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[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.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<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
Introduction to The AIM Family of
Funds............................. A-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
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
Appendix............................. A-24
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
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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
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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.
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THE FUND
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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)
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<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.
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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.
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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>
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(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.
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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.
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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.
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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
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<PAGE> 8
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.
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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
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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.
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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 "EMU"). The EMU 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 that is a
member of the European Union and satisfies the criteria for participation in the
EMU, may elect to participate in the EMU and may supplement its existing
currency with the euro 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-
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<PAGE> 11
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
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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.
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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 also serves as the Fund's pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, G.T. Global
Variable Investment Series and G.T. Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets.
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),
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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, 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 share-
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holders, 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 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
14
<PAGE> 15
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.
15
<PAGE> 16
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 EQUITY FUND
AIM EMERGING MARKETS FUND AIM MONEY MARKET FUND(*)
AIM EMERGING MARKETS 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 GROWTH 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> 17
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> 18
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> 19
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> 20
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."
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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.
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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.
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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
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<PAGE> 24
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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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-
A-10
<PAGE> 26
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> 27
- --------------------------------------------------------------------------------
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>
A-12
<PAGE> 28
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> 29
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> 30
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> 31
(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.
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<PAGE> 32
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> 33
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> 34
- --------------------------------------------------------------------------------
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 monthly 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> 35
<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> 36
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.
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<PAGE> 37
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> 38
- --------------------------------------------------------------------------------
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> 39
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>
A-24
<PAGE> 40
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>
<S> <C> <C> <C>
</TABLE>
<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> 41
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> 42
[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> 43
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> 44
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> 45
<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> 46
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.
4
<PAGE> 47
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 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 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") (Austria,
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
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
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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 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
24
<PAGE> 67
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
(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> 68
(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> 69
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> 70
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> 71
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> 72
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> 73
<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> 74
<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. 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.
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> 75
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> 76
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> 77
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> 78
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> 79
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> 80
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.
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
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<PAGE> 81
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.
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.
39
<PAGE> 82
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. 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.
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.
40
<PAGE> 83
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
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:
(n)
P(1+T) =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>
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:
(n)
P(1+U) =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:
(n)
P(1+V) =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>
41
<PAGE> 84
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
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
42
<PAGE> 85
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.
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
43
<PAGE> 86
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.
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
44
<PAGE> 87
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
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
45
<PAGE> 88
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> 89
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> 90
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> 91
FINANCIAL STATEMENTS
FS
<PAGE> 92
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> <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> 93
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> 94
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> 95
AIM NEW DIMENSION FUND
(FORMERLY GT GLOBAL NEW DIMENSION FUND)
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 15,
1997
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED TO
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
-------------- ---------------
<S> <C> <C>
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> 96
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> 97
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> 98
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> 99
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> 100
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> 101
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> 102
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> 103
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> 104
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> 105
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> 106
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> 107
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> 108
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> 109
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
