<PAGE> 1
As filed with the Securities and Exchange Commission on April 6, 1999
1933 Act Registration No. 333-30551
1940 Act Registration No. 811-7787
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No.
---- ---
Post-Effective Amendment No. 8 X
--- ---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 9 X
--- ---
(Check appropriate box or boxes.)
AIM SERIES TRUST
--------------------------------------------------
(Exact name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (713) 626-1919
---------------
Copy to:
Lisa A. Moss, Esq. Arthur J. Brown, Esq.
A I M Advisors, Inc. R. Darrell Mounts, Esq.
11 Greenway Plaza, Suite 100 Kirkpatrick & Lockhart LLP
Houston, Texas 77046 1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this
Amendment
It is proposed that this filing will become effective (check appropriate box):
___ immediately upon filing pursuant to paragraph (b)
_X_ on May 3, 1999 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on (date) pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on (date) pursuant to paragraph (a)(2)
If appropriate, check the following box:
___ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest
<PAGE> 2
AIM GLOBAL TRENDS FUND
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
AIM Global Trends Fund seeks to provide long-term growth of capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE--Registered Trademark--
<PAGE> 3
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 3
- - - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 4
Performance Table 4
FEE TABLE AND EXPENSE EXAMPLE 5
- - - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 5
Expense Example 5
FUND MANAGEMENT 7
- - - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 7
Advisor Compensation 7
Portfolio Managers 7
OTHER INFORMATION 7
- - - - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 7
Dividends and Distributions 7
FINANCIAL HIGHLIGHTS 8
- - - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-4
Redeeming Shares A-5
Exchanging Shares A-7
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - - - -
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 4
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AIM GLOBAL TRENDS FUND
------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
THE FUND
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing, normally, substantially
all of its assets in the following "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.
The advisor allocates the fund's assets among the theme funds according to the
industry weighting of the companies composing the Morgan Stanley Capital
International (MSCI) All Country World Index, which is a broad unmanaged index
of global stock prices in 38 industry sectors. After assessing which theme funds
can invest, as part of their primary focus, in each of these industries, the
advisor invests the fund's assets in the theme funds based upon the percentage
weight assigned to each industry. Because this weighting changes over time, the
advisor rebalances the fund's assets at least semi-annually. In addition, the
advisor invests money in, and satisfies redemption requests by redeeming shares
of, each theme fund according to the MSCI weighting as of the last business day
of the preceding month.
As of April 1, 1999, the fund's assets were allocated as follows:
Consumer Products and Services Fund 31.25%
Financial Services Fund 20.06%
Health Care Fund 11.09%
Infrastructure Fund 15.91%
Resources Fund 9.70%
Telecommunications Fund 12.00%
For cash management purposes, the fund may hold all or a portion of its assets
in cash or money market or instruments. As a result, the fund may not achieve
its investment objective.
If the fund's Board of Trustees determines that it is in the best interests of
the fund and its shareholders, the fund may redeem its investment in the theme
funds.
THE THEME FUNDS
The investment objective of each theme fund is long-term growth of capital.
The theme fund considers a company to be in a particular industry if it (1)
derives at least 50% of either its revenues or earnings from activities related
to that industry; or (2) devotes at least 50% of its assets to such activities,
based on the company's most recent fiscal year.
AIM Global Consumer Products and Services Fund invests all of its investable
assets in the Global Consumer Products and Services Portfolio, which in turn
normally invests at least 65% of its total assets in equity securities of
domestic and foreign consumer products and services companies, which include
companies that manufacture, market, retail, or distribute consumer products and
goods and services related to entertainment, publishing, sports, and media, or
that supply goods and services to such companies.
AIM Global Resources Fund invests all of its investable assets in the Global
Resources Portfolio, which in turn normally invests at least 65% of its total
assets in equity securities of domestic and foreign natural resource companies,
which include companies that own, explore, or develop natural resources and
other basic commodities (such as foodstuffs) or supply goods and services to
such companies.
AIM Global Infrastructure Fund invests all of its investable assets in the
Global Infrastructure Portfolio, which in turn normally invests at least 65% of
its total assets in equity securities of domestic and foreign infrastructure
companies, which include companies that design, develop, or provide products and
services significant to a country's infrastructure, such as transportation
systems, communications equipment and services, and energy sources.
AIM Global Financial Services Fund invests all of its investable assets in the
Global Financial Services Portfolio, which in turn normally invests at least 65%
of its total assets in common and preferred stocks, and equity securities of
domestic and foreign financial services companies, which include commercial
banks, insurance brokerages, securities brokerages, investment banks, leasing
companies, and real estate-related companies.
AIM Global Health Care Fund normally invests at least 65% of its total assets
in equity securities of domestic and foreign health care companies, which
include companies that design, manufacture, or sell products or services used
for or in connection with health care or medicine.
AIM Global Telecommunications Fund normally invests at least 65% of its total
assets in equity securities of domestic and foreign telecommunications
companies, which include companies that develop, manufacture, or sell
communications services and equipment, computer and electronic components and
equipment, mobile communications, and broadcasting.
Starting June 1, 1999, the AIM Global Telecommunications Fund's name will be
changed to "AIM Global Telecommunications and Technology Fund" to reflect better
its principal strategies. The fund seeks to meet its objective by investing at
least 65% of its total assets in equity securities of domestic and foreign
telecommunications and technology companies. Such companies include those that
develop, manufacture, or sell computer and electronic components and equipment,
software, semiconductors, Internet technology, communications services and
equipment, mobile communications and broadcasting.
The remainder of each theme fund's assets may be invested in debt securities
issued by companies in the theme fund's respective industry and/or equity and
debt securities of companies outside of the industry that the theme fund's
portfolio managers believe stand to benefit from developments in that industry.
1
<PAGE> 5
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AIM GLOBAL TRENDS FUND
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INVESTMENT OBJECTIVE AND STRATEGIES (continued)
- --------------------------------------------------------------------------------
In anticipation of or in response to adverse market conditions or for cash
management purposes, a theme fund may hold all or a portion of its assets in
cash (U.S. dollars, foreign currency or multinational currency units), money
market instruments, or high-quality debt securities. As a result, the theme fund
may not achieve its investment objective.
Each theme fund may engage in active and frequent trading of portfolio
securities to achieve its investment objective. If a theme fund or portfolio
does trade in this way, it may incur increased transaction costs and brokerage
commissions, both of which can lower the actual return on your investment.
Active trading may also increase short-term capital gains and losses, which may
affect the taxes you have to pay.
If a theme fund's Board of Trustees determines that it is in the best
interests of the fund and its shareholders, that theme fund may redeem its
investment in its portfolio.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the theme funds invest. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
Because each theme fund focuses its investments in a particular industry, an
investment in a theme fund 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 theme fund will be especially susceptible to factors
affecting the industry 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 that industry.
Foreign securities may be further affected by other factors, including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or tax policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers of securities in which the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 6
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AIM GLOBAL TRENDS FUND
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PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
ANNUAL
YEAR TOTAL
ENDED RETURNS
- ----- -------
12/31/98 9.37%
During the period shown in the bar chart, the highest quarterly return was
19.49% (quarter ended December 31, 1998) and the lowest quarterly return was
- -17.89% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR INCEPTION DATE
- ------------------------------------------------------------------------------
Class A 4.18% 1.07% 09/15/97
Class B 3.83 1.35 09/15/97
Class C -- 7.94 01/02/98
MSCI All Country World Index(1) 19.69 17.16(2) 08/31/97(2)
- -------------------------------------------------------------------------------
(1) The MSCI All Country World Index measures the performance of securities
listed on the major world stock exchanges of 47 markets, including both
developed and emerging markets.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
<PAGE> 7
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AIM GLOBAL TRENDS FUND
----------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees None None None
Distribution and/or
Service (12b-1) Fees 0.50% 1.00% 1.00%
Other Expenses(2) None None None
Total Annual Fund Operating
Expenses 0.50 1.00 1.00
- -------------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) "Other Expenses," including transfer agency, legal and audit fees, and other
operating expenses, are borne by the fund's advisor.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more
than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $664 $1,058 $1,477 $2,642
Class B 748 1,064 1,506 2,663
Class C 348 764 1,306 2,786
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $664 $1,058 $1,477 $2,642
Class B 248 764 1,306 2,663
Class C 248 764 1,306 2,786
- ----------------------------------------------
</TABLE>
In addition to the annual fund operating expenses shown above, the fund, as a
shareholder in the theme funds, indirectly bears its pro rata share of the fees
and expenses incurred by those funds. As a result, the investment returns of the
fund reflect the expenses of the theme funds in which it holds shares. Because
the fund invests only in Advisor Class shares of the 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 theme funds for their fiscal years ended October 31, 1998.
<TABLE>
<CAPTION>
<S> <C>
- - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
EXPENSE RATIO
OF ADVISOR
THEME FUND CLASS SHARES(1)
- -------------------------------------------------
<S> <C>
Consumer Products and Services
Fund 1.45%
Financial Services Fund 1.49%
Health Care Fund 1.34%
Infrastructure Fund 1.50%
Resources Fund 1.50%
Telecommunications Fund 1.38%
- -------------------------------------------------
</TABLE>
(1) The theme funds' advisor has contractually agreed to limit each theme fund's
net expenses.
4
<PAGE> 8
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AIM GLOBAL TRENDS FUND
----------------------
FEE TABLE AND EXPENSE EXAMPLE (continued)
- --------------------------------------------------------------------------------
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 theme funds in which the fund was invested as of October 31, 1998, plus
the fund's total operating expenses.(1)
<TABLE>
<CAPTION>
AIM GLOBAL TRENDS FUND (INCLUDING THE
FUND'S INDIRECT PRO RATA SHARE OF THE AGGREGATE
EXPENSES OF THE THEME FUNDS) EXPENSE RATIO
- -----------------------------------------------------
<S> <C>
Class A 1.95%
Class B 2.45%
Class C 2.45%
- -----------------------------------------------------
</TABLE>
(1) These percentages do not necessarily reflect the current allocation of the
fund's assets to the theme funds or the allocation of the fund's assets on
any other date.
5
<PAGE> 9
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AIM GLOBAL TRENDS FUND
----------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) is responsible for the day-to-day management
of AIM Global Trends Fund. The advisor is located at 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's
operations and ensures that the fund's assets are invested in the underlying
theme funds according to the formula and predetermined percentages described in
the "Investment Objective and Strategies" section of this prospectus.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
The advisor receives no compensation for the services it provides to the fund.
PORTFOLIO MANAGERS
The fund is not actively managed and does not have a portfolio manager. The
underlying theme funds are actively managed by teams of investment
professionals.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Global Trends Fund are subject to the maximum
4.75% initial sales charge as listed under the heading "CATEGORY II Initial
Sales Charges" in the "Shareholder Information--Choosing a Share Class" section
of this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
6
<PAGE> 10
----------------------
AIM GLOBAL TRENDS FUND
----------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
SEPTEMBER 15,
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1998(A) DECEMBER 31, 1997(A)
- -------------------------------------------------------------------------------------------------------------------------
<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 gain (loss) on
investments 1.01 (0.31)
------- -------
Net increase (decrease) from investment operations 0.99 (0.32)
------- -------
Distributions to shareholders:
From net investment income (0.02) --
From net realized gain on investments (0.14) --
In excess of net investment income -- (0.48)
------- -------
Total distributions (0.16) (0.48)
------- -------
Net asset value, end of period $ 11.46 $ 10.63
======= =======
Total investment return(b) 9.37% (2.68)%(c)
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
Net assets, end of period (in 000's) $17,822 $15,145
Ratio of net investment income (loss) to average net
assets (0.21)% (0.35)%(d)
Ratio of operating expenses to average net assets 0.50% 0.50%(d)
Portfolio turnover rate(e) 28% 1%(d)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Total investment return does not include sales charges.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover rates are calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
7
<PAGE> 11
----------------------
AIM GLOBAL TRENDS FUND
----------------------
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
SEPTEMBER 15,
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1998(A) DECEMBER 31, 1997(A)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.62 $ 11.43
------- -------
Income from investment operations:
Net investment income (loss) (0.07) (0.02)
Net realized and unrealized gain (loss) on
investments 1.00 (0.32)
------- -------
Net increase (decrease) from investment operations 0.93 (0.34)
------- -------
Distributions to shareholders:
From net investment income -- --
From net realized gain on investments (0.14) --
In excess of net investment income -- (0.47)
------- -------
Total distributions (0.14) (0.47)
------- -------
Net asset value, end of period $ 11.41 $ 10.62
======= =======
Total investment return(b) 8.83% (2.83)%(c)
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
Net assets, end of period (in 000's) $25,555 $19,184
Ratio of net investment income (loss) to average net
assets (0.71)% (0.85)%(d)
Ratio of operating expenses to average net assets 1.00% 1.00%(d)
Portfolio turnover rate(e) 28% 1%(d)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Total investment return does not include sales charges.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover rates are calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
8
<PAGE> 12
----------------------
AIM GLOBAL TRENDS FUND
----------------------
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C(A)
------------------------
YEAR ENDED
DECEMBER 31,
1998(B)
- --------------------------------------------------------------------------------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period $10.62
------
Income from investment operations:
Net investment income (loss) (0.08)
Net realized and unrealized gain (loss) on investments 1.00
------
Net increase (decrease) from investment operations 0.92
------
Distributions to shareholders:
From net investment income --
From net realized gain on investments (0.14)
In excess of net investment income --
------
Total distributions (0.14)
------
Net asset value, end of period $11.40
======
Total investment return(c) 8.94%
- --------------------------------------------------------------------------------------
Ratios and supplemental data:
Net assets, end of period (in 000's) $ 249
Ratio of net investment income (loss) to average net assets (0.71)%
Ratio of operating expenses to average net assets 1.00%
Portfolio turnover rate(d) 28%
- --------------------------------------------------------------------------------------
</TABLE>
(a) Commencing January 1, 1998, the fund began offering Class C shares.
(b) These selected per share data were calculated based upon average shares
outstanding during the period.
(c) Total investment return does not include sales charges.
(d) Portfolio turnover rates are calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
9
<PAGE> 13
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
<PAGE> 14
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 15
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 3 MCF--05/99
<PAGE> 16
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
<PAGE> 17
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A- 5 MCF--05/99
<PAGE> 18
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
<PAGE> 19
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 20
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 21
------------------------
AIM GLOBAL TRENDS FUND
------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite
100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, DC, 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Global Trends Fund
SEC 1940 Act file number: 811-7787
[AIM LOGO APPEARS HERE] www.aimfunds.com INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 22
AIM GLOBAL TRENDS FUND
------------------------------------------------------------------------
Advisor Class
AIM Global Trends Fund seeks to provide long-term growth of capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information. Please read it before
investing and keep it for future
reference.
The Advisor Class is closed to new
investors.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 23
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 3
- - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 4
Performance Table 4
FEE TABLE AND EXPENSE EXAMPLE 5
- - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 5
Expense Example 5
FUND MANAGEMENT 6
- - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 6
Advisor Compensation 6
Portfolio Managers 6
OTHER INFORMATION 6
- - - - - - - - - - - - - - - - - - - - - - - - - -
Dividends and Distributions 6
FINANCIAL HIGHLIGHTS 7
- - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - - -
Purchasing Shares A-4
Redeeming Shares A-5
Exchanging Shares A-7
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 24
----------------------
AIM GLOBAL TRENDS FUND
----------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
THE FUND
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing, normally, substantially
all of its assets in the following "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.
The advisor allocates the fund's assets among the theme funds according to the
industry weighting of the companies composing the Morgan Stanley Capital
International (MSCI) All Country World Index, which is a broad unmanaged index
of global stock prices in 38 industry sectors. After assessing which theme funds
can invest, as part of their primary focus, in each of these industries, the
advisor invests the fund's assets in the theme funds based upon the percentage
weight assigned to each industry. Because this weighting changes over time, the
advisor rebalances the fund's assets at least semi-annually. In addition, the
advisor invests money in, and satisfies redemption requests by redeeming shares
of, each theme fund according to the MSCI weighting as of the last business day
of the preceding month.
As of April 1, 1999, the fund's assets were allocated as follows:
<TABLE>
<S> <C>
Consumer Products and Services Fund 31.25%
Financial Services Fund 20.06%
Health Care Fund 11.09%
Infrastructure Fund 15.91%
Resources Fund 9.70%
Telecommunications Fund 12.00%
</TABLE>
For cash management purposes, the fund may hold all or a portion of its assets
in cash or money market instruments. As a result, the fund may not achieve its
investment objective.
If the fund's Board of Trustees determines that it is in the best interests of
the fund and its shareholders, the fund may redeem its investment in the theme
funds.
THE THEME FUNDS
The investment objective of each theme fund is long-term growth of capital.
The theme fund considers a company to be in a particular industry if it (1)
derives at least 50% of either its revenues or earnings from activities related
to that industry; or (2) devotes at least 50% of its assets to such activities,
based on the company's most recent fiscal year.
AIM Global Consumer Products and Services Fund invests all of its investable
assets in the Global Consumer Products and Services Portfolio, which in turn
normally invests at least 65% of its total assets in equity securities of
domestic and foreign consumer products and services companies, which include
companies that manufacture, market, retail, or distribute consumer products and
goods and services related to entertainment, publishing, sports, and media, or
that supply goods and services to such companies.
AIM Global Resources Fund invests all of its investable assets in the Global
Resources Portfolio, which in turn normally invests at least 65% of its total
assets in equity securities of domestic and foreign natural resource companies,
which include companies that own, explore, or develop natural resources and
other basic commodities (such as foodstuffs) or supply goods and services to
such companies.
AIM Global Infrastructure Fund invests all of its investable assets in the
Global Infrastructure Portfolio, which in turn normally invests at least 65% of
its total assets in equity securities of domestic and foreign infrastructure
companies, which include companies that design, develop, or provide products and
services significant to a country's infrastructure, such as transportation
systems, communications equipment and services, and energy sources.
AIM Global Financial Services Fund invests all of its investable assets in the
Global Financial Services Portfolio, which in turn normally invests at least 65%
of its total assets in equity securities of domestic and foreign financial
services companies, which include commercial banks, insurance brokerages,
securities brokerages, investment banks, leasing companies, and real
estate-related companies.
AIM Global Health Care Fund normally invests at least 65% of its total assets
in equity securities of domestic and foreign health care companies, which
include companies that design, manufacture, or sell products or services used
for or in connection with health care or medicine.
AIM Global Telecommunications Fund normally invests at least 65% of its total
assets in equity securities of domestic and foreign telecommunications
companies, which include companies that develop, manufacture, or sell
communications services and equipment, computer and electronic components and
equipment, mobile communications, and broadcasting.
Starting June 1, 1999, the AIM Global Telecommunications Fund's name will be
changed to "AIM Global Telecommunications and Technology Fund" to reflect better
its principal strategies. The fund seeks to meet its objective by investing at
least 65% of its total assets in equity securities of domestic and foreign
telecommunications and technology companies. Such companies include those that
develop, manufacture, or sell computer and electronic components and equipment,
software, semiconductors, Internet technology, communications services and
equipment, mobile communications and broadcasting.
The remainder of each theme fund's assets may be invested in debt securities
issued by companies in the theme fund's respective industry and/or equity and
debt securities of companies outside of the industry that the theme fund's
portfolio managers believe stand to benefit from developments in that industry.
In anticipation of or in response to adverse market conditions or for cash
management purposes, a theme fund may hold all or a portion of its assets in
cash (U.S. dollars, foreign currency or multinational currency units), money
market instruments, or
1
<PAGE> 25
----------------------
AIM GLOBAL TRENDS FUND
----------------------
high-quality debt securities. As a result, the theme fund may not achieve its
investment objective.
Each theme fund may engage in active and frequent trading of portfolio
securities to achieve its investment objective. If a theme fund or portfolio
does trade in this way, it may incur increased transaction costs and brokerage
commissions, both of which can lower the actual return on your investment.
Active trading may also increase short-term capital gains and losses, which may
affect the taxes you have to pay.
If a theme fund's Board of Trustees determines that it is in the best
interests of the fund and its shareholders, that theme fund may redeem
its investment in its portfolio.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the theme funds invest. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
Because each theme fund focuses its investments in a particular industry, an
investment in a theme fund 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 theme fund will be especially susceptible to factors
affecting the industry 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 that industry.
Foreign securities may be further affected by other factors, including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or tax policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
not able to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers that they are taking similar steps. Year
2000 problems may also affect issuers of securities in which the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 26
----------------------
AIM GLOBAL TRENDS FUND
----------------------
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the fund's Advisor
Class shares year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1998 ............................................. 9.80%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
19.57% (quarter ended December 30, 1998) and the lowest quarterly return was
- -17.76% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR INCEPTION DATE
- -------------------------------------------------------------------
<S> <C> <C> <C>
Advisor Class 9.80% 5.40% 09/15/97
MSCI All Country World
Index(1) 21.72 17.16(2) 08/31/97(2)
- -------------------------------------------------------------------
</TABLE>
(1) The MSCI All Country World Index measures the performance of securities
listed on the major world stock exchanges of 47 markets, including both
developed and emerging markets.
(2) The average annual total return given is since the inception date of the
Advisor class.
3
<PAGE> 27
----------------------
AIM GLOBAL TRENDS FUND
----------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) ADVISOR CLASS
- ---------------------------------------------------
<S> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None
Maximum Deferred
Sales Charge (Load)
(as a percentage of original
purchase price or redemption
proceeds, whichever is less) None
- ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) ADVISOR CLASS
- ---------------------------------------------------
<S> <C>
Management Fees None
Distribution and/or
Service (12b-1) Fees None
Other Expenses(1) None
Total Annual Fund Operating
Expenses None
- ---------------------------------------------------
</TABLE>
(1) "Other expenses," including transfer agency, legal and audit fees, and other
operating expenses, are borne by the fund's advisor.
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the
Advisor Class of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------
<S> <C> <C> <C> <C>
Advisor Class $148 $459 $792 $1,735
- ----------------------------------------------------
</TABLE>
In addition to the annual fund operating expenses shown above, the fund, as a
shareholder in the theme funds, indirectly bears its pro rata share of the fees
and expenses incurred by those funds. As a result, the investment returns of the
fund reflect the expenses of the theme funds in which it holds shares. Because
the fund invests only in Advisor Class shares of the 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 theme funds for their fiscal years ended October 31, 1998.
<TABLE>
<CAPTION>
EXPENSE RATIO OF
THEME FUND ADVISOR CLASS SHARES(1)
- --------------------------------------------------------------------
<S> <C>
Consumer Products and Services Fund 1.45%
Financial Services Fund 1.49%
Health Care Fund 1.34%
Infrastructure Fund 1.50%
Resources Fund 1.50%
Telecommunications Fund 1.38%
- --------------------------------------------------------------------
</TABLE>
(1) The theme funds' advisor has contractually agreed to limit each theme fund's
net expenses.
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 theme funds in which the fund was invested as of October 31, 1998, plus
the fund's total operating expenses.(1)
<TABLE>
<CAPTION>
AIM GLOBAL TRENDS FUND (INCLUDING THE
FUND'S INDIRECT PRO RATA SHARE OF THE AGGREGATE
EXPENSES OF THE THEME FUNDS) EXPENSE RATIO
- ------------------------------------------------------------
<S> <C>
Advisor Class 1.45%
- ------------------------------------------------------------
</TABLE>
(1) These percentages do not necessarily reflect the current allocation of the
fund's assets to the theme funds or the allocation of the fund's assets on
any other date.
4
<PAGE> 28
----------------------
AIM GLOBAL TRENDS FUND
----------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) is responsible for the day-to-day management
of AIM Global Trends Fund. The advisor is located at 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's
operations and ensures that the fund's assets are invested in the underlying
theme funds according to the formula and predetermined percentages described in
the "Investment Objective and Strategies" section of this prospectus.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
The advisor receives no compensation for the services it provides to the fund.
PORTFOLIO MANAGERS
The fund is not actively managed and does not have a portfolio manager. The
underlying theme funds are actively managed by teams of investment
professionals.
OTHER INFORMATION
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
5
<PAGE> 29
----------------------
AIM GLOBAL TRENDS FUND
----------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------------------
SEPTEMBER 15,
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1998(a) DECEMBER 31, 1997(a)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $10.64 $11.43
------ ------
Income from investment operations:
Net investment income (loss) 0.03 0.01
Net realized and unrealized gain (loss) on investments 1.00 (0.31)
Net increase (decrease) from investment operations 1.03 (0.30)
Distributions to shareholders:
From net investment income (0.08) --
From net realized gain on investments (0.14) --
In excess of net investment income -- (0.49)
------ ------
Total distributions (0.22) (0.49)
------ ------
Net asset value, end of period $11.45 $10.64
====== ======
Total investment return 9.80% (2.51)%(b)
- -----------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
Net assets, end of period (in 000's) $ 821 $1,241
Ratio of net investment income (loss) to average net assets 0.28% 0.15%(c)
Ratio of operating expenses to average net assets 0.00% 0.00%(c)
Portfolio turnover rate(d) 28% 1%(c)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover rates are calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
6
<PAGE> 30
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about
Advisor Class shares of all the AIM Funds.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM ACCOUNT
The minimum initial investment for Advisor Class shares is $500; and the minimum
investment for purchases of additional Advisor Class shares is $50.
HOW TO PURCHASE SHARES
Shares offered by this prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees. Advisor Class
shares are available through financial consultants (such as financial planners,
trust companies, bank trust departments, and registered investment advisors). In
order to purchase Advisor Class shares of any of the AIM Funds, your financial
consultant, on your behalf, must submit a fully completed new account
application form directly to the transfer agent.
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Must be submitted by your financial Mail your check and the remittance
consultant. slip from your confirmation
statement to the transfer agent.
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
By Wire Your financial consultant must mail Call the transfer agent to receive
a completed account application to a reference number. Then, use the
the transfer agent. You or your wire instructions at left.
financial consultant may call the
transfer agent at (800) 959-4246 to
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase order.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-1 ADV--05/99
<PAGE> 31
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in
Advisor Class shares of certain AIM Funds. Unless you specify otherwise, your
dividends and distributions will automatically be reinvested in the same AIM
Fund.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in Advisor Class shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend or distribution
must be at least $5,000; or (b) in the AIM Fund receiving the dividend or
distribution must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends and
distributions into another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this program, you can designate how the
total value of your holdings of Advisor Class shares of AIM Funds should be
rebalanced, on a percentage basis, between two and ten of your AIM Funds on a
quarterly, semiannual, or annual basis. Your portfolio will be rebalanced
through the exchange of shares in one or more of your AIM Funds for Advisor
Class shares of one or more other AIM Funds in your portfolio. If you wish to
participate in the Program, make changes or cancel the Program, the transfer
agent must receive your request to participate, changes, or cancellation in good
order at least five business days prior to the next rebalancing date, which is
normally the 28th day of the last month of the period you choose. You may
realize taxable gains from these exchanges. We may modify, suspend, or terminate
the program at any time on 60 days' prior written notice.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET TIMING ACTIVITY.
REDEEMING SHARES
REDEMPTION FEES
No redemption fee is imposed when shares are redeemed or repurchased; however,
dealers/financial institutions may charge service fees for handling repurchase
transactions.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
The transfer agent must receive your call during the hours
the New York Stock Exchange (NYSE) is open for business in
order to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
ADV--05/99 A-2
<PAGE> 32
-------------
THE AIM FUNDS
-------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds at the address on record with us.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange Advisor Class shares in one AIM
Fund for Advisor Class shares of another AIM Fund. You also may exchange Advisor
Class shares for AIM Cash Reserve shares of AIM Money Market Fund. Before
requesting an exchange, review the prospectus of the AIM Fund you wish to
acquire.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - The AIM Fund from which you are exchanging must have received the full amount
of the purchase price for the shares being exchanged;
- - Recently acquired shares must have been held in your account for ten business
days, and all other shares must have been held for at least one day, prior to
the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the New York Stock Exchange (NYSE) is open for business;
however, you still will be
A-3 ADV--05/99
<PAGE> 33
-------------
THE AIM FUNDS
-------------
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. The AIM Funds
value all other securities and assets at their fair value. Securities and other
assets quoted in foreign currencies are valued in U.S. dollars based on the
prevailing exchange rates on that day. In addition, if, between the time trading
ends on a particular security and the close of the New York Stock Exchange
(NYSE), events occur that materially affect the value of the security, the AIM
Funds may value the security at its fair value as determined in good faith by or
under the supervision of the Board of Trustees of the AIM Fund. The effect of
using fair value pricing is that an AIM Fund's net asset value will be subject
to the judgment of the Board of Trustees instead of being determined by the
market. Because some of the AIM Funds may invest in securities that are
primarily listed on foreign exchanges, the value of those funds' shares may
change on days when you will not be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange, and redemption orders
calculated at the net asset value after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different rates of tax apply to ordinary income and long-term
capital gain distributions. Every year, you will be sent information showing the
amount of dividends and distributions you received from each AIM Fund during the
prior year will be sent to you.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state, and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
ADV--05/99 A-4
<PAGE> 34
----------------------
AIM GLOBAL TRENDS FUND
----------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite
100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, DC 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
-------------------------------------
AIM Global Trends Fund--Advisor Class
SEC 1940 Act file number: 811-7787
-------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 35
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 MAY 3, 1999
RELATING TO THE AIM GLOBAL TRENDS FUND PROSPECTUS DATED MAY 3, 1999
<PAGE> 36
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE TRUST......................... 4
The Trust and Its Shares.................................. 4
INVESTMENT STRATEGIES AND RISKS............................. 5
Investment Policies of the Fund........................... 5
Morgan Stanley Capital International All Country (AC)
World Index ("MSCI")................................... 5
U.S. Government Securities................................ 6
Repurchase Agreements..................................... 6
Investment Policies of the Underlying Theme Funds......... 6
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................... 15
Introduction.............................................. 15
Special Risks of Options, Futures and Currency
Strategies............................................. 15
Writing Call Options...................................... 16
Writing Put Options....................................... 17
Purchasing Put Options.................................... 17
Purchasing Call Options................................... 18
Index Options............................................. 19
Interest Rate, Currency and Stock Index Futures
Contracts.............................................. 20
Options on Futures Contracts.............................. 22
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies.......................... 22
Forward Contracts......................................... 22
Foreign Currency Strategies -- Special Considerations..... 23
Cover..................................................... 24
RISK FACTORS OF THE UNDERLYING THEME PORTFOLIOS............. 24
General................................................... 24
Financial Services Fund................................... 24
Infrastructure Fund....................................... 25
Resources Fund............................................ 25
Consumer Products and Services Fund....................... 25
Health Care Fund.......................................... 26
Telecommunications Fund................................... 26
Debt Securities........................................... 26
Investing in Smaller Companies............................ 27
Purchases and Redemptions................................. 27
Illiquid Securities....................................... 27
Foreign Securities........................................ 28
INVESTMENT LIMITATIONS...................................... 32
Investment Limitations of the Fund........................ 32
Investment Limitations of the Underlying Theme Funds and
Portfolios............................................. 33
Feeder Funds........................................... 33
Health Care Fund....................................... 35
Telecommunications Fund................................ 36
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 37
MANAGEMENT.................................................. 39
Trustees and Executive Officers........................... 39
Management Services Relating to the Fund.................. 40
</TABLE>
2
<PAGE> 37
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
THE DISTRIBUTION PLANS...................................... 41
The Class A and C Plan.................................... 41
The Class B Plan.......................................... 41
Both Plans................................................ 42
THE DISTRIBUTOR............................................. 44
REDUCTIONS IN INITIAL SALES CHARGES......................... 47
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS................. 50
HOW TO PURCHASE AND REDEEM SHARES........................... 51
Backup Withholding........................................ 51
NET ASSET VALUE DETERMINATION............................... 53
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 53
Reinvestment of Dividends and Distributions............... 53
Tax Matters............................................... 53
Taxation of the Fund...................................... 53
Taxation of the Funds' Shareholders....................... 54
Reinstatement Privilege................................... 54
SHAREHOLDER INFORMATION..................................... 54
MISCELLANEOUS INFORMATION................................... 56
Special Servicing Agreement............................... 56
Charges for Certain Account Information................... 56
Custodian and Transfer Agent.............................. 56
Independent Accountants................................... 57
Legal Matters............................................. 57
Shareholder Liability..................................... 57
Control Persons and Principal Holders of Securities....... 58
INVESTMENT RESULTS.......................................... 58
Total Return Quotations................................... 58
Performance Information................................... 60
General Information about the Underlying Theme
Portfolios............................................. 62
Health Care Fund.......................................... 62
Information about the Global Health Care Industries....... 63
Telecommunications Fund................................... 63
Consumer Products and Services Fund....................... 64
Infrastructure Fund....................................... 64
Financial Services Fund................................... 64
Resources Fund............................................ 65
APPENDIX A.................................................. 66
APPENDIX B.................................................. 67
Description of Commercial Paper Ratings................... 67
Description of Bond Ratings............................... 67
Absence of Rating......................................... 68
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 38
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 Global 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.
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 May 3, 1999, 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.
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 the Fund have equal
rights and privileges. Each share of a particular class is entitled to one vote,
to participate equally in dividends and distributions declared by the Trust's
Board of Trustees with respect to the class of the Fund and, upon liquidation of
the Fund, to participate proportionately in the net assets of the Fund allocable
to such class remaining after satisfaction of outstanding liabilities of the
Fund allocable to such class. Fund shares are fully paid, non-assessable and
fully transferable when issued and have no preemptive rights and have such
conversion and exchange rights as set forth in the Prospectus and this Statement
of Additional Information. Fractional shares have proportionately the same
rights, including voting rights, as are provided for a full share. Other than
the automatic conversion of Class B Shares to Class A Shares, there are no
conversion rights.
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.
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
4
<PAGE> 39
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 Investment Company Act of 1940, as amended, ("1940 Act").
Fund shares do not have cumulative voting rights, which means that the holders
of a majority of the shares voting for the election of Trustees can elect all
the Trustees. A Trustee may be removed at any meeting of the shareholders of the
Trust by a vote of the shareholders owning at least two-thirds of the
outstanding shares. Any Trustee may call a special meeting of shareholders for
any purpose. Furthermore, Trustees shall promptly call a meeting of shareholders
solely for the purpose of removing one or more Trustees when requested in
writing to do so by shareholders holding 10% of the Trust's outstanding shares.
Pursuant to the Trust's Declaration of Trust, the Trust may issue an unlimited
number of shares of the Fund. Each share of the Fund represents an interest in
the Fund only, has a par value of $0.01 per share, represents an equal
proportionate interest in the Fund with other Fund shares and is entitled to
such dividends and other distributions out of the income earned and gain
realized on the assets belonging to the Fund as may be declared at the
discretion of the Board of Trustees. Each share of the Fund is equal in
earnings, assets and voting privileges, except that each class normally has
exclusive voting rights with respect to its distribution plan and bears the
expenses, if any, related to the distribution of its shares. Fund shares, when
issued, are fully paid and nonassessable.
INVESTMENT STRATEGIES AND RISKS
INVESTMENT POLICIES OF THE FUND
The following discussion of investment strategies and risks supplements the
discussion of investment objective and risks set forth in the Prospectus under
the headings "Investment Objective and Strategies" and "Principal Risks of
Investing in the Fund."
The Fund's investment objective may not be changed without the approval of the
holders of a majority of the Fund's outstanding shares. Unless specifically
noted, the Fund's investment policies described in the Prospectus and this
Statement of Additional Information, are not fundamental policies and may be
changed by the Trust's Board of Trustees 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 the Fund's investment policies or restrictions.
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 45 countries including both
developed and developing countries as of April 30, 1998. Each of the 2,483
stocks is placed into one of 38 MSCI industry sectors. AIM exercises no
discretion in investing the Fund's assets. Rather, AIM periodically determines
the allocation of the Fund's assets to the Underlying Theme Portfolios according
to the industry weightings of the companies composing the MSCI. AIM assesses
which of the Underlying Theme Portfolios can invest, as part of its primary
focus, in each of these industries. Where two or more Underlying Theme
Portfolios can invest in an industry, the weighting of that industry in the MSCI
is split equally among each qualifying Underlying Theme Portfolio. Of course,
the Underlying Theme Portfolios do not invest necessarily in the same industries
or the same companies that compose the MSCI. See Appendix A for the allocation
of the 38 industries to the Underlying Theme Portfolios.
The allocation 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 Portfolios or the allocation of the Fund's
assets on any other date.
The Fund is a more diversified investment than any single Underlying Theme
Portfolio. However, because the Underlying Theme Portfolios are actively managed
without any attempt to reflect the country, industry or company weightings of
the MSCI, the Underlying Theme Portfolios will perform differently than the
corresponding industry components of the MSCI, and the Underlying Theme
Portfolios 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
5
<PAGE> 40
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.
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. In addition to the investment practices described in the Prospectus, the
Underlying Theme Portfolios 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. There is no assurance that any
Underlying Theme Portfolio will achieve its investment objective. 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. Investors desiring
more information on an Underlying Theme Portfolio should call (800) 347-4246 or
contact their financial adviser for the Underlying Theme Portfolio's prospectus.
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.
The approval of the Fund and of other investors in the Portfolio; if any, is
not required to change the investment objective, policies or limitations of the
Portfolio, unless otherwise specified. Written notice shall be provided to
shareholders of the Fund thirty days prior to any changes in the Portfolio's
investment objective.
6
<PAGE> 41
A change in the Portfolio's investment objective, policies or limitations that
is not approved by the Board or the shareholders of the Feeder Fund could
require the Feeder Fund to redeem its interest in the Portfolio. Any such
redemption could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Portfolio. Should such a distribution
occur, the Feeder Fund could incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of investments for the Feeder Fund and
could adversely affect its liquidity. Upon redemption, the Board would consider
what action might be taken, including the investment of all the investable
assets of the Feeder Fund in another pooled investment entity having
substantially the same investment objective as the Feeder Fund or the retention
by the Feeder Fund of its own investment advisor to manage its assets in
accordance with its investment objective, policies and limitations discussed
herein.
In addition to selling an interest therein to the Feeder Fund, the Portfolio
may sell interests therein to other non-affiliated investment companies and/or
other institutional investors. All institutional investors in the Portfolio will
pay a proportionate share of the Portfolio's expenses and will invest in the
Portfolio on the same terms and conditions. However, if another investment
company invests any or all of its assets in a Portfolio, it would not be
required to sell its shares at the same public offering price as the Feeder Fund
and may charge different sales commissions. Therefore, investors in the Feeder
Fund may experience different returns that investors in another investment
company that invests exclusively in the Portfolio. As of the date of this
Prospectus, the Feeder Fund is the only institutional investor in the Portfolio.
The Feeder Fund may be materially affected by the actions of other large
investors, if any, in the Portfolio. For example, as with all open-end
investment companies, if a large investor were to redeem its interest in the
Portfolio, (1) the Portfolio's remaining investors could experience higher pro
rata operating expenses, thereby producing lower returns and (2) the Portfolio's
security holdings may become less diverse, resulting in increased risk.
Institutional investors in the Portfolio that have a greater pro rata ownership
interest in the Portfolio than the Feeder Fund could have effective voting
control over the operation of the Portfolio.
The investment objective of each Underlying Theme Fund and the Portfolio is
long-term growth of capital. The Portfolios, AIM Global Health Care Fund
("Health Care Fund") and AIM Global Telecommunications Fund ("Telecommunications
Fund"), together, are referred to herein as the "Underlying Theme Portfolios."
The investment objective of any Underlying Theme Portfolio may not be changed
without the approval of a majority of the outstanding voting shares of the
Underlying Theme Portfolio. Because each such Underlying Theme Portfolio will
invest only in its corresponding Portfolio, that Underlying Theme Portfolio's
shareholders will acquire only an indirect interest in the investments of that
Portfolio.
The investments of the Fund are concentrated in the Underlying Theme
Portfolios, so the Fund's investment performance is directly related to the
investment performance of the Underlying Theme Portfolios. The ability of the
Fund to meet its investment objective is directly related to the allocation
among those Underlying Theme Portfolios as well as the ability of the Underlying
Theme Portfolios to meet their objectives. There is no assurance that the
investment objective of the Fund or any Underlying Theme Portfolio will be
achieved. The value of the Underlying Theme Portfolios' domestic and foreign
investments varies in response to many factors. The value of equity securities
held by an Underlying Theme Portfolio 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 Portfolio generally will fluctuate with changes in
the perceived creditworthiness of the issuers of such securities and interest
rates.
Because each Underlying Theme Portfolio 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 Portfolio 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.
In addition to its primary investment policy set forth in its Prospectus, each
Underlying Theme Portfolio may invest up to 35% of its total assets in debt
securities issued by companies in the Underlying Theme Portfolio's particular
industry and/or equity and debt securities of companies outside of that industry
which, in the AIM's opinion, stand to benefit from developments in that
industry.
Financial Services Fund
Examples of financial services companies include commercial banks and savings
institutions and loan associations and their holding companies; consumer and
industrial finance companies; diversified financial services companies;
investment banks; insurance brokerages; securities brokerage and investment
advisory companies; real estate-related companies;
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leasing companies; and a variety of firms in all segments of the insurance field
such as multi-line, property and casualty and life insurance and insurance
holding companies.
AIM believes an accelerating rate of global economic interdependence will lead
to significant growth in the demand for financial services. In addition, in
AIM's view, as the industries evolve, opportunities will emerge for those
companies positioned for the future. Thus, AIM expects that banking and related
financial institution consolidation in the developed countries, increased demand
for retail borrowing in developing countries, a growing need for international
trade-based financing, a rising demand for sophisticated risk management, the
proliferating number of liquid securities markets around the world, and larger
concentrations of investable assets should lead to growth in financial service
companies that are positioned for the future.
Infrastructure Fund
Examples of infrastructure companies include those engaged in designing,
developing or providing the following products and services: electricity
production; oil, gas, and coal exploration, development, production and
distribution; water supply, including water treatment facilities; nuclear power
and other alternative energy sources; transportation, including the construction
or operation of transportation systems; steel, concrete, or similar types of
products; communications equipment and services (including equipment and
services for both data and voice transmission); mobile communications and
cellular radio/paging; emerging technologies combining telephone, television
and/or computer systems; and other products and services, which, in AIM's
judgment, constitute services significant to the development of a country's
infrastructure.
AIM believes that a country's infrastructure is one key to the long-term
success of that country's economy. AIM believes that adequate energy,
transportation, water, and communications systems are essential elements for
long-term economic growth. AIM believes that many developing nations, especially
in Asia and Latin America, plan to make significant expenditures to the
development of their infrastructure in the coming years, which is expected to
facilitate increased levels of services and manufactured goods.
In the developed countries of North America, Europe, Japan and the Pacific
Rim, AIM expects that the replacement and upgrade of transportation and
communications systems should stimulate growth in the infrastructure industries
of those countries. In addition, in AIM's view, deregulation of
telecommunications and electric and gas utilities in many countries is promoting
significant changes in these industries.
AIM believes that strong economic growth in developing countries and
infrastructure replacement, upgrade, and deregulation in more developed
countries provide an environment for favorable investment opportunities in
infrastructure companies worldwide. In addition, the long-term growth rates of
certain foreign countries' economies may be substantially higher than the
long-term growth rate of the U.S. economy. An integral aspect of certain foreign
countries' economies may be the development or improvement of their
infrastructure.
Resources Fund
Examples of natural resource companies include those which own, explore or
develop: energy sources (such as oil, gas and coal); ferrous and non-ferrous
metals (such as iron, aluminum, copper, nickel, zinc and lead), strategic metals
(such as uranium and titanium) and precious metals (such as gold, silver and
platinum); chemicals; forest products (such as timber, coated and uncoated tree
sheet, pulp and newsprint); other basic commodities (such as foodstuffs);
refined products (such as chemicals and steel) and service companies that sell
to these producers and refiners; and other products and services, which, in
AIM's opinion are significant to the ownership and development of natural
resources and other basic commodities.
AIM believes that the liberalization of formerly socialist economies will
bring about dramatic changes in both the supply and demand for natural
resources. In addition, rapid industrialization in developing countries of Asia
and Latin America is generating new demands for industrial materials that are
affecting world commodities markets. AIM believes these changes are likely to
create investment opportunities that benefit from new sources of supply and/or
from changes in commodities prices.
AIM also believes that investments in natural resource industries offer an
opportunity to protect wealth against the capital-eroding effects of inflation.
During periods of accelerating inflation or currency uncertainty, worldwide
investment demand for natural resources, particularly precious metals, tends to
increase, and during periods of disinflation or currency stability, it tends to
decrease. AIM believes that rising commodity prices and increasing worldwide
industrial production may favorably affect share prices of natural resource
companies, and investments in such companies can offer excellent opportunities
to offset the effects of inflation.
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Consumer Products and Services Fund
Examples of consumer products and services companies include those that
manufacture, market, retail, or distribute: durable goods (such as homes,
household goods, automobiles, boats, furniture and appliances, and computers);
non-durable goods (such as food and beverages and apparel); media,
entertainment, broadcasting, publishing and sports-related goods and services
(such as television and radio broadcast, motion pictures, wireless
communications, gaming casinos, theme parks, restaurants and lodging); and goods
and services to companies in the foregoing industries (such as advertisers,
textile companies and distribution and shipping companies).
The Portfolio expects that a significant portion of its assets may be invested
in the securities of U.S. issuers from time to time, particularly those that
market their products globally. However, consumer products and services
companies of a particular nation or region of the world are often operated and
owned in their local markets, close to their customers. These companies, AIM
believes, may offer superior opportunities for capital growth as compared to
their larger, multinational counterparts. Certain global markets may be more
attractive than others from time to time; companies dependent on U.S. markets,
for example, may be outperformed by companies not dependent on U.S. markets.
AIM also believes that the demand for consumer products and services worldwide
will increase along with rising disposable incomes in both developed and
developing nations. Emerging economies, such as those in China, Southeast Asia,
Eastern Europe and Latin America, offer opportunities for the growth and
expansion of consumer markets. These regions currently comprise a growing source
of inexpensive consumer products for export and a growing source of demand for
consumer products and services as the disposable incomes of their populations
increase. In AIM's view, these changes are likely to create investment
opportunities in companies, both local and multinational, that are able to
employ innovative manufacturing, marketing, retailing and distribution methods
to open new markets and/or expand existing markets.
Health Care Fund
Examples of health care companies include those that are substantially engaged
in the design, manufacture or sale of products or services used for or in
connection with health care or medicine. Such firms may include pharmaceutical
companies; firms that design, manufacture, sell or supply medical, dental and
optical products, hardware or services; companies involved in biotechnology,
medical diagnostic, and biochemical research and development; and companies
involved in the ownership and/or operation of health care facilities.
The Fund expects that, from time to time, a significant portion of its assets
may be invested in the securities of U.S. issuers. Health care industries,
however, are global industries with significant, growing markets outside of the
United States. A sizeable portion of the companies which comprise the health
care industries are headquartered outside of the United States, and many
important pharmaceutical and biotechnology discoveries and technological
breakthroughs have occurred outside of the United States, primarily in Japan,
the United Kingdom and Western Europe.
AIM believes that the global health care industries offer attractive long-term
supply/demand dynamics. While the United States, Western Europe, and Japan
presently account for a substantial portion of health care expenditures, this
should change dramatically in the coming decade if the populations of developing
countries devote an increasing percentage of income to health care.
Additionally, AIM believes demographics on aging point to a significant increase
in demand from the industrialized nations, as the elderly account for a growing
proportion of worldwide health care spending. Finally, in AIM's view, technology
will continue to expand the range of products and services offered, with new
drugs, medical devices and surgical procedures addressing medical conditions
previously considered untreatable.
In addition to these underlying trends, the United States is presently
experiencing a period of rapid and profound change in its own health care
system, marked by the rise of managed care, the formation of health care
delivery networks, and widespread consolidation across all segments of the
industry. AIM believes that this transition offers investment opportunities in
those companies acting as consolidators or otherwise gaining market share at the
expense of less efficient competitors.
Telecommunications Fund
Examples of telecommunications companies include those engaged in designing,
developing or providing the following products and services: communications
equipment and services (including equipment and services for both data and voice
transmission); electronic components and equipment; broadcasting (including
television and radio, satellite, microwave and cable television and
narrowcasting); computer equipment, mobile communications and cellular
radio/paging; electronic mail; local and wide area networking and linkage of
word and data processing systems; publishing and
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information systems; videotext and teletext; and emerging technologies combining
telephone, television and/or computer systems.
AIM believes that there are opportunities for continued growth in demand for
components, products, media and systems to collect, store, retrieve, transmit,
process, distribute, record, reproduce and use information. The pervasive
societal impact of communications and information technologies has been
accelerated by the lower costs and higher efficiencies that result from the
blending of computers with telecommunications systems. Accordingly, companies
engaged in the production of methods for using electronic and, potentially,
video technology to communicate information are expected to be important in the
Fund's portfolio. Older technologies, such as photography and print also may be
represented, however.
SELECTION OF EQUITY INVESTMENTS AND ASSET ALLOCATION. Each Underlying Theme
Portfolio expects that, from time to time, a significant portion of its assets
may be invested in the securities of domestic issuers. The industry represented
in each Underlying Theme Portfolio, however, is a global industry with
significant, growing markets outside of the United States. A sizable proportion
of the companies that compromise the industries in which the Underlying Theme
Portfolios invest are headquartered outside of the United States.
For these reasons, AIM believes that a portfolio composed only of securities
of U.S. issuers does not provide the greatest potential return from an
investment by the Underlying Theme Portfolio. AIM uses its financial expertise
in markets located throughout the world and the substantial global resources of
AMVESCAP PLC in attempting to identify those countries and companies then
providing the greatest potential for long-term capital appreciation. In this
fashion, AIM seeks to enable shareholders to capitalize on the substantial
investment opportunities and the potential for long-term capital presented by
the industry represented in each Underlying Theme Portfolio.
AIM allocates each Underlying Theme Portfolio's (or its corresponding
Portfolio's) assets among securities of countries and in currency denominations
where opportunities for meeting each Underlying Theme Portfolio's investment
objective are expected to be the most attractive. Each Underlying Theme
Portfolio may invest substantially in securities denominated in foreign
currencies or in multinational currency units (such as euros). Under normal
conditions, each Underlying Theme Portfolio 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, AIM, on behalf of the
Underlying Theme Portfolios, 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, AIM 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.
With respect to the Global Resources Portfolio, AIM has identified four areas
that it expects will create investment opportunities: (i) improving
supply/demand fundamentals, which may result in higher commodity prices; (ii)
privatization of state-owned natural resource businesses; (iii) management which
can improve production efficiencies without correspondingly increasing commodity
prices; and (iv) service companies with emerging technologies that can enhance
productivity or reduce production costs. Of course, there is no certainty that
these factors will produce the anticipated results.
With respect to the Telecommunications Fund, AIM 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.
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There may be times when, in AIM's opinion, 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 AIM'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 AIM to
be located in that country may have substantial foreign operations or
subsidiaries and/or export sales exceeding in size the assets or sales in that
country.
In certain countries, governmental restrictions and other limitations on
investment may affect an Underlying Theme Portfolio's ability to invest in such
countries. In addition, in some instances only special classes of securities may
be purchased by foreigners and the market prices, liquidity and rights with
respect to those securities may vary from shares owned by nationals. AIM 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 AIM 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
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 AIM's judgment, 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.
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
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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
consisting of cash, U.S. government securities, or certain irrevocable letters
of credit 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. The risks in lending 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.
Loans will only be made to firms deemed by AIM to be of good standing and will
not be made unless, in AIM's judgment, 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.
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REPURCHASE AGREEMENTS. A repurchase agreement is a transaction in which an
Underlying Theme Portfolio purchases securities from a bank or recognized
securities dealer and simultaneously commits to resell the securities to the
bank or dealer on an agreed-upon date or upon demand and at a price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased securities. Although repurchase agreements carry certain risks not
associated with direct investments in securities, including possible decline in
the market value of the underlying securities and delays and costs to the
Underlying Theme Portfolio if the other party to the repurchase agreement
becomes bankrupt, the Underlying Theme Portfolios intend to enter into
repurchase agreements only with banks and dealers believed by AIM 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. AIM 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 may borrow from banks or may borrow through reverse
repurchase agreements and "roll" transactions in connection with meeting
requests for the redemptions of the Funds' shares. 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.
However, no additional investments will be made if an Underlying Theme
Portfolio's borrowings exceed 5% of its total assets. 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.
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WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES. Each Underlying Theme Portfolio
may purchase debt securities on a "when-issued" basis and may purchase or sell
such securities on a "forward commitment" basis in order to hedge against
anticipated changes in interest rates and prices. The price, which is generally
expressed in yield terms, is fixed at the time that the commitment is made, but
delivery and payment for the securities take place at a later date. When-issued
securities and forward commitments may be sold prior to the settlement date, but
an Underlying Theme Portfolio will purchase or sell when-issued securities or
enter into forward commitments only with the intention of actually receiving or
delivering the securities, as the case may be. No income accrues on securities
that have been purchased pursuant to a forward commitment or on a when-issued
basis prior to delivery to the Underlying Theme Portfolio. If an Underlying
Theme Portfolio disposes of the right to acquire a when-issued security prior to
its acquisition or disposes of its right to deliver or receive against a forward
commitment, it may incur a gain or loss. At the time that an Underlying Theme
Portfolio enters into a transaction on a when-issued or forward commitment
basis, the Underlying Theme Portfolio will segregate cash or liquid securities
equal to the value of the when-issued or forward commitment securities with its
custodian and will mark to market daily such assets. There is a risk that the
securities may not be delivered and that the Underlying Theme Portfolio may
incur a loss.
SHORT SALES. Each Underlying Theme Portfolio may make short sales of
securities. A short sale is a transaction in which an Underlying Theme Portfolio
sells a security in anticipation that the market price of that security will
decline. An Underlying Theme Portfolio may make short sales (i) as a form of
hedging to offset potential declines in long positions in securities it owns, or
anticipates acquiring, or in similar securities, and (ii) in order to maintain
flexibility in its securities holdings.
When an Underlying Theme Portfolio makes a short sale of a security it does
not own, it must borrow the security sold short and deliver it to the
broker/dealer or other intermediary through which it made the short sale. The
Underlying Theme Portfolio may have to pay a fee to borrow particular securities
and will often be obligated to pay over any payments received on such borrowed
securities.
An Underlying Theme Portfolio's obligation to replace the borrowed security
when the borrowing is called or expires will be secured by collateral deposited
with the intermediary. The Underlying Theme Portfolio will also be required to
deposit collateral with its custodian to the extent, if any, necessary so that
the value of both collateral deposits in the aggregate is at all times equal to
at least 100% of the current market value of the security sold short. Depending
on arrangements made with the intermediary from which it borrowed the security
regarding payment of any amounts received by it on such security, an Underlying
Theme Portfolio may not receive any payments (including interest) on its
collateral deposited with such intermediary.
If the price of the security sold short increases between the time of the
short sale and the time an Underlying Theme Portfolio replaces the borrowed
security, it will incur a loss; conversely, if the price declines, the
Underlying Theme Portfolio will realize a gain. Any gain will be decreased, and
any loss increased, by the transaction costs associated with the transaction.
Although an Underlying Theme Portfolio's gain is limited by the price at which
it sold the security short, its potential loss theoretically is unlimited.
No Underlying Theme Portfolio will make a short sale if, after giving effect
to the sale, the market value of the securities sold short exceeds 25% of the
value of its total assets or its aggregate short sales of the securities of any
one issuer exceed the lesser of 2% of its net assets or 2% of the securities of
any class of the issuer. Moreover, an Underlying Theme Portfolio may engage in
short sales only with respect to securities listed on a national securities
exchange.
TEMPORARY DEFENSIVE STRATEGIES. The Underlying Theme Portfolios retain the
flexibility to respond promptly to changes in market and economic conditions.
Accordingly, in the interest of preserving shareholders' capital, AIM 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 Portfolios 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 Portfolio 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 Portfolios 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 Portfolios and the Fund may invest include, but are not limited
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to, United States government securities; high-grade commercial paper; bank
certificates of deposit; bankers' acceptances and repurchase agreements related
to any of the foregoing. "High-grade commercial paper" refers to commercial
paper rated A-1 by Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. ("S&P"), or P-1 by Moody's Investors Service, Inc. ("Moody's") or, if not
rated, determined by AIM to be of comparable quality.
AFFILIATED PERSONS
The officers and trustees of the Trust currently serve as officers and
trustees of the Underlying Theme Portfolios. AIM also serves as investment
advisor and/or administrator to the Underlying Theme Portfolios. Therefore,
conflicts may arise so as these persons fulfill their fiduciary responsibilities
to the Fund and the Underlying Theme Portfolios.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
INTRODUCTION
An Underlying Theme Portfolio may use forward currency contracts, futures
contracts, options on securities, options on indices, options on currencies, and
options on futures contracts to attempt to hedge against the overall level of
investment and currency risk normally associated with Underlying Theme Portfolio
investments. These instruments are often referred to as "derivatives," which may
be defined as financial instruments whose performance is derived, at least in
part, from the performance of another asset (such as a security, currency or an
index of securities). Each Underlying Theme Portfolio may invest in such
instruments up to the full value of its portfolio assets.
To attempt to hedge against adverse movements in exchange rates between
currencies, an Underlying Theme Portfolio may enter into forward currency
contracts for the purchase or sale of a specified currency at a specified future
date. Such contracts may involve the purchase or sale of a foreign currency
against the U.S. dollar or may involve two foreign currencies. An Underlying
Theme Portfolio may enter into forward currency contracts either with respect to
specific transactions or with respect to its portfolio positions. An Underlying
Theme Portfolio also may purchase and sell put and call options on currencies,
futures contracts on currencies and options on such future contracts to hedge
against movements in exchange rates.
In addition, an Underlying Theme Portfolio may purchase and sell put and call
options on equity and debt securities to hedge against the risk of fluctuations
in the prices of securities held by the Underlying Theme Portfolio or that AIM
intends to include in the Underlying Theme Portfolio's holders. An Underlying
Theme Portfolio also may purchase and sell put and call options on stock indexes
to hedge against overall fluctuations in the securities markets generally or in
a specific market sector.
Further, an Underlying Theme Portfolio may sell stock index futures contracts
and may purchase put options or write call options on such futures contracts to
protect against a general stock market decline or a decline in a specific market
sector that could affect adversely the Underlying Theme Portfolio's holders. An
Underlying Theme Portfolio also may purchase stock index futures contracts and
purchase call options or write put options on such contracts to hedge against a
general stock market or market sector advance and thereby attempt to lessen the
cost of future securities acquisitions. An Underlying Theme Portfolio may use
interest rate futures contracts and options thereon to hedge the debt portion of
its portfolio against changes in the general level of interest rates.
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 AIM'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 AIM 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
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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 AIM 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) There is no assurance that a liquid secondary market will exist
for any particular option, futures contract or option thereon at any
particular time.
(5) As described below, an Underlying Theme Portfolio might be
required to maintain assets as "cover," maintain segregated accounts or
make margin payments when it takes positions in instruments involving
obligations to third parties (i.e., instruments other than purchased
options). If the Underlying Theme Portfolio were unable to close out its
positions in such instruments, it might be required to continue to maintain
such assets or accounts or make such payments until the position expired or
matured. The requirements might impair the Underlying Theme Portfolio's
ability to sell a portfolio security or make an investment at a time when
it would otherwise be favorable to do so, or require that the Underlying
Theme Portfolio sell a portfolio security at a disadvantageous time. The
Underlying Theme Portfolio's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability
and willingness of the other party to the transaction ("contra party") to
enter into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Underlying Theme Portfolio.
WRITING CALL OPTIONS
Each Underlying Theme Portfolio may write (sell) call options on securities,
indices and currencies. Call options generally will be written on securities and
currencies that, in the opinion of AIM, 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.
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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, AIM will
consider the reasonableness of the anticipated premium and the likelihood that a
liquid secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit an Underlying Theme
Portfolio to write another call option on the underlying security or currency
with either a different exercise price or expiration date, or both.
Each Underlying Theme Portfolio will pay transaction costs in connection with
the writing of options and in entering into closing purchase contracts.
Transaction costs relating to options activity are normally higher than those
applicable to purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, an Underlying Theme Portfolio may
purchase an underlying security or currency for delivery in accordance with the
exercise of an option, rather than delivering such security or currency from its
portfolio. In such cases, additional costs will be incurred.
An Underlying Theme Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more,
respectively, than the premium received from writing the option. Because
increases in the market price of a call option generally will reflect increases
in the market price of the underlying security or currency, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security or currency owned by an Underlying
Theme Portfolio.
WRITING PUT OPTIONS
Each Underlying Theme Portfolio may write put options on securities, indices
and currencies. A put option gives the purchaser of the option the right to
sell, and the writer (seller) the obligation to buy, the underlying security or
currency at the exercise price at any time until (American style) or on
(European style) the expiration date. The operation of put options in other
respects, including their related risks and rewards, is substantially identical
to that of call options.
An Underlying Theme Portfolio generally would write put options in
circumstances where AIM 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
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and any transaction costs would reduce any profit otherwise available for
distribution when the security or currency is eventually sold.
An Underlying Theme Portfolio may also purchase put options at a time when it
does not own the underlying security or currency. By purchasing put options on a
security or currency it does not own, that Underlying Theme Portfolio seeks to
benefit from a decline in the market price of the underlying security or
currency. If the put option is not sold when it has remaining value, and if the
market price of the underlying security or currency remains equal to or greater
than the exercise price during the life of the put option, the Underlying Theme
Portfolio will lose its entire investment in the put option. In order for the
purchase of a put option to be profitable, the market price of the underlying
security or currency must decline sufficiently below the exercise price to cover
the premium and transaction costs, unless the put option is sold in a closing
sale transaction.
PURCHASING CALL OPTIONS
Each Underlying Theme Portfolio may purchase call options on securities,
indices and currencies. As the holder of a call option, an Underlying Theme
Portfolio would have the right to purchase the underlying security or currency
at the exercise price at any time until (American style) or on (European style)
the expiration date. An Underlying Theme Portfolio may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
Call options may be purchased by an Underlying Theme Portfolio for the purpose
of acquiring the underlying security or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable an Underlying Theme
Portfolio to acquire the security or currency at the exercise price of the call
option plus the premium paid. At times, the net cost of acquiring the security
or currency in this manner may be less than the cost of acquiring the security
or currency directly. This technique may also be useful to an Underlying Theme
Portfolio in purchasing a large block of securities that would be more difficult
to acquire by direct market purchases. So long as it holds such a call option,
rather than the underlying security or currency itself, the Underlying Theme
Portfolio is partially protected from any unexpected decline in the market price
of the underlying security or currency and, in such event, could allow the call
option to expire, incurring a loss only to the extent of the premium paid for
the option.
An Underlying Theme Portfolio may also purchase call options on underlying
securities or currencies it owns to avoid realizing losses that would result in
a reduction of its current return. For example, where an Underlying Theme
Portfolio has written a call option on an underlying security or currency having
a current market value below the price at which it purchased the security or
currency, an increase in the market price could result in the exercise of the
call option written by the Underlying Theme Portfolio and the realization of a
loss on the underlying security or currency. Accordingly, the Underlying Theme
Portfolio could purchase a call option on the same underlying security or
currency, which could be exercised to fulfill its delivery obligations under its
written call (if it is exercised). This strategy could allow the Underlying
Theme Portfolio to avoid selling the portfolio security or currency at a time
when it has an unrealized loss; however, the Underlying Theme Portfolio would
have to pay a premium to purchase the call option plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of each
Underlying Theme Portfolio's total assets at the time of each purchase.
An Underlying Theme Portfolio may attempt to accomplish objectives similar to
those involved in using Forward Contracts by purchasing put or call options on
currencies. A put option gives an Underlying Theme Portfolio as purchaser the
right (but not the obligation) to sell a specified amount of currency at the
exercise price at any time until (American style) or on (European style) the
expiration date of the option. A call option gives an Underlying Theme Portfolio
as purchaser the right (but not the obligation) to purchase a specified amount
of currency at the exercise price at any time until (American style) or on
(European style) the expiration date of the option. An Underlying Theme
Portfolio might purchase a currency put option, for example, to protect itself
against a decline in the dollar value of a currency in which it holds or
anticipates holding securities. If the currency's value should decline against
the dollar, the loss in currency value should be offset, in whole or in part, by
an increase in the value of the put. If the value of the currency instead should
rise against the dollar, any gain to an Underlying Theme Portfolio would be
reduced by the premium it had paid for the put option. A currency call option
might be purchased, for example, in anticipation of, or to protect against, a
rise in the value against the dollar of a currency in which an Underlying Theme
Portfolio anticipates purchasing securities.
Options may be either listed on an exchange or traded in over-the-counter
("OTC") markets. Listed options are third-party contracts (i.e., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation) and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. An Underlying Theme Portfolio will not purchase an OTC option unless it
believes that daily valuations for such options are readily obtainable. OTC
options differ from exchange-traded options in
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that OTC options are transacted with dealers directly and not through a clearing
corporation (which guarantees performance). Consequently, there is a risk of
non-performance by the dealer. Since no exchange is involved, OTC options are
valued on the basis of an average of the last bid prices obtained from dealers,
unless a quotation from only one dealer is available, in which case only that
dealer's price will be used. In the case of OTC options, there can be no
assurance that a liquid secondary market will exist for any particular option at
any specific time.
The staff of the SEC considers purchased OTC options to be illiquid
securities. An Underlying Theme Portfolio may also sell OTC options and, in
connection therewith, segregate assets or cover its obligations with respect to
OTC options written by it. The assets used as cover for OTC options written by
an Underlying Theme Portfolio will be considered illiquid unless the OTC options
are sold to qualified dealers who agree that the Underlying Theme Portfolio may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC option written
subject to this procedure would be considered illiquid only to the extent that
the maximum repurchase price under the formula exceeds the intrinsic value of
the option.
An Underlying Theme Portfolio's ability to establish and close out positions
in exchange-listed options depends on the existence of a liquid market. Each
Underlying Theme Portfolio intends to purchase or write only those
exchange-traded options for which there appear to be liquid secondary markets.
However, there can be no assurance that such a market will exist at any
particular time. Closing transactions can be made for OTC options only by
negotiating directly with the contra party or by a transaction in the secondary
market if any such market exists. Although an Underlying Theme Portfolio will
enter into OTC options only with contra parties that are expected to be capable
of entering into closing transactions with it, there is no assurance that the
Underlying Theme Portfolio will in fact be able to close out an OTC option
position at a favorable price prior to expiration. In the event of insolvency of
the contra party, the Underlying Theme Portfolio might be unable to close out an
OTC option position at any time prior to its expiration.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or
futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. When an Underlying
Theme Portfolio writes a call on an index, it receives a premium and agrees
that, prior to the expiration date, the purchaser of the call, upon exercise of
the call, will receive from the Underlying Theme Portfolio an amount of cash if
the closing level of the index upon which the call is based is greater than the
exercise price of the call. The amount of cash is equal to the difference
between the closing price of the index and the exercise price of the call times
a specified multiple (the "multiplier"), which determines the total dollar value
for each point of such difference. When an Underlying Theme Portfolio buys a
call on an index, it pays a premium and has the same rights as to such call as
are indicated above. When an Underlying Theme Portfolio buys a put on an index,
it pays a premium and has the right, prior to the expiration date, to require
the seller of the put, upon the Underlying Theme Portfolio's exercise of the
put, to deliver to the Underlying Theme Portfolio an amount of cash if the
closing level of the index upon which the put is based is less than the exercise
price of the put, which amount of cash is determined by the multiplier, as
described above for calls. When the Underlying Theme Portfolio writes a put on
an index, it receives a premium and the purchaser has the right, prior to the
expiration date, to require the Underlying Theme Portfolio to deliver to it an
amount of cash equal to the difference between the closing level of the index
and the exercise price times the multiplier, if the closing level is less than
the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when an Underlying Theme
Portfolio writes a call on an index it cannot provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. An Underlying Theme Portfolio can offset some of the risk of writing
a call index option position by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, an Underlying
Theme Portfolio cannot, as a practical matter, acquire and hold a portfolio
containing exactly the same securities as underlie the index and, as a result,
bears a risk that the value of the securities held will vary from the value of
the index.
Even if an Underlying Theme Portfolio could assemble a securities portfolio
that exactly reproduced the composition of the underlying index, it still would
not be fully covered from a risk standpoint because of the "timing risk"
inherent in writing index options. When an index option is exercised, the amount
of cash that the holder is entitled to receive is determined by the difference
between the exercise price and the closing index level on the date when the
option is exercised. As with other kinds of options, the Underlying Theme
Portfolio, as the call writer, will not know that it has been assigned until the
next business day at the earliest. The time lag between exercise and notice of
assignment poses no risk for the writer of a covered call on a specific
underlying security, such as common stock, because there the writer's 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
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already owns the underlying security, it can satisfy its settlement obligations
by simply delivering it, and the risk that its value may have declined since the
exercise date is borne by the exercising holder. In contrast, even if the writer
of an index call holds securities that exactly match the composition of the
underlying index, it will not be able to satisfy its assignment obligations by
delivering those securities against payment of the exercise price. Instead, it
will be required to pay cash in an amount based on the closing index value on
the exercise date; and by the time it learns that it has been assigned, the
index may have declined, with a corresponding decline in the value of its
securities portfolio. This "timing risk" is an inherent limitation on the
ability of index call writers to cover their risk exposure by holding securities
positions.
If an Underlying Theme Portfolio purchases an index option and exercises it
before the closing index value for that day is available, it runs the risk that
the level of the underlying index may subsequently change. If such a change
causes the exercised option to fall out-of-the-money, the Underlying Theme
Portfolio will be required to pay the difference between the closing index value
and the exercise price of the option (times the applicable multiplier) to the
assigned writer.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each Underlying Theme Portfolio may enter into interest rate, currency or
stock index futures contracts (collectively, "Futures" or "Futures Contracts")
as a hedge against changes in prevailing levels of interest rates, currency
exchange rates or stock price levels, respectively, in order to establish more
definitely the effective return on securities or currencies held or intended to
be acquired by it. An Underlying Theme Portfolio's hedging may include sales of
Futures as an offset against the effect of expected increases in interest rates,
and decreases in currency exchange rates and stock prices, and purchases of
Futures as an offset against the effect of expected declines in interest rates,
and increases in currency exchange rates or stock prices.
Each Underlying Theme Portfolio only will enter into Futures Contracts that
are traded on futures exchanges and are standardized as to maturity date and
underlying financial instrument. Futures exchanges and trading thereon in the
United States are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission ("CFTC"). Futures are exchanged in London at the
London International Financial Futures Exchange.
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce an Underlying Theme Portfolio's exposure to interest rate,
currency exchange rate and stock market fluctuations, an Underlying Theme
Portfolio may be able to hedge its exposure more effectively and at a lower cost
through using Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (security
or currency) for a specified price at a designated date, time and place. A stock
index Futures Contract provides for the delivery, at a designated date, time and
place, of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of trading on the contract
and the price at which the Futures Contract is originally struck; no physical
delivery of stocks comprising the index is made. Brokerage fees are incurred
when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment
for financial instruments or currencies, Futures Contracts usually are closed
out before the delivery date. Closing out an open Futures Contract sale or
purchase is effected by entering into an offsetting Futures Contract purchase or
sale, respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Underlying Theme Portfolio
realizes a gain; if it is more, the Underlying Theme Portfolio realizes a loss.
Conversely, if the offsetting sale price is more than the original purchase
price, the Underlying Theme Portfolio realizes a gain; if it is less, the
Underlying Theme Portfolio realizes a loss. The transaction costs must also be
included in these calculations. There can be no assurance, however, that an
Underlying Theme Portfolio will be able to enter into an offsetting transaction
with respect to a particular Futures Contract at a particular time. If an
Underlying Theme Portfolio is not able to enter into an offsetting transaction,
it will continue to be required to maintain the margin deposits on the Futures
Contract.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one Futures Contract of September Deutschemarks on an
exchange may be fulfilled at any time before delivery under the Futures Contract
is required (i.e., on a specified date in September, the "delivery month") by
the purchase of another Futures Contract of September Deutschemarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Underlying
Theme Portfolio.
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Each Underlying Theme Portfolio's Futures transactions will be entered into
for hedging purposes only; that is, Futures Contracts will be sold to protect
against a decline in the price of securities or currencies that an Underlying
Theme Portfolio owns, or Futures Contracts will be purchased to protect an
Underlying Theme Portfolio against an increase in the price of securities or
currencies it has committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by an Underlying Theme Portfolio in order to initiate Futures trading
and maintain its open positions in Futures Contracts. A margin deposit made when
the Futures Contract is entered into ("initial margin") is intended to ensure
the Underlying Theme Portfolio's performance under the Futures Contract. The
margin required for a particular Futures Contract is set by the exchange on
which the Futures Contract is traded and may be significantly modified from time
to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which the Underlying Theme Portfolio entered into
the Futures Contract will be made on a daily basis as the price of the
underlying security, currency or index fluctuates making the Futures Contract
more or less valuable, a process known as marking-to-market.
Risks of Using Futures Contracts. The prices of Futures Contracts are volatile
and are influenced by, among other things, actual and anticipated changes in
interest rates and currency exchange rates, and in stock market movements, which
in turn are affected by fiscal and monetary policies and national and
international political and economic events.
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the securities or currencies in an Underlying Theme
Portfolio's portfolio being hedged. The degree of imperfection of correlation
depends upon circumstances such as variations in speculative market demand for
Futures and for securities or currencies, including technical influences in
Futures trading; and differences between the financial instruments being hedged
and the instruments underlying the standard Futures Contracts available for
trading. A decision of whether, when and how to hedge involves skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in
Futures Contract and options on Futures Contracts prices during a single trading
day. The daily limit establishes the maximum amount that the price of a Futures
Contract or option may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular type of Futures Contract or option, no trades may be made on that
day at a price beyond that limit. The daily limit governs only price movement
during a particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions. Futures
Contracts and option prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of positions and subjecting some traders to substantial
losses.
If an Underlying Theme Portfolio were unable to liquidate a Futures or option
on Futures position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Underlying
Theme Portfolio would continue to be subject to market risk with respect to the
position. In addition, except in the case of purchased options, the Underlying
Theme Portfolio would continue to be required to make daily variation margin
payments and might be required to maintain the position being hedged by the
Future or option or to maintain cash or securities in a segregated account.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price
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distortions. In addition, activities of large traders in both the Futures and
securities markets involving arbitrage, "program trading" and other investment
strategies might result in temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the Futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account,
which represents the amount by which the market price of the Futures Contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the Futures Contract. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the securities, currencies
or index upon which the Futures Contract is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If an Underlying Theme Portfolio writes an option on a Futures Contract, it
will be required to deposit initial and variation margin pursuant to
requirements similar to those applicable to Futures Contracts. Premiums received
from the writing of an option on a Futures Contract are included in the initial
margin deposit.
An Underlying Theme Portfolio may seek to close out an option position by
selling an option covering the same Futures Contract and having the same
exercise price and expiration date. The ability to establish and close out
positions on such options is subject to the maintenance of a liquid secondary
market.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that an Underlying Theme Portfolio enters into Futures
Contracts, options on Futures Contracts and options on foreign currencies traded
on a CFTC-regulated exchange, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the liquidation value of the Underlying
Theme Portfolio, after taking into account unrealized profits and unrealized
losses on any contracts it has entered into. In general, a call option on a
Futures Contract is "in-the-money" if the value of the underlying Futures
Contract exceeds the strike, i.e., exercise, price of the call; a put option on
a Futures Contract is "in-the-money" if the value of the underlying Futures
Contract is exceeded by the strike price of the put. This guideline may be
modified by the applicable Board, without a shareholder vote. This limitation
does not limit the percentage of an Underlying Theme Portfolio's assets at risk
to 5%.
FORWARD CONTRACTS
A Forward Contract is an obligation, usually arranged with a commercial bank
or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. An Underlying
Theme Portfolio either may accept or make delivery of the currency at the
maturity of the Forward Contract. An Underlying Theme Portfolio may also, if its
contra party agrees prior to maturity, enter into a closing transaction
involving the purchase or sale of an offsetting contract.
An Underlying Theme Portfolio engages in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates.
An Underlying Theme Portfolio might sell a particular foreign currency forward,
for example, when it holds bonds denominated in a foreign currency but
anticipates, and seeks to be protected against, a decline in the currency
against the U.S. dollar. Similarly, an Underlying Theme Portfolio might sell the
U.S. dollar forward when it holds bonds denominated in U.S. dollars but
anticipates, and seeks to be protected against, a decline in the U.S. dollar
relative to other currencies. Further, an Underlying Theme Portfolio might
purchase a currency forward to "lock in" the price of securities denominated in
that currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
Forward Contract generally has no deposit requirement, and no commissions
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are charged at any stage for trades. Each Underlying Theme Portfolio will enter
into such Forward Contracts with major U.S. or foreign banks and securities or
currency dealers in accordance with guidelines approved by the applicable Board.
An Underlying Theme Portfolio may enter into Forward Contracts either with
respect to specific transactions or with respect to overall investments of that
Underlying Theme Portfolio. The precise matching of the Forward Contract amounts
and the value of specific securities generally will not be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the Forward Contract is entered into and the date it matures. Accordingly,
it may be necessary for that Underlying Theme Portfolio to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Underlying Theme Portfolio is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency the Underlying Theme Portfolio is obligated to deliver. The projection
of short-term currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly uncertain.
Forward Contracts involve the risk that anticipated currency movements will not
be predicted accurately, causing an Underlying Theme Portfolio to sustain losses
on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring an Underlying Theme
Portfolio to sell a currency, it either may sell a security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which it will obtain, on the same maturity date, the same amount of
the currency that it is obligated to deliver. Similarly, an Underlying Theme
Portfolio may close out a Forward Contract requiring it to purchase a specified
currency by entering into a second contract, if its contra party agrees,
entitling it to sell the same amount of the same currency on the maturity date
of the first contract. An Underlying Theme Portfolio would realize a gain or
loss as a result of entering into such an offsetting Forward Contract under
either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
the offsetting contract.
The cost to an Underlying Theme Portfolio of engaging in Forward Contracts
varies with factors such as the currencies involved, the length of the contract
period and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are involved.
The use of Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities an Underlying Theme Portfolio owns or intends to
acquire, but it does establish a rate of exchange in advance. In addition, while
Forward Contract sales limit the risk of loss due to a decline in the value of
the hedged currencies, they also limit any potential gain that might result
should the value of the currencies increase.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
An Underlying Theme Portfolio may use options on foreign currencies, Futures
on foreign currencies, options on Futures on foreign currencies and Forward
Contracts to hedge against movements in the values of the foreign currencies in
which the Underlying Theme Portfolio's securities are denominated. Such currency
hedges can protect against price movements in a security that the Underlying
Theme Portfolio owns or intends to acquire that are attributable to changes in
the value of the currency in which it is denominated. Such hedges do not,
however, protect against price movements in the securities that are attributable
to other causes.
An Underlying Theme Portfolio might seek to hedge against changes in the value
of a particular currency when no Futures Contract, Forward Contract or option
involving that currency is available or one of such contracts is more expensive
than certain other contracts. In such cases, the Underlying Theme Portfolio may
hedge against price movements in that currency by entering into a contract on
another currency or basket of currencies, the values of which the portfolio
manager believes will have a positive correlation to the value of the currency
being hedged. The risk that movements in the price of the contract will not
correlate perfectly with movements in the price of the currency being hedged is
magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward
Contracts and options on foreign currencies depends on the value of the
underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of Futures Contracts, Forward
Contracts or options, the Underlying Theme Portfolio could be disadvantaged by
dealing in the odd lot market (generally consisting of transactions of less than
$1 million) for the underlying foreign currencies at prices that are less
favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot
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transactions where rates might be less favorable. The interbank market in
foreign currencies is a global, round-the-clock market. To the extent the U.S.
options or Futures markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements might take place in
the underlying markets that cannot be reflected in the markets for the Futures
contracts or options until they reopen.
Settlement of Futures Contracts, Forward Contracts and options involving
foreign currencies might be required to take place within the country issuing
the underlying currency. Thus, an Underlying Theme Portfolio might be required
to accept or make delivery of the underlying foreign currency in accordance with
any U.S. or foreign regulations regarding the maintenance of foreign banking
arrangements by U.S. residents and might be required to pay any fees, taxes and
charges associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other
than options purchased by an Underlying Theme Portfolio) expose the Underlying
Theme Portfolio to an obligation to another party. An Underlying Theme Portfolio
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, currencies, or other options,
Forward Contracts or Futures Contracts or (2) cash, receivables and short-term
debt securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Underlying Theme
Portfolio will comply with SEC guidelines regarding cover for these instruments
and, if the guidelines so require, set aside cash or liquid securities.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Forward Contract, Futures Contract or option is
open, unless they are replaced with other appropriate assets. If a large portion
of an Underlying Theme Portfolio's assets is used for cover or otherwise set
aside, it could affect portfolio management or the Underlying Theme Portfolio's
ability to meet redemption requests or other current obligations.
RISK FACTORS OF THE UNDERLYING THEME PORTFOLIOS
GENERAL
Equity securities, particularly common stocks, generally represent the most
junior position in an issuer's capital structure, and entitle holders to an
interest in the assets of the issuer, if any, remaining after all more senior
claims have been satisfied. The value of equity securities held by an Underlying
Theme Portfolio will fluctuate in response to general market and economic
developments, as well as developments affecting the particular issuers of such
securities. The value of debt securities held by an Underlying Theme Portfolio
generally will fluctuate with changes in the perceived creditworthiness of the
issuers of such securities and interest rates.
FINANCIAL SERVICES FUND
Companies in the financial services sector are subject to rapid business
changes, significant competition, value fluctuations due to the concentration of
loans in particular industries significantly affected by economic conditions
(such as real estate or energy), and volatile performance dependent upon the
availability and cost of capital and prevailing interest rates. In addition,
general economic conditions significantly affect these companies. Credit and
other losses resulting from the financial difficulty of borrowers or other third
parties potentially may have an adverse effect on companies in these industries.
Foreign banks, particularly those of Japan, have reported financial difficulties
attributed to increased competition, regulatory changes, and general economic
difficulties.
The financial services area in the United States currently is changing
relatively rapidly as existing distinctions between various financial service
segments become less clear. For instance, recent business combinations have
included insurance, finance, and securities brokerage under single ownership.
Some primarily retail corporations have expanded into securities and insurance
fields. Investment banking, securities brokerage, and investment advisory
companies are subject to government regulation and risk due to securities
trading and underwriting activities.
Many of the investment considerations discussed in connection with banks,
savings institutions and loan associations, and finance companies also apply to
insurance companies. The performance of insurance company investments will be
subject to risk from several factors. The earnings of insurance companies will
be affected by interest rates, pricing (including severe pricing competition
from time to time), claims activity, marketing competition and general economic
conditions. Particular insurance lines also will be influenced by specific
matters. Property and casualty insurance profits may be affected by certain
weather catastrophes and other disasters. Life and health insurers' profits may
be affected by mortality and morbidity rates. Individual companies may be
exposed to material risks, including reserve inadequacy,
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problems in investment portfolios (due to real estate or "junk" bond holdings,
for example), and the inability to collect from reinsurance carriers. Insurance
companies are subject to extensive governmental regulation, including the
imposition of maximum rate levels, which may not be adequate for some lines of
business. Proposed or potential anti-trust or tax law changes also may affect
adversely insurance companies' policy sales, tax obligations, and profitability.
INFRASTRUCTURE FUND
The nature of regulation of infrastructure industries continues to evolve in
both the United States and foreign countries, and changes in governmental policy
and the need for regulatory approvals may have a material effect on the products
and services offered by companies in the infrastructure industries. Electric,
gas, water, and most telecommunications companies in the United States, for
example, are subject to both federal and state regulation affecting permitted
rates of return and the kinds of services that may be offered. Government
regulation may also hamper the development of new technologies. Adverse
regulatory developments could therefore potentially affect the performance of
the Fund.
In addition, many infrastructure companies have historically been subject to
the risks attendant to increases in fuel and other operating costs, high
interest costs on borrowed funds, costs associated with compliance with
environmental, and other safety regulations and changes in the regulatory
climate. Changes in prevailing interest rates may also affect the Infrastructure
Fund's share values because prices of equity and debt securities of
infrastructure companies tend to increase when interest rates decline and
decrease when interest rates rise. Further, competition is intense for many
infrastructure companies. As a result, many of these companies may be adversely
affected in the future and such companies may be subject to increased share
price volatility. In addition, many companies have diversified into oil and gas
exploration and development, and therefore returns may be more sensitive to
energy prices.
Some infrastructure companies, such as water supply companies, operate in
highly fragmented market sectors due to local ownership. In addition, some of
these companies are mature and experience little or no growth. Either of these
factors could have a material effect on infrastructure companies and could
therefore affect the performance of the Fund.
RESOURCES FUND
The Fund invests in companies that engage in the exploration, development, and
distribution of coal, oil and gas in the United States. These companies are
subject to significant federal and state regulation, which may affect rates of
return on such investments and the kinds of services that may be offered. In
addition, many natural resource companies historically have been subject to
significant costs associated with compliance with environmental and other safety
regulations. Governmental regulation may also hamper the development of new
technologies.
Further, competition is intense for many natural resource companies. As a
result, many of these companies may be adversely affected in the future and the
value of the securities issued by such companies may be subject to increased
price volatility. Such companies may also be subject to irregular fluctuations
in earnings due to changes in the availability of money, the level of interest
rates, and other factors.
The value of securities of natural resource companies will fluctuate in
response to market conditions for the particular natural resources with which
the issuers are involved. The price of natural resources will fluctuate due to
changes in worldwide levels of inventory, and changes, perceived or actual, in
production and consumption. With respect to precious metals, such price
fluctuations may be substantial over short periods of time. In addition, the
value of natural resources may fluctuate directly with respect to various stages
of the inflationary cycle and perceived inflationary trends and are subject to
numerous factors, including national and international politics.
CONSUMER PRODUCTS AND SERVICES FUND
The performance of consumer products and services companies relates closely to
the actual and perceived performance of the overall economy, interest rates, and
consumer confidence. In addition, many consumer products and services companies
have unpredictable earnings, due in part to changes in consumer tastes and
intense competition. As a result of either of these factors, consumer products
and services companies may be subject to increased share price volatility.
The consumer products and services industry may also be subject to greater
government regulation than many other industries. Changes in governmental policy
and the need for regulatory approvals may have a material effect on the products
and services offered by companies in the consumer products and services
industries. Such governmental regulations may also hamper the development of new
business opportunities.
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HEALTH CARE FUND
Health care industries generally are subject to substantial governmental
regulation. Changes in governmental policy or regulation could have a material
effect on the demand for products and services offered by companies in the
health care industries and therefore could affect the performance of the Fund.
Regulatory approvals are generally required before new drugs and medical devices
or procedures may be introduced and before the acquisition of additional
facilities by health care providers. In addition, the products and services
offered by such companies may be subject to rapid obsolescence caused by
technological and scientific advances.
TELECOMMUNICATIONS FUND
Telecommunications industries may be subject to greater governmental
regulation than many other industries and changes in governmental policy and the
need for regulatory approvals may have a material effect on the products and
services offered by companies in the telecommunications industries. Telephone
operating companies in the United States, for example, are subject to both
federal and state regulation affecting permitted rates of return and the kinds
of services that may be offered. In addition, certain types of companies in the
telecommunications industries are engaged in fierce competition for market share
that could result in increased share price volatility.
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 each may invest up to 20%, and Health
Care Fund, Telecommunications Fund and Financial Services Portfolio each may
invest up to 5% 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 is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by 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." See
Appendix B for a description of the various debt ratings.
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.
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Lower quality debt securities of corporate issuers frequently have call or
buy-back features that permit the issuer to call or repurchase the security from
an Underlying Theme Portfolio. If an issuer exercises these provisions in a
declining interest rate market, the Underlying Theme Portfolio may have to
replace the security with a lower yielding security, resulting in a decreased
return for investors. In addition, the Underlying Theme Portfolios may have
difficulty disposing of lower quality securities because they may have a thin
trading market. There may be no established retail secondary market for many of
these securities, and each Underlying Theme Portfolio anticipates that such
securities could be sold only to a limited number of dealers or institutional
investors. The lack of a liquid secondary market also may have an adverse impact
on market prices of such instruments and may make it more difficult for the
Underlying Theme Portfolios to obtain accurate market quotations for purposes of
valuing their portfolio investments. The Underlying Theme Portfolios may also
acquire lower quality debt securities during an initial underwriting or which
are sold without registration under applicable securities laws. Such securities
involve special considerations and risks.
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower quality debt securities in which the Underlying Theme
Portfolios may invest include: (i) potential adverse publicity; (ii) heightened
sensitivity to general economic or political conditions; and (iii) the likely
adverse impact of a major economic recession. An Underlying Theme Portfolio may
also incur additional expenses to the extent it is required to seek recovery
upon a default in the payment of principal or interest on portfolio holdings,
and the Underlying Theme Portfolio may have limited legal recourse in the event
of a default.
AIM 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.
INVESTING IN SMALLER COMPANIES
While an Underlying Theme Portfolio's holdings normally will include
securities of established suppliers of traditional products and services, an
Underlying Theme Portfolio may invest in smaller companies which can benefit
from the development of new products and services. These smaller companies 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.
PURCHASES AND REDEMPTIONS
From time to time, the Underlying Theme Portfolios may experience relatively
large purchases or redemptions due to rebalancing of the Fund by AIM. This may
have a material effect on the Underlying Theme Portfolios, because Underlying
Theme Portfolios that experience redemptions as a result of the rebalancing may
have to sell portfolio securities and because Underlying Theme Portfolios 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
Portfolios 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.
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.
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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 AIM, in accordance with procedures approved by
that Board. AIM 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). AIM 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, AIM 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. AIM believes that carefully
selected investments in joint ventures, cooperatives, partnerships and state
enterprises that are illiquid (collectively, "Special Situations") could enable
an Underlying Theme Portfolio to achieve capital appreciation substantially
exceeding the appreciation it would realize if it did not make such investments.
However, in order to attempt to limit investment risk, each Underlying Theme
Portfolio will invest no more than 5% of its total assets in Special Situations.
FOREIGN SECURITIES
Political, Social and Economic Risks. Individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, rate of savings and capital
reinvestment, resource self sufficiency and balance of payments positions.
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, confiscatory taxation or other confiscation by
any country, an Underlying Theme Portfolio could lose its entire investment in
any such country. In addition, governmental regulation in certain foreign
countries may impose interest rate controls, credit controls, and price
controls. These factors could have a material effect on foreign companies and
could therefore affect the performance of the Underlying Theme Portfolios.
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;
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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 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.
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 has established a common European currency
for participating countries which is known as the "euro." Each participating
country supplemented 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 introduction of the euro presents unique risks and uncertainties,
including how outstanding financial contracts will be treated after January 1,
1999; the establishment of exchange rates for existing currencies and the euro;
and the
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creation of suitable clearing and settlement systems for the euro. These and
other factors could cause market disruptions and could adversely affect the
value of securities held by the Fund.
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. AIM will consider such difficulties when determining the
allocation of an Underlying Theme Portfolio's assets, although AIM 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 charge
higher custody fees than those attributable to domestic investing and 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 "Dividends, Distributions and
Tax Matters."
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,
the 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. AIM believes that this deregulation should
improve the prospects for economic growth in many Western European countries.
Among other things, the deregulation could enable companies domiciled in one
country to avail themselves of lower labor costs existing in other countries. In
addition, this deregulation could benefit companies domiciled in one country by
opening additional markets for their goods and services in other countries.
Since, however, it is not clear what the exact form or effect of these Common
Market reforms will be on business in Western Europe, it is impossible to
predict the long-term impact of the implementation of these programs on the
securities owned by an Underlying Theme Portfolio.
Special Considerations Affecting Russia and Eastern European
Countries. Investing in Russia and Eastern European countries involves a high
degree of risk and special considerations not typically associated with
investing in the U.S. securities markets and should be considered highly
speculative. Such risks include the following: (1) delays in settling portfolio
transactions and risk of loss arising out of the system of share registration
and custody; (2) the risk that it may be impossible or more difficult than in
other countries to obtain and/or enforce a 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
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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 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. Many investments in
emerging markets are considered speculative and therefore may offer greater
return potential, but have significantly greater risk. 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
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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"). AIM 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 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
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(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 foregoing investment limitations, the Fund may invest in
Underlying Theme Funds that have adopted investment limitations that may be more
or less restrictive than those listed above. As a result, the Fund may engage
indirectly in investment strategies that are prohibited under the investment
limitations listed above. The investment limitations and other investment
policies and restrictions of each Underlying Theme Fund are described in its
prospectus and statement of additional information.
Pursuant to Section 12(d)(1)(G) of the 1940 Act, the Fund may invest
substantially all of its assets in the Underlying Theme Funds.
INVESTMENT LIMITATIONS OF THE UNDERLYING THEME FUNDS AND PORTFOLIOS
FEEDER FUNDS
The Financial Services Fund, Infrastructure Fund, Resources Fund and Consumer
Products and Services Fund (each, a "Feeder Fund," and collectively, the "Feeder
Funds") each has the following fundamental investment policy to enable it to
invest in the Financial Services Portfolio, Infrastructure Portfolio, Resources
Portfolio and Consumer Products and Services Portfolio (each a "Portfolio," and
collectively, the "Portfolios"), respectively:
Notwithstanding any other investment policy of the Fund, the Fund may invest
all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
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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;
(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;
34
<PAGE> 69
(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.
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
35
<PAGE> 70
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.
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.
36
<PAGE> 71
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 AIM. As stated in the Prospectus, AIM 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, AIM 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, AIM 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 AIM generally seeks reasonably competitive
commission rates and spreads, payment of the lowest commission or spread is not
necessarily consistent with the best net results. While each Underlying Theme
Portfolio may engage in soft dollar arrangements for research services, as
described below, it has no obligation to deal with any broker/dealer or group of
broker/dealers in the execution of portfolio transactions.
Consistent with the interests of each Underlying Theme Portfolio, AIM 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
AIM for its use in managing that Underlying Theme Portfolio and its other
advisory accounts. Such services may include
37
<PAGE> 72
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 AIM 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 AIM determines in good faith
that such commission is reasonable in terms either of that particular
transaction or the overall responsibility of AIM 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
receives over the long term. Research services may also be received from dealers
who execute portfolio transactions in OTC markets.
AIM 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 AIM 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 AIM 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, AIM may consider a broker/dealer's sale of the
shares of the Underlying Theme Funds and the other portfolios for which AIM
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. Each Board has
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.
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 Portfolios and their corresponding Portfolios have ranged from
35% to 392%
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<PAGE> 73
during their most recent fiscal years. There is no assurance that the turnover
rates of the Underlying Theme Portfolios 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 Portfolios.
For the fiscal year ended December 31, 1998 and the period of September 15, 1997
through December 31, 1997, the portfolio turnover rates were 28% and 1%,
respectively.
MANAGEMENT
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below. Unless otherwise
indicated, the address of each Executive Officer is 11 Greenway Plaza, Suite
100, Houston, Texas 77046.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
--------------------- ------------------- ------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM, (52) 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); and
Director, "R" Homes, Inc. and
various other companies.
- ----------------------------------------------------------------------------------------------------
FRANK S. BAYLEY, (59) Trustee Partner, law firm of Baker &
Two Embarcadero Center McKenzie; and Director and Chairman,
Suite 2400 C.D. Stimson Company (a private
San Francisco, CA 94111 investment company).
- ----------------------------------------------------------------------------------------------------
ARTHUR C. PATTERSON, (55) Trustee Managing Partner, Accel Partners (a
428 University Avenue venture capital firm); and Director,
Palo Alto, CA 94301 Viasoft and PageMart, Inc. (both
public software companies) and
several other privately held
software and communications
companies.
- ----------------------------------------------------------------------------------------------------
RUTH H. QUIGLEY, (64) Trustee Private investor; and President,
1055 California Street Quigley Friedlander & Co., Inc. (a
San Francisco, CA 94108 financial advisory services firm)
from 1984 to 1986.
- ----------------------------------------------------------------------------------------------------
MELVILLE B. COX, (55) Vice President Vice President and Chief Compliance
Officer, A I M Advisors, Inc., A I M
Capital Management, Inc., A I M
Distributors, Inc., A I M Fund
Services, Inc. and Fund Management
Company.
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* A trustee who is an "interested person" of the Trust and A I M Advisors, Inc.
as defined in the 1940 Act.
39
<PAGE> 74
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
--------------------- ------------------- ------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
GARY T. CRUM, (51) 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.
- ----------------------------------------------------------------------------------------------------
CAROL F. RELIHAN, (44) Vice President Director, Senior Vice President,
General Counsel and Secretary, A I M
Advisors, Inc.; Senior 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.
- ----------------------------------------------------------------------------------------------------
SAMUEL D. SIRKO (39) Vice President and Secretary Assistant General Counsel and
Assistant Secretary of 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; and Vice
President, Assistant General Counsel
and Assistant Secretary of A I M
Advisors, Inc.
- ----------------------------------------------------------------------------------------------------
DANA R. SUTTON, (40) Vice President and Treasurer Vice President and Fund Controller,
A I M Advisors, Inc.; and Assistant
Vice President and Assistant
Treasurer, Fund Management Company.
- ----------------------------------------------------------------------------------------------------
</TABLE>
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 AIM 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. For the fiscal year ended
December 31, 1998, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms. Quigley, who
are not directors, officers or employees of AIM or any affiliated company,
received total compensation of $7,700, $7,100, $7,400 and $7,700, respectively,
from the Trust for their services as Trustees. For the fiscal year ended
December 31, 1998, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who
are not directors, officers or employees of AIM or any other affiliated company,
received total compensation of $106,850, $90,650, $98,600 and $99,500,
respectively, from the investment companies managed or administered by AIM for
which he or she served as a Trustee. Fees and expenses disbursed to the Trustees
contained no accrued or payable pension or retirement benefits. Other Trustees
and officers receive no compensation or expense reimbursement from the Trust. As
of April 1, 1999, the Trustees and officers of the Trust, as a group, owned less
than 1% of the outstanding shares of any class of the Trust.
MANAGEMENT SERVICES RELATING TO THE FUND
AIM serves as the investment advisor and administrator to the Fund under an
investment management and administration contract ("Management Contract")
between the Trust and AIM. AIM does not receive a fee for providing management
services to the Fund.
AIM was organized in 1976, and along with its subsidiaries, manages or advises
approximately 110 investment 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
40
<PAGE> 75
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.
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.
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 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
Class A and C 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.
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;
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.
41
<PAGE> 76
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 may from time to time waive or reduce any portion of its
12b-1 fee for Class A shares and Class C shares. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM Distributors will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Fund's detriment during the
period stated in the agreement between AIM Distributors and the Fund.
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 Funds, pursuant to the respective Plans. 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.
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.
Prior to June 1, 1998, the Fund had a different Rule 12b-1 plan, which
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.
42
<PAGE> 77
For the fiscal period ended December 31, 1998, the Fund paid the following
amounts under the Prior Plan and the current plan:
<TABLE>
<CAPTION>
% OF CLASS AVERAGE DAILY NET ASSETS
-------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- -------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Prior Plan............. $40,450 $102,970 $ 512 0.50% 1.00% 1.00%
Current Plan........... $58,122 $155,976 $1,568 0.50% 1.00% 1.00%
</TABLE>
An estimate of fees by category paid by the Fund with regard to Class A, Class
B and Class C shares during the fiscal period ended December 31, 1998 follows:
<TABLE>
<S> <C>
CLASS A
Advertising............................................... $ 20,406
Printing and Mailing prospectuses, semi-annual reports and
annual reports (other than to current shareholders).... $ 1,583
Seminars.................................................. 0
Compensation to Underwriters to partially offset other
marketing expenses..................................... 0
Compensation to Dealers including Finder's Fees........... $ 76,681
Compensation to Sales Personnel........................... 0
CLASS B
Advertising............................................... $ 1,760
Printing and Mailing prospectuses, semi-annual reports and
annual reports (other than to current shareholders).... $ 166
Seminars.................................................. $ 385
Compensation to Underwriters to partially offset other
marketing expenses..................................... $194,474
Compensation to Dealers................................... $ 62,514
Compensation to Sales Personnel........................... 0
CLASS C
Advertising............................................... $ 484
Printing and Mailing prospectuses, semi-annual reports and
annual reports (other than to current shareholders).... 0
Seminars.................................................. 0
Compensation to Underwriters.............................. $ 1,567
Compensation to Dealers................................... $ 39
Compensation to Sales Personnel........................... 0
</TABLE>
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 from year to 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.
43
<PAGE> 78
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 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.
44
<PAGE> 79
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.
From time to time, AIM Distributors may transfer and sell its right to
payments under the Distribution Agreement relating to Class B Shares in order to
finance distribution expenditures in respect of Class B Shares.
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, 1998.
<TABLE>
<CAPTION>
JUNE 1, 1998 TO
JANUARY 1, 1998
---------------------
SALES AMOUNT
CHARGES RETAINED
------- --------
<S> <C> <C>
AIM Global Trends Fund...................................... $85,590 $14,589
</TABLE>
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 AIM
Distributors for the period of June 1, 1998 to December 31, 1998.
<TABLE>
<CAPTION>
JUNE 1, 1998 TO
DECEMBER 31, 1998
---------------------
SALES AMOUNT
CHARGES RETAINED
------- --------
<S> <C> <C>
AIM Global Trends Fund...................................... $5,303 $5,203
</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, 1998:
<TABLE>
<CAPTION>
1998
-------
<S> <C>
AIM Global Trends Fund...................................... $77,466
</TABLE>
SALES CHARGES AND DEALER CONCESSIONS
CATEGORY I. Certain AIM Funds are currently sold with a sales charge ranging
from 5.50% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds include Class A shares of each of AIM Advisor Flex Fund, AIM
Advisor International Value Fund, AIM Advisor Large Cap Value Fund, AIM Advisor
MultiFlex Fund, AIM Aggressive Growth Fund, AIM Asian Growth Fund, AIM Basic
Value Fund, AIM Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund,
AIM Constellation Fund, AIM European Development Fund, AIM Europe Growth Fund,
AIM Global Utilities Fund, AIM Global Growth & Income Fund, AIM International
Equity Fund, AIM Japan Growth Fund, AIM Large Cap Growth Fund, AIM Mid Cap
Equity Fund, AIM Mid Cap Opportunities Fund, AIM New Pacific Growth Fund, AIM
Select Growth Fund, AIM Small Cap Growth Fund, AIM Small Cap Opportunities Fund,
AIM Value Fund and AIM Weingarten Fund.
<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>
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>
45
<PAGE> 80
CATEGORY II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: the Class A shares of each of AIM Advisor Real Estate Fund,
AIM Balanced Fund, AIM Developing Markets Fund, AIM Emerging Markets Debt Fund,
AIM Global Aggressive Growth Fund, AIM Global Consumer Products and Services
Fund, AIM Global Financial Services Fund, AIM Global Government Income Fund, AIM
Global Growth Fund, AIM Global Health Care Fund, AIM Global Income Fund, AIM
Global Infrastructure Fund, AIM Global Resources Fund, AIM Global
Telecommunications Fund, AIM Global Trends Fund, AIM High Income Municipal Fund,
AIM High Yield Fund, AIM High Yield Fund II, AIM Income Fund, AIM Intermediate
Government Fund, AIM Latin American Fund, AIM Municipal Bond Fund, AIM Strategic
Income Fund and AIM Tax-Exempt Bond Fund of Connecticut.
<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>
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>
CATEGORY III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are the Class A shares of each of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund.
<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>
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 as set forth below.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. At the option of the dealer, such
incentives may take the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than Class A shares of each of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund as follows: 1% of the first $2 million of such
purchases, plus 0.80% of the next $1 million of such purchases, plus 0.50% of
the next $17 million of such purchases,
46
<PAGE> 81
plus 0.25% of amounts in excess of $20 million of such purchases. AIM
Distributors may make payments to dealers and institutions who are dealers of
record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), and which are sold at net
asset value and are not subject to a contingent deferred sales charge, in an
amount up to 0.10% of such purchases of Class A shares of AIM Limited Maturity
Treasury Fund, and in an amount up to 0.25% of such purchases of Class A shares
of AIM Tax-Free Intermediate Fund.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.00% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price of the Class C
shares sold by the dealer or institution, and will consist of a sales commission
of 0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge, (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. After the first full year, AIM Distributors will make such
payments quarterly to dealers and institutions based on the average net asset
value of Class C shares which are attributable to shareholders for whom the
dealers and institutions are designated as dealers of record. These commissions
are not paid on sales to investors exempt from the CDSC, including shareholders
of record on April 30, 1995, who purchase additional shares in any of the Funds
on or after May 1, 1995, and in circumstances where AIM Distributors grants an
exemption on particular transactions.
AIM Distributors may pay investment dealers or other financial service firms
for share purchases (measured on an annual basis) of Class A Shares of all AIM
Funds except AIM Limited Maturity Treasury Fund, AIM Tax-Free Intermediate Fund
and AIM Tax-Exempt Cash Fund sold at net asset value to an employee benefit plan
as follows: 1% of the first $2 million of such purchases, plus 0.80% of the next
$1 million of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in excess of $20 million of such purchases and
up to 0.10% of the net asset value of any Class A shares of AIM Limited Maturity
Treasury Fund sold at net asset value to an employee benefit plan in accordance
with this paragraph.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class
B and Class C shares of the AIM Funds will not be taken into account in
determining whether a purchase qualifies for a reduction in initial sales
charges.
The term "purchaser" means:
- 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"), if:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the Funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting an
application on behalf of each new participant with the contribution
transmittal;
47
<PAGE> 82
- 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 (SAR-SEP) or a Savings Incentive Match
Plans for Employees IRA (SIMPLE IRA), where the employer has notified the
distributor in writing that all of its related employee SEP, SAR-SEP or
SIMPLE IRA accounts should be linked; or
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company.
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge as provided herein.
1. LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for (i) Class A
shares of AIM Tax-Exempt Cash Fund, and AIM Cash Reserve Shares of AIM Money
Market Fund and (ii) Class B and Class C shares of the AIM Funds) within the
following 13 consecutive months. By marking the LOI section on the account
application and by signing the account application, the purchaser indicates that
he understands and agrees to the terms of the LOI and is bound by the provisions
described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
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2. RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund
and (ii) Class B and Class C shares of the AIM Funds) at the time of the
proposed purchase. Rights of Accumulation are also available to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992. To determine
whether or not a reduced initial sales charge applies to a proposed purchase,
AIM Distributors takes into account not only the money which is invested upon
such proposed purchase, but also the value of all shares of the AIM Funds
(except for (i) Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve
Shares of AIM Money Market Fund and (ii) Class B and Class C shares of the AIM
Funds) owned by such purchaser, calculated at their then current public offering
price. If a purchaser so qualifies for a reduced sales charge, the reduced sales
charge applies to the total amount of money then being invested by such
purchaser and not just to the portion that exceeds the breakpoint above which a
reduced sales charge applies. For example, if a purchaser already owns
qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest
an additional $20,000 in a fund, with a maximum initial sales charge of 5.50%,
the reduced initial sales charge of 5.25% will apply to the full $20,000
purchase and not just to the $15,000 in excess of the $25,000 breakpoint. To
qualify for obtaining the discount applicable to a particular purchase, the
purchaser or his dealer must furnish AFS with a list of the account numbers and
the names in which such accounts of the purchaser are registered at the time the
purchase is made.
PURCHASES AT NET ASSET VALUE
Purchases of shares of any of the AIM Funds at net asset value (without
payment of an initial sales charge) may be made in connection with: (a) the
reinvestment of dividends and distributions from a fund; (b) exchanges of shares
of certain other funds; (c) use of the reinstatement privilege; or (d) a merger,
consolidation or acquisition of assets of a fund.
The following purchasers will not pay initial sales charges on purchases of
Class A shares because there is a reduced sales effort involved in sales to
these purchasers:
- AIM Management and its affiliates, or their clients;
- Any current or retired officer, director or employee (and members of their
immediate family) of AIM Management, its affiliates or The AIM Family of
Funds--Registered Trademark--, and any foundation, trust or employee
benefit plan established exclusively for the benefit of, or by, such
persons;
- Any current or retired officer, director, or employee (and members of their
immediate family), of CIGNA Corporation or its affiliates, or of First Data
Investor Services Group; and any deferred compensation plan for directors of
Investment companies sponsored by CIGNA Investments, Inc. or its affiliates;
- Sales representatives and employees (and members of their immediate family)
of selling group members or financial institutions that have arrangements
with such selling group members;
- Purchases through approve fee-based programs;
- Employee benefit plans designated as qualified purchasers as defined above,
and non-qualified plans offered in conjunction therewith, provided the
initial investment in the plan(s) is at least $1 million; the sponsor signs
a $1 million LOI; the employer-sponsored plan(s) has at least 100 eligible
employees; or all plan transactions are executed through a single omnibus
account per Fund and the financial institution or service organization has
entered into the appropriate agreement with the distributor. Section 403(b)
plans sponsored by public educational institutions are not eligible for a
sales charge exception based on the aggregate investment made by the plan or
the number of eligible employees. Purchases of AIM Small Cap Opportunities
Fund by such plans are subject to initial sales charges;
- Shareholders of record or discretionary advised clients of any investment
advisor holding shares of AIM Weingarten Fund or AIM Constellation Fund on
September 8, 1996, or of AIM Charter Fund on November 17, 1986, who have
continuously owned shares having a market value of at least $500 and who
purchase additional shares of the same Fund;
- Unitholders of G/SET series unit investment trusts investing proceeds from
such trusts in shares of AIM Weingarten Fund or AIM Constellation Fund;
provided, however, prior to the termination date of the trusts, a unitholder
may invest proceeds from the redemption or repurchase of his units only when
the investment in shares of AIM Weingarten Fund and AIM Constellation Fund
is effected within 30 days of the redemption or repurchase;
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- A shareholder of a fund that merges or consolidates with an AIM Fund or that
sells its assets to an AIM Fund in exchange for shares of an AIM Fund;
- Shareholders of the GT Global funds as of April 30, 1987 who since that date
continually have owned shares of one or more of these funds; and
- Certain former AMA Investment Advisers' shareholders who became shareholders
of the AIM Global Health Care Fund in October 1989, and who have
continuously held shares in the GT Global funds since that time.
- Shareholders of record of Advisor Class shares of AIM International Growth
Fund or AIM Worldwide Growth Fund on February 12, 1999 who have continuously
owned shares of the AIM Funds.
As used above, immediate family includes an individual and his or her spouse,
children, parents and parents of spouse.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
CDSCs will not apply to the following:
- Additional purchases of Class C shares of AIM Advisor Flex Fund, AIM Advisor
International Value Fund, AIM Advisor Large Cap Value Fund, AIM Advisor
MultiFlex Fund and AIM Advisor Real Estate Fund by shareholders of record on
April 30, 1995, of these Funds, except that shareholders whose
broker-dealers maintain a single omnibus account with AFS on behalf of those
shareholders, perform sub-accounting functions with respect to those
shareholders, and are unable to segregate shareholders of record prior to
April 30, 1995, from shareholders whose accounts were opened after that date
will be subject to a CDSC on all purchases made after March 1, 1996;
- Redemptions following the death or post-purchase disability of (1) any
registered shareholders on an account or (2) a settlor of a living trust, of
shares held in the account at the time of death or initial determination of
post-purchase disability;
- Certain distributions from individual retirement accounts, Section 403(b)
retirement plans, Section 457 deferred compensation plans and Section 401
qualified plans, where redemptions result from (i) required minimum
distributions to plan participants or beneficiaries who are age 70 1/2 or
older, and only with respect to that portion of such distributions that does
not exceed 12% annually of the participant's or beneficiaries account value
in a particular AIM Fund; (ii) in kind transfers of assets where the
participant or beneficiary notifies the distributor of the transfer no later
than the time the transfer occurs; (iii) tax-free rollovers or transfers of
assets to another plan of the type described above invested in Class B or
Class C shares of one or more of the AIM Funds; (iv) tax-free returns of
excess contributions or returns of excess deferral amounts; and (v)
distributions on the death or disability (as defined in the Internal Revenue
Code of 1986, as amended) of the participant or beneficiary;
- Amounts from a Systematic Withdrawal Plan of up to an annual amount of 12%
of the account value on a per fund basis, at the time the withdrawal plan is
established, provided the investor reinvests his dividends;
- Liquidation by the Fund when the account value falls below the minimum
required account size of $500;
- Investment account(s) of AIM; and
- Class C shares where the investor's dealer or record notifies the
distributor prior to the time of investment that the dealer waives the
payment otherwise payable to him.
Upon the redemption of shares in Categories I and II purchased in amounts of
$1 million or more, no CDSC will be applied in the following situations:
- Shares held more than 18 months;
- Redemptions from employee benefit plans designated as qualified purchasers,
as defined above, where the redemptions are in connection with employee
terminations or withdrawals, provided the total amount invested in the plan
is at least $1,000,000; the sponsor signs a $1 million LOI; or the
employer-sponsored plan has at least 100 eligible employees; provided,
however, that 403(b) plans sponsored by public educational institutions
shall qualify for the CDSC waiver on the basis of the value of each plan
participant's aggregate investment in the AIM Funds, and not on the
aggregate investment made by the plan or on the number of eligible
employees;
- Private foundations or endowment funds;
- Redemption of shares by the investor where the investor's dealer waives the
amounts otherwise payable to it by the distributor and notifies the
distributor prior to the time of investment; and
- Shares acquired by exchange from Class A shares in Categories I and II
unless the shares acquired by exchange are redeemed within 18 months of the
original purchase of the Class A shares.
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HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Funds may be
purchased appears in the Prospectus under the caption "Purchasing Shares."
The sales charge normally deducted on purchases of Class A shares of the Funds
is used to compensate AIM Distributors and participating dealers for their
expenses incurred in connection with the distribution of such shares. Since
there is little expense associated with unsolicited orders placed directly with
AIM Distributors by persons, who because of their relationship with the Funds or
with AIM and its affiliates, are familiar with the Funds, or whose programs for
purchase involve little expense (e.g., because of the size of the transaction
and shareholder records required), AIM Distributors believes that it is
appropriate and in the Funds' best interests that such persons be permitted to
purchase Class A shares of the Funds through AIM Distributors without payment of
a sales charge. The persons who may purchase Class A shares of the Funds without
a sales charge are shown in the Prospectus.
Complete information concerning the method of exchanging shares of the Funds
for shares of the other mutual funds managed or advised by AIM is set forth in
the Prospectus under the caption "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in the
Prospectus under the caption "Redeeming Shares." Shares of the AIM Funds may be
redeemed directly through AIM Distributors or through any dealer who has entered
into an agreement with AIM Distributors. In addition to the obligation of the
Funds to redeem shares, AIM Distributors also repurchases shares. AIM intends to
redeem all shares of the Funds in cash. In addition to the Funds' obligation to
redeem shares, AIM Distributors may also repurchase shares as an accommodation
to shareholders. To effect a repurchase, those dealers who have executed
Selected Dealer Agreements with AIM Distributors must phone orders to the order
desk of the Fund telephone (800) 347-4246 and guarantee delivery of all required
documents in good order. A repurchase is effected at the net asset value of the
Fund next determined after such order is received. Such arrangement is subject
to timely receipt by AFS of all required documents in good order. If such
documents are not received within a reasonable time after the order is placed,
the order is subject to cancellation. While there is no charge imposed by the
Funds or by AIM Distributors (other than any applicable CDSC) when shares are
redeemed or repurchased, dealers may charge a fair service fee for handling the
transaction.
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the New York Stock Exchange ("NYSE") is restricted, as determined
by applicable rules and regulations of the SEC, (b) the NYSE is closed for other
than customary weekend and holiday closings, (c) the SEC has by order permitted
such suspension, or (d) an emergency as determined by the SEC exists making
disposition of portfolio securities or the valuation of the net assets of the
Fund not reasonably practicable.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, must, according to IRS regulations, withhold
31% of redemption payments and reportable dividends (whether paid or accrued) in
the case of any shareholder who fails to provide the Fund with a taxpayer
identification number ("TIN") and a certification that he is not subject to
backup withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect
TIN, or
(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.
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Certain payees and payments are exempt from backup withholding and information
reporting. A complete listing of such exempt entities appears in the
Instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
- 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 1940 Act
- 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.
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
federal income tax withholding at a 30% rate on ordinary income dividends and
distributions and return of capital distributions. Under applicable treaty law,
residents of treaty countries may qualify for a reduced rate of withholding or a
withholding exemption.
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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 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.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gains distributions are automatically reinvested
in additional shares of the same class of each Fund unless the shareholder has
requested in writing to receive such dividends and distributions in cash or that
they be invested i shares of another AIM Fund, subject to the terms and
conditions set forth in "Shareholder Information -- Dividends and
Distributions." If a shareholder's account does not have any shares in it on a
dividend or capital gains distribution payment date, the dividend or
distribution will be paid in cash whether or not the shareholder has elected to
have such dividends or distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
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.
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The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
TAXATION OF THE FUND'S SHAREHOLDERS
Dividends and other distributions declared by the Fund, and payable to
shareholders of record as of a date, in October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation or foreign partnership ("foreign shareholder") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by the Fund to a foreign
shareholder that is "effectively connected with the conduct of a U.S. trade or
business," in which case the reporting and withholding requirements applicable
to domestic shareholders will apply. A distribution of net capital gain by the
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Fund and its shareholders. Investors are urged to
consult their own tax advisors for more detailed information and for information
regarding any foreign, state and local taxes applicable to distributions
received from the Fund.
REINSTATEMENT PRIVILEGE
For federal income tax purposes, exercise of your reinstatement privilege may
increase the amount of gain or reduce the amount of loss recognized in the
original transaction, because the initial sales charge will not be taken into
account in determining such gain or loss to the extent there has been a
reduction in the initial sales charge. The wash sale rules may also act to defer
the loss.
SHAREHOLDER INFORMATION
This information supplements the discussion in the Fund's Prospectus under the
title "Shareholder Information."
TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer to ensure
that all orders are transmitted on a timely basis to the Transfer Agent. Any
loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. If a check used to purchase
shares does not clear, or if any investment order must be canceled due to
nonpayment, the investor will be responsible for any resulting loss to an AIM
Fund or to AIM Distributors.
SHARE CERTIFICATES. AIM Funds will issue share certificates upon written
request to AFS. Otherwise, shares are held on the shareholder's behalf and
recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, all shares are
to be held by the Transfer Agent and all dividends and distributions are
reinvested in shares of the applicable AIM Fund by the Transfer Agent. To
provide funds for payments made under the Systematic Withdrawal Plan, the
Transfer Agent redeems sufficient full and fractional shares at their net asset
value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the AIM Funds and AIM Cash Reserve
Shares of AIM Money Market Fund), it is disadvantageous to effect such purchases
while a Systematic Withdrawal Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
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TERMS AND CONDITIONS OF EXCHANGES. If a shareholder is exchanging into a fund
paying daily dividends, and the release of the exchange proceeds is delayed for
the foregoing five-day period, such shareholder will not begin to accrue
dividends until the sixth business day after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with certain
dealers and investment advisory firms to accept telephone instructions to
exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by telegraph or use overnight courier services to expedite exchanges by mail,
which will be effective on the business day received by the Transfer Agent as
long as such request is received prior to NYSE Close. The Transfer Agent and AIM
Distributors may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction.
By signing an account application form, an investor appoints the Transfer
Agent as his true and lawful attorney-in-fact to surrender for redemption any
and all unissued shares held by the Transfer Agent in the designated account(s),
or in any other account with any of the AIM Funds, present or future, which has
the identical registration as the designated account(s), with full power of
substitution in the premises. The Transfer Agent and AIM Distributors are
thereby authorized and directed to accept and act upon any telephone redemptions
of shares held in any of the account(s) listed from any person who requests the
redemption proceeds to be applied to purchase shares in any one or more of the
AIM Funds, provided that such fund is available for sale and provided that the
registration and mailing address of the shares to be purchased are identical to
the registration of the shares being redeemed. An investor acknowledges by
signing the form that he understands and agrees that the Transfer Agent and AIM
Distributors may not be liable for any loss, expense or cost arising out of any
telephone exchange requests effected in accordance with the authorization set
forth in these instructions if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions. The Transfer Agent reserves the right to modify or
terminate the telephone exchange privilege at any time without notice. An
investor may elect not to have this privilege by marking the appropriate box on
the application. Then any exchanges must be effected in writing by the investor.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an investor
appoints the Transfer Agent as his true and lawful attorney-in-fact to surrender
for redemption any and all unissued shares held by the Transfer Agent in the
designated account(s), present or future, with full power of substitution in the
premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone redemption requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. 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.
SIGNATURE GUARANTEES. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner, (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the SEC, and further
provided that such guarantor institution is listed in one of the reference
guides contained in the Transfer Agent's current Signature Guarantee Standards
and Procedures, such as certain domestic banks, credit unions, securities
dealers, or securities exchanges. The Transfer Agent will also accept signatures
with either: (1) a signature guaranteed with a medallion stamp of the STAMP
Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of
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the transaction involved does not exceed the surety coverage amount indicated on
the medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
DIVIDENDS AND DISTRIBUTIONS. In determining the amount of capital gains, if
any, available for distribution, net capital gains are offset against available
net capital losses, if any, carried forward from previous fiscal periods.
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than those
for Class A shares or AIM Cash Reserve Shares because of higher distribution
fees paid by Class B and Class C shares. Dividends on all shares may also be
affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution in 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.
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 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.
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.
CHARGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying charges for requests for copies
of shareholder account statements and other historical account information older
than the current year and the immediately preceding year.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street,
Boston, Massachusetts 02110, is custodian of all securities and cash of the
Fund. The Custodian attends to the collection of principal and income, pays and
56
<PAGE> 91
collects all monies for securities bought and sold by the Fund and performs
certain other ministerial duties. A I M Fund Services, Inc., a wholly owned
subsidiary of AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, acts
as transfer and dividend disbursing agent for the Fund. These services do not
include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Fund pays the Custodian and the
Transfer Agent such compensation as may be agreed upon from time to time.
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.
LEGAL MATTERS
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.
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 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.
57
<PAGE> 92
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 April 1, 1999, 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
ITC Cust IRA FBO 6.52% -0-
Edward Clark
2198 Lake Marie Drive
Santa Maria, CA 93455
ITC Cust FBO 6.38% -0-
Brian E. Crist Roth IRA CONV
P.O. Box 1380
Anoyo Grande, CA 93421-1360
ITC Cust Rollover IRA FBO 5.42% -0-
Charlene Breit
1411 Stockton St.
Santa Maria, CA 93455-4460
ADVISOR CLASS
LGT Asset Management 401(K) Plan 82.68% -0-
Judy Creel, Arthur Sprague, or
Robert Alley TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
LGT Asset Management 401(K) Plan 12.68% -0-
Judy Creel, Arthur Sprague, or
Robert Alley TTEES
Attn: Debbie Nettles A/C 5000201000
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
</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>
58
<PAGE> 93
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 Class A, Class B and Class C shares of the
Fund for the periods shown, were:
<TABLE>
<CAPTION>
PERIODS ENDED
DECEMBER 31, 1998
--------------------------
1 YEAR SINCE INCEPTION
------ ---------------
<S> <C> <C>
Class A Shares....................................... 4.18% 1.38%
Class B Shares....................................... 3.83% 1.75%
Class C Shares....................................... -- 7.94%
</TABLE>
The inception date of Class A, Class B and Class C shares of the Fund are
September 15, 1997, September 15, 1997 and January 2, 1998, respectively.
PERFORMANCE INFORMATION
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. 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.
From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of their fees and/or assume certain expenses of the Underlying
Theme Funds. Voluntary fee waivers or reductions or commitments to assume
expenses may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions or commitments to assume
expenses, AIM will retain its ability to be reimbursed for such fee prior to the
end of each fiscal year. Contractual fee waivers or reductions or reimbursement
of expenses set forth in the Fee Table in a Prospectus may not be terminated or
amended to the Fund's detriment during the period stated in the agreement
between AIM and the Fund. Fee waivers or reductions or commitments to reduce
expenses will have the effect of increasing the Fund's yield and total return.
The performance of the Fund will vary from time to time and past results are
not necessarily indicative of future results. A Fund's performance is a function
of its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund and market
conditions. A shareholder's investment in the Fund is not insured or guaranteed.
These factors should be carefully considered by the investor before making an
investment in the Fund.
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. 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.
59
<PAGE> 94
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.
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.
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
60
<PAGE> 95
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
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,
61
<PAGE> 96
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
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
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<PAGE> 97
relatively non-cyclical industry that continues to provide goods and services to
the public in periods of economic weakness as well as economic strength.
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
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
63
<PAGE> 98
- The International Monetary Fund (IMF) and its publications
- IFC and its publications
- OECD and its publications
INFRASTRUCTURE FUND
From time to time the Fund and AIM Distributors may quote information
including:
- Supply and demand of telephone equipment and services, electricity, water,
transportation, construction materials and other infrastructure related
products and services
- Regulatory environment of infrastructure industries
- Quantity and costs of current and projected infrastructure projects
- Privatization of industries and companies
- New technologies, products and services used in infrastructure industries
- Infrastructure Finance Magazine and other periodicals
FINANCIAL SERVICES FUND
From time to time the Fund and AIM Distributors may quote information
including:
- Supply and demand of financial services
- Regulatory environment of financial service industries
- Credit ratings of U.S. and non-U.S. banks
- New technologies, products and services used in the financial services
industries
- Consolidation in the financial services industries
RESOURCES FUND
From time to time the Fund and AIM Distributors may quote information
including:
- Supply, demand and prices of natural resources
- Regulatory environment of natural resources
- Supply, demand and prices of products manufactured from natural resources
- New technologies, products and services used in the natural resources
industries
64
<PAGE> 99
APPENDIX A
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>
65
<PAGE> 100
APPENDIX B
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
66
<PAGE> 101
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.
67
<PAGE> 102
FINANCIAL STATEMENTS
FS
<PAGE> 103
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of AIM Global Trends Fund (formerly AIM New Dimension Fund
and prior to that GT Global New Dimension Fund) and Board of Trustees of AIM
Series Trust (formerly GT Global Series Trust):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM Global Trends Fund at
December 31, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
BOSTON, MASSACHUSETTS
FEBRUARY 19, 1999
FS-1
<PAGE> 104
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADVISOR
CLASS VALUE % OF NET
AIM GLOBAL THEME FUNDS SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
AIM Global Consumer Products and Services Fund ..................... 560,525 $ 14,680,148 33.0
AIM Global Financial Services Fund ................................. 476,746 9,453,864 21.3
AIM Global Infrastructure Fund ..................................... 474,400 7,040,101 15.8
AIM Global Health Care Fund ........................................ 212,889 5,126,361 11.5
AIM Global Resources Fund .......................................... 384,299 4,265,717 9.6
AIM Global Telecommunications Fund ................................. 216,883 4,157,651 9.4
------------ -----
TOTAL THEME FUND INVESTMENTS (cost $43,425,392) ...................... 44,723,842 100.6
------------ -----
TOTAL INVESTMENTS (cost $43,425,392) * .............................. 44,723,842 100.6
Other Assets and Liabilities ......................................... (276,719) (0.6)
------------ -----
NET ASSETS ........................................................... $ 44,447,123 100.0
------------ -----
------------ -----
</TABLE>
- --------------
* For Federal income tax purposes, cost is $44,126,685 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 2,594,572
Unrealized depreciation: (1,997,415)
-------------
Net unrealized appreciation: $ 597,157
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-2
<PAGE> 105
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments at value (cost $43,425,392) (Note 1).................................................. $44,723,842
Receivable for Fund shares sold................................................................... 64,727
----------
Total assets.................................................................................... 44,788,569
----------
Liabilities:
Payable for Fund shares repurchased............................................................... 251,784
Payable for service and distribution expenses (Note 2)............................................ 89,662
----------
Total liabilities............................................................................... 341,446
----------
Net assets.......................................................................................... $44,447,123
----------
----------
Class A:
Net asset value and redemption price per share ($17,821,706 DIVIDED BY 1,555,460 shares
outstanding)....................................................................................... $ 11.46
----------
----------
Maximum offering price per share (100/95.25 of $11.46) *............................................ $ 12.03
----------
----------
Class B:+
Net asset value and offering price per share ($25,555,015 DIVIDED BY 2,240,410 shares
outstanding)....................................................................................... $ 11.41
----------
----------
Class C:+
Net asset value and offering price per share ($249,327 DIVIDED BY 21,865 shares outstanding)........ $ 11.40
----------
----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($821,075 DIVIDED BY
71,690 shares outstanding)......................................................................... $ 11.45
----------
----------
Net assets consist of:
Paid in capital (Note 4).......................................................................... $44,578,806
Undistributed net investment income............................................................... 2,313
Accumulated net realized loss on investments...................................................... (1,432,446)
Net unrealized appreciation of investments........................................................ 1,298,450
----------
Total -- representing net assets applicable to capital shares outstanding........................... $44,447,123
----------
----------
<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-3
<PAGE> 106
STATEMENT OF OPERATIONS
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income............................................................................ $ 131,152
Interest income............................................................................ 3,454
----------
Total investment income.................................................................. 134,606
----------
Expenses:
Service and distribution expenses: (Note 2)
Class A...................................................................... $ 98,572
Class B...................................................................... 258,946
Class C...................................................................... 2,080 359,598
----------
Other expenses............................................................................. 1,921
----------
Total expenses............................................................................. 361,519
----------
Net investment loss.......................................................................... (226,913)
----------
Net realized and unrealized gain (loss) on investments: (Note 1)
Net realized loss on investments............................................... (1,998,812)
Capital gain distributions received............................................ 836,396
----------
Net realized loss during the year........................................................ (1,162,416)
Net unrealized appreciation during the year.............................................. 4,092,846
----------
Net realized and unrealized gain on investments.............................................. 2,930,430
----------
Net increase in net assets resulting from operations......................................... $2,703,517
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-4
<PAGE> 107
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 15,
1997
(COMMENCEMENT
OF
YEAR ENDED OPERATIONS) TO
DECEMBER 31, DECEMBER 31,
1998 1997
------------- --------------
<S> <C> <C>
Increase in net assets
Operations:
Net investment loss...................................................... $ (226,913) $ (31,440)
Net realized gain (loss) on investments.................................. (1,162,416) 1,983,653
Net change in unrealized appreciation (depreciation) of investments...... 4,092,846 (2,794,396)
------------- --------------
Net increase (decrease) in net assets resulting from operations........ 2,703,517 (842,183)
------------- --------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............................................... (26,011) --
From net realized gain on investments.................................... (219,151) --
In excess of net investment income....................................... -- (583,714)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............................................... -- --
From net realized gain on investments.................................... (311,471) --
In excess of net investment income....................................... -- (781,183)
Class C:+
Distributions to shareholders: (Note 1)
From net investment income............................................... -- N/A
From net realized gain on investments.................................... (2,998) N/A
In excess of net investment income....................................... -- N/A
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............................................... (5,762) --
From net realized gain on investments.................................... (9,683) --
In excess of net investment income....................................... -- (53,046)
------------- --------------
Total distributions.................................................... (575,076) (1,417,943)
------------- --------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 26,507,554 41,029,628
Decrease from capital shares repurchased................................. (19,757,886) (3,300,488)
------------- --------------
Net increase from capital share transactions........................... 6,749,668 37,729,140
------------- --------------
Total increase in net assets............................................... 8,878,109 35,469,014
Net assets:
Beginning of year........................................................ 35,569,014 100,000
------------- --------------
End of year *............................................................ $44,447,123 $ 35,569,014
------------- --------------
------------- --------------
*Includes undistributed/accumulated net investment income (loss).......... $ 2,313 $ 28,710
------------- --------------
------------- --------------
<FN>
- --------------
+ Commencing January 1, 1998, the Fund began offering Class C shares.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-5
<PAGE> 108
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 CLASS B
------------------------------------ ------------------------------------
SEPTEMBER 15, 1997 SEPTEMBER 15, 1997
(COMMENCEMENT (COMMENCEMENT
YEAR ENDED OF OPERATIONS) YEAR ENDED OF OPERATIONS)
DECEMBER 31, TO DECEMBER 31, 1997 DECEMBER 31, TO DECEMBER 31, 1997
1998 (d) (d) 1998 (d) (d)
------------- --------------------- ------------- ---------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.63 $ 11.43 $ 10.62 $ 11.43
------------- ---------- ------------- ----------
Income from investment operations:
Net investment income (loss).......... (0.02) (0.01) (0.07) (0.02)
Net realized and unrealized gain
(loss) on investments................ 1.01 (0.31) 1.00 (0.32)
------------- ---------- ------------- ----------
Net increase (decrease) from
investment operations.............. 0.99 (0.32) 0.93 (0.34)
------------- ---------- ------------- ----------
Distributions to shareholders:
From net investment income............ (0.02) -- -- --
From net realized gain on
investments.......................... (0.14) -- (0.14) --
In excess of net investment income.... -- (0.48) -- (0.47)
------------- ---------- ------------- ----------
Total distributions................. (0.16) (0.48) (0.14) (0.47)
------------- ---------- ------------- ----------
Net asset value, end of period.......... $ 11.46 $ 10.63 $ 11.41 $ 10.62
------------- ---------- ------------- ----------
------------- ---------- ------------- ----------
Total investment return (c)............. 9.37% (2.68)% (b) 8.83% (2.83)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 17,822 $ 15,145 $ 25,555 $ 19,184
Ratio of net investment income (loss) to
average net assets..................... (0.21)% (0.35)% (a) (0.71)% (0.85)% (a)
Ratio of operating expenses to average
net assets (Note 2).................... 0.50% 0.50% (a) 1.00% 1.00% (a)
Portfolio turnover rate++............... 28% 1% (a) 28% 1% (a)
</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.
+ Commencing January 1, 1998, the Fund began offering Class C shares.
++ Portfolio turnover rates are calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
FS-6
<PAGE> 109
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>
ADVISOR CLASS
------------------------------------
CLASS C+ SEPTEMBER 15, 1997
------------- (COMMENCEMENT
YEAR ENDED YEAR ENDED OF OPERATIONS)
DECEMBER 31, DECEMBER 31, TO DECEMBER 31, 1997
1998 (d) 1998 (d) (d)
------------- ------------- ---------------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.62 $ 10.64 $ 11.43
------------- ------------- ----------
Income from investment operations:
Net investment income (loss).......... (0.08) 0.03 0.01
Net realized and unrealized gain
(loss) on investments................ 1.00 1.00 (0.31)
------------- ------------- ----------
Net increase (decrease) from
investment operations.............. 0.92 1.03 (0.30)
------------- ------------- ----------
Distributions to shareholders:
From net investment income............ -- (0.08) --
From net realized gain on
investments.......................... (0.14) (0.14) --
In excess of net investment income.... -- -- (0.49)
------------- ------------- ----------
Total distributions................. (0.14) (0.22) (0.49)
------------- ------------- ----------
Net asset value, end of period.......... $ 11.40 $ 11.45 $ 10.64
------------- ------------- ----------
------------- ------------- ----------
Total investment return (c)............. 8.94% 9.80% (2.51)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 249 $ 821 $ 1,241
Ratio of net investment income (loss) to
average net assets..................... (0.71)% 0.28% 0.15% (a)
Ratio of operating expenses to average
net assets (Note 2).................... 1.00% 0.00% 0.00% (a)
Portfolio turnover rate++............... 28% 28% 1% (a)
</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.
+ Commencing January 1, 1998, the Fund began offering Class C shares.
++ Portfolio turnover rates are calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
FS-7
<PAGE> 110
NOTES TO
FINANCIAL STATEMENTS
December 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
AIM Global Trends Fund (the "Fund"), formerly AIM New Dimension Fund and prior
to that 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 year. 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 of the Fund are valued based on the closing net asset value of
Advisor Class shares of each Underlying Theme Funds 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. The Fund currently has a capital loss carryforward of
$731,153 which expires in 2006.
(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.
2. RELATED PARTIES
A I M Advisors, Inc. (the "Manager"), an indirectly wholly owned subsidiary of
AMVESCAP PLC, is the Fund's investment manager and 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. Also, as of the close of business
May 29, 1998, A I M Distributors, Inc. ("AIM Distributors"), a wholly-owned
subsidiary of the Manager, became the Fund's distributor, and the Trust was
reorganized from a Massachusetts business trust into a Delaware business trust.
Finally, as of the close of business on September 4, 1998, A I M Fund Services,
Inc. ("AFS"), an affiliate of the Manager and AIM Distributors, replaced GT
Global Investor Services, Inc. ("GT Services") as the transfer agent of the
Fund.
AIM Distributors 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 Fund's distributor.
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 year ended December 31, 1998, AIM Distributors
retained $5,203 of such sales charges. Purchases of Class A shares exceeding
$1,000,000 may be subject to a contingent deferred sales charge ("CDSC") upon
redemption, in accordance with the Fund's current prospectus. There were no
CDSC's collected for Class A for the year ended December 31,1998. 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
FS-8
<PAGE> 111
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 year ended December
31, 1998, AIM Distributors collected such CDSCs in the amount of $77,258. 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 year ended December 31, 1998, AIM Distributors
collected such CDSCs in the amount of $208. In addition, AIM Distributors makes
ongoing shareholder servicing and trail commission payments to dealers whose
clients hold Class B 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"), 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 that 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. The Fund, pursuant to the Fund's Class B Plan,
compensates AIM Distributors at an annualized rate of 1.00% of the average daily
net assets of the Fund's Class B shares. Of these amounts, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A or Class B
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own the
appropriate class of shares of the Fund. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge.
The Manager is 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 AFS, 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 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.
Effective as of the close of business September 4, 1998, the Fund, pursuant to a
transfer agency and service agreement, has agreed to pay AFS an annualized fee
of $24.85 per shareholder accounts that are open during any monthly year (this
fee includes all out-of-pocket expenses), and an annualized fee of $0.70 per
shareholder account that is closed during any monthly year. Both fees shall be
billed by AFS monthly in arrears on a prorated basis of 1/12 of the annualized
fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Services, an affiliate
of the Manager and AIM Distributors, was the transfer agent of the Fund. For
performing shareholder servicing, reporting, and general transfer agent
services, GT Services received 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
was also reimbursed by the Fund for its out-of-pocket expenses for such items as
postage, forms, telephone charges, stationery and office supplies.
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 or AIM Distributors $5,000 per year
plus $300 for each meeting of the board or any committee thereof attended by the
Trustee. Until such order is received, the Manager pays the trustees such fees.
FS-9
<PAGE> 112
3. PURCHASES AND SALES
For the year ended December 31, 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............. $ 5,701,863 $ 4,562,266
Telecommunications Fund......................... $ 1,828,214 1,193,655
Financial Services Fund......................... $ 3,832,422 2,779,932
Resources Fund.................................. $ 3,479,472 1,184,858
Health Care Fund................................ $ 2,374,943 1,310,095
Infrastructure Fund............................. $ 3,414,597 1,984,449
</TABLE>
4. CAPITAL SHARES
At December 31, 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:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SEPTEMBER 15, 1997
(COMMENCEMENT OF
YEAR ENDED OPERATIONS)
DECEMBER 31, 1998 TO DECEMBER 31, 1997
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold................................................. 952,323 $ 10,681,667 1,560,835 $ 17,768,084
Shares issued in connection with reinvestment of
distributions ............................................ 22,552 245,281 54,891 563,181
----------- ------------ ----------- ------------
974,875 10,926,948 1,615,726 18,331,265
Shares repurchased ......................................... (843,563) (9,206,317) (194,494) (2,190,806)
----------- ------------ ----------- ------------
Net increase ............................................... 131,312 $ 1,720,631 1,421,232 $ 16,140,459
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
<CAPTION>
CLASS B
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................. 1,302,574 $ 14,551,138 1,832,668 $ 20,681,472
Shares issued in connection with reinvestment of
distributions ............................................ 26,664 289,152 67,039 687,825
<CAPTION>
CLASS B
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
----------- ------------ ----------- ------------
1,329,238 14,840,290 1,899,707 21,369,297
Shares repurchased ......................................... (894,609) (9,623,737) (96,841) (1,061,266)
----------- ------------ ----------- ------------
Net increase ............................................... 434,629 $ 5,216,553 1,802,866 $ 20,308,031
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
<CAPTION>
CLASS C
*
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................. 35,723 $ 397,022 -- $ --
Shares issued in connection with reinvestment of
distributions ............................................ 265 2,876 -- --
----------- ------------ ----------- ------------
35,988 399,898 -- --
Shares repurchased ......................................... (14,123) (146,933) -- --
----------- ------------ ----------- ------------
Net increase ............................................... 21,865 $ 252,965 -- $ --
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
<CAPTION>
ADVISOR
CLASS
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................. 29,946 $ 324,974 113,102 $ 1,276,664
Shares issued in connection with reinvestment of
distributions ............................................ 1,418 15,444 5,102 52,402
---------- ------------ ---------- ------------
31,364 340,418 118,204 1,329,066
Shares repurchased ......................................... (76,261) (780,899) (4,533) (48,416)
---------- ------------ ---------- ------------
Net increase (decrease) .................................... (44,897) $ (440,481) 113,671 $ 1,280,650
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
- ----------------
* The Fund began offering Class C shares on January 1, 1998.
- ----------------
FEDERAL TAX INFORMATION (UNAUDITED):
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$543,303 as a capital gain dividend for the fiscal year ended December 31, 1998.
FS-10
<PAGE> 113
STATEMENT OF
ADDITIONAL INFORMATION
ADVISOR CLASS SHARES OF
AIM GLOBAL TRENDS FUND
(A SERIES PORTFOLIO OF
AIM SERIES TRUST)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
---------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF THE
ABOVE-NAMED FUND, A COPY OF WHICH MAY BE OBTAINED FREE
OF CHARGE FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 347-4246
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 3, 1999
RELATING TO PROSPECTUS DATED MAY 3, 1999
<PAGE> 114
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE TRUST......................... 4
The Trust and Its Shares.................................. 4
INVESTMENT STRATEGIES AND RISKS............................. 5
Investment Policies of the Fund........................... 5
Morgan Stanley Capital International All Country (AC)
World Index ("MSCI")................................... 5
U.S. Government Securities................................ 6
Repurchase Agreements..................................... 6
Investment Policies of the Underlying Theme Funds......... 6
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................... 14
Introduction.............................................. 14
Special Risks of Options, Futures and Currency
Strategies............................................. 15
Writing Call Options...................................... 16
Writing Put Options....................................... 17
Purchasing Put Options.................................... 17
Purchasing Call Options................................... 17
Index Options............................................. 19
Interest Rate, Currency and Stock Index Futures
Contracts.............................................. 19
Options on Futures Contracts.............................. 21
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies.......................... 22
Forward Contracts......................................... 22
Foreign Currency Strategies -- Special Considerations..... 23
Cover..................................................... 23
RISK FACTORS OF THE UNDERLYING THEME PORTFOLIOS............. 24
General................................................... 24
Financial Services Fund................................... 24
Infrastructure Fund....................................... 24
Resources Fund............................................ 25
Consumer Products and Services Fund....................... 25
Health Care Fund.......................................... 25
Telecommunications Fund................................... 25
Debt Securities........................................... 25
Investing in Smaller Companies............................ 26
Purchases and Redemptions................................. 27
Illiquid Securities....................................... 27
Foreign Securities........................................ 28
INVESTMENT LIMITATIONS...................................... 32
Investment Limitations of the Fund........................ 32
Investment Limitations of Underlying Theme Funds and
Portfolios............................................. 33
Feeder Funds.............................................. 33
Health Care Funds......................................... 34
Telecommunications Fund................................... 35
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 37
MANAGEMENT.................................................. 38
Trustees and Executive Officers........................... 38
Management Services Relating to the Fund.................. 40
Distribution Services Relating to the Fund................ 40
HOW TO PURCHASE AND REDEEM SHARES........................... 40
Backup Withholding........................................ 41
NET ASSET VALUE DETERMINATION............................... 42
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 42
Reinvestment of Dividends and Distributions............... 42
Tax Matters............................................... 42
Taxation of the Fund...................................... 43
Taxation of the Fund's Shareholders....................... 43
</TABLE>
2
<PAGE> 115
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
SHAREHOLDER INFORMATION..................................... 43
MISCELLANEOUS INFORMATION................................... 47
Special Servicing Agreement............................... 47
Charges for Certain Account Information................... 48
Custodian and Transfer Agent.............................. 48
Independent Accountants................................... 48
Shareholder Liability..................................... 48
Control Persons and Principal Holders of Securities....... 48
INVESTMENT RESULTS.......................................... 49
Total Return Quotations................................... 49
Performance Information................................... 50
General Information About Underlying Theme Portfolios..... 51
APPENDIX A.................................................. 54
APPENDIX B.................................................. 55
Description of Commercial Paper Ratings................... 55
Description of Bond Ratings............................... 56
Absence of Ratings........................................ 56
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 116
INTRODUCTION
This Statement of Additional Information relates to the Advisor Class shares
of AIM Global Trends Fund, formerly known as GT Global 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.
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 May 3, 1999, which relates to the Advisor Class shares
of the Fund. Copies of the Prospectus and additional copies of this Statement of
Additional Information may be obtained without charge by writing the principal
distributor of the Fund's shares, A I M Distributors, Inc. ("AIM Distributors"),
P.O. Box 4739, Houston, Texas 77210-4739, or by calling (800) 347-4246.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Fund. Some of the
information required to be in this Statement of Additional Information is also
included in the Fund's current Prospectus, and in order to avoid repetition,
reference will be made herein to sections of the Prospectus. Additionally, the
Prospectus and this Statement of Additional Information omit certain information
contained in the Trust's Registration Statement filed with the SEC. Copies of
the Registration Statement, including items omitted from the Prospectus and this
Statement of Additional Information, may be obtained from the SEC by paying the
charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust was previously organized as a Massachusetts business trust named "GT
Global Series Trust," which was established on August 26, 1996 and which had one
series named "GT Global New Dimension Fund." On May 29, 1998, the Trust was
reorganized into a Delaware business trust, which was initially established on
May 7, 1998. The Trust currently consists of one series, the Fund. The Fund
currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and Advisor Class shares. From time to time the Board of
Trustees of the Trust may create new series of shares without the necessity of a
vote of the shareholders of the Trust. All historical financial and other
information contained in this Statement of Additional Information for periods
prior to May 29, 1998 relating to the Fund is that of GT Global New Dimension
Fund.
This Statement of Additional Information relates solely to the Advisor Class
shares of the Fund.
The term "majority of the outstanding shares" of the Trust, of the Fund or of
a particular class of the Fund means, respectively, the vote of the lesser of
(a) 67% or more of the shares of the Trust, Fund or such class present at a
meeting of the Trust's shareholders, if the holders of more than 50% of the
outstanding shares of the Trust, the Fund or such class are present or
represented by proxy, or (b) more than 50% of the outstanding shares of the
Trust, the Fund or such class.
Class A, Class B, Class C and Advisor Class shares of the Fund have equal
rights and privileges. Each share of a particular class is entitled to one vote,
to participate equally in dividends and distributions declared by the Trust's
Board of Trustees with respect to the class of the Fund and, upon liquidation of
the Fund, to participate proportionately in the net assets of the Fund allocable
to such class remaining after satisfaction of outstanding liabilities of the
Fund allocable to such class. Fund shares are fully paid, non-assessable and
fully transferable when issued and have no preemptive rights and have such
conversion and exchange rights as set forth in the Prospectus and this Statement
of Additional Information. Fractional shares have proportionately the same
rights, including voting rights, as are provided for a full share. Other than
the automatic conversion of Class B shares to Class A shares, there are no
conversion rights.
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> 117
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 Investment Company Act of 1940, as amended ("1940 Act").
Fund shares do not have cumulative voting rights, which means that the holders
of a majority of the shares voting for the election of Trustees can elect all
the Trustees. A Trustee may be removed at any meeting of the shareholders of the
Trust by a vote of the shareholders owning at least two-thirds of the
outstanding shares. Any Trustee may call a special meeting of shareholders for
any purpose. Furthermore, Trustees shall promptly call a meeting of shareholders
solely for the purpose of removing one or more Trustees when requested in
writing to do so by shareholders holding 10% of the Trust's outstanding shares.
Pursuant to the Trust's Declaration of Trust, the Trust may issue an unlimited
number of shares of the Fund. Each share of the Fund represents an interest in
the Fund only, has a par value of $0.01 per share, represents an equal
proportionate interest in the Fund with other Fund shares and is entitled to
such dividends and other distributions out of the income earned and gain
realized on the assets belonging to the Fund as may be declared at the
discretion of the Board of Trustees. Each share of the Fund is equal in
earnings, assets and voting privileges, except that each class normally has
exclusive voting rights with respect to its distribution plan and bears the
expenses, if any, related to the distribution of its shares. Fund shares, when
issued, are fully paid and nonassessable.
INVESTMENT STRATEGIES AND RISKS
INVESTMENT POLICIES OF THE FUND
The following discussion of investment strategies and risks supplements the
discussion of investment objective and risks set forth in the Prospectus under
the headings "Investment Objective and Strategies" and "Principal Risks of
Investing in the Fund."
Unless specifically noted, the Fund's investment policies described in the
Prospectus and this Statement of Additional Information, are not fundamental
policies and may be changed by the Trust's Board of Trustees 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 the Fund's investment policies or restrictions.
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 45 countries including both
developed and developing countries as of April 30, 1998. Each of the 2,483
stocks is placed into one of 38 MSCI industry sectors. AIM exercises no
discretion in investing the Fund's assets. Rather, AIM periodically determines
the allocation of the Fund's assets to the Underlying Theme Portfolios according
to the industry weightings of the companies composing the MSCI. AIM assesses
which of the Underlying Theme Portfolios can invest, as part of its primary
focus, in each of these industries. Where two or more Underlying Theme
Portfolios can invest in an industry, the weighting of that industry in the MSCI
is split equally among each qualifying Underlying Theme Portfolio. Of course,
the Underlying Theme Portfolios do not invest necessarily in the same industries
or the same companies that compose the MSCI. See Appendix A for the allocation
of the 38 industries to the Underlying Theme Portfolios.
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 Portfolios or the allocation of the Fund's assets on any
other date.
The Fund is a more diversified investment than any single Underlying Theme
Portfolio. However, because the Underlying Theme Portfolios are actively managed
without any attempt to reflect the country, industry or company weightings of
the MSCI, the Underlying Theme Portfolios will perform differently than the
corresponding industry components of the MSCI, and the Underlying Theme
Portfolios 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
5
<PAGE> 118
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.
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. In addition to the investment practices described in the Prospectus, the
Underlying Theme Portfolios 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. There is no assurance that any
Underlying Theme Portfolio will achieve its investment objective. 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. Investors desiring
more information on an Underlying Theme Portfolio should call (800) 347-4246 or
contact their financial adviser for the Underlying Theme Portfolio's prospectus.
The Underlying Theme Funds are diversified series of AIM Investment Funds (the
"Underlying Trust"), a registered open-end management investment company. The
AIM Global Consumer Products and Services Fund ("Consumer Products and Services
Fund"), AIM Global Financial Services Fund ("Financial Services Fund"), AIM
Global Infrastructure Fund ("Infrastructure Fund"), and AIM Global Resources
Fund ("Resources Fund") (each, a "Feeder Fund," and, collectively, the "Feeder
Funds") each invests all of its assets in the Global Consumer Products and
Services Portfolio, Global Financial Services Portfolio, Global Infrastructure
Portfolio and Global Resources Portfolio (each, a "Portfolio," and,
collectively, the "Portfolios"), respectively.
Each Portfolio is a subtrust (a "series") of Global Investment Portfolio (an
open-end management investment company) with an investment objective that is
identical to that of its corresponding Underlying Theme Fund. Whenever the
phrase "all of the Underlying Theme Fund's investable assets" is used herein, it
means that the only investment securities held by a Feeder Fund will be its
interest in its corresponding Portfolio. A Feeder Fund may withdraw its
investment in its corresponding Portfolio at any time, if the Underlying Trust's
Board of Trustees determines that it is in the best interests of the Feeder Fund
and its shareholders to do so.
The approval of the Fund and of other investors in the Portfolio; if any, is
not required to change the investment objective, policies or limitations of the
Portfolio, unless otherwise specified. Written notice shall be provided to
shareholders of the Fund thirty days prior to any changes in the Portfolio's
investment objective.
A change in the Portfolio's investment objective, policies or limitations that
is not approved by the Board or the shareholders of the Feeder Fund could
require the Feeder Fund to redeem its interest in the Portfolio. Any such
redemption could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Portfolio. Should such a distribution
occur, the Feeder Fund could incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of
6
<PAGE> 119
investments for the Feeder Fund and could adversely affect its liquidity. Upon
redemption, the Board would consider what action might be taken, including the
investment of all the investable assets of the Feeder Fund in another pooled
investment entity having substantially the same investment objective as the
Feeder Fund or the retention by the Feeder Fund of its own investment advisor to
manage its assets in accordance with its investment objective, policies and
limitations discussed herein.
In addition to selling an interest therein to the Feeder Fund, the Portfolio
may sell interests therein to other non-affiliated investment companies and/or
other institutional investors. All institutional investors in the Portfolio will
pay a proportionate share of the Portfolio's expenses and will invest in the
Portfolio on the same terms and conditions. However, if another investment
company invests any or all of its assets in a Portfolio, it would not be
required to sell its shares at the same public offering price as the Feeder Fund
and may charge different sales commissions. Therefore, investors in the Feeder
Fund may experience different returns than investors in another investment
company that invests exclusively in the Portfolio. As of the date of this
Prospectus, the Feeder Fund is the only institutional investor in the Portfolio.
The Feeder Fund may be materially affected by the actions of other large
investors, if any, in the Portfolio. For example, as with all open-end
investment companies, if a large investor were to redeem its interest in the
Portfolio, (1) the Portfolio's remaining investors could experience higher pro
rata operating expenses, thereby producing lower returns and (2) the Portfolio's
security holdings may become less diverse, resulting in increased risk.
Institutional investors in the Portfolio that have a greater pro rata ownership
interest in the Portfolio than the Feeder Fund could have effective voting
control over the operation of the Portfolio.
The investment objective of each Underlying Theme Fund and the Portfolio is
long-term capital growth. The Portfolios, AIM Global Health Care Fund ("Health
Care Fund") and AIM Global Telecommunications Fund ("Telecommunications Fund"),
together, are referred to herein as the "Underlying Theme Portfolios." The
investment objective of an Underlying Theme Portfolio may not be changed without
the approval of a majority of the outstanding voting shares of the Underlying
Theme Portfolio. Because each such Underlying Theme Portfolio will invest only
in its corresponding Portfolio, that Underlying Theme Portfolio's shareholders
will acquire only an indirect interest in the investments of that Portfolio.
The investments of the Fund are concentrated in the Underlying Theme
Portfolios, so the Fund's investment performance is directly related to the
investment performance of the Underlying Theme Portfolios. The ability of the
Fund to meet its investment objective is directly related to the allocation
among those Underlying Theme Portfolios as well as the ability of the Underlying
Theme Portfolios to meet their objectives. There is no assurance that the
investment objective of the Fund or any Underlying Theme Portfolio will be
achieved. The value of the Underlying Theme Portfolios' domestic and foreign
investments varies in response to many factors. The value of equity securities
held by an Underlying Theme Portfolio 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 Portfolio generally will fluctuate with changes in
the perceived creditworthiness of the issuers of such securities and interest
rates.
Because each Underlying Theme Portfolio 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 Portfolio 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.
In addition to its primary investment policy set forth in its Prospectus, each
Underlying Theme Portfolio may invest up to 35% of its total assets in debt
securities issued by companies in the Underlying Theme Portfolio's particular
industry and/or equity and debt securities of companies outside of that industry
which, in AIM's opinion, stand to benefit from developments in that
industry.
Financial Services Fund
7
<PAGE> 120
Examples of financial services companies include commercial banks and savings
institutions and loan associations and their holding companies; consumer and
industrial finance companies; diversified financial services companies;
investment banks; insurance brokerages; securities brokerage and investment
advisory companies; real estate-related companies; leasing companies; and a
variety of firms in all segments of the insurance field such as multi-line,
property and casualty and life insurance and insurance holding companies.
AIM believes an accelerating rate of global economic interdependence
will lead to significant growth in the demand for financial services. In
addition, in AIM's view, as the industries evolve, opportunities will
emerge for those companies positioned for the future. Thus, AIM expects
that banking and related financial institution consolidation in the developed
countries, increased demand for retail borrowing in developing countries, a
growing need for international trade-based financing, a rising demand for
sophisticated risk management, the proliferating number of liquid securities
markets around the world, and larger concentrations of investable assets should
lead to growth in financial service companies that are positioned for the
future.
Infrastructure Fund
Examples of infrastructure companies include those engaged in designing,
developing or providing the following products and services: electricity
production; oil, gas, and coal exploration, development, production and
distribution; water supply, including water treatment facilities; nuclear power
and other alternative energy sources; transportation, including the construction
or operation of transportation systems; steel, concrete, or similar types of
products; communications equipment and services (including equipment and
services for both data and voice transmission); mobile communications and
cellular radio/paging; emerging technologies combining telephone, television
and/or computer systems; and other products and services, which, in AIM's
judgment, constitute services significant to the development of a country's
infrastructure.
AIM believes that a country's infrastructure is one key to the long-term
success of that country's economy. AIM believes that adequate energy,
transportation, water, and communications systems are essential elements for
long-term economic growth. AIM believes that many developing nations, especially
in Asia and Latin America, plan to make significant expenditures to the
development of their infrastructure in the coming years, which is expected to
facilitate increased levels of services and manufactured goods.
In the developed countries of North America, Europe, Japan and the Pacific
Rim, AIM expects that the replacement and upgrade of transportation and
communications systems should stimulate growth in the infrastructure industries
of those countries. In addition, in AIM's view, deregulation of
telecommunications and electric and gas utilities in many countries is promoting
significant changes in these industries.
AIM believes that strong economic growth in developing countries and
infrastructure replacement, upgrade, and deregulation in more developed
countries provide an environment for favorable investment opportunities in
infrastructure companies worldwide. In addition, the long-term growth rates of
certain foreign countries' economies may be substantially higher than the
long-term growth rate of the U.S. economy. An integral aspect of certain foreign
countries' economies may be the development or improvement of their
infrastructure.
Resources Fund
Examples of natural resource companies include those which own, explore or
develop: energy sources (such as oil, gas and coal); ferrous and non-ferrous
metals (such as iron, aluminum, copper, nickel, zinc and lead), strategic metals
(such as uranium and titanium) and precious metals (such as gold, silver and
platinum); chemicals; forest products (such as timber, coated and uncoated tree
sheet, pulp and newsprint); other basic commodities (such as foodstuffs);
refined products (such as chemicals and steel) and service companies that sell
to these producers and refiners; and other products and services, which, in
AIM's opinion are significant to the ownership and development of natural
resources and other basic commodities.
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AIM believes that the liberalization of formerly socialist economies will
bring about dramatic changes in both the supply and demand for natural
resources. In addition, rapid industrialization in developing countries of Asia
and Latin America is generating new demands for industrial materials that are
affecting world commodities markets. AIM believes these changes are likely to
create investment opportunities that benefit from new sources of supply and/or
from changes in commodities prices.
AIM also believes that investments in natural resource industries offer an
opportunity to protect wealth against the capital-eroding effects of inflation.
During periods of accelerating inflation or currency uncertainty, worldwide
investment demand for natural resources, particularly precious metals, tends to
increase, and during periods of disinflation or currency stability, it tends to
decrease. AIM believes that rising commodity prices and increasing worldwide
industrial production may favorably affect share prices of natural resource
companies, and investments in such companies can offer excellent opportunities
to offset the effects of inflation.
Consumer Products and Services Fund
Examples of consumer products and services companies include those that
manufacture, market, retail, or distribute: durable goods (such as homes,
household goods, automobiles, boats, furniture and appliances, and computers);
non-durable goods (such as food and beverages and apparel); media,
entertainment, broadcasting, publishing and sports-related goods and services
(such as television and radio broadcast, motion pictures, wireless
communications, gaming casinos, theme parks, restaurants and lodging); and goods
and services to companies in the foregoing industries (such as advertisers,
textile companies and distribution and shipping companies).
The Portfolio expects that a significant portion of its assets may be invested
in the securities of U.S. issuers from time to time, particularly those that
market their products globally. However, consumer products and services
companies of a particular nation or region of the world are often operated and
owned in their local markets, close to their customers. These companies, AIM
believes, may offer superior opportunities for capital growth as compared to
their larger, multinational counterparts. Certain global markets may be more
attractive than others from time to time; companies dependent on U.S. markets,
for example, may be outperformed by companies not dependent on U.S. markets.
AIM also believes that the demand for consumer products and services worldwide
will increase along with rising disposable incomes in both developed and
developing nations. Emerging economies, such as those in China, Southeast Asia,
Eastern Europe and Latin America, offer opportunities for the growth and
expansion of consumer markets. These regions currently comprise a growing source
of inexpensive consumer products for export and a growing source of demand for
consumer products and services as the disposable incomes of their populations
increase. In AIM's view, these changes are likely to create investment
opportunities in companies, both local and multinational, that are able to
employ innovative manufacturing, marketing, retailing and distribution methods
to open new markets and/or expand existing markets.
Health Care Fund
Examples of health care companies include those that are substantially engaged
in the design, manufacture or sale of products or services used for or in
connection with health care or medicine. Such firms may include pharmaceutical
companies; firms that design, manufacture, sell or supply medical, dental and
optical products, hardware or services; companies involved in biotechnology,
medical diagnostic, and biochemical research and development; and companies
involved in the ownership and/or operation of health care facilities.
The Fund that, from time to time, a significant portion of its assets may be
invested in the securities of U.S. issuers. Health care industries, however, are
global industries with significant, growing markets outside of the United
States. A sizeable portion of the companies which comprise the health care
industries are headquartered outside of the United States, and many important
pharmaceutical and biotechnology discoveries and technological breakthroughs
have occurred outside of the United States, primarily in Japan, the United
Kingdom and Western Europe.
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AIM believes that the global health care industries offer attractive
long-term supply/demand dynamics. While the United States, Western Europe, and
Japan presently account for a substantial portion of health care expenditures,
this should change dramatically in the coming decade if the populations of
developing countries devote an increasing percentage of income to health care.
Additionally, AIM believes demographics on aging point to a significant
increase in demand from the industrialized nations, as the elderly account for a
growing proportion of worldwide health care spending. Finally, in AIM's
view, technology will continue to expand the range of products and services
offered, with new drugs, medical devices and surgical procedures addressing
medical conditions previously considered untreatable.
In addition to these underlying trends, the United States is presently
experiencing a period of rapid and profound change in its own health care
system, marked by the rise of managed care, the formation of health care
delivery networks, and widespread consolidation across all segments of the
industry. AIM believes that this transition offers investment opportunities
in those companies acting as consolidators or otherwise gaining market
share at the expense of less efficient competitors.
Telecommunications Fund
Examples of telecommunications companies include those engaged in designing,
developing or providing the following products and services: communications
equipment and services (including equipment and services for both data and voice
transmission); electronic components and equipment; broadcasting (including
television and radio, satellite, microwave and cable television and
narrowcasting); computer equipment, mobile communications and cellular
radio/paging; electronic mail; local and wide area networking and linkage of
word and data processing systems; publishing and information systems; videotext
and teletext; and emerging technologies combining telephone, television and/or
computer systems.
AIM believes that there are opportunities for continued growth in
demand for components, products, media and systems to collect, store, retrieve,
transmit, process, distribute, record, reproduce and use information. The
pervasive societal impact of communications and information technologies has
been accelerated by the lower costs and higher efficiencies that result from the
blending of computers with telecommunications systems. Accordingly, companies
engaged in the production of methods for using electronic and, potentially,
video technology to communicate information are expected to be important in the
Fund's portfolio. Older technologies, such as photography and print also may be
represented, however.
SELECTION OF EQUITY INVESTMENTS AND ASSET ALLOCATION. Each Underlying Theme
Portfolio expects that, from time to time, a significant portion of its assets
may be invested in the securities of domestic issuers. The industry represented
in each Underlying Theme Portfolio, however, is a global industry with
significant, growing markets outside of the United States. A sizable proportion
of the companies that compromise the industries in which the Underlying Theme
Portfolios invest are headquartered outside of the United States.
For these reasons, AIM believes that a portfolio composed only of securities
of U.S. issuers does not provide the greatest potential return from an
investment by the Underlying Theme Portfolio. AIM uses its financial expertise
in markets located throughout the world and the substantial global resources of
AMVESCAP PLC in attempting to identify those countries and companies then
providing the greatest potential for long-term capital appreciation. In this
fashion, AIM seeks to enable shareholders to capitalize on the substantial
investment opportunities and the potential for long-term capital presented by
the industry represented in each Underlying Theme Portfolio. AIM allocates each
Underlying Theme Portfolio's (or its corresponding Portfolio's) assets among
securities of countries and in currency denominations where opportunities for
meeting each Underlying Theme Portfolio's investment objective are expected to
be the most attractive. Each Underlying Theme Portfolio may invest substantially
in securities denominated in foreign currencies or in multinational currency
units (such as euros). Under normal conditions, each Underlying Theme Portfolio
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, AIM, on behalf of the
Underlying Theme Portfolios, ordinarily looks for several of the following
characteristics: above-average per share earnings growth; high return on
invested
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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, AIM 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.
With respect to the Global Resources Portfolio, AIM has identified four areas
that it expects will create investment opportunities: (i) improving
supply/demand fundamentals, which may result in higher commodity prices; (ii)
privatization of state-owned natural resource businesses; (iii) management which
can improve production efficiencies without correspondingly increasing commodity
prices; and (iv) service companies with emerging technologies that can enhance
productivity or reduce production costs. Of course, there is no certainty that
these factors will produce the anticipated results.
With respect to the Telecommunications Fund, AIM 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 AIM's opinion, 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 AIM'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 AIM to
be located in that country may have substantial foreign operations or
subsidiaries and/or export sales exceeding in size the assets or sales in that
country.
In certain countries, governmental restrictions and other limitations on
investment may affect an Underlying Theme Portfolio's ability to invest in such
countries. In addition, in some instances only special classes of securities may
be purchased by foreigners and the market prices, liquidity and rights with
respect to those securities may vary from shares owned by nationals. AIM 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 AIM 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
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 AIM's judgment, the potential benefits
of such investments justify the payment of any applicable premiums. The return
on such securities will be reduced by operating expenses of such companies,
including payments to the investment managers of those investment companies.
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DEPOSITARY RECEIPTS. An Underlying Theme Portfolio may hold securities of
foreign issuers in the form of American Depositary Receipts ("ADRs"), American
Depositary Shares ("ADSs") and European Depositary Receipts ("EDRs") or other
securities convertible into securities of eligible foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. ADRs and ADSs are typically issued
by an American bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. EDRs, which are sometimes referred
to as Continental Depositary Receipts ("CDRs"), are issued in Europe typically
by foreign banks and trust companies and evidence ownership of either foreign or
domestic securities. Generally, ADRs and ADSs in registered form are designed
for use in U.S. securities markets and EDRs in bearer form are designed for use
in European securities markets. For purposes of each Underlying Theme
Portfolio's investment policies, an Underlying Theme Portfolio's investments in
ADRs, ADSs and EDRs will be deemed to be investments in the equity securities
representing securities of foreign issuers into which they may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored."
While ADRs issued under these two types of facilities are in some respects
similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depository usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into U.S. dollars, the disposition of non-cash distributions, and
the performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass-through voting
rights to ADR holders in respect of the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Underlying Theme Portfolios may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS. Warrants or rights may be acquired by an Underlying Theme
Portfolio in connection with other securities or separately and provide the
Underlying Theme Portfolio with the right to purchase at a later date other
securities of the issuer. Warrants are securities permitting, but not
obligating, their holder to subscribe for other securities or commodities.
Warrants do not carry with them the right to dividends or voting rights with
respect to the securities that they entitle their holder to purchase, and they
do not represent any rights in the assets of the issuer. As a result, warrants
may be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities and a warrant ceases to have value if it is not
exercised prior to its expiration date.
LENDING OF UNDERLYING THEME PORTFOLIO SECURITIES. For the purpose of realizing
additional income, each Underlying Theme Portfolio may make secured loans of its
securities holdings amounting to not more than 30% of its total assets.
Securities loans are made to broker/dealers or institutional investors pursuant
to agreements requiring that the loans be continuously secured by collateral
consisting of cash, U.S. government securities, or certain irrevocable letters
of credit 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. The risks in lending 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.
Loans will only be made to firms deemed by AIM to be of good standing and will
not be made unless, in AIM's judgment, the consideration to be earned from such
loans would justify the risk. The risks in lending 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.
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COMMERCIAL BANK OBLIGATIONS. For the purposes of each Underlying Theme
Portfolio's investment policies with respect to bank obligations, obligations of
foreign branches of U.S. banks and of foreign banks are obligations of the
issuing bank and may be general obligations of the parent bank. Such obligations
may, however, be limited by the terms of a specific obligation and by government
regulation. As with investments in non-U.S. securities in general, investments
in the obligations of foreign branches of U.S. banks and of foreign banks may
subject each Underlying Theme Portfolio to investment risks that are different
in some respects from those of investments in obligations of U.S. issuers.
Although each Underlying Theme Portfolio will typically acquire obligations
issued and supported by the credit of U.S. or foreign banks having total assets
at the time of purchase of $1 billion or more, this $1 billion figure is not an
investment policy or restriction of each Underlying Theme Portfolio. For the
purposes of calculation with respect to the $1 billion figure, the assets of a
bank will be deemed to include the assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS. A repurchase agreement is a transaction in which an
Underlying Theme Portfolio purchases securities from a bank or recognized
securities dealer and simultaneously commits to resell the securities to the
bank or dealer on an agreed-upon date or upon demand and at a price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased securities. Although repurchase agreements carry certain risks not
associated with direct investments in securities, including possible decline in
the market value of the underlying securities and delays and costs to the
Underlying Theme Portfolio if the other party to the repurchase agreement
becomes bankrupt, the Underlying Theme Portfolios intend to enter into
repurchase agreements only with banks and dealers believed by AIM 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. AIM 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 may borrow from banks or may borrow through reverse
repurchase agreements and "roll" transactions in connection with meeting
requests for the redemptions of the Funds' shares. 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.
However, no additional investments will be made if an Underlying Theme
Portfolio's borrowings exceed 5% of its total assets. 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.
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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.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES. Each Underlying Theme Portfolio
may purchase debt securities on a "when-issued" basis and may purchase or sell
such securities on a "forward commitment" basis in order to hedge against
anticipated changes in interest rates and prices. The price, which is generally
expressed in yield terms, is fixed at the time that the commitment is made, but
delivery and payment for the securities take place at a later date. When-issued
securities and forward commitments may be sold prior to the settlement date, but
an Underlying Theme Portfolio will purchase or sell when-issued securities or
enter into forward commitments only with the intention of actually receiving or
delivering the securities, as the case may be. No income accrues on securities
that have been purchased pursuant to a forward commitment or on a when-issued
basis prior to delivery to the Underlying Theme Portfolio. If an Underlying
Theme Portfolio disposes of the right to acquire a when-issued security prior to
its acquisition or disposes of its right to deliver or receive against a forward
commitment, it may incur a gain or loss. At the time that an Underlying Theme
Portfolio enters into a transaction on a when-issued or forward commitment
basis, the Underlying Theme Portfolio will segregate cash or liquid securities
equal to the value of the when-issued or forward commitment securities with its
custodian and will mark to market daily such assets. There is a risk that the
securities may not be delivered and that the Underlying Theme Portfolio may
incur a loss.
SHORT SALES. Each Underlying Theme Portfolio may make short sales of
securities. A short sale is a transaction in which an Underlying Theme Portfolio
sells a security in anticipation that the market price of that security will
decline. An Underlying Theme Portfolio may make short sales (i) as a form of
hedging to offset potential declines in long positions in securities it owns, or
anticipates acquiring, or in similar securities, and (ii) in order to maintain
flexibility in its securities holdings.
When an Underlying Theme Portfolio makes a short sale of a security it does
not own, it must borrow the security sold short and deliver it to the
broker/dealer or other intermediary through which it made the short sale. The
Underlying Theme Portfolio may have to pay a fee to borrow particular securities
and will often be obligated to pay over any payments received on such borrowed
securities.
An Underlying Theme Portfolio's obligation to replace the borrowed security
when the borrowing is called or expires will be secured by collateral deposited
with the intermediary. The Underlying Theme Portfolio will also be required to
deposit collateral with its custodian to the extent, if any, necessary so that
the value of both collateral deposits in the aggregate is at all times equal to
at least 100% of the current market value of the security sold short. Depending
on arrangements made with the intermediary from which it borrowed the security
regarding payment of any amounts received by it on such security, an Underlying
Theme Portfolio may not receive any payments (including interest) on its
collateral deposited with such intermediary.
If the price of the security sold short increases between the time of the
short sale and the time an Underlying Theme Portfolio replaces the borrowed
security, it will incur a loss; conversely, if the price declines, the
Underlying Theme Portfolio will realize a gain. Any gain will be decreased, and
any loss increased, by the transaction costs associated with the transaction.
Although an Underlying Theme Portfolio's gain is limited by the price at which
it sold the security short, its potential loss theoretically is unlimited.
No Underlying Theme Portfolio will make a short sale if, after giving effect
to the sale, the market value of the securities sold short exceeds 25% of the
value of its total assets or its aggregate short sales of the securities of any
one issuer exceed the lesser of 2% of its net assets or 2% of the securities of
any class of the issuer. Moreover, an Underlying Theme Portfolio may engage in
short sales only with respect to securities listed on a national securities
exchange.
TEMPORARY DEFENSIVE STRATEGIES. The Underlying Theme Portfolios retain the
flexibility to respond promptly to changes in market and economic conditions.
Accordingly, in the interest of preserving shareholders' capital, AIM 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 Portfolios 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
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Theme Portfolio 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 Portfolios 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 Portfolios and the Fund may invest include, but are not limited
to, United States government securities; high-grade commercial paper; bank
certificates of deposit; bankers' acceptances and repurchase agreements related
to any of the foregoing. "High-grade commercial paper" refers to commercial
paper rated A-1 by Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., ("S&P") or P-1 by Moody's Investors Service, Inc. "Moody's" or, if not
rated, determined by AIM to be of comparable quality.
AFFILIATED PERSONS. The officers and trustees of the Trust currently serve as
officers and trustees of the Underlying Theme Portfolios. AIM also serves as
investment advisor and/or administrator to the Underlying Theme Portfolios.
Therefore, conflicts may arise so as these persons fulfill their fiduciary
responsibilities to the Fund and the Underlying Theme Portfolios.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
INTRODUCTION
An Underlying Theme Portfolio may use forward currency contracts, futures
contracts, options on securities, options on indices, options on currencies, and
options on futures contracts to attempt to hedge against the overall level of
investment and currency risk normally associated with Underlying Theme Portfolio
investments. These instruments are often referred to as "derivatives," which may
be defined as financial instruments whose performance is derived, at least in
part, from the performance of another asset (such as a security, currency or an
index of securities). Each Underlying Theme Portfolio may invest in such
instruments up to the full value of its portfolio assets.
To attempt to hedge against adverse movements in exchange rates between
currencies, an Underlying Theme Portfolio may enter into forward currency
contracts for the purchase or sale of a specified currency at a specified future
date. Such contracts may involve the purchase or sale of a foreign currency
against the U.S. dollar or may involve two foreign currencies. An Underlying
Theme Portfolio may enter into forward currency contracts either with respect to
specific transactions or with respect to its portfolio positions. An Underlying
Theme Portfolio also may purchase and sell put and call options on currencies,
futures contracts on currencies and options on such future contracts to hedge
against movements in exchange rates.
In addition, an Underlying Theme Portfolio may purchase and sell put and call
options on equity and debt securities to hedge against the risk of fluctuations
in the prices of securities held by the Underlying Theme Portfolio or that AIM
intends to include in the Underlying Theme Portfolio's holders. An Underlying
Theme Portfolio also may purchase and sell put and call options on stock indexes
to hedge against overall fluctuations in the securities markets generally or in
a specific market sector.
Further, an Underlying Theme Portfolio may sell stock index futures contracts
and may purchase put options or write call options on such futures contracts to
protect against a general stock market decline or a decline in a specific market
sector that could affect adversely the Underlying Theme Portfolio's holders. An
Underlying Theme Portfolio also may purchase stock index futures contracts and
purchase call options or write put options on such contracts to hedge against a
general stock market or market sector advance and thereby attempt to lessen the
cost of future securities acquisitions. An Underlying Theme Portfolio may use
interest rate futures contracts and options thereon to hedge the debt portion of
its portfolio against changes in the general level of interest rates.
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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 AIM'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 AIM 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 AIM 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) There is no assurance that a liquid secondary market will exist
for any particular option, futures contract or option thereon at any
particular time.
(5) As described below, an Underlying Theme Portfolio might be
required to maintain assets as "cover," maintain segregated accounts or
make margin payments when it takes positions in instruments involving
obligations to third parties (i.e., instruments other than purchased
options). If the Underlying Theme Portfolio were unable to close out its
positions in such instruments, it might be required to continue to maintain
such assets or accounts or make such payments until the position expired or
matured. The requirements might impair the Underlying Theme Portfolio's
ability to sell a portfolio security or make an investment at a time when
it would otherwise be favorable to do so, or require that the Underlying
Theme Portfolio sell a portfolio security at a disadvantageous time. The
Underlying Theme Portfolio's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability
and willingness of the other party to the transaction ("contra party") to
enter into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Underlying Theme Portfolio.
WRITING CALL OPTIONS
Each Underlying Theme Portfolio may write (sell) call options on securities,
indices and currencies. Call options generally will be written on securities and
currencies that, in the opinion of AIM, are not expected to make any major price
moves in the near future but that, over the long term, deemed to be attractive
investments for the Underlying Theme Portfolios.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he or she may be
assigned an exercise notice, requiring him or her to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by purchasing an option
identical to that previously sold.
Portfolio securities or currencies on which call options may be written will
be purchased solely on the basis of investment considerations consistent with
each Underlying Theme Portfolio's investment objective. When writing a call
option, an Underlying Theme Portfolio, in return for the premium, gives up the
opportunity for profit from a price
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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, AIM will
consider the reasonableness of the anticipated premium and the likelihood that a
liquid secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit an Underlying Theme
Portfolio to write another call option on the underlying security or currency
with either a different exercise price or expiration date, or both.
Each Underlying Theme Portfolio will pay transaction costs in connection with
the writing of options and in entering into closing purchase contracts.
Transaction costs relating to options activity are normally higher than those
applicable to purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, an Underlying Theme Portfolio may
purchase an underlying security or currency for delivery in accordance with the
exercise of an option, rather than delivering such security or currency from its
portfolio. In such cases, additional costs will be incurred.
An Underlying Theme Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more,
respectively, than the premium received from writing the option. Because
increases in the market price of a call option generally will reflect increases
in the market price of the underlying security or currency, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security or currency owned by an Underlying
Theme Portfolio.
WRITING PUT OPTIONS
Each Underlying Theme Portfolio may write put options on securities, indices
and currencies. A put option gives the purchaser of the option the right to
sell, and the writer (seller) the obligation to buy, the underlying security or
currency at the exercise price at any time until (American style) or on
(European style) the expiration date. The operation of put options in other
respects, including their related risks and rewards, is substantially identical
to that of call options.
An Underlying Theme Portfolio generally would write put options in
circumstances where AIM 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
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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 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
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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.
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.
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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.
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
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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 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.
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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.
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%.
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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.
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.
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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.
RISK FACTORS OF THE UNDERLYING THEME PORTFOLIOS
GENERAL
Equity securities, particularly common stocks, generally represent the most
junior position in an issuer's capital structure, and entitle holders to an
interest in the assets of the issuer, if any, remaining after all more senior
claims have been satisfied. The value of equity securities held by an Underlying
Theme Portfolio will fluctuate in response to general market and economic
developments, as well as developments affecting the particular issuers of such
securities. The value of debt securities held by an Underlying Theme Portfolio
generally will fluctuate with changes in the perceived creditworthiness of the
issuers of such securities and interest rates.
FINANCIAL SERVICES FUND
Companies in the financial services sector are subject to rapid business
changes, significant competition, value fluctuations due to the concentration of
loans in particular industries significantly affected by economic conditions
(such as real estate or energy), and volatile performance dependent upon the
availability and cost of capital and prevailing interest rates. In addition,
general economic conditions significantly affect these companies. Credit and
other losses
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resulting from the financial difficulty of borrowers or other third parties
potentially may have an adverse effect on companies in these industries. Foreign
banks, particularly those of Japan, have reported financial difficulties
attributed to increased competition, regulatory changes, and general economic
difficulties.
The financial services area in the United States currently is changing
relatively rapidly as existing distinctions between various financial service
segments become less clear. For instance, recent business combinations have
included insurance, finance, and securities brokerage under single ownership.
Some primarily retail corporations have expanded into securities and insurance
fields. Investment banking, securities brokerage, and investment advisory
companies are subject to government regulation and risk due to securities
trading and underwriting activities.
Many of the investment considerations discussed in connection with banks,
savings institutions and loan associations, and finance companies also apply to
insurance companies. The performance of insurance company investments will be
subject to risk from several factors. The earnings of insurance companies will
be affected by interest rates, pricing (including severe pricing competition
from time to time), claims activity, marketing competition and general economic
conditions. Particular insurance lines also will be influenced by specific
matters. Property and casualty insurance profits may be affected by certain
weather catastrophes and other disasters. Life and health insurers' profits may
be affected by mortality and morbidity rates. Individual companies may be
exposed to material risks, including reserve inadequacy, problems in investment
portfolios (due to real estate or "junk" bond holdings, for example), and the
inability to collect from reinsurance carriers. Insurance companies are subject
to extensive governmental regulation, including the imposition of maximum rate
levels, which may not be adequate for some lines of business. Proposed or
potential anti-trust or tax law changes also may affect adversely insurance
companies' policy sales, tax obligations, and profitability.
INFRASTRUCTURE FUND
The nature of regulation of infrastructure industries continues to evolve in
both the United States and foreign countries, and changes in governmental policy
and the need for regulatory approvals may have a material effect on the products
and services offered by companies in the infrastructure industries. Electric,
gas, water, and most telecommunications companies in the United States, for
example, are subject to both federal and state regulation affecting permitted
rates of return and the kinds of services that may be offered. Government
regulation may also hamper the development of new technologies. Adverse
regulatory developments could therefore potentially affect the performance of
the Fund.
In addition, many infrastructure companies have historically been subject to
the risks attendant to increases in fuel and other operating costs, high
interest costs on borrowed funds, costs associated with compliance with
environmental, and other safety regulations and changes in the regulatory
climate. Changes in prevailing interest rates may also affect the Infrastructure
Fund's share values because prices of equity and debt securities of
infrastructure companies tend to increase when interest rates decline and
decrease when interest rates rise. Further, competition is intense for many
infrastructure companies. As a result, many of these companies may be adversely
affected in the future and such companies may be subject to increased share
price volatility. In addition, many companies have diversified into oil and gas
exploration and development, and therefore returns may be more sensitive to
energy prices.
Some infrastructure companies, such as water supply companies, operate in
highly fragmented market sectors due to local ownership. In addition, some of
these companies are mature and experience little or no growth. Either of these
factors could have a material effect on infrastructure companies and could
therefore affect the performance of the Fund.
RESOURCES FUND
The Fund invests in companies that engage in the exploration, development, and
distribution of coal, oil and gas in the United States. These companies are
subject to significant federal and state regulation, which may affect rates of
return on such investments and the kinds of services that may be offered. In
addition, many natural resource companies historically have been subject to
significant costs associated with compliance with environmental and other safety
regulations. Governmental regulation may also hamper the development of new
technologies.
Further, competition is intense for many natural resource companies. As a
result, many of these companies may be adversely affected in the future and the
value of the securities issued by such companies may be subject to increased
price volatility. Such companies may also be subject to irregular fluctuations
in earnings due to changes in the availability of money, the level of interest
rates, and other factors.
The value of securities of natural resource companies will fluctuate in
response to market conditions for the particular natural resources with which
the issuers are involved. The price of natural resources will fluctuate due to
changes in worldwide levels of inventory, and changes, perceived or actual, in
production and consumption. With respect to precious metals, such price
fluctuations may be substantial over short periods of time. In addition, the
value of natural resources
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may fluctuate directly with respect to various stages of the inflationary cycle
and perceived inflationary trends and are subject to numerous factors, including
national and international politics.
CONSUMER PRODUCTS AND SERVICES FUND
The performance of consumer products and services companies relates closely to
the actual and perceived performance of the overall economy, interest rates, and
consumer confidence. In addition, many consumer products and services companies
have unpredictable earnings, due in part to changes in consumer tastes and
intense competition. As a result of either of these factors, consumer products
and services companies may be subject to increased share price volatility.
The consumer products and services industry may also be subject to greater
government regulation than many other industries. Changes in governmental policy
and the need for regulatory approvals may have a material effect on the products
and services offered by companies in the consumer products and services
industries. Such governmental regulations may also hamper the development of new
business opportunities.
HEALTH CARE FUND
Health care industries generally are subject to substantial governmental
regulation. Changes in governmental policy or regulation could have a material
effect on the demand for products and services offered by companies in the
health care industries and therefore could affect the performance of the Fund.
Regulatory approvals are generally required before new drugs and medical devices
or procedures may be introduced and before the acquisition of additional
facilities by health care providers. In addition, the products and services
offered by such companies may be subject to rapid obsolescence caused by
technological and scientific advances.
TELECOMMUNICATIONS FUND
Telecommunications industries may be subject to greater governmental
regulation than many other industries and changes in governmental policy and the
need for regulatory approvals may have a material effect on the products and
services offered by companies in the telecommunications industries. Telephone
operating companies in the United States, for example, are subject to both
federal and state regulation affecting permitted rates of return and the kinds
of services that may be offered. In addition, certain types of companies in the
telecommunications industries are engaged in fierce competition for market share
that could result in increased share price volatility.
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 each may invest up to 20%, and Health
Care Fund, Telecommunications Fund, and Financial Services Portfolio each may
invest up to 5%, 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 is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by 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."
See Appendix B for a description of the various debt ratings.
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
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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 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.
AIM 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.
INVESTING IN SMALLER COMPANIES
While an Underlying Theme Portfolio's holdings normally will include
securities of established suppliers of traditional products and services, an
Underlying Theme Portfolio may invest in smaller companies which can benefit
from the development of new products and services. These smaller companies 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.
PURCHASES AND REDEMPTIONS
From time to time, the Underlying Theme Portfolios may experience relatively
large purchases or redemptions due to rebalancing of the Fund by AIM. This may
have a material effect on the Underlying Theme Portfolios, because Underlying
Theme Portfolios that experience redemptions as a result of the rebalancing may
have to sell portfolio securities and because Underlying Theme Portfolios 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
Portfolios 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.
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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 AIM, in accordance with procedures approved by
that Board. AIM 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). AIM 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, AIM 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. AIM believes that carefully
selected investments in joint ventures, cooperatives, partnerships and state
enterprises that are illiquid (collectively, "Special Situations") could enable
an Underlying Theme Portfolio to achieve capital appreciation substantially
exceeding the appreciation it would realize if it did not make such investments.
However, in order to attempt to limit investment risk, each Underlying Theme
Portfolio will invest no more than 5% of its total assets in Special Situations.
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FOREIGN SECURITIES
Political, Social and Economic Risks. Individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, rate of savings and capital
reinvestment, resource self sufficiency and balance of payments positions.
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, confiscatory taxation or other confiscation by
any country, an Underlying Theme Portfolio could lose its entire investment in
any such country. In addition, governmental regulation in certain foreign
countries may impose interest rate controls, credit controls, and price
controls. These factors could have a material effect on foreign companies and
could therefore affect the performance of the Underlying Theme Portfolios.
Religious, Political and Ethnic Stability. Certain countries in which an
Underlying Theme Portfolio may invest may have groups that advocate radical
religious or revolutionary philosophies or support ethnic independence. Any
disturbance on the part of such individuals could carry the potential for
widespread destruction or confiscation of property owned by individuals and
entities foreign to such country and could cause the loss of an Underlying Theme
Portfolio's investment in those countries. Instability may also result from,
among other things, (i) authoritarian governments or military involvement in
political and economic decision-making, including changes in government through
extra-constitutional means, (ii) popular unrest associated with demands for
improved political, economic and social conditions, and (iii) hostile relations
with neighboring or other countries. Such political, social and economic
instability could disrupt the principal financial markets in which an Underlying
Theme Portfolio invests and adversely affect the value of its assets.
Foreign Investment Restrictions. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as an Underlying Theme Portfolio.
These restrictions or controls may at times limit or preclude investments in
certain securities and may increase the cost and expenses of an Underlying Theme
Portfolio. For example, certain countries require prior governmental approval
before investments by foreign persons may be made or may limit the amount of
investment by foreign persons in a particular company or limit the investment by
foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals. Moreover, the national policies of certain countries may
restrict investment opportunities in issuers or industries deemed sensitive to
national interests. In addition, some countries require governmental approval
for the repatriation of investment income, capital or the proceeds of securities
sales by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
restrictions on foreign capital remittances abroad. An Underlying Theme
Portfolio could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investments.
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.
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 has established a common European currency
for participating countries which is known as the "euro." Each participating
country supplemented its existing currency with the euro on January 1, 1999, and
it is anticipated that each participating country 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 expect to participate in the EMU and may supplement its existing
currency with the euro after January 1, 1999.
The introduction of the euro presents unique risks and uncertainties,
including 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.
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. AIM will consider such difficulties when determining the
allocation of an Underlying Theme Portfolio's assets, although AIM 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 charge
higher custody fees than those attributable to domestic investing and 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 its foreign issuers may be subject to withholding taxes by
the foreign issuer's country, thereby reducing that income or delaying the
receipt of income when those taxes may be recaptured. See "Dividends,
Distributions and Tax Matters."
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,
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Italy, Luxembourg, the 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. AIM believes that this
deregulation should improve the prospects for economic growth in many Western
European countries. Among other things, the deregulation could enable companies
domiciled in one country to avail themselves of lower labor costs existing in
other countries. In addition, this deregulation could benefit companies
domiciled in one country by opening additional markets for their goods and
services in other countries. Since, however, it is not clear what the exact form
or effect of these Common Market reforms will be on business in Western Europe,
it is impossible to predict the long-term impact of the implementation of these
programs on the securities owned by an Underlying Theme Portfolio.
Special Considerations Affecting Russia and Eastern European Countries.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
U.S. securities markets and should be considered highly speculative. Such risks
include the following: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on a fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and could
follow radically different political and/or economic policies to the detriment
of investors, including non-market-oriented policies such as the support of
certain industries at the expense of other sectors or investors, or a return to
the centrally planned economy that existed when such countries had a communist
form of government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt which may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
Special Considerations Affecting Japan. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the United States. In general, however, reported net income in
Japan is understated relative to U.S. accounting standards and this is one
reason why price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the United States,
both factors which tend to result in lower discount rates and higher
price-earnings ratios in Japan than in the United States.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
Special Considerations Affecting Pacific Region Countries. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
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.
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Special Considerations Affecting Latin American Countries. Most Latin American
countries have experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have very negative effects on the economies
and securities markets of certain Latin American countries. Certain Latin
American countries are also among the largest debtors to commercial banks and
foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further, due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are
maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the currency which, in turn, can have a disruptive and negative
effect on foreign investors. For example, in late 1994, the value of the Mexican
peso lost more than one-third of its value relative to the U.S. dollar.
Special Considerations Affecting Emerging Markets. Many investments in
emerging markets are considered speculative and therefore may offer greater
return potential, but have significantly greater risk. 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"). AIM believes that privatizations may
offer opportunities for significant capital appreciation and intends to invest
assets of the Underlying Theme Portfolios in privatizations in appropriate
circumstances. In certain foreign countries, the ability of foreign entities
such as the Underlying Theme Portfolios to participate in privatizations may be
limited by local law, or the terms on which the Underlying Theme Portfolios may
be permitted to participate may be less advantageous than those for local
investors. There can be no assurance that foreign governments will continue to
sell companies currently owned or controlled by them or that privatization
programs will be successful.
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INVESTMENT LIMITATIONS
INVESTMENT LIMITATIONS OF THE FUND
The following fundamental limitations of the Fund cannot be changed without
the affirmative vote of a majority of the outstanding shares of the Fund.
The Fund will not:
(1) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
(2) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
restriction, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(4) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(5) Purchase or sell physical commodities unless acquired as a result
of owning securities or other instruments, but the Fund may purchase, sell
or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments; or
(6) Purchase securities of any one issuer if, as a result, more than
5% of the Fund's total assets would be invested in securities of that
issuer or the Fund would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Fund's total
assets may be invested without regard to this limitation, and except that
this limitation does not apply to securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities or to securities issued
by other investment companies.
Because of its investment objective and policies, the Fund will concentrate
more than 25% of its assets in the mutual fund industry. In accordance with the
Fund's investment program set forth in the Prospectus, the Fund may invest more
than 25% of its assets in the Underlying Theme Funds.
The following investment limitations of the Fund are non-fundamental and may
be changed by the vote of the Trust's Board of Trustees without shareholder
approval.
The Fund will not:
(1) Invest more than 15% of its net assets in illiquid securities, a
term which means securities that cannot be disposed of within seven days in
the ordinary course of business at approximately the amount at which the
Fund has valued the securities and includes, among other things, repurchase
agreements maturing in more than seven days;
(2) Purchase portfolio securities while borrowings in excess of 5% of
its total assets are outstanding;
(3) Purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and except that the Fund
may make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contract or derivative instruments;
(4) Engage in short sales of securities or maintain a short position,
except that the Fund may maintain short positions in connection with its
use of financial options an futures, forward and spot currency contracts,
swap transactions and other financial contracts or derivative instruments;
or
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(5) Purchase securities of other investment companies, except to the
extent permitted by the 1940 Act or under the terms of any exemptive order
granted by the SEC and except that this limitation does not apply to
securities received or acquired as dividends, through offers of exchange,
or as a result of reorganization, consolidation, or merger.
If a percentage restriction on investment or utilization of assets is adhered
to at the time of an investment or transaction, a later change in percentage
ownership of a security or kind of securities resulting from changing market
values or a similar type of event will not be considered a violation of the
Fund's policies or restrictions.
Notwithstanding the foregoing investment limitations, the Fund may invest in
Underlying Theme Funds that have adopted investment limitations that may be more
or less restrictive than those listed above. As a result, the Fund may engage
indirectly in investment strategies that are prohibited under the investment
limitations listed above. The investment limitations and other investment
policies and restrictions of each Underlying Theme Fund are described in its
Prospectus and Statement of Additional Information.
Pursuant to Section 12(d)(1)(G) of the 1940 Act, the Fund may invest
substantially all of its assets in the Underlying Theme Funds.
INVESTMENT LIMITATIONS OF THE UNDERLYING THEME FUNDS AND PORTFOLIOS
Feeder Funds. The Financial Services Fund, Infrastructure Fund, Resources Fund
and Consumer Products and Services Fund (each, a "Feeder Fund," and
collectively, the "Feeder Funds") each has the following fundamental investment
policy to enable it to invest in the Financial Services Portfolio,
Infrastructure Portfolio, Resources Portfolio and Consumer Products and Services
Portfolio (each a "Portfolio," and collectively, the "Portfolios"),
respectively:
Notwithstanding any other investment policy of the Fund, the Fund may invest
all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
All other fundamental investment policies, and the non-fundamental investment
policies, of each Feeder Fund and its corresponding Portfolio are identical.
Therefore, although the following discusses the investment policies of each
Portfolio and its Board of Trustees, it applies equally to each Feeder Fund and
its Board of Trustees.
Each Portfolio has adopted the following investment limitations as fundamental
policies that may not be changed without the affirmative vote of a majority of
the outstanding shares of the Portfolio. Whenever a Feeder Fund is requested to
vote on a change in the investment limitations of its corresponding Portfolio,
the Fund will hold a meeting of its shareholders and will cast its votes as
instructed by its shareholders.
No Portfolio may:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Portfolio may exercise rights under agreements relating
to such securities, including the right to enforce security interests and
to hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Portfolio may
purchase, sell or enter into financial options and futures, forward and
spot currency contracts, swap transactions and other financial contracts or
derivative instruments;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Portfolio might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Portfolio's total
assets (including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the
Portfolio may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes; or
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(6) Purchase securities of any one issuer if, as a result, more than
5% of the Portfolio's total assets would be invested in securities of that
issuer or the Portfolio would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Portfolio's
total assets may be invested without regard to this limitation, and except
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities or to securities
issued by other investment companies.
The following investment policies of each Portfolio are not fundamental
policies and may be changed by vote of the Portfolios' Board of Trustees without
shareholder approval. No Portfolio may:
(1) Invest in securities of an issuer if the investment would cause
the Portfolio to own more than 10% of any class of securities of any one
issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a
readily available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of
those positions (excluding the amount by which options are "in-the-money")
exceeds 5% of the liquidation value of the Portfolio's portfolio, after
taking into account unrealized profits and unrealized losses on any
contracts the Portfolio has entered into;
(5) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the Portfolio's
assets, the Portfolio will not make any additional investments;
(6) Invest more than 10% of its total assets in shares of other
investment companies and may not invest more than 5% of its total assets in
any one investment company or acquire more than 3% of the outstanding
voting securities of any one investment company;
(7) Purchase securities on margin, provided that each Portfolio may
obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Portfolio
may make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments; or
(8) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Investors should refer to the applicable Prospectus for further information
with respect to the investment objective of each Feeder Fund, which may not be
changed without the approval of Fund shareholders, and its corresponding
Portfolio's investment objective, which may be changed without the approval of
its shareholders, and other investment policies, techniques and limitations,
which may or may not be changed without shareholder approval.
HEALTH CARE FUND
The Health Care Fund has adopted the following investment limitations as
fundamental policies, which may not be changed without the affirmative vote of a
majority of the outstanding shares of the Health Care Fund.
The Health Care Fund may not:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Health Care Fund may exercise rights under agreements
relating to such securities, including the right to enforce security
interests and to hold real estate acquired by reason of such enforcement
until that real estate can be liquidated in an orderly manner;
(2) Engage in the business of underwriting securities of other
issuers, except to the extent that the Health Care Fund might be considered
an underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(3) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or
35
<PAGE> 148
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.
The following investment policies of the Health Care Fund are not fundamental
policies and may be changed by vote of the Underlying Trust's Board of Trustees
without shareholder approval. The Health Care Fund will not:
(1) Purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits
maturing in more than seven days, or purchase OTC options or hold assets
set aside to cover OTC options written by the Health Care Fund, if
immediately after and as a result, the value of such securities would
exceed, in the aggregate, 15% of the Health Care Fund's net assets;
(2) Purchase securities on margin, provided that the Health Care Fund
may obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Health
Care Fund may make margin deposits in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments; or
(3) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities; or
(4) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the Health Care
Fund's total assets it will not make any additional investments.
Investors should refer to the Health Care Fund's Prospectus for further
information with respect to the Health Care Fund's investment objective, which
may not be changed without the approval of its shareholders, and other
investment policies, techniques and limitations, which may be changed without
shareholder approval.
TELECOMMUNICATIONS FUND
The Telecommunications Fund has adopted the following investment limitations
as fundamental policies, which may not be changed without the affirmative role
of a majority of the outstanding shares of the Telecommunications Fund.
The Telecommunications Fund may not:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Telecommunications Fund may exercise rights under
agreements relating to such securities, including the right to enforce
security interests and to hold real estate acquired by reason of such
enforcement until that real estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Telecommunications
Fund may purchase, sell or enter into financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments;
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<PAGE> 149
(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.
Notwithstanding any other investment policy of the Telecommunications Fund,
the Telecommunications Fund may invest all of its investable assets (cash,
securities and receivables related to securities) in an open-end management
investment company having substantially the same investment objective, policies
and limitations as the Fund.
The following investment policies of the Telecommunications Fund are not
fundamental policies and may be changed by vote of the Underlying Trust's Board
of Trustees without shareholder approval. The Telecommunications Fund may not:
(1) Invest in securities of an issuer if the investment would cause
the Telecommunications Fund to own more than 10% of any class of securities
of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a
readily available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of
those positions (excluding the amount by which options are "in-the-money")
exceeds 5% of the liquidation value of the Fund's portfolio, after taking
into account unrealized profits and unrealized losses on any contracts the
Fund has entered into;
(5) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the
Telecommunications Fund's total assets, it will not make any additional
investments;
(6) Purchase securities on margin, provided that the
Telecommunications Fund may obtain short-term credits as may be necessary
for the clearance of purchases and sales of securities, and further
provided that the Telecommunications Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Investors should refer to the Telecommunications Fund's Prospectus for further
information with respect to the Telecommunications Fund's investment objective,
which may not be changed without the approval of its shareholders, and other
investment policies, techniques and limitations, which may be changed without
shareholder approval.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Fund's or Portfolio's investment policies or
restrictions. A Fund or Portfolio may exchange securities, exercise conversion
or subscription rights, warrants
37
<PAGE> 150
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 AIM. As stated in the Prospectus, AIM 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, AIM 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, AIM 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 AIM generally seeks reasonably competitive
commission rates and spreads, payment of the lowest commission or spread is not
necessarily consistent with the best net results. While each Underlying Theme
Portfolio may engage in soft dollar arrangements for research services, as
described below, it has no obligation to deal with any broker/dealer or group of
broker/dealers in the execution of portfolio transactions.
Consistent with the interests of each Underlying Theme Portfolio, AIM may
select broker/dealers to execute that Underlying Theme Portfolio's portfolio
transaction, on the basis of the research and brokerage services they provide to
AIM 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 AIM determines in good faith that such commission is
reasonable in terms either of that particular transaction or the overall
responsibility of AIM 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 receives over the long term. Research
services may also be received from dealers who execute portfolio transactions in
OTC markets.
AIM 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 AIM 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 AIM believes that
coordination and the ability to participate in volume transactions will be
beneficial to that Portfolio.
Under a policy adopted by the applicable Board, and subject to the policy of
obtaining the best net results, AIM may consider a broker/dealer's sale of the
shares of the Underlying Theme Funds and the other portfolios for which AIM
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.
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<PAGE> 151
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. Each Board has
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to such affiliates are reasonable and
fair in the context of the market in which they are operating. Any such
transactions will be effected and related compensation paid only in accordance
with applicable SEC regulations.
The Funds may engage in certain principal and agency transactions with banks
and their affiliates that own 5% or more of the outstanding voting securities of
a Fund, provided the conditions of an exemptive order received by the Funds from
the SEC are met. In addition, a Fund may purchase or sell a security from or to
another AIM Fund provided the Funds follow procedures adopted by the Boards of
Directors/Trustees of the various AIM Funds, including the Trust. These
inter-fund transactions do not generate brokerage commissions but may result in
custodial fees or taxes or other related expenses.
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 Portfolios 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 Portfolios 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 Portfolios. For the fiscal year ended December 31, 1998 and
the period of September 15, 1997 through December 31, 1997, the portfolio
turnover rates were 28% and 1%, respectively.
MANAGEMENT
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below. Unless otherwise
indicated, the address of each Executive Officer is 11 Greenway Plaza, Suite
100, Houston, Texas 77046.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT
NAME, ADDRESS AND AGE WITH REGISTRANT LEAST THE PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (52) Trustee, Chairman of the Director, President and Chief Executive Officer,
Board and President A I M Management Group Inc.; Director and President,
A I M Advisors, Inc.; Director and Senior Vice
President, A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc. and
Fund Management Company; and Director, AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------------
C. DEREK ANDERSON (57) Trustee President, Plantagenet Capital Management, LLC (an
220 Sansome Street investment partnership); Chief Executive Officer,
Suite 400 Plantagenet Holdings, Ltd. (an investment banking
San Francisco, CA 94104 firm); Director, Anderson Capital Management, Inc.
since 1988; Director, PremiumWear, Inc. (formerly
Munsingwear, Inc.) (a casual apparel company); and
Director, "R" Homes, Inc. and various other
companies.
- ----------------------------------------------------------------------------------------------------------
FRANK S. BAYLEY (59) Trustee Partner, law firm of Baker & McKenzie; and Director
Two Embarcadero Center and Chairman of C.D. Stimson Company (a private
Suite 2400 investment company).
San Francisco, CA 94111
- ----------------------------------------------------------------------------------------------------------
ARTHUR C. PATTERSON (55) Trustee Managing Partner of Accel Partners (a venture
428 University Avenue capital firm); and Director of Viasoft and
Palo Alto, CA 94301 PageMart, Inc. (both public software companies) and
several other privately held software and
communications companies.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* A trustee who is an "interested person" of the Trust and A I M Advisors, Inc.
as defined in the 1940 Act.
39
<PAGE> 152
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT
NAME, ADDRESS AND AGE WITH REGISTRANT LEAST THE PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
RUTH H. QUIGLEY (64) Trustee Private investor; and President, Quigley Friedlander
1055 California Street & Co., Inc. (a financial advisory services firm)
San Francisco, CA 94108 from 1984 to 1986.
- ----------------------------------------------------------------------------------------------------------
MELVILLE B. COX (55) Vice President Vice President and Chief Compliance Officer, A I M
Advisors, Inc., A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc. and
Fund Management Company.
- ----------------------------------------------------------------------------------------------------------
GARY T. CRUM (51) 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.
- ----------------------------------------------------------------------------------------------------------
CAROL F. RELIHAN (44) Vice President Director, Senior Vice President, General Counsel and
Secretary, A I M Advisors, Inc.; Senior 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.
- ----------------------------------------------------------------------------------------------------------
SAMUEL D. SIRKO (39) Vice President and Assistant General Counsel and Assistant Secretary of
Secretary 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; and
Vice President, Assistant General Counsel and
Assistant Secretary of A I M Advisors, Inc.
- ----------------------------------------------------------------------------------------------------------
DANA R. SUTTON (40) Vice President and Vice President and Fund Controller, A I M Advisors,
Treasurer Inc.; and Assistant Vice President and Assistant
Treasurer, Fund Management Company.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
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 AIM 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. For the fiscal year ended
December 31, 1998, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms. Quigley, who
are not directors, officers or employees of AIM or any affiliated company,
received total compensation of $7,700, $7,100, $7,400 and $7,700, respectively,
from the Trust for their services as Trustees. For the fiscal year ended
December 31, 1998, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who
are not directors, officers or employees of AIM or any other affiliated company,
received total compensation of $106,850, $90,650, $98,600 and $99,500,
respectively, from the Investment companies managed or administered by AIM for
which he or she served as a Trustee. Fees and expenses disbursed to the Trustees
contained no accrued or payable pension or retirement benefits. Other Trustees
and Officers receive no compensation or expense reimbursement from the Trust. As
of April 1, 1999, the Trustees and officers and their families as a group owned
in the aggregate beneficially or of record less than 1% of the shares of the
Fund.
40
<PAGE> 153
MANAGEMENT SERVICES RELATING TO THE FUND
AIM serves as the investment adviser and administrator to the Fund under an
investment management and administration contract ("Management Contract")
between the Trust and AIM. AIM does not receive a fee for providing management
services to the Fund.
AIM was organized in 1976, and along with its subsidiaries, manages or advises
approximately 110 investment 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.
DISTRIBUTION SERVICES RELATING TO THE FUND
The Trust has entered into a Master Distribution Agreement (the "Distribution
Agreement"), with AIM Distributors, a registered broker-dealer and a wholly
owned subsidiary of AIM to act as the distributor of the Advisor Class shares of
the Fund. The Distribution Agreement provides AIM Distributors with the
exclusive right to distribute Advisor Class shares of the Fund directly and
through institutions with whom AIM Distributors has entered into select dealer
agreements.
The Fund's Advisor Class shares are offered continuously through the Fund's
principal underwriter and distributor, AIM Distributors, on a "best efforts"
basis pursuant to a distribution contract between the Trust and AIM Distributors
without a front-end sales charge or contingent deferred sales charge.
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 "Purchasing
Shares -- How to Purchase Shares."
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 "Exchanging Shares."
Information concerning redemption of the Fund's shares is set forth in the
Prospectuses under the heading "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 Fund's obligation to redeem shares, AIM
Distributors may also repurchase shares as an accommodation to shareholders. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions. 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 applicable 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 a 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.
41
<PAGE> 154
The Fund's net asset value is calculated by dividing the number of outstanding
shares into the net assets of the Fund. Net assets are the excess of a Fund's
assets over its liabilities. A more detailed description of how each Fund's net
asset value is calculated appears under the heading "Net Asset Value
Determination."
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, must, according to IRS regulations, withhold
31% of redemption payments and reportable dividends (whether paid or accrued) in
the case of any shareholder who fails to provide the Fund with a taxpayer
identification number ("TIN") and a certification that he is not subject to
backup withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect
TIN, or
(3) the investor is notified by the IRS that the investor is subject
to backup withholding because the investor failed to report all of the
interest and dividends on such investor's tax return (for reportable
interest and dividends only), or
(4) the investor fails to certify to the Fund that the investor is not
subject to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to
reportable interest, dividend, broker or barter exchange accounts opened
after 1983, or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting. A complete listing of such exempt entities appears in the
Instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
- 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 1940 Act
- 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
42
<PAGE> 155
- 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.
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
federal income tax withholding at a 30% rate on ordinary income dividends and
distributions and return of capital distributions. Under applicable treaty law,
residents of treaty countries may qualify for a reduced rate of withholding or a
withholding exemption.
NET ASSET VALUE DETERMINATION
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.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gains distributions are automatically reinvested
in additional shares of the same class of each Fund unless the shareholder has
requested in writing to receive such dividends and distributions in cash or that
they be invested in shares of another AIM Fund, subject to the terms and
conditions set forth in the Prospectus under the caption "Special
Plans -- Automatic Dividend Investment." If a shareholder's account does not
have any shares in it on a dividend or capital gains distribution payment date,
the dividend or distribution will be paid in cash whether or not the shareholder
has elected to have such dividends or distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
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.
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<PAGE> 156
The Fund will invest its assets in shares of the Underlying Theme Funds, cash
and money market instruments. Accordingly, the Fund's income will consist of
distributions from the Underlying Theme Funds, net gains realized from the
disposition of Underlying Theme Fund shares and interest. If an Underlying Theme
Fund qualifies for treatment as a RIC under the Code -- each has done so for its
past taxable years and intends to continue to do so for its current and future
taxable years -- (1) dividends paid to the Fund from the Underlying Theme Fund's
investment company taxable income (which may include net gains from certain
foreign currency transactions) will be taxable to the Fund as ordinary income to
the extent of the Underlying Theme Fund's earnings and profits and (2)
distributions paid to the Fund from the Underlying Theme Fund's net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
when designated as such, will be taxable to the Fund as long-term capital gains,
regardless of how long the Fund has held the Underlying Theme Fund's shares. If
shares of an Underlying Theme Fund are purchased within 30 days before or after
redeeming at a loss other shares of that Underlying Theme Fund (whether
pursuant to a rebalancing of the Fund's portfolio or otherwise) all or a part of
the loss will not be deductible by the Fund and instead will increase its basis
for the newly purchased shares.
Although an Underlying Theme Fund will be eligible to elect to "pass-through"
to its shareholders (including the Fund) the benefit of the foreign tax credit
with respect to any foreign and U.S. possessions income taxes it pays if more
than 50% in the value of its total assets at the close of any taxable year
consists of securities of foreign corporations, the Fund will not qualify to
pass that benefit through to its shareholders because of its inability to
satisfy that asset test.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
TAXATION OF THE FUND'S SHAREHOLDERS
Dividends and other distributions declared by the Fund, and payable to
shareholders of record as of a date, in October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual, or nonresident alien fiduciary of a trust or
estate, foreign corporation or foreign partnership ("foreign shareholder")
generally will be subject to U.S. withholding tax (at a rate of 30% or lower
treaty rate). Withholding will not apply, however, to a dividend paid by the
Fund to a foreign shareholder that is "effectively connected with the conduct of
a U.S. trade or business," in which case the reporting and withholding
requirements applicable to domestic shareholders will apply. A distribution of
net capital gain by the Fund to a foreign shareholder generally will be subject
to U.S. federal income tax (at the rates applicable to domestic persons) only if
the distribution is "effectively connected" or the foreign shareholder is
treated as a resident alien individual for federal income tax purposes.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Fund and its shareholders. Investors are urged to
consult their own tax advisors for more detailed information and for information
regarding any foreign, state and local taxes applicable to distributions
received from the Fund.
SHAREHOLDER INFORMATION
This information supplements the discussion in the Fund's Prospectus under
the title "Shareholder Information."
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and
44
<PAGE> 157
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. 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.
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).
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor Class Fund acquired through exchange
must be qualified for sale in the state in which the shareholder resides; (c)
the exchange must be made between accounts having identical registrations and
addresses; (d) the full amount of the purchase price for the shares being
exchanged must have already been received by the fund; (e) the account from
which shares have been exchanged must be coded as having a certified taxpayer
identification number on file or, in the alternative, an appropriate IRS Form
W-8 (certificate of foreign status) or Form W-9 (certifying exempt status) must
have been received by the fund; (f) newly acquired shares (through either an
initial or subsequent investment) are held in an account for at least ten
business days, and all other shares are held in an account for at least one day,
prior to the exchange; and (g) certificates representing shares must be returned
before shares can be exchanged. There is no fee for exchanges among the Advisor
Class Funds.
The current prospectus of each of the Advisor Class Funds and current
information concerning the operation of the exchange privilege are available
through AIM Distributors or through any dealer who has executed an applicable
agreement with AIM Distributors. Before exchanging shares, investors should
review the prospectuses of the funds whose shares will be acquired through
exchange. Exchanges of shares are considered to be sales for federal and state
income tax purposes and may result in a taxable gain or loss to a shareholder.
The exchange privilege is not an option or right to purchase shares but is
permitted under the respective policies of the participating funds, and may be
modified or discontinued by any of such funds or by AIM Distributors at any
time, and to the extent permitted by applicable law, without notice.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
45
<PAGE> 158
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Timing of Purchase
Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
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 "Shareholder Information -- Timing
of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the
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<PAGE> 159
preceding 30 days; (c) the shares to be redeemed are not in certificate form;
(d) the person requesting the redemption can provide proper identification
information, and (e) the proceeds of the redemption do not exceed $50,000. AIM
Distributors has made arrangements with certain dealers and investment advisors
to accept telephone instructions for the redemption of shares. AIM Distributors
reserves the right to impose conditions on these dealers and investment
advisors, including the condition that they enter into agreements (which contain
additional conditions with respect to the redemption of shares) with AIM
Distributors. The Transfer Agent and AIM Distributors will not be liable for any
loss, expense or cost arising out of any telephone redemption request effected
in accordance with the authorization set forth in the appropriate form if they
reasonably believe such request to be genuine, but may in certain cases be
liable for losses due to unauthorized or fraudulent transactions if they do not
follow reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
taxpayer identification number and current address, and mailings of
confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. A charge for special handling (such as
wiring of funds or expedited delivery services) may be made by the Transfer
Agent. The right of redemption may not be suspended or the date of payment upon
redemption postponed except under unusual circumstances such as when trading on
the NYSE is restricted or suspended. Payment of the proceeds of redemptions
relating to shares for which checks sent in payment have not yet cleared will be
delayed until it is determined that the check has cleared, which may take up to
ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. AIM Funds may waive or modify any signature guarantee
requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the SEC, and further
provided that such guarantor institution is listed in one of the reference
guides contained in the Transfer Agent's current Signature Guarantee Standards
and Procedures, such as certain domestic banks, credit unions, securities
dealers, or securities exchanges. The Transfer Agent will also accept signatures
with either: (1) a signature guaranteed with a medallion stamp of the STAMP
Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information
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<PAGE> 160
regarding whether a particular institution or organization qualifies as an
"eligible guarantor institution," an investor should contact the Client Services
Department of AFS.
DIVIDENDS AND DISTRIBUTIONS. In determining the amount of capital gains, if
any, available for distribution, net capital gains are offset against available
net capital losses, if any, carried forward from previous fiscal periods. Each
Advisor Class Fund may make additional distributions, if necessary, to avoid a
non-deductible 4% federal excise tax on certain undistributed income and capital
gain (the "Excise Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
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.
AIM Distributors and its agents reserve the right at any time (1) to withdraw
all or any part of the offering made by the Fund's 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 "Terms and
Conditions of Exchanges."
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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 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.
Certain non-recurring and extraordinary expenses will not be paid in
accordance with the Service Agreement including: the fees and costs of actions,
suits or proceedings and any penalties or damages in connection therewith, to
which the Trust and/or the Fund may incur directly, or may incur as a result of
its legal obligation to provide indemnification to its officers, trustees and
agents; the fees and costs of any governmental investigation and any fines or
penalties in connection therewith; and any federal, state or local tax, or
related interest penalties or additions to tax, incurred, for example, as a
result of the Trust's failure to distribute all of its income and gains, its
failure to qualify as a RIC under the Code, or failure to timely file any
required tax returns or other filings. Amounts not payable pursuant to the
Service Agreement will be paid by the Fund.
CHARGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying charges for requests for copies
of shareholder account statements and other historical account information older
than the current year and the immediately preceding year.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street,
Boston, Massachusetts 02110, is custodian of all securities and cash of the
Fund. The Custodian attends to the collection of principal and income, pays and
collects all monies for securities bought and sold by the Fund and performs
certain other ministerial duties. A I M Fund Services, Inc., a wholly owned
subsidiary of AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, acts
as transfer and dividend disbursing agent for the Fund. These services do not
include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Fund pays the Custodian and the
Transfer Agent such compensation as may be agreed upon from time to time.
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.
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<PAGE> 162
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 return for Advisor Class shares of the Fund for the
periods shown were:
<TABLE>
<CAPTION>
PERIODS ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
One year.................................................... 9.80%
Since inception............................................. 7.04%
</TABLE>
The inception date for Advisor Class shares of the Fund is September 15, 1997.
PERFORMANCE INFORMATION
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. 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.
From time to time and in its discretion, AIM or its affiliates may waive all
or a portion of their fees and/or assume certain expenses of the Underlying
Theme Funds. Voluntary fee waivers or reductions or commitments to assume
expenses may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions or commitments to assume
expenses, AIM will retain its ability to be reimbursed for such fee prior to the
end of each fiscal year. Contractual fee waivers or reductions or reimbursement
of expenses set forth in the Fee Table in a Prospectus may not be terminated or
amended to the Fund's detriment during the period stated in the agreement
between AIM and the Fund. Fee waivers or reductions or commitments to reduce
expenses will have the effect of increasing the Fund's yield and total return.
The performance of the Fund will vary from time to time and past results are
not necessarily indicative of future results. A Fund's performance is a function
of its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund and market
conditions. A shareholder's investment in the Fund is not insured or guaranteed.
These factors should be carefully considered by the investor before making an
investment in the Fund.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS AND THE FUND'S RETURN, INVESTORS SHOULD
50
<PAGE> 163
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.
UNDERLYING THEME FUND PERFORMANCE. The Fund has a limited history and
therefore a limited performance record. Thus, the performance shown below is not
the performance of the Fund, but instead reflects the performance of the
Underlying Theme Funds. The following table shows the average annual total
returns of Class A and Class B shares of each Underlying Theme Fund for the most
recent one- and five-year periods (as applicable) and for the life of the
Underlying Theme Funds. The performance information reflects deduction of the
maximum applicable sales charges. Returns would be higher if these charges were
not reflected. The Fund invests in the Advisor Class shares of the Underlying
Theme Funds, which are not subject to sales charges and distribution and service
fees. However, Class A and Class B shares of the Fund are subject to their own
sales charges and distribution and service fees.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE OF FUND
----------------- ----------------- ------------------
UNDERLYING THEME FUND CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
- --------------------- ------- ------- ------- ------- ------- -------
AVERAGE ANNUAL TOTAL RETURN THROUGH 4/30/98
<S> <C> <C> <C> <C> <C> <C>
Consumer Products and Services Fund............. 45.69% 47.14% n/a n/a 30.87%(1) 31.66%(1)
Financial Services Fund......................... 33.53% 34.54% n/a n/a 17.52%(2) 17.94%(2)
Health Care Fund................................ 28.90% 29.62% 17.91% 18.25% 14.59%(3) 18.50%(4)
Infrastructure Fund............................. 8.37% 8.14% n/a n/a 9.93%(5) 10.17%(5)
Resources Fund.................................. 7.91% 7.80% n/a n/a 9.00%(6) 9.24%(6)
Telecommunications Fund......................... 36.09% 37.17% 14.34% 14.64% 13.67%(7) 14.85%(8)
</TABLE>
Past performance of the Underlying Theme Funds is not a guarantee of future
results for either the Underlying Theme Funds or the Fund. Further information
about each Underlying Theme Fund's performance is contained in its Annual Report
to Shareholders, which may be obtained without charge by calling (800) 824-1580
or contacting your financial adviser.
- --------
(1) The Consumer Products and Services Fund commenced operations on December 30,
1994.
(2) The Financial Services Fund commenced operations on May 31, 1994.
(3) Class A shares of the Health Care Fund were initially offered on August 7,
1989.
(4) Class B shares of the Health Care Fund where 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.
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
51
<PAGE> 164
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
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.
52
<PAGE> 165
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
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Research firms such as Mehta and Isaly which publishes Pharmaceutical
Portfolio Recommendations
- OECD and its publications such as the OECD Health Data, as supplemented
annually
- Morgan Stanley Capital International stock market industry indices such as
Health & Personal Care
- The World Bank and its publications such as The World Development Report, as
supplemented annually
- IFC and publications such as the Emerging Stock Markets Factbook
Information About the Global Health Care Industries. The Fund and the
Sub-advisor believe that certain market and demographic factors merit an
investor's consideration when making a health care investment. Worldwide
standards of living and life expectancy have increased at a substantial rate.
The Sub-advisor, the investment advisor to the AIM/GT Funds, expects this
growth, which works to the general benefit of the global health care industry,
to continue at a roughly comparable rate in the future, although no assurances
can be given in this regard. Moreover, according to the Sub-advisor, the health
care industry historically has proven to be a relatively non-cyclical industry
that continues to provide goods and services to the public in periods of
economic weakness as well as economic strength.
The Sub-advisor believes that the anticipated increase in the world's elderly
population could increase demand for health care products and services. For
example, according to data compiled by the Sub-advisor, in Japan the number of
people age 65 and older is expected to grow over 100% by the year 2025; in
Germany, France and the U.S., the same age group should grow 40%. Similarly, the
U.S. Census Bureau predicts the number of Americans 85 and older to double in
the next 30 years. From time to time, the Fund and AIM Distributors will quote
information including, but not limited to, international data regarding
populations, birth rates, mortality rates, life expectancy, health care
expenditures, and gross domestic product vs. life expectancy. The information
quoted has not been independently verified by the Fund or AIM Distributors and
will be based on data that is believed to be reliable and accurate.
53
<PAGE> 166
Telecommunications Fund. From time to time the Fund and AIM Distributors will
quote information including data regarding:
- Increased usage of new technologies such as, but not limited to, cellular
and wireless communications in emerging and established countries around the
world
- Supply and demand of telephone equipment and services
- Regulatory environment of telecommunications industries
- Revenue, price and usage of telecommunications products and services
- Privatization and/or deregulation of telecommunications companies
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Salomon Brothers World Equity Telecommunications Index, which includes stock
market data about the telecommunications industry in established and
developing markets
- OECD and other publications from its subsidiaries such as the International
Telecommunications Union
- Morgan Stanley Capital International stock market industry indices such as
Telecommunications, Broadcasting & Publishing and Data Processing &
Reproduction
- International Technology Consultants, a Washington D.C. based firm which
publishes reports such as Eastern European & Soviet Telecom Report and Latin
American Telecom Report
- Telegeography and other publications
Deregulation in the United States. The United States has been the bellwether
for deregulation of the telephone industry. The divestiture of the Bell System
from American Telephone and Telegraph has produced competing companies in the
United States. Such U.S. market-driven competition has, for example, led to
lower costs for consumers which in turn led to greater consumer usage and to
higher industrywide revenues. The Sub-advisor expects this scenario to continue
to benefit such companies in the U.S. and similarly to be realized by the
established telecommunications companies in established economies, although no
assurances can be made in this regard.
Consumer Products and Services Fund. From time to time the Fund and AIM
Distributors will quote information including data regarding:
- Trading volume, number of listed companies and the largest companies located
around the world in the consumer products and services industries
- Expenditures, demand and consumption by various countries, regions, income
classes and age groups of consumer products and services
- Population of countries, regions and age groups
- Life expectancy rates in various regions, countries and age groups
- New consumer products and services in the development or manufacturing
stages
- Income of various regions, countries and age groups
- Sales and sales growth of consumer products and services companies in their
own country and abroad
- Sales, supply and demand of consumer products and services
- Parent companies and the products and services they distribute
- Regulatory environment of consumer products industries
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
54
<PAGE> 167
- The World Bank and its publications
- The International Monetary Fund (IMF) and its publications
- IFC and its publications
- OECD and its publications
Infrastructure Fund. From time to time the Fund and AIM Distributors may quote
information including:
- Supply and demand of telephone equipment and services, electricity, water,
transportation, construction materials and other infrastructure related
products and services
- Regulatory environment of infrastructure industries
- Quantity and costs of current and projected infrastructure projects
- Privatization of industries and companies
- New technologies, products and services used in infrastructure industries
- Infrastructure Finance Magazine and other periodicals
Financial Services Fund. From time to time the Fund and AIM Distributors may
quote information including:
- Supply and demand of financial services
- Regulatory environment of financial service industries
- Credit ratings of U.S. and non-U.S. banks
- New technologies, products and services used in the financial services
industries
- Consolidation in the financial services industries
Resources Fund. From time to time the Fund and AIM Distributors may quote
information including:
- Supply, demand and prices of natural resources
- Regulatory environment of natural resources
- Supply, demand and prices of products manufactured from natural resources
- New technologies, products and services used in the natural resources
industries
55
<PAGE> 168
APPENDIX A
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
MCSI AC WORLD PRODUCTS AND FINANCIAL HEALTH
INDEX INDUSTRY SERVICES SERVICES CARE INFRASTRUCTURE RESOURCES TELECOMMUNICATIONS
- -------------- ------------ --------- ------ -------------- --------- ------------------
<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. Material &
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>
56
<PAGE> 169
APPENDIX B
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc. ("Moody's") employs the designations "Prime-1"
and "Prime-2" to indicate commercial paper having the highest capacity for
timely repayment. Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and well-
established access to a range of financial markets and assured sources of
alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt obligations. This
normally will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Standard & Poor's, a division of the McGraw-Hill Companies, Inc. ("S&P") rates
commercial paper in four categories ranging from "A-1" for the highest quality
obligations to "D" for the lowest. A-1 -- This highest category indicates that
the degree of safety regarding timely payment is strong. Those issues determined
to possess extremely strong safety characteristics will be denoted with a plus
sign (+) designation. A-2 -- Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of safety is not as
high as for issues designated "A-1." A-3 -- Issues carrying this designation
have adequate capacity for timely payment. They are, however, more vulnerable to
the adverse effects of changes in circumstances than obligations carrying the
higher designations. B -- Issues rated "B" are regarded as having only
speculative capacity for timely payment. C -- This rating is assigned to
short-term debt obligations with a doubtful capacity for payment. D -- Debt
rated "D" is in payment default. The "D" rating category is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period.
S&P rates the securities debt of various entities in categories ranging from
"AAA" to "D" according to quality. Investment grade ratings are the first four
categories: AAA -- Highest rating. Capacity to pay interest and repay principal
is extremely strong. AA -- Very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.
A -- Has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. BBB -- Regarded as
having adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" is
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. BB -- Has less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BBB-" rating. B -- Has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The "B" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB-" rating. CCC -- Has a
currently identifiable vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely payment of interest
and repayment of principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay interest and
repay principal. The "CCC" rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "B" or "B-" rating.
CC -- Typically applied to debt subordinated to senior debt that is assigned an
actual or implied "CCC" rating. C -- Typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued. C1 -- Reserved for income bonds
on which no interest is being paid. D -- In payment default. The "D" category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. This rating will also be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
57
<PAGE> 170
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
DESCRIPTION OF BOND RATINGS
Moody's rates the long-term debt securities issued by various entities from
"Aaa" to "C." Investment Grade Ratings are the first four categories:
Aaa -- Best quality. These securities carry the smallest degree of investment
risk and are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Aa -- High quality by all standards. Together with the
Aaa group they comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the Aaa securities.
A -- Upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future. Baa -- Medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. Ba -- Have
speculative elements and their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B -- Generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small. Caa -- Poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca -- Speculative in a high degree. Such issues are often in default or have
other marked shortcomings. C -- Lowest rated class of bonds. Issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
ABSENCE OF RATING
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B in its corporate bond rating system. The modifier 1
indicates that the company ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
58
<PAGE> 171
FINANCIAL STATEMENTS
FS
<PAGE> 172
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of AIM Global Trends Fund (formerly AIM New Dimension Fund
and prior to that GT Global New Dimension Fund) and Board of Trustees of AIM
Series Trust (formerly GT Global Series Trust):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM Global Trends Fund at
December 31, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
BOSTON, MASSACHUSETTS
FEBRUARY 19, 1999
FS-1
<PAGE> 173
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADVISOR
CLASS VALUE % OF NET
AIM GLOBAL THEME FUNDS SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
AIM Global Consumer Products and Services Fund ..................... 560,525 $ 14,680,148 33.0
AIM Global Financial Services Fund ................................. 476,746 9,453,864 21.3
AIM Global Infrastructure Fund ..................................... 474,400 7,040,101 15.8
AIM Global Health Care Fund ........................................ 212,889 5,126,361 11.5
AIM Global Resources Fund .......................................... 384,299 4,265,717 9.6
AIM Global Telecommunications Fund ................................. 216,883 4,157,651 9.4
------------ -----
TOTAL THEME FUND INVESTMENTS (cost $43,425,392) ...................... 44,723,842 100.6
------------ -----
TOTAL INVESTMENTS (cost $43,425,392) * .............................. 44,723,842 100.6
Other Assets and Liabilities ......................................... (276,719) (0.6)
------------ -----
NET ASSETS ........................................................... $ 44,447,123 100.0
------------ -----
------------ -----
</TABLE>
- --------------
* For Federal income tax purposes, cost is $44,126,685 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 2,594,572
Unrealized depreciation: (1,997,415)
-------------
Net unrealized appreciation: $ 597,157
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-2
<PAGE> 174
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments at value (cost $43,425,392) (Note 1).................................................. $44,723,842
Receivable for Fund shares sold................................................................... 64,727
----------
Total assets.................................................................................... 44,788,569
----------
Liabilities:
Payable for Fund shares repurchased............................................................... 251,784
Payable for service and distribution expenses (Note 2)............................................ 89,662
----------
Total liabilities............................................................................... 341,446
----------
Net assets.......................................................................................... $44,447,123
----------
----------
Class A:
Net asset value and redemption price per share ($17,821,706 DIVIDED BY 1,555,460 shares
outstanding)....................................................................................... $ 11.46
----------
----------
Maximum offering price per share (100/95.25 of $11.46) *............................................ $ 12.03
----------
----------
Class B:+
Net asset value and offering price per share ($25,555,015 DIVIDED BY 2,240,410 shares
outstanding)....................................................................................... $ 11.41
----------
----------
Class C:+
Net asset value and offering price per share ($249,327 DIVIDED BY 21,865 shares outstanding)........ $ 11.40
----------
----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($821,075 DIVIDED BY
71,690 shares outstanding)......................................................................... $ 11.45
----------
----------
Net assets consist of:
Paid in capital (Note 4).......................................................................... $44,578,806
Undistributed net investment income............................................................... 2,313
Accumulated net realized loss on investments...................................................... (1,432,446)
Net unrealized appreciation of investments........................................................ 1,298,450
----------
Total -- representing net assets applicable to capital shares outstanding........................... $44,447,123
----------
----------
<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-3
<PAGE> 175
STATEMENT OF OPERATIONS
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income............................................................................ $ 131,152
Interest income............................................................................ 3,454
----------
Total investment income.................................................................. 134,606
----------
Expenses:
Service and distribution expenses: (Note 2)
Class A...................................................................... $ 98,572
Class B...................................................................... 258,946
Class C...................................................................... 2,080 359,598
----------
Other expenses............................................................................. 1,921
----------
Total expenses............................................................................. 361,519
----------
Net investment loss.......................................................................... (226,913)
----------
Net realized and unrealized gain (loss) on investments: (Note 1)
Net realized loss on investments............................................... (1,998,812)
Capital gain distributions received............................................ 836,396
----------
Net realized loss during the year........................................................ (1,162,416)
Net unrealized appreciation during the year.............................................. 4,092,846
----------
Net realized and unrealized gain on investments.............................................. 2,930,430
----------
Net increase in net assets resulting from operations......................................... $2,703,517
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-4
<PAGE> 176
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 15,
1997
(COMMENCEMENT
OF
YEAR ENDED OPERATIONS) TO
DECEMBER 31, DECEMBER 31,
1998 1997
------------- --------------
<S> <C> <C>
Increase in net assets
Operations:
Net investment loss...................................................... $ (226,913) $ (31,440)
Net realized gain (loss) on investments.................................. (1,162,416) 1,983,653
Net change in unrealized appreciation (depreciation) of investments...... 4,092,846 (2,794,396)
------------- --------------
Net increase (decrease) in net assets resulting from operations........ 2,703,517 (842,183)
------------- --------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............................................... (26,011) --
From net realized gain on investments.................................... (219,151) --
In excess of net investment income....................................... -- (583,714)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............................................... -- --
From net realized gain on investments.................................... (311,471) --
In excess of net investment income....................................... -- (781,183)
Class C:+
Distributions to shareholders: (Note 1)
From net investment income............................................... -- N/A
From net realized gain on investments.................................... (2,998) N/A
In excess of net investment income....................................... -- N/A
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............................................... (5,762) --
From net realized gain on investments.................................... (9,683) --
In excess of net investment income....................................... -- (53,046)
------------- --------------
Total distributions.................................................... (575,076) (1,417,943)
------------- --------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 26,507,554 41,029,628
Decrease from capital shares repurchased................................. (19,757,886) (3,300,488)
------------- --------------
Net increase from capital share transactions........................... 6,749,668 37,729,140
------------- --------------
Total increase in net assets............................................... 8,878,109 35,469,014
Net assets:
Beginning of year........................................................ 35,569,014 100,000
------------- --------------
End of year *............................................................ $44,447,123 $ 35,569,014
------------- --------------
------------- --------------
*Includes undistributed/accumulated net investment income (loss).......... $ 2,313 $ 28,710
------------- --------------
------------- --------------
<FN>
- --------------
+ Commencing January 1, 1998, the Fund began offering Class C shares.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-5
<PAGE> 177
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 CLASS B
------------------------------------ ------------------------------------
SEPTEMBER 15, 1997 SEPTEMBER 15, 1997
(COMMENCEMENT (COMMENCEMENT
YEAR ENDED OF OPERATIONS) YEAR ENDED OF OPERATIONS)
DECEMBER 31, TO DECEMBER 31, 1997 DECEMBER 31, TO DECEMBER 31, 1997
1998 (d) (d) 1998 (d) (d)
------------- --------------------- ------------- ---------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.63 $ 11.43 $ 10.62 $ 11.43
------------- ---------- ------------- ----------
Income from investment operations:
Net investment income (loss).......... (0.02) (0.01) (0.07) (0.02)
Net realized and unrealized gain
(loss) on investments................ 1.01 (0.31) 1.00 (0.32)
------------- ---------- ------------- ----------
Net increase (decrease) from
investment operations.............. 0.99 (0.32) 0.93 (0.34)
------------- ---------- ------------- ----------
Distributions to shareholders:
From net investment income............ (0.02) -- -- --
From net realized gain on
investments.......................... (0.14) -- (0.14) --
In excess of net investment income.... -- (0.48) -- (0.47)
------------- ---------- ------------- ----------
Total distributions................. (0.16) (0.48) (0.14) (0.47)
------------- ---------- ------------- ----------
Net asset value, end of period.......... $ 11.46 $ 10.63 $ 11.41 $ 10.62
------------- ---------- ------------- ----------
------------- ---------- ------------- ----------
Total investment return (c)............. 9.37% (2.68)% (b) 8.83% (2.83)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 17,822 $ 15,145 $ 25,555 $ 19,184
Ratio of net investment income (loss) to
average net assets..................... (0.21)% (0.35)% (a) (0.71)% (0.85)% (a)
Ratio of operating expenses to average
net assets (Note 2).................... 0.50% 0.50% (a) 1.00% 1.00% (a)
Portfolio turnover rate++............... 28% 1% (a) 28% 1% (a)
</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.
+ Commencing January 1, 1998, the Fund began offering Class C shares.
++ Portfolio turnover rates are calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
FS-6
<PAGE> 178
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>
ADVISOR CLASS
------------------------------------
CLASS C+ SEPTEMBER 15, 1997
------------- (COMMENCEMENT
YEAR ENDED YEAR ENDED OF OPERATIONS)
DECEMBER 31, DECEMBER 31, TO DECEMBER 31, 1997
1998 (d) 1998 (d) (d)
------------- ------------- ---------------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.62 $ 10.64 $ 11.43
------------- ------------- ----------
Income from investment operations:
Net investment income (loss).......... (0.08) 0.03 0.01
Net realized and unrealized gain
(loss) on investments................ 1.00 1.00 (0.31)
------------- ------------- ----------
Net increase (decrease) from
investment operations.............. 0.92 1.03 (0.30)
------------- ------------- ----------
Distributions to shareholders:
From net investment income............ -- (0.08) --
From net realized gain on
investments.......................... (0.14) (0.14) --
In excess of net investment income.... -- -- (0.49)
------------- ------------- ----------
Total distributions................. (0.14) (0.22) (0.49)
------------- ------------- ----------
Net asset value, end of period.......... $ 11.40 $ 11.45 $ 10.64
------------- ------------- ----------
------------- ------------- ----------
Total investment return (c)............. 8.94% 9.80% (2.51)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 249 $ 821 $ 1,241
Ratio of net investment income (loss) to
average net assets..................... (0.71)% 0.28% 0.15% (a)
Ratio of operating expenses to average
net assets (Note 2).................... 1.00% 0.00% 0.00% (a)
Portfolio turnover rate++............... 28% 28% 1% (a)
</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.
+ Commencing January 1, 1998, the Fund began offering Class C shares.
++ Portfolio turnover rates are calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
FS-7
<PAGE> 179
NOTES TO
FINANCIAL STATEMENTS
December 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
AIM Global Trends Fund (the "Fund"), formerly AIM New Dimension Fund and prior
to that 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 year. 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 of the Fund are valued based on the closing net asset value of
Advisor Class shares of each Underlying Theme Funds 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. The Fund currently has a capital loss carryforward of
$731,153 which expires in 2006.
(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.
2. RELATED PARTIES
A I M Advisors, Inc. (the "Manager"), an indirectly wholly owned subsidiary of
AMVESCAP PLC, is the Fund's investment manager and 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. Also, as of the close of business
May 29, 1998, A I M Distributors, Inc. ("AIM Distributors"), a wholly-owned
subsidiary of the Manager, became the Fund's distributor, and the Trust was
reorganized from a Massachusetts business trust into a Delaware business trust.
Finally, as of the close of business on September 4, 1998, A I M Fund Services,
Inc. ("AFS"), an affiliate of the Manager and AIM Distributors, replaced GT
Global Investor Services, Inc. ("GT Services") as the transfer agent of the
Fund.
AIM Distributors 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 Fund's distributor.
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 year ended December 31, 1998, AIM Distributors
retained $5,203 of such sales charges. Purchases of Class A shares exceeding
$1,000,000 may be subject to a contingent deferred sales charge ("CDSC") upon
redemption, in accordance with the Fund's current prospectus. There were no
CDSC's collected for Class A for the year ended December 31,1998. 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
FS-8
<PAGE> 180
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 year ended December
31, 1998, AIM Distributors collected such CDSCs in the amount of $77,258. 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 year ended December 31, 1998, AIM Distributors
collected such CDSCs in the amount of $208. In addition, AIM Distributors makes
ongoing shareholder servicing and trail commission payments to dealers whose
clients hold Class B 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"), 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 that 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. The Fund, pursuant to the Fund's Class B Plan,
compensates AIM Distributors at an annualized rate of 1.00% of the average daily
net assets of the Fund's Class B shares. Of these amounts, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A or Class B
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own the
appropriate class of shares of the Fund. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge.
The Manager is 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 AFS, 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 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.
Effective as of the close of business September 4, 1998, the Fund, pursuant to a
transfer agency and service agreement, has agreed to pay AFS an annualized fee
of $24.85 per shareholder accounts that are open during any monthly year (this
fee includes all out-of-pocket expenses), and an annualized fee of $0.70 per
shareholder account that is closed during any monthly year. Both fees shall be
billed by AFS monthly in arrears on a prorated basis of 1/12 of the annualized
fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Services, an affiliate
of the Manager and AIM Distributors, was the transfer agent of the Fund. For
performing shareholder servicing, reporting, and general transfer agent
services, GT Services received 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
was also reimbursed by the Fund for its out-of-pocket expenses for such items as
postage, forms, telephone charges, stationery and office supplies.
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 or AIM Distributors $5,000 per year
plus $300 for each meeting of the board or any committee thereof attended by the
Trustee. Until such order is received, the Manager pays the trustees such fees.
FS-9
<PAGE> 181
3. PURCHASES AND SALES
For the year ended December 31, 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............. $ 5,701,863 $ 4,562,266
Telecommunications Fund......................... $ 1,828,214 1,193,655
Financial Services Fund......................... $ 3,832,422 2,779,932
Resources Fund.................................. $ 3,479,472 1,184,858
Health Care Fund................................ $ 2,374,943 1,310,095
Infrastructure Fund............................. $ 3,414,597 1,984,449
</TABLE>
4. CAPITAL SHARES
At December 31, 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:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SEPTEMBER 15, 1997
(COMMENCEMENT OF
YEAR ENDED OPERATIONS)
DECEMBER 31, 1998 TO DECEMBER 31, 1997
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold................................................. 952,323 $ 10,681,667 1,560,835 $ 17,768,084
Shares issued in connection with reinvestment of
distributions ............................................ 22,552 245,281 54,891 563,181
----------- ------------ ----------- ------------
974,875 10,926,948 1,615,726 18,331,265
Shares repurchased ......................................... (843,563) (9,206,317) (194,494) (2,190,806)
----------- ------------ ----------- ------------
Net increase ............................................... 131,312 $ 1,720,631 1,421,232 $ 16,140,459
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
<CAPTION>
CLASS B
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................. 1,302,574 $ 14,551,138 1,832,668 $ 20,681,472
Shares issued in connection with reinvestment of
distributions ............................................ 26,664 289,152 67,039 687,825
<CAPTION>
CLASS B
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
----------- ------------ ----------- ------------
1,329,238 14,840,290 1,899,707 21,369,297
Shares repurchased ......................................... (894,609) (9,623,737) (96,841) (1,061,266)
----------- ------------ ----------- ------------
Net increase ............................................... 434,629 $ 5,216,553 1,802,866 $ 20,308,031
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
<CAPTION>
CLASS C
*
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................. 35,723 $ 397,022 -- $ --
Shares issued in connection with reinvestment of
distributions ............................................ 265 2,876 -- --
----------- ------------ ----------- ------------
35,988 399,898 -- --
Shares repurchased ......................................... (14,123) (146,933) -- --
----------- ------------ ----------- ------------
Net increase ............................................... 21,865 $ 252,965 -- $ --
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
<CAPTION>
ADVISOR
CLASS
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................. 29,946 $ 324,974 113,102 $ 1,276,664
Shares issued in connection with reinvestment of
distributions ............................................ 1,418 15,444 5,102 52,402
---------- ------------ ---------- ------------
31,364 340,418 118,204 1,329,066
Shares repurchased ......................................... (76,261) (780,899) (4,533) (48,416)
---------- ------------ ---------- ------------
Net increase (decrease) .................................... (44,897) $ (440,481) 113,671 $ 1,280,650
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
- ----------------
* The Fund began offering Class C shares on January 1, 1998.
- ----------------
FEDERAL TAX INFORMATION (UNAUDITED):
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$543,303 as a capital gain dividend for the fiscal year ended December 31, 1998.
FS-10
<PAGE> 182
PART C
OTHER INFORMATION
Item 23. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
a (1) - Agreement and Declaration of Trust of Registrant dated May 7, 1998, was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 4 on June 1, 1998, and is hereby
incorporated by reference.
(2) - First Amendment to Agreement and Declaration of Trust of Registrant was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 7 on February 12, 1999, and is
hereby incorporated by reference.
b (1) - By-Laws of Registrant dated May 7, 1998, were filed as an Exhibit to Registrant's Post-Effective
Amendment No. 4 on June 1, 1998, and is hereby incorporated by reference.
(2) - Amended and Restated By-Laws of Registrant dated December 10, 1998, are filed
herewith electronically.
c - Provisions of instruments defining the rights of holders of Registrant's securities contained
in the Agreement and Declaration of Trust Articles II, VI, VII, VIII and IX were filed as an Exhibit to
Registrant's Post-Effective Amendment No.4 on July 7, 1998, and are hereby incorporated by reference. Such
provisions are also found in Registrant's Amended and Restated By-Laws Articles IV, V, VI, VII and VIII,
which are filed herewith electronically.
d (1) - Investment Management and Administration Contract, dated May 29, 1998, between
Registrant and A I M Advisors, Inc. was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 6 on August 26, 1998, and is hereby incorporated by reference.
(2) - Sub-Advisory and Sub-Administration Contract, dated May 29, 1998, between A I M
Advisors, Inc. and INVESCO (NY), Inc. with respect to Registrant was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 6 on August 26, 1998, and is hereby
incorporated by reference.
(3) - (a) Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation
Agreement, dated September 9, 1998, is filed herewith
electronically.
- (b) Amendment No. 1, dated September 28, 1998, to Foreign Country Selection and
Mandatory Securities Depository Responsibilities Delegation Agreement, dated September
9, 1998, is filed herewith electronically.
- (c) Amendment No. 2, dated December 14, 1998, to Foreign Country Selection and
Mandatory Securities Depository Responsibilities Delegation Agreement, dated September
9, 1998, is filed herewith electronically.
- (d) Amendment No. 3, dated December 22, 1998, to Foreign Country Selection and
Mandatory Securities Depository Responsibilities Delegation Agreement, dated September
9, 1998, is filed herewith electronically.
</TABLE>
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<PAGE> 183
<TABLE>
<S> <C>
- (e) Amendment No. 4, dated January 26, 1999, to Foreign Country Selection and
Mandatory Securities Depository Responsibilities Delegation Agreement, dated September
9, 1998, is filed herewith electronically.
- (f) Amendment No. 5, dated March 1, 1999, to Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation Agreement, dated September 9, 1998,
is filed herewith electronically.
e (1) - Distribution Agreement, dated May 29, 1998, between Registrant and A I M Distributors,
Inc. with respect to Class A and Class C shares was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 6 on August 26, 1998, and is hereby incorporated by reference.
(2) - Distribution Agreement, dated May 29, 1998, between Registrant and A I M Distributors,
Inc. with respect to Class B shares was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 6 on August 26, 1998, and is hereby incorporated by reference.
(3) - Distribution Agreement, dated May 29, 1998, between Registrant and A I M Distributors,
Inc. with respect to Advisor Class shares was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 6 on August 26, 1998, and is hereby incorporated by reference.
(4) - Form of Selected Dealer Agreement between A I M Distributors, Inc. and selected dealers
was filed as an Exhibit to Registrant's Post-Effective Amendment No. 7 on
February 12, 1999, and is hereby incorporated by reference.
(5) - Form of Bank Selling Group Agreement between A I M Distributors, Inc. and banks was
filed as an Exhibit to Registrant's Post-Effective Amendment No. 7 on February 12, 1999,
and is hereby incorporated by reference.
f - Agreements Concerning Officers and Director/Trustee Benefits - None.
g (1) - Custodian Agreement, dated June 1, 1998, between Registrant and State Street Bank and
Trust Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 6 on
August 26, 1998, and is hereby incorporated by reference.
(2) - Amendment to Custodian Contract, dated January 26, 1999, was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 7 on February 12, 1999, and is hereby
incorporated by reference.
h (1) - Transfer Agency and Service Agreement between Registrant and A I M Fund Services,
Inc., was filed as an Exhibit to Registrant's Post-Effective Amendment No. 7 on February
12, 1999, and is hereby incorporated by reference.
(2) - (i) Remote Access and Related Services Agreement, dated as of December 23, 1994, was
filed as an Exhibit to Registrant's Post-Effective Amendment No. 6 on August 26, 1998, and
is hereby incorporated by reference.
- (ii) Amendment No. 1, dated October 4, 1995, to the Remote Access and Related Services
Agreement, dated as of December 23, 1994, was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 6 on August 26, 1998, and is hereby incorporated by reference.
- (iii) Addendum No. 2, dated October 12, 1995, to the Remote Access and Related Services
Agreement, dated as of December 23, 1994, was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 6 on August 26, 1998, and is hereby incorporated by reference.
</TABLE>
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<PAGE> 184
<TABLE>
<S> <C>
- (iv) Amendment No. 3, dated February 1, 1997, to the Remote Access and Related
Services Agreement, dated December 23, 1994, was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 6 on August 26, 1998, and is hereby incorporated by
reference.
- (v) Exhibit 1, effective as of August 4, 1997, to the Remote Access and Related
Services Agreement, dated December 23, 1994, was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 6 on August 26, 1998, and is
hereby incorporated by reference.
- (vi) Preferred Registration Technology Escrow Agreement, dated September 10,
1997, was filed as an Exhibit to Registrant's Post-Effective Amendment No. 6
on August 26, 1998, and is hereby incorporated by reference.
- (vii) Amendment No. 4, dated June 30, 1998, to the Remote Access and Related Services
Agreement, dated December 23, 1994, was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 7 on February 12, 1999, and is hereby incorporated by
reference.
- (viii) Amendment No. 5, dated July 1, 1998, to the Remote Access and Related Services
Agreement, dated December 23, 1994, was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 7 on February 12, 1999, and is hereby incorporated by
reference.
(3) - Fund Accounting and Pricing Agent Agreement between Registrant and INVESCO (NY),
Inc., dated May 29, 1998, was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 7 on February 12, 1999.
(4) - Fund Accounting and Pricing Agent Agreement between Registrant and A I M Advisors,
Inc., dated June 1, 1998, is filed herewith electronically.
i (1) - Consent of Kirkpatrick & Lockhart LLP is filed herewith electronically.
(2) - Opinion and Consent of Delaware Counsel was filed as an Exhibit to Post-
Effective Amendment No. 4 on June 1, 1998, and is hereby incorporated by reference.
j - Consent of PricewaterhouseCoopers LLP is filed herewith electronically.
k - Omitted Financial Statements - None.
l - Letter of Investment Intent was filed as an Exhibit to Registrant's Pre-Effective
Amendment No. 1 on August 22, 1997, and is hereby incorporated by reference.
m (1) - Distribution Plan adopted pursuant to Rule 12b-1 with respect to Class A and
C shares was filed as an Exhibit to Registrant's Post-Effective Amendment
No. 7 on February 12, 1999, and is hereby incorporated by reference.
(2) - Distribution Plan adopted pursuant to Rule 12b-1 with respect to Class B shares
was filed as an Exhibit to Registrant's Post-Effective Amendment No. 7 on
February 12, 1999, and is hereby incorporated by reference.
(3) - (i) Form of Shareholder Service Agreement to be used
in connection with Registrant's Master Distribution
Plan is filed herewith electronically.
- (ii) Form of Bank Shareholder Service Agreement to be
used in connection with Registrant's Master
Distribution Plan is filed herewith electronically.
</TABLE>
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<PAGE> 185
<TABLE>
<S> <C>
- (iii) Form of Service Agreement for Bank Trust Department and for Broker to
be used in connection with Registrant's Master Distribution Plan is filed herewith
electronically.
- (iv) Form of Agency Pricing Agreement to be used in connection with
Registrant's Master Distribution Plan is filed herewith electronically.
n - Financial Data Schedules are filed herewith electronically.
o - Rule 18f-3 Multiple Class Plan was filed as an Exhibit to Post-Effective Amendment No. 6
on August 26, 1998, and is hereby incorporated by reference.
</TABLE>
Item 24. Persons Controlled by or Under Common Control with Registrant
Provide a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant. For any person
controlled by another person, disclose the percentage of voting securities
owned by the immediately controlling person or other basis of that person's
control. For each company, also provide the state or other sovereign power
under the laws of which the company is organized.
None.
Item 25. Indemnification
State the general effect of any contract, arrangements or statute
under which any director, officer, underwriter or affiliated person of the
Registrant is insured or indemnified in any manner against any liability which
may be incurred in such capacity, other than insurance provided by any
director, officer, affiliated person or underwriter for their own protection.
Article VIII of the Registrant's Agreement and Declaration of Trust,
as amended, provides for indemnification of certain persons acting
on behalf of the Registrant. Article VIII, Section 8.1 provides that
a Trustee, when acting in such capacity, shall not be personally
liable to any person for any act, omission, or obligation of the
Registrant or any Trustee; provided, however, that nothing contained
in the Registrant's Agreement and Declaration of Trust or in the
Delaware Business Trust Act shall protect any Trustee against any
liability to the Registrant or the Shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in
the conduct of the office of Trustee.
Article VII, Section 3 of the Registrant's Amended and Restated
By-Laws also provides that every person who is, or has been, a
Trustee or Officer of the Registrant to the fullest extent permitted
by the Delaware Business Trust Act, the Registrant's Amended and
Restated ByLaws and other applicable law.
A I M Advisors, Inc. ("AIM"), the Registrant and other investment
companies managed by AIM their respective officers, trustees,
directors and employees (the "Insured Parties") are insured under a
joint Mutual Fund and Investment Advisory Professional and Directors
and Officers Liability Policy, issued by ICI Mutual Insurance
Company, with a $35,000,000 limit of liability.
Section 9 of the Investment Management and Administration Contract
between the Registrant and AIM provides that AIM shall not be
liable, and each series of the Registrant shall indemnify AIM and
its directors, officers and employees, for any costs or liabilities
C-4
<PAGE> 186
arising from any error of judgment or mistake of law or any loss
suffered by any series of the Registrant or the Registrant in
connection with the matters to which the Investment Management and
Administration Contract relates except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of AIM in the
performance by AIM of its duties or from reckless disregard by AIM
of its obligations and duties under the Investment Management and
Administration Contract.
Item 26. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment advisor of the Registrant, and each
director, officer or partner of any such investment advisor, is or has been, at
any time during the past two fiscal years, engaged for his own account or in
the capacity of director, officer, employee, partner, or trustee.
The only employment of a substantial nature of the Advisor's
directors and officers is with the Advisor and its affiliated
companies. Reference is also made to the caption "Fund Management -
The Manager" of the Prospectus which comprises Part A of the
Registration Statement, and to the caption "Management" of the
Statement of Additional Information which comprises Part B of the
Registration Statement, and to Item 27(b) of this Part C.
Item 27. Principal Underwriters
(a) A I M Distributors, Inc., the Registrant's
principal underwriter, also acts as a principal
underwriter to the following investment
companies:
AIM Advisor Funds, Inc.
AIM Eastern Europe Fund
AIM Equity Funds, Inc. (Retail Classes)
AIM Funds Group
AIM Growth Series
AIM International Funds, Inc.
AIM Investment Funds
AIM Investment Securities Funds (Retail Class)
AIM Special Opportunities Funds
AIM Summit Fund, Inc.
AIM Tax-Exempt Funds, Inc.
AIM Variable Insurance Funds, Inc.
GT Global Floating Rate Fund, Inc. -
(d/b/a AIM Floating Rate Fund)
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<PAGE> 187
(b)
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------ -------------------------- --------------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors None
Michael J. Cemo President & Director None
Gary T. Crum Director Vice President
Robert H. Graham Senior Vice President & Director Chairman; President
W. Gary Littlepage Senior Vice President & Director None
James L. Salners Executive Vice President None
John Caldwell Senior Vice President None
Marilyn M. Miller Senior Vice President None
Gene L. Needles Senior Vice President None
Gordon J. Sprague Senior Vice President None
Michael C. Vessels Senior Vice President None
B.J. Thompson First Vice President None
James R. Anderson Vice President None
Mary K. Coleman Vice President None
Mary A. Corcoran Vice President None
Melville B. Cox Vice President & Chief Vice President
Compliance Officer
Glenda A. Dayton Vice President None
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
Dawn M. Hawley Vice President & Treasurer None
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
Charles H. Mclaughlin Vice President None
Ivy B. McLemore Vice President None
</TABLE>
- ------------------------------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
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<PAGE> 188
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------ -------------------------- --------------------
<S> <C> <C>
Terri L. Ransdell Vice President None
Carol F. Relihan Vice President Vice President
Kamala C. Sachidanandan Vice President None
Frank V. Serebrin Vice President None
Christopher T. Simutis Vice President None
Gary K. Wendler Vice President None
Norman W. Woodson Vice President None
David E. Hessel Assistant Vice President, None
Assistant Treasurer
& Controller
Kathleen J. Pflueger Secretary Assistant Secretary
Luke P. Beausoleil Assistant Vice President None
Sheila R. Brown Assistant Vice President None
Scott E. Burman Assistant Vice President None
Tisha B. Christopher Assistant Vice President None
Mary C. Mangham Assistant Vice President None
Mary E. Gentempo Assistant Vice President None
Simon R. Hoyle Assistant Vice President None
Rebecca Starling-Klatt Assistant Vice President None
Kathryn A. Jordan Assistant Vice President None
Kim T. McAuliffe Assistant Vice President None
David B. O'Neil Assistant Vice President None
Nicholas D. White Assistant Vice President None
Nancy L. Martin Assistant General Counsel Assistant Secretary
& Assistant Secretary
</TABLE>
- ------------------------------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
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<PAGE> 189
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------ -------------------------- --------------------
<S> <C> <C>
Samuel D. Sirko Assistant General Counsel Vice President & Secretary
& Assistant Secretary
P. Michelle Grace Assistant Secretary None
Lisa A. Moss Assistant Secretary None
Stephen I. Winer Assistant Secretary None
</TABLE>
- ------------------------------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
(c) - Not Applicable
Item 28. Location of Accounts and Records
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to
31a-3) promulgated thereunder, furnish the name and address of each person
maintaining physical possession of each such account, book or other document.
Accounts, books and other records required by Rules 31a-1 and 31a-2
under the Investment Company Act of 1940, as amended, are maintained
and held in the offices of the Registrant and its advisor, A I M
Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046,
and its custodian, State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA 02110.
Records covering shareholder accounts and portfolio transactions are
also maintained and kept by the Registrant's Transfer Agent, A I M
Fund Services, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046, and by the Registrant's custodian, State Street Bank and
Trust Company, 225 Franklin Street, Boston, MA 02110.
Item 29. Management Services
Provide a summary of the substantive provisions of any
management-related service contract not discussed in Part A or Part B
disclosing parties to the contract, the total dollars paid and by whom, for the
last three fiscal years.
None.
Item 30. Undertakings
None.
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<PAGE> 190
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 6th day of
April, 1999.
REGISTRANT: AIM SERIES TRUST
By: /s/ ROBERT H. GRAHAM
---------------------------------
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ ROBERT H. GRAHAM Chairman, Trustee & President April 6, 1999
- ------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ C. DEREK ANDERSON Trustee April 6, 1999
- -------------------------
(C. Derek Anderson)
/s/ FRANK S. BAYLEY Trustee April 6, 1999
- -------------------------
(Frank S. Bayley)
/s/ ARTHUR C. PATTERSON Trustee April 6, 1999
- -------------------------
(Arthur C. Patterson)
/s/ RUTH H. QUIGLEY Trustee April 6, 1999
- -------------------------
(Ruth H. Quigley)
/s/ KENNETH W. CHANCEY Vice President & April 6, 1999
- ------------------------- Principal Financial
(Kenneth W. Chancey) and Accounting Officer
<PAGE> 191
INDEX TO EXHIBITS
AIM SERIES TRUST
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
b(2) Amended and Restated By-Laws Registrant, dated December 10, 1998
d(3)(a) Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation
Agreement, dated September 9, 1998
d(3)(b) Amendment No. 1, dated September 28, 1998, to Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation Agreement, dated September 9, 1998
d(3)(c) Amendment No. 2, dated December 14, 1998, to Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation Agreement, dated September 9, 1998
d(3)(d) Amendment No. 3, dated December 22, 1998, to Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation Agreement, dated September 9, 1998
d(3)(e) Amendment No. 4, dated January 26, 1999, to Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation Agreement, dated September 9, 1998
d(3)(f) Amendment No. 5, dated March 1, 1999, to Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation Agreement, dated September 9, 1998
h(4) Fund Accounting and Pricing Agreement between Registrant and A I M Advisors, Inc.
i(1) Consent of Kirkpatrick & Lockhart LLP
j Consent of PricewaterhouseCoopers LLP
m(3)(i) Form of Shareholder Service Agreement
m(3)(ii) Form of Bank Shareholder Service Agreement
m(3)(iii) Form of Service Agreement for Bank Trust Department
m(3)(iv) Form of Agency Pricing Agreement
n Financial Data Schedules
</TABLE>
<PAGE> 1
EXHIBIT b(2)
AMENDED AND RESTATED BYLAWS
OF
AIM SERIES TRUST,
A DELAWARE BUSINESS TRUST
ADOPTED EFFECTIVE MAY 7,1998
AMENDED EFFECTIVE DECEMBER 10, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I OFFICES .............................................................................. 1
Section 1. Registered Office ............................................................. 1
Section 2. Other Offices ................................................................. 1
ARTICLE II TRUSTEES ............................................................................ 1
Section 1. Number . ...................................................................... 1
Section 2 Term........................................................................... 1
Section 3. Vacancy ....................................................................... 2
Section 4. Delegation of Power ........................................................... 2
Section 5. Inability to Serve Full Term .................................................. 2
Section 6. Powers ........................................................................ 2
Section 7. Meetings of the Trustees ...................................................... 2
Section 8. Regular Meetings .............................................................. 3
Section 9. Quorum ........................................................................ 3
Section 10. Action Without Meeting ....................................................... 3
Section 11. Designation, Powers, and Name of Committees .................................. 3
Section 12, Minutes of Committee ......................................................... 3
Section 13. Compensation of Trustees ..................................................... 4
ARTICLE III OFFICERS............................................................................ 4
Section 1. Executive Officers ............................................................ 4
Section 2. Term of Office ................................................................ 4
Section 3. President ..................................................................... 4
Section 4. Chairman of the Board ......................................................... 4
Section 5. Other Officers ................................................. .............. 5
Section 6. Secretary...................................................................... 5
Section 7. Treasurer ..................................................................... 5
Section 8. Surety Bond ................................................................... 5
ARTICLE IV MEETINGS OF SHAREHOLDERS ............................................................ 5
Section 1. Purpose ....................................................................... 5
Section 2. Nominations of Trustees........................................................ 6
Section 3. Election of Trustees .......................................................... 6
Section 4. Notice of Meetings............................................................. 6
Section 5. Special Meetings............................................................... 6
Section 6. Notice of Special Meeting...................................................... 6
Section 7. Conduct of Special Meeting..................................................... 6
Section 8. Quorum......................................................................... 7
Section 9. Organization of Meetings....................................................... 7
Section 10. Voting Standard............................................................... 7
Section 11. Voting Procedure.............................................................. 7
Section 12. Action Without Meeting........................................................ 8
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE V NOTICES .............................................................................. 8
Section 1. Methods of Giving Notice........................................................ 8
Section 2. Written Waiver ................................................................. 8
ARTICLE VI CERTIFICATES OF SHARES............................................................... 8
Section 1. Issuance........................................................................ 8
Section 2. Countersignature................................................................ 9
Section 3. Lost Certificates............................................................... 9
Section 4. Transfer of Shares.............................................................. 9
Section 5. Fixing Record Date ............................................................. 9
Section 6. Registered Shareholders ........................................................ 9
ARTICLE VII GENERAL PROVISIONS ................................................................. 10
Section 1. Dividends and Distributions .................................................... 10
Section 2. Redemptions .................................................................... 10
Section 3. Indemnification ................................................................ 10
Section 4. Advance Payments of Indemnifiable Expenses...................................... 10
Section 5. Seal ........................................................................... 11
Section 6. Severability ................................................................... 11
Section 7. Headings ....................................................................... 11
ARTICLE VIII AMENDMENTS ........................................................................ 11
Section 1. Amendments...................................................................... 11
</TABLE>
ii
<PAGE> 4
AMENDED AND RESTATED BYLAWS
OF
AIM SERIES TRUST,
A DELAWARE BUSINESS TRUST
Capitalized terms not specifically defined herein
shall have the meanings ascribed to them in the Trust's
Agreement and Declaration of Trust ("Agreement").
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of AIM Series
Trust (the "Trust") shall be in the County of New Castle, State of Delaware.
Section 2. Other Offices. The Trust may also have offices at such
other places both within and without the State of Delaware as the Trustees may
from time to time determine or the business of the Trust may require.
ARTICLE II
TRUSTEES
Section 1. Number. The number of Trustees shall initially be five, and
thereafter shall be such number as shall be fixed from time to time by
resolution of the Board of Trustees; provided, however, that the number of
Trustees shall in no event be less than two nor more than twelve.
Section 2. Term. The Trustees shall hold office during the lifetime of
the Trust, except (a) that any Trustee may resign his trusteeship or may retire
by written instrument signed by him and delivered to the other Trustees, which
shall take effect upon such delivery or upon such later date as is specified
therein; (b) that any Trustee may be removed at any time by written instrument,
signed by at least two-thirds of the number of Trustees prior to such removal,
specifying the date when such removal shall become effective; (c) that any
Trustee who has died, become physically or mentally incapacitated by reason of
disease or otherwise, or is otherwise unable to serve, may be retired by written
instrument signed by a majority of the other Trustees, specifying the date of
his retirement; and (d) that a Trustee may be removed at any meeting of the
shareholders of the Trust.
Section 3. Vacancy. In case of the declination to serve, death,
resignation, retirement or removal of a Trustee, or a Trustee is otherwise
unable to serve, or an increase in the number of Trustees, a vacancy shall
occur. Whenever a vacancy in the Trustees shall occur, until such vacancy is
filled, the other Trustees shall have all the powers hereunder and the
certification of
<PAGE> 5
the other Trustees of such vacancy shall be conclusive. In the case of an
existing vacancy, the remaining Trustees may fill such vacancy by appointing
such other person as they in their discretion shall see fit, or may leave such
vacancy unfilled or may reduce the number of Trustees to not less than two
Trustees. Such appointment shall be evidenced by a written instrument signed by
a majority of the Trustees in office or by resolution of the Trustees, duly
adopted, which shall be recorded in the minutes of a meeting of the Trustees,
whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to Sections 2 and 3 of Article II of these Amended
and Restated Bylaws, or elected pursuant to Section 3 of Article IV, and the
Agreement shall have accepted this appointment in writing and agreed in writing
to be bound by the terms of the Trust Agreement, the Trust estate shall vest in
the new Trustee or Trustees, together with the continuing Trustees, without any
further act or conveyance, and he shall be deemed a Trustee hereunder.
Section 4. Delegation of Power. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any one time to any
other Trustee or Trustees, provided that in no case shall less than two
Trustees personally exercise the other powers hereunder except as herein
otherwise expressly provided.
Section 5. Inability to Serve Full Term. The declination to serve,
death, resignation, retirement, removal, incapacity, or inability of the
Trustees, or any one of them, shall not operate to terminate the Trust or to
revoke any existing agency created pursuant to the terms of the Agreement.
Section 6. Powers. The Trustees shall have exclusive and absolute
control over the trust property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the trust property and
business in their own night, but with such powers of delegation as may be
permitted by the Agreement. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the State of Delaware, in
any and all states of the United States of America, in the District of
Columbia in any and all commonwealths, territories, dependencies, colonies, or
possessions of the United States of America, and in any foreign jurisdiction
and to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in other to promote the interests of the Trust
although such things are not herein specifically mentioned. Any determination
as to what is in the interests of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of these Amended and Restated
Bylaws and the Agreement, the presumption shall be in favor of a grant of power
to the Trustees.
Section 7. Meetings of the Trustees. The Trustees of the Trust may
hold meetings, both regular and special, either within or without the State of
Delaware.
2
<PAGE> 6
Section 8. Regular Meetings. Regular meetings of the Board of Trustees
shall be held each year, at such time and place as the Board of Trustees may
determine.
Section 9. Notice of Meetings. Notice of the time, date, and place of
all meetings of the Trustees shall be given to each Trustee by telephone,
facsimile, electronic-mail, or other electronic mechanism sent to his or her
home or business address at least twenty-four hours in advance of the meeting
or in person at another meeting of the Trustees or by written notice mailed to
his or her home or business address at least seventy-two hours in advance of
the meeting.
Section 10. Quorum. At all meetings of the Trustees, a majority of the
Trustees then in office (but in no event less than two Trustees) shall
constitute a quorum for the transaction of business and the act of a majority
of the Trustees present at any meeting at which there is a quorum shall be the
act of the Board of Trustees, except as may be otherwise specifically provided
by applicable law or by the Agreement or these Amended and Restated Bylaws. If
a quorum shall not be present at any meeting of the Board of Trustees, the
Trustees present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 11. Action Without Meeting. Unless otherwise restricted by the
Agreement or these Amended and Restated Bylaws, any action required or
permitted to be taken at any meeting of the Board of Trustees or of any
committee thereof may be taken without a meeting by unanimous written consent
of the Trustees or committee members (or by written consent of a majority of
the Trustees if the President of the Trust determines that such exceptional
circumstances exist, and are of such urgency, as to make unanimous written
consent impossible or impractical, which determination shall be conclusive and
binding on all Trustees and not otherwise subject to challenge) and the writing
or writings are filed with the minutes of proceedings of the board or
committee.
Section 12. Designation, Powers, and Name of Committees. The Board of
Trustees may, by resolution passed by a majority of the whole Board, designate
one or more committees, each committee to consist of two or more of the
Trustees of the Trust. The Board may designate one or more Trustee as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of such committee. Each committee, to the extent provided in the
resolution, shall have and may exercise the powers of the Board of Trustees in
the management of the business and affairs of the Trust: provided, however,
that in the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such members constitute a quorum, may
unanimously appoint another member of the Board of Trustees to act at the
meeting in the place of any such absent or disqualified member. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Trustees.
Section 13. Minutes of Committee. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Trustees when
required.
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Section 14. Compensation of Trustees. The Trustees as such shall be
entitled to reasonable compensation for their services as determined from time
to time by the Board of Trustees. Nothing herein shall in any way prevent the
employment of any Trustee for advisory, management, administrative, legal,
accounting, investment banking, underwriting, brokerage, or investment dealer
or other services and the payment for the same by the Trust.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The initial executive officers of the
Trust shall be elected by the Board of Trustees as soon as practicable after
the organization of the Trust. The executive officers may include a Chairman of
the Board, and shall include a President, one or more Vice Presidents (the
number thereof to be determined by the Board of Trustees), a Secretary and a
Treasurer. The Chairman of the Board, if any, shall be selected from among the
Trustees. The Board of Trustees may also in its discretion appoint Assistant
Vice Presidents, Assistant Secretaries, Assistant Treasurers, and other
officers, agents and employees, who shall have such authority and perform such
duties as the Board may determine. The Board of Trustees may fill any vacancy
which may occur in any office. Any two offices, except for those of President
and Vice President, may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument on behalf of the Trust in more
than one capacity, if such instrument is required by law or by these Amended
and Restated Bylaws to be executed, acknowledged or verified by two or more
officers.
Section 2. Term of Office. Unless otherwise specifically determined by
the Board of Trustees, the officers shall serve at the pleasure of the Board of
Trustees. If the Board of Trustees in its judgment finds that the best
interests of the Trust will be served, the Board of Trustees may remove any
officer of the Trust at any time with or without cause. The Trustees may
delegate this power to the President with respect to any other officer. Such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Any officer may resign from office at any time by
delivering a written resignation to the Trustees or the President. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Section 3. President. The President shall be the chief executive
officer of the Trust and, subject to the Board of Trustees, shall generally
manage the business and affairs of the Trust. If there is no Chairman of the
Board, or if the Chairman of the Board has been appointed but is absent, the
President shall, if present, preside at all meetings of the shareholders and
the Board of Trustees.
Section 4. Chairman of the Board. The Chairman of the Board, if any,
shall preside at all meetings of the shareholders and the Board of Trustees, if
the Chairman of the Board is present. The Chairman of the Board shall have
such other powers and duties as shall be determined by the Board of Trustees,
and shall undertake such other assignments as may be requested by the
President.
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Section 5. Other Officers. The Chairman of the Board or one or more
Vice Presidents shall have and exercise such powers and duties of the President
in the absence or inability to act of the President, as may be assigned to
them, respectively, by the Board of Trustees or, to the extent not so assigned,
by the President. In the absence or inability to act of the President, the
powers and duties of the President not otherwise assigned by the Board of
Trustees or the President shall devolve upon the Chairman of the Board, or in
the Chairman's absence, the Vice Presidents in the order of their election.
Section 6. Secretary. The Secretary shall (a) have custody of the seal
of the Trust; (b) attend meetings of the shareholders, the Board of Trustees,
and any committees of Trustees and keep the minutes of such meetings of
shareholders, Board of Trustees and any committees thereof, and (c) issue all
notices of the Trust. The Secretary shall have charge of the shareholder
records and such other books and papers as the Board may direct, and shall
perform such other duties as may be incidental to the office or which are
assigned by the Board of Trustees. The Secretary shall also keep or cause to be
kept a shareholder book, which may be maintained by means of computer systems,
containing the names, alphabetically arranged, of all persons who are
shareholders of the Trust, showing their places of residence, the number and
class or series of any class of shares of beneficial interest held by them,
respectively, and the dates when they became the record owners thereof and
such book shall be open for inspection as prescribed by the laws of the State
of Delaware.
Section 7. Treasurer. The Treasurer shall have the care and custody of
the funds and securities of the Trust and shall deposit the same in the name of
the Trust in such bank or banks or other depositories, subject to withdrawal in
such manner as these Amended and Restated Bylaws or the Board of Trustees may
determine. The Treasurer shall, if required by the Board of Trustees, give such
bond for the faithful discharge of duties in such form as the Board of Trustees
may require.
Section 8. Surety Bond. The Trustees may require any officer or agent
of the Trust to execute a bond (including, without limitation, any bond
required by the Investment Company Act of 1940, as amended ("1940 Act") and
the rules and regulations of the Securities and Exchange Commission
("Commission") to the Trust in such sum and with such surety or sureties as the
Trustees may determine, conditioned upon the faithful performance of his or her
duties to the Trust, including responsibility for negligence and for the
accounting of any of the Trust's property, funds, or securities that may come
into his or her hands.
ARTICLE IV
MEETINGS OF SHAREHOLDERS
Section 1. Purpose. All meetings of the shareholders for the election
of Trustees shall be held at such place as may be fixed from time to time by
the Trustees, or at such other place either within or without the State of
Delaware as shall be designated from time to time by the Trustees and stated in
the notice indicating that a meeting has been called for such purpose. Meetings
of shareholders may be held for any purpose determined by the Trustees and may
be held at such time and place, within or without the State of Delaware as
shall be stated in the notice of the
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meeting or in a duly executed waiver of notice thereof. At all meetings of the
shareholders, every shareholder of record entitled to vote thereat shall be
entitled to vote either in person or by proxy, which term shall include proxies
provided through written, electronic, telephonic, computerized, facsimile,
telecommunications, telex or oral communication or by any other form of
communication, each pursuant to such voting procedures and through such systems
as are authorized by the Trustees or one or more executive officers of the
Trust. Unless a proxy provides otherwise, such proxy is not valid more than
eleven months after its date. A proxy with respect to shares held in the name
of two or more persons shall be valid if executed by any one of them unless at
or prior to exercise of the proxy the Trust receives a specific written notice
to the contrary from any one of them. A proxy purporting to be executed by or
on behalf of a shareholder shall be deemed valid unless challenged at or prior
to its exercise and the burden of proving invalidity shall rest on the
challenger.
Section 2. Nominations of Trustees. Nominations of individuals for
election to the Board of Trustees shall be made by the Board of Trustees or a
nominating committee of the Board of Trustees, if one has been established (the
"Nominating Committee"). Any shareholder of the Trust may submit names of
individuals to be considered by the Nominating Committee or the Board of
Trustees, as applicable, provided, however, (i) that such person was a
shareholder of record at the time of submission of such names and is entitled
to vote at the meeting, and (ii) that the Nominating Committee or the Board of
Trustees, as applicable, shall make the final determination of persons to be
nominated.
Section 3. Election of Trustees. All meetings of shareholders for the
purpose of electing Trustees shall be held on such date and at such time as
shall be designated from time to time by the Trustees and stated in the notice
of the meeting, at which the shareholders shall elect by a plurality vote any
number of Trustees as the notice for such meeting shall state are to be
elected, and transact such other business as may properly be brought before the
meeting in accordance with Section 1 of this Article IV,
Section 4. Notice of Meetings. Written notice of any meeting stating
the place, date, and hour of the meeting shall be given to each shareholder
entitled to vote at such meeting not less than ten days before the date of the
meeting in accordance with Article V hereof.
Section 5. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by applicable law or by
the Agreement, may be called by any Trustee; provided, however, that the
Trustees shall promptly call a meeting of the shareholders solely for the
purpose of removing one or more Trustees, when requested in writing so to do by
the record holders of not less than ten percent of the outstanding share of the
Trust.
Section 6. Notice of Special Meeting. Written notice of a special
meeting stating the place, date, and hour of the meeting and the purpose of
purposes for which the meetings is called, shall be given not less than ten
days before the date of the meeting, to each shareholder entitled to vote at
such meeting.
Section 7. Conduct of Special Meeting. Business transacted at any
special meeting of shareholders shall be limited to the purpose stated in the
notice.
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Section 8. Quorum. The holders of one-third of the shares of
beneficial interests that are issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
at all meetings of the shareholders for the transaction of business except as
otherwise provided by applicable law or by the Agreement. If, however, such
quorum shall not be present or represented at any meeting of the shareholders,
the vote of the holders of a majority of shares cast shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 9. Organization of Meetings.
(a) The Chairman of the Board of Trustees shall preside at
each meeting of shareholders. In the absence of the Chairman of the Board, the
meeting shall be chaired by the President, or if the President shall not be
present, by a Vice President. In the absence of all such officers, the meeting
shall be chaired by a person elected for such purpose at the meeting. The
Secretary of the Trust, if present, shall act as Secretary of such meetings, or
if the Secretary is not present, an Assistant Secretary of the Trust shall so
act, and if no Assistant Secretary is present, then a person designated by the
Secretary of the Trust shall so act, and if the Secretary has not designated a
person, then the meeting shall elect a secretary for the meeting,
(b) The Board of Trustees of the Trust shall be entitled to
make such rules and regulations for the conduct of meetings of shareholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Trustees, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing: an agenda or order of business for the
meeting; rules and procedures for maintaining order at the meeting and the
safety of those present; limitations on participation in such meeting to
shareholders of record of the Trust and their duly authorized and constituted
proxies, and such other persons as the chairman shall permit; restrictions on
entry to the meeting after the time fixed for the commencement thereof;
limitations on the time allotted to questions or comments by participants; and
regulation of the opening and closing of the polls for balloting, on matters
which are to be voted on by ballot, unless and to the extent the Board of
Trustees or the chairman of the meeting determines that meetings of shareholders
shall not be required to be held in accordance with the rules of parliamentary
procedure.
Section 10. Voting Standard. When a quorum is present at any meeting,
the vote of the holders of a majority of the shares cast shall decide any
question brought before such meeting, unless the question is one on which, by
express provision of applicable law, the Agreement, these Amended and Restated
Bylaws, or applicable contract, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 11. Voting Procedure. Each whole share shall be entitled to
one vote, and each fractional share shall be entitled to a proportionate
fractional vote. On any matter submitted to a vote of the shareholders, all
shares shall be voted together, except when required by applicable
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law or when the Trustees have determined that the matter affects the interests
of one or more Portfolios (or Classes), then only the shareholders of such
Portfolios (or Classes) shall be entitled to vote thereon.
Section 12. Action Without Meeting. Unless otherwise provided in the
Agreement or applicable law, any action required to be taken at any meeting of
shareholders of the Trust, or any action which may be taken at any meeting of
such shareholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of any such action without a meeting by
less than unanimous written consent shall be given to those shareholders who
have not consented in writing.
ARTICLE V
NOTICES
Section 1. Methods of Giving Notice. Whenever, under the provisions of
applicable law or of the Agreement or of these Amended and Restated Bylaws,
notice is required to be given to any Trustee or shareholder, it shall not,
unless otherwise provided herein, be construed to mean personal notice, but
such notice may be given orally in person, or by telephone (promptly confirmed
in writing), or in writing, by mail addressed to such Trustee or shareholder,
at his address as it appears on the records of the Trust, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Notice to Trustees or members of
a committee may also be given by telex, telegram, telecopier or via overnight
courier. If sent by telex or telecopier, notice to a Trustee or member of a
committee shall be deemed to be given upon transmittal; if sent by telegram,
notice to a Trustee or member of a committee shall be deemed to be given when
the telegram, so addressed, is delivered to the telegraph company, and if sent
via overnight courier, notice to a Trustee or member of a committee shall be
deemed to be given when delivered against a receipt therefor.
Section 2. Written Waiver. Whenever any notice is required to be given
under the provisions of applicable law or of the Agreement or of these Amended
and Restated Bylaws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VI
CERTIFICATES OF SHARES
Section 1. Issuance. Upon request, every holder of shares in the Trust
shall be entitled to have a certificate, signed by, or in the name of the Trust
by, a Trustee, certifying the number of shares owned by him in the Trust.
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Section 2. Countersignature. Where a certificate is countersigned (1)
by a transfer agent other than the Trust or its employee, or, (2) by a
registrar other than the Trust or its employee, the signature of the Trustee
may be a facsimile.
Section 3. Lost Certificates. The Board of Trustees may direct a new
certificate or certificates to be issued in place of any certificate or
certificates therefore issued by the Trust alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of the fact by the person claiming
the certificate to be lost, stolen or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Trustees may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require
and/or to give the Trust a bond in such sum as it may direct as indemnity
against any claim that may be made against the Trust with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfer of Shares. The Trustees shall make such rules as
they consider appropriate for the transfer of shares and similar matters. To
the extent certificates are issued in accordance with Section 1 of this Article
VI, upon surrender to the Trust or the transfer agent of the Trust of such
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Trust to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 5. Fixing Record Date. In order that the Trustees may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution of allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of beneficial interests
or for the purpose of any other lawful action, the Board of Trustees may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Trustees, and
which record date shall not be more than ninety nor less than ten days before
the date of such meeting, nor more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Trustees for
action by shareholder consent in writing without a meeting, nor more than
ninety days prior to any other action. A determination of shareholders of
record entitled to notice of or to vote at a meeting of shareholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Trustees may fix a new record date for the adjourned meeting.
Section 6. Registered Shareholders. The Trust shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice hereof, except as otherwise provided
by the laws of Delaware.
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ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends and Other Distributions. The Trustees may from
time to time declare and pay dividends and make other distributions with
respect to any Portfolio, or Class thereof, which may be from income, capital
gains or capital. The amount of such dividends or other distributions and the
payment of them and whether they are in cash or any other Trust Property shall
be wholly in the discretion of the Trustees.
Section 2. Redemptions. Any holder of record of shares of a particular
Portfolio, or Class thereof, shall have the right to require the Trust to
redeem his shares, or any portion thereof, subject to the terms and conditions
set forth in the registration statement in effect from time to time. The
redemption price may in any case or cases be paid wholly or partly in kind if
the Trustees determine that such payment is advisable in the interest of the
remaining shareholders of the Portfolio or Class thereof for which the shares
are being redeemed. Subject to the foregoing, the fair value, selection and
quantity of securities or other property so paid or delivered as all or part of
the redemption price may be determined by or under authority of the Trustees.
In no case shall the Trust be liable for any delay of any Person in
transferring securities selected for delivery as all or part of any payment in
kind.
The Trustees may, at their option, and at any time, have the right to
redeem shares of any shareholder of a particular Portfolio or Class thereof in
accordance with Section 2 of this Article VII. The Trustees may refuse to
transfer or issue shares to any person to the extent that the same is necessary
to comply with applicable law or advisable to further the purposes for which
the Trust is formed.
If, at any time when a request for transfer or redemption of Shares of
any Portfolio is received by the Trust or its agent, the value of the shares of
such Portfolio in a Shareholder's account is less than Five Hundred Dollars
($500.00), after giving effect to such transfer or redemption, the Trust may,
at any time following such transfer or redemption and upon giving thirty (30)
days' notice to the Shareholder, cause the remaining Shares of such Portfolio
in such Shareholder's account to be redeemed at net asset value in accordance
with such procedures set forth above.
Section 3. Indemnification. Every person who is, or has been, a
Trustee or officer of the Trust shall be indemnified by the Trust to the
fullest extent permitted by the Delaware Business Trust Act, these Amended and
Restated Bylaws and other applicable law.
Section 4. Advance Payments of Indemnifiable Expenses. To the maximum
extent permitted by the Delaware Act and other applicable law, the Trust or
applicable Portfolio may advance to a Covered Person, in connection with the
preparation and presentation of a defense to any claim, action, suit, or
proceeding, expenses for which the Covered Person would ultimately be entitled
to indemnification; provided that the Trust or applicable Portfolio has
received an undertaking by or on behalf of such Covered Person that such amount
will be paid over by him to the Trust or applicable Portfolio of it is
ultimately determined that he is not entitled to
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indemnification for such expenses, and further provided that (i) such Covered
Person shall have provided appropriate security for such undertaking, (ii) the
Trust is insured against losses arising out of any such advance payments, or
(iii) either a majority of the Trustees who are not interested persons (as
defined in the 1940 Act) of the Trust nor parties to the matter, or independent
legal counsel in a written opinion shall have determined, based upon a review
of readily available facts (as opposed to a full trial-type inquiry) that there
is reason to believe that such Covered Person will not be disqualified from
indemnification for such expenses.
Section 5. Seal. The business seal shall have inscribed thereon the
name of the business trust, the year of its organization and the word "Business
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or otherwise reproduced. Any officer or Trustee of the
Trust shall have authority to affix the corporate seal of the Trust to any
document requiring the same.
Section 6. Severability. The provisions of these Amended and Restated
Bylaws are severable. If the Board of Trustees determines, with the advice of
counsel, that any provision hereof conflicts with the 1940 Act, the regulated
investment company provisions of the Internal Revenue Code, or other applicable
laws and regulations, the conflicting provision shall be deemed never to have
constituted a part of these Amended and Restated Bylaws; provided, however,
that such determination shall not affect any of the remaining provisions of
these Amended and Restated Bylaws or render invalid or improper any action
taken or omitted prior to such determination. If any provision hereof shall be
held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision only in such jurisdiction
and shall not affect any other provision of these Amended and Restated Bylaws.
Section 7. Headings. Headings are placed in these Amended and Restated
Bylaws for convenience of reference only and in case of any conflict, the text
of these Amended and Restated Bylaws rather than the headings shall control.
ARTICLE VIII
AMENDMENTS
Section 1. Amendments. These Amended and Restated Bylaws may be
altered or repealed at any regular or special meeting of the Board of Trustees
without prior notice. These Amended and Restated Bylaws may also be altered or
repealed at any special meeting of the shareholders, but only if the Board of
Trustees resolves to put a proposed alteration or repealer to the vote of the
shareholders and notice of such alternation or repealer is contained in a
notice of the special meeting being held for such purpose.
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EXHIBIT d(3)(a)
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This FOREIGN COUNTRY SELECTION AND MANDATORY SECURITIES DEPOSITORY
RESPONSIBILITIES DELEGATION AGREEMENT (the "Agreement") is made this 9th day of
September, 1998 by and between A I M ADVISORS, INC., a Delaware corporation
("AIM") and each registered investment company (the "Investment Companies") and
its respective portfolios (the "Funds") listed on the signature page hereof.
W I T N E S S E T H:
WHEREAS, AIM has agreed to accept responsibility for selecting and
monitoring relationships with compulsory depositories; and
WHEREAS, AIM has agreed to accept responsibility for the selection of
foreign countries in which the Funds may invest;
NOW, THEREFORE, AIM hereby agrees to exercise reasonable care, prudence and
diligence such as a person having safekeeping of fund assets would exercise in
performing the following responsibilities:
1. DEFINITIONS.
A. "FOREIGN ASSETS" means any of a Fund's investments (including foreign
currencies) for which the primary market is outside the United States,
currency contracts that are settled outside the United States, and
such cash and cash equivalents as are reasonably necessary to effect
the Fund's transactions in such investments.
B. "FOREIGN CUSTODY MANAGER" means State Street Bank and Trust Company.
C. "MANDATORY SECURITIES DEPOSITORY" means a foreign securities
depository or clearing agency that, either as a legal or practical
matter, must be used if a Fund determines to place Foreign Assets in a
country outside the United States (i) because required by law or
regulation; (ii) because securities cannot be withdrawn from such
foreign securities depository or clearing agency; or (iii) because
maintaining or effecting trades in securities outside the foreign
securities depository or clearing agency is not consistent with
prevailing or developing custodial or market practices.
D. "PREVAILING COUNTRY RISKS" means all factors reasonably related to the
systemic risk of holding Foreign Assets in a particular country,
including but not limited to, such country's political environment;
economic and financial infrastructure (including any Mandatory
Securities Depositories operating in the country); prevailing or
developing custody and settlement practices; laws and regulations
applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country; and factors comprising "prevailing country
risk", including the effects of foreign law on the safekeeping of Fund
assets, the likelihood of expropriation, nationalization, freezing or
confiscation of the Fund's assets and any reasonably foreseeable
difficulties in repatriating the Fund's assets.
<PAGE> 2
E. "SECURITIES DEPOSITORY" means a system for the central handling of
securities where all securities of any particular class or series of
any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical
delivery of the securities. A Securities Depository includes a
Mandatory Securities Depository.
2. FOREIGN COUNTRY SELECTION. Selection of foreign countries in which a Fund
invests. AIM may determine that an issuer is located in a particular
country based on various factors, including the following: (i) the issuer
is organized under the laws of and maintains a principal office in that
country; (ii) the issuer derives 50% or more of its total revenues from
business in that country; or (iii) the primary market for the issuer's
securities is in that country. In addition, in determining whether to
maintain assets of a Fund in a foreign country, AIM shall consider
Prevailing Country Risks. AIM may rely on information provided by
computerized information services, such as Bloomberg terminals, in making
the foregoing determinations. AIM may also rely on information and
opinions provided by the Foreign Custody Manager in making such
determinations. AIM may add or delete foreign countries to or from the
list of approved foreign countries from time to time, as determined by the
AIM employees who are portfolio managers of the Funds.
3. MANDATORY SECURITIES DEPOSITORIES SELECTION. Selection of Mandatory
Securities Depositories for the placement and maintenance of Foreign
Assets. AIM shall not make any such selection unless and until it has
complied with the terms of paragraphs 4 through 6 of this Agreement.
4. DETERMINATION OF REASONABLE CARE. Determinations by AIM that the Foreign
Assets will be subject to reasonable care, based on the standards
applicable to custodians in the relevant market, if such Assets are held
with a Mandatory Securities Depository. In making such determinations, AIM
shall consider all factors relevant to the safekeeping of such Foreign
Assets, including without limitation:
A. The practices, procedures, and internal controls of the Mandatory
Securities Depository, including, but not limited to, the physical
protections available for certificated securities (if applicable), the
method of keeping custodial records, and the security and data
protection practices;
B. Whether the Mandatory Securities Depository has the requisite
financial strength to provide reasonable care for the Foreign Assets;
C. The general reputation and standing of the Mandatory Securities
Depository and its operating history and number of participants; and
D. Whether the Fund will have jurisdiction over and be able to enforce
judgments against the Mandatory Securities Depository, such as by
virtue of the existence of any offices of the Mandatory Securities
Depository in the United States or the consent by the Mandatory
Securities Depository to service of process in the United States.
5. FOREIGN CUSTODY ARRANGEMENTS. Implementation of the Funds' foreign custody
arrangements pursuant to written contracts, by the rules or established
practices or
<PAGE> 3
procedures of the Mandatory Securities Depository, or by any combination of the
foregoing that AIM determines will provide reasonable care for the Funds'
Foreign Assets based on the standards specified in paragraph A.2. above. Any
such contracts shall include provisions that provide:
A. For indemnification or insurance arrangements (or any combination of
the foregoing) such that the Funds will be adequately protected
against the risk of loss of Foreign Assets held in accordance with
such contracts;
B. That the Funds' Foreign Assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the
custodian or its creditors except a claim of payment for their safe
custody or administration or, in the case of cash deposits, liens or
rights in favor of creditors of the custodian arising under
bankruptcy, insolvency, or similar laws;
C. That beneficial ownership for the Funds' Foreign Assets will be freely
transferable without the payment of money or value other than for safe
custody or administration;
D. That adequate records will be maintained identifying the Foreign
Assets as belonging to a Fund or as being held by a third party for
the benefit of the Fund;
E. That each Fund's independent public accountants will be given access
to those records or confirmation of the content of those records; and
F. That a Fund will receive periodic reports with respect to the
safekeeping of the Fund's Foreign Assets, including, but not limited
to, notification of any transfer to or from the Fund's accounts or a
third party account containing Foreign Assets held for the benefit of
the Fund.
In lieu of any or all of the provisions specified in a. through f.
above, such contracts may contain such other provisions that AIM
determines will provide, in their entirety, the same or a greater
level of care and protection for Fund Foreign Assets as the specified
provisions, in their entirety.
6. MONITORING MANDATORY SECURITIES DEPOSITORIES. Establishment of a system
(a) to monitor the appropriateness of maintaining the Fund's Foreign Assets
with a particular Mandatory Securities Depository under Section 4 above,
and the contracts governing the Funds' arrangements under Section 5 above;
and (b) to notify the Funds promptly if an arrangement no longer meets the
requirements of [this section B] and to withdraw promptly the Funds'
Foreign Assets from such Mandatory Securities Depository in such event.
7. REPORTS AND OTHER INFORMATION.
A. ANNUAL REPORTS AND OTHER INFORMATION. AIM shall furnish annually to
the Boards of Directors/Trustees information regarding the factors
used in its system to monitor Mandatory Securities Depositories.
B. QUARTERLY REPORTS. AIM will submit to the Boards of
Directors/Trustees a quarterly report listing all newly approved
countries and all countries in which a Fund invested
<PAGE> 4
for the first time during the preceding quarter. Such report shall
include a revised Appendix 1 to the Foreign Custody and Country
Selection Procedures, if applicable, listing the approved countries.
AIM will submit to the Boards of Directors/Trustees a quarterly report
indicating changes to Mandatory Securities Depositories to the extent
such report is not provided by the Foreign Custody Manager.
C. OTHER REPORTS. AIM will notify the Boards of Directors/Trustees in
writing of any material change in the Mandatory Securities
Depositories for a Fund that has not been reported by the Foreign
Custody Manager promptly after the occurrence of the material change.
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
A I M ADVISORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------ -------------------------
Assistant Secretary Name:
Title:
(SEAL)
AIM ADVISOR FUNDS, INC. AIM SUMMIT FUND, INC.
AIM Advisor Flex Fund
AIM Advisor International Value Fund AIM INTERNATIONAL FUNDS, INC.
AIM Advisor Large Cap Value Fund AIM Asian Growth Fund
AIM Advisor MultiFlex Fund AIM European Development Fund
AIM Advisor Real Estate Fund AIM International Equity Fund
AIM Global Aggressive Growth Fund
AIM EQUITY FUNDS, INC. AIM Global Growth Fund
AIM Aggressive Growth Fund AIM Global Income Fund
AIM Blue Chip Fund
AIM Capital Development Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM Charter Fund AIM V.I. Aggressive Growth Fund
AIM Constellation Fund AIM V.I. Balanced Fund
AIM Weingarten Fund AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM FUNDS GROUP AIM V.I. Diversified Income Fund
AIM Balanced Fund AIM V.I. Global Utilities Fund
AIM Global Utilities Fund AIM V.I. Government Securities Fund
AIM High Yield Fund AIM V.I. Growth Fund
AIM Income Fund AIM V.I. Growth & Income Fund
AIM Money Market Fund AIM V.I. High Yield Fund
AIM Select Growth Fund AIM V.I. International Equity Fund
AIM Value Fund AIM V.I. Money Market Fund
AIM V.I. Value Fund
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Small Cap Opportunities Fund
Attest: /s/ P. MICHELLE GRACE By: /s/ JOHN J. ARTHUR
------------------------ ---------------------------
Assistant Secretary Name: John J. Arthur
Title: Senior Vice President
(SEAL)
<PAGE> 1
EXHIBIT d(3)(b)
AMENDMENT NO. 1
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 1 dated as of September 28, 1998, amends the Foreign
Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement (the "Agreement"), dated September 9, 1998, between A I M
Advisors, Inc., a Delaware corporation and each registered investment company
(the "Investment Companies") and its respective portfolios (the "Funds") listed
on the signature page thereof.
W I T N E S S E T H:
WHEREAS, the parties to the Agreement desire to amend the Agreement to
add AIM Investment Securities Funds on behalf of its AIM High Yield Fund II
portfolio as a party to the agreement;
NOW, THEREFORE, the parties agree as follows;
1. The list of Investment Companies and Funds covered by the
Agreement is hereby amended to include the following:
"AIM INVESTMENT SECURITIES FUNDS
AIM High Yield Fund II"
2. In all other respects, the Agreement is hereby confirmed and
remains in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: /s/ SAMUEL D. SIRKO By: /s/ ROBERT H. GRAHAM
---------------------------- ---------------------------------
Assistant Secretary President
(SEAL)
AIM ADVISOR FUNDS, INC. AIM SPECIAL OPPORTUNITIES FUNDS
AIM Advisor Flex Fund AIM Small Cap Opportunities Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund AIM SUMMIT FUND, INC.
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund AIM INTERNATIONAL FUNDS, INC.
AIM Asian Growth Fund
AIM EQUITY FUNDS, INC. AIM European Development Fund
AIM Aggressive Growth Fund AIM International Equity Fund
AIM Blue Chip Fund AIM Global Aggressive Growth Fund
AIM Capital Development Fund AIM Global Growth Fund
AIM Charter Fund AIM Global Income Fund
AIM Constellation Fund
AIM Weingarten Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Aggressive Growth Fund
AIM FUNDS GROUP AIM V.I. Balanced Fund
AIM Balanced Fund AIM V.I. Capital Appreciation Fund
AIM Global Utilities Fund AIM V.I. Capital Development Fund
AIM High Yield Fund AIM V.I. Diversified Income Fund
AIM Income Fund AIM V.I. Global Utilities Fund
AIM Money Market Fund AIM V.I. Government Securities Fund
AIM Select Growth Fund AIM V.I. Growth Fund
AIM Value Fund AIM V.I. Growth & Income Fund
AIM V.I. High Yield Fund
AIM INVESTMENT SECURITIES FUNDS AIM V.I. International Equity Fund
AIM High Yield Fund II AIM V.I. Money Market Fund
AIM V.I. Value Fund
Attest: /s/ SAMUEL D. SIRKO By: /s/ ROBERT H. GRAHAM
---------------------------- ---------------------------------
Assistant Secretary President
(SEAL)
<PAGE> 1
EXHIBIT d(3)(c)
AMENDMENT NO. 2
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 2, dated as of December 14, 1998, amends the
Foreign Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement (the "Agreement"), dated September 9, 1998, between A I M
Advisors, Inc., a Delaware corporation and each registered investment company
(the "Investment Companies") and its respective portfolios (the "Funds") listed
on the signature page thereof.
W I T N E S S E T H:
WHEREAS, the parties to the Agreement desire to amend the Agreement to
add AIM V.I. Global Growth and Income Fund and AIM V.I. Telecommunications Fund
of AIM Variable Insurance Funds, Inc. as a party to the agreement;
NOW, THEREFORE, the parties agree as follows;
1. The list of Investment Companies and Funds covered by the
Agreement is hereby amended to include the following:
"AIM V.I. Global Growth and Income Fund
AIM V.I. Telecommunications Fund"
2. In all other respects, the Agreement is hereby confirmed and
remains in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------------- ----------------------------
Assistant Secretary President
(SEAL)
AIM ADVISOR FUNDS, INC. AIM SPECIAL OPPORTUNITIES FUNDS
AIM Advisor Flex Fund AIM Small Cap Opportunities Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund AIM SUMMIT FUND, INC.
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund AIM INTERNATIONAL FUNDS, INC.
AIM Asian Growth Fund
AIM EQUITY FUNDS, INC. AIM European Development Fund
AIM Aggressive Growth Fund AIM International Equity Fund
AIM Blue Chip Fund AIM Global Aggressive Growth Fund
AIM Capital Development Fund AIM Global Growth Fund
AIM Charter Fund AIM Global Income Fund
AIM Constellation Fund
AIM Weingarten Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Aggressive Growth Fund
AIM FUNDS GROUP AIM V.I. Balanced Fund
AIM Balanced Fund AIM V.I. Capital Appreciation Fund
AIM Global Utilities Fund AIM V.I. Capital Development Fund
AIM High Yield Fund AIM V.I. Diversified Income Fund
AIM Income Fund AIM V.I. Global Growth and Income Fund
AIM Money Market Fund AIM V.I. Global Utilities Fund
AIM Select Growth Fund AIM V.I. Government Securities Fund
AIM Value Fund AIM V.I. Growth Fund
AIM V.I. Growth & Income Fund
AIM INVESTMENT SECURITIES FUNDS AIM V.I. High Yield Fund
AIM High Yield Fund II AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Telecommunications Fund
AIM V.I. Value Fund
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------------- ----------------------------
Assistant Secretary President
(SEAL)
<PAGE> 1
EXHIBIT d(3)(d)
AMENDMENT NO. 3
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 3, dated as of December 22, 1998, amends the Foreign
Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement, dated September 9, 1998, between A I M Advisors, Inc., a
Delaware corporation and each registered investment company (the "Investment
Companies") and its respective portfolios (the "Funds") listed on the signature
page thereof (as amended and supplemented, the "Agreement").
NOW, THEREFORE, the parties agree as follows;
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to include the following portfolio of AIM Special
Opportunities Funds:
AIM Mid Cap Opportunities Fund
In all other respects, the Agreement is hereby confirmed and remains in
full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ CAROL F. RELIHAN
----------------------------- -------------------------------
Assistant Secretary Senior Vice President
AIM ADVISOR FUNDS, INC. AIM SPECIAL OPPORTUNITIES FUNDS
AIM Advisor Flex Fund AIM Small Cap Opportunities Fund
AIM Advisor International Value Fund AIM Mid Cap Opportunities Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund AIM SUMMIT FUND, INC.
AIM Advisor Real Estate Fund
AIM INTERNATIONAL FUNDS, INC.
AIM EQUITY FUNDS, INC. AIM Asian Growth Fund
AIM Aggressive Growth Fund AIM European Development Fund
AIM Blue Chip Fund AIM International Equity Fund
AIM Capital Development Fund AIM Global Aggressive Growth Fund
AIM Charter Fund AIM Global Growth Fund
AIM Constellation Fund AIM Global Income Fund
AIM Weingarten Fund
AIM VARIABLE INSURANCE FUNDS, INC.
AIM FUNDS GROUP AIM V.I. Aggressive Growth Fund
AIM Balanced Fund AIM V.I. Balanced Fund
AIM Global Utilities Fund AIM V.I. Capital Appreciation Fund
AIM High Yield Fund AIM V.I. Capital Development Fund
AIM Income Fund AIM V.I. Diversified Income Fund
AIM Money Market Fund AIM V.I. Global Growth and Income Fund
AIM Select Growth Fund AIM V.I. Global Utilities Fund
AIM Value Fund AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM INVESTMENT SECURITIES FUNDS AIM V.I. Growth & Income Fund
AIM High Yield Fund II AIM V.I. High Yield Fund
AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Telecommunications Fund
AIM V.I. Value Fund
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
----------------------------- -----------------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT d(3)(e)
AMENDMENT NO. 4
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 4, dated as of January 26, 1999, amends the Foreign
Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement, dated September 9, 1998, between A I M Advisors, Inc., a
Delaware corporation and each registered investment company (the "Investment
Companies") and its respective portfolios (the "Funds") listed on the signature
page thereof (as amended and supplemented, the "Agreement").
NOW, THEREFORE, the parties agree as follows;
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to include the following investment companies and funds:
EMERGING MARKETS DEBT PORTFOLIO
GROWTH PORTFOLIO
Small Cap Portfolio
Value Portfolio
GLOBAL INVESTMENT PORTFOLIO
Global Consumer Products and Services Portfolio
Global Financial Services Portfolio
Global Infrastructure Portfolio
Global Natural Resources Portfolio
GT GLOBAL FLOATING RATE FUND, INC. (doing business as AIM
Floating Rate Fund)
AIM SERIES TRUST
AIM Global Trends Fund
FLOATING RATE PORTFOLIO
AIM EASTERN EUROPE FUND
AIM INVESTMENT FUNDS
AIM Global Government Income Fund
AIM Strategic Income Fund
AIM Emerging Markets Debt Fund
AIM Global Growth & Income Fund
AIM Emerging Markets Fund
AIM Developing Markets Fund
AIM Latin American Growth Fund
AIM Global Financial Services Fund
<PAGE> 2
AIM Global Health Care Fund
AIM Global Telecommunications Fund
AIM Global Consumer Products and Services Fund
AIM Global Infrastructure Fund
AIM Global Resources Fund
AIM GROWTH SERIES
AIM New Pacific Growth Fund
AIM Europe Growth Fund
AIM Japan Growth Fund
AIM International Growth Fund
AIM Worldwide Growth Fund
AIM Mid Cap Equity Fund
AIM Small Cap Growth Fund
AIM Basic Value Fund
GT GLOBAL VARIABLE INVESTMENT TRUST
GT Global Variable Latin America Fund
GT Global Variable Telecommunications Fund
GT Global Variable Growth & Income Fund
GT Global Variable Strategic Income Fund
GT Global Variable Emerging Markets Fund
GT Global Variable Government Income Fund
GT Global Variable U.S. Government Income Fund
GT Global Variable Infrastructure Fund
GT Global Variable Natural Resources Fund
GT GLOBAL VARIABLE INVESTMENT SERIES
GT Global Variable New Pacific Fund
GT Global Variable Europe Fund
GT Global Variable America Fund
GT Global Variable International Fund
GT Global Variable Money Market Fund
In all other respects, the Agreement is hereby confirmed and remains in
full force and effect.
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Amendment No. 4 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ CAROL F. RELIHAN
--------------------------------- ---------------------------------
Assistant Secretary Senior Vice President
AIM ADVISOR FUNDS, INC. AIM INTERNATIONAL FUNDS, INC.
AIM Advisor Flex Fund AIM Asian Growth Fund
AIM Advisor International Value Fund AIM European Development Fund
AIM Advisor Large Cap Value Fund AIM International Equity Fund
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Global Income Fund
AIM EQUITY FUNDS, INC.
AIM Aggressive Growth Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM Blue Chip Fund AIM V.I. Aggressive Growth Fund
AIM Capital Development Fund AIM V.I. Balanced Fund
AIM Charter Fund AIM V.I. Capital Appreciation Fund
AIM Constellation Fund AIM V.I. Capital Development Fund
AIM Weingarten Fund AIM V.I. Diversified Income Fund
AIM V.I. Global Growth and Income Fund
AIM FUNDS GROUP AIM V.I. Global Utilities Fund
AIM Balanced Fund AIM V.I. Government Securities Fund
AIM Global Utilities Fund AIM V.I. Growth Fund
AIM High Yield Fund AIM V.I. Growth & Income Fund
AIM Income Fund AIM V.I. High Yield Fund
AIM Money Market Fund AIM V.I. International Equity Fund
AIM Select Growth Fund AIM V.I. Money Market Fund
AIM Value Fund AIM V.I. Telecommunications Fund
AIM V.I. Value Fund
AIM INVESTMENT SECURITIES FUNDS
AIM High Yield Fund II EMERGING MARKETS DEBT PORTFOLIO
AIM SPECIAL OPPORTUNITIES FUNDS GROWTH PORTFOLIO
AIM Small Cap Opportunities Fund Small Cap Portfolio
AIM Mid Cap Opportunities Fund Value Portfolio
AIM SUMMIT FUND, INC.
<PAGE> 4
GLOBAL INVESTMENT PORTFOLIO AIM GROWTH SERIES
Global Consumer Products and Services AIM New Pacific Growth Fund
Portfolio AIM Europe Growth Fund
Global Financial Services Portfolio AIM Japan Growth Fund
Global Infrastructure Portfolio AIM International Growth Fund
Global Natural Resources Portfolio AIM Worldwide Growth Fund
AIM Mid Cap Equity Fund
GT GLOBAL FLOATING RATE FUND, INC. AIM Small Cap Growth Fund
(doing business as AIM Floating Rate AIM Basic Value Fund
Fund)
GT GLOBAL VARIABLE INVESTMENT TRUST
AIM SERIES TRUST GT Global Variable Latin America Fund
AIM Global Trends Fund GT Global Variable Telecommunications
Fund
FLOATING RATE PORTFOLIO GT Global Variable Growth & Income
Fund
AIM EASTERN EUROPE FUND GT Global Variable Strategic Income
Fund
AIM INVESTMENT FUNDS GT Global Variable Emerging Markets
AIM Global Government Income Fund Fund
AIM Strategic Income Fund GT Global Variable Government Income
AIM Emerging Markets Debt Fund Fund
AIM Global Growth & Income Fund GT Global Variable U.S. Government
AIM Emerging Markets Fund Income Fund
AIM Developing Markets Fund GT Global Variable Infrastructure Fund
AIM Latin American Growth Fund GT Global Variable Natural Resources
AIM Global Financial Services Fund Fund
AIM Global Health Care Fund
AIM Global Telecommunications Fund GT GLOBAL VARIABLE INVESTMENT SERIES
AIM Global Consumer Products and GT Global Variable New Pacific Fund
Services Fund GT Global Variable Europe Fund
AIM Global Infrastructure Fund GT Global Variable America Fund
AIM Global Resources Fund GT Global Variable International Fund
GT Global Variable Money Market Fund
/s/ SAMUEL D. SIRKO
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ ------------------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT d(3)(f)
AMENDMENT NO. 5
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 5, dated as of March 1, 1999, amends the Foreign
Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement, dated September 9, 1998, between A I M Advisors, Inc., a
Delaware corporation and each registered investment company (the "Investment
Companies") and its respective portfolios (the "Funds") listed on the signature
page thereof (as amended and supplemented, the "Agreement").
NOW, THEREFORE, the parties agree as follows;
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to include the following portfolio of AIM Equity Funds,
Inc.:
AIM Large Cap Growth Fund
In all other respects, the Agreement is hereby confirmed and remains in
full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment No. 5 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: By: /s/ CAROL F. RELIHAN
-------------------------------- -------------------------------
Assistant Secretary Senior Vice President
AIM ADVISOR FUNDS, INC. AIM INTERNATIONAL FUNDS, INC.
AIM Advisor Flex Fund AIM Asian Growth Fund
AIM Advisor International Value Fund AIM European Development Fund
AIM Advisor Large Cap Value Fund AIM International Equity Fund
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Global Income Fund
AIM EQUITY FUNDS, INC.
AIM Aggressive Growth Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM Blue Chip Fund AIM V.I. Aggressive Growth Fund
AIM Capital Development Fund AIM V.I. Balanced Fund
AIM Charter Fund AIM V.I. Capital Appreciation Fund
AIM Constellation Fund AIM V.I. Capital Development Fund
AIM Large Cap Growth Fund AIM V.I. Diversified Income Fund
AIM Weingarten Fund AIM V.I. Global Growth and Income Fund
AIM V.I. Global Utilities Fund
AIM FUNDS GROUP AIM V.I. Government Securities Fund
AIM Balanced Fund AIM V.I. Growth Fund
AIM Global Utilities Fund AIM V.I. Growth & Income Fund
AIM High Yield Fund AIM V.I. High Yield Fund
AIM Income Fund AIM V.I. International Equity Fund
AIM Money Market Fund AIM V.I. Money Market Fund
AIM Select Growth Fund AIM V.I. Telecommunications Fund
AIM Value Fund AIM V.I. Value Fund
AIM INVESTMENT SECURITIES FUNDS EMERGING MARKETS DEBT PORTFOLIO
AIM High Yield Fund II
GROWTH PORTFOLIO
AIM SPECIAL OPPORTUNITIES FUNDS Small Cap Portfolio
AIM Small Cap Opportunities Fund Value Portfolio
AIM Mid Cap Opportunities Fund
AIM SUMMIT FUND, INC.
<PAGE> 3
GLOBAL INVESTMENT PORTFOLIO AIM GROWTH SERIES
Global Consumer Products and Services AIM New Pacific Growth Fund
Portfolio AIM Europe Growth Fund
Global Financial Services Portfolio AIM Japan Growth Fund
Global Infrastructure Portfolio AIM International Growth Fund
Global Natural Resources Portfolio AIM Worldwide Growth Fund
AIM Mid Cap Equity Fund
GT GLOBAL FLOATING RATE FUND, INC. AIM Small Cap Growth Fund
(doing business as AIM Floating Rate AIM Basic Value Fund
Fund)
GT GLOBAL VARIABLE INVESTMENT
AIM SERIES TRUST TRUST
AIM Global Trends Fund GT Global Variable Latin America Fund
GT Global Variable Telecommunications
FLOATING RATE PORTFOLIO Fund
GT Global Variable Growth & Income
AIM EASTERN EUROPE FUND Fund
GT Global Variable Strategic Income
AIM INVESTMENT FUNDS Fund
AIM Global Government Income Fund GT Global Variable Emerging Markets
AIM Strategic Income Fund Fund
AIM Emerging Markets Debt Fund GT Global Variable Government Income
AIM Global Growth & Income Fund Fund
AIM Emerging Markets Fund GT Global Variable U.S. Government
AIM Developing Markets Fund Income Fund
AIM Latin American Growth Fund GT Global Variable Infrastructure
AIM Global Financial Services Fund Fund
AIM Global Health Care Fund GT Global Variable Natural Resources
AIM Global Telecommunications Fund Fund
AIM Global Consumer Products and
Services Fund GT GLOBAL VARIABLE INVESTMENT SERIES
AIM Global Infrastructure Fund GT Global Variable New Pacific Fund
AIM Global Resources Fund GT Global Variable Europe Fund
GT Global Variable America Fund
GT Global Variable International Fund
GT Global Variable Money Market Fund
/s/ SAMUEL D. SIRKO
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
-------------------------------- ------------------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT h(4)
FUND ACCOUNTING AND PRICING AGENT AGREEMENT
This Fund Accounting and Pricing Agent Agreement (the "Agreement") is
made as of June 1, 1998, by and between AIM Series Trust (the "Company") and
A I M Advisors, Inc. ("AIM").
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company;
WHEREAS, the Company currently operates one mutual fund, which is
organized as a separate and distinct series of the Company's shares (such
existing fund and such funds as may hereafter be established being referred to
in this Agreement as the "Funds" and singly as a "Fund");
WHEREAS, the Company is part of a complex of investment companies that
are advised and administered by AIM, and such complex is currently comprised of
the following investment companies: AIM Growth Series, AIM Investment Funds,
Inc., AIM Investment Portfolios, Inc., AIM Series Trust, GT Global Variable
Investment Series and GT Global Variable Investment Trust (the "AIM Funds");
WHEREAS, the Company desires to retain AIM to act as its accounting and
pricing agent, and AIM is willing to act in such capacities.
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions hereinafter set forth, the Company and AIM hereby agree as follows:
SECTION 1. APPOINTMENT. The Company hereby appoints AIM to act as the accounting
and pricing agent for each Fund for the period and on the terms and conditions
set forth in this Agreement. AIM hereby accepts such appointment and agrees to
render the services set forth for the compensation herein provided.
SECTION 2. DEFINITIONS As used in this Agreement and in addition to the terms
defined elsewhere herein, the following terms shall have the meanings assigned
to them in this Section:
(a) "Authorized Person" means any officer of the Company and any
other person, whether or not any such person is an officer or employee of the
Company, duly authorized by the Board of Directors/Trustees (the "Board"), the
President or any Vice President of the Fund to give Oral and/or Written
Instructions on behalf of the Company or any Fund.
(b) "Commission" means the Securities and Exchange Commission.
(c) "Custodian" means the custodian or custodians employed by the
Company to maintain custody of the Funds' assets.
1
<PAGE> 2
(d) "Governing Documents" means the Articles of Incorporation,
Agreement and Declaration of Trust, By-Laws and/or other applicable charter
documents of the Company, all as they may be amended from time to time.
(e) "Oral Instruction" means oral instructions actually received
by AIM from an Authorized Person or from a person reasonably believed by AIM to
be an Authorized Person, provided that, any Oral Instruction shall be promptly
confirmed by Written Instructions.
(f) "Prospectus" means the current prospectus and statement of
additional information of a Fund, taken together.
(g) "Shares" means shares of beneficial interest of any of the
Funds.
(h) "Shareholder" means any owner of Shares.
(i) "Written Instructions" means written instructions delivered by
hand, mail, tested telegram or telex, cable or facsimile sending device received
by AIM and signed by an Authorized Person.
SECTION 3. COMPLIANCE WITH LAWS, ETC. In performing its responsibilities
hereunder, AIM shall comply with all terms and provisions of the Governing
Documents, the Prospectus and all applicable state and federal laws including,
without limitation, the 1940 Act and the rules and regulations promulgated by
the Commission thereunder.
SECTION 4. SERVICES. In consideration of the compensation payable hereunder and
subject to the supervision and control of the Company's Boards, AIM shall
provide the following services to the Funds:
(a) PRICING AGENT. As pricing agent, AIM shall:
(1) Obtain security market quotes from services approved
by AIM or, if such quotes are unavailable, from such sources as may be
designated in procedures adopted by AIM and approved by the Company's Board,
and, in either case, calculate the market value of the Funds' investments; and
(2) Value the assets of the Funds and compute the net
asset value per Share of the Funds at such dates and times and in the manner
specified in the then currently effective Prospectus and transmit to the Funds'
portfolio manager(s).
(b) ACCOUNTING AGENT. As fund accounting agent, AIM shall:
(1) Calculate the net income of each Fund;
(2) Calculate capital gains or losses for each Fund from
the sale or disposition of assets, if any;
2
<PAGE> 3
(3) Maintain the general ledger and other accounts, books
and financial records of the Company, as required under Section 31(a) of the
1940 Act and the rules promulgated by the Commission thereunder in connection
with the services provided by AIM;
(4) Perform the following functions on a daily basis:
(A) journalize each Fund's investment, capital
share and income and expense activities;
(B) reconcile cash and investment balances of
each Fund with the Custodian and provide the Funds'
portfolio manager(s) with the beginning cash balance
available for investment purposes and update the cash
availability throughout the day as necessary;
(C) verify investment buy/sell trade tickets
received from a Fund's portfolio manager(s) and
transmit trades to a Fund's Custodian for proper
settlement;
(D) maintain individual ledgers for investment
securities;
(E) maintain historical tax lots for investment
securities;
(F) calculate various contractual expenses
(e.g., advisory and custody fees);
(G) post to and prepare the Funds' statements of
assets and liabilities and statements of operations.
and
(H) monitor expense accruals and notify any
Authorized Person of any proposed adjustments;
(5) Receive and act upon notices, Oral and
Written Instructions, certificates, instruments or other communications from a
Fund's shareholder servicing and transfer agent;
(6) Assist in the preparation of financial
statements semiannually which will include the following items:
(A) schedule of investments;
(B) statement of assets and
liabilities;
(C) statement of operations; and
(D) changes in net assets;
3
<PAGE> 4
(7) Prepare monthly security transaction
listings;
(8) Prepare quarterly broker security
transactions summaries; and
(9) At the reasonable request of the Company,
assist in the preparation of various reports or other financial documents
required by federal, state and other appropriate laws and regulations.
SECTION 5. COMPENSATION. As compensation for the services rendered by AIM
hereunder during the term of the Agreement, each Fund shall pay to AIM monthly
such fees as shall be agreed to from time to time by the Company and AIM, in
writing and attached hereto as Schedule A. In addition, as may be agreed to from
time to time in writing by the Company and AIM, each Fund shall reimburse AIM
for certain expenses that it incurs in rendering services with respect to that
Fund under this Agreement.
SECTION 6. RELIANCE BY AIM ON INSTRUCTIONS. Unless otherwise provided in this
Agreement, AIM shall act only upon Oral or Written Instructions. AIM shall be
entitled to rely upon any such Instructions actually received by it under this
Agreement. The Company agrees that AIM shall incur no liability to the Company
or any of the Funds in acting upon Oral or Written Instructions given to AIM
hereunder, provided that, such Instructions reasonably appear to have been
received from an Authorized Person.
SECTION 7. COOPERATION WITH AGENTS OF THE COMPANY. AIM shall cooperate with the
Company's agents and employees, including, without limitation, their independent
accountants, and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that all necessary. information is
made available to such agents to the extent necessary in the performance of
their duties to the Company.
SECTION 8. CONFIDENTIALITY. AIM, on behalf of itself and its employees, agrees
to treat confidentially all records and other information relating to the
Company and the Funds except when requested to divulge such information by duly
constituted authorities provided that notification and prior approval is
obtained from the Company, which approval shall not be unreasonably withheld and
may not be withheld if AIM, in its judgment, may be subject to civil or criminal
contempt proceedings for failure to comply.
SECTION 9. STANDARD OF CARE. In the performance of its responsibilities
hereunder, AIM shall exercise care and diligence in the performance of its
duties and act in good faith and use its best efforts to ensure the accuracy and
completeness of all services under this Agreement. In performing services
hereunder, AIM:
(a) shall be under no duty to take any action on behalf of the
Company or the Funds except as specifically set forth herein or as may be
specifically agreed to by AIM in writing, and in computing the net asset value
per Share of a Fund, AIM may rely upon any information furnished to it
including, without limitation, information (1) as to the accrual of liabilities
of a Fund and as to liabilities of a Fund not appearing on the books of account
kept by AIM, (2) as to the existence, status and proper treatment of reserves,
if any, authorized by a Fund, (3) as to the
4
<PAGE> 5
sources of quotations to be used in computing net asset value, (4) as to the
fair value to be assigned to any securities or other property for which price
quotations are not readily available and (5) as to the sources of information
with respect to "corporate actions" affecting portfolio securities of a Fund
(information as to "corporate actions" shall include information as to
dividends, distributions, interest payments, prepayments, stock splits, stock
dividends, rights offerings, conversions, exchanges, recapitalizations,
mergers, redemptions, calls, maturity dates and similar actions, including
ex-dividend and record dates and the amounts and terms thereof);
(b) shall be responsible and liable for all losses, damages and
costs (including reasonable attorneys' fees) incurred by the Company or any Fund
which is due to or caused by AIM's negligence in the performance of its duties
under this Agreement or for AIM'S negligent failure to perform such duties as
are specifically assumed by AIM in this Agreement, provided that, to the extent
that duties, obligations and responsibilities are not expressly set forth in
this Agreement, AIM shall not be liable for any act or omission that does not
constitute willful misfeasance, bad faith or negligence on the part of AIM or
reckless disregard by AIM of such duties, obligations and responsibilities, and
(c) without-limiting the generality of the foregoing, AIM shall
not, in connection with AIM's duties under this Agreement, be under any duty or
obligation to inquire into and shall not be liable for or in respect of:
(1) the validity or invalidity or authority or lack of
authority of any Oral or Written Instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement, if any, and that AIM
reasonably believes to be genuine; and
(2) delays or errors or loss of data occurring by reason
of circumstances beyond AIM's control including, without limitation, acts of
civil or military authorities, national emergencies, labor difficulties, fire,
mechanical breakdown, denial of access, earthquake, flood or catastrophe, acts
of God, insurrection, war, riots, or failure of the mails, transportation,
communication or power supply.
Notwithstanding any other provisions of this Agreement, the following provisions
shall apply with respect to AIM's computation of a Fund's net asset value: AIM
shall be held to the exercise of reasonable care in computing and determining
net asset value as provided in Section 4(a), above, but shall not be held
accountable or liable for any losses, damages or expenses of a Fund or any
Shareholder or former Shareholder may incur arising from or based upon errors or
delays in the determination of such net asset value unless such error or delay
was due to AIM's negligence or willful misfeasance in the computation and
determination of such net asset value. The parties hereto acknowledge, however,
that AIM causing an error or delay in the determination of net asset value may,
but does not in an of itself, constitute negligence or willful misfeasance. In
no event shall AIM be liable or responsible to the Company or a Fund or any
other party for any error or delay which continued or was undetected after the
date of an audit of the Company or any Fund performed by the certified public
accountants employed by the Company if, in the exercise of reasonable care in
accordance with generally accepted accounting principles, such accountants
should have become aware of such error or delay in the course of performing such
audit. AIM's liability for any such negligence or willful misfeasance which
5
<PAGE> 6
results in an error in determination of such net asset value be limited to the
direct out-of-pocket loss a Fund and/or any Shareholder or former Shareholder
shall actually incur.
Without limiting the generality of the foregoing, AIM shall not be held
accountable or liable to a Fund, a Shareholder or former Shareholder or any
other person for any delays or losses, damages or expenses any of them may
suffer or incur resulting from (1) AIM's failure to receive timely and suitable
notification concerning quotations, corporate actions or similar matters
relating to or affecting portfolio securities of a Fund or (2) any errors in the
computation of a net asset value based upon or arising out of quotations or
information as to corporate actions if received by AIM from a source that AIM
was authorized to rely upon. Nevertheless, AIM will use its best judgment in
determining whether to verify through other sources any information that it has
received as to quotations or corporate actions if AIM has reason to believe that
any such information is incorrect.
SECTION 10. RECEIPT OF ADVICE. If AIM is in doubt as to any action to be taken
or omitted by it, AIM may request, and shall be entitled. to rely upon,
directions and advice from the Company, including Oral or Written Instructions
where appropriate, or from counsel of its own choosing (who may also be counsel
for the Company or any Fund), with respect to any question of law. In case of
conflict between directions, advice or Oral and Written Instructions received by
AIM pursuant to this Section, AIM shall be entitled to rely on and follow the
advice received from counsel as described above. AIM shall be protected in any
action or in action that it takes in reliance on any directions, advice or Oral
or Written Instructions received pursuant to this Section that AIM, after the
receipt of the same, in good faith believes to be consistent with such
directions, advice or Oral or Written Instructions, as the case may be.
Notwithstanding the foregoing, nothing, in this Section shall be construed as
imposing on AIM any obligation to seek such directions, advice or Oral or
Written Instruction, or to act in accordance with them when received, unless the
same is a condition to AIM's properly taking or omitting to take such action
under the terms of this Agreement.
SECTION 11. INDEMNIFICATION OF AIM. The Company agrees to indemnify and hold
harmless AIM and its officers, directors, employees, nominees and
subcontractors, if any, from all taxes, charges, expenses, assessments, claims
and liabilities, including, without limitation, liabilities arising under the
1940 Act, the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, the Commodities Exchange Act and any state or foreign
securities or blue sky laws, and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, arising directly or indirectly
from any action or thing that AIM takes or omits to take or do:
(a) at the request or on the direction of or in reliance upon the advice
of the Company;
(b) upon Oral or Written Instructions; or
(c) in the performance by AIM of its responsibilities under this
Agreement;
provided that, AIM, shall not be indemnified against any liability to the
Company or the Funds, or
6
<PAGE> 7
any expenses incident thereto, arising out of AIM's own willful misfeasance, bad
faith or negligence or reckless disregard of its duties in connection with the
performance of its duties and obligations specifically described in this
Agreement.
SECTION 12. INDEMNIFICATION OF THE COMPANY. AIM agrees to indemnify and hold
harmless the Company and its officers, trustees, directors and employees, from
all taxes, charges, expenses, assessments, claims and liabilities, including,
without limitation, liabilities arising under the 1940 Act, the Securities Act
of 1933, as amended, the Securities Exchange Act of 1934, as amended, the
Commodities Exchange Act and any state or foreign securities or blue sky laws,
and expenses, including, without limitation, reasonable attorneys' fees and
disbursements, arising directly or indirectly from any action or omission of
AIM that does not meet the standard of care to which AIM is subject under
Section 9. above.
SECTION 13. LIMITATION OF LIABILITY OF SHAREHOLDERS AND TRUSTEES OF THE COMPANY.
It is expressly agreed that the obligations of the Company hereunder shall not
be binding upon any of the shareholders, trustees, directors, officers,
nominees, agents or employees of the Company personally, but shall only bind
the assets and property of the applicable Funds, as provided in the Governing
Documents. The execution and delivery of this Agreement has been authorized by
the Board of the Company, and this Agreement has been executed and delivered by
an authorized officer of the Company acting as such, and neither such
authorization by the Board nor such execution and delivery by such officer shall
be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the assets and
property of the applicable Fund as provided in the Governing Documents.
SECTION 14. DURATION AND TERMINATION. This Agreement shall continue with respect
to the Company and each Fund until termination with respect to the Company, or
with respect to one or more Funds, is effected by the Company or AIM upon sixty
days' prior written notice to the other. In the event of the "assignment" of
this Agreement within the meaning of the 1940 Act, this Agreement shall
terminate automatically.
SECTION 15. NOTICES. All notices and other communications hereunder, including
Written Instructions, shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices with respect to a party shall be
directed to such address as may from time to time be designated by that party to
the other.
SECTION 16. FURTHER ACTIONS. The Company and AIM agree to perform such further
acts and to execute such further documents as may be necessary or appropriate to
effect the purposes of this Agreement.
SECTION 17. AMENDMENTS. This Agreement, or any part thereof, may be amended only
by an instrument in writing signed by the Company and AIM.
SECTION 18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
7
<PAGE> 8
SECTION 19. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the Company and AIM and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
Company and AIM may embody in one or more separate documents their agreement or
agreements with respect to such matters that this Agreement provides may be
later agreed to by and between the Company and AIM from time to time. The
captions in this Agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the Company
and AIM and their respective successors.
8
<PAGE> 9
IN WITNESS WHEREOF, the Company and AIM have caused this Agreement to be
executed by their officers designated below as of this day, month and year first
above written.
AIM SERIES TRUST
By: /s/ ROBERT H. GRAHAM
--------------------------------
Robert H. Graham
President
Attest: /s/ SAMUEL D. SIRKO
----------------------------
Samuel D. Sirko
Assistant Secretary
A I M ADVISORS, INC.
By: /s/ CAROL F. RELIHAN
--------------------------------
Carol F. Relihan
Senior Vice President,
General Counsel and Secretary
Attest: /s/ SAMUEL D. SIRKO
---------------------------
Samuel D. Sirko
Assistant Secretary
9
<PAGE> 10
SCHEDULE A
TO
FUND ACCOUNTING
AND
PRICING AGENT AGREEMENT
FOR
AIM SERIES TRUST
FUND ACCOUNTING AND PRICING AGENT FEES
Each Fund shall pay a Fee to AIM determined as a percentage of the Fund's
net assets. The annualized rate at which the fee is paid (the Fee Rate) and the
Fee shall be calculated as set forth below:
o An Asset Multiplier is determined by multiplying 0.0003 times the first $5
billion in average net assets of the AIM Funds plus 0.0002 times such net
assets over $5 billion.
o The Fee Rate is determined by dividing the Asset Multiplier by the net
assets of the AN Funds.
o The Monthly Fee is determined then by multiplying the average daily Fee Rate
by the number of days in the month and by the Fund's average daily net
assets then dividing by 365/or 366, as appropriate.
Example: For Fund X having $100 million in average net assets during December
1997, in which the AIM Funds have average net assets of $8 billion:
Asset Multiplier = (0.0003)($5 billion) + (0.0002)($3 billion) = $2.1 million
Fee Rate = $2.1 million = 0.0002625
------------
$8 billion
Monthly Fee = (31)(0.0002625)($100 million) = $2,229.45
----
(365)
10
<PAGE> 1
EXHIBIT i(1)
April 2, 1999
AIM Series Trust
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Ladies and Gentlemen:
We hereby consent to the reference to our firm in the statements of
additonal information that are being filed as part of Post-Effective Amendment
No. 8 to the registration statement of AIM Series Trust on Form N-1A (File No.
811-7787).
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ R. Darrell Mounts
-------------------------
R. Darrell Mounts
<PAGE> 1
EXHIBIT j
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of AIM Series Trust:
RE: AIM Global Trends Fund
We consent to the inclusion in Post-Effective Amendment No. 8 under the
Securities Act of 1933, as amended, and Amendment No. 9 under the Investment
Company Act of 1940, as amended, to the Registration Statement on Form N-1A, of
AIM Series Trust, of our report dated February 19, 1999, on our audit of the
financial statements and financial highlights of the AIM Global Trends Fund,
which report is included in the Annual Report to Shareholders for the periods
stated therein, which are also included in this Registration Statement. We also
consent to the reference to our Firm under the caption "Independent Accountants"
in the statement of additional information.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 1, 1999
<PAGE> 1
EXHIBIT m(3)(i)
[LOGO ONLY]
A I M DISTRIBUTORS, INC.
SHAREHOLDER SERVICE AGREEMENT
FOR SALE OF SHARES
OF THE AIM MUTUAL FUNDS
This Shareholder Service Agreement (the "Agreement") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940, by each of the
AIM-managed mutual funds (or designated classes of such funds) listed in
Schedule A, which may be amended from time to time by AIM Distributors, Inc.
("Distributors") to this Agreement (the "Funds"), under a Distribution Plan (the
"Plan") adopted pursuant to said Rule. This Agreement, being made between
Distributors, solely as agent for such Funds and the undersigned authorized
dealer, defines the services to be provided by the authorized dealer for which
it is to receive payments pursuant to the Plan adopted by each of the Funds. The
Plan and the Agreement have been approved by a majority of the directors of each
of the Funds, including a majority of the directors who are not interested
persons of such Funds, and who have no direct or indirect financial interest in
the operation of the Plan or related agreements (the "Dis-interested
Directors"), by votes cast in person at a meeting called for the purpose of
voting on the Plan. Such approval included a determination that in the exercise
of their reasonable business judgement and in light of their fiduciary duties,
there is a reasonable likelihood that the Plan will benefit such Fund and its
shareholders.
1. To the extent that you provide distribution-related and continuing
personal shareholder services to customers who may, from time to time,
directly or beneficially own shares of the Funds, including but not
limited to, distributing sales literature, answering routine customer
inquiries regarding the Funds, assisting customers in changing dividend
options, account designations and addresses, and in enrolling into any
of several special investment plans offered in connection with the
purchase of the Funds' shares, assisting in the establishment and
maintenance of customer accounts and records and in the processing of
purchase and redemption transactions, investing dividends and capital
gains distributions automatically in shares and providing such other
services as the Funds or the customer may reasonably request, we,
solely as agent for the Funds, shall pay you a fee periodically or
arrange for such fee to be paid to you.
2. The fee paid with respect to each Fund will be calculated at the end of
each payment period (as indicated in Schedule A) for each business day
of the Fund during such payment period at the annual rate set forth in
Schedule A as applied to the average net asset value of the shares of
such Fund purchased or acquired through exchange on or after the Plan
Calculation Date shown for such Fund on Schedule A. Fees calculated in
this manner shall be paid to you only if your firm is the dealer of
record at the close of business on the last business day of the
applicable payment period, for the account in which such shares are
held (the "Subject Shares"). In cases where Distributors has advanced
payment to you of the first year's fee for shares sold at net asset
value and subject to a contingent deferred sales charge, no additional
payments will be made to you during the first year the Subject Shares
are held.
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<PAGE> 2
3. The total of the fees calculated for all of the Funds listed on
Schedule A for any period with respect to which calculations are made
shall be paid to you within 45 days after the close of such period.
4. We reserve the right to withhold payment with respect to the Subject
Shares purchased by you and redeemed or repurchased by the Fund or by
us as Agent within seven (7) business days after the date of our
confirmation of such purchase. We reserve the right at any time to
impose minimum fee payment requirements before any periodic payments
will be made to you hereunder.
5. This Agreement and Schedule A does not require any broker-dealer to
provide transfer agency and recordkeeping related services as nominee
for its customers.
6. You shall furnish us and the Funds with such information as shall
reasonably be requested either by the directors of the Funds or by us
with respect to the fees paid to you pursuant to this Agreement.
7. We shall furnish the directors of the Funds, for their review on a
quarterly basis, a written report of the amounts expended under the
Plan by us and the purposes for which such expenditures were made.
8. Neither you nor any of your employees or agents are authorized to make
any representation concerning shares of the Funds except those
contained in the then current Prospectus or Statement of Additional
Information for the Funds, and you shall have no authority to act as
agent for the Funds or for Distributors.
9. We may enter into other similar Shareholder Service Agreements with any
other person without your consent.
10. This Agreement may be amended at any time without your consent by
Distributors mailing a copy of an amendment to you at address set forth
below. Such amendment shall become effective on the date specified in
such amendment unless you elect to terminate this Agreement within
thirty (30) days of your receipt of such amendment.
11. This Agreement may be terminated with respect to any Fund at any time
without payment of any penalty by the vote of a majority of the
directors of such Fund who are Dis-interested Directors or by a vote of
a majority of the Fund's outstanding shares, on sixty (60) days'
written notice. It will be terminated by any act which terminates
either the Selected Dealer Agreement between your firm and us or the
Fund's Distribution Plan, and in any event, it shall terminate
automatically in the event of its assignment as that term is defined in
the 1940 Act.
12. The provisions of the Distribution Agreement between any Fund and us,
insofar as they relate to the Plan, are incorporated herein by
reference. This Agreement shall become effective upon execution and
delivery hereof and shall continue in full force and effect as long as
the continuance of the Plan and this related Agreement are approved at
least annually by a vote of the directors, including a majority of the
Dis-interested Directors, cast in person at a meeting called for the
purpose of voting thereon. All communications to us should be sent to
the address of Distributors as shown at the bottom of this
3/99
<PAGE> 3
Agreement. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
13. You represent that you provide to your customers who own shares of the
Funds personal services as defined from time to time in applicable
regulations of the National Association of Securities Dealers, Inc.,
and that you will continue to accept payments under this Agreement only
so long as you provide such services.
14. This Agreement shall be construed in accordance with the laws of the
State of Texas.
A I M DISTRIBUTORS, INC.
Date: By:
----------------------- --------------------------------------------
The undersigned agrees to abide by the foregoing terms and conditions.
Date: By:
----------------------- --------------------------------------------
Signature
--------------------------------------------
Print Name Title
--------------------------------------------
Dealer's Name
--------------------------------------------
Address
--------------------------------------------
City State Zip
--------------------------------------------
Telephone
Please sign both copies and return one copy of each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
3/99
<PAGE> 4
SCHEDULE "A" TO
SHAREHOLDER SERVICE AGREEMENT
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Advisor Flex Fund A Shares 0.25 August 4, 1997
AIM Advisor Flex Fund B Shares 0.25 March 3, 1998
AIM Advisor Flex Fund C Shares 1.00** August 4, 1997
AIM Advisor International Value Fund A Shares 0.25 August 4, 1997
AIM Advisor International Value Fund B Shares 0.25 March 3, 1998
AIM Advisor International Value Fund C Shares 1.00** August 4, 1997
AIM Advisor Large Cap Value Fund A Shares 0.25 August 4, 1997
AIM Advisor Large Cap Value Fund B Shares 0.25 March 3, 1998
AIM Advisor Large Cap Value Fund C Shares 1.00** August 4, 1997
AIM Advisor MultiFlex Fund A Shares 0.25 August 4, 1997
AIM Advisor MultiFlex Fund B Shares 0.25 March 3, 1998
AIM Advisor MultiFlex Fund C Shares 1.00** August 4, 1997
AIM Advisor Real Estate Fund A Shares 0.25 August 4, 1997
AIM Advisor Real Estate Fund B Shares 0.25 March 3, 1998
AIM Advisor Real Estate Fund C Shares 1.00** August 4, 1997
AIM Aggressive Growth Fund A Shares 0.25 July 1, 1992
AIM Aggressive Growth Fund B Shares 0.25 March 1, 1999
AIM Aggressive Growth Fund C Shares 1.00** March 1, 1999
AIM Asian Growth Fund A Shares 0.25 November 1, 1997
AIM Asian Growth Fund B Shares 0.25 November 1, 1997
AIM Asian Growth Fund C Shares 1.00** November 1, 1997
AIM Balanced Fund A Shares 0.25 October 18, 1993
AIM Balanced Fund B Shares 0.25 October 18, 1993
AIM Balanced Fund C Shares 1.00** August 4, 1997
AIM Blue Chip Fund A Shares 0.25 June 3, 1996
AIM Blue Chip Fund B Shares 0.25 October 1, 1996
AIM Blue Chip Fund C Shares 1.00** August 4, 1997
AIM Capital Development Fund A Shares 0.25 June 17, 1996
AIM Capital Development Fund B Shares 0.25 October 1, 1996
AIM Capital Development Fund C Shares 1.00** August 4, 1997
AIM Charter Fund A Shares 0.25 November 18, 1986
AIM Charter Fund B Shares 0.25 June 15, 1995
AIM Charter Fund C Shares 1.00** August 4, 1997
AIM Constellation Fund A Shares 0.25 September 9, 1986
AIM Constellation Fund B Shares 0.25 November 3, 1997
AIM Constellation Fund C Shares 1.00** August 4, 1997
AIM European Development Fund A Shares 0.25 November 1, 1997
AIM European Development Fund B Shares 0.25 November 1, 1997
AIM European Development Fund C Shares 1.00** November 1, 1997
AIM Global Aggressive Growth Fund A Shares 0.50** September 15, 1994
AIM Global Aggressive Growth Fund B Shares 0.25 September 15, 1994
AIM Global Aggressive Growth Fund C Shares 1.00** August 4, 1997
AIM Global Growth Fund A Shares 0.50** September 15, 1994
AIM Global Growth Fund B Shares 0.25 September 15, 1994
</TABLE>
3/99
<PAGE> 5
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Global Growth Fund C Shares 1.00** August 4, 1997
AIM Global Income Fund A Shares 0.50** September 15, 1994
AIM Global Income Fund B Shares 0.25 September 15, 1994
AIM Global Income Fund C Shares 1.00** August 4, 1997
AIM Global Utilities Fund A Shares 0.25 July 1, 1992
AIM Global Utilities Fund B Shares 0.25 September 1, 1993
AIM Global Utilities Fund C Shares 1.00** August 4, 1997
AIM High Income Municipal Fund A Shares 0.25 December 22, 1997
AIM High Income Municipal Fund B Shares 0.25 December 22, 1997
AIM High Income Municipal Fund C Shares 1.00** December 22, 1997
AIM High Yield Fund A Shares 0.25 July 1, 1992
AIM High Yield Fund B Shares 0.25 September 1, 1993
AIM High Yield Fund C Shares 1.00** August 4, 1997
AIM High Yield Fund II A Shares 0.25 October 1, 1998
AIM High Yield Fund II B Shares 0.25 November 20, 1998
AIM High Yield Fund II C Shares 1.00** November 20, 1998
AIM Income Fund A Shares 0.25 July 1, 1992
AIM Income Fund B Shares 0.25 September 1, 1993
AIM Income Fund C Shares 1.00** August 4, 1997
AIM Intermediate Government Fund A Shares 0.25 July 1, 1992
AIM Intermediate Government Fund B Shares 0.25 September 1, 1993
AIM Intermediate Government Fund C Shares 1.00** August 4, 1997
AIM International Equity Fund A Shares 0.25 May 21, 1992
AIM International Equity Fund B Shares 0.25 September 15, 1994
AIM International Equity Fund C Shares 1.00** August 4, 1997
AIM Large Cap Growth Fund A Shares 0.25 March 1, 1999
AIM Large Cap Growth Fund B Shares 0.25 March 1, 1999
AIM Large Cap Growth Fund C Shares 1.00** March 1, 1999
AIM Limited Maturity Treasury Fund 0.15 December 2, 1987
AIM Money Market Fund B Shares 0.25 October 18, 1993
AIM Money Market Fund C Shares 1.00** August 4, 1997
AIM Money Market Fund Cash Reserve Shares 0.25 October 18, 1993
AIM Municipal Bond Fund A Shares 0.25 July 1, 1992
AIM Municipal Bond Fund B Shares 0.25 September 1, 1993
AIM Municipal Bond Fund C Shares 1.00** August 4, 1997
AIM Select Growth Fund A Shares 0.25 July 1, 1992
AIM Select Growth Fund B Shares 0.25 September 1,1993
AIM Select Growth Fund C Shares 1.00** August 4, 1997
AIM Small Cap Opportunities Fund A Shares 0.25 June 29, 1998
AIM Small Cap Opportunities Fund B Shares 0.25 July 13, 1998
AIM Small Cap Opportunities Fund C Shares 1.00** December 30, 1998
AIM Tax-Exempt Bond Fund of Connecticut A Shares 0.25 July 1, 1992
AIM Tax-Exempt Cash Fund A Shares 0.10 July 1, 1992
AIM Value Fund A Shares 0.25 July 1, 1992
AIM Value Fund B Shares 0.25 October 18, 1993
AIM Value Fund C Shares 1.00** August 4, 1997
AIM Weingarten Fund A Shares 0.25 September 9, 1986
AIM Weingarten Fund B Shares 0.25 June 15, 1995
AIM Weingarten Fund C Shares 1.00** August 4, 1997
</TABLE>
3/99
<PAGE> 6
*Frequency of Payments: Quarterly, B and C share payments begin after an initial
12 month holding period. Where the broker dealer or financial institution waives
the 1% up-front commission on Class C shares, payments commence immediately.
**Of this amount, 0.25% is paid as a shareholder servicing fee and the remainder
is paid as an asset-based sales charge, as those terms are defined under the
rules of the National Association of Securities Dealers, Inc.
Minimum Payments: $50 (with respect to all funds in the aggregate.)
No payment pursuant to this Schedule is payable to a dealer, bank or other
service provider for the first year with respect to sales of $1 million or more,
at no load, in cases where A I M Distributors, Inc. has advanced the service fee
to the dealer, bank or other service provider.
THE FOLLOWING FUNDS ARE ADDED AS OF THE CLOSE OF BUSINESS MAY 29, 1998:
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Basic Value Fund A Shares 0.25 May 29, 1998
AIM Basic Value Fund B Shares 0.25 May 29, 1998
AIM Basic Value Fund C Shares 1.00** May 3, 1999
AIM Developing Markets Fund A Shares 0.25 May 29, 1998
AIM Developing Markets Fund B Shares 0.25 May 29, 1998
AIM Developing Markets Fund C Shares 1.00** March 1, 1999
AIM Europe Growth Fund A Shares 0.25 May 29, 1998
AIM Europe Growth Fund B Shares 0.25 May 29, 1998
AIM Europe Growth Fund C Shares 1.00** May 3, 1999
AIM Global Consumer Products and
Services Fund A Shares 0.40** May 29, 1998
AIM Global Consumer Products and
Services Fund B Shares 0.25 May 29, 1998
AIM Global Consumer Products and
Services Fund C Shares 1.00** March 1, 1999
AIM Global Financial Services Fund A Shares 0.40** May 29, 1998
AIM Global Financial Services Fund B Shares 0.25 May 29, 1998
AIM Global Financial Services Fund C Shares 1.00** March 1, 1999
AIM Global Government Income Fund A Shares 0.25 May 29, 1998
AIM Global Government Income Fund B Shares 0.25 May 29, 1998
AIM Global Government Income Fund C Shares 1.00** March 1, 1999
AIM Global Growth & Income Fund A Shares 0.25 May 29, 1998
AIM Global Growth & Income Fund B Shares 0.25 May 29, 1998
AIM Global Growth & Income Fund C Shares 1.00** March 1, 1999
AIM Global Health Care Fund A Shares 0.40** May 29, 1998
AIM Global Health Care Fund B Shares 0.25 May 29, 1998
AIM Global Health Care Fund C Shares 1.00** March 1, 1999
AIM Emerging Markets Debt Fund A Shares 0.25 May 29, 1998
AIM Emerging Markets Debt Fund B Shares 0.25 May 29, 1998
AIM Emerging Markets Debt Fund C Shares 1.00** March 1, 1999
AIM Global Infrastructure Fund A Shares 0.40** May 29, 1998
AIM Global Infrastructure Fund B Shares 0.25 May 29, 1998
AIM Global Infrastructure Fund C Shares 1.00** March 1, 1999
AIM Global Resources Fund A Shares O.40** May 29, 1998
AIM Global Resources Fund B Shares O.25 May 29, 1998
AIM Global Resources Fund C Shares 1.00** March 1, 1999
AIM Global Telecommunications Fund A Shares 0.40** May 29, 1998
AIM Global Telecommunications Fund B Shares 0.25 May 29, 1998
AIM Global Telecommunications Fund C Shares 1.00** March 1, 1999
</TABLE>
3/99
<PAGE> 7
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Japan Growth Fund A Shares 0.25 May 29, 1998
AIM Japan Growth Fund B Shares 0.25 May 29, 1998
AIM Japan Growth Fund C Shares 1.00** March 1, 1999
AIM Latin American Growth Fund A Shares 0.40** May 29, 1998
AIM Latin American Growth Fund B Shares 0.25 May 29, 1998
AIM Latin American Growth Fund C Shares 1.00** May 3, 1999
AIM Mid Cap Equity Fund A Shares 0.25 May 29, 1998
AIM Mid Cap Equity Fund B Shares 0.25 May 29, 1998
AIM Mid Cap Equity Fund C Shares 1.00** May 3, 1999
AIM Global Trends Fund A Shares 0.40** May 29, 1998
AIM Global Trends Fund B Shares 0.25 May 29, 1998
AIM Global Trends Fund C Shares 1.00** May 29, 1998
AIM New Pacific Growth Fund A Shares 0.25 May 29, 1998
AIM New Pacific Growth Fund B Shares 0.25 May 29, 1998
AIM New Pacific Growth Fund C Shares 1.00** May 3, 1999
AIM Small Cap Growth Fund A Shares 0.25 May 29, 1998
AIM Small Cap Growth Fund B Shares 0.25 May 29, 1998
AIM Small Cap Growth Fund C Shares 1.00** May 3, 1999
AIM Strategic Income Fund A Shares 0.25 May 29, 1998
AIM Strategic Income Fund B Shares 0.25 May 29, 1998
AIM Strategic Income Fund C Shares 1.00** March 1, 1999
</TABLE>
*Frequency of Payments:
EFFECTIVE UNTIL JUNE 30, 1998: Class A and B share payments commence immediately
and are paid quarterly. Class C share payments commence after an initial twelve
month holding period and are paid quarterly.
**Of this amount, 0.25% is paid as a shareholder servicing fee and the remainder
is paid as an asset-based sales charge, as those terms are defined under the
rules of the National Association of Securities Dealers, Inc.
EFFECTIVE JULY 1, 1998: B share payments, like C share payments, will begin
after an initial 12 month holding period and are paid quarterly. Where the
broker dealer or financial institution waives the 1% up-front commission on
Class C shares, payments commence immediately.
**Of this amount, 0.25% is paid as a shareholder servicing fee and the remainder
is paid as an asset-based sales charge, as those terms are defined under the
rules of the National Association of Securities Dealers, Inc.
Minimum Payments: $50 (with respect to all funds in the aggregate.)
No payment pursuant to this Schedule is payable to a dealer, bank or other
service provider for the first year with respect to sales of $1 million or more,
at no load, in cases where A I M Distributors, Inc. has advanced the service fee
to the dealer, bank or other service provider.
3/99
<PAGE> 1
EXHIBIT m(3)(ii)
[LOGO ONLY]
A I M DISTRIBUTORS, INC.
BANK SHAREHOLDER
SERVICE AGREEMENT
We desire to enter into an Agreement with A I M Distributors, Inc. (the
"Company") acting as agent for the "AIM Funds", for servicing of our agency
clients who are shareholders of, and the administration of such shareholder
accounts in the shares of the AIM Funds (hereinafter referred to as the
"Shares"). Subject to the Company's acceptance of this Agreement, the terms and
conditions of this Agreement shall be as follows:
1. We shall provide continuing personal shareholder and administration
services for holders of the Shares who are also our clients. Such
services to our clients may include, without limitation, some or all of
the following: answering shareholder inquires regarding the Shares and
the AIM Funds; performing subaccounting; establishing and maintaining
shareholder accounts and records; processing and bunching 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 us; forwarding applicable AIM
Funds prospectuses, proxy statements, reports and notices to our
clients who are holders of Shares; and such other administrative
services as you reasonably may request, to the extent we are permitted
by applicable statute, rule or regulations to provide such services. We
represent that we shall accept fees hereunder only so long as we
continue to provide personal shareholder services to our clients.
2. Shares purchased by us as agents for our clients will be registered
(choose one) (in our name or in the name of our nominee) (in the names
of our clients). The client will be the beneficial owner of the Shares
purchased and held by us in accordance with the client's instructions
and the client may exercise all applicable rights of a holder of such
Shares. We agree to transmit to the AIM Funds' transfer agent in a
timely manner, all purchase orders and redemption requests of our
clients and to forward to each client any proxy statements, periodic
shareholder reports and other communications received from the Company
by us on behalf of our clients. The Company agrees to pay all
out-of-pocket expenses actually incurred by us in connection with the
transfer by us of such proxy statements and reports to our clients as
required by applicable law or regulation. We agree to transfer record
ownership of a client's Shares to the client promptly upon the request
of a client. In addition, record ownership will be promptly transferred
to the client in the event that the person or entity ceases to be our
client.
3. Within three (3) business days of placing a purchase order we agree to
send (i) a cashiers check to the Company, or (ii) a wire transfer to
the AIM Funds' transfer agent, in an amount equal to the amount of all
purchase orders placed by us on behalf of our clients and accepted by
the Company.
4. We agree to make available to the Company, upon the Company's request,
such information relating to our clients who are beneficial owners of
Shares and their transactions in such Shares as may be required by
applicable laws and regulations or as may be reasonably requested by
the
3/99
<PAGE> 2
Bank Shareholder Service Agreement Page 2
Company. The names of our customers shall remain our sole property and
shall not be used by the Company for any other purpose except as needed
for servicing and information mailings in the normal course of business
to holders of the Shares.
5. We shall provide such facilities and personnel (which may be all or any
part of the facilities currently used in our business, or all or any
personnel employed by us) as may be necessary or beneficial in carrying
out the purposes of this Agreement.
6. Except as may be provided in a separate written agreement between the
Company and us, neither we nor any of our employees or agents are
authorized to assist in distribution of any of the AIM Funds' shares
except those contained in the then current Prospectus applicable to the
Shares; and we shall have no authority to act as agent for the Company
or the AIM Funds. Neither the AIM Funds, A I M Advisors, Inc. nor A I M
Distributors, Inc. will be a party, nor will they be represented as a
party, to any agreement that we may enter into with our clients.
7. In consideration of the services and facilities described herein, we
shall receive from the Company on behalf of the AIM Funds an annual
service fee, payable at such intervals as may be set forth in Schedule
A hereto, of a percentage of the aggregate average net asset value of
the Shares owned beneficially by our clients during each payment
period, as set forth in Schedule A hereto, which may be amended from
time to time by the Company. We understand that this Agreement and the
payment of such service fees has been authorized and approved by the
Boards of Directors/Trustees of the AIM Funds, and is subject to
limitations imposed by the National Association of Securities Dealers,
Inc. In cases where the Company has advanced payments to us of the
first year's fee for shares sold with a contingent deferred sales
charge, no payments will be made to us during the first year the
subject Shares are held.
8. The AIM Funds reserve the right, at their discretion and without
notice, to suspend the sale of any Shares or withdraw the sale of
Shares.
9. We understand that the Company reserves the right to amend this
Agreement or Schedule A hereto at any time without our consent by
mailing a copy of an amendment to us at the address set forth below.
Such amendment shall become effective on the date specified in such
amendment unless we elect to terminate this Agreement within thirty
(30) days of our receipt of such amendment.
10. This Agreement may be terminated at any time by the Company on not less
than 15 days' written notice to us at our principal place of business.
We, on 15 days' written notice addressed to the Company at its
principal place of business, may terminate this Agreement, said
termination to become effective on the date of mailing notice to
Company of such termination. The Company's failure to terminate for any
cause shall not constitute a waiver of the Company's right to terminate
at a later date for any such cause. This Agreement shall terminate
automatically in the event of its assignment, the term "assignment" for
this purpose having the meaning defined in Section 2(a)(4) of the
Investment Company Act of 1940, as amended.
3/99
<PAGE> 3
Bank Shareholder Service Agreement Page 3
11. All communications to the Company shall be sent to it at Eleven
Greenway Plaza, Suite 100, Houston, Texas, 77046-1173. Any notice to us
shall be duly given if mailed or telegraphed to us at this address
shown on this Agreement.
12. This Agreement shall become effective as of the date when it is
executed and dated below by the Company. This Agreement and all rights
and obligations of the parties hereunder shall be governed by and
construed under the laws of the State of Texas.
A I M DISTRIBUTORS, INC.
Date: By: X
-------------------- ----------------------------------------------
The undersigned agrees to abide by the foregoing terms and conditions.
Date: By: X
-------------------- ----------------------------------------------
Signature
----------------------------------------------
Print Name Title
----------------------------------------------
Dealer's Name
----------------------------------------------
Address
----------------------------------------------
City State Zip
Please sign both copies and return one copy of each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
3/99
<PAGE> 4
Bank Shareholder Service Agreement Page 4
SCHEDULE "A" TO
SHAREHOLDER SERVICE AGREEMENT
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Advisor Flex Fund A Shares 0.25 August 4, 1997
AIM Advisor Flex Fund B Shares 0.25 March 3, 1998
AIM Advisor Flex Fund C Shares 1.00** August 4, 1997
AIM Advisor International Value Fund A Shares 0.25 August 4, 1997
AIM Advisor International Value Fund B Shares 0.25 March 3, 1998
AIM Advisor International Value Fund C Shares 1.00** August 4, 1997
AIM Advisor Large Cap Value Fund A Shares 0.25 August 4, 1997
AIM Advisor Large Cap Value Fund B Shares 0.25 March 3, 1998
AIM Advisor Large Cap Value Fund C Shares 1.00** August 4, 1997
AIM Advisor MultiFlex Fund A Shares 0.25 August 4, 1997
AIM Advisor MultiFlex Fund B Shares 0.25 March 3, 1998
AIM Advisor MultiFlex Fund C Shares 1.00** August 4, 1997
AIM Advisor Real Estate Fund A Shares 0.25 August 4, 1997
AIM Advisor Real Estate Fund B Shares 0.25 March 3, 1998
AIM Advisor Real Estate Fund C Shares 1.00** August 4, 1997
AIM Aggressive Growth Fund A Shares 0.25 July 1, 1992
AIM Aggressive Growth Fund B Shares 0.25 March 1, 1999
AIM Aggressive Growth Fund C Shares 1.00** March 1, 1999
AIM Asian Growth Fund A Shares 0.25 November 1, 1997
AIM Asian Growth Fund B Shares 0.25 November 1, 1997
AIM Asian Growth Fund C Shares 1.00** November 1, 1997
AIM Balanced Fund A Shares 0.25 October 18, 1993
AIM Balanced Fund B Shares 0.25 October 18, 1993
AIM Balanced Fund C Shares 1.00** August 4, 1997
AIM Blue Chip Fund A Shares 0.25 June 3, 1996
AIM Blue Chip Fund B Shares 0.25 October 1, 1996
AIM Blue Chip Fund C Shares 1.00** August 4, 1997
AIM Capital Development Fund A Shares 0.25 June 17, 1996
AIM Capital Development Fund B Shares 0.25 October 1, 1996
AIM Capital Development Fund C Shares 1.00** August 4, 1997
AIM Charter Fund A Shares 0.25 November 18, 1986
AIM Charter Fund B Shares 0.25 June 15, 1995
AIM Charter Fund C Shares 1.00** August 4, 1997
AIM Constellation Fund A Shares 0.25 September 9, 1986
AIM Constellation Fund B Shares 0.25 November 3, 1997
AIM Constellation Fund C Shares 1.00** August 4, 1997
AIM European Development Fund A Shares 0.25 November 1, 1997
AIM European Development Fund B Shares 0.25 November 1, 1997
AIM European Development Fund C Shares 1.00** November 1, 1997
AIM Global Aggressive Growth Fund A Shares 0.50** September 15, 1994
AIM Global Aggressive Growth Fund B Shares 0.25 September 15, 1994
</TABLE>
3/99
<PAGE> 5
Bank Shareholder Service Agreement Page 5
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Global Aggressive Growth Fund C Shares 1.00** August 4, 1997
AIM Global Growth Fund A Shares 0.50 September 15, 1994
AIM Global Growth Fund B Shares 0.25 September 15, 1994
AIM Global Growth Fund C Shares 1.00** August 4, 1997
AIM Global Income Fund A Shares 0.50 September 15, 1994
AIM Global Income Fund B Shares 0.25 September 15, 1994
AIM Global Income Fund C Shares 1.00** August 4, 1997
AIM Global Utilities Fund A Shares 0.25 July 1, 1992
AIM Global Utilities Fund B Shares 0.25 September 1, 1993
AIM Global Utilities Fund C Shares 1.00** August 4, 1997
AIM High Income Municipal Fund A Shares 0.25 December 22, 1997
AIM High Income Municipal Fund B Shares 0.25 December 22, 1997
AIM High Income Municipal Fund C Shares 1.00** December 22, 1997
AIM High Yield Fund A Shares 0.25 July 1, 1992
AIM High Yield Fund B Shares 0.25 September 1, 1993
AIM High Yield Fund C Shares 1.00** August 4, 1997
AIM High Yield Fund II A Shares 0.25 October 1, 1998
AIM High Yield Fund II B Shares 0.25 November 20, 1998
AIM High Yield Fund II C Shares 1.00** November 20, 1998
AIM Income Fund A Shares 0.25 July 1, 1992
AIM Income Fund B Shares 0.25 September 1, 1993
AIM Income Fund C Shares 1.00** August 4, 1997
AIM Intermediate Government Fund A Shares 0.25 July 1, 1992
AIM Intermediate Government Fund B Shares 0.25 September 1, 1993
AIM Intermediate Government Fund C Shares 1.00** August 4, 1997
AIM International Equity Fund A Shares 0.25 May 21, 1992
AIM International Equity Fund B Shares 0.25 September 15, 1994
AIM International Equity Fund C Shares 1.00** August 4, 1997
AIM Large Cap Growth Fund A Shares 0.25 March 1, 1999
AIM Large Cap Growth Fund B Shares 0.25 March 1, 1999
AIM Large Cap Growth Fund C Shares 1.00** March 1, 1999
AIM Limited Maturity Treasury Fund 0.15 December 2, 1987
AIM Money Market Fund B Shares 0.25 October 18, 1993
AIM Money Market Fund C Shares 1.00** August 4, 1997
AIM Money Market Fund Cash Reserve Shares 0.25 October 18, 1993
AIM Municipal Bond Fund A Shares 0.25 July 1, 1992
AIM Municipal Bond Fund B Shares 0.25 September 1, 1993
AIM Municipal Bond Fund C Shares 1.00** August 4, 1997
AIM Select Growth Fund A Shares 0.25 July 1, 1992
AIM Select Growth Fund B Shares 0.25 September 1,1993
AIM Select Growth Fund C Shares 1.00** August 4, 1997
AIM Small Cap Opportunities Fund A Shares 0.25 June 29, 1998
AIM Small Cap Opportunities Fund B Shares 0.25 July 13, 1998
AIM Small Cap Opportunities Fund C Shares 1.00** December 30, 1998
</TABLE>
3/99
<PAGE> 6
Bank Shareholder Service Agreement Page 6
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Tax-Exempt Bond Fund of Connecticut A Shares 0.25 July 1, 1992
AIM Tax-Exempt Cash Fund A Shares 0.10 July 1, 1992
AIM Value Fund A Shares 0.25 July 1, 1992
AIM Value Fund B Shares 0.25 October 18, 1993
AIM Value Fund C Shares 1.00** August 4, 1997
AIM Weingarten Fund A Shares 0.25 September 9, 1986
AIM Weingarten Fund B Shares 0.25 June 15, 1995
AIM Weingarten Fund C Shares 1.00** August 4, 1997
</TABLE>
*Frequency of Payments: Quarterly, B and C share payments begin after an initial
12 month holding period. Where the broker dealer or financial institution waives
the 1% up-front commission on Class C shares, payments commence immediately.
**Of this amount, 0.25% is paid as a shareholder servicing fee and the remainder
is paid as an asset-based sales charge, as those terms are defined under the
rules of the National Association of Securities Dealers, Inc.
Minimum Payments: $50 (with respect to all funds in the aggregate.)
No payment pursuant to this Schedule is payable to a dealer, bank or other
service provider for the first year with respect to sales of $1 million or more,
at no load, in cases where A I M Distributors, Inc. has advanced the service fee
to the dealer, bank or other service provider.
THE FOLLOWING FUNDS ARE ADDED AS OF THE CLOSE OF BUSINESS MAY 29, 1998:
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Basic Value Fund A Shares 0.25 May 29, 1998
AIM Basic Value Fund B Shares 0.25 May 29, 1998
AIM Basic Value Fund C Shares 1.00** May 3, 1999
AIM Developing Markets Fund A Shares 0.25 May 29, 1998
AIM Developing Markets Fund B Shares 0.25 May 29, 1998
AIM Developing Markets Fund C Shares 1.00** March 3, 1999
AIM Europe Growth Fund A Shares 0.25 May 29, 1998
AIM Europe Growth Fund B Shares 0.25 May 29, 1998
AIM Europe Growth Fund C Shares 1.00** May 3, 1999
AIM Global Consumer Products and
Services Fund A Shares 0.40** May 29, 1998
AIM Global Consumer Products and
Services Fund B Shares 0.25 May 29, 1998
AIM Global Consumer Products and
Services Fund C Shares 1.00** March 1, 1999
</TABLE>
3/99
<PAGE> 7
Bank Shareholder Service Agreement Page 7
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Global Financial Services Fund A Shares 0.40** May 29, 1998
AIM Global Financial Services Fund B Shares 0.25 May 29, 1998
AIM Global Financial Services Fund C Shares 1.00** March 1, 1999
AIM Global Government Income Fund A Shares 0.25 May 29, 1998
AIM Global Government Income Fund B Shares 0.25 May 29, 1998
AIM Global Government Income Fund C Shares 1.00** March 1, 1999
AIM Global Growth & Income Fund A Shares 0.25 May 29, 1998
AIM Global Growth & Income Fund B Shares 0.25 May 29, 1998
AIM Global Growth & Income Fund C Shares 1.00** March 1, 1999
AIM Global Health Care Fund A Shares 0.40** May 29, 1998
AIM Global Health Care Fund B Shares 0.25 May 29, 1998
AIM Global Health Care Fund C Shares 1.00** March 1, 1999
AIM Emerging Markets Debt Fund A Shares 0.25 May 29, 1998
AIM Emerging Markets Debt Fund B Shares 0.25 May 29, 1998
AIM Emerging Markets Debt Fund C Shares 1.00** March 1, 1999
AIM Global Infrastructure Fund A Shares 0.40** May 29, 1998
AIM Global Infrastructure Fund B Shares 0.25 May 29, 1998
AIM Global Infrastructure Fund C Shares 1.00** March 1, 1999
AIM Global Resources Fund A Shares 0.40** May 29, 1998
AIM Global Resources Fund B Shares 0.25 May 29, 1998
AIM Global Resources Fund C Shares 1.00** March 1, 1999
AIM Global Telecommunications Fund A Shares 0.40** May 29, 1998
AIM Global Telecommunications Fund B Shares 0.25 May 29, 1998
AIM Global Telecommunications Fund C Shares 1.00** March 1, 1999
AIM Japan Growth Fund A Shares 0.25 May 29, 1998
AIM Japan Growth Fund B Shares 0.25 May 29, 1998
AIM Japan Growth Fund C Shares 1.00** May 3, 1999
AIM Latin American Growth Fund A Shares 0.40** May 29, 1998
AIM Latin American Growth Fund B Shares 0.25 May 29, 1998
AIM Latin American Growth Fund C Shares 1.00** March 1, 1999
AIM Mid Cap Equity Fund A Shares 0.25 May 29, 1998
AIM Mid Cap Equity Fund B Shares 0.25 May 29, 1998
AIM Mid Cap Equity Fund C Shares 1.00** May 3, 1999
AIM Global Trends Fund A Shares 0.40** May 29, 1998
AIM Global Trends Fund B Shares 0.25 May 29, 1998
AIM Global Trends Fund C Shares 1.00** May 29, 1998
AIM New Pacific Growth Fund A Shares 0.25 May 29, 1998
AIM New Pacific Growth Fund B Shares 0.25 May 29, 1998
AIM New Pacific Growth Fund C Shares 1.00** May 3, 1999
AIM Small Cap Growth Fund A Shares 0.25 May 29, 1998
AIM Small Cap Growth Fund B Shares 0.25 May 29, 1998
AIM Small Cap Growth Fund C Shares 1.00** May 3, 1999
AIM Strategic Income Fund A Shares 0.25 May 29, 1998
AIM Strategic Income Fund B Shares 0.25 May 29, 1998
AIM Strategic Income Fund C Shares 1.00** March 1, 1999
</TABLE>
*Frequency of Payments:
3/99
<PAGE> 8
Bank Shareholder Service Agreement Page 8
EFFECTIVE UNTIL JUNE 30, 1998: Class A and B share payments commence immediately
and are paid quarterly. Class C share payments commence after an initial twelve
month holding period and are paid quarterly.
**Of this amount, 0.25% is paid as a shareholder servicing fee and the remainder
is paid as an asset-based sales charge, as those terms are defined under the
rules of the National Association of Securities Dealers, Inc.
EFFECTIVE JULY 1, 1998: B share payments, like C share payments, will begin
after an initial 12 month holding period and are paid quarterly. Where the
broker dealer or financial institution waives the 1% up-front commission on
Class C shares, payments commence immediately.
** Of this amount, 0.25% is paid as a shareholder servicing fee and the
remainder is paid as an asset-backed sales charge, as those terms are defined
under the rules of the National Association of Securities Dealers, Inc.
Minimum Payments: $50 (with respect to all funds in the aggregate.)
No payment pursuant to this Schedule is payable to a dealer, bank or other
service provider for the first year with respect to sales of $1 million or more,
at no load, in cases where A I M Distributors, Inc. has advanced the service fee
to the dealer, bank or other service provider.
3/99
<PAGE> 1
EXHIBIT m(3)(iii)
[LOGO ONLY]
A I M DISTRIBUTORS, INC.
A I M DISTRIBUTORS, INC.
SHAREHOLDER SERVICE AGREEMENT
(BANK TRUST DEPARTMENTS)
____________, 19__
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with A I M Distributors, Inc. ("AIM
Distributors") as agent on behalf of the funds listed on Schedule A hereto (the
"Funds"), for the servicing of our clients who are shareholders of, and the
administration of accounts in, the Funds. We understand that this Shareholder
Service Agreement (the "Agreement") has been adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act") by each of the Funds,
under a Distribution Plan (the "Plan") adopted pursuant to said Rule, and is
subject to applicable rules of the National Association of Securities Dealers,
Inc. ("NASD"). This Agreement defines the services to be provided by us for
which we are to receive payments pursuant to the Plan. The Plan and the
Agreement have been approved by a majority of the directors or trustees of the
applicable Fund, including a majority of directors or trustees who are not
interested persons of the applicable Fund, and who have no direct or indirect
financial interest in the operation of the Plan or related agreements, by votes
cast in person at a meeting called for the purpose of voting on the Plan. Such
approval included a determination by the directors or trustees of the applicable
Fund, in the exercise of their reasonable business judgement and in light of
their fiduciary duties, that there is a reasonable likelihood that the Plan will
benefit the Fund and the holders of its Shares. The terms and conditions of this
Agreement shall be as follows:
1. To the extent that we provide continuing personal shareholder services
and administrative support services to our customers who may from time
to time own shares of the Funds of record or beneficially, including
but not limited to, forwarding sales literature, answering routine
customer inquiries regarding the Funds, assisting customers in changing
dividend options, account designations and addresses, and in enrolling
into any of several special investment plans offered in connection with
the purchase of the Funds' shares, assisting in the establishment and
maintenance of customer accounts and records and in the processing of
purchase and redemption transactions, investing dividends and capital
gains distributions automatically in shares of the Funds and providing
such other services as AIM Distributors or the customer may reasonably
request, you shall pay us a fee periodically. We represent that we
shall accept fees hereunder only so long as we continue to provide such
personal shareholder services.
2. We agree to transmit to AIM Distributors in a timely manner, all
purchase orders and redemption requests of our clients and to forward
to each client all proxy statements, periodic shareholder reports and
other communications received from AIM Distributors by us relating
<PAGE> 2
Shareholder Service Agreement Page 2
(Bank Trust Departments)
to shares of the Funds owned by our clients. AIM Distributors, on behalf
of the Funds, agrees to pay all out-of-pocket expenses actually incurred
by us in connection with the transfer by us of such proxy statements and
reports to our clients as required under applicable laws or regulations.
3. We agree to make available upon AIM Distributors's request, such
information relating to our clients who are beneficial owners of Fund
shares and their transactions in such shares as may be required by
applicable laws and regulations or as may be reasonably requested by AIM
Distributors.
4. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record
ownership will be promptly transferred to the client in the event that
the person or entity ceases to be our client.
5. Neither we nor any of our employees or agents are authorized to make
any representation to our clients concerning the Funds except those
contained in the then current prospectuses applicable to the Funds,
copies of which will be supplied to us by AIM Distributors; and we
shall have no authority to act as agent for any Fund or AIM
Distributors. Neither a Fund, nor A I M Advisors, Inc. ("AIM") will be
a party, nor will they be represented as a party, to any agreement that
we may enter into with our clients and neither a Fund nor AIM shall
participate, directly or indirectly, in any compensation that we may
receive from our clients in connection with our acting on their behalf
with respect to this Agreement.
6. In consideration of the services and facilities described herein, we
shall receive a maximum annual service fee and asset-based sales charge,
payable monthly, as set forth on Schedule A hereto. We understand that
this Agreement and the payment of such service fees and asset-based
sales charge has been authorized and approved by the Board of Directors
or Trustees of the applicable Fund, and that the payment of fees
thereunder is subject to limitations imposed by the rules of the NASD.
7. AIM Distributors reserves the right, in its discretion and without
notice, to suspend the sale of any Fund or withdraw the sale of shares
of a Fund, or upon notice to us, to amend this Agreement. We agree that
any order to purchase shares of the Funds placed by us after notice of
any amendment to this Agreement has been sent to us shall constitute our
agreement to any such amendment.
8. All communications to AIM Distributors shall be duly given if mailed to
A I M Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173. Any notice to us shall be duly given if mailed to us at the
address specified by us in this Agreement or to such other address as we
shall have designated in writing to AIM Distributors.
9. This Agreement may be terminated at any time by AIM Distributors on not
less than 60 days' written notice to us at our principal place of
business. We, on 60 days' written notice addressed to AIM Distributors
at its principal place of business, may terminate this Agreement. AIM
Distributors may also terminate this Agreement for cause on violation by
us of any of the provisions of this Agreement, said termination to
become effective on the date of mailing notice to us of such
termination. AIM Distributors's failure to terminate for any cause shall
not constitute a waiver of AIM Distributors's right to terminate at a
later date for
<PAGE> 3
Shareholder Service Agreement Page 3
(Bank Trust Departments)
any such cause. This Agreement may be terminated with respect to any
Fund at any time by the vote of a majority of the directors or trustees
of such Fund who are disinterested directors or by a vote of a majority
of the Fund's outstanding shares, on not less than 60 days' written
notice to us at our principal place of business. This Agreement will be
terminated by any act which terminates the Agreement for Purchase of
Shares of The AIM Family of Funds--Registered Trademark-- between us and
AIM Distributors or a Fund's Distribution Plan, and in any event, it
shall terminate automatically in the event of its assignment by us, the
term "assignment" for this purpose having the meaning defined in Section
2(a)(4) of the 1940 Act.
10. We represent that our activities on behalf of our clients and pursuant
to this Agreement either (i) are not such as to require our registration
as a broker-dealer in the state(s) in which we engage in such
activities, or (ii) we are registered as a broker-dealer in the state(s)
in which we engage in such activities. We represent that we are
registered as a broker-dealer with the NASD if required under applicable
law.
11. This Agreement and the Agreement for Purchase of Shares of The AIM
Family of Funds--Registered Trademark-- through Bank Trust Departments
constitute the entire agreement between us and AIM Distributors and
supersede all prior oral or written agreements between the parties
hereto. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which shall constitute the same
instrument.
12. This Agreement and all rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of Texas.
13. This Agreement shall become effective as of the date when it is executed
and dated by AIM Distributors.
<PAGE> 4
Shareholder Service Agreement Page 4
(Bank Trust Departments)
The undersigned agrees to abide by the foregoing terms and conditions.
-----------------------------------
(Firm Name)
-----------------------------------
(Address)
-----------------------------------
City/State/Zip/County
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated:
-----------------------------
ACCEPTED:
A I M DISTRIBUTORS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated:
-----------------------------
Please sign both copies and return to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
<PAGE> 5
Shareholder Service Agreement Page 5
(Bank Trust Departments)
SCHEDULE A
<TABLE>
<CAPTION>
Funds Fees
----- ----
<S> <C> <C>
AIM Advisor Funds, Inc.
AIM Advisor Flex Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Equity Funds, Inc.
AIM Aggressive Growth Fund
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund (Retail Class)
AIM Constellation Fund (Retail Class)
AIM Large Cap Growth Fund
AIM Weingarten Fund (Retail Class)
AIM Funds Group
AIM Balanced Fund
AIM Global Utilities Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Select Growth Fund
AIM Value Fund
AIM Growth Series
AIM Basic Value Fund
AIM Europe Growth Fund
AIM Japan Growth Fund
AIM Mid Cap Equity Fund
AIM New Pacific Growth Fund
AIM Small Cap Growth Fund
AIM International Funds, Inc.
AIM Asian Growth Fund
AIM European Development Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Global Income Fund
AIM International Equity Fund
</TABLE>
<PAGE> 6
Shareholder Service Agreement Page 6
(Bank Trust Departments)
<TABLE>
<S> <C>
AIM Investment Funds
AIM Developing Markets Fund
AIM Emerging Markets Debt 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 Latin American Growth Fund
AIM Strategic Income Fund
AIM Investment Securities Funds
AIM Limited Maturity Treasury Fund
AIM High Yield Fund II
AIM Series Trust
AIM Global Trends Fund
AIM Special Opportunities Funds
AIM Small Cap Opportunities Fund
AIM Tax-Exempt Funds, Inc.
AIM High Income Municipal Fund
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
</TABLE>
<PAGE> 7
[LOGO ONLY]
A I M Distributors, Inc.
A I M DISTRIBUTORS, INC.
SHAREHOLDER SERVICE AGREEMENT
(BROKERS FOR BANK TRUST DEPARTMENTS)
__________________ , 19__
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with A I M Distributors, Inc.
("AIM Distributors") as agent on behalf of the funds listed on Schedule A
hereto, which may be amended from time to time by AIM Distributors (the
"Funds"), for the servicing of our clients who are shareholders of, and the
administration of accounts in, the Funds. We understand that this Shareholder
Service Agreement (the "Agreement") has been adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act") by each of the Funds,
under a Distribution Plan (the "Plan") adopted pursuant to said Rule, and is
subject to applicable rules of the National Association of Securities Dealers,
Inc. ("NASD"). This Agreement defines the services to be provided by us for
which we are to receive payments pursuant to the Plan. The Plan and the
Agreement have been approved by a majority of the directors or trustees of the
applicable Fund, including a majority of directors or trustees who are not
interested persons of the applicable Fund, and who have no direct or indirect
financial interest in the operation of the Plan or related agreements, by votes
cast in person at a meeting called for the purpose of voting on the Plan. Such
approval included a determination by the directors or trustees of the
applicable Fund, in the exercise of their reasonable business judgement and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Plan will benefit the Fund and the holders of its Shares. The terms and
conditions of this Agreement shall be as follows:
1. To the extent that we provide continuing personal shareholder services
and administrative support services to our customers who may from
time to time own shares of the Funds of record or beneficially,
including but not limited to, forwarding sales literature, answering
routine customer inquiries regarding the Funds, assisting customers
in changing dividend options, account designations and addresses, and
in enrolling into any of several special investment plans offered in
connection with the purchase of the Funds' shares, assisting in the
establishment and maintenance of customer accounts and records and in
the processing of purchase and redemption transactions, investing
dividends and capital gains distributions automatically in shares of
the Funds and providing such other services as AIM Distributors or
the customer may reasonably request, you shall pay us a fee
periodically. We represent that we shall accept fees hereunder only
so long as we continue to provide such personal shareholder services.
2. We agree to transmit to AIM Distributors in a timely manner, all
purchase orders and redemption requests of our clients and to forward
to each client all proxy statements, periodic
<PAGE> 8
Shareholder Service Agreement Page 2
(Brokers for Bank Trust Departments)
shareholder reports and other communications received from AIM
Distributors by us relating to shares of the Funds owned by our
clients. AIM Distributors, on behalf of the Funds, agrees to pay all
out-of-pocket expenses actually incurred by us in connection with the
transfer by us of such proxy statements and reports to our clients as
required under applicable laws or regulations.
3. We agree to transfer to AIM Distributors in a timely manner as set
forth in the applicable prospectus, federal funds in an amount equal
to the amount of all purchase orders placed by us and accepted by AIM
Distributors. In the event that AIM Distributors fails to receive such
federal funds on such date (other than through the fault of AIM
Distributors), we shall indemnify the applicable Fund and AIM
Distributors against any expense (including overdraft charges)
incurred by the applicable Fund and/or AIM Distributors as a result of
the failure to receive such federal funds.
4. We agree to make available upon AIM Distributors's request, such
information relating to our clients who are beneficial owners of Fund
shares and their transactions in such shares as may be required by
applicable laws and regulations or as may be reasonably requested by
AIM Distributors.
5. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record
ownership will be promptly transferred to the client in the event that
the person or entity ceases to be our client.
6. Neither we nor any of our employees or agents are authorized to make
any representation to our clients concerning the Funds except those
contained in the then current prospectuses applicable to the Funds,
copies of which will be supplied to us by AIM Distributors; and we
shall have no authority to act as agent for any Fund or AIM
Distributors. Neither a Fund, nor A I M Advisors, Inc. ("AIM") will
be a party, nor will they be represented as a party, to any agreement
that we may enter into with our clients and neither a Fund nor AIM
shall participate, directly or indirectly, in any compensation that
we may receive from our clients in connection with our acting on
their behalf with respect to this Agreement.
7. In consideration of the services and facilities described herein, we
shall receive a maximum annual service fee and asset-based sales
charge, payable monthly, as set forth on Schedule A hereto. We
understand that this Agreement and the payment of such service fees
and asset-based sales charge has been authorized and approved by the
Board of Directors or Trustees of the applicable Fund, and that the
payment of fees thereunder is subject to limitations imposed by the
rules of the NASD.
8. AIM Distributors reserves the right, in its discretion and without
notice, to suspend the sale of any Fund or withdraw the sale of shares
of a Fund, or upon notice to us, to amend this Agreement. We agree
that any order to purchase shares of the Funds placed by us after
notice of any amendment to this Agreement has been sent to us shall
constitute our agreement to any such amendment.
9. All communications to AIM Distributors shall be duly given if mailed
to
<PAGE> 9
Shareholder Service Agreement Page 3
(Brokers for Bank Trust Departments)
A I M Distributors, Inc., 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173. Any notice to us shall be duly given if mailed to us
at the address specified by us in this Agreement or to such other
address as we shall have designated in writing to AIM Distributors.
10. This Agreement may be terminated at any time by AIM Distributors on
not less than 60 days' written notice to us at our principal place of
business. We, on 60 days' written notice addressed to AIM
Distributors at its principal place of business, may terminate this
Agreement. AIM Distributors may also terminate this Agreement for
cause on violation by us of any of the provisions of this Agreement,
said termination to become effective on the date of mailing notice to
us of such termination. AIM Distributors's failure to terminate for
any cause shall not constitute a waiver of AIM Distributors's right
to terminate at a later date for any such cause. This Agreement may
be terminated with respect to any Fund at any time by the vote of a
majority of the directors or trustees of such Fund who are
disinterested directors or by a vote of a majority of the Fund's
outstanding shares, on not less than 60 days' written notice to us at
our principal place of business. This Agreement will be terminated by
any act which terminates the Selected Dealer Agreement between us and
AIM Distributors or a Fund's Distribution Plan, and in any event,
shall terminate automatically in the event of its assignment by us,
the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the 1940 Act.
11. We represent that our activities on behalf of our clients and pursuant
to this Agreement either (I) are not such as to require our
registration as a broker-dealer in the state(s) in which we engage in
such activities, or (ii) we are registered as a broker-dealer in the
state(s) in which we engage in such activities. We represent that we
are registered as a broker-dealer with the NASD if required under
applicable law.
12. This Agreement and all rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of
Texas. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which shall constitute the same
instrument. This Agreement shall not relieve us or AIM Distributors
from any obligations either may have under any other agreements
between us.
13. This Agreement shall become effective as of the date when it is
executed and dated by AIM Distributors.
<PAGE> 10
Shareholder Service Agreement Page 4
(Brokers for Bank Trust Departments)
The undersigned agrees to abide by the foregoing terms and conditions.
_____________________________________________
(Firm Name)
_____________________________________________
(Address)
_____________________________________________
City/State/Zip/County
By: ________________________________________
Name:________________________________________
Title:_______________________________________
Dated:_______________________________________
ACCEPTED:
A I M DISTRIBUTORS, INC.
By: ______________________________
Name: ______________________________
Title:______________________________
Dated:______________________________
Please sign both copies and return to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
<PAGE> 11
Shareholder Service Agreement Page 5
(Brokers for Bank Trust Departments)
SCHEDULE A
Funds Fees
----- ----
AIM Advisor Funds, Inc.
AIM Advisor Flex Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Equity Funds, Inc.
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund (Retail Class)
AIM Constellation Fund (Retail Class)
AIM Large Cap Growth Fund
AIM Weingarten Fund (Retail Class)
AIM Aggressive Growth Fund
AIM Funds Group
AIM Balanced Fund
AIM Global Utilities Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Select Growth Fund
AIM Value Fund
AIM Growth Series
AIM Basic Value Fund
AIM Europe Growth Fund
AIM Japan Growth Fund
AIM Mid Cap Equity Fund
AIM New Pacific Growth Fund
AIM Small Cap Growth Fund
AIM International Funds, Inc.
AIM Asian Growth Fund
AIM European Development Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Global Income Fund
AIM International Equity Fund
<PAGE> 12
Shareholder Service Agreement Page 6
(Brokers for Bank Trust Departments)
AIM Investment Funds
AIM Developing Markets Fund
AIM Emerging Markets Debt 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 Latin American Growth Fund
AIM Strategic Income Fund
AIM Investment Securities Funds
AIM Limited Maturity Treasury Fund
AIM High Yield Fund II
AIM Series Trust
AIM Global Trends Fund
AIM Special Opportunities Funds
AIM Small Cap Opportunities Fund
AIM Tax-Exempt Funds, Inc.
AIM High Income Municipal Fund
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
<PAGE> 1
EXHIBIT m(3)(iv)
AGENCY PRICING AGREEMENT
(THE AIM FAMILY OF FUNDS--Registered Trademark--)
This Agreement is entered into as of the ___ of _________, 19__,
between______________(the "Plan Provider") and A I M Distributors, Inc. (the
"Distributor").
RECITAL
Plan Provider acts as a trustee and/or servicing agent for defined
contribution plans and/or deferred compensation plans (the "Plans") and invests
and reinvests such Plans' assets as specified by an investment advisor, sponsor
or administrative committee of the Plan (a "Plan Representative") generally upon
the direction of Plan beneficiaries (the "Participants").
Plan Provider and Distributor desire to facilitate the purchase and
redemption of shares (the "Shares") of the funds listed on Exhibit A hereto
which may be amended from time to time by Distributor (the "Fund" or "Funds"),
registered investment companies distributed by Distributor, on behalf of the
Plans, through one or more accounts (not to exceed one per Plan) in each Fund
(individually an "Account" and collectively the "Accounts"), subject to the
terms and conditions of this Agreement. Distributor shall, on behalf of the
Funds, pay to Plan Provider a fee in accordance with Exhibit A hereto.
AGREEMENT
1. SERVICES
Plan Provider shall provide shareholder and administration services for
the Plans and/or their Participants, including, without limitation:
answering questions about the Funds; assisting in changing dividend
options, account designations and addresses; establishing and
maintaining shareholder accounts and records; and assisting in
processing purchase and redemption transactions (the "Services"). Plan
Provider shall comply with all applicable laws, rules and regulations,
including requirements regarding prospectus delivery and maintenance
and preservation of records. To the extent allowed by law, Plan
Provider shall provide Distributor with copies of all records that
Distributor may reasonably request. Distributor or its affiliate will
recognize each Plan as an unallocated account in each Fund, and will
not maintain separate accounts in each Fund for each Participant.
Except to the extent provided in Section 3, all Services performed by
Plan Provider shall be as an independent contractor and not as an
employee or agent of Distributor or any of the Funds. Plan Provider and
Plan Representatives, and not Distributor, shall take all necessary
action so that the transactions contemplated by this Agreement shall
not be "Prohibited Transactions" under section 406 of the Employee
Retirement Income Security Act of 1974, or section 4975 of the Internal
Revenue Code.
2. PRICING INFORMATION
Each Fund or its designee will furnish Plan Provider on each business
day that the New York Stock Exchange is open for business ("Business
Day"), with (i) net asset value information as of the close of trading
(currently 4:00 p.m. Eastern Time) on the New York
<PAGE> 2
Stock Exchange or as at such later times at which a Fund's net asset
value is calculated as specified in such Fund's prospectus ("Close of
Trading"), (ii) dividend and capital gains information as it becomes
available, and (iii) in the case of income Funds, the daily accrual or
interest rate factor (mil rate). The Funds shall use their best efforts
to provide such information to Plan Provider by 6:00 p.m. Central Time
on the same Business Day.
Distributor or its affiliate will provide Plan Provider (a) daily
confirmations of Account activity within five Business Days after each
day on which a purchase or redemption of Shares is effected for the
particular Account, (b) if requested by Plan Provider, quarterly
statements detailing activity in each Account within fifteen Business
Days after the end of each quarter, and (c) such other reports as may
be reasonably requested by Plan Provider.
3. ORDERS AND SETTLEMENT
If Plan Provider receives instructions in proper form from Participants
or Plan Representatives before the Close of Trading on a Business Day,
Plan Provider will process such instructions that same evening. On the
next Business Day, Plan Provider will transmit orders for net purchases
or redemptions of Shares to Distributor or its designee by 9:00 a.m.
Central Time and wire payment for net purchases by 2:00 p.m. Central
Time. Distributor or its affiliate will wire payment for net
redemptions on the Business Day following the day the order is executed
for the Accounts. In doing so, Plan Provider will be considered the
Funds' agent, and Shares will be purchased and redeemed as of the
Business Day on which Plan Provider receives the instructions. Plan
Provider will record time and date of receipt of instructions and will,
upon request, provide such instructions and other records relating to
the Services to Distributor's auditors. If Plan Provider receives
instructions in proper form after the Close of Trading on a Business
Day, Plan Provider will treat the instructions as if received on the
next Business Day.
4. REPRESENTATIONS WITH RESPECT TO THE DISTRIBUTOR AND THE FUNDS
Plan Provider and its agents shall limit representations concerning a
Fund or Shares to those contained in the then current prospectus of
such Fund, in current sales literature furnished by Distributor to Plan
Provider, in publicly available databases, such as those databases
created by Standard & Poor's and Morningstar, and in current sales
literature created by Plan Provider and submitted to and approved in
writing by Distributor prior to its use.
5. USE OF NAMES
Plan Provider and its affiliates will not, without the prior written
approval of Distributor, make public references to A I M Management
Group Inc. or any of its subsidiaries, or to the Funds. For purposes of
this provision, the public does not include Plan Providers'
representatives who are actively engaged in promoting the Funds. Any
brochure or other communication to the public that mentions the Funds
shall be submitted to Distributor for written approval prior to use.
Plan Provider shall provide copies of its regulatory filings that
include any reference to A I M Management Group Inc. or its
subsidiaries or the Funds to Distributor. If Plan Provider or its
affiliates should make unauthorized references or representations, Plan
Provider agrees to indemnify and hold harmless the Funds, A I M
Management Group
-2-
<PAGE> 3
Inc. and its subsidiaries from any claims, losses, expenses or
liability arising in any way out of or connected in any way with such
references or representations.
6. TERMINATION
(a) This Agreement may be terminated with respect to any Fund at
any time without any penalty by the vote of a majority of the
directors of such Fund who are "disinterested directors", as
that term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), or by a vote of a majority of the
Fund's outstanding shares, on sixty (60) days' written notice.
It will be terminated by any act which terminates either the
Fund's Distribution Plan, or any related agreement thereunder,
and in any event, it shall terminate automatically in the
event of its assignment as that term is defined in the 1940
Act.
(b) Either party may terminate this Agreement upon ninety (90)
days' prior written notice to the other party at the address
specified below.
7. INDEMNIFICATION
(a) Plan Provider agrees to indemnify and hold harmless the
Distributor, its affiliates, the Funds, the Funds' investment
advisors, and each of their directors, officers, employees,
agents and each person, if any, who controls them within the
meaning of the Securities Act of 1933, as amended (the
"Securities Act"), (the "Distributor Indemnitees") against any
losses, claims, damages, liabilities or expenses to which a
Distributor Indemnitee may become subject insofar as those
losses, claims, damages, liabilities or expenses or actions in
respect thereof, arise out of or are based upon (i) Plan
Provider's negligence or willful misconduct in performing the
Services, (ii) any breach by Plan Provider of any material
provision of this Agreement, or (iii) any breach by Plan
Provider of a representation, warranty or covenant made in
this Agreement; and Plan Provider will reimburse the
Distributor Indemnitee for any legal or other expenses
reasonably incurred, as incurred, by them in connection with
investigating or defending such loss, claim or action. This
indemnity agreement will be in addition to any liability which
Plan Provider may otherwise have.
(b) Distributor agrees to indemnify and hold harmless Plan
Provider and its affiliates, and each of its directors,
officers, employees, agents and each person, if any, who
controls Plan Provider within the meaning of the Securities
Act (the "Plan Provider Indemnitees") against any losses,
claims, damages, liabilities or expenses to which a Plan
Provider Indemnitee may become subject insofar as such losses,
claims, damages, liabilities or expenses (or actions in
respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact
contained in the Registration Statement or Prospectus of a
Fund, or the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to
make statements therein not misleading, (ii) any breach by
Distributor of any material provision of this Agreement, (iii)
Distributor's negligence or willful misconduct in carrying out
its duties and responsibilities under this Agreement, or (iv)
any breach by Distributor of a representation, warranty or
covenant made in this Agreement; and Distributor will
reimburse the Plan Provider Indemnitees for any
-3-
<PAGE> 4
legal or other expenses reasonably incurred, as incurred, by
them, in connection with investigating or defending any such
loss, claim or action. This indemnity agreement will be in
addition to any liability which Distributor may otherwise
have.
(c) If any third party threatens to commence or commences any
action for which one party (the "Indemnifying Party") may be
required to indemnify another person hereunder (the
"Indemnified Party"), the Indemnified Party shall promptly
give notice thereof to the Indemnifying Party. The
Indemnifying Party shall be entitled, at its own expense and
without limiting its obligations to indemnify the Indemnified
Party, to assume control of the defense of such action with
counsel selected by the Indemnifying Party which counsel shall
be reasonably satisfactory to the Indemnified Party. If the
Indemnifying Party assumes the control of the defense, the
Indemnified Party may participate in the defense of such claim
at its own expense. Without the prior written consent of the
Indemnified Party, which consent shall not be withheld
unreasonably, the Indemnifying Party may not settle or
compromise the liability of the Indemnified Party in such
action or consent to or permit the entry of any judgment in
respect thereof unless in connection with such settlement,
compromise or consent each Indemnified Party receives from
such claimant an unconditional release from all liability in
respect of such claim.
8. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Texas applicable to agreements fully
executed and to be performed therein.
9. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each party represents that it is free to enter into this Agreement and
that by doing so it will not breach or otherwise impair any other
agreement or understanding with any other person, corporation or other
entity. Each party represents that it has full power and authority
under applicable law, and has taken all action necessary to enter into
and perform this Agreement and the person executing this Agreement on
its behalf is duly authorized and empowered to execute and deliver this
Agreement. Additionally, each party represents that this Agreement,
when executed and delivered, shall constitute its valid, legal and
binding obligation, enforceable in accordance with its terms.
Plan Provider further represents, warrants, and covenants that:
(a) it is registered as a transfer agent pursuant to Section 17A
of the Securities Exchange Act of 1934, as amended (the "1934
Act"), or is not required to be registered as such;
(b) the arrangements provided for in this Agreement will be
disclosed to the Plan Representatives; and
(c) it is registered as a broker-dealer under the 1934 Act or any
applicable state securities laws, or, including as a result of
entering into and performing the services set forth in this
Agreement, is not required to be registered as such.
-4-
<PAGE> 5
Distributor further represents, warrants and covenants, that:
(a) it is registered as a broker-dealer under the 1934 Act and any
applicable state securities laws; and
(b) the Funds' advisors are registered as investment advisors
under the Investment Advisers Act of 1940, the Funds are
registered as investment companies under the 1940 Act and Fund
Shares are registered under the Securities Act.
10. MODIFICATION
This Agreement and Exhibit A may be amended at any time by Distributor
without Plan Provider's consent by Distributor mailing a copy of an
amendment to Plan Provider at the address set forth below. Such
amendment shall become effective thirty (30) days from the date of
mailing unless this Agreement is terminated by the Plan Provider within
such thirty (30) days.
11. ASSIGNMENT
This Agreement shall not be assigned by a party hereto, without the
prior written consent of the other parties hereto, except that a party
may assign this Agreement to an affiliate having the same ultimate
ownership as the assigning party without such consent.
12. SURVIVAL
The provisions of Sections 1, 5 and 7 shall survive termination of this
Agreement.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their duly
authorized officers as of the date first above written.
-------------------------------------
(PLAN PROVIDER)
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
Address:
-----------------------------
A I M DISTRIBUTORS, INC.
(DISTRIBUTOR)
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
11 Greenway Plaza
Suite 100
Houston, Texas 77210
-6-
<PAGE> 7
EXHIBIT A
For the term of this Agreement, Distributor, or its affiliates, shall
pay Plan Provider the following amounts for each of the following Funds with
respect to the average daily net asset value of the Class A Shares of the Plans'
balances for the prior quarter:
<TABLE>
<CAPTION>
FUND ANNUAL FEE
- ---- ----------
<S> <C>
AIM Advisor Funds, Inc. (Class A Shares Only)
AIM Advisor Flex Fund .25%
AIM Advisor International Value Fund .25%
AIM Advisor Large Cap Value Fund .25%
AIM Advisor MultiFlex Fund .25%
AIM Advisor Real Estate Fund .25%
AIM Equity Funds, Inc. (Class A Shares Only)
AIM Aggressive Growth Fund .25%
AIM Blue Chip Fund .25%
AIM Capital Development Fund .25%
AIM Charter Fund .25%
AIM Constellation Fund .25%
AIM Large Cap Growth Fund .25%
AIM Weingarten Fund .25%
AIM Funds Group (Class A Shares Only)
AIM Balanced Fund .25%
AIM Global Utilities Fund .25%
AIM High Yield Fund .25%
AIM Income Fund .25%
AIM Intermediate Government Fund .25%
AIM Municipal Bond Fund .25%
AIM Select Growth Fund .25%
AIM Value Fund .25%
AIM Growth Series (Class A Shares Only)
AIM Basic Value Fund .25%
AIM Europe Growth Fund .25%
AIM Japan Growth Fund .25%
AIM Mid Cap Equity Fund .25%
AIM New Pacific Growth Fund .25%
AIM Small Cap Growth Fund .25%
</TABLE>
<PAGE> 8
<TABLE>
<S> <C>
AIM International Funds, Inc. (Class A Shares Only)
AIM Asian Growth Fund .25%
AIM European Development Fund .25%
AIM Global Aggressive Growth Fund .25%
AIM Global Growth Fund .25%
AIM Global Income Fund .25%
AIM International Equity Fund .25%
AIM Investment Funds (Class A Shares Only)
AIM Developing Markets Fund .25%
AIM Emerging Markets Fund .25%
AIM Emerging Markets Debt Fund .25%
AIM Global Consumer Products and Services Fund .25%
AIM Global Financial Services Fund .25%
AIM Global Government Income Fund .25%
AIM Global Growth & Income Fund .25%
AIM Global Health Care Fund .25%
AIM Global Infrastructure Fund .25%
AIM Global Resources Fund .25%
AIM Global Telecommunications Fund .25%
AIM Latin American Growth Fund .25%
AIM Strategic Income Fund .25%
AIM Investment Securities Funds (Class A Shares Only)
AIM High Yield Fund II .25%
AIM Limited Maturity Treasury Fund .15%
AIM Series Trust (Class A Shares Only)
AIM Global Trends Fund .25%
AIM Special Opportunities Funds (Class A Shares Only)
AIM Small Cap Opportunities Fund .25%
</TABLE>
Distributor or its affiliates shall calculate the amount of quarterly
payment and shall deliver to Plan Provider a quarterly statement showing the
calculation of the quarterly amounts payable to Plan Provider. Distributor
reserves the right at any time to impose minimum fee payment requirements before
any quarterly payments will be made to Plan Provider. Payment to Plan Provider
shall occur within 30 days following the end of each quarter. All parties agree
that the payments referred to herein are for record keeping and administrative
services only and are not for legal, investment advisory or distribution
services.
Minimum Payments: $50 (with respect to all Funds in the aggregate.)
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001021453
<NAME> AIM SERIES TRUST
<SERIES>
<NUMBER> 010
<NAME> AIM GLOBAL TRENDS FUND - CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 43425
<INVESTMENTS-AT-VALUE> 44724
<RECEIVABLES> 65
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 44789
<PAYABLE-FOR-SECURITIES> 252
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 89
<TOTAL-LIABILITIES> 341
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44579
<SHARES-COMMON-STOCK> 1555
<SHARES-COMMON-PRIOR> 1424
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1432)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1298
<NET-ASSETS> 44447
<DIVIDEND-INCOME> 131
<INTEREST-INCOME> 3
<OTHER-INCOME> 1
<EXPENSES-NET> (362)
<NET-INVESTMENT-INCOME> (227)
<REALIZED-GAINS-CURRENT> (1162)
<APPREC-INCREASE-CURRENT> 4093
<NET-CHANGE-FROM-OPS> 2704
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (26)
<DISTRIBUTIONS-OF-GAINS> (219)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 952
<NUMBER-OF-SHARES-REDEEMED> (844)
<SHARES-REINVESTED> 23
<NET-CHANGE-IN-ASSETS> 8878
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 362
<AVERAGE-NET-ASSETS> 46380
<PER-SHARE-NAV-BEGIN> 10.63
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 1.01
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (0.14)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.46
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001021453
<NAME> AIM SERIES TRUST
<SERIES>
<NUMBER> 020
<NAME> AIM GLOBAL TRENDS FUND - CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 43425
<INVESTMENTS-AT-VALUE> 44724
<RECEIVABLES> 65
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 44789
<PAYABLE-FOR-SECURITIES> 252
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 89
<TOTAL-LIABILITIES> 341
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44579
<SHARES-COMMON-STOCK> 2240
<SHARES-COMMON-PRIOR> 1806
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1432)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1298
<NET-ASSETS> 44447
<DIVIDEND-INCOME> 131
<INTEREST-INCOME> 3
<OTHER-INCOME> 1
<EXPENSES-NET> (362)
<NET-INVESTMENT-INCOME> (227)
<REALIZED-GAINS-CURRENT> (1162)
<APPREC-INCREASE-CURRENT> 4093
<NET-CHANGE-FROM-OPS> 2704
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (311)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1303
<NUMBER-OF-SHARES-REDEEMED> (895)
<SHARES-REINVESTED> 27
<NET-CHANGE-IN-ASSETS> 8878
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 362
<AVERAGE-NET-ASSETS> 46380
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> (0.07)
<PER-SHARE-GAIN-APPREC> 1.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.14)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.41
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001021453
<NAME> AIM SERIES TRUST
<SERIES>
<NUMBER> 030
<NAME> AIM GLOBAL TRENDS FUND - CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 43425
<INVESTMENTS-AT-VALUE> 44724
<RECEIVABLES> 65
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 44789
<PAYABLE-FOR-SECURITIES> 252
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 89
<TOTAL-LIABILITIES> 341
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44579
<SHARES-COMMON-STOCK> 22
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1432)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1298
<NET-ASSETS> 44447
<DIVIDEND-INCOME> 131
<INTEREST-INCOME> 3
<OTHER-INCOME> 1
<EXPENSES-NET> (362)
<NET-INVESTMENT-INCOME> (227)
<REALIZED-GAINS-CURRENT> (1162)
<APPREC-INCREASE-CURRENT> 4093
<NET-CHANGE-FROM-OPS> 2704
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (3)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36
<NUMBER-OF-SHARES-REDEEMED> (14)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8878
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 362
<AVERAGE-NET-ASSETS> 46380
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 1.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.14)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.40
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001021453
<NAME> AIM SERIES TRUST
<SERIES>
<NUMBER> 040
<NAME> AIM GLOBAL TRENDS FUND - ADVISOR CLASS
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 43425
<INVESTMENTS-AT-VALUE> 44724
<RECEIVABLES> 65
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 44789
<PAYABLE-FOR-SECURITIES> 252
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 89
<TOTAL-LIABILITIES> 341
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44579
<SHARES-COMMON-STOCK> 72
<SHARES-COMMON-PRIOR> 117
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1432)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1298
<NET-ASSETS> 44447
<DIVIDEND-INCOME> 131
<INTEREST-INCOME> 3
<OTHER-INCOME> 1
<EXPENSES-NET> 362
<NET-INVESTMENT-INCOME> (227)
<REALIZED-GAINS-CURRENT> (1162)
<APPREC-INCREASE-CURRENT> 4093
<NET-CHANGE-FROM-OPS> 2704
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6)
<DISTRIBUTIONS-OF-GAINS> (10)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30
<NUMBER-OF-SHARES-REDEEMED> (76)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 8878
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 362
<AVERAGE-NET-ASSETS> 46380
<PER-SHARE-NAV-BEGIN> 10.64
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 1.00
<PER-SHARE-DIVIDEND> (0.08)
<PER-SHARE-DISTRIBUTIONS> (0.14)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.45
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
