<PAGE> 1
As filed with the Securities and Exchange Commission on February 12, 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. 7 X
--
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
--
Amendment No. 8 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:
<TABLE>
<S> <C>
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
</TABLE>
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b)
- ---
on (date) pursuant to paragraph (b)
- ---
60 days after filing pursuant to paragraph (a)(1)
- ---
X on May 3, 1999 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
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION DATED FEBRUARY 12, 1999
[AIM LOGO APPEARS HERE]
AIM GLOBAL TRENDS FUND
PROSPECTUS
MAY 3, 1999
AIM Global Trends Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
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.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES......................................................................3
PRINCIPAL RISKS OF INVESTING IN THE FUND.................................................................5
PERFORMANCE INFORMATION..................................................................................6
ANNUAL TOTAL RETURNS............................................................................6
PERFORMANCE TABLE...............................................................................7
FEE TABLE AND EXPENSE EXAMPLE............................................................................8
FEE TABLE.......................................................................................8
EXPENSE EXAMPLE.................................................................................9
FUND MANAGEMENT.........................................................................................11
THE MANAGER....................................................................................11
MANAGER COMPENSATION...........................................................................11
PORTFOLIO MANAGERS.............................................................................11
OTHER INFORMATION.......................................................................................13
INITIAL SALES CHARGES FOR CLASS A SHARES.......................................................13
DIVIDENDS AND DISTRIBUTIONS....................................................................13
FINANCIAL HIGHLIGHTS....................................................................................13
SHAREHOLDER INFORMATION................................................................................A-1
CHOOSING A SHARE CLASS........................................................................A-1
PURCHASING SHARES.............................................................................A-4
REDEEMING SHARES..............................................................................A-6
EXCHANGING SHARES.............................................................................A-9
PRICING OF SHARES............................................................................A-11
TAXES........................................................................................A-11
OBTAINING ADDITIONAL INFORMATION...........................................................BACK COVER PAGE
</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.
2
<PAGE> 4
INVESTMENT OBJECTIVE AND STRATEGIES
THE FUND
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its 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 manager 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
manager 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
manager rebalances the fund's assets at least semi-annually. In addition, the
manager 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 [ ], the fund's assets were allocated as follows:
<TABLE>
<CAPTION>
<S> <C>
Consumer Products and Services Fund ....................[ ]%
Financial Services Fund ................................[ ]%
Health Care Fund........................................[ ]%
Infrastructure Fund.....................................[ ]%
Resources Fund..........................................[ ]%
Telecommunications Fund.................................[ ]%
</TABLE>
For cash management purposes, the fund may hold all or a portion
of its assets in cash, or money market or U.S. government securities. 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.
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.
3
<PAGE> 5
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.
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 securities, 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.]
4
<PAGE> 6
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 price of equity
securities goes up and down in response to many factors, including the
historical and prospective earnings of the issuer of the stock, 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
o 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.
o 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.
o Regulations -- Foreign companies generally are subject to less
stringent regulations, including financial and accounting controls,
than are U.S. companies. As a result, among other things, there
generally is less publicly available information about foreign
companies than about U.S. companies.
o 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 price of common stocks 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. In addition, developing
countries may have greater political or economic instability, less regulation
and smaller, less liquid and more volatile markets than countries with more
mature economies.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment manager and the fund's other service providers
are unable to distinguish the year 2000 from the year 1900.
The fund's investment manager 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.
5
<PAGE> 7
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.
GLOBAL TRENDS
<TABLE>
<CAPTION>
[GRAPH]
Year Return (%)
---- ----------
<S> <C>
1998 .............................................. 9.37%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was [ ]%
(quarter ended , 1998) and the lowest quarterly return was [ ]% (quarter ended ,
1998).
6
<PAGE> 8
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 December 31, 1998)
Since Inception
1 Year Inception Date
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 4.18% 1.07% 09/15/97
- ----------------------------------------------------------------------------------------------------------
Class B 3.83 1.35 09/15/97
- ----------------------------------------------------------------------------------------------------------
Class C -- 7.94 01/01/98
- ----------------------------------------------------------------------------------------------------------
MSCI All Country World Index(1) 19.69 11.81(2) 09/30/97(2)
==========================================================================================================
</TABLE>
(1) The MSCI All Country World Index is a market value-weighted average of the
performance of securities listed on the major world stock exchanges of 47
markets, including both developed and emerging markets. It includes the
effect of reinvested dividends and is measured in U.S. dollars.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
7
<PAGE> 9
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>
Class A Class B Class C
------- ------- -------
Shareholder Fees (fees paid directly from your investment)
<S> <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
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
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
------- ------- -------
</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 manager.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
8
<PAGE> 10
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 $ $ $ $
Class B
Class C
</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 $ $ $ $
Class B
Class C
</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>
THEME FUND EXPENSE RATIO OF ADVISOR
CLASS SHARES(1)
<S> <C>
Consumer Products and Services Fund..................... [ ]%
Financial Services Fund................................. [ ]%
Health Care Fund........................................ [ ]%
Infrastructure Fund..................................... [ ] %
Resources Fund.......................................... [ ]%
Telecommunications Fund................................. [ ]%
</TABLE>
(1) A I M Advisors, Inc., the fund's manager, has agreed to limit each theme
fund's expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to a maximum level of 1.50% of the average daily net
assets of such fund's Advisor Class shares until May 31, 2000. The waiver may
not be terminated.
9
<PAGE> 11
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 AGGREGATE
INDIRECT PRO RATA SHARE OF THE EXPENSES OF THE EXPENSE RATIO(2)
THEME FUNDS)
<S> <C>
Class A ____%
Class B ____%
Class C ____%
</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.
(2) Because of the manager's agreement to limit each theme fund's expenses as
described above, the fund's aggregate expense ratio will not exceed 2.00%, 2.50%
and 2.50% for Class A, Class B, and Class C shares, respectively.
10
<PAGE> 12
FUND MANAGEMENT
THE MANAGER
A I M Advisors, Inc. (the manager) is responsible for the day-to-day management
of AIM Global Trends Fund. The manager is located at 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173. The manager 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 manager has acted as an investment advisor since its organization in 1976.
Today, the manager, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
MANAGER COMPENSATION
The manager 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.
11
<PAGE> 13
OTHER INFORMATION
INITIAL SALES CHARGES FOR CLASS A SHARES
Purchases of Class A shares of the 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.
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.
12
<PAGE> 14
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
Year Ended December 31,
1998
-------------------------
<S> <C>
Net asset value, beginning of period $ xx.xx
-------
Income from investment operations:
Net investment income (loss) (x.xx)
-------
Net gains on securities (both realized and unrealized) (x.xx)
-------
Total from investment operations (x.xx)
-------
Distributions from net realized gains (x.xx)
-------
Net asset value, end of period $ xx.xx
-------
Total return (a) (x.xx)%
-------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $xx,xxx
-------
Ratio of expenses to average net assets (b) x.xx% (c)(d)
-------
Ratio of net investment income (loss) to average net assets (e) (x.xx)% (c)
-------
Portfolio turnover rate xx%
-------
</TABLE>
(a) Does not deduct sales charges and are not annualized for periods than one
year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
X.XX%, X.XX%, X.XX%, X.XX%, and X.XX% for 1998-1994.
(c) Ratios are annualized and based on average net assets of $XX,XXX,XXX,XXX
(d) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been the
same.
(e) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement were (X.XX)%, (X.XX)%, (X.XX)% and (X.XX)% for 1998-1994.
13
<PAGE> 15
<TABLE>
<CAPTION>
Class B
Year Ended December 31,
1998
--------------------------
<S> <C>
Net asset value, beginning of period $ xx.xx
--------
Income from investment operations:
Net investment income (loss) (x.xx)
--------
Net gains on securities (both realized and unrealized) (x.xx)
--------
Total from investment operations (x.xx)
--------
Distributions from net realized gains (x.xx)
--------
Net asset value, end of period $ xx.xx
--------
Total return (a) (x.xx)%
--------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ xx,xxx
--------
Ratio of expenses to average net assets (b) x.xx% (c)(d)
--------
Ratio of net investment income (loss) to average net assets (e) (x.xx)% (c)
--------
Portfolio turnover rate xx%
--------
</TABLE>
(a) Does not deduct sales charges and are not annualized for periods than one
year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
X.XX%, X.XX%, X.XX%, X.XX%, and X.XX% for 1998-1994.
(c) Ratios are annualized and based on average net assets of $XX,XXX,XXX,XXX
(d) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been the
same.
(e) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement were (X.XX)%, (X.XX)%, (X.XX)% and (X.XX)% for 1998-1994.
14
<PAGE> 16
<TABLE>
<CAPTION>
Class C
Year Ended December 31,
1998
-----------------------------
<S> <C>
Net asset value, beginning of period $ xx.xx
--------
Income from investment operations:
Net investment income (loss) (x.xx)
--------
Net gains on securities (both realized and unrealized) (x.xx)
--------
Total from investment operations (x.xx)
--------
Distributions from net realized gains (x.xx)
--------
Net asset value, end of period $ xx.xx
--------
Total return (a) (x.xx)%
--------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ xx,xxx
--------
Ratio of expenses to average net assets (b) x.xx% (c)(d)
--------
Ratio of net investment income (loss) to average net assets (e) (x.xx)% (c)
--------
Portfolio turnover rate xx%
--------
</TABLE>
(a) Does not deduct sales charges and are not annualized for periods than one
year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
X.XX%, X.XX%, X.XX%, X.XX%, and X.XX% for 1998-1994.
(c) Ratios are annualized and based on average net assets of $XX,XXX,XXX,XXX
(d) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been the
same.
(e) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement were (X.XX)%, (X.XX)%, (X.XX)% and (X.XX)% for 1998-1994.
16
<PAGE> 17
Shareholder Information
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
Many of the funds advised by the advisor (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 six charge on redemptions within
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*
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
* 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.
MCF-03/99
A-1
<PAGE> 18
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>
A-2
<PAGE> 19
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 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.
A-3
<PAGE> 20
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 $ 0 ($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 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
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-4
<PAGE> 21
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).
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.
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 eighteen 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.
A-5
<PAGE> 22
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 thirty 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-6
<PAGE> 23
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, in 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 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;
- - Exchanges must be made between accounts with identical registration
information;
A-7
<PAGE> 24
- - 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 issuance of shares
being purchased 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.
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 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, 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 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.
A-8
<PAGE> 25
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.
A-9
<PAGE> 26
[BACK COVER PAGE]
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
United States 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, D.C., 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, D.C. 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
<PAGE> 27
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION DATED FEBRUARY 12, 1999
[AIM LOGO APPEARS HERE]
ADVISOR CLASS
AIM GLOBAL TRENDS FUND
PROSPECTUS
MAY 3, 1999
AIM Global Trends Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
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.
<PAGE> 28
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES......................................................................3
PRINCIPAL RISKS OF INVESTING IN THE FUND.................................................................5
PERFORMANCE INFORMATION..................................................................................6
ANNUAL TOTAL RETURNS............................................................................6
PERFORMANCE TABLE...............................................................................7
FEE TABLE AND EXPENSE EXAMPLE............................................................................8
FEE TABLE.......................................................................................8
EXPENSE EXAMPLE.................................................................................8
FUND MANAGEMENT.........................................................................................10
THE MANAGER....................................................................................10
MANAGER COMPENSATION...........................................................................10
PORTFOLIO MANAGERS.............................................................................10
OTHER INFORMATION.......................................................................................11
DIVIDENDS AND DISTRIBUTIONS....................................................................11
FINANCIAL HIGHLIGHTS....................................................................................12
SHAREHOLDER INFORMATION................................................................................A-1
PURCHASING SHARES.............................................................................A-1
REDEEMING SHARES..............................................................................A-3
EXCHANGING SHARES.............................................................................A-5
PRICING OF SHARES.............................................................................A-6
TAXES.........................................................................................A-6
OBTAINING ADDITIONAL INFORMATION...........................................................BACK COVER PAGE
</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.
2
<PAGE> 29
INVESTMENT OBJECTIVE AND STRATEGIES
THE FUND
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its 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 manager 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
manager 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
manager rebalances the fund's assets at least semi-annually. In addition, the
manager 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 [ ], the fund's assets were allocated as follows:
<TABLE>
<S> <C>
Consumer Products and Services Fund ................................. [ ]%
Financial Services Fund ............................................. [ ]%
Health Care Fund..................................................... [ ]%
Infrastructure Fund.................................................. [ ]%
Resources Fund....................................................... [ ]%
Telecommunications Fund.............................................. [ ]%
</TABLE>
For cash management purposes, the fund may hold all or a portion of its assets
in cash, or money market, or U.S. government securities. 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.
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.
3
<PAGE> 30
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.
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 securities, 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.]
4
<PAGE> 31
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 price of equity
securities goes up and down in response to many factors, including the
historical and prospective earnings of the issuer of the stock, 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:
o 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.
o 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.
o Regulations -- Foreign companies generally are subject to less
stringent regulations, including financial and accounting controls,
than are U.S. companies. As a result, among other things, there
generally is less publicly available information about foreign
companies than about U.S. companies.
o 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 price of common stocks 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. In addition, developing
countries may have greater political or economic instability, less regulation
and smaller, less liquid and more volatile markets than countries with more
mature economies.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment manager and the fund's other service providers are
not able to distinguish the year 2000 from the year 1900.
The fund's investment manager 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.
5
<PAGE> 32
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.
GLOBAL TRENDS ADVISOR
<TABLE>
<CAPTION>
[GRAPH]
Year Return (%)
---- ----------
<S> <C>
1998 .................................................. 9.80%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
[____%] (quarter ended [______________, 1998]) and the lowest quarterly return
was[____%] (quarter ended [_______________, 1998]).
6
<PAGE> 33
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 December 31, 1998)
Since Inception
1 Year Inception Date
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisor Class 9.80% 5.40% 09/16/97
- -------------------------------------------------------------------------------------------------------
MSCI All Country World Index(1) 19.69 11.81(2) 09/16/97(2)
=======================================================================================================
</TABLE>
(1) The MSCI All Country World Index is a market value-weighted average of the
performance of securities listed on the major world stock exchanges of 47
markets, including both developed and emerging markets. It includes the
effect of reinvested dividends and is measured in U.S. dollars.
(2) The above annual total return given is since the inception date of the
Advisor Class.
7
<PAGE> 34
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:
Advisor Class
-------------
Shareholder Fees (fees paid directly from your investment)
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
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees None
Distribution and/or Service (12b-1) Fees None
Other Expenses(1) None
Total Annual Fund Operating Expenses
----
- -------------------
(1) "Other expenses," including transfer agency, legal and audit fees, and
other operating expenses, are borne by the fund's manager.
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 $ $ $ $
</TABLE>
8
<PAGE> 35
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>
THEME FUND EXPENSE RATIO OF ADVISOR
CLASS SHARES(1)
<S> <C>
Consumer Products and Services Fund........................ [ ]%
Financial Services Fund.................................... [ ]%
Health Care Fund........................................... [ ]%
Infrastructure Fund........................................ [ ]%
Resources Fund............................................. [ ]%
Telecommunications Fund.................................... [ ]%
</TABLE>
(1) A I M Advisors, Inc., the fund's manager, has agreed to limit each theme
fund's expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to a maximum level of 1.50% of the average daily net
assets of such fund's Advisor Class shares until May 31, 2000. The waiver may
not be terminated.
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)
AIM GLOBAL TRENDS FUND (INCLUDING THE FUND'S AGGREGATE
INDIRECT PRO RATA SHARE OF THE EXPENSES OF THE EXPENSE RATIO(2)
THEME FUNDS)
Advisor Class ____%
(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.
[(2) Because of the manager's agreement to limit each theme fund's expenses as
described above, the fund's aggregate expense ratio will not exceed ___% for
Advisor Class shares of the fund.]
9
<PAGE> 36
FUND MANAGEMENT
THE MANAGER
A I M Advisors, Inc. (the manager) is responsible for the day-to-day management
of AIM Global Trends Fund. The manager is located at 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173. The manager 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 manager has acted as an investment advisor since its organization in 1976.
Today, the manager, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
MANAGER COMPENSATION
The manager receives no compensation for the services it provides to the fund.
PORTFOLIO MANAGER
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.
10
<PAGE> 37
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.
11
<PAGE> 38
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
Year Ended December 31,
1998
-----------------------
<S> <C>
Net asset value, beginning of period $ xx.xx
--------
Income from investment operations:
Net investment income (loss) (x.xx)
--------
Net gains on securities (both realized and unrealized) (x.xx)
--------
Total from investment operations (x.xx)
--------
Distributions from net realized gains (x.xx)
--------
Net asset value, end of period $ xx.xx
--------
Total return (a) (x.xx)%
--------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ xx,xxx
--------
Ratio of expenses to average net assets (b) x.xx% (c)(d)
--------
Ratio of net investment income (loss) to average net assets (e) (x.xx)% (c)
--------
Portfolio turnover rate xx%
--------
</TABLE>
(a) Does not deduct sales charges and are not annualized for periods less than
one year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
X.XX%, X.XX%, X.XX%, X.XX%, and X.XX% for 1998-1994.
(c) Ratios are annualized and based on average net assets of $XX,XXX,XXX,XXX.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been the
same.
(e) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement were (X.XX)%, (X.XX)%, (X.XX)%, (X.XX)% and (X.XX)% for
1998-1994.
12
<PAGE> 39
Shareholder Information for Advisor Class Shares
- --------------------------------------------------------------------------------
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 funds advised by the
advisor (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.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
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--03/99
<PAGE> 40
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.
THE DISTRIBUTOR AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO (1) REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; (2) MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR (3) WITHDRAW ALL OR ANY
PART OF THE OFFERING MADE BY THIS PROSPECTUS.
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--03/99 A- 2
<PAGE> 41
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. 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 issuance of shares
being purchased 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 allowed to exchange by telephone even if you have
changed your address of record within the preceding 30 days.
A- 3 ADV--03/99
<PAGE> 42
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, 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--03/99 A- 4
<PAGE> 43
[BACK COVER PAGE]
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
United States 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, D.C., 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, D.C. 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
<PAGE> 44
The information in this Statement of Additional Information is not complete and
may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell these securities and
is not soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
SUBJECT TO COMPLETION DATED FEBRUARY 12, 1999
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> 45
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
Investment Policies of the Underlying Theme Funds......... 6
When Issued or Forward Commitment Securities.............. 10
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................. 12
Introduction........................................... 12
Special Risks of Options, Futures and Currency
Strategies............................................ 12
Writing Call Options................................... 13
Writing Put Options.................................... 14
Purchasing Put Options................................. 14
Purchasing Call Options................................ 15
Index Options.......................................... 16
Interest Rate, Currency and Stock Index Futures
Contracts............................................. 17
Options on Futures Contracts........................... 18
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies......................... 19
Forward Contracts...................................... 19
Foreign Currency Strategies -- Special
Considerations........................................ 20
Cover.................................................. 21
RISK FACTORS OF THE UNDERLYING THEME PORTFOLIOS........... 21
Debt Securities........................................ 21
Illiquid Securities.................................... 22
Foreign Securities..................................... 23
INVESTMENT LIMITATIONS...................................... 27
Investment Limitations of the Fund........................ 27
Investment Limitations of the Underlying Theme Funds and
Portfolios............................................. 28
Feeder Funds........................................... 28
Health Care Fund....................................... 30
Telecommunications Fund................................ 31
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 32
MANAGEMENT.................................................. 34
Trustees and Executive Officers........................... 34
Management Services Relating to the Fund.................. 35
THE DISTRIBUTION PLANS...................................... 36
The Class A and C Plan.................................... 36
The Class B Plan.......................................... 36
Both Plans................................................ 36
THE DISTRIBUTOR............................................. 39
REDUCTIONS IN INITIAL SALES CHARGES......................... 42
Contingent Deferred Sales Charge Exceptions............... 45
</TABLE>
2
<PAGE> 46
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
HOW TO PURCHASE AND REDEEM SHARES........................... 45
Backup Withholding........................................ 46
NET ASSET VALUE DETERMINATION............................... 47
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 48
Reinvestment of Dividends and Distributions............... 48
Tax Matters............................................... 48
Taxation of the Fund...................................... 48
Taxation of the Funds' Shareholders....................... 48
Reinstatement Privilege................................... 49
SHAREHOLDER INFORMATION..................................... 49
MISCELLANEOUS INFORMATION................................... 51
Special Servicing Agreement............................... 51
Charges for Certain Account Information................... 51
Custodian and Transfer Agent.............................. 52
Independent Accountants................................... 52
Legal Matters............................................. 52
Shareholder Liability..................................... 52
Control Persons and Principal Holders of Securities....... 53
INVESTMENT RESULTS.......................................... 53
Total Return Quotations................................... 53
Performance Information................................... 54
General Information about the Underlying Theme
Portfolios............................................. 55
Health Care Fund.......................................... 55
Information about the Global Health Care Industries....... 56
Telecommunications Fund................................... 56
Deregulation in the United States......................... 57
Consumer Products and Services Fund....................... 57
Infrastructure Fund....................................... 57
Financial Services Fund................................... 58
Resources Fund............................................ 58
APPENDIX.................................................... 59
Description of Commercial Paper Ratings................... 59
Description of Bond Ratings............................... 59
Absence of Rating......................................... 60
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 47
INTRODUCTION
This Statement of Additional Information relates to the Class A, Class B and
Class C shares of AIM Global Trends Fund, formerly known as GT New Dimension
Fund, (the "Fund"). The Fund is a diversified series of AIM Series Trust (the
"Trust"), an open-end management investment company organized as a Delaware
business trust. The Fund seeks its investment objective by investing
substantially all of its assets in shares of the AIM Global Theme Funds: AIM
Global Consumer Products and Services Fund; AIM Global Financial Services Fund;
AIM Global Health Care Fund; AIM Global Infrastructure Fund; AIM Global
Resources Fund; and AIM Global Telecommunications Fund (collectively, the
"Underlying Theme Funds"). A I M Advisors, Inc. ("AIM") serves as the investment
manager of and administrator for the Fund.
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. Investors must receive a Prospectus before they invest in the Fund.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Fund. Some of the
information required to be in this Statement of Additional Information is also
included in the Fund's current Prospectus, and in order to avoid repetition,
reference will be made herein to sections of the Prospectus. Additionally, the
Prospectus and this Statement of Additional Information omit certain information
contained in the Trust's Registration Statement filed with the SEC. Copies of
the Registration Statement, including items omitted from the Prospectus and this
Statement of Additional Information, may be obtained from the SEC by paying the
charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust was previously organized as a Massachusetts business trust named "GT
Global Series Trust," which was established on August 26, 1996 and which had one
series named "GT Global New Dimension Fund." On May 29, 1998, the Trust was
reorganized into a Delaware business trust, which was initially established on
May 7, 1998. The Trust currently consists of one series, the Fund. The Fund
currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and Advisor Class shares. From time to time the Board of
Trustees of the Trust may create new series of shares without the necessity of a
vote of the shareholders of the Trust. All historical financial and other
information contained in this Statement of Additional Information for periods
prior to May 29, 1998 relating to the Fund is that of GT Global New Dimension
Fund.
This Statement of Additional Information relates solely to the Class A, Class
B and Class C shares of the Fund.
The term "majority of the outstanding shares" of the Trust, of the Fund or of
a particular class of the Fund means, respectively, the vote of the lesser of
(a) 67% or more of the shares of the Trust, Fund, such class or such Portfolio
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, such class or such
Portfolio are present or represented by proxy, or (b) more than 50% of the
outstanding shares of the Trust, the Fund, such class or such Portfolio.
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> 48
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 48 countries including both
developed and developing countries as of April 30, 1998. Each of the 2,483
stocks is placed into one of 38 MSCI industry sectors. 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 the Appendix 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> 49
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.
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> 50
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 Feeder Fund is long-term capital growth. The
investment objectives of the AIM Global Health Care Fund ("Health Care Fund")
and the AIM Global Telecommunications Fund ("Telecommunications Fund") are
long-term capital appreciation and long-term growth of capital, respectively.
The Portfolios and the Health Care Fund and the 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 AIM's opinion, stand to benefit from developments in that industry.
For each Underlying Theme Portfolio's investment purposes, an issuer is
considered to be in a particular industry if: (i) at least 50% of either the
revenues or the earnings of the issuer was derived from activities related to
that particular industry or (ii) at least 50% of the assets was devoted to such
activities, based upon the company's most recent fiscal year.
Financial Services Fund
The remainder of the Financial Services Portfolio's assets may be invested in
debt securities issued by financial services companies and/or equity and debt
securities of companies outside of the financial services industries, which, in
the opinion of AIM, stand to benefit from developments in the financial services
industries.
7
<PAGE> 51
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
The remainder of the Infrastructure Portfolio's assets may be invested in debt
securities issued by infrastructure companies and/or equity and debt securities
of companies outside of the infrastructure industries, which, in the opinion of
AIM, stand to benefit from developments in the infrastructure industries.
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
The remainder of the Resources Portfolio's assets may be invested in debt
securities issued by natural resource companies and/or equity and debt
securities of companies outside of the natural resource industries, which, in
the opinion of AIM, stand to benefit from developments in the natural
resource industries.
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.
8
<PAGE> 52
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
The remainder of the Consumer Products and Services Portfolio's assets may be
invested in debt securities issued by consumer products or services companies
and/or equity and debt securities of companies outside the consumer products or
services industries, which, in the opinion of AIM, stand to benefit
from developments in such industries.
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 economics, 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
The remainder of the Health Care Fund's assets may be invested in debt
securities issued by health care companies and/or equity and debt securities of
companies outside of the health care industry, which, in the opinion of
AIM, stand to benefit from developments in the health care industries.
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
The remainder of the assets of the Telecommunications Fund may be invested in
debt securities issued by telecommunications companies and/or equity and debt
securities of companies outside of the telecommunications industry which, in the
opinion of AIM, stand to benefit from developments in the telecommunications
industries.
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 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.
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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.
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
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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 Theme Portfolio adopts a temporary defensive
posture, it will not be invested so as to achieve directly its investment
objective.
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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.
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.
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, 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
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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
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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, 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
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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.
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."
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Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features that permit the issuer to call or repurchase the security from
an Underlying Theme Portfolio. If an issuer exercises these provisions in a
declining interest rate market, the Underlying Theme Portfolio may have to
replace the security with a lower yielding security, resulting in a decreased
return for investors. In addition, the Underlying Theme Portfolios may have
difficulty disposing of lower quality securities because they may have a thin
trading market. There may be no established retail secondary market for many of
these securities, and each Underlying Theme Portfolio anticipates that such
securities could be sold only to a limited number of dealers or institutional
investors. The lack of a liquid secondary market also may have an adverse impact
on market prices of such instruments and may make it more difficult for the
Underlying Theme Portfolios to obtain accurate market quotations for purposes of
valuing their portfolio investments. The Underlying Theme Portfolios may also
acquire lower quality debt securities during an initial underwriting or which
are sold without registration under applicable securities laws. Such securities
involve special considerations and risks.
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower quality debt securities in which the Underlying Theme
Portfolios may invest include: (i) potential adverse publicity; (ii) heightened
sensitivity to general economic or political conditions; and (iii) the likely
adverse impact of a major economic recession. An Underlying Theme Portfolio may
also incur additional expenses to the extent it is required to seek recovery
upon a 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 Instability. Certain countries in which an
Underlying Theme Portfolio may invest may have groups that advocate radical
religious or revolutionary philosophies or support ethnic independence. Any
disturbance on the part of such individuals could carry the potential for
widespread destruction or confiscation of property owned by individuals and
entities foreign to such country and could cause the loss of an Underlying Theme
Portfolio's investment in those countries. Instability may also result from,
among other things, (i) authoritarian governments or military involvement in
political and economic decision-making, including changes in government through
extra-constitutional means, (ii) popular unrest associated with demands for
improved political, economic and social conditions; and (iii) hostile relations
with neighboring or other countries. Such political, social and economic
instability could disrupt the principal financial markets in which an Underlying
Theme Portfolio invests and adversely affect the value of its assets.
Foreign Investment Restrictions. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as an Underlying Theme Portfolio.
These restrictions or controls may at times limit or preclude investments in
certain securities and may increase the cost and expenses of an Underlying Theme
Portfolio. For example, certain countries require prior governmental approval
before investments by foreign persons may be made or may limit the amount of
investment by foreign persons in a particular company or limit the investment by
foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals. Moreover, the national policies of certain countries may
restrict investment opportunities in issuers or industries deemed sensitive to
national interests. In addition, some countries require governmental approval
for the repatriation of investment income, capital or the proceeds of securities
sales by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
restrictions on foreign capital remittances abroad. An Underlying Theme
Portfolio could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investments.
Non-Uniform Corporate Disclosure Standards and Governmental Regulation.
Foreign companies are subject to accounting, auditing and financial standards
and requirements that differ, in some cases significantly, from those applicable
to U.S. companies. In particular, the assets, liabilities and profits appearing
on the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Most of the foreign securities held by an Underlying
Theme Portfolio will not be registered with the SEC or regulators of any foreign
country, nor will the issuers thereof be subject to the SEC's reporting
requirements. Thus, there will be less available information concerning most
foreign issuers of securities held by an Underlying Theme Portfolio than is
available concerning U.S. issuers. In instances where the financial statements
of an issuer are not deemed to reflect accurately the financial situation of the
issuer, AIM 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 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 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 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 judgment; (3) pervasiveness of
corruption and crime in the economic system; (4) currency exchange rate
volatility and the lack of available currency hedging instruments; (5) higher
rates of inflation (including the risk of social unrest associated with periods
of hyper-inflation) and high unemployment; (6) controls on foreign investment
and local practices disfavoring foreign investors and limitations on
repatriation of invested capital, profits and dividends, and on a fund's ability
to exchange local currencies for U.S. dollars; (7) political instability and
social unrest and violence; (8) the risk that the governments of Russia and
Eastern European countries may decide not to continue to support the economic
reform programs implemented recently and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed when such countries had a communist form of government; (9)
the financial condition of companies in these countries, including large amounts
of inter-company debt which may create a payments crisis on a national scale;
(10) dependency on exports and the corresponding importance of international
trade; (11) the risk that the tax system in these countries will not be reformed
to prevent inconsistent, retroactive and/or exorbitant taxation; and (12) the
underdeveloped nature of the securities markets.
Special Considerations Affecting Japan. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the United States. In general, however, reported net income in
Japan is understated relative to U.S. accounting standards and this is one
reason why price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the United States,
both factors which tend to result in lower discount rates and higher
price-earnings ratios in Japan than in the United States.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
Special Considerations Affecting Pacific Region Countries. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also exist between South Korea and North Korea. In
addition, the Underlying Theme Portfolios may invest in Hong Kong, which
reverted to Chinese administration on July 1, 1997. Investments in Hong Kong may
be subject to expropriation, nationalization or confiscation, in which case an
Underlying Theme Portfolio could lose its entire investment in Hong Kong. In
addition, the reversion of Hong Kong also presents a risk that the Hong Kong
dollar will be devalued and a risk of possible loss of investor confidence in
Hong Kong's currency, stock market and assets.
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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 and 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
total assets, the Portfolio will not make any additional investments;
(6) Invest more than 10% of its total assets in shares of other
investment companies and may not invest more than 5% of its total assets in
any one investment company or acquire more than 3% of the outstanding
voting securities of any one investment company;
(7) Purchase securities on margin, provided that each Portfolio may
obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Portfolio
may make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments; or
(8) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Investors should refer to the applicable Prospectus for further information
with respect to the investment objective of each Feeder Fund, which may not be
changed without the approval of Fund shareholders, and its corresponding
Portfolio's investment objective, which may be changed without the approval of
its shareholders, and other investment policies, techniques and limitations,
which may or may not be changed without shareholder approval.
HEALTH CARE FUND
The Health Care Fund has adopted the following investment limitations as
fundamental policies, which may not be changed without the affirmative vote of a
majority of the outstanding shares of the Health Care Fund.
The Health Care Fund may not:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Health Care Fund may exercise rights under agreements
relating to such securities, including the right to enforce security
interests and to hold real estate acquired by reason of such enforcement
until that real estate can be liquidated in an orderly manner;
(2) Engage in the business of underwriting securities of other
issuers, except to the extent that the Health Care Fund might be considered
an underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(3) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or
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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 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;
36
<PAGE> 80
(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 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
37
<PAGE> 81
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 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.
38
<PAGE> 82
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. Both Boards
have adopted procedures in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to such affiliates are reasonable and
fair in the context of the market in which they are operating. Any such
transactions will be effected and related compensation paid only in accordance
with applicable SEC regulations.
The Fund may engage in certain principal and agency transactions with banks
and their affiliates that own 5% or more of the outstanding voting securities of
the Fund, provided the conditions of an exemptive order received by the Funds
from the SEC are met. In addition, a Fund may purchase or sell a security from
or to another AIM Fund provided the Fund follows procedures adopted by the
Boards of Directors/Trustees of the various AIM Funds, including the Trust.
These inter-fund transactions do not generate brokerage commissions but may
result in custodial fees or taxes or other related expenses.
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).
- ----------------------------------------------------------------------------------------------------
</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> 83
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
--------------------- ------------------- ------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
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.
- ----------------------------------------------------------------------------------------------------
+JOHN J. ARTHUR, (54) Vice President Director and Senior Vice President,
A I M Advisors, Inc.; and Vice
President and Treasurer, A I M
Management Group Inc.
- ----------------------------------------------------------------------------------------------------
KENNETH W. CHANCEY, (53) Vice President and Principal Senior Vice President -- Mutual Fund
50 California Street Accounting Officer Accounting, the Sub-advisor since
San Francisco, CA 94111 1997; Vice President -- Mutual Fund
Accounting, the Sub-advisor from
1992-1997.
- ----------------------------------------------------------------------------------------------------
MELVILLE B. COX, (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, (43) 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 Assistant Vice President and Fund Controller,
Treasurer A I M Advisors, Inc.; and Assistant
Vice President and Assistant
Treasurer, Fund Management Company.
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
+ Mr. Arthur and Ms. Relihan are married to each other.
The Board of Trustees has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and its
funds and recommending firms to serve as independent auditors of the Trust. All
of the Trust's Trustees also serve as directors
40
<PAGE> 84
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 [INVESCO (NY), Inc.] or any other affiliated company is paid
aggregate fees of $5,000 a year, plus $300 per Fund for each meeting of the
Board attended, and reimbursed travel and other expenses incurred in connection
with attendance at such meetings. Other Trustees and officers receive no
compensation or expense reimbursement from the Trust. As of 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 manager 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.
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.
41
<PAGE> 85
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.
BOTH PLANS
Pursuant to an incentive program, AIM Distributors may enter into agreements
("Shareholder Service Agreements") with investment dealers selected from time to
time by AIM Distributors for the provision of distribution assistance in
connection with the sale of the Fund's shares to such dealers' customers, and
for the provision of continuing personal shareholder services to customers who
may from time to time directly or beneficially own shares of the Funds. The
distribution assistance and continuing personal shareholder services to be
rendered by dealers under the Shareholder Service Agreements may include, but
shall not be limited to, the following: distributing sales literature; answering
routine customer inquiries concerning the Fund; assisting customers in changing
dividend options, account designations and addresses, and in enrolling in any of
the several special investment plans offered in connection with the purchase of
the Fund's shares; assisting in the establishment and maintenance of customer
accounts and records and in the processing of purchase and redemption
transactions; investing dividends and any capital gains distributions
automatically in the Fund's shares; and providing such other information and
services as the Fund or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements authorizing
payments to selected dealers, banks may enter into Shareholder Service
Agreements authorizing payments under the Plans to be made to banks which
provide services to their customers who have purchased shares. Services provided
pursuant to Shareholder Service Agreements with banks may include some or all of
the following: answering shareholder inquiries regarding the Fund, performing
sub-accounting; establishing and maintaining shareholder accounts and records;
processing customer purchase and redemption transactions; providing periodic
statements showing a shareholder's account balance and the integration of such
statements with those of other transactions and balances in the shareholder's
other accounts serviced by the bank; forwarding applicable prospectuses, proxy
statements, reports and notices to bank clients who hold Fund shares; and such
other administrative services as the Fund reasonably may request, to the extent
permitted by applicable statute, rule or regulation. Similar agreements may be
permitted under the Plans for institutions which provide recordkeeping for and
administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one particular class over another.
Under a Shareholder Service Agreement, the Fund agrees to pay periodically
fees to selected dealers and other institutions who render the foregoing
services to their customers. The fees payable under a Shareholder Service
Agreement generally will be calculated at the end of each payment period for
each business day of the Fund during such period at the annual rate of 0.25% of
the average daily net asset value of the Fund's shares purchased or acquired
through exchange. Fees calculated in this manner shall be paid only to those
selected dealers or other institutions who are dealers or institutions of record
at the close of business on the last business day of the applicable payment
period for the account in which the Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable limitations
imposed by rules of the National Association of Securities Dealers, Inc.
("NASD"). The Plans conform to rules of the NASD by limiting payments made to
dealers and other financial institutions who provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund
to no more than 0.25% per annum of the average daily net assets of the funds
attributable to the customers of such dealers or financial institutions, and by
imposing a cap on the total sales charges, including asset based sales charges,
that may be paid by the Fund and its respective classes.
AIM Distributors does not act as principal, but rather as agent for the Fund,
in making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Fund and not of AIM Distributors.
Financial
42
<PAGE> 86
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 adopted a different Rule 12b-1 plan, that
operated as a "reimbursement-type" plan (the "Prior Plan"). The information
provided below related to payments made under the Prior Plan, which provided for
payments to GT Global Inc., the distributor of the Fund at the time the Prior
Plan was in effect.
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 A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Prior Plan............................... $11,800 $27,856 0.50% 1.00%
Current Plan............................. $ $ % %
</TABLE>
Actual fees by category paid by the Fund with regard to the Class A shares
during the fiscal period ended December 31, 1998 follows:
<TABLE>
<S> <C>
CLASS A
Compensation to Underwriters to partially offset other
marketing expenses..................................... $
Compensation to Dealers including finder's fees........... $
</TABLE>
Actual fees by category paid by the Fund with regard to the Class B shares
during the fiscal period ended December 31, 1998 as follows:
<TABLE>
<S> <C>
CLASS B
Compensation to Underwriters to partially offset upfront
dealer commissions
and other marketing costs.............................. $
Compensation to Dealers................................... $
</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 until May 29, 1999, and each year thereafter, as long as such
continuance is specifically approved at least annually by the Board of Trustees,
including a majority of the Qualified Trustees.
The Plans may be terminated by the vote of a majority of the Qualified
Trustees, or, with respect to a particular class, by the vote a majority of the
outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
it may be amended by the Trustees, including a majority of the Qualified
Trustees, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plans are in effect, the selection or
nomination of the Qualified Trustees is committed to the discretion of the
Qualified Trustees. In the event the Class A and C Plan is amended in a manner
which the Board of Trustees determines would materially increase the charges
paid under the Class A and C Plan, the Class B shares of the Fund will no longer
convert into Class A shares of the same Fund unless the Class B shares, voting
separately, approve such amendment. If the Class B shareholders do not approve
such amendment, the Board of Trustees will (i) create a new class of shares of
the Fund which is identical in all
43
<PAGE> 87
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.
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.
44
<PAGE> 88
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
December 31, 1998
------------------
SALES AMOUNT
CHARGES RETAINED
------- --------
<S> <C> <C>
AIM Global Trends Fund...................................... $ $
</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...................................... $ $
</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...................................... $
</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 Global Utilities
Fund, AIM Global Growth & Income Fund, AIM International Equity Fund, AIM
International Growth Fund, AIM Japan Growth Fund, AIM Large Cap Growth Fund, AIM
Mid Cap Equity 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>
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
45
<PAGE> 89
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, 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.
46
<PAGE> 90
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 Small Cap Opportunities
Funds, 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;
- 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
47
<PAGE> 91
- 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.
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
48
<PAGE> 92
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(R), 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,
provided the initial investment in the Fund(s) is at least $1 million; the
sponsor signs a $1 million LOI; the employer-sponsored plan 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 Weingarten or Constellation on September 8, 1996,
or of Charter 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 Weingarten or Constellation; 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 Weingarten and Constellation is effected within 30
days of the redemption or repurchase;
- A shareholder of a fund that merges or consolidates with an AIM Fund or that
sells its assets to an AIM Fund in exchange for shares of an AIM Fund;
- Shareholders of the GT Global funds as of April 30, 1987 who since that date
continually have owned shares of one or more of these funds; 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.
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<PAGE> 93
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.
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 -- How
to Purchase Shares."
The sales charge normally deducted on purchases of Class A shares of the Funds
is used to compensate AIM Distributors and participating dealers for their
expenses incurred in connection with the distribution of such shares. Since
there is little expense associated with unsolicited orders placed directly with
AIM Distributors by persons, who because of their relationship with the Funds or
with AIM and its affiliates, are familiar with the Funds, or whose programs for
purchase involve little expense (e.g., because of the size of the transaction
and shareholder records required), AIM Distributors believes that it is
appropriate and in the Funds' best interests that such persons be permitted to
purchase Class A shares of
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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 -- How to Redeem Shares." Shares
of the AIM Funds may be redeemed directly through AIM Distributors or through
any dealer who has entered into an agreement with AIM Distributors. In addition
to the obligation of the Funds to redeem shares, AIM Distributors also
repurchases shares. AIM intends to redeem all shares of the Funds in cash. In
addition to the Funds' obligation to redeem shares, AIM Distributors may also
repurchase shares as an accommodation to shareholders. To effect a repurchase,
those dealers who have executed Selected Dealer Agreements with AIM Distributors
must phone orders to the order desk of the Fund telephone: (713) 626-1919,
Extension 5001 (in Houston) or (800) 347-4246 (elsewhere) and guarantee delivery
of all required documents in good order. A repurchase is effected at the net
asset value of 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 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)
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- 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.
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.
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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 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.
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
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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.
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.
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
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due to unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
By signing an account application form, an investor appoints the Transfer
Agent as his true and lawful attorney-in-fact to surrender for redemption any
and all unissued shares held by the Transfer Agent in the designated account(s),
or in any other account with any of the AIM Funds, present or future, which has
the identical registration as the designated account(s), with full power of
substitution in the premises. The Transfer Agent and AIM Distributors are
thereby authorized and directed to accept and act upon any telephone redemptions
of shares held in any of the account(s) listed from any person who requests the
redemption proceeds to be applied to purchase shares in any one or more of the
AIM Funds, provided that such fund is available for sale and provided that the
registration and mailing address of the shares to be purchased are identical to
the registration of the shares being redeemed. An investor acknowledges by
signing the form that he understands and agrees that the Transfer Agent and AIM
Distributors may not be liable for any loss, expense or cost arising out of any
telephone exchange requests effected in accordance with the authorization set
forth in these instructions if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions. The Transfer Agent reserves the right to modify or
terminate the telephone exchange privilege at any time without notice. An
investor may elect not to have this privilege by marking the appropriate box on
the application. Then any exchanges must be effected in writing by the investor.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an investor
appoints the Transfer Agent as his true and lawful attorney-in-fact to surrender
for redemption any and all unissued shares held by the Transfer Agent in the
designated account(s), present or future, with full power of substitution in the
premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone redemption requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transactions. The Transfer Agent reserves the
right to cease to act as attorney-in-fact subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone redemption
privilege at any time without notice. An Investor may elect not to have this
privilege by marking the appropriate box on the application. 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 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.
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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
Funds. The custodian attends to the collection of principal and income, pays and
collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. A I M Fund Services, Inc., a wholly owned
subsidiary of AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, acts
as transfer and dividend disbursing agent for the Funds. These services do not
include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Funds pay the Custodian and the
Transfer Agent such compensation as may be agreed upon from time to time.
Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002, serves as
Sub-Custodian for retail purchases of the AIM Funds.
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Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") has entered into
an agreement with the Trust (and certain other AIM Funds), First Data Investor
Service Group (formerly The Shareholder Services Group, Inc.) and Financial Data
Services, Inc., pursuant to which MLPF&S has agreed to perform certain
shareholder sub-accounting services for its customers who beneficially own
shares of the Fund.
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.
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of the Trust enjoy the same limitations
of liability extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
the Trust Agreement disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
trustee. If a shareholder is held personally liable for the obligations of the
Trust, the Trust Agreement provides that the shareholder shall be entitled out
of the assets belonging to the applicable Fund (or allocable to the applicable
Class), to be held harmless from and indemnified against all loss and expense
arising from such liability in accordance with the Trust's Bylaws and applicable
law. Thus, the risk of a shareholder incurring financial loss on account of such
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations and where the other party was held not to be bound by
the disclaimer.
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
- ------------------------------------------------------------
MLPF& S For the Sole Benefit of its Customers, Security % -0-
#97R61
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Floor
Jacksonville, FL 32246-6484
</TABLE>
- ---------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
57
<PAGE> 101
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return, as described in the
Prospectus, is as follows:
(n)
P(1+T) = ERV
<TABLE>
<S> <C> <C> <C>
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable maximum
sales load is deducted at the beginning of the 1, 5, or 10
year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the 1, 5, or 10 year periods (or fractional
portion of such period).
</TABLE>
Standard total return quotes may be accompanied by total return figures
calculated by alternative methods. For example, average annual total return may
be calculated without assuming payment of the full sales load according to the
following formula:
(n)
P(1+U) = ERV
<TABLE>
<S> <C> <C> <C>
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only a
stated portion of, or none of, the applicable maximum sales
load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.
</TABLE>
Cumulative total return across a stated period may be calculated as follows:
(n)
P(1+V) = ERV
<TABLE>
<S> <C> <C> <C>
Where P = a hypothetical initial payment of $1,000.
V = cumulative total return assuming payment of all of, a stated
portion of, or none of, the applicable maximum sales load at
the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.
</TABLE>
The cumulative total returns for the Class A and Class B shares of the Fund
for the period shown, were:
<TABLE>
<CAPTION>
PERIOD CLASS A CLASS B
------ ------- -------
<S> <C> <C>
Fiscal period ended December 31, 1998.................. % %
</TABLE>
58
<PAGE> 102
PERFORMANCE INFORMATION
Total return and yield figures for the Fund are neither fixed nor guaranteed,
and the Fund's principal is not insured. Performance quotations reflect
historical information and should not be considered representative of the Fund's
performance for any period in the future. Performance is a function of a number
of factors which can be expected to fluctuate. The Fund may provide performance
information in reports, sales literature and advertisements. The Fund may also,
from time to time, quote information about the Fund published or aired by
publications or other media entities which contain articles or segments relating
to investment results or other data about the Fund. Such publications or media
entities may include the following, among others:
Advertising Age
Barron's
Best's Review
Broker World
Business Week
Changing Times
Christian Science Monitor
CNBC
CNN
Consumer Reports
Economist
EuroMoney
FACS of the Week
Financial Planning
Financial Product News
Financial Services Week
Financial World
Forbes
Fortune
Global Finance
Hartford Courant Inc.
Insurance Forum
Institutional Investor
Insurance Week
Investor's Daily
Journal of the American
Society of CLU & ChFC
Kiplinger Letter
Money
Mutual Fund Forecaster
Mutual Fund Magazine
Nation's Business
New York Times
PBS
Pension World
Pensions & Investments
Personal Investor
Philadelphia Inquirer
Smart Money
USA Today
U.S. News & World Report
Wall Street Journal
Washington Post
The Fund and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Fund with the following, or compare the Fund's performance to performance
data of similar mutual funds as published in the following, among others:
Bank Rate National Monitor Index
Bear Stearns Foreign Bond Index
Bond Buyer Index
CDA/Wiesenberger Investment Company Services
(data and mutual fund rankings and
comparisons)
CNBC/Financial News Composite Index
COFI
Consumer Price Index
Datastream
Donoghue's
Dow Jones Industrial Average
EAFE Index
First Boston High Yield Index
Fitch (publications)
Ibbotson Associates International Bond Index
International Bank for Reconstruction and
Development (publications)
International Finance Corporation Emerging
Markets Database
International Financial Statistics
Lehman Bond Indices
Lipper Analytical Data Services, Inc. (data and
mutual fund rankings and comparisons)
Micropal, Inc. (data and mutual fund rankings
and comparisons)
Moody's Investors Service (publications)
Morgan Stanley Capital International All
Country (AC) World Index
Morgan Stanley Capital International World
Indices
Morningstar, Inc. (data and mutual fund rankings
and comparisons)
NASDAQ
Organization for Economic Cooperation and
Development (publications)
Salomon Brothers Global Telecommunications
Index
Salomon Brothers World Government Bond
Index -- Non-U.S.
Salomon Brothers World Government Bond Index
Standard & Poor's (publications)
Standard & Poor's 500 Composite Stock Price
Index
Stangar
Wilshire Associates
World Bank (publications and reports)
The World Bank Publication of Trends in
Developing Countries
Worldscope
59
<PAGE> 103
The Fund may also compare its performance to rates on Certificates of Deposit
and other fixed rate investments such as the following:
10-year Treasuries
30-year Treasuries
30-day Treasury Bills
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. Advertising for the Fund may from time to time include discussions
of general economic conditions and interest rates. Advertising for the Fund may
also include reference to the use of the Fund as part of an individual's overall
retirement investment program. From time to time, sales literature and/or
advertisements for the Fund may disclose (i) the largest holdings in the Fund's
portfolio, (ii) certain selling group members and/or (iii) certain institutional
shareholders.
From time to time, the Fund's sales literature and/or advertisements may
discuss generic topics pertaining to the mutual fund industry. This includes,
but is not limited to, literature addressing general information about mutual
funds, variable annuities, dollar-cost averaging, stocks, bonds, money markets,
certificates of deposit, retirement, retirement plans, asset allocation,
tax-free investing, college planning, and inflation.
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential investments,
investors should note that the methods of computing performance of other
potential investments are not necessarily comparable to the methods employed by
a Fund.
GENERAL INFORMATION ABOUT THE UNDERLYING THEME PORTFOLIOS
Each Underlying Theme Portfolio may invest worldwide across industries within
the Portfolio's area of concentration without national or regional restrictions.
The ability of each Underlying Theme Portfolio to invest worldwide may allow the
portfolio managers to select industries in different economic cycles and varying
stages of development, though there is no assurance that the managers will be
successful in this selection.
Each Underlying Theme Portfolio's area of concentration reflects the
underlying theme of the Portfolio. AIM Distributors believes that there are
certain social, political and economic trends that may benefit one or more
industries within an Underlying Theme Portfolio's area of concentration. Of
course, there is no assurance that any of the Funds will benefit as a result.
HEALTH CARE FUND
From time to time the Fund and AIM Distributors will quote information
including data regarding:
- Trading volume, number of listed companies and the largest companies of the
global health care industry
- Expenditures by various countries, regions and age groups on health care
- Population of countries, regions and age groups
- Natality and mortality rates in various regions, countries and age groups
- Life expectancy rates in various regions, countries and age groups
- New health care products and products seeking approval
- Health maintenance organizations (HMOs) and their enrollment growth
- Studies from, but not limited to, the American Medical Association showing
the effectiveness of using drugs to cure illness
- Medical technology and devices in use or in development
- Regulatory environment of health care industries
- Consolidation in the health care industries
60
<PAGE> 104
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Research firms such as Mehta and Isaly which publishes Pharmaceutical
Portfolio Recommendations
- OECD and its publications such as the OECD Health Data, as supplemented
annually
- Morgan Stanley Capital International stock market industry indices such as
Health & Personal Care
- The World Bank and its publications such as The World Development Report, as
supplemented annually
- IFC and publications such as the Emerging Stock Markets Factbook
INFORMATION ABOUT THE GLOBAL HEALTH CARE INDUSTRIES
The Fund and the Sub-advisor believe that certain market and demographic
factors merit an investor's consideration when making a health care investment.
Worldwide standards of living and life expectancy have increased at a
substantial rate. The Sub-advisor, the investment advisor to the AIM Funds,
expects this growth, which works to the general benefit of the global health
care industry, to continue at a roughly comparable rate in the future, although
no assurances can be given in this regard. Moreover, according to the
Sub-advisor, the health care industry historically has proven to be a relatively
non-cyclical industry that continues to provide goods and services to the public
in periods of economic weakness as well as economic strength.
AIM 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 AIM, in Japan the number of people age 65 and
older is expected to grow over 100% by the year 2025; in Germany, France and the
U.S., the same age group should grow 40%. Similarly, the U.S. Census Bureau
predicts the number of Americans 85 and older to double in the next 30 years.
From time to time, the Fund and AIM Distributors will quote information
including, but not limited to, international data regarding populations, birth
rates, mortality rates, life expectancy, health care expenditures, and gross
domestic product vs. life expectancy. The information quoted has not been
independently verified by the Fund or AIM Distributors and will be based on data
that is believed to be reliable and accurate.
TELECOMMUNICATIONS FUND
From time to time the Fund and AIM Distributors will quote information
including data regarding:
- Increased usage of new technologies such as, but not limited to, cellular
and wireless communications in emerging and established countries around the
world
- Supply and demand of telephone equipment and services
- Regulatory environment of telecommunications industries
- Revenue, price and usage of telecommunications products and services
- Privatization and/or deregulation of telecommunications companies
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Salomon Brothers World Equity Telecommunications Index, which includes stock
market data about the telecommunications industry in established and
developing markets
- OECD and other publications from its subsidiaries such as the International
Telecommunications Union
- Morgan Stanley Capital International stock market industry indices such as
Telecommunications, Broadcasting & Publishing and Data Processing &
Reproduction
- International Technology Consultants, a Washington D.C. based firm which
publishes reports such as Eastern European & Soviet Telecom Report and Latin
American Telecom Report
- Telegeography and other publications
61
<PAGE> 105
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.
AIM expects this scenario to continue to benefit such companies in the U.S. and
similarly to be realized by the established telecommunications companies in
established economies, although no assurances can be made in this regard.
CONSUMER PRODUCTS AND SERVICES FUND
From time to time the Fund and AIM Distributors will quote information
including data regarding:
- Trading volume, number of listed companies and the largest companies located
around the world in the consumer products and services industries
- Expenditures, demand and consumption by various countries, regions, income
classes and age groups of consumer products and services
- Population of countries, regions and age groups
- Life expectancy rates in various regions, countries and age groups
- New consumer products and services in the development or manufacturing
stages
- Income of various regions, countries and age groups
- Sales and sales growth of consumer products and services companies in their
own country and abroad
- Sales, supply and demand of consumer products and services
- Parent companies and the products and services they distribute
- Regulatory environment of consumer products industries
The information quoted will not be independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including, but not limited to, the following:
- Consumer and trade groups
- Fortune magazine and other periodicals
- The World Bank and its publications
- The International Monetary Fund (IMF) and its publications
- IFC and its publications
- OECD and its publications
INFRASTRUCTURE FUND
From time to time the Fund and AIM Distributors may quote information
including:
- Supply and demand of telephone equipment and services, electricity, water,
transportation, construction materials and other infrastructure related
products and services
- Regulatory environment of infrastructure industries
- Quantity and costs of current and projected infrastructure projects
- Privatization of industries and companies
- New technologies, products and services used in infrastructure industries
- Infrastructure Finance Magazine and other periodicals
62
<PAGE> 106
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
63
<PAGE> 107
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's Investors, Inc. ("Moody's") employs the designations "Prime-1" and
"Prime-2" to indicate commercial paper having the highest capacity for timely
repayment. Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This normally will be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") rates
commercial paper in four categories ranging from "A-1" for the highest quality
obligations to "D" for the lowest. A-1 -- This highest category indicates that
the degree of safety regarding timely payment is strong. Those issues determined
to possess extremely strong safety characteristics will be denoted with a plus
sign (+) designation. A-2 -- Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of safety is not as
high as for issues designated "A-1." A-3 -- Issues carrying this designation
have adequate capacity for timely payment. They are, however, more vulnerable to
the adverse effects of changes in circumstances than obligations carrying the
higher designations. B -- Issues rated "B" are regarded as having only
speculative capacity for timely payment. C -- This rating is assigned to
short-term debt obligations with a doubtful capacity for payment. D -- Debt
rated "D" is in payment default. The "D" rating category is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period.
DESCRIPTION OF BOND RATINGS
Moody's rates the long-term debt securities issued by various entities from
"Aaa" to "C." Investment Grade Ratings are the first four categories:
Aaa -- Best quality. These securities carry the smallest degree of investment
risk and are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Aa -- High quality by all standards. Together with the
Aaa group they comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the Aaa securities.
A -- Upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future. Baa -- Medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. Ba -- Have
speculative elements and their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B -- Generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small. Caa -- Poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca -- Speculative in a high degree. Such issues are often in default or have
other marked shortcomings. C -- Lowest rated class of bonds. Issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
S&P rates the securities debt of various entities in categories ranging from
"AAA" to "D" according to quality. Investment grade ratings are the first four
categories: AAA -- Highest rating. Capacity to pay interest and repay principal
is extremely strong. AA -- Very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.
A -- Has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. BBB -- Regarded as
having adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" is
regarded, on balance, as predominantly speculative with
64
<PAGE> 108
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.
65
<PAGE> 109
FINANCIAL STATEMENTS
FS
<PAGE> 110
The information in this Statement of Additional Information is not complete
and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective.
This Statement of Additional Information is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
SUBJECT TO COMPLETION DATED FEBRUARY 12, 1999
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> 111
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
Investment Policies of the Underlying Theme Funds......... 6
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................... 12
Introduction.............................................. 12
Special Risks of Options, Futures and Currency
Strategies............................................. 12
Writing Call Options...................................... 13
Writing Put Options....................................... 14
Purchasing Put Options.................................... 14
Purchasing Call Options................................... 15
Index Options............................................. 16
Interest Rate, Currency and Stock Index Futures
Contracts.............................................. 17
Options on Futures Contracts.............................. 18
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies.......................... 19
Forward Contracts......................................... 19
Foreign Currency Strategies -- Special Considerations..... 20
Cover..................................................... 21
RISK FACTORS OF THE UNDERLYING THEME PORTFOLIOS............. 21
Debt Securities........................................... 21
Investing in Smaller Companies............................ 22
Purchases and Redemptions................................. 22
Illiquid Securities....................................... 22
Foreign Securities........................................ 23
INVESTMENT LIMITATIONS...................................... 27
Investment Limitations of the Fund........................ 27
Investment Limitations of Underlying Theme Funds and
Portfolios............................................. 28
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 32
MANAGEMENT.................................................. 34
Trustees and Executive Officers........................... 34
Management Services Relating to the Fund.................. 35
Distribution Services Relating to the Fund................ 35
HOW TO PURCHASE AND REDEEM SHARES........................... 35
Backup Withholding........................................ 36
NET ASSET VALUE DETERMINATION............................... 37
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 38
Reinvestment of Dividends and Distributions............... 38
Tax Matters............................................... 38
Taxation of the Fund...................................... 38
Taxation of the Fund's Shareholders....................... 38
</TABLE>
2
<PAGE> 112
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
SHAREHOLDER INFORMATION..................................... 39
Timing of Purchase Orders................................. 39
Share Certificates........................................ 39
Terms and Conditions of Exchanges......................... 39
Exchanges by Mail......................................... 40
Exchanges by Telephone.................................... 40
Redemptions by Mail....................................... 41
Redemptions by Telephone.................................. 41
Timing and Pricing of Redemption Orders................... 41
Signature Guarantees...................................... 42
Dividends and Distributions............................... 42
Minimum Account Balance................................... 43
MISCELLANEOUS INFORMATION................................... 43
Special Servicing Agreement............................... 43
Charges for Certain Account Information................... 44
Custodian and Transfer Information........................ 44
Independent Accountants................................... 44
Shareholder Liability..................................... 44
Control Persons and Principal Holders of Securities....... 45
INVESTMENT RESULTS.......................................... 45
Total Return Quotations................................... 45
Performance Information................................... 46
General Information About Underlying Theme Portfolios..... 47
APPENDIX.................................................... 50
Description of Commercial Paper Ratings................... 50
Description of Bond Ratings............................... 51
Absence of Ratings........................................ 51
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 113
INTRODUCTION
This Statement of Additional Information relates to the Advisor Class shares
of AIM Global Trends Fund, formerly known as GT New Dimension Fund, (the
"Fund"). The Fund is a diversified series of AIM Series Trust (the "Trust"), an
open-end management investment company organized as a Delaware business trust.
The Fund seeks its investment objective by investing substantially all of its
assets in shares of the AIM Global Theme Funds: AIM Global Consumer Products and
Services Fund; AIM Global Financial Services Fund; AIM Global Health Care Fund;
AIM Global Infrastructure Fund; AIM Global Resources Fund; and AIM Global
Telecommunications Fund (collectively, the "Underlying Theme Funds"). A I M
Advisors, Inc. ("AIM") serves as the investment manager of and administrator for
the Fund.
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.
Investors must receive a Prospectus before they invest in the Fund.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Fund. Some of the
information required to be in this Statement of Additional Information is also
included in the Fund's current Prospectus, and in order to avoid repetition,
reference will be made herein to sections of the Prospectus. Additionally, the
Prospectus and this Statement of Additional Information omit certain information
contained in the Trust's Registration Statement filed with the SEC. Copies of
the Registration Statement, including items omitted from the Prospectus and this
Statement of Additional Information, may be obtained from the SEC by paying the
charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust was previously organized as a Massachusetts business trust named "GT
Global Series Trust," which was established on August 26, 1996 and which had one
series named "GT Global New Dimension Fund." On May 29, 1998, the Trust was
reorganized into a Delaware business trust, which was initially established on
May 7, 1998. The Trust currently consists of one series, the Fund. The Fund
currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and Advisor Class shares. From time to time the Board of
Trustees of the Trust may create new series of shares without the necessity of a
vote of the shareholders of the Trust. All historical financial and other
information contained in this Statement of Additional Information for periods
prior to May 29, 1998 relating to the Fund is that of GT Global New Dimension
Fund.
This Statement of Additional Information relates solely to the Advisor Class
shares of the Fund.
The term "majority of the outstanding shares" of the Trust, of the Fund or of
a particular class of the Fund means, respectively, the vote of the lesser of
(a) 67% or more of the shares of the Trust, Fund, such class or such Portfolio
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, such class or such
Portfolio are present or represented by proxy, or (b) more than 50% of the
outstanding shares of the Trust, the Fund, such class or such Portfolio.
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.
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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 48 countries including both
developed and developing countries as of April 30, 1998. Each of the 2,483
stocks is placed into one of 38 MSCI industry sectors. 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 the Appendix 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
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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
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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 Feeder Fund is long-term capital growth. The
investment objectives of the AIM Global Health Care Fund ("Health Care Fund")
and the AIM Global Telecommunications Fund ("Telecommunications Fund") are
long-term capital appreciation and long-term growth of capital, respectively.
The Portfolios and the Health Care Fund and the 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. For each Underlying Theme Portfolio's investment purposes, an issuer
is considered to be in a particular industry if: (i) at least 50% of either the
revenues or the earnings of the issuer was derived from activities related to
that particular industry or (ii) at least 50% of the assets was devoted to such
activities, based upon the company's most recent fiscal year.
Financial Services Fund
The remainder of the Financial Services Portfolio's assets may be invested in
debt securities issued by financial services companies and/or equity and debt
securities of companies outside of the financial services industries, which, in
the opinion of AIM, stand to benefit from developments in the financial services
industries.
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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
The remainder of the Infrastructure Portfolio's assets may be invested in debt
securities issued by infrastructure companies and/or equity and debt securities
of companies outside of the infrastructure industries, which, in the opinion of
AIM, stand to benefit from developments in the infrastructure industries.
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
The remainder of the Resources Portfolio's assets may be invested in debt
securities issued by natural resource companies and/or equity and debt
securities of companies outside of the natural resource industries, which, in
the opinion of AIM, stand to benefit from developments in the natural resource
industries.
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
The remainder of the Consumer Products and Services Portfolio's assets may be
invested in debt securities issued by consumer products or services companies
and/or equity and debt securities of companies outside the consumer products or
services industries, which, in the opinion of AIM, stand to benefit from
developments in such industries.
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
The remainder of the Health Care Fund's assets may be invested in debt
securities issued by health care companies and/or equity and debt securities of
companies outside of the health care industry, which, in the opinion of AIM,
stand to benefit from developments in the health care industries.
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
The remainder of the assets of the Telecommunications Fund may be invested in
debt securities issued by telecommunications companies and/or equity and debt
securities of companies outside of the telecommunications industry which, in the
opinion of AIM, stand to benefit from developments in the telecommunications
industries.
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.
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.
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."
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
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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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(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
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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> 148
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. Both Boards
have adopted procedures in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to such affiliates are reasonable and
fair in the context of the market in which they are operating. Any such
transactions will be effected and related compensation paid only in accordance
with applicable SEC regulations.
The Funds may engage in certain principal and agency transactions with banks
and their affiliates that own 5% or more of the outstanding voting securities of
a Fund, provided the conditions of an exemptive order received by the Funds from
the SEC are met. In addition, a Fund may purchase or sell a security from or to
another AIM Fund provided the Funds follow procedures adopted by the Boards of
Directors/Trustees of the various AIM Funds, including the Trust. These
inter-fund transactions do not generate brokerage commissions but may result in
custodial fees or taxes or other related expenses.
MANAGEMENT
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below. Unless otherwise
indicated, the address of each Executive Officer is 11 Greenway Plaza, Suite
100, Houston, Texas 77046.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT
NAME, ADDRESS AND AGE WITH REGISTRANT LEAST THE PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (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 Mr. Anderson is President, Plantagenet Capital
220 Sansome Street Management, LLC (an investment partnership); Chief
Suite 400 Executive Officer, Plantagenet Holdings, Ltd. (an
San Francisco, CA 94104 investment banking firm); Director, Anderson Capital
Management, Inc. since 1988; and Director,
PremiumWear, Inc. (formerly Munsingwear, Inc.) (a
casual apparel company) and Director, "R" Homes, Inc.
and various other companies.
- ----------------------------------------------------------------------------------------------------------
FRANK S. BAYLEY (59) Trustee Mr. Bayley is a partner of the law firm of Baker &
Two Embarcadero Center McKenzie, and serves as a Director and Chairman of
Suite 2400 C.D. Stimson Company (a private investment company).
San Francisco, CA 94111
- ----------------------------------------------------------------------------------------------------------
ARTHUR C. PATTERSON (55) Trustee Mr. Patterson is Managing Partner of Accel Partners
428 University Avenue (a venture capital firm). He also serves as a
Palo Alto, CA 94301 director of Viasoft and PageMart, Inc. (both public
software companies), as well as several other
privately held software and communications companies.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* A trustee who is an "interested person" of the Trust and A I M Advisors, Inc. as defined in the 1940
Act.
</TABLE>
39
<PAGE> 149
<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 Miss Quigley is a private investor. From 1984 to
1055 California Street 1986, she was President of Quigley Friedlander & Co.,
San Francisco, CA 94108 Inc. (a financial advisory services firm).
- ----------------------------------------------------------------------------------------------------------
+JOHN J. ARTHUR (54) Vice President Director and Senior Vice President, A I M Advisors,
Inc.; and Vice President and Treasurer, A I M
Management Group Inc.
- ----------------------------------------------------------------------------------------------------------
KENNETH W. CHANCEY (52) Vice President and Senior Vice President -- Mutual Fund Accounting, the
50 California Street Principal Accounting Sub-advisor since 1992; Vice President -- Mutual Fund
San Francisco, CA 94111 Officer Accounting, the Sub-advisor from 1992 - 1997.
- ----------------------------------------------------------------------------------------------------------
MELVILLE B. COX (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,
Assistant Treasurer Inc.; and Assistant Vice President and Assistant
Treasurer, Fund Management Company.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
+ Mr. Arthur and Ms. Relihan are married to each other.
The Board of Trustees has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and its
funds and recommending firms to serve as independent auditors of the Trust. All
of the Trust's Trustees also serve as directors or trustees of some or all of
the other investment companies managed, administered or advised by AIM. All of
the Trust's Executive Officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM. Each Trustee
who is not a director, officer or employee of [INVESCO(NY), Inc.] or any other
affiliated company is paid aggregate fees of $5,000 a year, plus $300 per Fund
for each meeting of the Board attended, and reimbursed travel and other expenses
incurred in connection with attendance at such meetings. Other Trustees and
Officers receive no compensation or expense reimbursement from the Trust. As of
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> 150
MANAGEMENT SERVICES RELATING TO THE FUND
AIM serves as the investment manager and administrator to the Fund under an
investment management and administration contract ("Management Contract")
between the Trust and AIM. 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> 151
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 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> 152
- 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> 153
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 each 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> 154
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
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<PAGE> 155
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
46
<PAGE> 156
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
47
<PAGE> 157
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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<PAGE> 158
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
Funds. The custodian attends to the collection of principal and income, pays and
collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. A I M Fund Services, Inc., a wholly owned
subsidiary of AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, acts
as transfer and dividend disbursing agent for the Funds. These services do not
include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Funds pay the Custodian and the
Transfer Agent such compensation as may be agreed upon from time to time.
Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002, serves as
Sub-Custodian for retail purchases of the AIM Funds.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") has entered into
an agreement with the Trust (and certain other AIM Funds), First Data Investor
Service Group (formerly The Shareholder Services Group, Inc.) and Financial Data
Services, Inc., pursuant to which MLPF&S has agreed to perform certain
shareholder sub-accounting services for its customers who beneficially own
shares of the Fund.
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> 159
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of the Trust enjoy the same limitations
of liability extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
the Trust Agreement disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
trustee. If a shareholder is held personally liable for the obligations of the
Trust, the Trust Agreement provides that the shareholder shall be entitled out
of the assets belonging to the applicable Fund (or allocable to the applicable
Class), to be held harmless from and indemnified against all loss and expense
arising from such liability in accordance with the Trust's Bylaws and applicable
law. Thus, the risk of a shareholder incurring financial loss on account of such
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations and where the other party was held not to be bound by
the disclaimer.
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 any 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 % -0-
MLPF&S for the Sole Benefit of
its Customers, Security #9,7R61
Attn: Fund Administration
4800 Deer Lake Drive East, 3rd Fl.
Jacksonville, Florida 32246-6484
</TABLE>
- ---------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return, as described in the
Prospectus, is as follows:
(n)
P(1+T) =ERV
<TABLE>
<S> <C> <C> <C>
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable maximum
sales load is deducted at the beginning of the 1, 5, or 10
year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the 1, 5, or 10 year periods (or fractional
portion of such period).
</TABLE>
Standard total return quotes may be accompanied by total return figures
calculated by alternative methods. For example, average annual total return may
be calculated without assuming payment of the full sales load according to the
following formula:
(n)
P(1+U) =ERV
<TABLE>
<S> <C> <C> <C>
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only a
stated portion of, or none of, the applicable maximum sales
load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.
</TABLE>
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<PAGE> 160
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
period September 15, 1997 to December 31, 1997 was (2.51)%.
PERFORMANCE INFORMATION
Total return and yield figures for the Fund are neither fixed nor guaranteed,
and the Fund's principal is not insured. Performance quotations reflect
historical information and should not be considered representative of the Fund's
performance for any period in the future. Performance is a function of a number
of factors which can be expected to fluctuate. The Fund may provide performance
information in reports, sales literature and advertisements. The Fund may also,
from time to time, quote information about the Fund published or aired by
publications or other media entities which contain articles or segments relating
to investment results or other data about the Fund. Such publications or media
entities may include the following, among others:
Advertising Age
Barron's
Best's Review
Broker World
Business Week
Changing Times
Christian Science Monitor
CNBC
CNN
Consumer Reports
Economist
EuroMoney
FACS of the Week
Financial Planning
Financial Product News
Financial Services Week
Financial World
Forbes
Fortune
Global Finance
Hartford Courant Inc.
Insurance Forum
Institutional Investor
Insurance Week
Investor's Daily
Journal of the American
Society of CLU & ChFC
Kiplinger Letter
Money
Mutual Fund Forecaster
Mutual Fund Magazine
Nation's Business
New York Times
PBS
Pension World
Pensions & Investments
Personal Investor
Philadelphia Inquirer
Smart Money
USA Today
U.S. News & World Report
Wall Street Journal
Washington Post
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<PAGE> 161
The Fund and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Fund with the following, or compare the Fund's performance to performance
data of similar mutual funds as published in the following, among others:
Bank Rate National Monitor Index
Bear Stearns Foreign Bond Index
Bond Buyer Index
CDA/Wiesenberger Investment Company Services
(data and mutual fund rankings and
comparisons)
CNBC/Financial News Composite Index
COFI
Consumer Price Index
Datastream
Donoghue's
Dow Jones Industrial Average
EAFE Index
First Boston High Yield Index
Fitch (publications)
Ibbotson Associates International Bond Index
International Bank for Reconstruction and
Development (publications)
International Finance Corporation Emerging
Markets Database
International Financial Statistics
Lehman Bond Indices
Lipper Analytical Data Services, Inc. (data and
mutual fund rankings and comparisons)
Micropal, Inc. (data and mutual fund rankings
and comparisons)
Moody's Investors Service (publications)
Morgan Stanley Capital International All
Country (AC) World Index
Morgan Stanley Capital International World
Indices
Morningstar, Inc. (data and mutual fund rankings
and comparisons)
NASDAQ
Organization for Economic Cooperation and
Development (publications)
Salomon Brothers Global Telecommunications
Index
Salomon Brothers World Government Bond
Index-Non-U.S.
Salomon Brothers World Government Bond Index
Standard & Poor's (publications)
Standard & Poor's 500 Composite Stock Price
Index
Stangar
Wilshire Associates
World Bank (publications and reports)
The World Bank Publication of Trends in
Developing Countries
Worldscope
The Fund may also compare its performance to rates on Certificates of Deposit
and other fixed rate investments such as the following:
10-year Treasuries
30-year Treasuries
30-day Treasury Bills
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. Advertising for the Fund may from time to time include discussions
of general economic conditions and interest rates. Advertising for the Fund may
also include reference to the use of the Fund as part of an individual's overall
retirement investment program. From time to time, sales literature and/or
advertisements for the Fund may disclose (i) the largest holdings in the Fund's
portfolio, (ii) certain selling group members and/or (iii) certain institutional
shareholders.
From time to time, the Fund's sales literature and/or advertisements may
discuss generic topics pertaining to the mutual fund industry. This includes,
but is not limited to, literature addressing general information about mutual
funds, variable annuities, dollar-cost averaging, stocks, bonds, money markets,
certificates of deposit, retirement, retirement plans, asset allocation,
tax-free investing, college planning, and inflation.
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential investments,
investors should note that the methods of computing performance of other
potential investments are not necessarily comparable to the methods employed by
a Fund.
GENERAL INFORMATION ABOUT THE UNDERLYING THEME PORTFOLIOS
Each Underlying Theme Portfolio may invest worldwide across industries within
the Portfolio's area of concentration without national or regional restrictions.
The ability of each Underlying Theme Portfolio to invest worldwide may allow the
portfolio managers to select industries in different economic cycles and varying
stages of development, though there is no assurance that the managers will be
successful in this selection.
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<PAGE> 162
Each Underlying Theme Portfolio's area of concentration reflects the
underlying theme of the Portfolio. AIM Distributors believes that there are
certain social, political and economic trends that may benefit one or more
industries within an Underlying Theme Portfolio's area of concentration. Of
course, there is no assurance that any of the Funds will benefit as a result.
Health Care Fund. From time to time the Fund and AIM Distributors will quote
information including data regarding:
- Trading volume, number of listed companies and the largest companies of the
global health care industry
- Expenditures by various countries, regions and age groups on health care
- Population of countries, regions and age groups
- Natality and mortality rates in various regions, countries and age groups
- Life expectancy rates in various regions, countries and age groups
- New health care products and products seeking approval
- Health maintenance organizations (HMOs) and their enrollment growth
- Studies from, but not limited to, the American Medical Association showing
the effectiveness of using drugs to cure illness
- Medical technology and devices in use or in development
- Regulatory environment of health care industries
- Consolidation in the health care industries
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Research firms such as Mehta and Isaly which publishes Pharmaceutical
Portfolio Recommendations
- OECD and its publications such as the OECD Health Data, as supplemented
annually
- Morgan Stanley Capital International stock market industry indices such as
Health & Personal Care
- The World Bank and its publications such as The World Development Report, as
supplemented annually
- IFC and publications such as the Emerging Stock Markets Factbook
Information About the Global Health Care Industries. The Fund and the
Sub-advisor believe that certain market and demographic factors merit an
investor's consideration when making a health care investment. Worldwide
standards of living and life expectancy have increased at a substantial rate.
The Sub-advisor, the investment advisor to the AIM/GT Funds, expects this
growth, which works to the general benefit of the global health care industry,
to continue at a roughly comparable rate in the future, although no assurances
can be given in this regard. Moreover, according to the Sub-advisor, the health
care industry historically has proven to be a relatively non-cyclical industry
that continues to provide goods and services to the public in periods of
economic weakness as well as economic strength.
The Sub-advisor believes that the anticipated increase in the world's elderly
population could increase demand for health care products and services. For
example, according to data compiled by the Sub-advisor, in Japan the number of
people age 65 and older is expected to grow over 100% by the year 2025; in
Germany, France and the U.S., the same age group should grow 40%. Similarly, the
U.S. Census Bureau predicts the number of Americans 85 and older to double in
the next 30 years. From time to time, the Fund and AIM Distributors will quote
information including, but not limited to, international data regarding
populations, birth rates, mortality rates, life expectancy, health care
expenditures, and gross domestic product vs. life expectancy. The information
quoted has not been independently verified by the Fund or AIM Distributors and
will be based on data that is believed to be reliable and accurate.
Telecommunications Fund. From time to time the Fund and AIM Distributors will
quote information including data regarding:
- Increased usage of new technologies such as, but not limited to, cellular
and wireless communications in emerging and established countries around the
world
- Supply and demand of telephone equipment and services
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<PAGE> 163
- Regulatory environment of telecommunications industries
- Revenue, price and usage of telecommunications products and services
- Privatization and/or deregulation of telecommunications companies
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Salomon Brothers World Equity Telecommunications Index, which includes stock
market data about the telecommunications industry in established and
developing markets
- OECD and other publications from its subsidiaries such as the International
Telecommunications Union
- Morgan Stanley Capital International stock market industry indices such as
Telecommunications, Broadcasting & Publishing and Data Processing &
Reproduction
- International Technology Consultants, a Washington D.C. based firm which
publishes reports such as Eastern European & Soviet Telecom Report and Latin
American Telecom Report
- Telegeography and other publications
Deregulation in the United States. The United States has been the bellwether
for deregulation of the telephone industry. The divestiture of the Bell System
from American Telephone and Telegraph has produced competing companies in the
United States. Such U.S. market-driven competition has, for example, led to
lower costs for consumers which in turn led to greater consumer usage and to
higher industrywide revenues. The Sub-advisor expects this scenario to continue
to benefit such companies in the U.S. and similarly to be realized by the
established telecommunications companies in established economies, although no
assurances can be made in this regard.
Consumer Products and Services Fund. From time to time the Fund and AIM
Distributors will quote information including data regarding:
- Trading volume, number of listed companies and the largest companies located
around the world in the consumer products and services industries
- Expenditures, demand and consumption by various countries, regions, income
classes and age groups of consumer products and services
- Population of countries, regions and age groups
- Life expectancy rates in various regions, countries and age groups
- New consumer products and services in the development or manufacturing
stages
- Income of various regions, countries and age groups
- Sales and sales growth of consumer products and services companies in their
own country and abroad
- Sales, supply and demand of consumer products and services
- Parent companies and the products and services they distribute
- Regulatory environment of consumer products industries
The information quoted will not be independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including, but not limited to, the following:
- Consumer and trade groups
- Fortune magazine and other periodicals
- The World Bank and its publications
- The International Monetary Fund (IMF) and its publications
- IFC and its publications
- OECD and its publications
54
<PAGE> 164
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> 165
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc. ("Moody's") employs the designations "Prime-1"
and "Prime-2" to indicate commercial paper having the highest capacity for
timely repayment. Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and well-
established access to a range of financial markets and assured sources of
alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt obligations. This
normally will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Standard & Poor's, a division of the McGraw-Hill Companies, Inc. ("S&P") rates
commercial paper in four categories ranging from "A-1" for the highest quality
obligations to "D" for the lowest. A-1 -- This highest category indicates that
the degree of safety regarding timely payment is strong. Those issues determined
to possess extremely strong safety characteristics will be denoted with a plus
sign (+) designation. A-2 -- Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of safety is not as
high as for issues designated "A-1." A-3 -- Issues carrying this designation
have adequate capacity for timely payment. They are, however, more vulnerable to
the adverse effects of changes in circumstances than obligations carrying the
higher designations. B -- Issues rated "B" are regarded as having only
speculative capacity for timely payment. C -- This rating is assigned to
short-term debt obligations with a doubtful capacity for payment. D -- Debt
rated "D" is in payment default. The "D" rating category is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period.
S&P rates the securities debt of various entities in categories ranging from
"AAA" to "D" according to quality. Investment grade ratings are the first four
categories: AAA -- Highest rating. Capacity to pay interest and repay principal
is extremely strong. AA -- Very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.
A -- Has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. BBB -- Regarded as
having adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" is
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. BB -- Has less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BBB-" rating. B -- Has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The "B" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB-" rating. CCC -- Has a
currently identifiable vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely payment of interest
and repayment of principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay interest and
repay principal. The "CCC" rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "B" or "B-" rating.
CC -- Typically applied to debt subordinated to senior debt that is assigned an
actual or implied "CCC" rating. C -- Typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued. C1 -- Reserved for income bonds
on which no interest is being paid. D -- In payment default. The "D" category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. This rating will also be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
56
<PAGE> 166
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.
57
<PAGE> 167
FINANCIAL STATEMENTS
FS
<PAGE> 168
PART C
OTHER INFORMATION
Item 23. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C> <C> <C>
(a) (1) - Agreement and Declaration of Trust of the Registrant dated May 7, 1998 was filed as an
Exhibit to Post-Effective Amendment No. 4 to the Registration Statement on Form N-1A,
filed on June 1, 1998, and is hereby incorporated by reference.
(2) - First Amendment to Agreement and Declaration of Trust of Registrant is filed herewith
electronically.
(b) - By-Laws of the Registrant dated May 7, 1998 was filed as an Exhibit to Post-Effective
Amendment No. 4 to the Registration Statement on Form N-1A, filed on June 1, 1998, and
is hereby incorporated by reference.
(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 and By-laws
Articles IV, V, VI, VII and VIII were filed as Exhibits to Post-Effective Amendment No. 5 to
the Registration Statement on Form N-1A, filed July 7, 1998, and are hereby incorporated
by reference.
(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 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 Post-Effective Amendment No. 6 on August 26, 1998 and is hereby incorporated by
reference.
(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 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 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 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
is filed herewith electronically.
(5) - Form of Bank Selling Group Agreement between A I M Distributors, Inc. and banks is filed
herewith electronically.
(f) - Agreements Concerning Officers and Directors/Trustees Benefits - None.
</TABLE>
C-1
<PAGE> 169
<TABLE>
<S> <C> <C> <C>
(g) (1) - Custodian Agreement, dated June 1, 1998, between Registrant and State Street Bank and
Trust Company was filed as an Exhibit to Post-Effective Amendment No. 6 on August 26,
1998 and is hereby incorporated by reference.
(2) - Amendment to Custodian Contract, dated January 26, 1999, is filed herewith electronically.
(h) (1) - Transfer Agency and Service Agreement between Registrant and A I M Fund Services, Inc.
is filed herewith electronically.
(2) - (i) Remote Access and Related Services Agreement, dated as of December 23, 1994, was
filed as an Exhibit to 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
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
Post-Effective Amendment No. 6 on August 26, 1998 and is hereby incorporated by
reference.
- (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
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
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 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, is filed herewith electronically.
- (viii) Amendment No. 5, dated July 1, 1998, to the Remote Access and Related
Services Agreement, dated December 23, 1994, is filed herewith electronically.
(3) - Fund Accounting and Pricing Agent Agreement between Registrant and INVESCO (NY),
Inc., dated May 29, 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 to the Registration Statement on Form N-1A, filed on June 1, 1998, and
is hereby incorporated by reference.
(j) - Other Opinions - None.
(k) - Omitted Financial Statements - None.
[(13) - Letter of Investment Intent was filed as an Exhibit to Pre-Effective Amendment No. 1 to
Registration Statement on Form N-1A, filed August 22, 1997, and is hereby incorporated
by reference.]
(l) - Agreement Concerning Initial Capitalization - None.
</TABLE>
C-2
<PAGE> 170
<TABLE>
<S> <C> <C> <C>
(m) (1) - Distribution Plan adopted pursuant to Rule 12b-1 with respect to Class A and C shares is
filed herewith electronically.
(2) - Distribution Plan adopted pursuant to Rule 12b-1 with respect to Class B shares is filed
herewith electronically.
(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.
- (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 Schedule was filed as an Exhibit to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A, filed on March 4, 1998, and is hereby incorporated
by reference.
(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.
C-3
<PAGE> 171
Article VII, Section 3 of the Registrant's 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 By-Laws and other applicable law.
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.
See the material under the heading "Trustees and Executive Officers"
and "Management" included in Part B (Statement of Additional
Information) of this Amendment. Information as to the Directors and
Officers of A I M Advisors, Inc. and INVESCO (NY), Inc. is included in
Schedule A and Schedule D of Part I of each entity's Form ADV (File No.
801-12313 and File No. 801-10254, respectively), filed with the
Securities and Exchange Commission, which are incorporated herein by
reference thereto.
Item 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 Portfolios
AIM Investment Securities Funds
AIM Summit Fund, Inc.
AIM Tax-Exempt Funds, Inc.
AIM Variable Insurance Funds, Inc.
GT Global Floating Rate Fund, Inc. (d/b/a AIM
Floating Rate Fund)
(b)
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- ---------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors None
Michael J. Cemo President & Director None
Gary T. Crum Director Vice President
Robert H. Graham Senior Vice President & Director Chairman; President
William G. Littlepage Senior Vice President & Director None
James L. Salners Executive Vice President None
John Caldwell Senior Vice President None
</TABLE>
- ----------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-4
<PAGE> 172
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- --------------------
<S> <C> <C>
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
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
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
David E. Hessel Assistant Vice President, None
Assistant Treasurer
& Controller
Kathleen J. Pflueger Secretary Assistant Secretary
Luke P. Beausoleil Assistant Vice President None
</TABLE>
- ----------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-5
<PAGE> 173
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- --------------------
<S> <C> <C>
Tisha B. Christopher Assistant Vice President None
Glenda A. Dayton Assistant Vice President None
Mary C. Mangham Assistant Vice President None
Mary E. Gentempo 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
Ivy B. McLemore Assistant Vice President None
David B. O'Neil Assistant Vice President None
Nicholas D. White Assistant Vice President None
Norman W. Woodson Assistant Vice President None
Nancy L. Martin Assistant General Counsel Assistant Secretary
& Assistant Secretary
Samuel D. Sirko Assistant General Counsel Vice President &
& Assistant 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.
C-6
<PAGE> 174
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.
C-7
<PAGE> 175
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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 12th day of
February, 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 and February 12, 1999
- --------------------------------- President (Principal
(Robert H. Graham) Executive Officer)
/s/ C. DEREK ANDERSON Trustee February 12, 1999
- ---------------------------------
(C. Derek Anderson)
/s/ FRANK S. BAYLEY Trustee February 12, 1999
- ---------------------------------
(Frank S. Bayley)
/s/ ARTHUR C. PATTERSON Trustee February 12, 1999
- ---------------------------------
(Arthur C. Patterson)
/s/ RUTH H. QUIGLEY Trustee February 12, 1999
- ---------------------------------
(Ruth H. Quigley)
/s/ KENNETH W. CHANCEY Vice President and February 12, 1999
- --------------------------------- Principal Financial
(Kenneth W. Chancey) and Accounting Officer
<PAGE> 176
INDEX TO EXHIBITS
AIM SERIES TRUST
<TABLE>
<CAPTION>
Exhibit Number
- --------------
<S> <C>
(a)(2) First Amendment to Agreement and Declaration of Trust of Registrant
(e)(4) Form of Selected Dealer Agreement between A I M Distributors, Inc. and Selected Dealers
(e)(5) Form of Bank Selling Group Agreement between A I M Distributors, Inc. and Banks
(g)(2) Amendment to Custodian Contract, dated January 26, 1999
(h)(1) Transfer Agency and Service Agreement between Registrant and A I M Fund Services, Inc.
(h)(2)(vii) Amendment No. 4, dated June 30, 1998, to the Remote Access and Related Services Agreement,
dated December 23, 1994
(h)(2)(viii) Amendment No. 5, dated July 1, 1998, to the Remote Access and Related Services Agreement,
dated December 23, 1994
(h)(3) Fund Accounting and Pricing Agreement between Registrant and INVESCO (NY), Inc.
(i)(1) Consent of Kirkpatrick & Lockhart LLP
(m)(1) Distribution Plan adopted pursuant to Rule 12b-1 with respect to Class A and C shares is filed
herewith electronically.
(m)(2) Distribution Plan adopted pursuant to Rule 12b-1 with respect to Class B shares is filed herewith
electronically.
(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
</TABLE>
<PAGE> 1
EXHIBIT (a)(2)
FIRST AMENDMENT
TO
AGREEMENT AND DECLARATION OF TRUST
OF
AIM SERIES TRUST
THIS FIRST AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST OF AIM
SERIES TRUST (the "Amendment") is entered into as of the 8th day of September,
1998, among C. Derek Anderson, Frank S. Bayley, Robert H. Graham, Arthur C.
Patterson and Ruth H. Quigley, as Trustees, and each person who became or
becomes a Shareholder in accordance with the terms set forth in that certain
Agreement and Declaration of Trust of AIM Series Trust entered into as of May 7,
1998, (the "Agreement").
WHEREAS, Sections 2.3 and 9.7 of the Agreement empower the Trustees
without Shareholder action to amend the Agreement in order to change the
designations of the Portfolios; and
WHEREAS, the Trustees on August 12, 1998 approved amending the
Agreement to change certain designations of the Portfolios as hereinafter set
forth.
NOW, THEREFORE, the Trustees hereby amend the Agreement as follows:
1. Capitalized terms not specifically defined in this Amendment shall
have the meanings ascribed to them in the Agreement.
2. Schedule A to the Agreement is hereby deleted in its entirety and a
new Schedule A to the Agreement is substituted as to read in its entirety as
follows:
"SCHEDULE A
AIM Series Trust shall be divided into the following Portfolios, each
of which shall have four Classes (Class A, Class B, Class C and Advisor Class):
AIM Global Trends Fund
Dated: September 8, 1998"
3. Except for the above change in Schedule A to the Agreement, the
Agreement shall in all other respects remain in full force and effect.
4. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same Amendment.
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IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this First Amendment to Agreement and Declaration of Trust
of AIM Series Trust as of the day first above written.
/s/ C. DEREK ANDERSON /s/ ROBERT H. GRAHAM
- ------------------------------------ ------------------------------------
C. Derek Anderson, Trustee Robert H. Graham, Trustee
/s/ FRANK S. BAYLEY /s/ ARTHUR C. PATTERSON
- ------------------------------------ ------------------------------------
Frank S. Bayley, Trustee Arthur C. Patterson, Trustee
/s/ RUTH H. QUIGLEY
------------------------------------
Ruth H. Quigley, Trustee
[THIS IS THE SIGNATURE PAGE FOR
THE FIRST AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
OF AIM SERIES TRUST]
<PAGE> 1
EXHIBIT (e)(4)
[AIM LOGO APPEARS HERE]
A I M DISTRIBUTORS, INC.
SELECTED DEALER AGREEMENT
FOR INVESTMENT COMPANIES MANAGED
BY A I M ADVISORS, INC.
TO THE UNDERSIGNED SELECTED DEALER:
Gentlemen:
A I M Distributors, Inc., as the exclusive national distributor of shares (the
"Shares") of the registered investment companies for which we now or in the
future act as underwriter, as disclosed in each Fund's prospectus, which may be
amended from time to time by us (the "Funds"), understands that you are a member
in good standing of the National Association of Securities Dealers, Inc.
("NASD"), or, if a foreign dealer, that you agree to abide by all of the rules
and regulations of the NASD for purposes of this Agreement (which you confirm by
your signature below). In consideration of the mutual covenants stated below,
you and we hereby agree as follows:
1 Sales of Shares through you will be at the public offering price of such
Shares (the net asset value of the Shares plus any sales charge applicable
to such Shares (the "Sales Charge")), as determined in accordance with the
then effective prospectus or Statement of Additional Information used in
connection with the offer and sale of Shares (collectively, the
"Prospectus"), which public offering price may reflect scheduled variations
in, or the elimination of, the Sales Charge on sales of the Funds' Shares
either generally to the public or in connection with special purchase plans,
as described in the Prospectus. You agree that you will apply any scheduled
variation in, or elimination of, the Sales Charge uniformly to all offerees
in the class specified in the Prospectus.
2 You agree to purchase Shares solely through us and only for the purpose of
covering purchase orders already received from customers or for your own
bona fide investment. You agree not to purchase for any other securities
dealer unless you have an agreement with such other dealer or broker to
handle clearing arrangements and then only in the ordinary course of
business for such purpose and only if such other dealer has executed a
Selected Dealer Agreement with us. You also agree not to withhold any
customer order so as to profit therefrom.
3 The procedures relating to the handling of orders shall be subject to
instructions which we will forward from time to time to all selected
dealers with whom we have entered into a Selected Dealer Agreement. The
minimum initial order shall be specified in the Funds' then current
Prospectuses. All purchase orders are subject to receipt of Shares by us
from the Funds concerned and to acceptance of such orders by us. We reserve
the right in our sole discretion to reject any order.
4 With respect to the Funds the Shares of which are indicated in that Fund's
Prospectus as being sold with a Sales Charge (the "Load Funds"), you will be
allowed the concessions from the public offering price provided in the Load
Funds' Prospectus and/or periodic instruction from us. With respect to the
Funds, the Shares of which are indicated in that Fund's Prospectus as being
sold with a contingent deferred sales charge or early withdrawal charge (the
"CDSC Funds"), you will be paid a commission or concession as disclosed in
the CDSC Fund's Prospectus and/or periodic instructions from us. With
respect to the Funds whose Shares are indicated as being sold without a
Sales Charge or a contingent deferred sales charge (the "No-Load Funds"),
you may charge a reasonable administrative fee. For the purpose of this
Agreement the term Dealer Commission means commissions or concessions
payable to you as disclosed in the Fund's Prospectuses and the terms "Sales
Charge" and "Dealer Commission" apply only to the Load Funds and the CDSC
Funds. All Dealer Commissions are subject to change without notice by us and
will comply with any changes in regulatory requirements. You agree that you
will not combine customer orders to reach breakpoints in commissions for any
purpose whatsoever unless authorized by the Prospectus or by us in writing.
5 You agree that your transactions in Shares of the Funds will be limited to
(a) the purchase of Shares from us for resale to your customers at the
public offering price then in effect or for your own bona fide investment,
(b) exchanges of Shares between Funds, as permitted by the Funds' then
current registration statement (which includes the Prospectus) and in
accordance with procedures as they may be modified by us from time to time,
and (c) transactions involving the redemption of Shares by a Fund or the
repurchase of Shares by us as an accommodation to shareholders or where
applicable, through tender offers. Redemptions by a Fund and repurchases by
us will be effected in the manner and upon the terms described in the
Prospectus. We will, upon your request, assist you in processing such orders
for redemptions or repurchases. To facilitate prompt payment following a
redemption or repurchase of Shares, the owner's signature shall appear as
registered on the Funds' records and, as described in the Prospectus, it may
be required to be guaranteed by a commercial bank, trust company or a member
of a national securities exchange.
5/98
<PAGE> 2
6 Sales and exchanges of Shares may only be made in those states and
jurisdictions where the Shares are registered or qualified for sale to the
public. We agree to advise you currently of the identity of those states
and jurisdictions in which the Shares are registered or qualified for sale,
and you agree to indemnify us and/or the Funds for any claim, liability,
expense or loss in any way arising out of a sale of Shares in any state or
jurisdiction in which such Shares are not so registered or qualified.
7 We shall accept orders only on the basis of the then current offering
price. You agree to place orders in respect of Shares immediately upon the
receipt of orders from your customers for the same number of shares. Orders
which you receive from your customers shall be deemed to be placed with us
when received by us. Orders which you receive prior to the close of
business, as defined in the Prospectus, and placed with us within the time
frame set forth in the Prospectus shall be priced at the offering price
next computed after they are received by you. We will not accept from you
a conditional order on any basis. All orders shall be subject to
confirmation by us.
8 Your customer will be entitled to a reduction in the Sales Charge on
purchases made under a Letter of Intent or Right of Accumulation described
in the Prospectus. In such case, your Dealer's Concession will be based
upon such reduced Sales Charge; however, in the case of a Letter of Intent
signed by your customer, an adjustment to a higher Dealer Commission
will thereafter be made to reflect actual purchases by your customer if he
should fail to fulfil his Letter of Intent. When placing wire trades, you
agree to advise us of any Letter of Intent signed by your customer or of
any Right of Accumulation available to him of which he has made you aware.
If you fail to so advise us, you will be liable to us for the return of
any Dealer Commission plus interest thereon.
9 You and we agree to abide by the Conduct Rules of the NASD and all other
federal and state rules and regulations that are now or may become
applicable to transactions hereunder. Your expulsion from the NASD will
automatically terminate this Agreement without notice. Your suspension from
the NASD or a violation by you of applicable state and federal laws and
rules and regulations of authorized regulatory agencies will terminate this
Agreement effective upon notice received by you from us. You agree that it
is your responsibility to determine the suitability of any Shares as
investments for your customers, and that AIM Distributors has no
responsibility for such determination.
10 With respect to the Load Funds and the CDSC Funds, and unless otherwise
agreed, settlement shall be made at the offices of the Funds' transfer
agent within three (3) business days after our acceptance of the order. With
respect to the No-Load Funds, settlement will be made only upon receipt by
the Fund of payment in the form of federal funds. If payment is not so
received or made within ten (10) business days of our acceptance of the
order, we reserve the right to cancel the sale or, at our option, to sell
the Shares to the Funds at the then prevailing net asset value. In this
event, or in the event that you cancel the trade for any reason, you agree
to be responsible for any loss resulting to the Funds or to us from your
failure to make payments as aforesaid. You shall not be entitled to any
gains generated thereby.
11 If any Shares of any of the Load Funds sold to you under the terms of this
Agreement are redeemed by the Fund or repurchased for the account of the
Funds or are tendered to the Funds for redemption or repurchase within seven
(7) business days after the date of our confirmation to you of your original
purchase order therefore, you agree to pay forthwith to us the full amount
of the Dealer Commission allowed to you on the original sale and we agree to
pay such amount to the Fund when received by us. We also agree to pay to the
Fund the amount of our share of the Sales Charge on the original sale of
such Shares.
12 Any order placed by you for the repurchase of Shares of a Fund is subject
to the timely receipt by 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, in which case you agree to be responsible for any loss
resulting to the Fund or to us from such cancellation.
13 We reserve the right in our discretion without notice to you to suspend
sales or withdraw any offering of Shares entirely, to change the offering
prices as provided in the Prospectus or, upon notice to you, to amend or
cancel this Agreement. You agree that any order to purchase Shares of the
Funds placed by you after notice of any amendment to this Agreement has
been sent to you shall constitute your agreement to any such amendment.
14 In every transaction, we will act as agent for the Fund and you will act as
principal for your own account. You have no authority whatsoever to act as
our agent or as agent for the Funds, any other Selected Dealer or the
Funds' transfer agent and nothing in this Agreement shall serve to appoint
you as an agent of any of the foregoing in connection with transactions
with your customers or otherwise.
15 No person is authorized to make any representations concerning the Funds or
their Shares except those contained in the Prospectus and any such
information as may be released by us as information supplemental to the
Prospectus. If you should make such unauthorized representation, you agree
to indemnify the Funds and us from and against any and all claims,
liability, expense or loss in any way arising out of or in any way
connected with such representation.
5/98
<PAGE> 3
16 We will supply you with copies of the Prospectuses of the Funds (including
any amendments thereto) in reasonable quantities upon request. You will
provide all customers with a Prospectus prior to or at the time such
customer purchases Shares. You will provide any customer who so requests a
copy of the Statement of Additional Information within the time dictated by
regulatory requirements, as they may be amended from time to time.
17 You shall be solely responsible for the accuracy, timeliness and
completeness of any orders transmitted by you on behalf of your customers
by wire or telephone for purchases, exchanges or redemptions, and shall
indemnify us against any claims by your customers as a result of your
failure to properly transmit their instructions.
18 No advertising or sales literature, as such terms are defined by the NASD,
of any kind whatsoever will be used by you with respect to the Funds or us
unless first provided to you by us or unless you have obtained our prior
written approval.
19 All expenses incurred in connection with your activities under this
Agreement shall be borne by you.
20 This Agreement shall not be assignable by you. This Agreement shall be
constructed in accordance with the laws of the State of Texas.
21 Any notice to you shall be duly given if mailed or telegraphed to you at
your address as registered from time to time with the NASD.
22 This Agreement constitutes the entire agreement between the undersigned and
supersedes all prior oral or written agreements between the parties hereto.
A I M DISTRIBUTORS, INC.
Date: By: X
------------------ ---------------------------------------------
The undersigned accepts your invitation to become a Selected Dealer and agrees
to abide by the foregoing terms and conditions. The undersigned acknowledges
receipt of prospectuses for use in connection with offers and sales of the
Funds.
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
5/98
<PAGE> 1
EXHIBIT (e)(5)
[AIM LOGO APPEARS HERE]
A I M DISTRIBUTORS, INC.
BANK ACTING AS AGENT
FOR ITS CUSTOMERS
Agreement Relating to Shares
of AIM Family of Funds
(Confirmation and Prospectus to be sent by A I M Distributors,
Inc. to Customer)
A I M Distributors, Inc. is the exclusive national distributor of the shares of
the registered investment companies for which we now or in the future act as
underwriter, as disclosed in each Fund's prospectus, which may be amended from
time to time by us (the "Funds"). As exclusive agent for the Funds, we are
offering to make available shares of the Funds (the "Shares") for purchase by
your customers on the following terms:
1 In all sales of Shares you shall act as agent for your customers, and in no
transaction shall you have any authority to act as agent for any Fund or
for us.
2 The customers in question are, for all purposes, your customers and not
customers of A I M Distributors, Inc. In receiving orders from your
customers who purchase Shares, A I M Distributors, Inc. is not soliciting
such customers and, therefore, has no responsibility for determining
whether Shares are suitable investments for such customers.
3 It is hereby understood that in all cases in which you place orders with us
for the purchase of Shares (a) you are acting as agent for the customer;
(b) the transactions are without recourse against you by the customer; (c)
as between you and the customer, the customer will have full beneficial
ownership of the securities; (d) each such transaction is initiated solely
upon the order of the customer; and (e) each such transaction is for the
account of the customer and not for your account.
4 Orders received from you will be accepted by us only at the public offering
price applicable to each order, as established by the then current
prospectus or Statement of Additional Information, (collectively, the
"Prospectus" of the appropriate Fund, subject to the discounts (defined
below) provided in such Prospectus. Following receipt from you of any order
to purchase Shares for the account of a customer, we shall confirm such
order to you in writing. We shall be responsible for sending your customer
a written confirmation of the order with a copy of the appropriate Fund's
current Prospectus. We shall send you a copy of such confirmation.
Additional instructions may be forwarded to you from time to time. All
orders are subject to acceptance or rejection by us in our sole discretion.
5 Members of the general public, including your customers, may purchase
Shares only at the public offering price determined in the manner described
in the current Prospectus of the appropriate Fund. With respect to the
Funds, the Shares of which are indicated in the Fund's Prospectus as
being sold with a sales charge (i.e. the "Load Funds"), you will be allowed
to retain a commission or concession from the public offering price
provided in such Load Funds' current Prospectus and/or periodic instructions
from us. With respect to the Funds, the Shares of which are indicated on the
attached Schedule A as being sold with a contingent deferred sales charge or
early withdrawal charge (the "CDSC Funds"), you will be
paid a commission or concession as disclosed in the CDSC Fund's then
current prospectus. With respect to the Funds whose Shares are indicated on
the attached Schedule as being sold without a sales charge or a contingent
deferred sales charge, (i.e. the "No-Load Funds"), you will not be allowed
to retain any commission or concession. All commissions or concessions set
forth in any of the Load Funds' or CDSC Funds' Prospectus are subject to
change without notice by us and will comply with any changes in regulatory
requirements.
6 The tables of sales charges and discounts set forth in the current
Prospectus of each Fund are applicable to all purchases made at any one
time by any "purchaser", as defined in the current Prospectus. For this
purpose, a purchaser may aggregate concurrent purchases of securities of
any of the Funds.
7 Reduced sales charges may also be available as a result of quantity
discounts, rights of accumulation or letters of intent. Further information
as to such reduced sales charges, if any, is set forth in the appropriate
Fund Prospectus. In such case, your discount will be based upon such
reduced sales charge; however, in the case of a letter of intent signed by
your customer, an adjustment to a higher discount will thereafter be made
to reflect actual purchases by your customer if he should fail to fulfill
his letter of intent. You agree to advise us promptly as to the amounts of
any sales made by you to your customers qualifying for reduced sales
charges. If you fail to so advise us of any letter of intent signed by your
customer or of any right of accumulation available to him of which he has
made you aware, you will be liable to us for the return of any discount
plus interest thereon.
8 By accepting this Agreement you agree:
a. that you will purchase Shares only from us;
b. that you will purchase Shares from us only to cover purchase orders
already received from your customers; and
c. that you will not withhold placing with us orders received from your
customers so as to profit yourself as a result of such withholdings.
9 We will not accept from you a conditional order for Shares on any basis.
10 Payment for Shares ordered from us shall be in the form of a wire transfer
or a cashiers check mailed to us. Payment shall be made within three (3)
business days after our acceptance of the order placed on behalf of your
customer. Payment shall be equal to the public offering price less the
discount retained by you hereunder.
5/98
<PAGE> 2
11 If payment is not received within ten (10) business days of our acceptance
of the order, we reserve the right to cancel the sale or, at our option, to
sell Shares to the Fund at the then prevailing net asset value. In this
event you agree to be responsible for any loss resulting to the Fund from
the failure to make payment as aforesaid.
12 Shares sold hereunder shall be available in book-entry form on the books of
the Funds' Transfer Agent unless other instructions have been given.
13 No person is authorized to make any representations concerning Shares of
any Fund except those contained in the applicable current Prospectus and
printed information subsequently issued by the appropriate Fund or by us as
information supplemental to such Prospectus. You agree that you will not
make Shares available to your customers except under circumstances that
will result in compliance with the applicable Federal and State Securities
and Banking Laws and that you will not furnish to any person any
information contained in the then current Prospectus or cause any
advertisement to be published in any newspaper or posted in any public
place without our consent and the consent of the appropriate Fund.
14 Sales and exchanges of Shares may only be made in those states and
jurisdictions where Shares are registered or qualified for sale to the
public. We agree to advise you currently of the identity of those states
and jurisdictions in which the Shares are registered or qualified for
sales, and you agree to indemnify us and/or the Funds for any claim,
liability, expense or loss in any way arising out of a sale of Shares in
any state or jurisdiction not identified by us as a state or jurisdiction
in which such Shares are so registered or qualified. We agree to indemnify
you for any claim, liability, expense or loss in any way arising out of a
sale of shares in any state or jurisdiction identified by us as a state or
jurisdiction in which shares are so registered or qualified.
15 You shall be solely responsible for the accuracy, timeliness and
completeness of any orders transmitted by you on behalf of your customers
by wire or telephone for purchases, exchanges or redemptions, and shall
indemnify us against any claims by your customers as a result of your
failure to properly transmit their instructions.
16 All sales will be made subject to our receipt of Shares from the
appropriate Fund. We reserve the right, in our discretion, without notice,
to modify, suspend or withdraw entirely the offering of any Shares and,
upon notice, to change the sales charge or discount or to modify, cancel or
change the terms of this Agreement. You agree that any order to purchase
Shares of the Funds placed by you after any notice of amendment to this
Agreement has been sent to you shall constitute your agreement to any such
agreement.
17 The names of your customers shall remain your sole property and shall not
be used by us for any purpose except for servicing and information mailings
in the normal course of business to Fund Shareholders.
18 Your acceptance of this Agreement constitutes a representation that you are
a "Bank" as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, as amended, and are duly authorized to engage in the transactions to
be performed hereunder.
All communications to us should be sent to A I M Distributors, Inc., Eleven
Greenway Plaza, Suite 100, Houston, Texas 77046. Any notice to you shall
be duly given if mailed or telegraphed to you at the address specified by
you below or to such other address as you shall have designated in writing
to us. This Agreement shall be construed in accordance with 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
5/98
<PAGE> 1
EXHIBIT g(2)
AMENDMENT TO CUSTODIAN CONTRACT
This Amendment to the Custodian Contract is made as of January 26, 1999 by
and between AIM Series Trust (the "Fund") and State Street Bank and Trust
Company (the "Custodian"). Capitalized terms used in this Amendment without
definition shall have the respective meanings ascribed to such terms in the
Custodian Contract referred to below.
WHEREAS, the Fund and the Custodian entered into a Custodian Contract dated
as of June 1, 1998 (as amended and in effect from time to time, the "Contract");
and
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets, and the Fund has made AIM Global Trends Fund subject to the
Contract (each such series, together with all other series subsequently
established by the Fund and made subject to the Contract in accordance with the
terms thereof, shall be referred to as a "Portfolio", and, collectively, the
"Portfolios"); and
WHEREAS, the Fund and the Custodian desire to amend certain provisions of
the Contract to reflect revisions to Rule 17f-5 ("Rule 17f-5") promulgated under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and the Custodian desire to amend and restate certain
other provisions of the Contract relating to the terms and conditions of the
custody of assets of each of the Portfolios held outside of the United States.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereby agree to amend the
Contract, pursuant to the terms thereof, as follows:
I. Article 3 of the Contract is hereby deleted, and Articles 4 through 20 of
the Contract are hereby amended, as of the effective date of this
Amendment, by renumbering same as Articles 5 through 21, respectively.
II. New Articles 3 and 4 of the Contract are hereby added, as of the effective
date of this Amendment, as set forth below.
3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
3.1. DEFINITIONS.
Capitalized terms in this Article 3 of the Contract shall have the following
meanings:
"Country Risk" 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
<PAGE> 2
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 the "prevailing country risk", including the effects of
foreign law on the safekeeping of Portfolio assets, the likelihood of
expropriation, nationalization, freezing, or confiscation of a Portfolio's
assets and any reasonably foreseeable difficulties in repatriating a Portfolio's
assets.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC, or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act, except that the term does not include Mandatory Securities
Depositories.
"Foreign Assets" means any of the Portfolio'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 Portfolio's transactions
in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule
17f-5.
"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
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.
3.2. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by its Board of Trustees (the "Board"), hereby
delegates to the Custodian, subject to Section (b) of Rule 17f-5, the
responsibilities set forth in this Article 3 with respect to Foreign Assets held
outside the United States, and the Custodian hereby accepts such delegation, as
Foreign Custody Manager of each Portfolio.
3.3. COUNTRIES COVERED.
The Foreign Custody Manager shall be responsible for performing the delegated
responsibilities defined below only with respect to (a) the countries listed on
Schedule A hereto as approved by the Board, which list of Board-approved
countries may be amended from time to time by the Fund with the agreement of the
Foreign Custody Manager, and (b) the custody arrangements set forth on such
Schedule A. The Foreign Custody Manager shall list on Schedule A the Eligible
Foreign Custodians selected by the Foreign Custody Manager to maintain the
assets of each Portfolio, which list of
<PAGE> 3
Eligible Foreign Custodians may be amended from time to time in the sole
discretion of the Foreign Custody Manager. Mandatory Securities Depositories are
listed on Schedule B to this Contract, which Schedule B may be amended from time
to time by the Foreign Custody Manager. The Foreign Custody Manager will provide
amended versions of Schedules A and B in accordance with Section 3.7 of this
Article 3.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account, or to place or maintain Foreign Assets, in a country listed on
Schedule A, and the fulfillment by the Fund of the account opening requirements
for such country (if any), the Foreign Custody Manager shall be deemed to have
been appointed by the Board as Foreign Custody Manager with respect to that
country and to have accepted the delegation. Execution of this Amendment by the
Fund shall be deemed to be a Proper Instruction to open an account, or to place
or maintain Foreign Assets, in each Board-approved country listed on Schedule A
in which the Custodian has previously placed or currently maintains Foreign
Assets pursuant to the terms of the Contract. Following the receipt of Proper
Instructions directing the Foreign Custody Manager to close the account of a
Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody
Manager in a designated country, the delegation by the Board to the Custodian as
Foreign Custody Manager for that country shall be deemed to have been withdrawn
and the Custodian shall immediately cease to be the Foreign Custody Manager of
the Portfolio with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to a Portfolio with respect
to the country as to which the Custodian's acceptance of delegation is
withdrawn.
3.4. SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS.
Subject to the provisions of this Article 3, the Foreign Custody Manager may
place and maintain the Foreign Assets in the care of the Eligible Foreign
Custodians selected by the Foreign Custody Manager in each country listed as
"approved" on Schedule A, as such Schedule is amended from time to time.
In performing its delegated responsibilities as Foreign Custody Manager to place
or maintain the Foreign Assets with an Eligible Foreign Custodian, the Foreign
Custody Manager shall determine that the Foreign Assets will be subject to
reasonable care, based on the standards applicable to custodians in the country
in which the Foreign Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of such assets,
including, without limitation, the factors specified in Rule 17f-5(c)(1).
<PAGE> 4
3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS.
The Foreign Custody Manager shall determine that the contract (or the rules or
established practices or procedures in the case of an Eligible Foreign Custodian
that is a foreign securities depository or clearing agency) governing the
foreign custody arrangements with each Eligible Foreign Custodian selected by
the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
3.4.3. MONITORING.
In each case in which the Foreign Custody Manager maintains Foreign Assets with
an Eligible Foreign Custodian, selected by the Foreign Custody Manager, the
Foreign Custody Manager shall maintain a system to monitor (i) the
appropriateness of maintaining the Foreign Assets with such Eligible Foreign
Custodian, and (ii) the contract governing the custody arrangements established
by the Foreign Custody Manager with the Eligible Foreign Custodian (or the rules
or established practices and procedures in the case of an Eligible Foreign
Custodian selected by the Foreign Custody Manager which is a foreign securities
depository or clearing agency that is not a Mandatory Securities Depository).
The Foreign Custody Manager shall provide the Board with information at least
annually as to the factors used in such monitoring system. In the event the
Foreign Custody Manager determines that the custody arrangements with an
Eligible Foreign Custodian that it has selected are no longer appropriate, the
Foreign Custody Manager shall promptly transfer the Fund's Foreign Assets to
another Eligible Foreign Custodian in the market and shall notify the Board in
accordance with Section 3.7 hereunder.
3.5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY.
For purposes of this Article 3, the Board shall be deemed to have considered and
determined to accept such Country Risk as is incurred by placing and maintaining
the Foreign Assets in each country for which the Custodian is serving as Foreign
Custody Manager of a Portfolio, and the Board shall be deemed to be monitoring
on a continuing basis such Country Risk to the extent that the Board considers
necessary or appropriate.
Notwithstanding any provision of this Contract to the contrary, the Fund on
behalf of the Portfolios and the Custodian expressly acknowledge and agree that
the Foreign Custody Manager shall not be delegated any responsibilities under
this Article 3 with respect to Mandatory Securities Depositories, and that the
determination by or on behalf of the Board to place the Foreign Assets in a
particular country shall be deemed to include the determination to place such
Foreign Assets eligible for any Mandatory Securities Depository with such
Mandatory Securities Depository, whether the Mandatory Securities Depository
exists at the time the Foreign Assets are acquired, or after the acquisition
thereof.
<PAGE> 5
3.6. STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A PORTFOLIO.
In performing the responsibilities delegated to it, the Foreign Custody Manager
shall exercise reasonable care, prudence and diligence such as a person having
responsibility for the safekeeping of assets of management investment companies
registered under the 1940 Act would exercise.
3.7. REPORTING REQUIREMENTS.
The Foreign Custody Manager shall report at least quarterly on the Foreign
Assets held with each Eligible Foreign Custodian and in connection therewith if
applicable, provide to the Board amended Schedules A or B at the end of the
calendar quarter in which an amendment to either Schedule has occurred. The
Foreign Custody Manager will make written reports notifying the Board of any
other material change in the foreign custody arrangements of the Portfolios
described in this Article 3 promptly after the occurrence of the material
change.
3.8. REPRESENTATIONS WITH RESPECT TO RULE 17f-5.
The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as
defined in section (a)(7) of Rule 17f-5.
The Fund represents to the Custodian that the Board has determined that it is
reasonable for the Board to rely on the Custodian to perform the
responsibilities delegated pursuant to this Contract to the Custodian as the
Foreign Custody Manager of each Portfolio.
3.9. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Board's delegation to the Custodian as Foreign Custody Manager of a
Portfolio shall be effective as of the date hereof and shall remain in effect
until terminated at any time, without penalty, by written notice from the
terminating party to the non-terminating party. Termination will become
effective thirty days after receipt by the non-terminating party of such notice.
The provisions of Section 3.3 hereof shall govern the delegation to and
termination of the Custodian as Foreign Custody Manager of the Fund with respect
to designated countries.
3.10. FUTURE NEGOTIATIONS.
If at any time prior to termination of this Amendment the Custodian as a matter
of standard business practice, accepts delegation as Foreign Custody Manager for
its U.S. mutual fund clients on terms materially different than set forth in
this Amendment, the Custodian hereby agrees to negotiate with the fund in good
faith with respect thereto.
<PAGE> 6
4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS HELD
OUTSIDE THE UNITED STATES.
4.1. DEFINITIONS.
Terms used in this Article 4 and not defined below shall have the meanings
ascribed them in the Contract or in this Amendment:
"Foreign Securities System" means either a clearing agency or a securities
depository which is listed on Schedule A hereto or a Mandatory Securities
Depository.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.
4.2. HOLDING SECURITIES.
The Custodian shall identify on its books as belonging to the Portfolios the
foreign securities held by each Foreign Sub-Custodian or Foreign Securities
System. The Custodian may hold foreign securities for all of its customers,
including the Portfolios, with any Foreign Sub-Custodian in an account that is
identified as belonging to the Custodian for the benefit of its customers,
provided however, that (i) the records of the Custodian with respect to foreign
securities of the Portfolios which are maintained in such account shall identify
those securities as belonging to the Portfolios and (ii), to the extent
permitted and customary in the market in which the account is maintained, the
Custodian shall require that securities so held by the Foreign Sub-Custodian be
held separately from any assets of such Foreign Sub-Custodian or of other
customers of such Foreign Sub-Custodian.
4.3. FOREIGN SECURITIES SYSTEMS.
Foreign securities shall be maintained in a Foreign Securities System in a
designated country only through arrangements implemented by the Foreign
Sub-Custodian in such country pursuant to the terms of this Contract.
4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN ASSETS.
The Custodian or a Foreign Sub-Custodian shall release and deliver foreign
securities of a Portfolio held by such Foreign Sub-Custodian, or in a Foreign
Securities System account, only upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:
(i) upon sale of such foreign securities for the Portfolio in accordance
with reasonable market practice in the country where such Foreign
Assets are held or traded, including, without limitation: (A)
delivery against
<PAGE> 7
expectation of receiving later payment; or (B), in the case of a
sale effected through a Foreign Securities System, in accordance
with the rules governing the operation of the Foreign Securities
System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other similar
offers for foreign securities of the Portfolio;
(iv) to the issuer thereof or its agent when such foreign securities are
called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of
the Custodian (or the name of the respective Foreign Sub-Custodian
or of any nominee of the Custodian (or such Foreign Sub-Custodian))
or for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or number
of units;
(vi) to brokers, clearing banks or other clearing agents for examination
or trade execution in accordance with reasonable market practices in
the country where such securities are held or traded; provided that
in any such case the Sub-Custodian shall have no responsibility or
liability for any loss arising from the delivery of such securities
prior to receiving payment for such securities except as may arise
from the Sub-Custodian's own negligence or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or temporary
securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by the
Fund requiring a pledge of assets by the Portfolio;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper corporate purpose, but only upon receipt of, in
addition to Proper Instructions, a copy of a resolution of the Board
or of an Executive Committee of the Board so authorized by the
Board, signed by
<PAGE> 8
an officer of the Fund and certified by its Secretary or an
Assistant Secretary that the resolution was duly adopted and is in
full force and effect (a "Certified Resolution"), specifying the
Foreign Assets to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery
of such Foreign Assets shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES.
Upon receipt of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out, or direct the
respective Foreign Sub-Custodian or the respective Foreign Securities System to
pay out, moneys of a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio, unless
otherwise directed by Proper Instructions, in accordance with
reasonable market settlement practice in the country where such
foreign securities are held or traded, including, without
limitation: (A) delivering money to the seller thereof or to a
dealer therefor (or an agent for such seller or dealer) against
expectation of receiving later delivery of such foreign securities;
or (B) in the case of a purchase effected through a Foreign
Securities System, in accordance with the rules governing the
operation of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of foreign
securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees under
this Contract, legal fees, accounting fees, and other operating
expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Portfolio, including transactions executed with or
through the Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vii) in connection with the borrowing or lending of foreign securities;
and
(viii) for any other proper purpose, but only upon receipt of, in addition
to Proper Instructions, a Certified Resolution specifying the amount
of such payment, setting forth the purpose for which such payment is
to be made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be made.
<PAGE> 9
4.4.3. MARKET CONDITIONS: MARKET INFORMATION.
Notwithstanding any provision of this Contract to the contrary, settlement and
payment for Foreign Assets received for the account of a Portfolio and delivery
of Foreign Assets maintained for the account of a Portfolio may be effected in
accordance with the customary established securities trading or processing
practices and procedures in the country or market in which the transaction
occurs generally accepted by Institutional Clients, including, without
limitation, delivering Foreign Assets to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such Foreign Assets from such
purchaser or dealer. For purposes of this Contract, "Institutional Clients"
means U.S. registered investment companies or major U.S. based commercial banks,
insurance companies, pension funds or substantially similar institutions which,
as a part of their ordinary business operations, purchase or sell securities and
make use of global custody services.
The Custodian shall provide to the Board the information with respect to custody
and settlement practices in countries in which the Custodian employs a Foreign
Sub-Custodian, including without limitation information relating to Foreign
Securities Systems, described on Schedule C hereto at the time or times set
forth on such Schedule. The Custodian may revise Schedule C from time to time,
provided that no such revision shall result in the Board being provided with
substantively less information than had been previously provided hereunder and,
provided further, that the Custodian shall in any event provide to the Board and
to A I M Advisors, Inc. annually the following information and opinions with
respect to the Board-approved countries listed on Schedule A:
(i) legal opinions relating to whether local law restricts with respect
to U.S. registered mutual funds (a) access of a fund's independent
public accountants to books and records of a Foreign Sub-Custodian
or Foreign Securities System, (b) a fund's ability to recover in the
event of bankruptcy or insolvency of a Foreign Sub-Custodian or
Foreign Securities System, (c) a fund's ability to recover in the
event of a loss by a Foreign Sub-Custodian or Foreign Securities
System, and (d) the ability of a foreign investor to convert cash
and cash equivalents to U.S. dollars;
(ii) summary of information regarding Foreign Securities Systems; and
(iii) country profile information containing market practice for
(a) delivery versus payment, (b) settlement method, (c) currency
restrictions, (d) buy-in practices, (e) foreign ownership limits,
and (f) unique market arrangements.
<PAGE> 10
4.5. REGISTRATION OF FOREIGN SECURITIES.
The foreign securities maintained in the custody of a Foreign Custodian (other
than bearer securities) shall be registered in the name of the Fund (on behalf
of the applicable Portfolio) or in the name of the Custodian or in the name of
any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and
the Fund agrees to hold any such nominee harmless from any liability as a holder
of record of such foreign securities, except to the extent that the Fund incurs
loss or damage due to failure of such nominee to meet its standard of care as
set forth in the Contract. The Custodian or a Foreign Sub-Custodian shall not be
obligated to accept securities on behalf of the Fund (on behalf of the
applicable Portfolio) under the terms of this Contract unless the form of such
securities and the manner in which they are delivered are in accordance with
reasonable market practice.
4.6. BANK ACCOUNTS.
The Custodian shall identify on its books as belonging to a Portfolio cash
(including cash denominated in foreign currencies) deposited with the Custodian.
Where the Custodian is unable to maintain, or market practice does not
facilitate the maintenance of, cash on the books of the Custodian, a bank
account or bank accounts opened and maintained outside the United States on
behalf of a Portfolio with a Foreign Sub-Custodian shall be subject only to
draft or order by the Custodian or such Foreign Sub-Custodian, acting pursuant
to the terms of this Contract to hold cash received by or from or for the
account of the Portfolio.
4.7. COLLECTION OF INCOME.
The Custodian shall use reasonable commercial efforts to collect all dividends,
income and other payments with respect to the Foreign Assets held hereunder to
which a Portfolio shall be entitled and shall credit such income, as collected,
to the Portfolio. In the event the Custodian or a Foreign Sub-Custodian must use
measures beyond those which are customary in a particular country to collect
such payments, the Fund and the Custodian shall consult as to such measures and
as to the compensation and expenses of the Custodian attendant thereto.
4.8. SHAREHOLDER RIGHTS.
With respect to the foreign securities held under this Article 4, the Custodian
will use commercially reasonable efforts to facilitate the exercise by the Fund
on behalf of the Portfolios of voting and other shareholder rights, subject
always to the laws, regulations and practical constraints that may obtain in the
country where such securities are issued. The Fund acknowledges that local
conditions, including lack of regulation, onerous procedural obligations, lack
of notice and other factors may have the effect of severely limiting the ability
of the Fund to exercise shareholder rights.
<PAGE> 11
4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES.
The Custodian shall transmit promptly to the Fund written information
(including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith) received by the
Custodian via the Foreign Sub-Custodians from issuers of the foreign securities
being held for the account of a Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund written information so
received by the Custodian from issuers of the foreign securities whose tender or
exchange is sought or from the party (or its agents) making the tender or
exchange offer. Subject to the standard of care to which the Custodian is held
under this Contract, the Custodian shall not be liable for any untimely exercise
of any tender, exchange or other right or power in connection with foreign
securities or other property of the Portfolio at any time held by it unless (i)
the Custodian or the respective Foreign Sub-Custodian is in actual possession of
such foreign securities or property and (ii) the Custodian receives Proper
Instructions with regard to the exercise of any such right or power, and both
(i) and (ii) occur at least two New York business days prior to the date on
which the Custodian is to take action to exercise such right or power.
4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS.
Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian
shall, to the extent possible consistent with prevailing market practice,
require the Foreign Sub-Custodian to exercise reasonable care in the performance
of its duties and to indemnify, and hold harmless, the Custodian from and
against any loss, damage, cost, expense, liability or claim arising out of or in
connection with such Foreign Sub-Custodian's performance of such obligations. At
the election of the Fund, the Fund shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a Foreign
Sub-Custodian as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund and any applicable
Portfolio has not been made whole for any such loss, damage, cost, expense,
liability or claim.
4.11. TAX LAW.
The Custodian shall have no responsibility or liability for any obligations now
or hereafter imposed on the Fund or the Custodian as custodian of the Portfolios
by the tax law of the United States or of any state or political subdivision
thereof. With respect to jurisdictions other than the United States, the sole
responsibility of the Custodian with regard to the tax law of any such
jurisdiction shall be to use reasonable efforts to (a) notify the Fund of the
obligations imposed on the Fund with respect to the Portfolios or the Custodian
as custodian of such Portfolios by the tax law of such jurisdictions, including
responsibility for withholding and other taxes, assessment or other governmental
charges, certifications and government reporting and (b) perform such
ministerial steps as are required to collect any tax refund, to ascertain the
appropriate rate of tax withholding and to provide such documents as may be
required to enable each Fund to receive appropriate tax treatment under
applicable tax laws and any applicable treaty provisions. The Custodian, in
performance of its duties under this Section, shall be entitled to treat each
Fund as a Delaware business trust which is "registered investment company" under
the laws of the United States, and it shall be the duty of each Fund to inform
the Custodian of any change in the organization, domicile or, to the extent
within
<PAGE> 12
the knowledge of the Fund, other relevant facts concerning tax treatment of the
Fund and further to inform the Custodian if the Fund is or becomes the
beneficiary of any special ruling or treatment not applicable to the general
nationality and category of entity of which the Fund is a part under general
laws and treaty provisions. The Custodian shall be entitled to rely on any
information supplied by the Fund. The Custodian may engage reasonable
professional advisors disclosed to the Fund by the Custodian, which may include
attorneys, accountants or financial institutions in the regular business of
investment administration and may rely upon advice received therefrom.
4.12. LIABILITY OF CUSTODIAN.
Except as may arise from the Custodian's own negligence or willful misconduct or
the negligence or willful misconduct of a Sub-Custodian, the Custodian shall be
without liability to the Fund for any loss, liability, claim or expense
resulting from or caused by Country Risk (as such term is defined in Article 3
hereof), regardless of whether assets are maintained in the custody of a Foreign
Sub-Custodian or a Foreign Securities Depository, the Custodian shall be without
liability for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism, or any other similar loss beyond the reasonable control of the
Custodian or the Sub-Custodian.
The Custodian shall be liable to the Fund on account of any actions or omissions
of any Foreign Sub-Custodian to the same extent as such Foreign Sub-Custodian
shall be liable to the Custodian.
4.13 USE OF TERM "FUND"; ASSETS AND LIABILITIES
All references in this Article 4 or in Article 3 of this Agreement to "Fund"
shall mean the Fund, or a Portfolio of the Fund, as the context requires or as
applicable.
The Custodian shall maintain separate and distinct records for each Portfolio
and the assets allocated solely with such Portfolio shall be held and accounted
for separately from the assets of the Fund associated solely with any other
Portfolio. The debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Portfolio shall be
enforceable against the assets of such Portfolio only, and not against the
assets of the Fund generally or the assets of any other Portfolio.
III. Except as specifically superseded or modified herein, the terms and
provisions of the Contract shall continue to apply with full force and effect.
In the event of any conflict between the terms of the Contract prior to this
Amendment and this Amendment, the terms of this Amendment shall prevail. If the
Custodian is delegated the responsibilities of Foreign Custody Manager pursuant
to the terms of Article 3 hereof, in the event of any conflict between the
provisions of Articles 3 and 4 hereof, the provisions of Article 3 shall
prevail.
<PAGE> 13
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and behalf by its duly authorized representative as of the
date first above written.
WITNESSED BY: STATE STREET BANK AND TRUST
COMPANY
/s/ MARC L. PARSONS
- -----------------------------
Marc L. Parsons By: /s/ RONALD E. LOGUE
Associate Counsel -----------------------------
Name: Ronald E. Logue
Title: Executive Vice President
WITNESSED BY: AIM SERIES TRUST
/s/ SAMUEL D. SIRKO
- -----------------------------
Name: Samuel D. Sirko By: /s/ CAROL F. RELIHAN
Title: Assistant Secretary -----------------------------
Name: Carol F. Relihan
Title: Vice President
<PAGE> 14
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale de Banque --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano S.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank. N.A. --
Bulgaria ING Bank N.V. --
Canada Canada Trustco Mortgage Company --
Chile Citibank, N.A. Deposito Central de Valores S.A.
People's Republic The Hongkong and Shanghai --
of China Banking Corporation Limited,
Shanghai and Shenzhen branches
Colombia Cititrust Colombia S.A. --
Sociedad Fiduciaria
</TABLE>
12/31/98 1
<PAGE> 15
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Costa Rica Banco BCT S.A. --
Croatia Privredna Banka Zagreb d.d --
CYPRUS Barclays Bank Plc. --
Cyprus Offshore Banking Unit
Czech Republic Ceskoslovenska Obchodni --
Banka, A.S.
Denmark Den Danske Bank
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
Finland Merita Bank Limited --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A. The Bank of Greece,
System for Monitoring Transactions in
Securities in Book-Entry Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Budapest Rt. --
</TABLE>
12/31/98 2
<PAGE> 16
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Iceland Icebank Ltd. --
India Deutsche Bank AG --
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank OF Ireland --
Israel Bank Hapoalim B.M. --
Italy Banque Paribas --
Ivory Coast Societe Generale de Banques --
en Cote d'Ivoire
Jamaica Scotiabank Jamaica Trust and Merchant --
Bank Ltd.
Japan The Daiwa Bank, Limited Japan Securities Depository
Center
The Fuji Bank, Limited
Jordan British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of Korea The Hongkong and Shanghai Banking
Corporation Limited
Latvia JSC Hansabank-Latvija --
</TABLE>
12/31/98 3
<PAGE> 17
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Lebanon British Bank of the Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank --
Malaysia Berhad
Mauritius The Hongkong and Shanghai --
Banking Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa --
The Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group --
(New Zealand) Limited
Norway Christiania Bank og Kreditkasse --
Oman British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
</TABLE>
12/31/98 4
<PAGE> 18
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
POLAND Citibank (Poland) S.A. --
Bank Polska Kasa Opieki S.A.
Portugal Banco Comercial Portugues --
Romania ING Bank N.V. --
Russia Credit Suisse First Boston AO, Moscow --
(as delegate of Credit Suisse
First Boston, Zurich)
Singapore The Development Bank --
of Singapore Limited
Slovak Republic Ceskoslovenska Obchodna --
Banka, A.S.
Slovenia Bank Austria d.d. Ljubljana --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander, S.A. --
Sri Lanka The Hongkong and Shanghai --
Banking Corporation Limited
Swaziland Standard Bank Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AG --
Taiwan - R.O.C. Central Trust of China --
Thailand Standard Chartered Bank --
</TABLE>
12/31/98 5
<PAGE> 19
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Trinidad & Tobago Republic Bank Limited --
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
Ottoman Bank
Ukraine ING Bank, Ukraine --
United Kingdom State Street Bank and Trust Company, --
London Branch
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
</TABLE>
Euroclear (The Euroclear System)/State Street London Limited
CEDEL, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
12/31/98 6
<PAGE> 20
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Argentina Caja de Valores S.A.
Australia Austraclear Limited
Reserve Bank Information and
Transfer System
Oesterreichische Kontrollbank Ag
(Wertpapiersammelbank Division)
Austria
Caisse Interprofessionnelle de Depot et
de Virement de Titres S.A.
Belgium Banque Nationale De Belgique
Brazil Companhia Brasileira de Liquidacao e
Custodia (CBLC)
Bolsa de Valores de Rio de Janeiro
All SSB clients presently use CBLC
Central de Custodia e de Liquidacao Financeira
de Titulos
Bulgaria Central Depository AD
Bulgarian National Bank
Canada The Canadian Depository
for Securities Limited
People's Republic Shanghai Securities Central Clearing and
Of China Registration Corporation
Shenzhen Securities Central Clearing
Co., Ltd.
Costa Rica Central de Valores S.A. (CEVAL)
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 1
<PAGE> 21
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Croatia Ministry of Finance
National Bank of Croatia
Czech Republic Stredisko cennych papiru
Czech National Bank
Denmark Vaerdipapircentralen (the Danish
Securities Center)
Egypt Misr Company for Clearing, Settlement,
and Central Depository
Estonia Eesti Vaatpaberite Keskdepositoorium
Finland The Finnish Central Securities
Depository
France Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobiliees (SICOVAM)
Germany Deutsche Borse Clearing AG
Greece The Central Securities Depository
(Apothetirion Titlon AE)
Hong Kong The Central Clearing and
Settlement System
Central Money Markets Unit
Hungary The Central Depository and Clearing
House (Budapest) Ltd. (KELER)
[Mandatory for Gov't Bonds only;
SSB does not use for other securities]
India The National Securities Depository Limited
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 2
<PAGE> 22
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Indonesia Bank Indonesia
Ireland Central Bank of Ireland
Securities Settlement Office
Israel The Tel Aviv Stock Exchange Clearing
House Ltd.
Bank of Israel
Italy Monte Titoli S.p.A.
Banca d'Italia
Ivory Coast Depositaire Central - Banque de Reglement
Jamaica The Jamaican Central Securities Depository
Japan Bank of Japan Net System
Kenya Central Bank of Kenya
Republic of Korea Korea Securities Depository Corporation
Latvia The Latvian Central Depository
Lebanon The Custodian and Clearing Center of
Financial Instruments for Lebanon
and the Middle East (MIDCLEAR) S.A.L.
The Central Bank of Lebanon
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 3
<PAGE> 23
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Lithuania The Central Securities Depository of Lithuania
Malaysia The Malaysian Central Depository Sdn. Bhd.
Bank Negara. Malaysia,
Scripless Securities Trading and Safekeeping
System
Mauritius The Central Depository & Settlement
Co. Ltd.
Mexico S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de Valores)
Morocco Maroclear
The Netherlands Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. (NECIGEF)
De Nederlandsche Bank N.V.
New Zealand New Zealand Central Securities
Depository Limited
Norway Verdipapirsentralen (the Norwegian
Registry of Securities)
Oman Muscat Securities Market
Pakistan Central Depository Company of Pakistan Limited
PERU Caja de Valores y Liquidaciones S.A.
(CAVALI)
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 4
<PAGE> 24
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Philippines The Philippines Central Depository, Inc.
The Registry of Scripless Securities
(ROSS) of the Bureau of the Treasury
Poland The National Depository of Securities
(Krajowy Depozyt Papierow Wartosciowych)
Central Treasury Bills Registrar
Portugal Central de Valores; Mobiliarios (Central)
Romania National Securities Clearing, Settlement and
Depository Co.
Bucharest Stock Exchange Registry Division
Singapore The Central Depository (Pte)
Limited
Monetary Authority of Singapore
Slovak Republic Stredisko Cennych Papierov
National Bank of Slovakia
Slovenia Klrinsko Depotna Druzba d.d.
South Africa The Central Depository Limited
Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.
Banco de Espana,
Central de Anotaciones en Cuenta
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 5
<PAGE> 25
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Sri Lanka Central Depository System
(Pvt) Limited
Sweden Vardepapperscentralen AB
(the Swedish Central Securities Depository)
Switzerland Schweizerische Effekten - Giro AG
Taiwan - R.O.C. The Taiwan Securities Central
Depository Co., Ltd.
Thailand Thailand Securities Depository
Company Limited
Tunisia Societe Tunisienne Interprofessionelle de
Compensation et de Depot de
Valeurs Mobilieres
Central Bank of Tunisia
Tunisian Treasury
Turkey Takas ve Saklama Bankasi A.S.
(TAKASBANK)
Central Bank of Turkey
Ukraine The National Bank of Ukraine
United Kingdom The Bank of England,
The Central Gilts Office and
The Central Moneymarkets Office
Uruguay Central Bank of Uruguay
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 6
<PAGE> 26
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Venezuela Central Bank of Venezuela
Zambia Lusaka Central Depository Limited
Bank of Zambia
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 7
<PAGE> 27
SCHEDULE C
MARKET INFORMATION
<TABLE>
<CAPTION>
PUBLICATION/TYPE OF INFORMATION BRIEF DESCRIPTION
- ------------------------------- -----------------
(Frequency)
<S> <C>
The Guide to Custody in World Markets An overview of safekeeping and settlement practices and
- ------------------------------------- procedures in each market in which State Street Bank and
(annually) Trust Company offers custodial services.
Global Custody Network Review Information relating to the operating history and structure of
- ----------------------------- depositories and Sub-Custodians located in the markets in
(annually) which State Street Bank and Trust Company offers custodial
services, including transnational depositories.
Global Legal Survey With respect to each market in which State Street Bank and
- ------------------- Trust Company offers custodial services, opinions relating to
(annually) whether local law restricts (i) access of a fund's independent
public accountants to books and records of a Foreign Sub-
Custodian or Foreign Securities System, (ii) the Fund's ability
to recover in the event of bankruptcy or insolvency of a
Foreign Sub-Custodian or Foreign Securities System, (iii) the
Fund's ability to recover in the event of a loss by a Foreign
Sub-Custodian or Foreign Securities System, and (iv) the
ability of a foreign investor to convert cash and cash
equivalents to U.S. dollars.
Subcustodian Agreements Copies of the subcustodian contracts State Street Bank and
- ----------------------- Trust Company has entered into with each subcustodian in the
(annually) markets in which State Street Bank and Trust Company offers
subcustody services to its US mutual fund clients.
Network Bulletins (weekly): Developments of interest to investors in the markets in which
State Street Bank and Trust Company offers custodial services.
Foreign Custody Advisories (as
necessary): With respect to markets in which State Street Bank and Trust
Company offers custodial services which exhibit special
custody risks, developments which may impact State Street's
ability to deliver expected levels of service.
</TABLE>
<PAGE> 1
EXHIBIT (h)(1)
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
AIM SERIES TRUST
AND
A I M FUND SERVICES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT..............................................1
ARTICLE 2 FEES AND EXPENSES...............................................................................2
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT............................................3
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND......................................................3
ARTICLE 5 INDEMNIFICATION.................................................................................4
ARTICLE 6 COVENANTS OF THE FUND AND THE TRANSFER AGENT....................................................5
ARTICLE 7 TERMINATION OF AGREEMENT........................................................................6
ARTICLE 8 ADDITIONAL FUNDS................................................................................6
ARTICLE 9 ASSIGNMENT......................................................................................6
ARTICLE 10 AMENDMENT.......................................................................................7
ARTICLE 11 TEXAS LAW TO APPLY..............................................................................7
ARTICLE 12 MERGER OF AGREEMENT.............................................................................7
ARTICLE 13 COUNTERPARTS....................................................................................7
ARTICLE 14 LIMITATION OF SHAREHOLDER LIABILITY.............................................................7
</TABLE>
<PAGE> 3
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the eighth day of September, 1998, by and between
AIM SERIES TRUST, a Delaware business trust, having its principal office and
place of business at 11 Greenway Plaza, Suite 100, Houston, Texas 77046 (the
"Fund"), and A I M Fund Services, Inc., a Delaware corporation having its
principal office and place of business at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046 (the "Transfer Agent").
WHEREAS, the Transfer Agent is registered as such with the Securities
and Exchange Commission (the "SEC"); and
WHEREAS, the Fund is authorized to issue shares in separate series and
classes, with each such series representing interests in a separate portfolio of
securities and other assets and each such class having different distribution
arrangements; and
WHEREAS, the Fund on behalf of each portfolio thereof (the
"Portfolios") desires to appoint the Transfer Agent as its transfer agent, and
agent in connection with certain other activities, with respect to the
Portfolios, and the Transfer Agent desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE 1
TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT
1.01 Subject to the terms and conditions set forth in this Agreement,
the Fund hereby employs and appoints the Transfer Agent to act as, and the
Transfer Agent agrees to act as, its transfer agent for the authorized and
issued shares of beneficial interest of the Fund representing interests of each
of the respective Portfolios ("Shares"), dividend disbursing agent, and agent in
connection with any accumulation or similar plans provided to shareholders of
each of the Portfolios (the "Shareholders"), including without limitation any
periodic investment plan or periodic withdrawal program, as provided in the
currently effective prospectus and statement of additional information (the
"Prospectus") of the Fund on behalf of the Portfolios.
1.02 The Transfer Agent agrees that it will perform the following
services:
(a) The Transfer Agent shall, in accordance with procedures established
from time to time by agreement between the Fund on behalf of each of the
Portfolios, as applicable, and the Transfer Agent:
(i) receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian of the Fund
authorized pursuant to the Agreement and Declaration
of Trust and Bylaws of the Fund (the "Custodian");
(ii) pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the
appropriate Shareholder account;
1
<PAGE> 4
(iii) receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
(iv) at the appropriate time as and when it receives
monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over in
the appropriate manner such monies as instructed by
the Fund;
(v) effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
Shares;
(vii) maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(viii) record the issuance of Shares of the Fund and
maintain pursuant to SEC Rule 17Ad-10(e) a record of
the total number of Shares which are authorized,
based upon data provided to it by the Fund, and
issued and outstanding.
The Transfer Agent shall also provide the Fund on a regular basis with
the total number of Shares which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of Shares, to monitor the
issuance of such Shares or to take cognizance of any laws relating to the issue
or sale of such Shares, which function shall be the sole responsibility of the
Fund.
(b) In addition to the services set forth in the above paragraph (a),
the Transfer Agent shall perform the customary services of a transfer agent,
including but not limited to: maintaining all Shareholder accounts, mailing
Shareholder reports and prospectuses to current Shareholders, preparing and
mailing confirmation forms and statements of accounts to Shareholders for all
purchases and redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information.
(c) Procedures as to who shall provide certain of these services in
Article 1 may be established from time to time by agreement between the Fund on
behalf of each Portfolio and the Transfer Agent. The Transfer Agent may at times
perform only a portion of these services and the Fund or its agent may perform
these services on the Fund's behalf.
ARTICLE 2
FEES AND EXPENSES
2.01 For performance by the Transfer Agent pursuant to this Agreement,
the Fund agrees on behalf of each of the Portfolios to pay the Transfer Agent
fees as set out in the initial fee schedule attached hereto. Such fees and
out-of-pocket expenses and advances identified under Section 2.02 below may be
changed from time to time subject to mutual written agreement between the Fund
and the Transfer Agent.
2
<PAGE> 5
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse the Transfer Agent for out-of-pocket expenses or advances
incurred by the Transfer Agent for the items set out in the fee schedule
attached hereto. In addition, any other expenses incurred by the Transfer Agent
at the request or with the consent of the Fund, will be reimbursed by the Fund
on behalf of the applicable Shares.
2.03 The Fund agrees on behalf of each of the Portfolios to pay all
fees and reimbursable expenses following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to the Transfer Agent by
the Fund at least seven (7) days prior to the mailing date of such materials.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the state of Delaware.
3.02 It is duly qualified to carry on its business in Delaware and in
Texas.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
3.06 It is registered as a Transfer Agent as required by the federal
securities laws.
3.07 This Agreement is a legal, valid and binding obligation to it.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
4.01 It is a business trust duly organized and existing and in good
standing under the laws of Delaware.
4.02 It is empowered under applicable laws and by its Agreement and
Declaration of Trust and Bylaws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Agreement and
Declaration of Trust and Bylaws have been taken to authorize it to enter into
and perform this Agreement.
3
<PAGE> 6
4.04 It is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended on behalf of each of the Portfolios is currently effective and will
remain effective, with respect to all Shares of the Fund being offered for sale.
ARTICLE 5
INDEMNIFICATION
5.01 The Transfer Agent shall not be responsible for, and the Fund
shall on behalf of the applicable Portfolio, indemnify and hold the Transfer
Agent harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) all actions of the Transfer Agent or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct;
(b) the Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of the Fund
hereunder;
(c) the reliance on or use by the Transfer Agent or its agents or
subcontractors of information, records and documents or services which (I) are
received or relied upon by the Transfer Agent or its agents or subcontractors
and/or furnished to it or performed by on behalf of the Fund, and (ii) have been
prepared, maintained and/or performed by the Fund or any other person or firm on
behalf of the Fund; provided such actions are taken in good faith and without
negligence or willful misconduct;
(d) the reliance on, or the carrying out by the Transfer Agent or its
agents or subcontractors of any instructions or requests of the Fund on behalf
of the applicable Portfolio; provided such actions are taken in good faith and
without negligence or willful misconduct; or
(e) the offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or regulations
of any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
5.02 The Transfer Agent shall indemnify and hold the Fund harmless from
and against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by the Transfer Agent as result of the Transfer Agent's lack
of good faith, negligence or willful misconduct.
5.03 At any time the Transfer Agent may apply to any officer of the
Fund for instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Transfer
Agent under this Agreement, and the Transfer Agent and its agents or
subcontractors shall not be liable to and shall be indemnified by the Fund on
behalf of the applicable Portfolio for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The
Transfer Agent shall be protected and indemnified in acting upon
4
<PAGE> 7
any paper or document furnished by or on behalf of the Fund, reasonably believed
to be genuine and to have been signed by the proper person or persons, or upon
any instruction, information, data, records or documents provided to the
Transfer Agent or its agents or subcontractors by machine readable input, telex,
CRT data entry or other similar means authorized by the Fund, and shall not be
held to have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
ARTICLE 6
COVENANTS OF THE FUND AND THE TRANSFER AGENT
6.01 The Fund shall, upon request, on behalf of each of the Portfolios
promptly furnish to the Transfer Agent the following:
(a) a certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Transfer Agent and the execution and
delivery of this Agreement; and
(b) a copy of the Agreement and Declaration of Trust and Bylaws of the
Fund and all amendments thereto.
6.02 The Transfer Agent shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Transfer Agent agrees that all such records
prepared or maintained by the Transfer Agent relating to the services to be
performed by the Transfer Agent hereunder are the property of the Fund and will
be preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to the Fund on and in accordance with
its request.
5
<PAGE> 8
6.03 The Transfer Agent and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.04 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund and to secure instructions from an authorized officer of the Fund as to
such inspection. The Transfer Agent reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be held liable for the failure to exhibit the Shareholder records to such
person.
ARTICLE 7
TERMINATION OF AGREEMENT
7.01 This Agreement may be terminated by either party upon sixty (60)
days written notice to the other.
7.02 Should the Fund exercise its right to terminate this Agreement,
all out-of-pocket expenses associated with the movement of records and material
will be borne by the Fund on behalf of the applicable Portfolios. Additionally,
the Transfer Agent reserves the right to charge the Fund or the applicable
Portfolios for any other reasonable expenses associated with such termination,
not to exceed a charge equivalent to the average of three (3) months' fees;
provided, however, the Transfer Agent shall not be entitled to such expenses in
the event of the merger and/or liquidation of the applicable Portfolios.
ARTICLE 8
ADDITIONAL FUNDS
8.01 In the event that the Fund establishes one or more series of
Shares in addition to the Portfolios with respect to which it desires to have
the Transfer Agent render services as transfer agent under the terms hereof, it
shall so notify the Transfer Agent in writing, and if the Transfer Agent agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
ARTICLE 9
ASSIGNMENT
9.01 Except as provided in Section 9.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
9.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
9.03 The Transfer Agent may, without further consent on the part of the
Fund, subcontract for the performance hereof with any entity which is duly
registered as a transfer agent pursuant to Section 17A(c)(1) of the Securities
Exchange Act of 1934 as amended ("Section 17A(c)(1)"); provided, however, that
the Transfer Agent shall be as fully responsible to the Fund for the acts and
omissions of any subcontractor as it is for its own acts and omissions.
6
<PAGE> 9
ARTICLE 10
AMENDMENT
10.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Trustees of the Fund.
ARTICLE 11
TEXAS LAW TO APPLY
11.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Texas.
ARTICLE 12
MERGER OF AGREEMENT
12.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
ARTICLE 13
COUNTERPARTS
13.01 This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
ARTICLE 14
LIMITATION OF SHAREHOLDER LIABILITY
14.01 Notice is hereby given that this Agreement is being executed by
the Fund by a duly authorized officer thereof acting as such and not
individually. The obligations of this Agreement are not binding upon any of the
Trustees, officers, shareholders or the investment advisor of the Fund
individually but are binding only upon the assets and property belonging to the
Fund, on its own behalf or on behalf of a Portfolio, for the benefit of which
the Trustees or officers have caused this Agreement to be executed.
7
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
AIM SERIES TRUST
By: /s/ ROBERT H. GRAHAM
-----------------------------
President
ATTEST:
/s/ SAMUEL D. SIRKO
- -----------------------------
Assistant Secretary
A I M FUND SERVICES, INC.
By: /s/ JOHN CALDWELL
-----------------------------
President
ATTEST:
/s/ SAMUEL D. SIRKO
- -----------------------------
Assistant Secretary
8
<PAGE> 11
FEE SCHEDULE
1. For performance by the Transfer Agent pursuant to this Agreement, the
Fund agrees on behalf of each of the Portfolios to pay the Transfer
Agent an annualized fee for shareholder accounts that are open during
any monthly period as set forth below, and an annualized fee of $.70
per shareholder account that is closed during any monthly period. Both
fees shall be billed by the Transfer Agent monthly in arrears on a
prorated basis of 1/12 of the annualized fee for all such accounts.
<TABLE>
<CAPTION>
Per Account Fee
Fund Type Annualized
- --------- ----------
<S> <C>
Class A Annual/Semi-Annual Dividends $24.85*
Class A Quarterly & Monthly Dividend 24.85*
Class A Daily Accrual 24.85*
Class B 24.85*
Class C 24.85*
Advisor Class 24.85*
</TABLE>
* This fee includes all out of pocket expenses, the annualized credit,
Consumer Price Index increase, Balance Credit and Remote Services Fee
discussed below. Currently, therefore, paragraphs 2,3, and 5 below do
not apply. Paragraph 4 does not apply for 1998, however the IRA Annual
Maintenance Fee will be charged beginning in 1999.
2. The Transfer Agent shall provide the various mutual funds that are
advised by A I M Advisors, Inc. or its affiliates and distributed by A
I M Distributors, Inc. (the "AIM Funds") with an annualized credit to
the monthly billings of (a) $1.50 for each open account in excess of
100,000 open AIM Funds Accounts up to and including 125,000 open AIM
Funds Accounts; (b) $1.75 for each open account in excess of 125,000
open AIM Funds Accounts up to and including 150,000 open AIM Funds
Accounts; (c) $2.00 for each open AIM Funds Account in excess of
150,000 open AIM Funds Accounts up to and including 200,000 open AIM
Funds Accounts; (d) $2.25 for each open AIM Funds Account in excess of
200,000 open AIM Funds Accounts up to and including 500,000 open AIM
Funds Accounts; (e) $2.50 for each open AIM Funds Account in excess of
500,000 open AIM Funds Accounts up to and including 1,000,000 open AIM
Funds Accounts; and (f) $3.00 for each open AIM Funds Account in excess
of 1,000,000 open AIM Funds Accounts.
3. In addition, beginning on the anniversary date of the execution of the
Remote Services Agreement with The Shareholder Services Group, Inc.,
and on each subsequent anniversary date, the per account fees shall
each be increased by a percentage amount equal to the percentage
increase in the then current Consumer Price Index (all urban consumers)
or its successor index, though in no event shall such increase be
greater than a 7% increase over the previous fees.
4. Other Fees
IRA Annual Maintenance Fee $10 per IRA account per year (paid by
investor per tax I.D. number).
9
<PAGE> 12
Balance Credit The total fees due to the Transfer Agent from all
funds affiliated with the Fund shall be reduced
by an amount equal to one half of investment
income earned by the Transfer Agent on the DDA
balances of the disbursement accounts for those
funds.
Remote Services Fee $3.60 per open account per year, payable monthly
and $1.80 per closed account per year, payable
monthly.
5. OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable
out-of-pocket expenses, including, but not limited to the following
items:
- Microfiche/microfilm production & equipment
- Magnetic media tapes and freight
- Printing costs, including, without limitation, certificates,
envelopes, checks, stationery, confirmations and statements
- Postage (bulk, pre-sort, ZIP+4, bar coding, first class)
direct pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment
and any expenses incurred in connection with such terminals
and lines
- Duplicating services
- Courier services
- Banking charges, including without limitation incoming and
outgoing wire charges @ $8.00 per wire
- Rendering fees as billed
- Federal Reserve charges for check clearance
- Record retention, retrieval and destruction costs, including,
but not limited to exit fees charged by third party record
keeping vendors
- Third party audit reviews
- All client specific Systems enhancements will be at the Funds'
cost.
- Certificate Insurance
- Such other miscellaneous expenses reasonably incurred by the
Transfer Agent in performing its duties and responsibilities
under this Agreement
- Check writing fee of $.75 per check redemption.
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing. In addition, the Fund will promptly
reimburse the Transfer Agent for any other unscheduled expenses
incurred by the Transfer Agent whenever the Fund and the Transfer Agent
mutually agree that such expenses are not otherwise properly borne by
the Transfer Agent as part of its duties and obligations under the
Agreement.
10
<PAGE> 1
EXHIBIT (h)(2)(vii)
AMENDMENT NUMBER 4 TO THE REMOTE
ACCESS AND RELATED SERVICES AGREEMENT
THIS AMENDMENT, dated as of June 30, 1998 is made to the Remote Access
and Related Services Agreement dated December 23, 1994, as amended (the
"Agreement") between each registered investment company listed on Exhibit 1 of
the Agreement (the "Fund") and First Data Investor Services Group, Inc,
("FDISG").
WITNESSETH
WHEREAS, the Fund and FDISG desire to further amend the Agreement to
reflect certain changes thereto.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree that as of the date first referenced above, the
Agreement shall be amended as follows:
1. Section 14(a) of the Agreement (as amended by Amendment Number 3) is
hereby deleted in its entirety and replaced with the following new Section
14(a):
"(a) This Agreement which became effective as of December 23, 1994 is
hereby extended and shall continue through December 31, 2002 (the
"Initial Term"). Upon the expiration of the Initial Term, this
Agreement shall automatically renew for successive terms of one
(1) year ("Renewal Terms") each, unless the Fund or FDISG
provides written notice to the other of its intent not to renew.
Such notice must be received not less than one-hundred and eighty
(180) days prior to the expiration of the Initial Term or the
then current Renewal Term."
2. Effective January 1, 1999, Section I "Shareholder Account Fees" of
Schedule C "Fee Schedule" (as amended by Amendment Number 3) is amended by
deleting Section I in its entirety and adding the following new Section I:
"I. SHAREHOLDER ACCOUNT FEES. The Fund shall pay the following
fees:
For the period beginning on January 1, 1999, and continuing through
December 31, 2002, the Fund shall pay FDISG an annualized fee for
shareholder accounts open during any monthly period ("Open Account
Fee") as follows:
<TABLE>
<CAPTION>
Account Volume Fee per shareholder account
-------------- ---------------------------
<S> <C> <C>
1-1.5 million $3.50
1.5-3 million $2.40
3-4 million $2.00
4-5 million $1.90
Exceeding 5 million $1.80
</TABLE>
<PAGE> 2
The Fund also shall pay FDISG Group an annualized fee of $1.60 per
shareholder account that is closed during any monthly period (Closed
Account Fee")(The Open Account Fees and Closed Account Fees hereafter
collectively referred to as "Shareholder Account Fees"). The
Shareholder Account Fees shall be billed by FDISG monthly in arrears on
a prorated basis of 1/12 of the annualized fee, for all such accounts.
In addition, on January 1 of the years 2001 and 2002 the Shareholder
Account fees may be increased by FDISG in an amount equal to the lesser
of (i) the cumulative percentage increase in the Consumer Price Index
for all Urban Consumers (CPI-U) U.S. City Average, All Items
(unadjusted = (1982-84 + 100). published by the U.S. Department of
Labor, or (ii) seven percent (7%) of the Shareholder Account Fees
charged by FDISG to the Fund for the preceding twelve (12) month
period.
In return for the Shareholder Account Fees, FDISG agrees to provide the
following to the Fund:
o Remote Access to FDISG's FSR System
o License for 512 IMPRESS Plus seats. Includes six weeks of
technical training (Completed)
o Conversion of the GT Global Funds into the AIM Family of Funds.
Conversion estimated at 4500 hours of systems development
o License for up to 15 copies of FDISG's ACE+ (Automate Control
Environment) software as further defined in Schedule H
o Dedicated Programming Support equivalent to 1 Systems Manager, 4
Programmers, and 2 Business Systems Analysts
o Separate FSR processing cycle
o Implementation of a Separate FSR processing cycle by September
15, 1997, as more fully described in the attached Exhibit 3 of
this Schedule C (Completed)
o Implementation of the core TA system functionality identified in
Exhibit 1 of this Schedule C (Completed)
o Implementation of IWT Release 5.x functionality as identified in
Exhibit 2 of this Schedule C (Completed)
o Continued use of FDISG's Price/Rate Transmission (PRAT)
application. The PRAT Application will accept prices and dividend
rates from the Fund Accounting Department of the Fund
electronically and post them to the FDISG Pricing System. The
PRAT application will run interconnected via Local Area Network
hardware and software."
The Agreement, as previously amended and as amended by this Amendment,
("Modified Agreement") constitutes the entire agreement between the parties with
respect to the subject matter hereof. The Modified Agreement supersedes all
prior and contemporaneous agreements between the parties in connection with the
subject matter hereof. No officer, employee, servant
<PAGE> 3
or other agent of either party is authorized to make any representation,
warranty, or other promises not expressly contained herein with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, as of the day and year first above
written.
On behalf of the Funds and respective Portfolios and Classes set forth in
Exhibit 1 of the Agreement, as amended and as may be amended in the future from
time to time.
By: /s/ [ILLEGIBLE]
--------------------------------------
Title: AIM Fund Services, Inc.
-----------------------------------
FIRST DATA INVESTOR SERVICES GROUP, INC
By: /s/ [ILLEGIBLE]
--------------------------------------
Title: Executive VP
-----------------------------------
<PAGE> 1
EXHIBIT (h)(2)(viii)
AMENDMENT NUMBER 5 TO THE REMOTE
ACCESS AND RELATED SERVICES AGREEMENT
THIS AMENDMENT, dated as of July 1, 1998 is made to the Remote Access
and Related Services Agreement dated December 23, 1994, as amended (the
"Agreement") between each registered investment company listed on Exhibit 1 of
the Agreement (the "Fund") and First Data Investor Services Group, Inc.
("FDISG").
WITNESSETH
WHEREAS, the Fund and FDISG desire to further amend the Agreement to
reflect certain changes thereto.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree that as of the date first referenced above, the
Agreement shall be amended as follows:
1. Exhibit 1 of the Agreement is hereby deleted and replaced with the
Attached revised Exhibit 1.
2. Section III "Additional Fees" of Schedule C "Fee Schedule" is hereby
amended to add the following new subsection h:
"h. Fees for IMPRESS Plus COLD:
(i) IMPRESS Plus COLD Software License Fees - The Fund shall pay an
initial license fee of $302,469 (the "License Fee) based on 512
IMPRESS Plus COLD seats licensed, which includes the use of the
INSCI Software. The initial License Fee shall be financed over a
period of 36 months and be payable monthly in arrears in amounts of
$8,401.66. Thereafter, the then current monthly License Fee
payments shall continue so long as the Fund continues to license
and use the IMPRESS Plus COLD Software. License Fee payments shall
commence on the earlier of a) first production usage of IMPRESS
Plus COLD software or b) September 1, 1998.
(ii) IMPRESS Plus Software Usage Fees. In addition to the License
Fee set forth above, the Fund shall pay a monthly usage fee of
$9,728.00 (the "Usage Fee") based on 512 IMPRESS Plus COLD seats
licensed, which includes the use of the INSCI Software. The Usage
Fee shall commence on the earlier of a) first production usage of
IMPRESS Plus COLD software or b) September 1, 1998.
(iii) IMPRESS Plus COLD Installation Fees. - Thirty (30) days
following the execution of Amendment Number 4 to the Agreement and
receipt of an invoice, the Fund shall pay to FDISG one-time
installation fee of $140,000. Installation
<PAGE> 2
covers 3 line data application and 1 Intelligent Data Stream
application. Installation activities include:
o Hardware installation at FDISG site
o IMPRESS Plus COLD application installation
o IMPRESS Plus COLD third party software installation
o Network Design Assistance
o Project Management
o Post Installation Support
(iv) Additional IMPRESS Plus COLD Fees:
o One-time fee for each additional Line Data Application - $10,000
o One-time fee for each additional Intelligent Data Stream
Application - $20,000
o Application Enhancements - $150/hr
(v) Maintenance and Support for IMPRESS Plus COLD includes items
listed in Section III.b above and the following:
o Report conversion to Express Delivery/IMPRESS Plus COLD
o Hardware support and maintenance
(v) IMPRESS Plus COLD License and Usage and IMPRESS Plus COLD
Installation Fees do not include the following:
o Hardware
o Network and Server Software not listed in Exhibit 1 of
Schedule G
o Customization or application integration
o Support for IMPRESS Plus COLD applications customized or built
by the Fund (see Section 3 of Exhibit 3 of Schedule G)
o Installation, Integration and On-going Support of hardware,
network, and software components not included in Schedule G
o Travel Expenses for install and support staff for on-site
visits (billed separately per Schedule D)
o Application Source Code
(vi) IMPRESS Plus COLD Hardware and Network Fees:
<TABLE>
<CAPTION>
One-time* Monthly Support Fee*
--------- --------------------
(Due Upon Execution)
<S> <C> <C>
Hardware $308,729.52 $3276.27
</TABLE>
* Fee is subject to change based on actual vendor costs"
<PAGE> 3
3. Section 1.3 of Schedule G is amended by adding the following:
"Notwithstanding the foregoing provisions of this Section 1.3 to the
contrary, FDISG shall install and maintain the equipment associated
with FDISG's IMPRESS Plus COLD product set forth in Exhibit 2.3 of this
Schedule G at its facility for the fees set forth in Section III.h. of
Schedule C. At the expense of the Fund, upon termination of the
Agreement or at the request of the Funds FDISG shall deliver to the
Fund such equipment."
4. Exhibit 1 of Schedule G is hereby amended as follows:
(a) Section 1.1 is amended by adding "IMPRESS Plus COLD Release 6.0" to
the list of IMPRESS Plus software products.
(b) Section 2.1 "FDISG Provided Third Party Software" is amended by
adding the following new section 2.1.3:
"2.1.3 INSCI Software. The following Third Party Software is
licensed directly to the Fund by FDISG subject to the terms and
conditions set forth in this Agreement:
Advanced COINSERV Software w/Hierarchical Storage Mgr.
WINCOINS Software
Vector Forms Software
Jukebox Driver Software, Two, 12" Drives
Metacode Server License
CDP Metacode Viewer, 300 Concurrent Users
Metacode Desktop & Converter
Operating Kit (Includes Dial-In for Trouble Shooting)"
5. Exhibit 1.1 of Schedule G "Specifications" is hereby amended to add the
IMPRESS Plus COLD Specifications attached hereto as Exhibit 1.1a of Schedule G.
The Agreement, as previously amended and as amended by this Amendment,
("Modified Agreement") constitutes the entire agreement between the parties with
respect to the subject matter hereof. The Modified Agreement supersedes all
prior and contemporaneous agreements between the parties in connection with the
subject matter hereof. No officer, employee, servant or other agent of either
party is authorized to make any representation, warranty, or other promises not
expressly contained herein with respect to the subject matter hereof.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their duly authorized officers, as of the day and year first
above written.
On behalf of the Funds and respective Portfolios and Classes set forth in
Exhibit 1 attached hereto as may be amended from time to time.
By: /s/ [ILLEGIBLE]
-----------------------------------
Title: Senior Vice President
--------------------------------
FMT DATA INVESTOR SERVICES GROUP, INC.
By: /s/ [ILLEGIBLE]
-----------------------------------
Title: Executive VP
--------------------------------
<PAGE> 5
EXHIBIT 1
List of Funds
<TABLE>
<CAPTION>
Fund# Fund Name
<S> <C>
1 AIM WEINGARTEN FUND - CLASS A
2 AIM CONSTELLATION FUND - CLASS A
6 AIM BALANCED FUND - CLASS A
7 AIM LIMITED MATURITY TREASURY FUND - CL
8 AIM TAX-FREE INTERMEDIATE SHARES
10 AIM CHARTER FUND - CLASS A
16 AIM INTERNATIONAL EQUITY FUND - CLASS A
17 AIM HIGH INCOME MUNICIPAL FUND - CLASS
30 AIM EUROPEAN DEVELOPMENT FUND - CLASS A
31 AIM ASIAN GROWTH FUND - CLASS A
34 AIM SMALL CAP OPPORTUNITIES FUND - CLASS
81 AIM GLOBAL AGGRESSIVE GROWTH FUND - CLASS
82 AIM GLOBAL GROWTH FUND - CLASS A
83 AIM GLOBAL INCOME FUND - CLASS A
301 AIM WEINGARTEN FUND - CLASS C
302 AIM CONSTELLATION FUND - CLASS C
303 AIM MUNICIPAL BOND FUND - CLASS C
305 AIM VALUE FUND - CLASS C
306 AIM BALANCED FUND - CLASS C
308 AIM GLOBAL UTILITIES FUND - CLASS C
310 AIM CHARTER FUND - CLASS C
314 AIM CAPITAL DEVELOPMENT FUND - CLASS C
315 AIM BLUE CHIP FUND - CLASS C
316 AIM INTERNATIONAL EQUITY FUND - CLASS C
317 AIM HIGH INCOME MUNICIPAL FUND - CLASS
320 AIM ADVISOR LARGE CAP VALUE FUND - CLASS
321 AIM ADVISOR INCOME FUND - CLASS C
322 AIM ADVISOR FLEX FUND - CLASS C
323 AIM ADVISOR CASH MANAGEMENT FUND - CLASS
324 AIM ADVISOR MULTIFLEX FUND - CLASS C
325 AIM ADVISOR REAL ESTATE FUND - CLASS C
326 AIM ADVISOR INTERNATIONAL VALUE FUND -
330 AIM EUROPEAN DEVELOPMENT FUND - CLASS C
331 AIM ASIAN GROWTH FUND - CLASS C
350 AIM SELECT GROWTH FUND - CLASS C
360 AIM INTERMEDIATE GOVERNMENT FUND - CLASS
365 AIM INCOME FUND - CLASS C
375 AIM HIGH YIELD FUND - CLASS C
380 AIM MONEY MARKET FUND - CLASS C
381 AIM GLOBAL AGGRESSIVE GROWTH FUND - CLASS
382 AIM GLOBAL GROWTH FUND - CLASS C
383 AIM GLOBAL INCOME FUND - CLASS C
384 AIM NEW DIMENSION FUND - CLASS C
401 AIM MONEY MARKET FUND - CLASS A
402 AIM INCOME FUND - CLASS A
403 AIM MUNICIPAL BOND FUND - CLASS A
404 AIM INTERMEDIATE GOVERNMENT FUND - CLASS
405 AIM VALUE FUND - CLASS A
</TABLE>
Page 1
<PAGE> 6
EXHIBIT 1
List of Funds
<TABLE>
<S> <C>
406 AIM SELECT GROWTH FUND - CLASS A
407 AIM AGGRESSIVE GROWTH FUND - CLASS A
408 AIM GLOBAL UTILITIES FUND - CLASS A
421 AIM CASH RESERVE SHARES
422 AIM TAX-EXEMPT CASH FUND
425 AIM HIGH YIELD FUND - CLASS A
430 CG GUARANTEED ACCT 71-73
431 CG GUARANTEED ACCT 74-77
432 CG GUARANTEED ACCT 1978
433 CG GUARANTEED ACCT 1979
434 CG GUARANTEED ACCT 1980
435 CG GUARANTEED ACCT 1981
436 CG GUARANTEED ACCT 1982
437 CG GUARANTEED ACCT 1983
438 CG GUARANTEED ACCT 1984
439 CG GUARANTEED ACCT 1985
440 CG GUARANTEED ACCT 1985A
441 CG GUARANTEED ACCT 1985B
442 CG GUARANTEED ACCT 1986
443 CG GUARANTEED ACCT 1986A
444 CG GUARANTEED ACCT 1987
445 CG GUARANTEED ACCT 1988
446 CG GUARANTEED ACCT 1989
447 CG GUARANTEED ACCT 1990
448 CG GUARANTEED ACCT 1991
449 CG GUARANTEED ACCT 1992
460 AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
514 AIM CAPITAL DEVELOPMENT FUND - CLASS A
515 AIM BLUE CHIP FUND - CLASS A
520 AIM ADVISOR LARGE CAP VALUE FUND - CLASS
521 AIM ADVISOR INCOME FUND - CLASS A
522 AIM ADVISOR FLEX FUND - CLASS A
523 AIM ADVISOR CASH MANAGEMENT FUND - CLASS
524 AIM ADVISOR MULTIFLEX FUND - CLASS A
525 AIM ADVISOR REAL ESTATE FUND - CLASS A
526 AIM ADVISOR INTERNATIONAL VALUE FUND -
541 AIM DOLLAR FUND CLASS A
542 AIM NEW PACIFIC GROWTH FUND CLASS A
543 AIM EUROPE GROWTH FUND CLASS A
544 AIM JAPAN GROWTH FUND CLASS A
546 AIM MID CAP GROWTH FUND CLASS A
547 AIM WORLDWIDE GROWTH FUND CLASS A
548 AIM STRATEGIC INCOME FUND CLASS A
549 AIM GLOBAL GOVERNMENT INCOME FUND CLASS
551 AIM GLOBAL HEALTH CARE FUND CLASS A
553 AIM LATIN AMERICAN GROWTH FUND CLASS A
556 AIM EMERGING MARKETS FUND CLASS A
557 AIM FINANCIAL SERVICES FUND CLASS A
558 AIM GLOBAL HIGH INCOME - CLASS A
</TABLE>
Page 2
<PAGE> 7
EXHIBIT 1
List of Funds
<TABLE>
<S> <C>
559 AIM GLOBAL INFRASTRUCTURE - CLASS A
561 AIM GLOBAL RESOURCES - CLASS A
562 AIM GLOBAL CONSUMER PRODUCTS & SERVICES
563 AIM AMERICA VALUE FUND - CLASS A
564 AIM SMALL CAP EQUITY FUND - CLASS A
576 AIM DEVELOPING MARKETS FUND - CLASS A
577 AIM INTERNATIONAL GROWTH FUND - CLASS A
578 AIM GLOBAL GROWTH AND INCOME FUND - CLASS
579 AIM GLOBAL TELECOMMUNICATIONS FUND - CLASS
584 AIM NEW DEVELOPING MARKETS FUND - CLASS
602 AIM CONSTELLATION FUND - CLASS B
614 AIM CAPITAL DEVELOPMENT FUND - CLASS B
615 AIM BLUE CHIP FUND - CLASS B
617 AIM HIGH INCOME MUNICIPAL FUND - CLASS
620 AIM ADVISOR LARGE CAP VALUE FUND - CLASS
622 AIM ADVISOR FLEX FUND - CLASS B
624 AIM ADVISOR MULTIFLEX FUND - CLASS B
625 AIM ADVISOR REAL ESTATE FUND - CLASS B
626 AIM ADVISOR INTERNATIONAL VALUE FUND - CLASS
630 AIM EUROPEAN DEVELOPMENT FUND - CLASS B
631 AIM ASIAN GROWTH FUND - CLASS B
634 AIM SMALL CAP OPPORTUNITIES - CLASS B
640 AIM WEINGARTEN FUND - CLASS B
641 AIM DOLLAR FUND CLASS B
642 AIM NEW PACIFIC GROWTH FUND CLASS B
643 AIM EUROPE GROWTH FUND CLASS B
644 AIM JAPAN GROWTH FUND CLASS B
645 AIM CHARTER FUND - CLASS B
646 AIM MID CAP GROWTH FUND CLASS B
647 AIM WORLDWIDE GROWTH FUND CLASS B
648 AIM STRATEGIC INCOME FUND CLASS B
649 AIM GLOBAL GOVERNMENT INCOME FUND CLASS
650 AIM SELECT GROWTH FUND - CLASS B
651 AIM GLOBAL HEALTH CARE FUND CLASS B
653 AIM LATIN AMERICAN GROWTH FUND CLASS B
655 AIM GLOBAL UTILITIES FUND - CLASS B
656 AIM EMERGING MARKETS FUND CLASS B
657 AIM GLOBAL FINANCIAL SERVICES FUND CLASS
658 AIM GLOBAL HIGH INCOME FUND CLASS B
659 AIM GLOBAL INFRASTRUCTURE FUND CLASS B
660 AIM INTERMEDIATE GOVERNMENT FUND - CLASS
661 AIM GLOBAL RESOURCES FUND CLASS B
662 AIM GLOBAL CONSUMER PRODUCTS AND SERVICE
663 AIM AMERICA VALUE FUND CLASS B
664 AIM SMALL CAP EQUITY FUND CLASS B
665 AIM INCOME FUND - CLASS B
670 AIM MUNICIPAL BOND FUND - CLASS B
675 AIM HIGH YIELD FUND - CLASS B
676 AIM DEVELOPING MARKETS FUND CLASS B
</TABLE>
Page 3
<PAGE> 8
EXHIBIT I
List of Funds
<TABLE>
<S> <C>
677 AIM INTERNATIONAL GROWTH FUND CLASS B
678 AIM GLOBAL GROWTH AND INCOME FUND CLASS
679 AIM GLOBAL TELECOMMUNICATIONS FUND CLASS
680 AIM MONEY MARKET FUND - CLASS B
684 AIM NEW DIMENSION FUND CLASS B
685 AIM BALANCED FUND - CLASS B
690 AIM VALUE FUND - CLASS B
691 AIM GLOBAL AGGRESSIVE GROWTH FUND - CLASS
692 AIM GLOBAL GROWTH FUND - CLASS B
693 AIM GLOBAL INCOME FUND - CLASS B
694 AIM INTERNATIONAL EQUITY FUND. - CLASS B
695 AIM FLOATING RATE FUND
800 SHORT-TERM INVESTMENTS TRUST - TREASURY
841 AIM DOLLAR FUND ADVISOR CLASS
842 AIM NEW PACIFIC GROWTH ADVISOR CLASS
843 AIM EUROPE GROWTH ADVISOR CLASS
844 AIM JAPAN GROWTH ADVISOR CLASS
846 AIM MID CAP GROWTH ADVISOR CLASS
847 AIM WORLDWIDE GROWTH ADVISOR CLASS
848 AIM STRATEGIC INCOME ADVISOR CLASS
849 AIM GLOBAL GOVT INCOME ADVISOR CLASS
851 AIM GLOBAL HEALTH CARE ADVISOR CLASS
853 AIM LATIN AMERICAN GROWTH ADVISOR CLASS
856 AIM EMERGING MARKETS ADVISOR CLASS
857 AIM GLOBAL FINANCIAL SERVICES ADVISOR CLASS
858 AIM GLOBAL HIGH INCOME ADVISOR CLASS
859 AIM GLOBAL INFRASTRUCTURE ADVISOR CLASS
861 AIM GLOBAL RESOURCES ADVISOR CLASS
862 AIM GLOBAL CONSUMER PRODUCTS & SERVICES
863 AIM AMERICAN VALUE FUND ADVISOR CLASS
864 AIM SMALL CAP EQUITY ADVISOR CLASS
876 AIM DEVELOPING MARKETS ADVISOR CLASS
877 AIM INTERNATIONAL GROWTH ADVISOR CLASS
878 AIM GLOBAL GROWTH & INCOME ADVISOR CLASS
879 AIM GLOBAL TELECOMMUNICATIONS ADVISOR CLASS
884 AIM NEW DIMENSION ADVISOR CLASS
</TABLE>
Page 4
<PAGE> 9
EXHIBIT 1.1a OF SCHEDULE G
SPECIFICATIONS
TABLE OF CONTENTS
III. HIGH LEVEL OVERVIEW OF IMPRESS PLUS FUNCTIONALITY
E. Computer Output to Laser Disc (COLD)
This item is the property of First Data Investor Services Group (First Data) of
Boston, Massachusetts, and contains confidential and trade secret information.
This Item may not be transferred from the custody or control of First Data
except as authorized by, and then only by way of loan for limited purposes. It
must be returned to First Data upon request and, in all events, upon completion
of the purpose of the loan. Neither this item nor the information it contains
may be used or disclosed to persons not having a need for such use or disclosure
consistent with the purpose of the loan, without the prior written consent of
First Data.
Copyright First Data Investor Services Group
1994,1995,1996,1997
ALL RIGHTS RESERVED
This media contains unpublished, confidential, and proprietary information of
First Data Investor Services Group. No disclosure or use of any portion of these
materials may be made without the express written consent of First Data Investor
Services Group.
<PAGE> 10
COMPUTER OUTPUT TO LASER DISC (COLD)
IMPRESS PLUS COMPUTER OUTPUT TO LASER DISC (COLD)
The IMPRESS Plus COLD module is a client/server based, graphical user interface
(GUI) system designed to provide an intelligent real-time application to enable
clients to improve the quality of the service provided to both shareholders and
broker dealers. This system provides functionality in the following areas:
STATEMENTS AND TAX FORMS
IMPRESS Plus COLD provides the client with on-line access to shareholder and
broker statements and tax forms. The print mail output stream is stored on
optical platters for retrieval and printing later. The forms and statements can
be searched for on-line through a common browse window integrated with the
IMPRESS Plus Imaging application. Daily output journals can also be migrated to
on-line access eliminating microfiche.
TECHNICAL OVERVIEW
IMPRESS Plus Cold is a high-speed, electronic document storage and retrieval
system which utilizes the high-density, low-cost storage capabilities of optical
and RAID disks. IMPRESS Plus COLD operates in a true client-server environment
and has the capability to simultaneously store multiple document types in a
single system. Among these document types are traditional Line Data; AFP;
Metacode; DJDE; Scanned Images, etc. Each of these data types can be stored on a
single system and are all viewed with a common viewer.
IMPRESS Plus utilizes third-party Metacode composition software from Gentext,
Inc. and third-party viewing software from CDP for local viewing and Adobe
Intranet/Internet viewing.
<PAGE> 11
EXHIBIT 2.3 OF SCHEDULE C
IMPRESS PLUS COLD
EQUIPMENT LIST AND NETWORK CONFIGURATION
<TABLE>
<CAPTION>
QUANTITY CATEGORY DESCRIPTION
=================================================================================
<S> <C> <C>
1 JUKEBOX Phillips 12Gb Tower Drive w/onsite installation
- ---------------------------------------------------------------------------------
2 JUKEBOX Phillips 6000 series media (10 to a box)
- ---------------------------------------------------------------------------------
1 JUKEBOX Cygnet 1802-2 with Philips Drives and SCSI Robotics
- ---------------------------------------------------------------------------------
1 JUKEBOX COLD Feet
- ---------------------------------------------------------------------------------
1 SUN CPU SUN Ultra 3000 base, CD-ROM, Solaris license, Cooling
package, (2) 25OMHZ Cpu's 4mb Cache, (1) CPU/Memory
Board/SharedApp
- ---------------------------------------------------------------------------------
2 SUN CPU SUN Sbus I/0 Board
- ---------------------------------------------------------------------------------
2 SUN CPU SUN 256Mb RAM Kit
- ---------------------------------------------------------------------------------
2 SUN CPU SUN 7200 RPM 9.1Gb Internal Hard Drive
- ---------------------------------------------------------------------------------
2 SUN CPU Enterprise Power/Cooling Module 300W
- ---------------------------------------------------------------------------------
1 SUN CPU Second Peripheral Power Supply
- ---------------------------------------------------------------------------------
2 SUN CPU X1052A Fast Differential/Buffered E-Net Card (SCSI
Controller)
- ---------------------------------------------------------------------------------
2 SUN CPU X1062A fast Wide Differential Sbus Card (SCSI Controller)
- ---------------------------------------------------------------------------------
1 SUN CPU SUN 17" Color Monitor and TGX Card
- ---------------------------------------------------------------------------------
1 SUN CPU SUN DLT7000 35-7OGb External Tape Drive w/50-68 pin
cable
- ---------------------------------------------------------------------------------
1 IBM Netfiniity Rack Cabinet with Power Supply
- ---------------------------------------------------------------------------------
1 DISK SUB Data General Clarion 2900D Raid Array w/2 SPs, and 3 PS's
(20) Drive Chassis
- ---------------------------------------------------------------------------------
1 DISK SUB DG Clarion 64mb mirrored cache upgrade
- ---------------------------------------------------------------------------------
2 DISK SUB Solaris Interface Kit
- ---------------------------------------------------------------------------------
5 DISK SUB Data General 7200 RPM 18Gb Disk Drives
- ---------------------------------------------------------------------------------
1 UPS Exide Electronics Powerware Plus 12 10 Kva UPS for SUN
CPU, DISK SUB and JUKEBOX
- ---------------------------------------------------------------------------------
1 UPS Exide Power Distribution Module for Powerware Plus 12
W/(1) L5.30 and (3) 5-15 receptacles
- ---------------------------------------------------------------------------------
1 NDM NOM TCP-IP 2 Concurrent Sessions SUN
- ---------------------------------------------------------------------------------
3 PREPRO PC Config #1
- ---------------------------------------------------------------------------------
1 SUPPORT PC Config #1/software/modem
- ---------------------------------------------------------------------------------
2 CABLES 25' Differential SCSI Cables (M) HD68 Thumbscrews (M)
- ---------------------------------------------------------------------------------
2 CABLES Active Differential Terminators Min DB-50
=================================================================================
</TABLE>
<PAGE> 1
EXHIBIT (h)(3)
FUND ACCOUNTING AND PRICING AGENT AGREEMENT
This Fund Accounting and Pricing Agent Agreement (the "Agreement") is
made as of May 29, 1998, by and between AIM Series Trust (the "Company") and
INVESCO (NY), INC. ("INVESCO (NY)").
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company;
WHEREAS, the Company currently operates one mutual fund, which is
organized as a separate and distinct series consisting of shares of beneficial
interest (such existing fund and such funds as may hereafter be established
being referred to in this Agreement as the "Funds" and singly as a "Fund");
WHEREAS, the Company is part of a complex of investment companies that
are sub-advised and/or sub-administered by INVESCO (NY) and with which INVESCO
(NY) has entered into Fund Accounting and Pricing Agent Agreements (the "INVESCO
(NY) Funds");
WHEREAS, the Company desires to retain INVESCO (NY) to act as its
accounting and pricing agent, and INVESCO (NY) is willing to act in such
capacities.
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions hereinafter set forth, the Company and INVESCO (NY) hereby agree as
follows:
SECTION 1. APPOINTMENT. The Company hereby appoints INVESCO (NY)
to act as the accounting and pricing agent for each Fund for the period and on
the terms and conditions set forth in this Agreement. INVESCO (NY) hereby
accepts such appointment and agrees to render the services set forth for the
compensation herein provided.
SECTION 2. DEFINITIONS. As used in this Agreement and in addition
to the terms defined elsewhere herein, the following terms shall have the
meanings assigned to them in this Section:
(a) "Authorized Person" means any officer of the Company
and any other person, whether or not any such person is an officer or
employee of the Company, duly authorized by the Board of Trustees (the
"Board"), the President or any Vice President of the Fund to give Oral
and/or Written Instructions on behalf of the Company or any Fund.
(b) "Commission" means the Securities and Exchange
Commission.
(c) "Custodian" means the custodian or custodians
employed by the Company to maintain custody of the Fund's assets.
(d) "Governing Documents" means the Declaration of Trust,
By-Laws and other applicable charter documents of the Company, all as
they may be amended from time to time.
(e) "Oral Instruction" means oral instructions actually
received by INVESCO (NY) from an Authorized Person or from a person
reasonably believed by
<PAGE> 2
INVESCO (NY) to be an Authorized Person, provided that, any Oral
Instruction shall be promptly confirmed by Written Instructions.
(f) "Prospectus" means the current prospectus and
statement of additional information of a Fund, taken together.
(g) "Shares" means shares of beneficial interest of any
of the Funds.
(h) "Shareholder" means any owner of Shares.
(i) "Written Instructions" means written instructions
delivered by hand, mail, tested telegram or telex, cable or facsimile
sending device received by INVESCO (NY) and signed by an Authorized
Person.
SECTION 3. COMPLIANCE WITH LAWS, ETC. In performing its
responsibilities hereunder, INVESCO (NY) shall comply with all terms and
provisions of the Governing Documents, the Prospectus and all applicable state
and federal laws including, without limitation, the 1940 Act and the rules and
regulations promulgated by the Commission thereunder.
SECTION 4. SERVICES. In consideration of the compensation payable
hereunder and subject to the supervision and control of the Company's Boards,
INVESCO (NY) shall provide the following services to the Funds:
(a) PRICING AGENT. As pricing agent, INVESCO (NY) shall:
(1) Obtain security market quotes from services approved
by the investment manager of the Funds or, if such quotes are
unavailable, then obtain such prices from the investment manager
of the Funds or from such sources as the investment manager may
direct, and, in either case, calculate the market value of the
Funds' investments; and
(2) Value the assets of the Funds and compute the net
asset value per Share of the Funds at such dates and times and in
the manner specified in the then currently effective Prospectus
and transmit to the Funds' investment manager.
(b) ACCOUNTING AGENT. As fund accounting agent, INVESCO (NY)
shall:
(1) Calculate the net income of each Fund;
(2) Calculate capital gains or losses for each Fund from
the sale or disposition of assets, if any;
(3) Maintain the general ledger and other accounts, books
and financial records of the Company, as required under Section
31(a) of the 1940 Act and the rules promulgated by the Commission
thereunder in connection with the services provided by INVESCO
(NY);
(4) Perform the following functions on a daily basis:
- 2 -
<PAGE> 3
(A) journalize each Fund's investment, capital
share and income and expense activities;
(B) reconcile cash and investment balances of each
Fund with the Custodian and provide the Funds' investment
manager with the beginning cash balance available for
investment purposes and update the cash availability
throughout the day as required by the investment manager;
(C) verify investment buy/sell trade tickets
received from a Fund's investment manager and transmit
trades to a Fund's Custodian for proper settlement;
(D) maintain individual ledgers for investment
securities;
(E) maintain historical tax lots for investment
securities;
(F) calculate various contractual expenses (e.g.,
advisory and custody fees);
(G) post to and prepare the Funds' statement of
assets and liabilities and statement of operations; and
(H) monitor expense accruals and notify an
Authorized Person of any proposed adjustments;
(5) Receive and act upon notices, Oral and Written
Instructions, certificates, instruments or other communications
from a Fund's shareholder servicing and transfer agent;
(6) Assist in the preparation of financial statements
semiannually which will include the following items:
(A) schedule of investments;
(B) statement of assets and liabilities;
(C) statement of operations;
(D) changes in net assets;
(E) cash statement; and
(F) schedule of capital gains and losses;
(7) Prepare monthly security transaction listings;
(8) Prepare quarterly broker security transactions
summaries; and
- 3 -
<PAGE> 4
(9) At the reasonable request of the Company, assist in
the preparation of various reports or other financial documents
required by federal, state and other appropriate laws and
regulations.
SECTION 5. COMPENSATION. As compensation for the services rendered
by INVESCO (NY) hereunder during the term of the Agreement, each Fund shall pay
to INVESCO (NY) monthly such fees as shall be agreed to from time to time by the
Company and INVESCO (NY), in writing and attached hereto as Schedule A. In
addition, as may be agreed to from time to time in writing by the Company and
INVESCO (NY), each Fund shall reimburse INVESCO (NY) for certain expenses that
it incurs in rendering services with respect to that Fund under this Agreement.
SECTION 6. RELIANCE BY INVESCO (NY) ON INSTRUCTIONS. Unless
otherwise provided in this Agreement, INVESCO (NY) shall act only upon Oral or
Written Instructions. INVESCO (NY) shall be entitled to rely upon any such
Instructions actually received by it under this Agreement. The Company agrees
that INVESCO (NY) shall incur no liability to the Company or any of the Funds in
acting upon Oral or Written Instructions given to INVESCO (NY) hereunder,
provided that, such Instructions reasonably appear to have been received from an
Authorized Person.
SECTION 7. COOPERATION WITH AGENTS OF THE COMPANY. INVESCO (NY)
shall cooperate with the Company's agents and employees, including, without
limitation, their independent accountants, and shall take all reasonable action
in the performance of its obligations under this Agreement to assure that all
necessary information is made available to such agents to the extent necessary
in the performance of their duties to the Company.
SECTION 8. CONFIDENTIALITY. INVESCO (NY), on behalf of itself and
its employees, agrees to treat confidentially all records and other information
relating to the Company and the Funds except when requested to divulge such
information by duly constituted authorities provided that notification and prior
approval is obtained from the Company, which approval shall not be unreasonably
withheld and may not be withheld if INVESCO (NY), in its judgment, may be
subject to civil or criminal contempt proceedings for failure to comply.
SECTION 9. STANDARD OF CARE. In the performance of its
responsibilities hereunder, INVESCO (NY) shall exercise care and diligence in
the performance of its duties and act in good faith and use its best efforts to
ensure the accuracy and completeness of all services under this Agreement. In
performing services hereunder, INVESCO (NY):
(a) shall be under no duty to take any action on behalf
of the Company or the Funds except as specifically set forth herein or
as may be specifically agreed to by INVESCO (NY) in writing, and in
computing the net asset value per Share of a Fund, INVESCO (NY) may
rely upon any information furnished to it including, without
limitation, information (1) as to the accrual of liabilities of a Fund
and as to liabilities of a Fund not appearing on the books of account
kept by INVESCO (NY), (2) as to the existence, status and proper
treatment of reserves, if any, authorized by a Fund, (3) as to the
sources of quotations to be used in computing net asset value, (4) as
to the fair value to be assigned to any securities or other property
for which price quotations are not readily available and (5) as to the
sources of information with respect to "corporate actions" affecting
portfolio securities of a Fund (information as to "corporate actions"
shall include information as to dividends, distributions, interest
payments, prepayments,
- 4 -
<PAGE> 5
stock splits, stock dividends, rights offerings, conversions,
exchanges, recapitalizations, mergers, redemptions, calls, maturity
dates and similar actions, including ex-dividend and record dates and
the amounts and terms thereof);
(b) shall be responsible and liable for all losses,
damages and costs (including reasonable attorneys' fees) incurred by
the Company or any Fund which is due to or caused by INVESCO (NY)'s
negligence in the performance of its duties under this Agreement or for
INVESCO (NY)'s negligent failure to perform such duties as are
specifically assumed by INVESCO (NY) in this Agreement, provided that,
to the extend that duties, obligations and responsibilities are not
expressly set forth in this Agreement, INVESCO (NY) shall not be
liable for any act or omission that does not constitute willful
misfeasance, bad faith or negligence on the part of INVESCO (NY) or
reckless disregard by INVESCO (NY) of such duties, obligations and
responsibilities; and
(c) without limiting the generality of the foregoing,
INVESCO (NY) shall not, in connection with INVESCO (NY)'s duties under
this Agreement, be under any duty or obligation to inquire into and
shall not be liable for or in respect of:
(1) the validity or invalidity or authority
or lack of authority of any Oral or Written
Instruction, notice or other instrument which
conforms to the applicable requirements of this
Agreement, if any and that INVESCO (NY) reasonably
believes to be genuine; and
(2) delays or errors or loss of data
occurring by reason of circumstances beyond INVESCO
(NY)'s control including, without limitation, acts of
civil or military authorities, national emergencies,
labor difficulties, fire, mechanical breakdown,
denial of access, earthquake, flood or catastrophe,
acts of God, insurrection, war, riots, or failure of
the mails, transportation, communication or power
supply.
Notwithstanding any other provisions of this Agreement, the following provisions
shall apply with respect to INVESCO (NY)'s computation of a Fund's net asset
value: INVESCO (NY) shall be held to the exercise of reasonable care in
computing and determining net asset value as provided in Section 4(a), above,
but shall not be held accountable or liable for any losses, damages or expenses
of a Fund or any Shareholder or former Shareholder may incur arising from or
based upon errors or delays in the determination of such net asset value unless
such error or delay was due to INVESCO (NY)'s negligence or willful misfeasance
in the computation and determination of such net asset value. The parties hereto
acknowledge, however, that INVESCO (NY) causing an error or delay in the
determination of net asset value may, but does not in an of itself, constitute
negligence or willful misfeasance. In no event shall INVESCO (NY) be liable or
responsible to the Company or a Fund or any other party for any error or delay
which continued or was undetected after the date of an audit of the Company or
any Fund performed by the certified public accountants employed by the Company
if, in the exercise of reasonable care in accordance with generally accepted
accounting principles, such accountants should have become aware of such error
or delay in the course of performing such audit. INVESCO (NY)'s liability for
any such negligence or willful misfeasance which results in an error in
determination of such net asset value be limited to the direct out-of-pocket
loss a Fund and/or any Shareholder or former Shareholder shall actually incur.
- 5 -
<PAGE> 6
Without limiting the generality of the foregoing, INVESCO (NY)
shall not be held accountable or liable to a Fund a Shareholder or former
Shareholder or any other person for any delays or losses, damages or expenses
any of them may suffer or incur resulting from (1) INVESCO (NY)'s failure to
receive timely and suitable notification concerning quotations, corporate
actions or similar matters relating to or affecting portfolio securities of a
Fund or (2) any errors in the computation of a net asset value based upon or
arising out of quotations or information as to corporate actions if received by
INVESCO (NY) from a source that INVESCO (NY) was authorized to rely upon.
Nevertheless, INVESCO (NY) will use its best judgment in determining whether to
verify through other sources any information that it has received as to
quotations or corporate actions if INVESCO (NY) has reason to believe that any
such information is incorrect.
SECTION 10. RECEIPT OF ADVICE. If INVESCO (NY) is in doubt as to
any action to be taken or omitted by it, INVESCO (NY) may request, and shall be
entitled to rely upon, directions and advice from the Company, including Oral or
Written Instructions where appropriate, or from counsel of its own choosing (who
may also be counsel for the Company or any Fund), with respect to any question
of law. In case of conflict between directions, advice or Oral and Written
Instructions received by INVESCO (NY) pursuant to this Section, INVESCO (NY)
shall be entitled to rely on and follow the advice received from counsel as
described above. INVESCO (NY) shall be protected in any action or in action that
it takes in reliance on any directions, advice or Oral or Written Instructions
received pursuant to this Section that INVESCO (NY), after the receipt of the
same, in good faith believes to be consistent with such directions, advice or
Oral or Written Instructions, as the case may be. Notwithstanding the foregoing,
nothing in this Section shall be construed as imposing on INVESCO (NY) any
obligation to seek such directions, advice or Oral or Written Instruction, or to
act in accordance with them when received, unless the same is a condition to
INVESCO (NY)'s properly taking or omitting to take such action under the terms
of this Agreement.
SECTION 11. INDEMNIFICATION OF INVESCO (NY). The Company agrees to
indemnify and hold harmless INVESCO (NY) and its officers, directors, employees,
nominees and subcontractors, if any, from all taxes, charges, expenses,
assessments, claims and liabilities, including, without limitation, liabilities
arising under the 1940 Act, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the Commodities Exchange Act and
any state or foreign securities or blue sky laws, and expenses, including,
without limitation, reasonable attorneys' fees and disbursements, arising
directly or indirectly from any action or thing that INVESCO (NY) takes or omits
to take or do:
(a) at the request or on the direction of or in reliance
upon the advice of the Company;
(b) upon Oral or Written Instructions; or
(c) in the performance by INVESCO (NY) of its
responsibilities under this Agreement;
provided that, INVESCO (NY) shall not be indemnified against any liability to
the Company or the Funds, or any expenses incident thereto, arising out of
INVESCO (NY)'s own willful misfeasance, bad faith or negligence or reckless
disregard of its duties in connection with the performance of its duties and
obligations specifically described in this Agreement.
- 6 -
<PAGE> 7
SECTION 12. INDEMNIFICATION OF THE COMPANY. INVESCO (NY) agrees to
indemnify and hold harmless the Company and its officers, trustees, directors
and employees, from all taxes, charges, expenses, assessments, claims and
liabilities, including, without limitation, liabilities arising under the 1940
Act, the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, the Commodities Exchange Act and any state or foreign
securities or blue sky laws, and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, arising directly or indirectly
from any action or omission of INVESCO (NY) that does not meet the standard of
care to which INVESCO (NY) is subject under Section 9, above.
SECTION 13. LIMITATION OF LIABILITY OF SHAREHOLDERS AND TRUSTEES
OF THE COMPANY. It is expressly agreed that the obligations of the Company
hereunder shall not be binding upon any of the shareholders, trustees,
directors, officers, nominees, agents or employees of the Company personally,
but shall only bind the assets and property of the applicable Funds, as provided
in the Governing Documents. The execution and delivery of this Agreement has
been authorized by the Board of the Company, and this Agreement has been
executed and delivered by an authorized officer of the Company acting as such,
and neither such authorization by the Board nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the assets
and property of the applicable Fund as provided in the Governing Documents.
SECTION 14. DURATION AND TERMINATION. This Agreement shall
continue with respect to the Company and each Fund until termination with
respect to the Company, or with respect to one or more Funds, is effected by the
Company or INVESCO (NY) upon sixty days' prior written notice to the other. In
the event of the "assignment" of this Agreement within the meaning of the 1940
Act, this Agreement shall terminate automatically.
SECTION 15. NOTICES. All notices and other communications
hereunder, including Written Instructions, shall be in writing or by confirming
telegram, cable, telex or facsimile sending device. Notices with respect to a
party shall be directed to such address as may from time to time be designated
by that party to the other.
SECTION 16. FURTHER ACTIONS. The Company and INVESCO (NY) agree to
perform such further acts and to execute such further documents as may be
necessary or appropriate to effect the purposes of this Agreement.
SECTION 17. AMENDMENTS. This Agreement, or any part thereof, may
be amended only by an instrument in writing signed by the Company and INVESCO
(NY).
SECTION 18. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
SECTION 19. SHAREHOLDER LIABILITY. It is expressly agreed that the
obligations of the Company hereunder shall not be binding upon any of the
Trustees, Shareholders, nominees, officers, agents or employees of the Company
personally, but shall only bind the assets and property of the Funds, as
provided in the Company's Agreement and Declaration of Trust. The execution and
delivery of this Agreement has been authorized by the Trustees of the Company
and this Agreement has been executed and delivered by an authorized
- 7 -
<PAGE> 8
Shareholders, nominees, officers, agents or employees of the Company personally,
but shall only bind the assets and property of the Funds, as provided in the
Company's Agreement and Declaration of Trust. The execution and delivery of this
Agreement has been authorized by the Trustees of the Company and this Agreement
has been executed and delivered by an authorized officer of the Company acting
as such; neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the assets and property of the Funds, as provided in the Company's
Agreement and Declaration of Trust.
SECTION 20. MISCELLANEOUS. This Agreement embodies the entire
agreement and understanding between the Company and INVESCO (NY) and supersedes
all prior agreements and understandings relating to the subject matter hereof,
provided that the Company and INVESCO (NY) may embody in one or more separate
documents their agreement or agreements with respect to such matters that this
Agreement provides may be later agreed to by and between the Company and INVESCO
(NY) from time to time. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement shall be governed by and construed in accordance with California law.
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the Company and INVESCO (NY) and their respective successors.
IN WITNESS WHEREOF, the Company and INVESCO (NY) have caused this
Agreement to be executed by their officers designated below as of this day,
month and year first above written.
AIM SERIES TRUST
By: /s/ KENNETH W. CHANCEY
--------------------------------------
Kenneth W. Chancey
Vice President, Principal Accounting
Officer and (Acting) CFO
Attest: /s/ MICHAEL A. SILVER
--------------------------------------
Michael A. Silver
Assistant Secretary
INVESCO (NY), INC.
By: /s/ HELGE K. LEE
--------------------------------------
Helge K. Lee
Chief Legal and Compliance Officer
and Secretary
Attest: /s/ MICHAEL A. SILVER
--------------------------------------
Michael A. Silver
- 8 -
<PAGE> 9
SCHEDULE A
FUND ACCOUNTING AND PRICING AGENT FEES
The Fund shall pay a Fee to INVESCO (NY) determined as a percentage of
the Fund's net assets. The annualized rate at which the fee is paid (the Fee
Rate) and the Fee shall be calculated as set forth below:
o An Asset Multiplier is determined by multiplying .0003 times the first $5
billion in average net assets of the INVESCO (NY) Funds plus .0002 times
the net assets over $5 billion.
o The Fee Rate is determined by dividing the Asset Multiplier by the net
assets of the INVESCO (NY) Funds.
o The Monthly Fee is determined then by multiplying the average daily Fee
Rate by the number of days in the month and by the Fund's average daily net
assets then dividing by 365/or 366
Example: For Fund X having $100 million in average net assets during December
1997, in which the INVESCO (NY) Funds have average net assets of $8 billion:
Asset Multiplier = (.0003)($5 billion) + (.0002)($3 billion) = $2.1 million
Fee Rate = $2.1 million = .0002625
------------
$8 billion
Monthly Fee = (31)(.0002625)($100 million) = $2,229.45
----
(365)
- 9 -
<PAGE> 1
EXHIBIT (i)(1)
[KIRKPATRICK & LOCKHART LLP LETTERHEAD]
February 12, 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
additional information that are being filed as part of Post-Effective Amendment
No. 7 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 (m)(1)
DISTRIBUTION PLAN
OF
AIM SERIES TRUST
(CLASS A SHARES AND CLASS C SHARES)
SECTION 1. AIM Series Trust, a Delaware business trust (the "Fund"),
on behalf of the series of shares of beneficial interest set forth in Schedule
A to this plan (the "Portfolios"), may act as a distributor of the Class A
Shares and Class C Shares (each a "Class") of such Portfolios as described in
Schedule A to this plan (the "Shares") of which the Fund is the issuer, pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"),
according to the terms of this Distribution Plan (the "Plan").
SECTION 2. The Fund may incur as a distributor of the Shares, expenses
at the rates set forth in Schedule A per annum of the average daily net assets
of the Fund attributable to the Shares, subject to any applicable limitations
imposed from time to time by applicable rules of the NASD Regulation, Inc.
SECTION 3. Amounts set forth in Schedule A may be expended when and if
authorized in advance by the Fund's Board of Trustees. Such amounts may be used
to finance any activity which is primarily intended to result in the sale of the
Shares, including, but not limited to, expenses of organizing and conducting
sales seminars, advertising programs, finders fees, printing prospectuses and
statements of additional information (and supplements thereto) and reports for
other than existing shareholders, preparation and distribution of advertising
material and sales literature, supplemental payments to dealers and other
institutions as asset-based sales charges. Amounts set forth on Schedule A may
also be used to finance payments of service fees under a shareholder service
arrangement to be established by A I M Distributors, Inc. ("Distributors") as
the Fund's distributor in accordance with Section 4, and the costs of
administering the Plan. To the extent that amounts paid hereunder are not used
specifically to reimburse Distributors for any such expense, such amounts may be
treated as compensation for distribution-related services of Distributors or the
Fund's former distributor, GT Global, Inc. All amounts expended pursuant to the
Plan shall be paid to Distributors and are the legal obligation of the Fund and
not of Distributors. That portion of the amounts paid under the Plan that is not
paid or advanced by Distributors to dealers or other institutions that provide
personal continuing shareholder service as a service fee pursuant to Section 4
shall be deemed an asset-based sales charge. No provision of this Plan shall be
interpreted to prohibit any payments by the Fund during periods when the Fund
has suspended or otherwise limited sales.
<PAGE> 2
SECTION 4.
(a) Amounts expended by the Fund under the Plan shall be used in
part for the implementation by Distributors of shareholder
service arrangements. The maximum service fee paid to any
service provider shall be twenty-five one-hundredths of one
percent (0.25%), or such lower rate for the Portfolio and
Class as is specified on Schedule A, per annum of the average
daily net assets of the Fund attributable to the Shares owned
by the customers of such service provider.
(b) Pursuant to this program, Distributors may enter into
agreements substantially in the form attached hereto as
Exhibit A ("Service Agreements") with such broker-dealers
("Dealers") as may be selected from time to time by
Distributors for the provision of distribution-related
personal shareholder services in connection with the sale of
Shares to the Dealers' clients and customers ("Customers") who
may from time to time directly or beneficially own Shares. The
distribution-related personal continuing shareholder services
to be rendered by Dealers under the Service Agreements may
include, but shall not be limited to, the following: (i)
distributing sales literature; (ii) answering routine Customer
inquiries concerning the Fund and the Shares; (iii) assisting
Customers in changing dividend options, account designations
and addresses, and in enrolling into any of several retirement
plans offered in connection with the purchase of the Shares;
(iv) assisting in the establishment and maintenance of
customer accounts and records, and in the processing of
purchase and redemption transactions; (v) investing dividends
and capital gains distributions automatically in Shares; and
(vi) providing such other information and services as the Fund
or the Customer may reasonably request.
(c) Distributors may also enter into Bank Shareholder Service
Agreements substantially in the form attached hereto as
Exhibit B ("Bank Agreements") with selected banks acting in an
agency capacity for their customers ("Banks"). Banks acting in
such capacity will provide some or all of the shareholder
services to their customers as set forth in the Bank
Agreements from time to time.
(d) Distributors may also enter into Agency Pricing Agreements
substantially in the form attached hereto as Exhibit C
("Pricing Agreements") with selected retirement plan service
providers acting in an agency capacity for their customers
("Retirement Plan Providers"). Retirement Plan Providers
acting in such a capacity will provide some or all of the
shareholders services to their customers as set forth in the
Pricing Agreements from time to time.
<PAGE> 3
(e) Distributors may also enter into Shareholder Service
Agreements substantially in the form attached hereto as
Exhibit D ("Bank Trust Department Agreements and Brokers for
Bank Trust Department Agreements") with selected bank trust
departments and brokers for bank trust departments. Such bank
trust departments and brokers for bank trust departments will
provide some or all of the shareholder services to their
customers as set forth in the Bank Trust Department Agreements
and Brokers for Bank Trust Department Agreements.
SECTION 5. Any amendment to this Plan that requires the approval of
the shareholders of a Class pursuant to Rule 12b-1 under the 1940 Act shall
become effective as to such Class upon approval of such amendment by a "majority
of the outstanding voting securities" (as defined in the 1940 Act) of such
Class, provided that the Board of Trustees of the Fund has approved such
amendment in accordance with the provisions of Section 6 of this Plan.
SECTION 6. This Plan, any amendment to this Plan and any agreements
related to this Plan shall become effective with respect to any Class of any
Portfolio immediately upon receipt by the Fund of both (a) the affirmative vote
of a majority of the Board of Trustees of the Fund, and (b) the affirmative vote
of a majority of those trustees of the Fund who are not "interested persons" of
the Fund (as defined in the 1940 Act) and have no direct or indirect financial
interest in the operation of this Plan or any agreements related to it (the
"Disinterested Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan or such agreements. Notwithstanding the foregoing, no such
amendment that requires the approval of the shareholders of a Class of a
Portfolio shall become effective as to such Class until such amendment has been
approved by the shareholders of such Class in accordance with the provisions of
Section 5 of this Plan.
SECTION 7. Unless sooner terminated pursuant to Section 9, this Plan
shall continue in effect until May 29, 1999 and thereafter shall continue in
effect so long as such continuance is specifically approved, at least annually,
in the manner provided for approval of this Plan in Section 6.
SECTION 8. Distributors shall provide to the Fund's Board of Trustees
and the Board of Trustees shall review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
SECTION 9. This Plan may be terminated with respect to the shares of
any Class of any Portfolio at any time by vote of a majority of the
Disinterested Trustees, or by a vote of a majority of the outstanding voting
securities of such Class of such Portfolio. Upon termination of this Plan with
respect to any or all such Classes, the obligation of the Fund to make payments
pursuant to this Plan with respect to such Classes shall terminate, and the Fund
shall not be required to make payments hereunder beyond such termination date
with respect to expenses incurred in connection with shares of such Classes sold
prior to such termination date.
<PAGE> 4
SECTION 10. Any agreement related to this Plan shall be made in
writing, and shall provide:
(a) that such agreement may be terminated with respect to the
shares of any Class of any Portfolio at any time, without
payment of any penalty, by vote of a majority of the
Disinterested Trustees or by a vote of the outstanding voting
securities of such Class of such Portfolio, on not more than
sixty (60) days' written notice to any other party to the
agreement; and
(b) that such agreement shall terminate automatically in the event
of its assignment.
SECTION 11. This Plan may not be amended with respect to the shares of
any Class of any Portfolio to increase materially the amount of distribution
expenses provided for in Section 2 hereof unless such amendment is approved by
such Class in the manner provided in Section 5 hereof, and no material amendment
to the Plan with respect to the shares of any Class of any Portfolio shall be
made unless approved in the manner provided for in Section 6 hereof.
<TABLE>
<S> <C>
AIM SERIES TRUST
(on behalf of its Class A Shares and Class C Shares)
Attest: /s/ MICHAEL A. SILVER By: /s/ WILLIAM J. GUILFOYLE
------------------------------- -----------------------------------------------
Michael A. Silver William J. Guilfoyle
Assistant Secretary President
Effective as of May 29, 1998.
</TABLE>
<PAGE> 5
SCHEDULE A
TO
DISTRIBUTION PLAN
OF
AIM SERIES TRUST
The Fund shall pay the Distributor as full compensation for all
services rendered and all facilities furnished under the Distribution Plan for
each Portfolio (or Class thereof) designated below, a Distribution Fee*
determined by applying the annual rate set forth below as to each Portfolio (or
Class thereof) to the average daily net assets of the Portfolio (or Class
thereof) for the plan year, computed in a manner used for the determination of
the offering price of shares of the Portfolio.
<TABLE>
<CAPTION>
PORTFOLIO (CLASS A SHARES) MAXIMUM MAXIMUM MAXIMUM
- -------------------------- ASSET-BASED SERVICE FEE AGGREGATE FEE
SALES CHARGE ----------- -------------
------------
<S> <C> <C> <C>
AIM New Dimension Fund 0.25% 0.25% 0.50%
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO (CLASS C SHARES) MAXIMUM MAXIMUM MAXIMUM
- -------------------------- ASSET-BASED SERVICE FEE AGGREGATE FEE
SALES CHARGE ----------- -------------
------------
<S> <C> <C> <C>
AIM New Dimension Fund 0.75% 0.25% 1.00%
</TABLE>
The Distributor will waive part or all of its Distribution Fee as to a
Portfolio (or Class thereof) to the extent that the ordinary business expenses
of the Portfolio exceed the expense limitation as to the Portfolio (if any) as
contained in the Master Investment Advisory Agreement between the Company and
A I M Advisors, Inc.
THIS PLAN REFERS TO EXHIBITS A-D, WHICH RELATE TO AGREEMENTS THAT THE
DISTRIBUTOR MAY ENTER INTO WITH THIRD PARTIES. FORMS OF THESE AGREEMENTS HAVE
NOT BEEN INCLUDED WITH THIS PLAN.
- ---------------------
* The Distribution Fee is payable apart from the sales charge, if any, as
stated in the current prospectus for the applicable Portfolio (or Class
thereof).
<PAGE> 1
EXHIBIT (m)(2)
DISTRIBUTION PLAN
OF
AIM SERIES TRUST
(CLASS B SHARES)
SECTION 1. AIM Series Trust, a Delaware business trust (the "Fund"), on behalf
of the series of beneficial interest set forth in Schedule A to this plan (the
"Portfolios"), may pay for distribution of the Class B Shares of such Portfolios
(the "Shares") which the Fund issues from time to time, pursuant to Rule l2b-1
under the Investment Company Act of 1940 (the "1940 Act"), according to the
terms of this Distribution Plan (the "Plan").
SECTION 2. The Fund may incur expenses for and pay any institution selected to
act as the Fund's agent for distribution of the Shares of any portfolio from
time to time (each, a "Distributor") at the rates set forth in Schedule A hereto
based on the average daily net assets of each class of Shares subject to any
applicable limitations imposed by the Conduct Rules of the NASD Regulation, Inc.
in effect from time to time (the "Conduct Rules"). All such payments are the
legal obligation of the Fund and not of any Distributor or its designee.
SECTION 3.
(a) Amounts set forth in Section 2 may be used to finance any activity
which is primarily intended to result in the sale of the Shares, including, but
not limited to, expenses of organizing and conducting sales seminars and running
advertising programs, payment of finders fees, printing of prospectuses and
statements of additional information (and supplements thereto) and reports for
other than existing shareholders, preparation and distribution of advertising
material and sales literature, payment of overhead and supplemental payments to
dealers and other institutions as asset-based sales charges. Amounts set forth
in Section 2 may also be used to finance payments of service fees under a
shareholder service arrangement, which may be established by each Distributor in
accordance with Section 4, and the costs of administering the Plan. To the
extent that amounts paid hereunder are not used specifically to reimburse the
Distributor for any such expense, such amounts may be treated as compensation
for the Distributor's distribution-related services. No provision of this Plan
shall be interpreted to prohibit any payments by the Fund during periods when
the Fund has suspended or otherwise limited sales.
(b) Subject to the provisions in Sections 8 and 9 hereof, amounts
payable pursuant to Section 2 in respect of Shares of each Portfolio shall be
paid by the Fund to the Distributor in respect of such Shares or, if more than
one institution has acted or is acting as Distributor in respect of such Shares,
then amounts payable pursuant to Section 2 in respect of such Shares shall be
paid to each such Distributor in proportion to the number of such Shares sold by
or attributable to such Distributor's distribution efforts
<PAGE> 2
in respect of such Shares in accordance with allocation provisions of each
Distributor's distribution agreement (the "Distributor's 12b-1 Share")
notwithstanding that such Distributor's distribution agreement with the fund may
have been terminated. The Distributor's 12b-1 Share shall include amounts
payable pursuant to Section 2 in respect of Shares sold by or attributable to
distribution efforts of GT Global, Inc. That portion of the amounts paid under
the Plan that is not paid or advanced by the Distributor to dealers or other
institutions that provide personal continuing shareholder service as a service
fee pursuant to Section 4 shall be deemed an asset-based sales charge.
(c) Any Distributor may assign, transfer or pledge ("Transfer") to one
or more designees (each an "Assignee"), its rights to all or a designated
portion of its Distributor's 12b-1 Share from time to time (but not such
Distributor's duties and obligations pursuant hereto or pursuant to any
distribution agreement in effect from time to time, if any, between such
Distributor and the Fund), free and clear of any offsets or claims the Fund may
have against such Distributor. Each such Assignee's ownership interest in a
Transfer of a specific designated portion of a Distributor's 12b-1 Share is
hereafter referred to as an "Assignee's 12b-1 Portion." A Transfer pursuant to
this Section 3(c) shall not reduce or extinguish any claims of the Fund against
the Distributor.
(d) Each Distributor shall promptly notify the Fund in writing of each
such Transfer by providing the Fund with the name and address of each such
Assignee.
(e) A Distributor may direct the Fund to pay an Assignee's 12b-1
Portion directly to such Assignee. In such event, the Distributor shall provide
the Fund with a monthly calculation of the amount of (i) the Distributor's 12b-1
Share, and (ii) each Assignee's 12b-1 Portion, if any, for such month (the
"Monthly Calculation"). In such event, the Fund shall, upon receipt of such
notice and Monthly Calculation from the Distributor, make all payments required
under such distribution agreement directly to the Assignee in accordance with
the information provided in such notice and Monthly Calculation upon the same
terms and conditions as if such payments were to be paid to the Distributor.
(f) Alternatively, in connection with a Transfer, a Distributor may
direct the Fund to pay all of such Distributor's 12b-1 Share from time to time
to a depository or collection agent designated by any Assignee, which depository
or collection agent may be delegated the duty of dividing such Distributor's
12b-1 Share between the Assignee's 12b-1 Portion and the balance of the
Distributor's 12b-1 Share (such balance, when distributed to the Distributor by
the depository or collection agent, the "Distributor's 12b-1 Portion"), in which
case only the Distributor's 12b-1 Portion may be subject to offsets or claims
the Fund may have against such Distributor.
<PAGE> 3
SECTION 4.
(a) Amounts expended by the Fund under the Plan shall be used in part
for the implementation by the Distributor of shareholder service arrangements
with respect to the Shares. The maximum service fee payable to any provider of
such shareholder service shall be twenty-five one-hundredths of one percent
(0.25%) per annum of the daily net assets of the Shares attributable to the
customers of such service provider. All such payments are the legal obligation
of the Fund and not of any Distributor or its designee.
(b) Pursuant to this Plan, the Distributor may enter into agreements
substantially in the form attached hereto as Exhibit A ("Service Agreements")
with such broker-dealers ("Dealers") as may be selected from time to time by the
Distributor for the provision of continuing shareholder services in connection
with Shares held by such Dealers' clients and customers ("Customers") who may
from time to time directly or beneficially own Shares. The personal continuing
shareholder services to be rendered by Dealers under the Service Agreements may
include, but shall not be limited to, some or all of the following: (i)
distributing sales literature; (ii) answering routine Customer inquiries
concerning the Fund and the Shares; (iii) assisting Customers in changing
dividend options, account designations and addresses, and in enrolling in any of
several retirement plans offered in connection with the purchase of Shares; (iv)
assisting in the establishment and maintenance of Customer accounts and records,
and in the processing of purchase and redemption transactions; (v) investing
dividends and capital gains distributions automatically in Shares; (vi)
performing sub-accounting; (vii) providing periodic statements showing a
Customer's shareholder account balance and the integration of such statements
with those of other transactions and balances in the Customer's account serviced
by such institution; (viii) forwarding applicable prospectuses, proxy
statements, reports and notices to Customers who hold Shares; and (ix) providing
such other information and administrative services as the Fund or the Customer
may reasonably request.
(c) The Distributor may also enter into Bank Shareholder Service
Agreements substantially in the form attached hereto as Exhibit B ("Bank
Agreements") with selected banks and financial institutions acting in an agency
capacity for their customers ("Banks"). Banks acting in such capacity will
provide some or all of the shareholder services to their customers as set forth
in the Bank Agreements from time to time.
(d) The Distributor may also enter into Agency Pricing Agreements
substantially in the form attached hereto as Exhibit C ("Pricing Agreements")
with selected retirement plan service providers acting in an agency capacity for
their customers ("Retirement Plan Providers"). Retirement Plan Providers acting
in such capacity will provide some or all of the shareholder services to their
customers as set forth in the Pricing Agreements from time to time.
<PAGE> 4
(e) The Distributor may also enter into Shareholder Service Agreements
substantially in the form attached hereto as Exhibit D ("Bank Trust Department
Agreements and Brokers for Bank Trust Department Agreements") with selected bank
trust departments and brokers for bank trust departments. Such bank trust
departments and brokers for bank trust departments will provide some or all of
the shareholder services to their customers as set forth in the Bank Trust
Department Agreements and Brokers for Bank Trust Department Agreements from time
to time.
SECTION 5. This Plan shall not take effect with respect to any Shares of any
Portfolio until (i) it has been approved, together with any related agreements,
by votes of the majority of both (a) the Board of Trustees of the Fund, and (b)
those trustees of the Fund who are not "interested persons" of the Fund (as
defined in the 1940 Act) and have no direct or indirect financial interest in
the operation of this Plan or any agreements related to it (the "Disinterested
Trustees"), cast in person at a meeting called for the purpose of voting on
this Plan or such agreements, and (ii) the execution by the Fund and A I M
Distributors, Inc. of a Master Distribution Agreement in respect of the Shares
of such Portfolio.
SECTION 6. Unless sooner terminated pursuant to Section 8, this Plan shall
continue in effect until May 29, 1999 and thereafter shall continue in effect so
long as such continuance is specifically approved, at least annually, in the
manner provided for approval of this Plan in Section 5.
SECTION 7. Each Distributor shall provide the Fund's Board of Trustees and the
Board of Trustees shall review, at least quarterly, a written report of the
amounts expended for distribution of the Shares and the purposes for which such
expenditures were made.
SECTION 8. This Plan may be terminated with respect to the Shares of any
Portfolio at any time by vote of a majority of the Disinterested Trustees, or by
a vote of a majority of outstanding Shares of such Portfolio. Upon termination
of this Plan with respect to any or all such classes, the obligation of the Fund
to make payments pursuant to this Plan with respect to such classes shall
terminate, and the Fund shall not be required to make payments hereunder beyond
such termination date with respect to expenses incurred in connection with
Shares sold prior to such termination date, provided, in each case that each of
the requirements of a Complete Termination of the Plan in respect of such class,
as defined below, are met. A termination of this Plan with respect to any or all
Shares of any or all Portfolios shall not affect the obligation of the Fund to
withhold and pay to any Distributor contingent deferred sales changes to which
such distributor is entitled pursuant to any distribution agreement. For
purposes of this Section 8, a "Complete Termination" of this Plan in respect of
any Portfolio shall mean a termination of this Plan in respect of such
Portfolio, provided that: (i) the Disinterested Trustees of the Fund shall have
acted in good faith and shall have determined that such termination is in the
best interest of the Fund and the shareholders of such Portfolio; (ii) the Fund
does not alter the terms of the contingent deferred sales charges applicable to
Shares outstanding at the time of such termination; and (iii) unless the
applicable Distributor at the time of such termination was
<PAGE> 5
in material breach under the distribution agreement in respect of such
Portfolio, the Fund shall not, in respect of such Portfolio, pay to any person
or entity, other than such Distributor or its designee, either the asset-based
sales charge or the service fee (or any similar fee) in respect of the Shares
sold by such Distributor prior to such termination.
SECTION 9. Any agreement related to this Plan shall be made in writing, and
shall provide:
(a) that such agreement may be terminated with respect to the Shares of
any or all Portfolios at any time, without payment of any penalty, by vote of
a majority of the Disinterested Trustees or by a vote of the majority of the
outstanding Shares of such Portfolio, on not more than sixty (60) days' written
notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of
its assignment; provided, however, that, subject to the provisions of Section 8
hereof, if such agreement is terminated for any reason, the obligation of the
Fund to make payments of (i) the Distributor's 12b-1 Share in accordance with
the directions of the Distributor pursuant to Section 3(e) or (f) hereof if
there exist Assignees for all or any portion of such Distributor's 12b-1 Share,
and (ii) the remainder of such Distributor's 12b-1 Share to such Distributor if
there are no Assignees for such Distributor's Share, pursuant to such agreement
and this Plan will continue with respect to the Shares until such Shares are
redeemed or automatically converted into another class of shares of the Fund.
SECTION 10. This Plan may not be amended with respect to the shares of any
Portfolio to increase materially the amount of distribution expenses provided
for in Section 2 hereof unless such amendment is approved by a vote of at least
a "majority of the outstanding voting securities" (as defined in the 1940 Act)
of the Shares of such Portfolio, and no material amendment to the Plan with
respect to the shares of any Portfolio shall be made unless approved in the
manner provided for in Section 5 hereof.
<TABLE>
<S> <C>
AIM SERIES TRUST
(on behalf of its Class B Shares)
Attest: /s/ MICHAEL A. SILVER By: /s/ WILLIAM J. GUILFOYLE
-------------------------------- -------------------------------
Michael A. Silver William J. Guilfoyle
Assistant Secretary President
Effective as of May 29, 1998.
</TABLE>
<PAGE> 6
SCHEDULE A
TO
DISTRIBUTION PLAN
OF
AIM SERIES TRUST
<TABLE>
<CAPTION>
CLASS B SHARES MAXIMUM MAXIMUM MAXIMUM
- -------------- ASSET-BASED SERVICE FEE AGGREGATE FEE
SALES CHARGE ----------- -------------
------------
<S> <C> <C> <C>
AIM New Dimension Fund 0.75% 0.25% 1.00%
</TABLE>
<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.
11/98
<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 Disinterested 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
11/98
<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
11/98
<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 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
</TABLE>
11/98
<PAGE> 5
<TABLE>
<S> <C> <C>
AIM Global Growth Fund A Shares 0.50** September 15, 1994
AIM Global Growth Fund B Shares 0.25 September 15, 1994
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- --------------------------------------------------------------------------------------------------
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 Limited Maturity Treasury Fund 0.15 December 2, 1987
AIM Money Market Fund A Shares 0.25 October 18, 1993
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 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
</TABLE>
11/98
<PAGE> 6
<TABLE>
<S> <C> <C>
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 Developing Markets Fund A Shares 0.25 May 29, 1998
AIM Developing Markets Fund B Shares 0.25 May 29, 1998
AIM Emerging Markets Fund A Shares 0.40** May 29, 1998
AIM Emerging Markets Fund B Shares 0.25 May 29, 1998
AIM Europe Growth Fund A Shares 0.25 May 29, 1998
AIM Europe Growth Fund B Shares 0.25 May 29, 1998
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 Financial Services Fund A Shares 0.40** May 29, 1998
AIM Global Financial Services Fund B Shares 0.25 May 29, 1998
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 Growth & Income Fund A Shares 0.25 May 29, 1998
AIM Global Growth & Income Fund B Shares 0.25 May 29, 1998
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 Emerging Markets Debt Fund A Shares 0.25 May 29, 1998
AIM Emerging Markets Debt Fund B Shares 0.25 May 29, 1998
AIM Global Infrastructure Fund A Shares 0.40** May 29, 1998
AIM Global Infrastructure Fund B Shares 0.25 May 29, 1998
AIM Global Resources Fund A Shares 0.40** May 29, 1998
</TABLE>
11/98
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
AIM Global Resources Fund B Shares 0.25 May 29, 1998
AIM Global Telecommunications Fund A Shares 0.40** May 29, 1998
AIM Global Telecommunications Fund B Shares 0.25 May 29, 1998
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
AIM International Growth Fund A Shares 0.25 May 29, 1998
AIM International Growth Fund B Shares 0.25 May 29, 1998
AIM Japan Growth Fund A Shares 0.25 May 29, 1998
AIM Japan Growth Fund B Shares 0.25 May 29, 1998
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 Mid Cap Equity Fund A Shares 0.25 May 29, 1998
AIM Mid Cap Equity Fund B Shares 0.25 May 29, 1998
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 Small Cap Growth Fund A Shares 0.25 May 29, 1998
AIM Small Cap Growth Fund B Shares 0.25 May 29, 1998
AIM Strategic Income Fund A Shares 0.25 May 29, 1998
AIM Strategic Income Fund B Shares 0.25 May 29, 1998
AIM Worldwide Growth Fund A Shares 0.25 May 29, 1998
AIM Worldwide Growth Fund B Shares 0.25 May 29, 1998
</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.)
11/98
<PAGE> 8
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.
11/98
<PAGE> 1
EXHIBIT m(3)(ii)
[LOGO ONLY]
BANK SHAREHOLDER
SERVICE AGREEMENT
AIM Distributors, Inc.
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 inquiries 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 form 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
11/98
<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.
11/98
<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
11/98
<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 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>
-44-
11/98
<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 Limited Maturity Treasury Fund 0.15 December 2, 1987
AIM Money Market Fund A Shares 0.25 October 18, 1993
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 Tax-Exempt Bond Fund of Connecticut A Shares 0.25 July 1, 1992
</TABLE>
11/98
<PAGE> 6
Bank Shareholder Service Agreement Page 6
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 Developing Markets Fund A Shares 0.25 May 29, 1998
AIM Developing Markets Fund B Shares 0.25 May 29, 1998
AIM Emerging Markets Fund A Shares 0.40** May 29, 1998
AIM Emerging Markets Fund B Shares 0.25 May 29, 1998
AIM Europe Growth Fund A Shares 0.25 May 29, 1998
AIM Europe Growth Fund B Shares 0.25 May 29, 1998
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 Financial Services Fund A Shares 0.40** May 29, 1998
</TABLE>
11/98
<PAGE> 7
Bank Shareholder Service Agreement Page 7
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AIM Global Financial Services Fund B Shares 0.25 May 29, 1998
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 Growth & Income Fund A Shares 0.25 May 29, 1998
AIM Global Growth & Income Fund B Shares 0.25 May 29, 1998
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 Emerging Markets Debt Fund A Shares 0.25 May 29, 1998
AIM Emerging Markets Debt Fund B Shares 0.25 May 29, 1998
AIM Global Infrastructure Fund A Shares 0.40** May 29, 1998
AIM Global Infrastructure Fund B Shares 0.25 May 29, 1998
AIM Global Resources Fund A Shares 0.40** May 29, 1998
AIM Global Resources Fund B Shares 0.25 May 29, 1998
AIM Global Telecommunications Fund A Shares 0.40** May 29, 1998
AIM Global Telecommunications Fund B Shares 0.25 May 29, 1998
AIM International Growth Fund A Shares 0.25 May 29, 1998
AIM International Growth Fund B Shares 0.25 May 29, 1998
AIM Japan Growth Fund A Shares 0.25 May 29, 1998
AIM Japan Growth Fund B Shares 0.25 May 29, 1998
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 Mid Cap Equity Fund A Shares 0.25 May 29, 1998
AIM Mid Cap Equity Fund B Shares 0.25 May 29, 1998
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 Small Cap Growth Fund A Shares 0.25 May 29, 1998
AIM Small Cap Growth Fund B Shares 0.25 May 29, 1998
AIM Strategic Income Fund A Shares 0.25 May 29, 1998
AIM Strategic Income Fund B Shares 0.25 May 29, 1998
AIM Worldwide Growth Fund A Shares 0.25 May 29, 1998
AIM Worldwide Growth Fund B Shares 0.25 May 29, 1998
</TABLE>
*Frequency of Payments:
11/98
<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-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.
11/98
<PAGE> 1
EXHIBIT m(3)(iii)
[LOGO ONLY]
A I M DISTRIBUTORS, INC.
SHAREHOLDER SERVICE AGREEMENT
A I M Distributors, Inc. (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(R) between us and AIM Distributors or
a Fund's Distribution Plan, and in any event, it shall terminate
automatically in the event of its assignment by us, the term
"assignment" for this purpose having the meaning defined in Section
2(a)(4) of the 1940 Act.
10. We represent that our activities on behalf of our clients and pursuant
to this Agreement either (i) are not such as to require our registration
as a broker-dealer in the state(s) in which we engage in such
activities, or (ii) we are registered as a broker-dealer in the state(s)
in which we engage in such activities. We represent that we are
registered as a broker-dealer with the NASD if required under applicable
law.
11. This Agreement and the Agreement for Purchase of Shares of The AIM
Family of Funds(R) through Bank Trust Departments constitute the entire
agreement between us and AIM Distributors and supersede all prior oral
or written agreements between the parties hereto. This Agreement may be
executed in counterparts, each of which shall be deemed an original but
all of which shall constitute the same instrument.
12. This Agreement and all rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of Texas.
13. This Agreement shall become effective as of the date when it is executed
and dated by AIM Distributors.
<PAGE> 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>
AIM Advisor Funds, Inc.
AIM Advisor Flex Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Equity Funds, Inc.
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund (Retail Class)
AIM Constellation Fund (Retail Class)
AIM Weingarten Fund (Retail Class)
AIM Aggressive Growth Fund*
AIM Funds Group
AIM Balanced Fund
AIM Global Utilities Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Select Growth Fund
AIM Value Fund
AIM Growth Series
AIM Basic Value Fund
AIM Europe Growth Fund
AIM International Growth Fund
AIM Japan Growth Fund
AIM Mid Cap Equity Fund
AIM New Pacific Growth Fund
AIM Small Cap Growth Fund
AIM Worldwide 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>
- -----------------------
* Shares of AIM Aggressive Growth Fund may only be sold to current
shareholders who maintain open accounts in AIM Aggressive Growth Fund.
<PAGE> 6
Shareholder Service Agreement Page 6
(Bank Trust Departments)
AIM Investment Funds
AIM Developing Markets Fund
AIM Emerging 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
<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 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 GrowthFund .25%
AIM Value Fund .25%
AIM Growth Series (Class A Shares Only)
AIM Basic Value Fund .25%
AIM Europe Growth Fund .25%
AIM International 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%
AIM Worldwide 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.)
