users will be able
to perform transactions while on the telephone with
customers by invoking simplified graphical data entry
screens. In addition, customer service
representatives can create electronic forms
consisting of processing instructions for other
departments and dynamically send route these work
items via the workflow manager.
CUSTOMER ENHANCED INQUIRY
SERVICE
SYSTEM The Enhanced Inquiry windows provide enriched and
(Continued) user-friendly replacements for legacy transfer agent
inquiry screens. Examples of the inquiry functions
are search for customer information by name, account
number and social security number, account
information, financial transaction history, service
history, and correspondence history.
<PAGE> 63
EXHIBIT 2.1 OF SCHEDULE G
EQUIPMENT
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
IMPRESS IMAGE PRODUCTION HARDWARE AND SYSTEMS SOFTWARE
- ---------------------------------------------------------------------------------------------------------
PRODUCT Description QTY
<S> <C> <C> <C> <C>
486/66 DX, 200 MB HG, 16 MB RAM, Network Intface
Card, VGA Monitor, Windows 3.1, Novell LWP 5.0,
Print Servers Parallel Cable for printer 10
- ---------------------------------------------------------------------------------------------------------
HP IV+ / 5 Laser Printer with 6 MB Ram, Jet Direct for
Printers other printing can be installed 10
- ---------------------------------------------------------------------------------------------------------
P100 or greater, 540 MB HG, 16 MB RAM, Network
Interface Card, Cornerstone DP120 Mono, Image
Accel2 PCI, Adaptec 1542cp SCSI Card, SCSI Cable,
Scan Server Terminator. 5
- ---------------------------------------------------------------------------------------------------------
Ricoh IS-520 SCSI with Ink Jet Endorser. SCSI
Mid Speed Scanner Version 5
- ---------------------------------------------------------------------------------------------------------
Sun SPARCstation 5 Model 170, 17" Color Display,
48MB RAM, 2X2.1 GB Int disks, 4mm Tape, 3.5"
Floppy Drive, CD-ROM, Solaris 2.5.1, Solarais
Answerbooks, 1 @ X1053A, Solaris 2.5.1 SDK Kit,
Kodak Scan Server Solaris 2.5.1 Motif ToolKit, SUN Professional C 4.0 3
- ---------------------------------------------------------------------------------------------------------
High Speed Scanner Kodak 923D Scanners 3
- ---------------------------------------------------------------------------------------------------------
Sun ULTRAserver 6000, 12 250MHZ CPU's, 17" Color
Display, 1.2GB RAM, 2x9 GB Int disks, DG Clariion 42
Gb Raid 5 disk array, 4mm Tape, CD-ROM, Solaris
2.5.1. Answerbooks, 35/7OGb DLT Tape Changer, 1 @
1053A, 1 @ X1052A, 2 @ X1062, Fast
Image Server Ethernet/FDDI/ATM 1
- ---------------------------------------------------------------------------------------------------------
CYGNET 1802 with (3) Philips LD6100 Optical Drives,
Jukebox Optical SCSI Cable, RS-232 Null Modem Cable 1
- ---------------------------------------------------------------------------------------------------------
P100 or greater, 540 MB HG, 32 MB RAM, Network
Interface Adapter, 15" SVGA Monitor, Resolution of at
least 1024 x 768, Windows 3.1, Hiijack Pro for
Fax Controller PC Windows, Microsoft Word 6.X 1
- ---------------------------------------------------------------------------------------------------------
Tower Style P90 or greater, 2 GB HG, 32 MB RAM,
Network interface adapter, 14" VGA Monitor, (4)
Gamalink CP4/LSI Fax Cards (4) Lines per card,
FAX Server** QEMM 8.X, Allcom LANFAX 2.15gl/2.2gl 1
- ---------------------------------------------------------------------------------------------------------
Existing File Server with at least 500 MB of disk space
Novell File Servers available 2 or 3
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
**The fax server will require analog modem lines a max of 16 lines would
- ---------------------------------------------------------------------------------------------------------
be required for the hardware listed above.
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (SUN, Optical) (10 KVA) 1
- ---------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (SUN) (1.4 KVA) 3
- ---------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (FAX HW) (1 KVA) 2
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 64
EXHIBIT 2.1 OF SCHEDULE G
EQUIPMENT
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
28.8 K Modem, lines, and cables (SUN for remote
Remote Link suppor) 1
- ---------------------------------------------------------------------------------------------------------
Equipment to maintain a routed or switched network
environment with no more that 25-30 clients per
Network Hardware network segment.
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Pentium 90 or greater with 24-32MB ram. Display
should optimally support Image resolutions of
1600X1280 but other resolutions can be supported for
Workstations casual use. (1280X1024) 400
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Software required on all workstations
- ---------------------------------------------------------------------------------------------------------
Windows 95, Windows NT
- ---------------------------------------------------------------------------------------------------------
Microsoft Word 6.X or Greater
- ---------------------------------------------------------------------------------------------------------
Microsoft TCP/IP Stack
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 65
EXHIBIT 2.2 OF SCHEDULE G
EQUIPMENT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
IMPRESS Test/Training Hardware and Systems Software
- -------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION QTY
<S> <C> <C> <C> <C>
486/66 DX, 200 MB HG, 16 MB RAM, Network Intface
Card, VGA Monitor, Windows 3.1, Novell LWP 5.0,
Print Server Parallel Cable for printer 1
- -------------------------------------------------------------------------------------------------------
HP IV+/5 Laser Printer with 6 MB Ram, Jet Direct for
Printer other printing can be installed 1
- -------------------------------------------------------------------------------------------------------
P100 or greater, 540 MB HG, 16 MB RAM, Network
Interface Card, Cornerstone DP 120 Mono, Image
Accel2 PCI, Adaptec 1542cp SCSI Card, SCSI Cable
Scan Server Terminator 1
- -------------------------------------------------------------------------------------------------------
Ricoh IS-420 SCSI with Ink Jet Endorser, SCSI
Low Speed Scanner Version 1
- -------------------------------------------------------------------------------------------------------
Sun ULTRAserver 1, 250MHZ CPU, 17" Color Display,
128MB RAM, 2X2.1 GB Int disks, SUN 4GB External
Disk Pack, (2) 4mm Tape Drives, CD-ROM, Solaris
Image Server 2.5.1, Answerbooks, 1 @ 1053A, 1 @ X1052A. 1
- -------------------------------------------------------------------------------------------------------
Phillips LD6100 Optical Drive Differential, SCSI Cable
Standalone Optical SCSI Differential Terminator. 1
- -------------------------------------------------------------------------------------------------------
P100 or greater, 540 MB HG, 32 MB RAM, Network
Interface Adapter, 15" SVGA Monitor, Resolution of at
least 1024 X 768, Windows 3.1, Hijack Pro for
Fax Controller PC Windows, Microsoft Word 6.X 1
- -------------------------------------------------------------------------------------------------------
Tower Style P90 or greater, 1 GB HG, 32 MB RAM,
Network interface adapter, 14" VGA Monitor, (1)
Gamalink CP4/LSI Fax Cards (4) Lines per card,
FAX Server** QEMM 8.X, Allcom LANFAX 2.15gl/2.2gl 1
- -------------------------------------------------------------------------------------------------------
Existing File Server with at least 500 MB of disk space
Novell File Servers available 1
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
** THE FAX SERVER WILL REQUIRE ANALOG MODEM LINES A MAX OF 4 LINES WOULD BE
REQUIRED FOR THE HARDWARE LISTED ABOVE.
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (FAX) (1 KVA) 1
- -------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (SUN, Optical) (3 KVA) 1
- -------------------------------------------------------------------------------------------------------
28.8 K Modem, lines, and cables (SUN for remote
Remote Link suppor) 1
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Pentium 90 or greater with 24-32 MBram. Display
should optimally support image resolutions of
1600X1280 but other resolutions can be supported for
Workstations casual use. (128X1024) 10
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Software required on all workstations
- -------------------------------------------------------------------------------------------------------
Windows 95, Windows NT
- -------------------------------------------------------------------------------------------------------
Microsoft Word 6.X or Greater
- -------------------------------------------------------------------------------------------------------
Microsoft TCP/IP Stack
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 66
EXHIBIT 3 OF SCHEDULE G
MAINTENANCE AND SUPPORT TERMS
These terms are based on an IMPRESS User network environment of up to 512 Users
and the associated server(s), as described in Exhibits 1 and 2 of this Schedule
G.
1. Software Support.FDISG shall provide the following Software support
services ("Software Support"):
1.1. FDISG shall provide the Fund with full System Administration Guide(s)
for FDISG Software.
1.2. FDISG will have a Response Center (help desk) to provide 24 hours a
day, 7 days a week to designated client contacts.
1.3. FDISG shall use reasonable efforts to resolve all Software failures
through; (a) remote support to the Fund's information systems staff ("Fund's
Staff"); (b) coordination of Third Party Vendor support (on-site or remotely);
(c) coordination of other subcontractors' actions; or (d) direct on-site
support by FDISG personnel.
1.4. FDISG shall investigate errors in the Software reported by the Fund
which prevent substantial compliance with the then current Documentation and to
initiate the corrective action, if any, which FDISG considers reasonable and
appropriate, including but not limited to temporary fixes, patches and
corrective releases to FDISG's clients generally. Notwithstanding the
foregoing, if reported errors result from or arise out of. (i) malfunctions of
equipment other than the Equipment, (ii) improper Fund operator procedure or
misuse of the system by the Fund, (iii) modifications or changes made to the
system without FDISG's prior written approval, (iv) causes beyond the
reasonable control of either party, or (v) user developed features such as
those users may develop with form generators, ad hoc report writers and user
customized screens, then FDISG shall have no responsibility for investigating
the error or making the correction, except as the parties may otherwise agree
to in writing. The Fund shall pay FDISG's then current time and materials
charges plus reasonable travel and out-of-pocket expenses incurred in
investigating and attempting to correct any such errors.
1.5. FDISG shall from time to time provide bug fixes, error corrections,
maintenance, minor enhancements, upgrades and updates to the Software which are
generally made available by FDISG to its similar customers as part of Software
Support ("Updates"). The cost of the Updates is included in the fees and other
charges identified in Schedule C of the Agreement, if the updates are supplied
to the Fund using FDISG's standard update facility. FDISG installation
assistance for the new Updates may be required and, is billable to the Fund as
an Additional Service. During the term of the Agreement, FDISG will use
reasonable efforts to provide the Fund with not less than thirty (30) days
prior written notice of FDISG's intent issue a new update of Software. The
Fund shall implement an Update within ninety (90) days of receipt. Any support
by FDISG of any prior release of the Software after such ninety (90) day period
shall be at FDISG's sole discretion and as an Additional Service.
1.6. Software Support, the License, and the Software shall not include any
modification to the Software which contains any substantial added functionality
(including any significant new interface features), as determined solely by
FDISG or any new architecture or any significant modification of the Software
which contains any substantial added or different functionality, whether or not
such new functionality is coupled with any change in software architecture or
hardware platform ("New Products"). New Products shall be provided and
licensed to the Fund as an Additional Service.
1.7. FDISG may decline to support the Software if (i) the Software or
Equipment was added to or changed without FDISG's prior approval; (ii) the Fund
does not perform the Software Support; or (iii) FDISG determines that such
support would adversely affect the Scope of Work.
1.8 Software Support for the FDISG Software shall conform to the standards
set forth in Section I of Schedule F.
2. The Fund's Maintenance and Support Responsibilities. The Fund's facility
will have all of the required security, space, electrical power source,
communications lines, heating, ventilation and cooling, and other physical
<PAGE> 67
requirements reasonably necessary for the installation and proper operation of
the Equipment. The Fund's users will first direct all questions and problem to
the Fund's Staff for proper call tracking and problem resolution. The Fund's
Staff will coordinate all facility issues at the site and will serve as primary
contact for FDISG when planning installs, upgrades and other equipment changes.
The Fund's Staff shall:
2.1. Identify designated client contacts, one for Operations and one
technical systems administrator, to function as single points of contact for
discussion, review and resolution of problems with FDISG.
2.2. Perform initial problem determination and symptom documentation.
2.3. Be responsible for all system hardware and network hardware components
and shrink-wrap software from a maintenance, support and problem resolution
standpoint.
2.4. Provide (a) data back-up and recovery, (b) preventive maintenance,
and (c) perform server administration tasks as described in the Systems
Administration Guide(s) and Third Party Software documentation.
2.5. Maintain all network and trouble-log documentation required by FDISG
or by third-party vendors. FDISG shall be allowed to review such documentation
if necessary to resolve support issues.
2.6. Be available during normal business hours and reachable for support 24
hours a day, 7 days a week, as required. The Fund shall maintain the
appropriate staff level to adequately perform the maintenance support functions
specified. This staff should have experience in network administration,
troubleshooting, Microsoft Windows, workstation memory management, and UNIX and
NT systems administration.
2.7. Consult with FDISG before performing any work that may affect the
Software or performance of the System, including installation, upgrading, or
unplanned maintenance affecting Equipment
2.8. The fund is responsible for maintenance and support of customized code
unless contracted with FDISG.
3. Support of Customized Code. (Code changed by Fund or FDISG on a customized
basis)
3.1 Software Revisions. At times, FDISG will provide software updates to
components (third party or FDISG software) to either enhance the product or
address quality deficiencies. FDISG is responsible for notifying the Fund of
these updates, and what changes have been made. The Fund is responsible for
installing the updates and modifying any code which they have customized to
accommodate these enhancements. Assistance can be provided by FDISG at stated
billable rates.
3.2 Support of Modified Code. FDISG will provide application, technical
and workflow support for modified code only on a time and materials basis.
FDISG may request the replacement of the modified code with the original code
in order to assist in the determination of the problem source.
3.3 Mainframe Resource Utilization. If customized code requires greater
FDISG mainframe CICS, DASD, or CPU resources than the base FDISG delivered
IMPRESS Plus solution, FDISG reserves the right to charge the Fund for this
usage. If there is concern that excessive resource utilization could impair
the mainframe system, FDISG reserves the right to disallow this modified code
from executing on the mainframe. The Fund is advised to consult with FDISG in
order to determine if planned customization may negatively impact mainframe
resources.
4. Roles and Responsibilities.
4.1 FDISG shall not be responsible for the support of any Directly
Obtained Third Party Software or any other third party products. The Fund is
responsible for network connectivity, Operating Systems, gateways, and other
third party products. FDISG is not responsible for hardware not listed in
Exhibit 2 of Schedule G or software not listed in Sections 1, 2.1.1, or 2.1.2
of Exhibit 1 of Schedule G, unless specifically covered in a separate
agreement.
4.2 Additional support tasks may be provided on a time and material basis.
This may include workflow analysis, customization, network design, third party
product installation and additional training.
<PAGE> 68
SCHEDULE H
ACE + SOFTWARE AND SUPPORT TERMS
ARTICLE 1 - SYSTEM, SUPPORT AND IMPLEMENTATION
1.1 Software and Support. FDISG shall provide or has previously provided
to the Fund and the Fund shall acquire from FDISG the right to use the computer
software programs set forth in Exhibit 1 of this Schedule H (the "SOFTWARE"),
for the fees indicated in Schedule C of Amendment Number 3 to the Agreement.
Software includes related user manuals and reference guides (collectively,
"DOCUMENTATION"). One copy of the Documentation shall be provided to the Fund
at no additional cost. FDISG shall provide only the machine readable object
version of the Software and not source code. Additional terms and conditions
concerning the Software are set forth in Exhibit 1 of Schedule H ("Exhibit 1").
Subject to the terms and conditions set forth in this Schedule H, FDISG grants
to the Fund and the Fund accepts from FDISG the non-exclusive, non-transferable
license to use the Software during the term of the Agreement ("LICENSE"). Some
software components ("THIRD PARTY SOFTWARE") required to be used with the
Software were developed by a third party ("THIRD PARTY VENDOR"). Third Party
Software is licensed to the Fund only pursuant to shrink wrapped or other
agreements between the Third Party Vendor and the Fund directly. Exhibit 1
shall indicate the Third Party Software that the Fund is responsible to obtain
and license. FDISG shall provide the Fund with all error corrections, minor
enhancements and interim upgrades to the Software which are made generally
available to FDISG client's of the Software ("SOFTWARE SUPPORT"), but shall not
provide a License to any substantial added functionality, new interfaces, new
architecture, new platforms or other major software development efforts, as
determined solely by FDISG.
1.2 Ownership. FDISG or its licensor shall retain title to and ownership
of the Software, copies, derivative works, inventions, discoveries, patentable
or copyrightable matter, concepts, expertise, techniques, patents, copyrights,
trade secrets and other related legal rights ("PROPRIETARY INFORMATION").
FDISG reserves all rights in the Proprietary Information not expressly granted
to the Fund in this Schedule H. Upon FDISG's request, the Fund shall inform
FDISG in writing of the quantity and location of any Software.
1.3 Equipment, System Implementation and Access. Fund is responsible for
acquiring, installing and maintaining the data processing and related equipment
("EQUIPMENT") also set forth in Exhibit 1 of Schedule H. Additional terms and
conditions concerning the Equipment are also set forth in Exhibit 1. The
Equipment identified in Exhibit 1 represents the minimum equipment requirements
to run the Software. FDISG disclaims responsibility for the performance of the
Software in the event that the Fund utilizes equipment different than that
which is set forth in Exhibit 1. FDISG and the Fund shall (a) within a
reasonable time after the Effective Date, agree upon the tasks required to
implement the Software, Third Party Software and Equipment ("SYSTEM") and the
party responsible and time frames for each task ("SCOPE OF WORK"); (b) perform
their respective assigned tasks according to the Scope of Work; and (c) if not
the party assigned to a task, cooperate with the responsible party. To the
extent the Scope of Work is incomplete, FDISG shall follow its reasonable and
customary practices. Upon prior notice by FDISG to the Fund, the Fund shall
give reasonable access to the System to FDISG, FDISG's employees, affiliates,
representatives, agents, contractors, licensors and suppliers ("FDISG'S
AGENTS") who are providing services under the Agreement or auditing adherence
to the Agreement.
1.4 Use of Software. Fund may use the Software during the term of this
Agreement only on the Equipment and only to process the Fund's data for
internal business purposes (which shall not, for purposes of this Agreement,
include use by Fund to provide services to its customers on a service bureau
basis) in connection with the Fund's use of the FDISG System and only at the
locations identified in the Agreement. If the Equipment is inoperative due to
malfunction, the license grant shall, upon written notice to FDISG, be
temporarily extended to authorize the Fund to use the Software on any other
equipment approved in writing by FDISG until the Equipment is returned to
operable condition. FDISG, in its reasonable discretion, may suspend any
Software Support while the Software is being used on such other Equipment. No
right is granted for use of the Software by any third party or by the Fund to
process for any third party, or for any other purpose whatsoever, except as
expressly provided in this paragraph..
1.5 Software Installation and Acceptance. FDISG shall advise the Fund
that the Software as listed in Exhibit 1 is installed and functioning on the
Equipment ("Software Installation Date") so that implementation and training
activities can proceed. The Fund shall be deemed to have accepted the Software
thirty (30) days after Software Installation Date or thirty (30) days after the
Fund's first use of Software to process live production data ("SOFTWARE
ACCEPTANCE DATE").
1.6 Copies of Software. The Fund may not copy the software except for
backup and archival purposes only, and the Fund shall include on all copies of
the Software all copyright and other proprietary notices or legends included on
the Software. The provisions of this Paragraph do not apply to Fund data files
in machine-readable form.
<PAGE> 69
1.7 No-Export. The Software shall not be shipped or used by the fund
outside the United States. The Fund shall comply with all applicable export
and re-export restrictions and regulations of the U.S. Department of Commerce
or other U.S. agency or authority. The Software shall not be transferred to a
prohibited country or otherwise in violation of any such restrictions or
regulations.
1.8 Termination. Terms and conditions of this Schedule H which require
their performance after the termination of the Agreement, including but not
limited to the License and Software use restrictions, limitations of liability,
indemnification, and confidentiality obligations, shall survive and be
enforceable despite the termination of the Agreement.
ARTICLE 2 - WARRANTIES AND REPRESENTATIONS
2.1 Software. For the term of the Agreement, FDISG warrants ("Performance
Warranty") that the Software shall perform on the Equipment substantially in
accordance with the Documentation, except for Third Party Software as set forth
in Paragraph 2.2 below. The timely correction of errors and deficiencies in
the Software shall be Fund's sole and exclusive remedy for the Performance
Warranty. FDISG warrants ("Rights Warranty") it has the right to license the
Software in accordance with the Agreement. Provided the Fund gives FDISG
timely written notice, reasonable assistance, including assistance from the
Fund's employees, agents, independent contractors and affiliates (collectively,
"Fund's Agents"), and sole authority to defend or settle the action, then FDISG
shall do the following ("Infringement Indemnification"): (a) defend or settle,
at its expense, any action brought against the Fund or the Fund's Agents to the
extent the action is based on a claim that the Software infringes a duly issued
United States' patent or copyright or violates a third party's proprietary
trade secrets or other similar intellectual property rights ("Infringement");
and (b) pay damages and costs finally awarded against the Fund or the Fund's
Agents directly attributable to such claim. FDISG shall have no Infringement
Indemnification obligation if the alleged Infringement is based upon the Fund's
use of the Software with equipment or software not furnished or approved by
FDISG or if such claim arises from FDISG's compliance with the Fund's designs,
or from the Fund's modifications of the Software. The Infringement
Indemnification states FDISG's entire liability for Infringement and shall be
the Fund's sole and exclusive remedy for the Rights Warranty.
2.2 Third Party Warranties. All warranties for the Third Party Software,
if any, are specifically set forth in the Software Exhibits, Exhibit 1 or in
the applicable agreements supplied by the Third Party Vendors. Subject to the
terms of the Exhibit 1 and to the extent permitted by FDISG's suppliers, FDISG
conveys to Fund all Third Party Software warranties made by the Third Party
Vendors.
2.3 Exclusion of Warranties. THE WARRANTIES SET FORTH IN PARAGRAPH 2.1
ABOVE AS TO THE SOFTWARE AND IN PARAGRAPH 2.2 ABOVE AS TO THIRD PARTY SOFTWARE
ARE IN LIEU OF ALL OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, ARISING
OUT OF OR RELATED TO THIS SCHEDULE G. FDISG SPECIFICALLY DISCLAIMS ALL OTHER
WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY,
NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
2.4 Fund Responsibility. The System is an information system only,
designed to assist the Fund and the Fund's Agents in performing their
professional activities and is not intended to replace the professional skill
and judgment of the Fund's Agents. Fund shall be solely responsible for: (a)
acts or omissions of the Fund's Agents in entering data into the System,
including its accuracy and adequacy; (b) checking the correctness and accuracy
of the System output and data; and (c) any use of or reliance upon the System
output by the Fund's Agents. Except for the Infringement Indemnification and
as limited by applicable law, the Fund shall indemnify, defend and hold FDISG
and FDISG's Agents harmless from any losses, costs, damages, and liabilities,
including without limitation, reasonable attorneys' fees and court costs,
relating to any claim by any third party arising from or related to the Fund's
and the Fund's Agents' use of the System or System output.
ARTICLE 3 - MISCELLANEOUS
3.1 Confidentiality Obligations. Each party shall keep confidential any
information relating to the other party's business which is clearly designated
or described in writing to be confidential ("Confidential Information"). Each
party shall keep and instruct its employees and agents to keep such information
confidential by using at least the same care and discretion as used with that
party's own confidential information. Information shall not be subject to such
confidentiality obligations if it is: (a) in the public domain, (b) known to a
party, prior to the time of disclosure by the other party, (c) lawfully and
rightfully disclosed to a party by a third party on a non-confidential basis,
(d) developed by a party without reference to Confidential Information or (e)
required to be disclosed by law. If either party, its employees or agents
breaches or threatens to breach the obligations relating to use of the
Confidential
<PAGE> 70
Information, the other party may obtain injunctive relief, in addition to its
other remedies, inadequate monetary damages and irreparable harm being
acknowledged.
3.2 Confidential and Privileged Information. The Proprietary Information,
other FDISG software and related information, and the Agreement are
Confidential Information of FDISG and FDISG's Agents. Absent FDISG's written
permission, Fund shall not duplicate FDISG's Confidential Information. Fund
accepts full responsibility for complying with all laws, rules and regulations
concerning use and disclosure of privileged data regarding any information
placed or stored in the System or output from the System. Fund shall not
modify or reverse engineer the Software without FDISG's prior written consent.
<PAGE> 71
EXHIBIT 1 OF SCHEDULE H
SOFTWARE/HARDWARE
1. FDISG Software.
1.1 FDISG Software includes the following products:
ACE +
2. Third Party Software.
2.1 Directly Obtained Third-Party Software. The following Third Party
Software are separately licensed by the Third Party Vendor directly to the Fund
subject to the respective terms and conditions of "shrink-wrapped" or other
agreements between the Third Party Vendor and the Fund. The Third Party
Software in the Required Column must be obtained by the Fund. The Third Party
Software in the Optional column is helpful but not required unless the
indicated features are being used. The Fund accepts the provisions of such
agreements, including the warranty provisions, if any, and agrees to comply
with the terms set forth in such agreements:
<TABLE>
<CAPTION>
Required Optional
-------- --------
<S> <C>
Windows 3.1 Reachout PC Link (for external FDISG Support of ACE +)
DOS 3.3 or higher
</TABLE>
3. Hardware.
3.1 It is recommended that ACE + run on a PC Network (LAN) to fully use its
database features. The network should have at least 200 Mb of available disk
space. ACE + will also run on an individual local (hard) drive. PC
specifications are:
o 2 or more IBM PC Compatible 486/66 (486/33 minimum) Mhz (or
Pentium) with 16 Mb Ram (8 Mb minimum)
o 500 Mb Local (hard) drives (for backup only)
o External Fax/Modems (9600 baud or greater)(for PC faxing or
Reachout only)
o HP Laserjet 4 w/ Windows Drivers
3.2 PC/Mainframe Connection: ACE + data is based on mainframe ASCII files.
These files must be transmitted from the mainframe to LAN or PC. This can be
accomplished various ways. FDISG uses a mainframe to Gateway and BARR/SNA
transmission.
<PAGE> 72
SCHEDULE I
DISASTER RECOVERY SUMMARY
OVERVIEW
First Data's data center is a free standing building that is self sufficient
with back-up water supply, fuel storage, and diesel generator backup. The
building is protected with 24 hour on site guard protection as well as security
camera coverage throughout the property. Access is by picture ID only and all
doors are protected with card key access. Additionally, all systems are
protected by ACF2 Security. Security is audited on a regular basis.
Additionally, First Data maintains a reliable, tested disaster recovery system.
A tape backup system is set up on a daily rotation schedule with a full backup
of all data. The backup jobs run automatically every night and all tapes are
sent off-site on a daily basis to a physically secured facility. A business
resumption site has been established in our Providence facility. This Hot Site
is fully equipped with equipment, wiring and supplies in the case of a disaster
or business recovery.
A disaster is defined as any unforeseen business interruption or outage that
renders the data center or telecommunications network inoperable or
inaccessible for an undetermined amount of time suspending normal processing.
First Data's Disaster Recovery Plan provides us with the required procedures
and resource references to execute a full recovery of the data center and
associated critical processing.
This Plan addresses:
o Computer and communications equipment
o Programs, data and documentation
o Building and environmental concerns
o Fire detection and building evacuation
o Personnel, and
o Client Liaisons.
Due to contractual requirements, the data center must provide on-line
accessibility and processing availability within 24 hours of a declared
disaster. Total "downtime" is not to exceed 48 hours.
All outages that affect any client are considered priority one and all
available resources will be utilized to resolve outages, failures or slowdowns.
APPROACH
In a disaster situation, numerous issues and tasks must be addressed
immediately. To ensure all get equal attention, "teams" have been developed.
These teams are comprised of experienced First Data personnel responsible to
execute specific assigned functions critical to the overall recovery. Each team
will activate their procedures concurrently to affect a full system recovery at
the hot site. Some of the teams will act as support teams providing
<PAGE> 73
financial, administrative, and logistical coordination. The remaining recovery
teams will address more specific data and telecommunications issues.
o Support Teams
Financial/Administrative Support
Human Resources/Corporate Communications
Applications Team
Client Liaison Team
o Recovery Teams
Management Teams
Systems Software
Data Center Operations
Vendor
Telecommunications Team
Production Control
Facilities/Hardware
Each team will be headed by a team leader and a designated alternate. If, for
any reason, the team leader is unavailable, the alternate will assume
responsibility for the team notification and progress reporting to the team
management.
Dial backup capabilities, diverse routing of communications circuits and
triangulation present the best options for insuring continued system access in
the event of a communications failure. First Data can demonstrate each of these
capabilities at the client's request.
TESTING SUMMARY
First Data/FDT has contracted with Comdisco to provide hotsite disaster
recovery and backup services. First Data's overall goal is to establish network
connectivity for on-line and transmission capability, restore the application
and recover forward to a point in time and then re-process a batch cycle.
Using Comdisco's site at North Bergen, the First Data Technology (FDT)
operating system will be recovered while testing FDISG recoverability for all
network and application platforms.
The recovery will take place remotely with FDT, using the Business Recovery
Facilities (BRF) in Denver, and Westboro staff working out of the new BRF
in Tewksbury, MA. Comdisco will have staff at both BRFs, as well as North
Bergen, to assist whenever needed.
Tests are conducted annually. The test runs for 48 contiguous hours. Multiple
shifts will be required for FDT, FDISG, and Comdisco staff. Specific staff
requirements will be determined as the scope of the test becomes more clearly
defined.
The systems recovery portion of the test will take place at the Comdisco site in
New Jersey utilizing an IBM ES9000 with related peripherals. All the equipment
used in testing is
<PAGE> 74
compatible with the FDT hardware located in Denver. All tape mounts will be
handled by Comdisco staff in New Jersey, and the telecommunications testing
will be staffed by FDT with Comdisco assisting in New Jersey.
FDISG Test Objectives
o Test recoverability from both of Comdisco's new Business Recovery
Facilities
o Test transmission and network connectivity with clients
o Check and verify tape volumes stored offsite
o Benchmark the restore time for all (500) DASD volumes
o Ship all tapes from Denver to New Jersey
o Document (CDRS/FDISG) connectivity procedures
o Recover all applications to previous business cycle
<PAGE> 1
EXHIBIT 9(a)(6)
EXHIBIT 1
LIST OF FUNDS
AIM ADVISOR FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Advisor Cash Management Fund Class A and Class C Shares
AIM Advisor Flex Fund Class A and Class C Shares
AIM Advisor Income Fund Class A and Class C Shares
AIM Advisor International Value Fund Class A and Class C Shares
AIM Advisor Large Cap Value Fund Class A and Class C Shares
AIM Advisor MultiFlex Fund Class A and Class C Shares
AIM Advisor Real Estate Fund Class A and Class C Shares
</TABLE>
AIM EQUITY FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Blue Chip Fund Class A, Class B and Class C Shares
AIM Capital Development Fund Class A, Class B and Class C Shares
AIM Charter Fund Class A, Class B and Class C Shares
AIM Weingarten Fund Class A, Class B and Class C Shares
AIM Aggressive Growth Fund Class A Shares
AIM Constellation Fund Class A and Class C Shares
</TABLE>
AIM FUNDS GROUP
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Balanced Fund Class A, Class B and Class C Shares
AIM Global Utilities Fund Class A, Class B and Class C Shares
AIM Growth Fund Class A, Class B and Class C Shares
AIM High Yield Fund Class A, Class B and Class C Shares
AIM Income Fund Class A, Class B and Class C Shares
AIM Intermediate Government Fund Class A, Class B and Class C Shares
AIM Municipal Bond Fund Class A, Class B and Class C Shares
AIM Value Fund Class A, Class B and Class C Shares
AIM Money Market Fund Class A, Class B, Class C and AIM Cash
Reserve Shares
</TABLE>
AIM INTERNATIONAL FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM International Equity Fund Class A, Class B and Class C Shares
AIM Global Aggressive Growth Fund Class A, Class B and Class C Shares
AIM Global Growth Fund Class A, Class B and Class C Shares
AIM Global Income Fund Class A, Class B and Class C Shares
AIM Asian Growth Fund Class A, Class B and Class C Shares
AIM European Development Fund Class A, Class B and Class C Shares
</TABLE>
<PAGE> 2
AIM INVESTMENT SECURITIES FUNDS
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
Limited Maturity Treasury Portfolio AIM Limited Maturity Treasury Shares
</TABLE>
AIM TAX-EXEMPT FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Tax-Exempt Cash Fund Class A Shares
AIM Tax-Exempt Bond Fund
Of Connecticut Class A Shares
Intermediate Portfolio AIM Tax-Free Intermediate Shares -
Class A
</TABLE>
On behalf of the Funds and respective Portfolios and Classes as set forth in
this Exhibit 1, which may be amended from time to time.
By: /s/ ROBERT H. GRAHAM
Title: President
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/ LEONARD A. WEISS
Title: EVP AND CFO
Effective as of August 4, 1997.
<PAGE> 1
EXHIBIT 9(a)(7)
EXHIBIT 2
PREFERRED REGISTRATION
TECHNOLOGY ESCROW AGREEMENT
Account Number 0609111-00002-0109001
Recitals
This Preferred Registration Technology Escrow Agreement including any
Exhibits ("Agreement") is effective this 10th day of September 1997, by and
among Data Securities International, Inc. ("DSI"), a Delaware corporation, First
Data Investor Services Group, Inc. ("Depositor"), and each registered investment
company listed on the attached Schedule A hereof ("Preferred Registrant").
WHEREAS, Depositor has entered into a certain Remote Access and
Related Services Agreement dated December 23, 1994, as amended by Amendment
Number 3 dated as of February 1, 1997 (the "Remote Agreement") with the
Preferred Registrant which pursuant thereto certain proprietary software, as
described in Section 12(i) of the Remote Agreement, in object-code form and
other materials of Depositor have been licensed to Preferred Registrant (the
"Software");
WHEREAS, Depositor and Preferred Registrant desire the Agreement to be
supplementary to said contract pursuant to 11 United States Code Section
365(n);
WHEREAS, availability of or access to the source code and other
proprietary data related to the Software is critical to Preferred Registrant in
the conduct of its business;
WHEREAS, Depositor has deposited or will deposit with DSI such source
code and other proprietary data to provide for retention, administration and
controlled access for Preferred Registration under conditions specified herein;
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in consideration of the promises, mutual
covenants and conditions contained herein, the parties hereto agree as follows:
1. Deposit Account. Following the delivery of the executed Agreement, DSI
shall open a deposit account ("Deposit Account") for Depositor. The
opening of the Deposit Account means that DSI shall establish an account
ledger in the name of Depositor, assign a deposit account number
("Deposit Account Number"), calendar renewal notices to be sent to
Depositor as provided in Section 30, and request the initial deposit
("Initial Deposit") from Depositor. Depositor has an obligation to make
the Initial Deposit. In the event that Depositor has not made the
Initial Deposit within sixty (60) days of the execution of this
1
<PAGE> 2
Agreement, DSI shall request the initial Deposit from Depositor and
notify Preferred Registrant that such Initial Deposit has not been
received.
2. Preferred Registration Account. Following the execution and delivery of
the Agreement, DSI shall open a registration account ("Registration
Account") for Preferred Registrant. The opening of the Registration
Account means that DSI shall establish under the Deposit Account an
account ledger with a unique registration number ("Registration Number")
in the name of Preferred Registrant, calendar renewal notices to be sent
to Preferred Registrant as provided in Section 30, and request the
Initial Deposit from Depositor. DSI shall notify Preferred Registrant
upon receipt of Initial Deposit.
3. Term of Agreement. The Agreement will commence on the effective date
and continue through January 31, 2000, unless terminated earlier as
provided in the Agreement. The Agreement may be extended for one (1)
year terms.
4. Exhibit A, Notices and Communications. Notices and invoices to
Depositor, Preferred Registrant or DSI should be sent to the parties at
the addresses identified in the Exhibit A.
Documents, payment of fees, deposits of material, and any written
communication should be sent to the DSI offices as identified in the
Exhibit A.
Depositor and Preferred Registrant agree to each name their respective
designated contact ("Designated Contact") to receive notices from DSI
and to act on their behalf in the performance of their obligations as
set forth in the Agreement. Depositor and Preferred Registrant agree to
notify DSI immediately in the event of a change of their Designated
Contact in the manner stipulated in Exhibit A.
5. Exhibit B and Deposit Material. Depositor will submit proprietary data
and related material ("Deposit Material") to DSI for retention and
administration in the Deposit Account.
The Deposit Material will be submitted together with a completed
document called a "Description of Deposit Material", hereinafter
referred to as Exhibit B. Each Exhibit B should be signed by Depositor
prior to submission to DSI and will be signed by DSI upon completion of
the Deposit Material inspection.
Depositor represents and warrants that it lawfully possesses all Deposit
Material, can transfer Deposit Material to DSI and has the authority to
store Deposit Material in accordance with the terms of the Agreement.
6. Deposit Material Inspection. Upon receipt of an Exhibit B and Deposit
Material, DSI will be responsible only for reasonably matching the
labeling of the materials to the item descriptions listed on the Exhibit
B and validating the count of the materials to the quantity listed on
the Exhibit B. DSI will not be responsible for any other claims made by
2
<PAGE> 3
the Depositor on the Exhibit B. Acceptance will occur when DSI concludes
that the Deposit Material Inspection is complete. Upon acceptance DSI
will sign the Exhibit B and assign it the next Exhibit B number. DSI
shall issue a copy of the Exhibit B to Depositor and Preferred
Registrant within ten (10) days of acceptance.
7. Initial Deposit. The Initial Deposit will consist of all material
initially supplied by Depositor to DSI.
8. Deposit Changes. Depositor may desire or may be obligated to update the
Deposit Account with supplemental or replacement Deposit Material of
technology releases.
Supplemental Deposit ("Supplemental") is Deposit Material which is to be
added to the Deposit Account.
Replacement Deposit ("Replacement") is Deposit Material which will
replace existing Deposit Material as identified by any one or more
Exhibit B(s) in the Deposit Account. Replaced Deposit Material will be
destroyed or returned to Depositor.
9. Deposit. The existing deposit ("Deposit") means all Exhibit B(s) and
their associated Deposit Material currently in DSI's possession.
Destroyed or returned Deposit Material is not part of the Deposit;
however, DSI shall keep records of the destruction or return of Deposit
Material.
10. Replacement Option. Within ten (10) days of receipt of Replacement from
Depositor, DSI will send a letter to Preferred Registrant stating that
Depositor requests to replace existing Deposit Material, and DSI will
include a copy of the new Exhibit B(s) listing the new Deposit Material.
Preferred Registrant has twenty (20) days from the mailing of such
letter by DSI to instruct DSI to retain the existing Deposit Material
held by DSI, and if so instructed, DSI will change the Replacement to a
Supplemental. Conversion to Supplemental may cause an additional
storage unit fee as specified by DSI's Fee and Services Schedule.
If Preferred Registrant does not instruct DSI to retain the existing
Deposit Material, DSI shall permit such Deposit Material to be replaced
with the Replacement. Within ten (10) days of acceptance of the
Replacement by DSI, DSI shall issue a copy of the executed Exhibit B(s)
to Depositor and Preferred Registrant. DSI will either destroy or
return to Depositor all Deposit Material replaced by the Replacement.
11. Storage Unit. DSI will store the Deposit in defined units of space,
called storage units. The cost of the first storage unit will be
included in the annual Deposit Account fee.
12. Deposit Obligations of Confidentiality. DSI agrees to establish a locked
receptacle in which it shall place the Deposit and shall put the
receptacle under the administration of
3
<PAGE> 4
one or more of its officers, selected by DSI, whose identity shall be
available to Depositor at all times. DSI shall exercise a
professional level of care in carrying out the terms of the Agreement.
DSI acknowledges Depositor's assertion that the Deposit shall contain
proprietary data and that DSI has an obligation to preserve and
protect the confidentiality of the Deposit.
Except as provided for in the Agreement, DSI agrees that it shall not
divulge, disclose, make available to third parties, or make any use
whatsoever of the Deposit.
13. Audit Rights. DSI agrees to keep records of the activities undertaken
and materials prepared pursuant to the Agreement. DSI may issue to
Depositor and Preferred Registrant an annual report profiling the
Deposit Account. Such annual report will identify the Depositor,
Preferred Registrant, the current Designated Contacts, selected
special services, and the Exhibit B history, which includes Deposit
Material acceptance and destruction or return dates.
Upon reasonable notice, during normal business hours and during the
term of the Agreement, Depositor or Preferred Registrant will be
entitled to inspect the records of DSI pertaining to the Agreement,
and accompanied by an employee of DSI, inspect the physical status and
condition of the Deposit. The Deposit may not be changed during the
audit.
14. Renewal Period of Agreement. Upon payment of the initial fee or
renewal fee, the Agreement will be in full force and will have an
initial period of at least one (1) year unless otherwise specified.
The Agreement may be renewed for additional periods upon receipt by
DSI of the specified renewal fees prior to the last day of the period
("Expiration Date"). DSI may extend the period of the Agreement to
cover the processing of any outstanding instruction made during any
period of the Agreement.
Preferred Registrant has the right to pay renewal fees and other
related fees. In the event Preferred Registrant pays the renewal fees
and Depositor is of the opinion that any necessary condition for
renewal is not met, Depositor may so notify DSI and Preferred
Registrant in writing. The resulting dispute will be resolved
pursuant to the dispute resolution process defined in Section 25.
15. Expiration. If the Agreement is not renewed, or is otherwise
terminated, all duties and obligations of DSI to Depositor and
Preferred Registrant will terminate. If Depositor requests the return
of the Deposit, DSI shall return the Deposit to Depositor only after
any outstanding invoices and the Deposit return fee are paid. If the
fees are not received by the Expiration Date of the Agreement, DSI, at
its option, may destroy the Deposit.
16. Certification by Depositor. Depositor represents to Preferred
Registrant that:
4
<PAGE> 5
a. The Deposit delivered to DSI consists of the following: source
code deposited on computer magnetic media; all necessary and
available information, proprietary information, and technical
documentation which will enable a reasonably skilled
programmer of Preferred Registrant to create, maintain and/or
enhance the Software without the aid of Depositor or any other
person or reference to any other materials; maintenance tools
(test programs and program specifications); proprietary or
third party system utilities (compiler and assembler
descriptions); description of the system/program generation;
descriptions and locations of programs not owned by Depositor
but required for use and/or support; and names of key
developers for the technology on Depositor's staff.
b. The Deposit will be defined in the Exhibit B(s).
These representations shall be deemed to be made continuously
throughout the term of the Agreement.
17. Indemnification. Depositor and Preferred Registrant agree to defend
and indemnify DSI and hold DSI harmless from and against any and all
claims, actions and suits, whether in contract or in tort, and from
and against any and all liabilities, losses, damages, costs, charges,
penalties, counsel fees, and other expenses of any nature (including,
without limitation, settlement costs) incurred by DSI as a result of
performance of the Agreement except in the event of a judgment which
specifies that DSI acted with gross negligence or willful misconduct.
18. Filing for Release of Deposit by Preferred Registrant. Upon notice to
DSI by Preferred Registrant of the occurrence of a release condition
as defined in Section 21 and payment of the release request fee, DSI
shall notify Depositor by certified mail or commercial express mail
service with a copy of the notice from Preferred Registrant. If
Depositor provides contrary instruction within ten (1O) days of the
mailing of the notice to Depositor, DSI shall not deliver a copy of
the Deposit to Preferred Registrant.
19. Contrary Instruction. "Contrary Instruction" is the filing of an
instruction with DSI by Depositor stating that a Contrary Instruction
is in effect. Such Contrary Instruction means an officer of Depositor
warrants that a release condition has not occurred or has been cured.
DSI shall send a copy of the instruction by certified mail or
commercial express mail service to Preferred Registrant. DSI shall
notify both Depositor and Preferred Registrant that there is a dispute
to be resolved pursuant to Section 25. Upon receipt of Contrary
Instruction, DSI shall continue to store the Deposit pending Depositor
and Preferred Registrant joint instruction, resolution pursuant to
Section 25, order by a court of competent jurisdiction, or termination
by non-renewal of the Agreement.
20. Release of Deposit to Preferred Registrant. Pursuant to Section 18, if
DSI does not receive Contrary Instruction from Depositor, DSI is
authorized to release the Deposit, or if more than one Preferred
Registrant is registered to the Deposit, a copy of the Deposit,
5
<PAGE> 6
to the Preferred Registrant filing for release following receipt of
any fees due to DSI including Deposit copying and delivery fees.
21. Release Conditions of Deposit to Preferred Registrant.
Release conditions are:
a. Depositor ceases to do business, makes an assignment for the
benefit of creditors, becomes insolvent (as revealed by its
books and records or otherwise), is generally unable to pay
its debts as such debts become due, or commences, or has
commenced against it a case under any chapter of state or
federal bankruptcy laws; and Depositor fails to cure any such
event within 60 days after receiving notice from Preferred
Registrant; and
b. Preferred Registrant has paid all amounts due Depositor under
the Remote Agreement.
22. Grant of Use License. Subject to the terms and conditions of the
Agreement, Depositor hereby transfers and upon execution by DSI, DSI
hereby accepts a non-exclusive, nontransferable, royalty-free license
("Use License") for the unexpired term of the Remote Agreement subject
to Section 15 thereof which DSI will transfer to Preferred Registrant
upon controlled release of the Deposit as described in the Agreement.
The Use License will be solely for Preferred Registrant's internal
purposes in connection with support, maintenance, and operation of the
Software solely as set forth in the Remote Agreement and not for any
other purpose or person.
23. Use License Representation. Depositor represents and warrants to
Preferred Registrant and DSI that it has no knowledge of any
incumbrance or infringement of the Deposit, or that any claim has been
made that the Deposit infringes any patent, trade secret, copyright or
other proprietary right of any third party. Depositor warrants that it
has the full right, power, and ability to enter into and perform the
Agreement, to grant the foregoing Use License, and to permit the
Deposit to be placed with DSI.
24. Conditions Following Release. Following a release and subject to
payment to DSI of all outstanding fees, DSI shall transfer the Use
License to Preferred Registrant. Additionally Preferred Registrant
shall be required to maintain the confidentiality of the released
Deposit.
25. Disputes. In the event of a dispute, DSI shall so notify Depositor and
Preferred Registrant in writing. Upon agreement of the parties at the
time of a dispute, such dispute will be settled by arbitration in
accordance with the commercial rules of the American Arbitration
Association ("AAA"). Unless otherwise agreed to by Depositor and
Preferred Registrant, arbitration will take place in San Diego,
California, USA.
6
<PAGE> 7
26. Verification Rights. Depositor grants to Preferred Registrant the
option to verify the Deposit for accuracy, completeness and
sufficiency. Depositor agrees to permit DSI and at least one employee
of Preferred Registrant to be present at Depositor's facility to
verify, audit and inspect of the Deposit for the benefit of Preferred
Registrant. If DSI is present or is selected to perform the
verification, DSI will be paid according to DSI's then current
verification service hourly rates and any out of pocket expenses.
27. General. DSI may act in reliance upon any instruction, instrument, or
signature believed to be genuine and may assume that any employee
giving any written notice, request, advice or instruction in
connection with or relating to the Agreement has apparent authority
and has been duly authorized to do so. DSI may provide copies of the
Agreement or account history information to any employee of Depositor
or Preferred Registrant upon their request. For purposes of
termination or replacement, Deposit Material shall be returned only to
Depositor's Designated Contact, unless otherwise instructed by
Depositor's Designated Contact.
DSI is not responsible for failure to fulfill its obligations under the
Agreement due to causes beyond DSI's control.
The Agreement is to be governed by and construed in accordance with
the laws of the State of California.
The Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes all previous
communications, representations, understandings, and agreements,
either oral or written, between the parties. The Agreement may be
amended only in a writing signed by the parties.
If any provision of the Agreement is held by any court to be invalid
or unenforceable, that provision will be severed from the Agreement
and any remaining provisions will continue in full force.
28. Title to Media. Subject to the terms of the Agreement, title to the
media, upon which the proprietary data is written or stored, is and
shall be irrevocably vested in DSI. Notwithstanding the foregoing,
Depositor will retain ownership of the proprietary data contained on
the media including all copyright, trade secret, patent or other
intellectual property ownership rights subsisting in such proprietary
data.
29. Termination of Rights. The Use License as described above will
terminate in the event that the Agreement is terminated without the
Use License transferring to Preferred Registrant.
30. Fees. Fees are due upon receipt of signed contract, receipt of Deposit
Material, or when service is requested, whichever is earliest. If
invoiced fees are not paid within sixty (60) days of the date of the
invoice, DSI may terminate the Agreement. If the payment is not
7
<PAGE> 8
timely received by DSI, DSI shall have the right to accrue and collect
interest at the rate of one and one-half percent per month (18% per
annum) from the date of the invoice for all late payments.
Renewal fees will be due in full upon the receipt of invoice unless
otherwise specified by the invoice. In the event that renewal fees are
not received thirty (30) days prior to the Expiration Date, DSI shall
so notify Depositor and Preferred Registrant. If the renewal fees are
not received by the Expiration Date, DSI may terminate the Agreement
without further notice and without liability of DSI to Depositor or
Preferred Registrant.
DSI shall not be required to process any request for service unless
the payment for such request shall be made or provided for in a manner
satisfactory to DSI.
All service fees and renewal fees will be those specified in DSI's Fee
and Services Schedule in effect at the time of renewal or request for
service, except as otherwise agreed. For any increase in DSI's
standard fees, DSI shall notify Depositor and Preferred Registrant at
least ninety (90) days prior to the renewal of the Agreement. For any
service not listed on the Fee and Services Schedule, DSI shall provide
a quote prior to rendering such service.
Fees invoiced by DSI are the responsibility of the Preferred
Registrant and as such all invoices in accordance with this Agreement
are to be sent to the Preferred Registrant.
8
<PAGE> 9
On behalf of the Investment Companies
and respective Portfolios and Classes
set forth in Schedule A attached
hereto as may be amended from
time to time.
<TABLE>
<S> <C>
By:/s/ ROBERT H. GRAHAM FIRST DATA INVESTOR SERVICES
--------------------------------- GROUP, INC.
Name: Robert H. Graham
------------------------------- By:/s/ ILLEGIBLE
Title: President ---------------------------------
------------------------------ Name: ILLEGIBLE
-------------------------------
Title: Executive Vice President
------------------------------
DATA SECURITIES
INTERNATIONAL, INC.
By:/s/ CHRISTIE WOODWARD
---------------------------------
Name: Christie Woodward
-------------------------------
Title: Contract Administrator
------------------------------
</TABLE>
<PAGE> 10
SCHEDULE A
LIST OF FUNDS
AIM ADVISOR FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Advisor Cash Management Fund Class A and Class C Shares
AIM Advisor Flex Fund Class A and Class C Shares
AIM Advisor Income Fund Class A and Class C Shares
AIM Advisor International Value Fund Class A and Class C Shares
AIM Advisor Large Cap Value Fund Class A and Class C Shares
AIM Advisor MultiFlex Fund Class A and Class C Shares
AIM Advisor Real Estate Fund Class A and Class C Shares
</TABLE>
AIM EQUITY FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Blue Chip Fund Class A, Class B Shares and Class C Shares
AIM Capital Development Fund Class A, Class B Shares and Class C Shares
AIM Charter Fund Class A, Class B Shares and Class C Shares
AIM Weingarten Fund Class A, Class B Shares and Class C Shares
AIM Aggressive Growth Fund Class A Shares
AIM Constellation Fund Class A Shares and Class C Shares
</TABLE>
AIM FUNDS GROUP
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Balanced Fund Class A, Class B Shares and Class C Shares
AIM Global Utilities Fund Class A, Class B Shares and Class C Shares
AIM Growth Fund Class A, Class B Shares and Class C Shares
AIM High Yield Fund Class A, Class B Shares and Class C Shares
AIM Income Fund Class A, Class B Shares and Class C Shares
AIM Intermediate Government Fund Class A, Class B Shares and Class C Shares
AIM Municipal Bond Fund Class A, Class B Shares and Class C Shares
AIM Value Fund Class A, Class B Shares and Class C Shares
AIM Money Market Fund Class A, Class B, Class C and AIM Cash Reserve Shares
</TABLE>
AIM INTERNATIONAL FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM International Equity Fund Class A, Class B Shares and Class C Shares
AIM Global Aggressive Growth Fund Class A, Class B Shares and Class C Shares
AIM Global Growth Fund Class A, Class B Shares and Class C Shares
AIM Global Income Fund Class A, Class B Shares and Class C Shares
AIM Asian Growth Fund Class A, Class B Shares and Class C Shares
AIM European Development Fund Class A, Class B Shares and Class C Shares
</TABLE>
AIM INVESTMENT SECURITIES FUNDS
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
Limited Maturity Treasury Portfolio AIM Limited Maturity Treasury Shares
</TABLE>
AIM TAX-EXEMPT FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Tax-Exempt Cash Fund Class A Shares
AIM Tax-Exempt Bond Fund of Connecticut Class A Shares
Intermediate Portfolio AIM Tax-Free Intermediate Shares- Class A
</TABLE>
<PAGE> 11
EXHIBIT A
DESIGNATED CONTACT
Account Number: 0609111-00002-01090011
<TABLE>
<S> <C>
NOTICES, DEPOSIT MATERIAL RETURNS AND INVOICES TO DEPOSITOR SHOULD BE ADDRESSED TO:
COMMUNICATION, INCLUDING DELINQUENCIES TO First Data Investor Services Group, Inc.
DEPOSITOR SHOULD BE ADDRESSED TO: ------------------------------------------------
4400 Computer Drive
First Data Investor Services Group, Inc. ------------------------------------------------
- ---------------------------------------- Westboro, MA 01581
4400 Computer Drive ------------------------------------------------
- ----------------------------------------
Westboro, MA 01581 ------------------------------------------------
- ----------------------------------------
Invoice Contact: Brendan Bowen
- ---------------------------------------- --------------------------------
Designated Contact: John Corey
---------------------
Telephone: (508)871-9601
------------------------------
Facsimile:
------------------------------
State of Incorporation: Massachusetts
-----------------
NOTICES AND COMMUNICATION, INCLUDING INVOICES TO PREFERRED REGISTRANT SHOULD BE
DELINQUENCIES TO PREFERRED REGISTRANT ADDRESSED TO:
SHOULD BE ADDRESSED TO: AIM Fund Services, Inc.
-----------------------------------------------
AIM Fund Services, Inc. Eleven Greenway Plaza
Eleven Greenway Plaza -----------------------------------------------
Houston, Texas 77046 Houston, Tx 77046
-----------------------------------------------
-----------------------------------------------
Designated Contact: Jack Caldwell Invoice Contact: Jack Caldwell
--------------------- -------------------------------
Telephone: (713)214-1633
------------------------------
Facsimile:
------------------------------
Requests from Depositor or Preferred Registrant INVOICE INQUIRIES AND FEE REMITTANCES TO DSI
Contact should be given Contact or authorized SHOULD BE ADDRESSED TO:
employee Registrant.
DSI
CONTRACTS, DEPOSIT MATERIAL AND NOTICES TO DSI Attn: Accounts Receivable
SHOULD BE ADDRESSED TO:
DSI
Attn: Contract Administration
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
Date:
-----------------------------------
</TABLE>
<PAGE> 12
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIAL
Deposit Account Number: 0609111-00002
--------------------------------------------------------
Depositor Company Name: First Data Investor Services Group
--------------------------------------------------------
DEPOSIT TYPE:
X Initial Supplemental Replacement
- ------ ------ ------
If Replacement: Destroy Deposit Return Deposit
------ ------
ENVIRONMENT:
Host System CPU/OS: MS Windows 3.11 or MS/Windows 95 OS on Intel X86 processor
based PC
------------------------------------------------------------
Version:
-----------------------------------------------------------------------
Backup:
------------------------------------------------------------------------
Source System CPU/OS: MS Windows 3.11 OS on Intel Pentium 133 MHz PC
----------------------------------------------------------
Version:
-----------------------------------------------------------------------
Compiler:Impress Imaging-Plexus AD v4.1, Informix ESQL v2.2, MS Visual C++v4.1
----------------------------------------------------------------------
Impress Clearinghouse & Toolbar-MS Visual C++ v4.1
----------------------------------------------------------------------
ACE Plus - MS Visual Basic 4.0, MS Access v2.0
----------------------------------------------------------------------
Special Instructions:
----------------------------------------------------------
DEPOSIT MATERIAL:
Exhibit B Name: Impress Imaging System Version: V5.2.06.01
---------------------- -------------------------
Impress Clearinghouse V5.2.02.01
---------------------- -------------------------
Impress Toolbar V5.2.01.01
---------------------- -------------------------
ACE Plus V2.05.07
---------------------- -------------------------
<TABLE>
<CAPTION>
Item Label Description Media Quantity
<S> <C> <C>
AIM Funds Source, CD 1
August 8, 1997
Case Arrived cracked DSI
</TABLE>
<TABLE>
<S> <C>
For Depositor, I certify that the above For DSI, I received the above described
described Deposit Material was sent to DSI: Deposit Material subject to the terms on
the reverse side of this Exhibit:
By:/s/ ILLEGIBLE By: /S/ CHRISTIE WOODWARD
--------------------------------------- ---------------------------------------
Print Name: ILLEGIBLE Print Name: CHRISTIE WOODWARD
------------------------------- -------------------------------
Date: 9-3-97 Date of Acceptance: 9-10-97
------------------------------------- -----------------------
</TABLE>
<PAGE> 13
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIAL
Deposit Account Number: 0609111-00002
------------------------------------------------------
Depositor Company Name: First Data Investor Services Group
------------------------------------------------------
DEPOSIT TYPE:
[X] Initial [ ] Supplemental [ ] Replacement
If Replacement: [ ] Destroy Deposit [ ] Return Deposit
ENVIRONMENT:
Host System CPU/OS: 3090/MVS
------------------------------------------------------------
Version:
-----------------------------------------------------------------------
Backup:
------------------------------------------------------------------------
Source System CPU/OS: 3090/MVS
----------------------------------------------------------
Version:
-----------------------------------------------------------------------
Compiler: Standard IBM Compiler
----------------------------------------------------------------------
Special Instructions:
----------------------------------------------------------
DEPOSIT MATERIAL:
Exhibit B Name: FSR Source Code-931761 Version:
---------------------------- --------------------------
FSR JCL-931384
Item Label Description Media Quantity
DSN-P03AIM.PRIV.VENDOR.SEA.CSSP Data Tape 1
ROD_PANLIB VOLSER-932154 DSI
DSN_P03AIMPRIV.VENDOR.SEQ.ESC Data Tape 1
ROW.TAPE VOLSER=932155
<TABLE>
<S> <C>
For Depositor, I certify that the above described For DSI, I received the above described Deposit
Deposit Material was sent to DSI: Material subject to the terms on the reverse side
of this Exhibit:
By: /s/ NOT LEGIBLE By: /s/ CHRISTIE WOODWARD
---------------------------------------------- ---------------------------------------------
Print Name: NOT LEGIBLE Print Name: CHRISTIE WOODWARD
-------------------------------------- -------------------------------------
Date: NOT LEGIBLE Date of Acceptance: NOT LEGIBLE
------------------------------------------- -----------------------------
</TABLE>
<PAGE> 1
EXHIBIT 9(b)
FUND ACCOUNTING AND PRICING AGENT AGREEMENT
This Fund Accounting and Pricing Agent Agreement (the "Agreement") is
made as of _______________, 1998, by and between AIM Series Trust (the
"Company") and INVESCO (NY), INC. ("INVESCO (NY)").
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company;
WHEREAS, the Company currently operates one mutual fund, which is
organized as a separate and distinct series consisting of shares of beneficial
interest (such existing fund and such funds as may hereafter be established
being referred to in this Agreement as the "Funds" and singly as a "Fund");
WHEREAS, the Company is part of a complex of investment companies that
are sub-advised and/or sub-administered by INVESCO (NY) and with which INVESCO
(NY) has entered into Fund Accounting and Pricing Agent Agreements (the "INVESCO
(NY) Funds");
WHEREAS, the Company desires to retain INVESCO (NY) to act as its
accounting and pricing agent, and INVESCO (NY) is willing to act in such
capacities.
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions hereinafter set forth, the Company and INVESCO (NY) hereby agree as
follows:
SECTION 1. APPOINTMENT. The Company hereby appoints INVESCO (NY)
to act as the accounting and pricing agent for each Fund for the period and on
the terms and conditions set forth in this Agreement. INVESCO (NY) hereby
accepts such appointment and agrees to render the services set forth for the
compensation herein provided.
SECTION 2. DEFINITIONS. As used in this Agreement and in addition
to the terms defined elsewhere herein, the following terms shall have the
meanings assigned to them in this Section:
(a) "Authorized Person" means any officer of the Company and
any other person, whether or not any such person is an officer or
employee of the Company, duly authorized by the Board of Trustees (the
"Board"), the President or any Vice President of the Fund to give Oral
and/or Written Instructions on behalf of the Company or any Fund.
(b) "Commission" means the Securities and Exchange Commission.
(c) "Custodian" means the custodian or custodians employed by
the Company to maintain custody of the Fund's assets.
<PAGE> 2
(d) "Governing Documents" means the Declaration of Trust,
By-Laws and other applicable charter documents of the Company, all as
they may be amended from time to time.
(e) "Oral Instruction" means oral instructions actually
received by INVESCO (NY) from an Authorized Person or from a person
reasonably believed by INVESCO (NY) to be an Authorized Person,
provided that, any Oral Instruction shall be promptly confirmed by
Written Instructions.
(f) "Prospectus" means the current prospectus and statement of
additional information of a Fund, taken together.
(g) "Shares" means shares of beneficial interest of any of the
Funds.
(h) "Shareholder" means any owner of Shares.
(i) "Written Instructions" means written instructions
delivered by hand, mail, tested telegram or telex, cable or facsimile
sending device received by INVESCO (NY) and signed by an Authorized
Person.
SECTION 3. COMPLIANCE WITH LAWS, ETC. In performing its
responsibilities hereunder, INVESCO (NY) shall comply with all terms and
provisions of the Governing Documents, the Prospectus and all applicable state
and federal laws including, without limitation, the 1940 Act and the rules and
regulations promulgated by the Commission thereunder.
SECTION 4. SERVICES. In consideration of the compensation payable
hereunder and subject to the supervision and control of the Company's Boards,
INVESCO (NY) shall provide the following services to the Funds:
(a) PRICING AGENT. As pricing agent, INVESCO (NY) shall:
(1) Obtain security market quotes from services
approved by the investment manager of the Funds or, if such quotes
are unavailable, then obtain such prices from the investment
manager of the Funds or from such sources as the investment
manager may direct, and, in either case, calculate the market
value of the Funds' investments; and
(2) Value the assets of the Funds and compute the
net asset value per Share of the Funds at such dates and times and
in the manner specified in the then currently effective Prospectus
and transmit to the Funds' investment manager.
(b) ACCOUNTING AGENT. As fund accounting agent, INVESCO (NY)
shall:
- 2-
<PAGE> 3
(1) Calculate the net income of each Fund;
(2) Calculate capital gains or losses for each Fund
from the sale or disposition of assets, if any;
(3) Maintain the general ledger and other accounts,
books and financial records of the Company, as required under
Section 31(a) of the 1940 Act and the rules promulgated by the
Commission thereunder in connection with the services provided by
INVESCO (NY);
(4) Perform the following functions on a daily
basis:
(A) journalize each Fund's investment,
capital share and income and expense activities;
(B) reconcile cash and investment
balances of each Fund with the Custodian and provide
the Funds' investment manager with the beginning
cash balance available for investment purposes and
update the cash availability throughout the day as
required by the investment manager;
(C) verify investment buy/sell trade
tickets received from a Fund's investment manager
and transmit trades to a Fund's Custodian for proper
settlement;
(D) maintain individual ledgers for
investment securities;
(E) maintain historical tax lots for
investment securities;
(F) calculate various contractual
expenses (e.g., advisory and custody fees);
(G) post to and prepare the Funds'
statement of assets and liabilities and statement of
operations; and
(H) monitor expense accruals and
notify an Authorized Person of any proposed
adjustments;
(5) Receive and act upon notices, Oral and Written
Instructions, certificates, instruments or other communications
from a Fund's shareholder servicing and transfer agent;
(6) Assist in the preparation of financial
statements semiannually
- 3 -
<PAGE> 4
which will include the following items:
(A) schedule of investments;
(B) statement of assets and
liabilities;
(C) statement of operations;
(D) changes in net assets;
(E) cash statement; and
(F) schedule of capital gains and
losses;
(7) Prepare monthly security transaction listings;
(8) Prepare quarterly broker security transactions
summaries; and
(9) At the reasonable request of the Company, assist
in the preparation of various reports or other financial documents
required by federal, state and other appropriate laws and
regulations.
SECTION 5. COMPENSATION. As compensation for the services rendered
by INVESCO (NY) hereunder during the term of the Agreement, each Fund shall pay
to INVESCO (NY) monthly such fees as shall be agreed to from time to time by the
Company and INVESCO (NY), in writing and attached hereto as Schedule A. In
addition, as may be agreed to from time to time in writing by the Company and
INVESCO (NY), each Fund shall reimburse INVESCO (NY) for certain expenses that
it incurs in rendering services with respect to that Fund under this Agreement.
SECTION 6. RELIANCE BY INVESCO (NY) ON INSTRUCTIONS. Unless
otherwise provided in this Agreement, INVESCO (NY) shall act only upon Oral or
Written Instructions. INVESCO (NY) shall be entitled to rely upon any such
Instructions actually received by it under this Agreement. The Company agrees
that INVESCO (NY) shall incur no liability to the Company or any of the Funds in
acting upon Oral or Written Instructions given to INVESCO (NY) hereunder,
provided that, such Instructions reasonably appear to have been received from an
Authorized Person.
SECTION 7. COOPERATION WITH AGENTS OF THE COMPANY. INVESCO (NY)
shall cooperate with the Company's agents and employees, including, without
limitation, their independent accountants, and shall take all reasonable action
in the performance of its obligations under this Agreement to assure that all
necessary information is made available to such agents to the extent necessary
in the performance of their duties to the Company.
- 4 -
<PAGE> 5
SECTION 8. CONFIDENTIALITY. INVESCO (NY), on behalf of itself and
its employees, agrees to treat confidentially all records and other information
relating to the Company and the Funds except when requested to divulge such
information by duly constituted authorities provided that notification and prior
approval is obtained from the Company, which approval shall not be unreasonably
withheld and may not be withheld if INVESCO (NY), in its judgment, may be
subject to civil or criminal contempt proceedings for failure to comply.
SECTION 9. STANDARD OF CARE. In the performance of its
responsibilities hereunder, INVESCO (NY) shall exercise care and diligence in
the performance of its duties and act in good faith and use its best efforts to
ensure the accuracy and completeness of all services under this Agreement. In
performing services hereunder, INVESCO (NY):
(a) shall be under no duty to take any action on behalf of the
Company or the Funds except as specifically set forth herein or as may
be specifically agreed to by INVESCO (NY) in writing, and in computing
the net asset value per Share of a Fund, INVESCO (NY) may rely upon
any information furnished to it including, without limitation,
information (1) as to the accrual of liabilities of a Fund and as to
liabilities of a Fund not appearing on the books of account kept by
INVESCO (NY), (2) as to the existence, status and proper treatment of
reserves, if any, authorized by a Fund, (3) as to the sources of
quotations to be used in computing net asset value, (4) as to the fair
value to be assigned to any securities or other property for which
price quotations are not readily available and (5) as to the sources
of information with respect to "corporate actions" affecting portfolio
securities of a Fund (information as to "corporate actions" shall
include information as to dividends, distributions, interest payments,
prepayments, stock splits, stock dividends, rights offerings,
conversions, exchanges, recapitalizations, mergers, redemptions,
calls, maturity dates and similar actions, including ex-dividend and
record dates and the amounts and terms thereof);
(b) shall be responsible and liable for all losses, damages and
costs (including reasonable attorneys' fees) incurred by the Company
or any Fund which is due to or caused by INVESCO (NY)'s negligence in
the performance of its duties under this Agreement or for INVESCO
(NY)'s negligent failure to perform such duties as are specifically
assumed by INVESCO (NY) in this Agreement, provided that, to the
extend that duties, obligations and responsibilities are not expressly
set forth in this Agreement, INVESCO (NY) shall not be liable for any
act or omission that does not constitute willful misfeasance, bad
faith or negligence on the part of INVESCO (NY) or reckless disregard
by INVESCO (NY) of such duties, obligations and responsibilities; and
(c) without limiting the generality of the foregoing, INVESCO
(NY) shall not, in connection with INVESCO (NY)'s duties under this
Agreement, be under any duty or obligation to inquire into and shall
not be liable for or in respect of:
(1) the validity or invalidity or authority or lack of
authority of any Oral or Written Instruction, notice or other
instrument which conforms
- 5 -
<PAGE> 6
to the applicable requirements of this Agreement, if any and that
INVESCO (NY) reasonably believes to be genuine; and
(2) delays or errors or loss of data occurring by reason of
circumstances beyond INVESCO (NY)'s control including, without
limitation, acts of civil or military authorities, national
emergencies, labor difficulties, fire, mechanical breakdown,
denial of access, earthquake, flood or catastrophe, acts of God,
insurrection, war, riots, or failure of the mails,
transportation, communication or power supply.
Notwithstanding any other provisions of this Agreement, the following provisions
shall apply with respect to INVESCO (NY)'s computation of a Fund's net asset
value: INVESCO (NY) shall be held to the exercise of reasonable care in
computing and determining net asset value as provided in Section 4(a), above,
but shall not be held accountable or liable for any losses, damages or expenses
of a Fund or any Shareholder or former Shareholder may incur arising from or
based upon errors or delays in the determination of such net asset value unless
such error or delay was due to INVESCO (NY)'s negligence or willful misfeasance
in the computation and determination of such net asset value. The parties hereto
acknowledge, however, that INVESCO (NY) causing an error or delay in the
determination of net asset value may, but does not in and of itself, constitute
negligence or willful misfeasance. In no event shall INVESCO (NY) be liable or
responsible to the Company or a Fund or any other party for any error or delay
which continued or was undetected after the date of an audit of the Company or
any Fund performed by the certified public accountants employed by the Company
if, in the exercise of reasonable care in accordance with generally accepted
accounting principles, such accountants should have become aware of such error
or delay in the course of performing such audit. INVESCO (NY)'s liability for
any such negligence or willful misfeasance which results in an error in
determination of such net asset value be limited to the direct out-of-pocket
loss a Fund and/or any Shareholder or former Shareholder shall actually incur.
Without limiting the generality of the foregoing, INVESCO (NY)
shall not be held accountable or liable to a Fund a Shareholder or former
Shareholder or any other person for any delays or losses, damages or expenses
any of them may suffer or incur resulting from (1) INVESCO (NY)'s failure to
receive timely and suitable notification concerning quotations, corporate
actions or similar matters relating to or affecting portfolio securities of a
Fund or (2) any errors in the computation of a net asset value based upon or
arising out of quotations or information as to corporate actions if received by
INVESCO (NY) from a source that INVESCO (NY) was authorized to rely upon.
Nevertheless, INVESCO (NY) will use its best judgment in determining whether to
verify through other sources any information that it has received as to
quotations or corporate actions if INVESCO (NY) has reason to believe that any
such information is incorrect.
SECTION 10. RECEIPT OF ADVICE. If INVESCO (NY) is in doubt as to
any action to be taken or omitted by it, INVESCO (NY) may request, and shall be
entitled to rely upon, directions and advice from the Company, including Oral or
Written Instructions where
- 6 -
<PAGE> 7
appropriate, or from counsel of its own choosing (who may also be counsel for
the Company or any Fund), with respect to any question of law. In case of
conflict between directions, advice or Oral and Written Instructions received by
INVESCO (NY) pursuant to this Section, INVESCO (NY) shall be entitled to rely on
and follow the advice received from counsel as described above. INVESCO (NY)
shall be protected in any action or in action that it takes in reliance on any
directions, advice or Oral or Written Instructions received pursuant to this
Section that INVESCO (NY), after the receipt of the same, in good faith believes
to be consistent with such directions, advice or Oral or Written Instructions,
as the case may be. Notwithstanding the foregoing, nothing in this Section shall
be construed as imposing on INVESCO (NY) any obligation to seek such directions,
advice or Oral or Written Instruction, or to act in accordance with them when
received, unless the same is a condition to INVESCO (NY)'s properly taking or
omitting to take such action under the terms of this Agreement.
SECTION 11. INDEMNIFICATION OF INVESCO (NY). The Company agrees to
indemnify and hold harmless INVESCO (NY) and its officers, directors, employees,
nominees and subcontractors, if any, from all taxes, charges, expenses,
assessments, claims and liabilities, including, without limitation, liabilities
arising under the 1940 Act, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the Commodities Exchange Act and
any state or foreign securities or blue sky laws, and expenses, including,
without limitation, reasonable attorneys' fees and disbursements, arising
directly or indirectly from any action or thing that INVESCO (NY) takes or omits
to take or do:
(a) at the request or on the direction of or in reliance upon
the advice of the Company;
(b) upon Oral or Written Instructions; or
(c) in the performance by INVESCO (NY) of its responsibilities
under this Agreement;
provided that, INVESCO (NY) shall not be indemnified against any liability to
the Company or the Funds, or any expenses incident thereto, arising out of
INVESCO (NY)'s own willful misfeasance, bad faith or negligence or reckless
disregard of its duties in connection with the performance of its duties and
obligations specifically described in this Agreement.
SECTION 12. INDEMNIFICATION OF THE COMPANY. INVESCO (NY) agrees to
indemnify and hold harmless the Company and its officers, trustees, directors
and employees, from all taxes, charges, expenses, assessments, claims and
liabilities, including, without limitation, liabilities arising under the 1940
Act, the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, the Commodities Exchange Act and any state or foreign
securities or blue sky laws, and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, arising directly or indirectly
from any action or omission of INVESCO (NY) that does not meet the standard of
care to which INVESCO (NY) is subject under Section 9, above.
- 7 -
<PAGE> 8
SECTION 13. LIMITATION OF LIABILITY OF SHAREHOLDERS AND TRUSTEES
OF THE COMPANY. It is expressly agreed that the obligations of the Company
hereunder shall not be binding upon any of the shareholders, Trustees,
directors, officers, nominees, agents or employees of the Company personally,
but shall only bind the assets and property of the applicable Funds, as provided
in the Governing Documents. The execution and delivery of this Agreement has
been authorized by the Board of the Company, and this Agreement has been
executed and delivered by an authorized officer of the Company acting as such,
and neither such authorization by the Board nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the assets
and property of the applicable Fund as provided in the Governing Documents.
SECTION 14. DURATION AND TERMINATION. This Agreement shall
continue with respect to the Company and each Fund until termination with
respect to the Company, or with respect to one or more Funds, is effected by the
Company or INVESCO (NY) upon sixty days' prior written notice to the other. In
the event of the "assignment" of this Agreement within the meaning of the 1940
Act, this Agreement shall terminate automatically.
SECTION 15. NOTICES. All notices and other communications
hereunder, including Written Instructions, shall be in writing or by confirming
telegram, cable, telex or facsimile sending device. Notices with respect to a
party shall be directed to such address as may from time to time be designated
by that party to the other.
SECTION 16. FURTHER ACTIONS. The Company and INVESCO (NY) agree to
perform such further acts and to execute such further documents as may be
necessary or appropriate to effect the purposes of this Agreement.
SECTION 17. AMENDMENTS. This Agreement, or any part thereof, may
be amended only by an instrument in writing signed by the Company and INVESCO
(NY).
SECTION 18. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
SECTION 19. SHAREHOLDER LIABILITY. It is expressly agreed that the
obligations of the Company hereunder shall not be binding upon any of the
Trustees, Shareholders, nominees, officers, agents or employees of the Company
personally, but shall only bind the assets and property of the Funds, as
provided in the Company's Agreement and Declaration of Trust. The execution and
delivery of this Agreement has been authorized by the Trustees of the Company
and this Agreement has been executed and delivered by an authorized officer of
the Company acting as such; neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the assets
- 8 -
<PAGE> 9
and property of the Funds, as provided in the Company's Agreement and
Declaration of Trust.
SECTION 20. MISCELLANEOUS. This Agreement embodies the entire
agreement and understanding between the Company and INVESCO (NY) and supersedes
all prior agreements and understandings relating to the subject matter hereof,
provided that the Company and INVESCO (NY) may embody in one or more separate
documents their agreement or agreements with respect to such matters that this
Agreement provides may be later agreed to by and between the Company and INVESCO
(NY) from time to time. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement shall be governed by and construed in accordance with California law.
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the Company and INVESCO (NY) and their respective successors.
IN WITNESS WHEREOF, the Company and INVESCO (NY) have caused this
Agreement to be executed by their officers designated below as of this day,
month and year first above written.
AIM SERIES TRUST
By:
---------------------------------------
Kenneth W. Chancey
Vice President, Principal Accounting
Officer and (Acting) CFO
Attest:
---------------------------------------
Michael A. Silver
Assistant Secretary
INVESCO (NY), INC.
By:
---------------------------------------
Helge K. Lee
Chief Legal and Compliance Officer
and Secretary
Attest:
---------------------------------------
Michael A. Silver
Assistant Secretary
- 9 -
<PAGE> 10
SCHEDULE A
FUND ACCOUNTING AND PRICING AGENT FEES
The Fund shall pay a Fee to INVESCO (NY) determined as a percentage of the
Fund's net assets. The annualized rate at which the fee is paid (the Fee Rate)
and the Fee shall be calculated as set forth below:
o An Asset Multiplier is determined by multiplying .0003 times the first $5
billion in average net assets of the INVESCO (NY) Funds plus .0002 times
the net assets over $5 billion.
o The Fee Rate is determined by dividing the Asset Multiplier by the net
assets of the INVESCO (NY) Funds.
o The Monthly Fee is determined then by multiplying the average daily Fee
Rate by the number of days in the month and by the Fund's average daily net
assets then dividing by 365/or 366
Example: For Fund X having $100 million in average net assets during December
1997, in which the INVESCO (NY) Funds have average net assets of $8 billion:
Asset Multiplier = (.0003) ($5 billion) + (.0002) ($3 billion) = $2.1 million
Fee Rate = $2.1 million = .0002625
------------
$8 billion
Monthly Fee = (31) (.0002625) ($100 million) = $2,229.45
----
(365)
- 10 -
<PAGE> 1
EXHIBIT 9(c)(5)
A I M DISTRIBUTORS, INC.
SHAREHOLDER SERVICE AGREEMENT
(BROKERS FOR BANK TRUST DEPARTMENTS)
[LOGO APPEARS HERE]
A I M Distributors, Inc.
_________________________, 19_____
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with A I M Distributors, Inc. ("AIM
Distributors") as agent on behalf of the funds listed on Schedule A hereto,
which may be amended from time to time by AIM Distributors (the "Funds"), for
the servicing of our clients who are shareholders of, and the administration of
accounts in, the Funds. We understand that this Shareholder Service Agreement
(the "Agreement") has been adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act") by each of the Funds, under a Distribution
Plan (the "Plan") adopted pursuant to said Rule, and is subject to applicable
rules of the National Association of Securities Dealers, Inc. ("NASD"). This
Agreement defines the services to be provided by us for which we are to receive
payments pursuant to the Plan. The Plan and the Agreement have been approved
by a majority of the directors or trustees of the applicable Fund, including a
majority of directors or trustees who are not interested persons of the
applicable Fund, and who have no direct or indirect financial interest in the
operation of the Plan or related agreements, by votes cast in person at a
meeting called for the purpose of voting on the Plan. Such approval included a
determination by the directors or trustees of the applicable Fund, in the
exercise of their reasonable business judgement and in light of their fiduciary
duties, that there is a reasonable likelihood that the Plan will benefit the
Fund and the holders of its Shares. The terms and conditions of this Agreement
shall be as follows:
1. To the extent that we provide continuing personal shareholder services
and administrative support services to our customers who may from time
to time own shares of the Funds of record or beneficially, including but
not limited to, forwarding sales literature, answering routine customer
inquiries regarding the Funds, assisting customers in changing dividend
options, account designations and addresses, and in enrolling into any
of several special investment plans offered in connection with the
purchase of the Funds' shares, assisting in the establishment and
maintenance of customer accounts and records and in the processing of
purchase and redemption transactions, investing dividends and capital
gains distributions automatically in shares of the Funds and providing
such other services as AIM Distributors or the customer may reasonably
request, you shall pay us a fee periodically. We represent that we
shall accept fees hereunder only so long as we continue to provide such
personal shareholder services.
2. We agree to transmit to AIM Distributors in a timely manner, all
purchase orders and redemption requests of our clients and to forward to
each client all proxy statements, periodic
<PAGE> 2
Shareholder Service Agreement Page 2
(Brokers for Bank Trust Departments)
shareholder reports and other communications received from AIM
Distributors by us relating to shares of the Funds owned by our clients.
AIM Distributors, on behalf of the Funds, agrees to pay all
out-of-pocket expenses actually incurred by us in connection with the
transfer by us of such proxy statements and reports to our clients as
required under applicable laws or regulations.
3. We agree to transfer to AIM Distributors in a timely manner as set forth
in the applicable prospectus, federal funds in an amount equal to the
amount of all purchase orders placed by us and accepted by AIM
Distributors. In the event that AIM Distributors fails to receive such
federal funds on such date (other than through the fault of AIM
Distributors), we shall indemnify the applicable Fund and AIM
Distributors against any expense (including overdraft charges) incurred
by the applicable Fund and/or AIM Distributors as a result of the
failure to receive such federal funds.
4. We agree to make available upon AIM Distributors's request, such
information relating to our clients who are beneficial owners of Fund
shares and their transactions in such shares as may be required by
applicable laws and regulations or as may be reasonably requested by AIM
Distributors.
5. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record
ownership will be promptly transferred to the client in the event that
the person or entity ceases to be our client.
6. Neither we nor any of our employees or agents are authorized to make any
representation to our clients concerning the Funds except those
contained in the then current prospectuses applicable to the Funds,
copies of which will be supplied to us by AIM Distributors; and we shall
have no authority to act as agent for any Fund or AIM Distributors.
Neither a Fund, nor A I M Advisors, Inc. ("AIM") will be a party, nor
will they be represented as a party, to any agreement that we may enter
into with our clients and neither a Fund nor AIM shall participate,
directly or indirectly, in any compensation that we may receive from our
clients in connection with our acting on their behalf with respect to
this Agreement.
7. In consideration of the services and facilities described herein, we
shall receive a maximum annual service fee and asset-based sales charge,
payable monthly, as set forth on Schedule A hereto. We understand that
this Agreement and the payment of such service fees and asset-based
sales charge has been authorized and approved by the Board of Directors
or Trustees of the applicable Fund, and that the payment of fees
thereunder is subject to limitations imposed by the rules of the NASD.
8. AIM Distributors reserves the right, in its discretion and without
notice, to suspend the sale of any Fund or withdraw the sale of shares
of a Fund, or upon notice to us, to amend this Agreement. We agree that
any order to purchase shares of the Funds placed by us after notice of
any amendment to this Agreement has been sent to us shall constitute our
agreement to any such amendment.
9. All communications to AIM Distributors shall be duly given if mailed to
A I M Distributors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173. Any notice to us shall be duly given if mailed to us at the
address specified by us in this
<PAGE> 3
Shareholder Service Agreement Page 3
(Brokers for Bank Trust Departments)
Agreement or to such other address as we shall have designated in
writing to AIM Distributors.
10. This Agreement may be terminated at any time by AIM Distributors on not
less than 60 days' written notice to us at our principal place of
business. We, on 60 days' written notice addressed to AIM Distributors
at its principal place of business, may terminate this Agreement. AIM
Distributors may also terminate this Agreement for cause on violation
by us of any of the provisions of this Agreement, said termination to
become effective on the date of mailing notice to us of such
termination. AIM Distributors's failure to terminate for any cause
shall not constitute a waiver of AIM Distributors's right to terminate
at a later date for any such cause. This Agreement may be terminated
with respect to any Fund at any time by the vote of a majority of the
directors or trustees of such Fund who are disinterested directors or by
a vote of a majority of the Fund's outstanding shares, on not less than
60 days' written notice to us at our principal place of business. This
Agreement will be terminated by any act which terminates the Selected
Dealer Agreement between us and AIM Distributors or a Fund's
Distribution Plan, and in any event, shall terminate automatically in
the event of its assignment by us, the term "assignment" for this
purpose having the meaning defined in Section 2(a)(4) of the 1940 Act.
11. We represent that our activities on behalf of our clients and pursuant
to this Agreement either (i) are not such as to require our registration
as a broker-dealer in the state(s) in which we engage in such
activities, or (ii) we are registered as a broker-dealer in the state(s)
in which we engage in such activities. We represent that we are
registered as a broker-dealer with the NASD if required under applicable
law.
12. This Agreement and all rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of Texas.
This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which shall constitute the same
instrument. This Agreement shall not relieve us or AIM Distributors
from any obligations either may have under any other agreements between
us.
13. This Agreement shall become effective as of the date when it is executed
and dated by AIM Distributors.
<PAGE> 4
Shareholder Service Agreement Page 4
(Brokers for Bank Trust Departments)
The undersigned agrees to abide by the foregoing terms and conditions.
------------------------------------
(Firm Name)
------------------------------------
(Address)
------------------------------------
City/State/Zip/County
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Dated:
-----------------------------
ACCEPTED:
A I M DISTRIBUTORS, INC.
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
Dated:
---------------------------
Please sign both copies and return to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
<PAGE> 5
Shareholder Service Agreement Page 5
(Brokers for Bank Trust Departments)
SCHEDULE A
<TABLE>
<CAPTION>
Funds Fees
----- ----
<S> <C>
AIM Advisor Funds, Inc.
AIM Advisor Flex Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Equity Funds, Inc.
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund (Retail Class)
AIM Constellation Fund (Retail Class)
AIM Weingarten Fund (Retail Class)
*AIM Aggressive Growth Fund
AIM Funds Group
AIM Balanced Fund
AIM Global Utilities Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Select Growth Fund
AIM Value Fund
AIM International Funds, Inc.
AIM Asian Growth Fund
AIM European Development Fund
AIM International Equity Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Global Income Fund
AIM Investment Securities Funds
AIM Limited Maturity Treasury Fund
AIM Special Opportunities Funds
AIM Small Cap Opportunities Fund
AIM Tax-Exempt Funds, Inc.
AIM High Income Municipal Fund
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
</TABLE>
__________________________________
* Shares of AIM Aggressive Growth Fund may only be sold to current
shareholders who maintain open accounts in AIM Aggressive Growth Fund.
<PAGE> 6
Shareholder Service Agreement Page 6
(Brokers for Bank Trust Departments)
THE FOLLOWING FUNDS ARE ADDED AS OF THE CLOSE OF BUSINESS MAY 29, 1998:
<TABLE>
<CAPTION>
Funds Fees
----- ----
<S> <C>
AIM Basic Value Fund
AIM Developing Markets Fund
AIM Dollar Fund
AIM Emerging Markets Fund
AIM Emerging Markets Debt Fund
AIM Europe Growth Fund
AIM Global Consumer Products and Services Fund
AIM Global Financial Services Fund
AIM Global Government Income Fund
AIM Global Growth and Income Fund
AIM Global Health Care Fund
AIM Global Infrastructure Fund
AIM Global Resources Fund
AIM Global Telecommunications Fund
AIM Global Trends Fund
AIM International Growth Fund
AIM Japan Growth Fund
AIM Latin American Growth Fund
AIM Mid Cap Equity Fund
AIM New Pacific Growth Fund
AIM Small Cap Growth Fund
AIM Strategic Income Fund
AIM Worldwide Growth Fund
</TABLE>
<PAGE> 7
A I M DISTRIBUTORS, INC.
[AIM Logo] SHAREHOLDER SERVICE AGREEMENT
(BANK TRUST DEPARTMENTS)
A I M Distributors, Inc.
_________________________, 19_____
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with A I M Distributors, Inc. ("AIM
Distributors") as agent on behalf of the funds listed on Schedule A hereto (the
"Funds"), for the servicing of our clients who are shareholders of, and the
administration of accounts in, the Funds. We understand that this Shareholder
Service Agreement (the "Agreement") has been adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act") by each of the Funds,
under a Distribution Plan (the "Plan") adopted pursuant to said Rule, and is
subject to applicable rules of the National Association of Securities Dealers,
Inc. ("NASD"). This Agreement defines the services to be provided by us for
which we are to receive payments pursuant to the Plan. The Plan and the
Agreement have been approved by a majority of the directors or trustees of the
applicable Fund, including a majority of directors or trustees who are not
interested persons of the applicable Fund, and who have no direct or indirect
financial interest in the operation of the Plan or related agreements, by votes
cast in person at a meeting called for the purpose of voting on the Plan. Such
approval included a determination by the directors or trustees of the
applicable Fund, in the exercise of their reasonable business judgement and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Plan will benefit the Fund and the holders of its Shares. The terms and
conditions of this Agreement shall be as follows:
1. To the extent that we provide continuing personal shareholder services
and administrative support services to our customers who may from time
to time own shares of the Funds of record or beneficially, including but
not limited to, forwarding sales literature, answering routine customer
inquiries regarding the Funds, assisting customers in changing dividend
options, account designations and addresses, and in enrolling into any
of several special investment plans offered in connection with the
purchase of the Funds' shares, assisting in the establishment and
maintenance of customer accounts and records and in the processing of
purchase and redemption transactions, investing dividends and capital
gains distributions automatically in shares of the Funds and providing
such other services as AIM Distributors or the customer may reasonably
request, you shall pay us a fee periodically. We represent that we
shall accept fees hereunder only so long as we continue to provide such
personal shareholder services.
2. We agree to transmit to AIM Distributors in a timely manner, all
purchase orders and redemption requests of our clients and to forward to
each client all proxy statements, periodic shareholder reports and other
communications received from AIM Distributors by us relating
<PAGE> 8
Shareholder Service Agreement Page 2
(Bank Trust Departments)
to shares of the Funds owned by our clients. AIM Distributors, on
behalf of the Funds, agrees to pay all out-of-pocket expenses actually
incurred by us in connection with the transfer by us of such proxy
statements and reports to our clients as required under applicable laws
or regulations.
3. We agree to make available upon AIM Distributors's request, such
information relating to our clients who are beneficial owners of Fund
shares and their transactions in such shares as may be required by
applicable laws and regulations or as may be reasonably requested by AIM
Distributors.
4. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record
ownership will be promptly transferred to the client in the event that
the person or entity ceases to be our client.
5. Neither we nor any of our employees or agents are authorized to make any
representation to our clients concerning the Funds except those
contained in the then current prospectuses applicable to the Funds,
copies of which will be supplied to us by AIM Distributors; and we shall
have no authority to act as agent for any Fund or AIM Distributors.
Neither a Fund, nor A I M Advisors, Inc. ("AIM") will be a party, nor
will they be represented as a party, to any agreement that we may enter
into with our clients and neither a Fund nor AIM shall participate,
directly or indirectly, in any compensation that we may receive from our
clients in connection with our acting on their behalf with respect to
this Agreement.
6. In consideration of the services and facilities described herein, we
shall receive a maximum annual service fee and asset-based sales charge,
payable monthly, as set forth on Schedule A hereto. We understand that
this Agreement and the payment of such service fees and asset-based
sales charge has been authorized and approved by the Board of Directors
or Trustees of the applicable Fund, and that the payment of fees
thereunder is subject to limitations imposed by the rules of the NASD.
7. AIM Distributors reserves the right, in its discretion and without
notice, to suspend the sale of any Fund or withdraw the sale of shares
of a Fund, or upon notice to us, to amend this Agreement. We agree that
any order to purchase shares of the Funds placed by us after notice of
any amendment to this Agreement has been sent to us shall constitute our
agreement to any such amendment.
8. All communications to AIM Distributors shall be duly given if mailed to
A I M Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173. Any notice to us shall be duly given if mailed to us at the
address specified by us in this Agreement or to such other address as we
shall have designated in writing to AIM Distributors.
9. This Agreement may be terminated at any time by AIM Distributors on not
less than 60 days' written notice to us at our principal place of
business. We, on 60 days' written notice addressed to AIM Distributors
at its principal place of business, may terminate this Agreement. AIM
Distributors may also terminate this Agreement for cause on violation by
us of any of the provisions of this Agreement, said termination to
become effective on the date of mailing notice to us of such
termination. AIM Distributors's failure to terminate for any cause
shall not constitute a waiver of AIM Distributors's right to terminate
at a later date for
<PAGE> 9
Shareholder Service Agreement Page 3
(Bank Trust Departments)
any such cause. This Agreement may be terminated with respect to any
Fund at any time by the vote of a majority of the directors or trustees
of such Fund who are disinterested directors or by a vote of a majority
of the Fund's outstanding shares, on not less than 60 days' written
notice to us at our principal place of business. This Agreement will be
terminated by any act which terminates the Agreement for Purchase of
Shares of The AIM Family of Funds(R) between us and AIM Distributors or
a Fund's Distribution Plan, and in any event, it shall terminate
automatically in the event of its assignment by us, the term
"assignment" for this purpose having the meaning defined in Section
2(a)(4) of the 1940 Act.
10. We represent that our activities on behalf of our clients and pursuant
to this Agreement either (i) are not such as to require our registration
as a broker-dealer in the state(s) in which we engage in such
activities, or (ii) we are registered as a broker-dealer in the state(s)
in which we engage in such activities. We represent that we are
registered as a broker-dealer with the NASD if required under applicable
law.
11. This Agreement and the Agreement for Purchase of Shares of The AIM
Family of Funds(R) through Bank Trust Departments constitute the entire
agreement between us and AIM Distributors and supersede all prior oral
or written agreements between the parties hereto. This Agreement may be
executed in counterparts, each of which shall be deemed an original but
all of which shall constitute the same instrument.
12. This Agreement and all rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of Texas.
13. This Agreement shall become effective as of the date when it is executed
and dated by AIM Distributors.
<PAGE> 10
Shareholder Service Agreement Page 4
(Bank Trust Departments)
The undersigned agrees to abide by the foregoing terms and conditions.
-----------------------------------
(Firm Name)
-----------------------------------
(Address)
-----------------------------------
City/State/Zip/County
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
Dated:
----------------------------
ACCEPTED:
A I M DISTRIBUTORS, INC.
By:
------------------------
Name:
------------------------
Title:
------------------------
Dated:
------------------------
Please sign both copies and return to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
<PAGE> 11
Shareholder Service Agreement Page 5
(Bank Trust Departments)
SCHEDULE A
<TABLE>
<CAPTION>
Funds Fees
----- ----
<S> <C>
AIM Advisor Funds, Inc.
AIM Advisor Flex Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Equity Funds, Inc.
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund (Retail Class)
AIM Constellation Fund (Retail Class)
AIM Weingarten Fund (Retail Class)
AIM Aggressive Growth Fund *
AIM Funds Group
AIM Balanced Fund
AIM Global Utilities Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Select Growth Fund
AIM Value Fund
AIM International Funds, Inc.
AIM Asian Growth Fund
AIM European Development Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Global Income Fund
AIM International Equity Fund
AIM Investment Securities Funds
AIM Limited Maturity Treasury Fund
AIM Special Opportunities Funds
AIM Small Cap Opportunities Fund
AIM Tax-Exempt Funds, Inc.
AIM High Income Municipal Fund
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
</TABLE>
__________________________________
* Shares of AIM Aggressive Growth Fund may only be sold to current
shareholders who maintain open accounts in AIM Aggressive Growth Fund.
<PAGE> 12
Shareholder Service Agreement Page 6
(Bank Trust Departments)
THE FOLLOWING FUNDS ARE ADDED AS OF THE CLOSE OF BUSINESS MAY 29, 1998:
<TABLE>
<CAPTION>
Funds Fees
----- ----
<S> <C>
AIM Basic Value Fund
AIM Developing Markets Fund
AIM Dollar Fund
AIM Emerging Markets Fund
AIM Emerging Markets Debt Fund
AIM Europe Growth Fund
AIM Global Consumer Products and Services Fund
AIM Global Financial Services Fund
AIM Global Government Income Fund
AIM Global Growth and Income Fund
AIM Global Health Care Fund
AIM Global Infrastructure Fund
AIM Global Resources Fund
AIM Global Telecommunications Fund
AIM Global Trends Fund
AIM International Growth Fund
AIM Japan Growth Fund
AIM Latin American Growth Fund
AIM Mid Cap Equity Fund
AIM New Pacific Growth Fund
AIM Small Cap Growth Fund
AIM Strategic Income Fund
AIM Worldwide Growth Fund
</TABLE>
<PAGE> 1
EXHIBIT 11(a)
[PRICEWATERHOUSECOOPERS LLP LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of AIM Series Trust (formerly, GT Global Series
Trust):
We hereby consent to the inclusion of our report dated February 17, 1998
on our audit of the financial statements and financial highlights of AIM Global
Trends Fund (formerly, GT Global New Dimension Fund) as of December 31, 1997 in
the Statement of Additional Information with respect to the Post-Effective
Amendment to the Registration Statement on Form N-1A under the Securities Act
of 1933, as amended, of AIM Series Trust. We further consent to the reference
to our Firm under the caption "Financial Highlights" in the Prospectus and
"Independent Accountants" in the Statement of Additional Information.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 25, 1998
<PAGE> 1
EXHIBIT 11(b)
August 24, 1998
AIM Series Trust
50 California Street, 27th Floor
San Francisco, California 94111
Ladies and Gentlemen:
We hereby consent to the reference to our firm in the prospectuses
that are being filed as part of Post-Effective Amendment No. 6 to the
registration statement of AIM Series Trust on Form N-1A (File No. 333-30551).
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ R. DARRELL MOUNTS
R. Darrell Mounts
<PAGE> 1
EXHIBIT 18
MULTIPLE CLASS PLAN
OF
AIM INVESTMENT FUNDS
AIM INVESTMENT PORTFOLIOS
AIM GROWTH SERIES
AIM SERIES TRUST
1. This Multiple Class Plan ("Plan") adopted in accordance with Rule 18f-3
under the Act shall govern the terms and conditions under which the Funds
may issue separate Classes of Shares representing interests in one or more
Portfolios of each Fund.
2. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
a. Act - Investment Company Act of 1940, as amended.
b. Advisor Class Shares - shall mean those Shares of a Fund designated as
Advisor Class Shares in the Fund's organizing documents.
c. CDSC - contingent deferred sales charge.
d. CDSC Period - the period of years following acquisition of Shares during
which such Shares may be assessed a CDSC upon redemption.
e. Class - a class of Shares of a Fund representing an interest in a
Portfolio.
f. Class A Shares - shall mean those Shares designated as Class A Shares in
the Fund's organizing documents, as well as those Shares deemed to be
Class A Shares for purposes of this Plan.
g. Class B Shares - shall mean those Shares designated as Class B Shares in
the Fund's organizing documents.
h. Class C Shares - shall mean those Shares designated as Class C Shares in
the Fund's organizing documents, as well as those Shares deemed to be
Class C Shares for purposes of this Plan. Class C Shares may not be
available for each Fund.
i. Directors - the directors or trustees of a Fund.
j. Distribution Expenses - expenses incurred in activities which are
primarily intended to result in the distribution and sale of Shares as
defined in a Plan of Distribution and/or agreements relating thereto.
<PAGE> 2
k. Distribution Fee - a fee paid by a Fund to the Distributor to compensate
the Distributor for Distribution Expenses.
l. Distributor - A I M Distributors, Inc. or Fund Management Company, as
applicable.
m. Fund - each of AIM Investment Funds, AIM Investment Portfolios, AIM
Growth Series, and AIM Series Trust.
n. Plan of Distribution - any plan adopted under Rule 12b-1 under the Act
with respect to payment of a Distribution Fee.
o. Portfolio - a series of the Shares of a Fund constituting a separate
investment portfolio of the Fund.
p. Service Fee - a fee paid to financial intermediaries for the ongoing
provision of personal services to Fund shareholders and/or the
maintenance of shareholder accounts.
q. Share - a share of common stock or of beneficial interest in a Fund, as
applicable.
3. Allocation of Income and Expenses.
a. Distribution and Service Fees - Each Class shall bear directly any and
all Distribution Fees and/or Service Fees payable by such Class pursuant
to a Plan of Distribution adopted by the Fund with respect to such Class.
b. Allocation of Other Expenses - Each Class shall bear proportionately all
other expenses incurred by a Fund based on the relative net assets
attributable to each such Class.
c. Allocation of Income, Gains, and Losses - Except to the extent provided
in the following sentence, each Portfolio will allocate income and
realized and unrealized capital gains and losses to a Class based on the
relative net assets of each Class. Notwithstanding the foregoing, each
Portfolio that declares dividends on a daily basis will allocate income
on the basis of settled shares.
d. Waiver and Reimbursement of Expenses - A Portfolio's adviser,
underwriter, or any other provider of services to the Portfolio may
waive or reimburse the expenses of a particular Class or Classes.
4. Distribution and Servicing Arrangements. The distribution and servicing
arrangements identified below will apply for the following Classes offered
by a Fund with respect to a Portfolio. The provisions of the Fund's
prospectus describing the distribution and servicing arrangements in detail
are incorporated herein by this reference.
a. Class A Shares. Class A Shares shall be offered at net asset value plus a
front-end sales charge as approved from time to time by the Directors and
set forth in the Fund's
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<PAGE> 3
prospectus, which may be reduced or eliminated for certain money market
fund shares, for larger purchases, under a combined purchase privilege,
under a right of accumulation, under a letter of intent or for certain
categories of purchasers as permitted by Rule 22(d) of the Act and as set
forth in the Fund's prospectus. Class A Shares that are not subject to a
front-end sales charge as a result of the foregoing shall be subject to a
CDSC for the CDSC Period set forth in Section 5(a) of this Plan if so
provided in the Fund's prospectus. The offering price of Shares subject
to a front-end sales charge shall be computed in accordance with Rule
22c-1 and Section 22(d) of the Act and the rules and regulations
thereunder. Class A Shares shall be subject to ongoing Service Fees
and/or Distribution Fees approved from time to time by the Directors and
set forth in the Fund's prospectus.
b. Class B Shares. Class B Shares shall be (i) offered at net asset value,
(ii) subject to a CDSC for the CDSC Period set forth in Section 5(b),
(iii) subject to ongoing Service Fees and Distribution Fees approved from
time to time by the Directors and set forth in the Fund's prospectus, and
(iv) to the extent provided for in the Fund's prospectus, converted to
Class A Shares eight years from the end of the calendar month in which
the shareholder's order to purchase was accepted as set forth in the
Fund's prospectus, except that Class B Shares of AIM Series Trust which
were acquired prior to June 1, 1998 shall convert to Class A Shares as of
the close of business on the last business day of the month in which the
seventh anniversary of the initial issuance of such Class B Shares
occurs.
c. Class C Shares. Class C Shares shall be (i) offered at net asset value,
(ii) subject to a CDSC for the CDSC Period set forth in Section 5(c), and
(iii) subject to ongoing service Fees and Distribution Fees approved from
time to time by the Directors and set forth in the Fund's prospectus.
d. Advisor Class Shares. Advisor Class Shares shall be (i) offered at net
asset value and (ii) offered only to certain categories of investors as
approved from time to time by the Trustees and as set forth in the Fund's
prospectus.
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares that do not
incur a front-end sales charge and of Class B Shares and Class C Shares as
follows:
a. Class A Shares. The CDSC Period for Class A Shares shall be the period
set forth in the Fund's prospectus. The CDSC Rate shall be as set forth
in the Fund's prospectus, the relevant portions of which are incorporated
herein by this reference. No CDSC shall be imposed on Class A Shares
unless so provided in a Fund's prospectus.
b. Class B Shares. The CDSC Period for the Class B Shares shall be six
years. The CDSC Rate for the Class B Shares shall be as set forth in the
Fund's prospectus, the relevant portions of which are incorporated herein
by this reference.
3
<PAGE> 4
c. Class C Shares. The CDSC Period for the Class C Shares shall be one year.
The CDSC Rate for the Class C Shares shall be as set forth in the Fund's
prospectus, the relevant portions of which are incorporated herein by
reference.
d. Method of Calculation. The CDSC shall be assessed on an amount equal to
the lesser of the then current market value or the cost of the Shares
being redeemed. No CDSC shall be imposed on increases in the net asset
value of the Shares being redeemed above the initial purchase price. No
CDSC shall be assessed on Shares derived from reinvestment of dividends
or capital gains distributions. The order in which Shares are to be
redeemed when not all of such Shares would be subject to a CDSC shall be
determined by the Distributor in accordance with the provisions of Rule
6c-10 under the Act.
e. Waiver. The Distributor may in its discretion waive a CDSC otherwise due
upon the redemption of Shares and disclosed in the Fund's prospectus or
statement of additional information and, for the Class A Shares, as
allowed under Rule 6c-10 under the Act.
6. Exchange Privileges. Exchanges of Shares shall be permitted as follows:
a. Class A Shares may be exchanged for Class A Shares of such other mutual
funds as are disclosed in the Fund's prospectus, subject to such terms
and limitations as disclosed in the Fund's prospectus and statement of
additional information.
b. Class B Shares may be exchanged for Class B Shares of such other mutual
funds as are disclosed in the Fund's prospectus, subject to such terms
and limitations as disclosed in the Fund's prospectus and statement of
additional information.
c. Class C Shares may be exchanged for Class C Shares of such other mutual
funds as are disclosed in the Fund's prospectus, subject to such terms
and limitations as disclosed in the Fund's prospectus and statement of
additional information.
d. Advisor Class Shares may be exchanged for Advisor Class Shares of such
other mutual funds as are disclosed in the Fund's prospectus, subject to
such terms and limitations as disclosed in the Fund's prospectus and
statement of additional information.
e. Depending upon the Portfolio from which and into which an exchange is
being made and when the shares were purchased, shares being acquired in
an exchange may be acquired at their offering price, at their net asset
value or by paying the difference in sales charges, as disclosed in the
Fund's prospectus and statement of additional information.
f. CDSC Computation. The CDSC payable upon redemption of Class A Shares,
Class B Shares, and Class C Shares subject to a CDSC shall be computed in
the manner described in the Fund's prospectus.
7. Service and Distribution Fees. The Service Fee and Distribution Fee
applicable to any Class shall be those set forth in the Fund's prospectus,
relevant portions of which are incorporated
4
<PAGE> 5
herein by this reference. All other terms and conditions with respect to
Service Fees and Distribution Fees shall be governed by the Plan of
Distribution adopted by the Fund with respect to such fees and Rule 12b-1
under the Act.
8. Conversion of Class B Shares.
a. Shares Received upon Reinvestment of Dividends and Distributions - Shares
purchased through the reinvestment of dividends and distributions paid on
Shares subject to conversion shall be treated as if held in a separate
sub-account. Each time any Shares in a shareholder's account (other than
Shares held in the sub-account) convert to Class A Shares, a
proportionate number of Shares held in the sub-account shall also convert
to Class A Shares.
b. Conversions on Basis of Relative Net Asset Value - All conversions shall
be effected on the basis of the relative net asset values of the two
Classes without the imposition of any sales load or other charge.
c. Amendments to Plan of Distribution for Class A Shares - If any amendment
is proposed to the Plan of Distribution under which Service Fees and
Distribution Fees are paid with respect to Class A Shares of a Fund that
would increase materially the amount to be borne by those Class A Shares,
then no Class B Shares shall convert into Class A Shares of that Fund
until the holders of Class B Shares of that Fund have also approved the
proposed amendment. If the holders of such Class B Shares do not approve
the proposed amendment, the Directors of the Fund and the Distributor
shall take such action as is necessary to ensure that the Class voting
against the amendment shall convert into another Class identical in all
material respects to Class A Shares of the Fund as constituted prior to
the amendment.
9. This Plan shall not take effect until a majority of the Directors of a Fund,
including a majority of the Directors who are not interested persons of the
Fund, shall find that the Plan, as proposed and including the expense
allocations, is in the best interests of each Class individually and the
Fund as a whole.
10. This Plan may not be amended to materially change the provisions of this
Plan unless such amendment is approved in the manner specified in Section 9
above.
5
