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As filed with the Securities and Exchange Commission on November 30, 1998
Registration No. 33-19338
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. __ [ ]
POST-EFFECTIVE AMENDMENT NO. __ [ ]
(Check appropriate box or boxes)
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AIM INVESTMENT FUNDS
(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:
Jeffrey H. Kupor, 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.,
(Name and Address of Agent for 2nd Floor
Service) Washington, D.C. 20036
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE
DATE OF THIS REGISTRATION STATEMENT
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
<PAGE> 2
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE> 3
NO FILING FEE IS REQUIRED BECAUSE, PURSUANT TO RULE 24f-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940, REGISTRANT HAS PREVIOUSLY REGISTERED AN
INDEFINITE NUMBER OF SHARES OF BENEFICIAL INTEREST, PAR VALUE $0.01 PER SHARE,
PURSUANT TO A REGISTRATION STATEMENT ON FORM N-1A (FILE NO. 33-19338). THE
REGISTRANT WILL FILE A NOTICE UNDER RULE 24f-2 FOR ITS FISCAL YEAR ENDED OCTOBER
31, 1998 ON OR BEFORE JANUARY 29, 1999.
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(a) UNDER THE SECURITIES ACT OF 1933)
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N-14 Item No. Location in
and Caption Prospectus/Proxy Statement
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PART A
Item 1. Beginning of Registration Statement and Outside Front Cover Page
of Prospectus.......................................................... Cover Page of
Registration
Statement; Front Cover Page of
Prospectus
Item 2. Beginning and Outside Back Cover Page of Prospectus.................... Table of Contents
Item 3. Fee Table, Synopsis Information and Risk Factors....................... Synopsis; Risk Factors
Item 4. Information about the Transaction...................................... Reasons for the
Transaction;
Synopsis; Additional Information
About the Reorganization;
Capitalization; Appendix I
Item 5. Information about the Registrant....................................... Front Cover Page of
Prospectus;
Synopsis; Risk Factors;
Incorporation of Documents by
Reference in the Prospectus;
Comparison of Investment
Objectives and Policies; Financial
Highlights; Additional Information
about Developing Markets Fund and
Emerging Markets Fund; Appendix II
Item 6. Information about the Company Being Acquired........................... Front Cover Page of
Prospectus;
Incorporation of Documents by
Reference in the Prospectus;
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<TABLE>
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Comparison of Investment
Objectives and Policies, Financial
Highlights; Additional Information
about Developing Markets Fund and
Emerging Markets Fund
Item 7. Voting Information..................................................... Prospectus Cover Page;
Notice of
Meeting of Shareholders;
Introduction; Ownership of
Developing Markets Fund and
Emerging Markets Fund Shares
Item 8. Interest of Certain Persons and Experts................................ Not Applicable
Item 9. Additional Information Required for Reoffering by Persons Deemed
to be Underwriters.................................................... Not Applicable
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PART B
Statement of Additional
Information Caption
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Item 10. Cover Page............................................................ Cover Page of
Statement of
Additional Information
Item 11. Table of Contents..................................................... Not Applicable
Item 12. Additional Information about the Registrant........................... Statement of Additional
Information of AIM Developing
Markets Fund dated September 8,
1998
Item 13. Additional Information about the Company Being Acquired............... Not Applicable
Item 14. Financial Statements.................................................. Financial Statements as noted in
the Statement of Additional
Information
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PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
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AIM EMERGING MARKETS FUND
A PORTFOLIO OF AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
December __, 1998
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your
approval of a proposed combination of AIM Emerging Markets Fund ("Emerging
Markets Fund") with AIM Developing Markets Fund ("Developing Markets Fund")
(each a "Fund"). Each Fund is a series of AIM Investment Funds ("Trust"), an
open-end management investment company organized as a Delaware business trust.
If the proposal is approved and implemented, each shareholder of Emerging
Markets Fund automatically would become a shareholder of Developing Markets
Fund.
Emerging Markets Fund and Developing Markets Fund both invest in the
securities of emerging and developing market companies. The investment objective
and policies of the Emerging Markets Fund are similar to the investment
objectives and policies of Developing Markets Fund. A I M Advisors, Inc.
("Advisor") serves as investment advisor and [INVESCO Asset Management Ltd.
(London), Inc. ("INVESCO London")] serves as investment sub-advisor to both
Funds. The Board of Trustees believes that combining the two Funds will benefit
Emerging Markets Fund's shareholders by providing them with a portfolio that has
a broader investment mandate than Emerging Markets Fund. To achieve its primary
investment objective of long-term capital appreciation and secondary objective
of income to the extent consistent with capital appreciation, Developing Markets
Fund may invest more extensively in debt securities than may Emerging Markets
Fund. As a result, Developing Markets Fund possesses greater flexibility than
Emerging Markets Fund to respond effectively to volatility in the equity
markets. The accompanying document describes the proposed transaction and
compares the investment policies, operating expenses, and performance histories
of the Funds.
Shareholders of Emerging Markets Fund are being asked to approve a Plan
of Reorganization and Termination that will govern the reorganization of
Emerging Markets Fund into Developing Markets Fund. After careful consideration,
the Board of Trustees of AIM Investment Funds has unanimously approved the
proposal and recommends that you read the enclosed materials carefully and then
vote FOR the proposal.
Your vote is important. Please take a moment now to sign and return
your proxy cards in the enclosed postage-paid return envelope. If we do not hear
from you after a reasonable amount of time you may receive a telephone call from
our proxy solicitor, Shareholder Communications Corporation, reminding you to
vote your shares. You may also vote your shares through a web site established
by Shareholder Communications Corporation by following the instructions that
appear on the enclosed proxy insert.
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Thank you for your cooperation and continued support.
Sincerely,
Robert H. Graham
Chairman of the Board and President
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AIM EMERGING MARKETS FUND
A PORTFOLIO OF AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY __, 1999
TO THE SHAREHOLDERS OF AIM EMERGING MARKETS FUND:
NOTICE IS HEREBY GIVEN that a Special Meeting of shareholders
("Meeting") of AIM Emerging Markets Fund ("Emerging Markets Fund"), an
investment portfolio of AIM Investment Funds (the "Trust"), will be held at 11
Greenway Plaza, Suite 100, Houston, TX 77046, on February __, 1999, at ___ p.m.,
local time, for the following purposes:
1. To consider a Plan of Reorganization and Termination (the "Plan")
that provides for the combination of Emerging Markets Fund and
Developing Markets Fund (the "Reorganization"). Pursuant to the Plan,
all of the assets of Emerging Markets Fund will be transferred to AIM
Developing Markets Fund ("Developing Markets Fund"), Developing Markets
Fund will assume all of the liabilities of Emerging Markets Fund, and
the Trust will issue to each shareholder a number of full and
fractional shares of the applicable class of Developing Markets Fund
having an aggregate value that, on the effective date of the
Reorganization, is equal to the aggregate net asset value of the
shareholder's shares of beneficial interest in the corresponding class
of Emerging Markets Fund. The value of each Emerging Markets Fund
shareholder's account with Developing Markets Fund immediately after
the Reorganization will be same as the value of such shareholder's
account with Emerging Markets Fund immediately prior to the
Reorganization. The Reorganization has been structured as a tax-free
transaction. No initial sales charge will be imposed in connection with
the Reorganization; and
2. To transact such other business, not currently contemplated, that
may properly come before the Meeting, or any adjournment thereof, in
the discretion of the proxies or their substitutes.
Shareholders of record as of the close of business on [_______ __,
1998], are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
Shareholders are requested to execute and return promptly in the
enclosed envelope the accompanying proxy, which is being solicited by the
management of the Trust. You may also vote your shares through a web site
established for that purpose by following the instructions on the enclosed proxy
insert. This is important for the purpose of ensuring a quorum at the Meeting.
Proxies may be revoked at any time before they are exercised by the subsequent
execution and
<PAGE> 8
submission of a revised proxy, by giving written notice of revocation to the
Trust at any time before the proxy is exercised or by voting in person at the
Meeting.
[name of officer]
[title of officer]
December __, 1998
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AIM EMERGING MARKETS FUND
AIM DEVELOPING MARKETS FUND
PORTFOLIOS OF AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 347-4246
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated: January __, 1999
This document is being furnished in connection with a Special Meeting
of Shareholders of AIM Emerging Markets Fund ("Emerging Markets Fund"), an
investment portfolio of AIM Investment Funds (the "Trust"), a Delaware business
trust, to be held at 11 Greenway Plaza, Suite 100, Houston, TX 77046 on February
__, 1999 at __:__p.m., local time (such meetings and any adjournments thereof
are referred to as the "Meeting"). At the Meeting, the shareholders of Emerging
Markets Fund are being asked to consider and approve a Plan of Reorganization
and Termination (the "Plan") that provides for the combination of Emerging
Markets Fund with AIM Developing Markets Fund ("Developing Markets Fund") (the
"Reorganization"). The Plan is attached as Appendix I to this Combined Proxy
Statement and Prospectus ("Proxy Statement/Prospectus"). The Board of Trustees
of the Trust has unanimously approved the Plan as being in the best interest of
Emerging Markets Fund's shareholders.
Pursuant to the Plan, all of the assets of Emerging Markets Fund will
be transferred to Developing Markets Fund, Developing Markets Fund will assume
all of the liabilities of Emerging Markets Fund, and the Trust will issue a
number of full and fractional shares of the applicable class of Developing
Markets Fund having an aggregate value that, on the effective date of the
Reorganization, is equal to the aggregate net asset value of the shareholder's
shares of beneficial interest in the corresponding class of Emerging Markets
Fund. The value of each Emerging Markets Fund shareholder's account with
Developing Markets Fund immediately after the Reorganization will be same as the
value of such shareholder's account with Emerging Markets Fund immediately prior
to the Reorganization. The Reorganization has been structured as a tax-free
transaction. No initial sales charge will be imposed in connection with the
Reorganization.
Developing Markets Fund is a non-diversified series of the Trust, which
is an open-end management investment company comprised of several outstanding
series (including Developing Markets Fund and Emerging Markets Fund). Developing
Markets Fund's primary investment objective is long-term capital appreciation;
its secondary investment objective is income, to the extent consistent with
seeking capital appreciation. Developing Markets Fund seeks to achieve its
investment objectives by investing primarily in equity securities of emerging
market issuers. Developing Markets Fund may also invest up to 50% of its total
assets in various types of emerging market debt securities.
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This Proxy Statement/Prospectus sets forth the information that a
shareholder of Emerging Markets Fund should know before voting on the Plan. It
should be read and retained for future reference.
The current Prospectus of Emerging Markets Fund, dated September 8,
1998, along with the Supplement to the Prospectus of AIM Emerging Markets Fund,
dated September 28, 1998, together with the related Statement of Additional
Information, dated September 8, 1998, along with the Annual Report to
Shareholders for the fiscal year ended October 31, 1998, are on file with the
Securities and Exchange Commission (the "SEC") and are incorporated by reference
into this Proxy Statement/Prospectus. The current Prospectus of Developing
Markets Fund, dated September 8, 1998, along with the Supplement to the
Prospectus of AIM Developing Markets Fund, dated September 28, 1998, together
with the related Statement of Additional Information, dated September 8, 1998,
along with the Annual Report to Shareholders for the fiscal year ended October
31, 1998, are on file with the SEC and are incorporated by reference into this
Proxy Statement/Prospectus. A copy of the prospectus of Developing Markets Fund
is attached as Appendix II to this Proxy Statement/Prospectus. Such documents
are available without charge by writing to A I M Distributors, Inc., P.O. Box.
4739, Houston, Texas 77210-4739 or by calling (800) 347-4246. The SEC maintains
a web site at http://www.sec.gov that contains the prospectuses and statements
of additional information described above, material incorporated by reference,
and other information about the Trust. Additional information about Emerging
Markets Fund and Developing Markets Fund may also be obtained on the web at
http://www.aimfunds.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 11
TABLE OF CONTENTS
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Section Title
Page
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INTRODUCTION..................................................................3
REASONS FOR THE REORGANIZATIONS...............................................5
Board Considerations.......................................................5
SYNOPSIS......................................................................7
The Reorganization.........................................................7
Comparison of the Funds....................................................7
COMPARISON OF PRINCIPAL RISK FACTORS.........................................12
Non-Diversified Classification............................................12
Investing in Emerging Markets.............................................13
Lower Quality Debt........................................................13
Sovereign Debt............................................................14
Currency Risk.............................................................14
Options, Futures, and Foreign Currency Transactions.......................15
FINANCIAL HIGHLIGHTS.........................................................15
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION..............................19
Terms of the Reorganization...............................................19
The Reorganization........................................................19
Description of Securities to be Issued....................................20
Purchases, Redemptions, and Exchanges of Shares...........................20
Dividends and Other Distributions.........................................21
</TABLE>
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Accounting Treatment.......................................................22
Federal Tax Considerations................................................22
ORGANIZATION OF THE FUNDS....................................................23
OWNERSHIP OF EMERGING MARKETS FUND AND DEVELOPING MARKETS FUND SHARES........23
CAPITALIZATION...............................................................24
LEGAL MATTERS................................................................25
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION................25
ADDITIONAL INFORMATION ABOUT EMERGING MARKETS FUND AND DEVELOPING MARKETS
FUND.........................................................................26
EXPERTS......................................................................27
APPENDIX I..............................Plan of Reorganization and Termination
APPENDIX II..........................Prospectus of AIM Developing Markets Fund
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,
Invest with Discipline, La Familia AIM de Fondos and La Familia AIM de Fondos
and Design are registered service marks and AIM Bank Connection is a service
mark, of A I M Management Group Inc.
</TABLE>
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INTRODUCTION
This Proxy Statement/Prospectus is furnished to shareholders of
Emerging Markets Fund, a series of the Trust, in connection with the
solicitation of proxies by the Board for use at the Meeting. All properly
executed and unrevoked proxies received in time for the Meeting will be voted in
accordance with the instructions contained therein. If no instructions are
given, shares represented by proxies will be voted FOR the proposal to approve
the Plan and in accordance with management's recommendation on other matters.
The presence in person or by proxy of one-third of the outstanding shares of
beneficial interest in Emerging Markets Fund at the Meeting will constitute a
quorum ("Quorum"). If a quorum is not present at the Meeting or a quorum is
present but sufficient votes to approve the proposal described herein
("Proposal") are not received, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of a majority of the shares
represented at the Meeting in person or by proxy. The persons named as proxies
will vote those proxies that they are entitled to vote FOR the Proposal in favor
of such an adjournment and will vote those proxies required to be voted AGAINST
the Proposal against such adjournment. In addition, if you sign, date and return
the proxy card, but give no voting instructions, the duly appointed proxies may,
in their discretion, vote upon such other matters as may come before the
Meeting.
Approval of the Plan requires the affirmative vote of a majority of the
shares cast at the Meeting. Abstentions and broker non-votes will be counted as
shares present at the Meeting for quorum purposes, but will not be considered
votes cast at the Meeting. Broker non-votes arise from a proxy returned by a
broker holding shares for a customer which indicates that the broker has not
been authorized by the customer to vote on a proposal. Any person giving a proxy
has the power to revoke it at any time prior to its exercise by executing a
superseding proxy or by submitting a written notice of revocation to the
Secretary of the Trust. To be effective, such revocation must be received by the
Secretary of the Trust prior to the Meeting and must indicate your name and
account number. In addition, although mere attendance at the Meeting will not
revoke a proxy, a registered shareholder present at the Meeting may withdraw his
proxy and vote in person. Shareholders may also transact any other business not
currently contemplated that may properly come before the Meeting in the
discretion of the proxies or their substitutes.
Shareholders of record as of the close of business on December ___,
1998 (the "Record Date"), are entitled to vote at the Meeting. On the Record
Date, there were ____ Class A shares, ____ Class B shares, and ____ Advisor
Class shares of Emerging Markets Fund outstanding. Each share is entitled to one
vote for each full share held, and a fractional vote for a fractional share
held.
The Trust has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the Meeting.
The Trust expects to solicit proxies principally by mail, but the Trust or SCC
may also solicit proxies by telephone, facsimile, telegraph, or personal
interview. Trust officers and employees of Advisor who assist in proxy
solicitation will not receive any additional or special compensation for any
such efforts. The cost of shareholder solicitation incurred in connection with
the Reorganizations is anticipated to be
3
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approximately $[ ] and will be borne by the Funds. However, because both Funds
are currently at their expense limits, the expenses of the Reorganization will
effectively be borne by the Advisor through reimbursement of expenses and
waivers. The Trust will request broker/dealer firms, custodians, nominees, and
fiduciaries to forward proxy material to the beneficial owners of the shares
held of record by such persons. The Trust may reimburse such brokers/dealer
firms, custodians, nominees, and fiduciaries for their reasonable expenses
incurred in connection with such proxy solicitation,
The Trust intends to mail this Proxy Statement/Prospectus and the
accompanying proxy on or about December __, 1998.
4
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REASONS FOR THE REORGANIZATIONS
Board Considerations
The Board of Trustees of the Trust, including a majority of trustees
who are not "interested persons," as that term is defined in the 1940 Act
("Independent Trustees"), has determined that the Reorganization is in the best
interests of the shareholders of Emerging Markets Fund, that the terms of the
Reorganization are fair and reasonable, and that the interests of Emerging
Markets Fund's shareholders will not be diluted as a result of the
Reorganization.
At a meeting of the Board of Trustees held on August 11-12, 1998, the A
I M Advisors, Inc. ("Advisor") proposed that the Board of Trustees approve the
Reorganization of Emerging Markets Fund into Developing Markets Fund. The Board
received from the Advisor written materials that described the structure and tax
consequences of the Reorganization and contained information concerning Emerging
Markets Fund and Developing Markets Fund, including comparative total return and
fee and expense information, a comparison of the investment objectives of
Emerging Markets Fund and Developing Markets Fund, pro forma expense ratios and
biographical information on the portfolio managers of Developing Markets Fund.
The Board also considered the performance of Emerging Markets Fund in
relation to the performance of Developing Markets Fund. As of May 31, 1998, the
Morningstar ratings and Lipper Analytical Services rankings for Emerging Markets
Fund and Developing Markets Fund were as follows:
MORNINGSTAR RATING(1)
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OVERALL 3-YEAR 5-YEAR 10-YEAR
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EMERGING MARKETS FUND 2 1 2 N/A
DEVELOPING MARKETS FUND 2 2 N/A N/A
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LIPPER RANK (PERCENTILE)
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<CAPTION>
YTD 1-YEAR 3-YEAR 5-YEAR
<S> <C> <C> <C> <C>
EMERGING MARKETS FUND 95% 85% 98% 85%
DEVELOPING MARKETS FUND 84% 54% 29% N/A
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(1) Under the Morningstar rating system, the top 10% of funds in a category
receive 5 stars, the next 22.5% receive 4 stars, the middle 35% receive 3 stars,
the next 22.5% receive 2 stars, and the bottom 10% receive a single star.
5
<PAGE> 16
In addition, the Board noted that no initial sales or other charges
would be imposed on any Developing Markets Fund shares issued to Emerging
Markets Fund shareholders in connection with the Reorganization. Finally, the
Board reviewed the principal terms of the Agreement. The Board also noted that
Emerging Markets Fund would be provided with an opinion of counsel that the
Reorganization would be tax-free to Emerging Markets Fund and its shareholders.
At meetings held on August 11-12, 1998, August 31, 1998, and September
23, 1998, the Board made an extensive inquiry into a number of factors with
respect to the Reorganization, including: (1) the compatibility of the Funds'
investment objectives, policies, and restrictions; (2) the Funds' respective
investment performances; (3) the effect of the Reorganization on the expense
ratio of Developing Markets Fund and that expense ratio relative to each Fund's
current expense ratio; (4) the costs to be incurred by each Fund as a result of
the Reorganization; (5) the tax consequences of the Reorganization; (6) possible
alternatives to the Reorganization, including continuing to operate Emerging
Markets Fund on a stand-alone basis or liquidating Emerging Markets Fund; and
(7) the potential benefits of the Reorganization to other persons, especially
the Advisor and its affiliates.
In considering the Reorganization, the Board also considered the fact
that Developing Markets Fund has a broader investment mandate than Emerging
Markets Fund and can utilize debt securities somewhat more extensively than can
Emerging Markets Fund. The Advisor noted its belief that Developing Markets
Fund's ability to invest more extensively in debt securities gives it greater
flexibility than Emerging Markets Fund has to effectively respond to volatility
in the equity markets. Such flexibility could, over the long term, benefit
shareholders. The Board also considered the fact that, although Developing
Markets Fund has a broader investment mandate, the investment objectives and
policies of the Funds are sufficiently compatible to enable Developing Markets
Fund to maintain its investment policies without any material changes after the
Reorganization. The Board noted that the risk profile of Developing Markets Fund
is substantially the same as that of Emerging Markets Fund. The Board also
considered the impact the Reorganization would have on expenses. Combining the
Funds could reduce the expenses borne by the shareholders. The Board was further
advised that the expense ratio of Developing Markets Fund also could decrease
if, as a result of the Reorganization, the combined Fund experienced increased
sales of its shares.
The Advisor further advised the Board that, while past performance is
no guarantee of future results, Developing Markets Fund had experienced
comparable or better investment performance than Emerging Markets Fund recently.
The Advisor also advised the Board that it did not expect to receive any
immediate direct benefits from the Reorganization, because the compensation
rate, measured as a percentage of net assets, that it would receive for its
advisory services would be the same for the combined Fund as it presently is for
the two Funds separately. However, the Advisor noted that it could benefit in
the future if the combined Fund's assets grow faster than the assets of the two
Funds separately would have grown in the absence of the Reorganization. In
addition, any reduction in Developing Markets Fund's expense ratio as a result
of the Reorganization could benefit the Advisor by reducing or eliminating any
reimbursements or waivers of expenses resulting from the Advisor's obligation to
limit the
6
<PAGE> 17
expenses of each Fund to 2.00% for Class A shares, 2.50% for Class B shares, and
1.50% for Advisor Class shares.
On the basis on the information provided to the Board and on their
evaluation of the Reorganization, the Board determined that the proposed
Reorganization will not dilute the interests of shareholders of Emerging Markets
Fund or Developing Markets Fund and is in the best interest of the shareholders
of Emerging Markets Fund in view of Developing Markets Fund's broader investment
mandate and greater flexibility to invest in debt instruments. Therefore, the
Board recommended the approval of the Plan by the shareholders of Emerging
Markets Fund at a special meeting.
SYNOPSIS
The Reorganization
The Plan provides for the acquisition by Developing Markets Fund of
Emerging Markets Fund's assets in exchange solely for Developing Markets Fund
shares and the assumption by Developing Markets Fund of Emerging Markets Fund's
liabilities. Those transactions will occur as of [8:00 a.m.], local time, on
February 12, 1999, or on such later date as the conditions to the closing are
satisfied ("Closing Date"). Emerging Markets Fund will then distribute the
Developing Markets Fund shares to its shareholders, by class, so that each
Emerging Markets Fund shareholder will receive the number of full and fractional
shares of the corresponding class of Developing Markets Fund in terms of fees
and other characteristics, including nomenclature ("Corresponding Class"), that
equals the value of the shareholder's holdings of Emerging Markets Fund shares
as of the closing date. Emerging Markets Fund then will be terminated as soon as
practicable thereafter.
The Trust will receive an opinion of Kirkpatrick & Lockhart LLP, its
counsel, to the effect that the Reorganization will constitute a tax-free
reorganization within the meaning of section 368(a)(1) of the Internal Revenue
Code of 1986, as amended ("Code"). Accordingly, no gain or loss will be
recognized to either Fund or their shareholders as a result of the
Reorganization. See "Additional Information About the Reorganization Federal
Income Tax Considerations" below.
Comparison of the Funds
Investment Objectives and Policies
The investment objective and policies of Emerging Markets Fund are
similar to the investment objectives and policies of Developing Markets Fund.
Emerging Markets Fund's investment objective is long-term growth of capital.
Under normal circumstances, Emerging Markets Fund seeks its objective by
investing at least 65% of its total assets in equity securities of companies in
emerging markets. Emerging Markets Fund may invest in the following types of
equity securities: common stock, preferred stock, securities convertible into
common stock, rights and warrants to acquire such securities and substantially
similar forms of equity with
7
<PAGE> 18
comparable risk characteristics. In addition, Emerging Markets Fund may invest
up to 20% of its assets in debt securities that are below investment grade and
up to 35% of its assets in emerging markets debt securities. Developing Markets
Fund primarily seeks long-term capital appreciation. Its secondary investment
objective is income, to the extent consistent with seeking capital appreciation.
Developing Markets Fund normally invests substantially all of its assets in
issuers in the developing (or "emerging") markets of Asia, Europe, Latin America
and elsewhere. A majority of the Developing Markets Fund's assets ordinarily is
invested in emerging market equity securities. There is no limit on the
percentage of assets that Developing Markets Fund may invest in debt securities
that are below investment grade. Developing Markets Fund may invest up to 50% of
its assets in emerging market debt securities, which are selected based on their
potential to provide a combination of capital appreciation and current income.
Investment Advisory Services
The Advisor serves as investment adviser, and the Sub-advisor serves as
investment sub-adviser, to the Funds. After the Reorganization, the Advisor and
Sub-advisor will continue to serve Developing Markets Fund in their current
capacities. Francesco Bertoni and Christine Rowley are primarily responsible for
the portfolio management of Emerging Markets Fund and Francesco Bertoni and
Cheng-Hock Lau are primarily responsible for the portfolio management of
Developing Markets Fund. In addition, both Funds currently utilize the reports
of several other analysts. It is expected that this will continue following the
reorganization. See "Portfolio Management" below.
Performance
Set forth below are average annual total returns for the periods
indicated for Emerging Markets Fund and Developing Markets Fund. Average annual
total return figures do not take into account sales charges applicable to
purchases of Class A shares or redemptions of Class B shares of the Funds.
<TABLE>
<CAPTION>
EMERGING MARKETS FUND DEVELOPING MARKETS FUND
ADVISOR ADVISOR
CLASS A CLASS B CLASS CLASS A CLASS B CLASS
SHARES SHARES SHARES SHARES SHARES SHARES
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
1 Year Ended Oct. 31, 1998 (39.62) (39.90) (39.23) (37.09) (39.76) (42.63)
% % % % % %
3 Years Ended Oct. 31, 1998 (18.96) (19.37) (18.51) (9.29) n/a n/a
% % % %
5 Years Ended Oct. 31, 1998 (11.50) (11.95) n/a n/a n/a n/a
% %
</TABLE>
8
<PAGE> 19
Expenses
Set forth below is a comparison of annual operating expenses as a
percentage of net assets ("Expense Ratio") for the Class A, Class B, and Advisor
Class shares of Emerging Markets Fund and Developing Markets Fund for the fiscal
year ended October 31, 1998. The pro forma estimated Expense Ratio of Developing
Markets Fund giving effect to the Reorganization is also provided. The Expense
Ratio is shown net of any voluntary fee waivers and expenses reimbursements.
<TABLE>
<CAPTION>
EMERGING MARKETS FUND DEVELOPING MARKETS FUND DEVELOPING MARKETS FUND PRO
FORMA ESTIMATED
---------------------------------- -------------------------------- ---------------------------------
ADVISOR ADVISOR ADVISOR
CLASS A CLASS B CLASS CLASS A CLASS B CLASS CLASS A CLASS B CLASS
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum sales load on 4.75%(1) None None 4.75%(1) None None 4.75%(1) None None
purchase of shares (as
a % of offering price)
Deferred Sales Charge None 5.00%(1) None None 5.00%(1) None None 5.00%(1) None
(as a % of original
purchase price or
redemption proceeds, as
applicable)
Annual Operating
Expenses (as a % of net
assets) (after fee
waivers or expense
reimbursements, if any)
Management Fees 0.98% 0.98% 0.98% 0.98% 0.98% 0.98% 0.98% 0.98% 0.98%
Rule 12b-1 Distribution 0.50% 1.00% None 0.50% 1.00% None 0.50% 1.00% None
Plan Payments
All Other Expenses
0.52% 0.52% 0.52% 0.52% 0.52% 0.52% 0.52% 0.52% 0.52%
----- ----- ----- ----- ----- ----- ----- ----- -----
Total Fund Operating 2.00% 2.50% 1.50% 2.00% 2.50% 1.50% 2.00% 2.50% 1.50%
Expenses (net of waivers)(2)
</TABLE>
- -----------------------
(1) Sales charge waivers are available for Class A and Class B shares, and
reduced sales charge purchase plans are available for Class A shares. The
maximum 5% contingent deferred sales charges ("CDSC") on Class B shares
applies to redemptions during the first year after purchase; the charge
generally declines by 1% annually thereafter, reaching zero after six
years.
(2) Expenses are based on the Fund's fiscal year ended October 31, 1998
restated to reflect the Advisor's undertaking to limit each Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the annual rate of 2.00%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. The Advisor has voluntarily agreed to continue these
limitations through May 31, 2000. "Other expenses" include custody,
transfer agent, legal and audit fees and other operating expenses. Without
reimbursements and waivers, "Other expenses" and "Total Fund Operating
Expenses" would have been 0.93% and 2.41%, respectively, for Class A
shares, 1.18% and 3.16%, respectively, for Class B shares, and 1.18% and
2.16%, respectively, for Advisor Class shares. 12b-1 distribution fees
include asset-based sales charges. Long-term Class A and Class B
shareholders may pay more in direct and indirect sales charges (including
distribution fees) than the economic equivalent of the maximum front-end
sales charge permitted by the National Association of Securities Dealers,
Inc. rules regarding investment companies.
Hypothetical Example of Effect of Expenses
An investor would have directly or indirectly paid the following
expenses on a $1,000 investment under the existing and estimated fees and
expenses stated above, assuming a 5% annual return. No initial sales charge will
be charged in connection with Class A shares of Developing Markets Fund
distributed to Class A shareholders of Emerging Markets Fund as part of the
Reorganization.
9
<PAGE> 20
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS (3)
---- ----- ----- ---------
<S> <C> <C> <C> <C>
EMERGING MARKETS FUND
Class A shares (1)....................... $67 $108 $151 $271
Class B shares:
Assuming complete redemption at end
of period (2)...................... $77 $111 $157 $274
Assuming no redemption................ $26 $79 $135 $274
Advisor Class shares..................... $15 $48 $82 $180
DEVELOPING MARKETS FUND
Class A shares........................... $67 $108 $151 $271
Class B shares:
Assuming complete redemption at end
of period (1)(2).................. $77 $111 $157 $274
Assuming no redemption (2)............ $26 $79 $135 $274
Advisor Class shares..................... $15 $48 $82 $180
Combined Fund
Class A shares........................... $67 $108 $151 $271
Class B shares:
Assuming complete redemption at end
of period (l)(2)................... $77 $111 $157 $274
Assuming no redemption (2)............ $26 $79 $135 $274
Advisor Class shares..................... $15 $48 $82 $180
</TABLE>
- --------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable contingent deferred sales change.
(3) For Class B shares, this number reflects the conversion to Class A shares
eight years following the end of the calendar month in which the purchase
was made.
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE
EXPENSES. THE FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN
THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC
APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND
DOES NOT REPRESENT THE FUND'S PROJECTED OR ACTUAL PERFORMANCE.
The actual expenses attributable to each Class of a Fund's shares will depend
upon, among other things, the level of average net assets and the extent to
which a Fund incurs variable expenses, such as transfer agency costs.
Sales Charges
10
<PAGE> 21
No sales charges are applicable to shares of Developing Market Fund
received in connection with the Reorganization. The Class A shares of both
Developing Markets Fund and Emerging Markets Fund are sold subject to a maximum
initial sales charge of 4.75%. Class B shares are sold subject to a maximum CDSC
of 5.00% of the lesser of the net asset value ("NAV") at time of purchase or
sale, which declines to zero after six years. For purposes of calculating the
CDSC, the holding period for the Class B shares distributed to Class B
shareholders of Emerging Markets Fund will be treated as having the same period
as the shares of Emerging Markets Fund previously held. The Advisor Class shares
of each Fund are sold without initial sales charges or CDSCs. New purchases of
Class A, Class B, and Advisor Class shares of Developing Markets Fund by any
shareholders will be subject to their terms, including, for example, for Class A
shares, the 4.75% initial sales charge. As is currently the case for each Fund,
no CDSC will be applied to redemptions of Class B shares that represent
reinvested dividends or other distributions, nor will Class A shares so acquired
be subject to any initial sales charge.
Distribution; Purchase, Exchange and Redemption
Shares of Developing Markets Fund and Emerging Markets Fund are
distributed by A I M Distributors, Inc. ("AIM Distributors"). The Class A shares
of Developing Markets Fund and Emerging Markets Fund pay a fee in the amount of
0.50% of average daily net assets to AIM Distributors for distribution services.
The Class B shares of Developing Markets Fund and Emerging Markets Fund pay AIM
Distributors fees at an annual rate of 1.00% of the average daily net assets
attributable to the Class B shares for distribution services. The Advisor Class
shares of Developing Markets Fund and Emerging Markets Fund are not subject to
such distribution fees. For more information, see the Investor's Guide to The
AIM Family of Funds in the Developing Markets Fund Prospectus attached as
Appendix II to this Proxy Statement/Prospectus.
Purchase and redemption procedures are the same for Developing Markets
Fund and Emerging Markets Fund. Shares of Developing Markets Fund and Emerging
Markets Fund may be exchanged for shares of other funds of The AIM Family of
Funds of the same class, as provided in each Fund's prospectus. No initial sales
charge will be imposed on the shares being acquired, and no CDSC will be imposed
on the shares being disposed of, through an exchange. However, a CDSC may apply
to redemptions of an AIM Fund's Class B shares acquired through an exchange.
Exchanges will be subject to minimum investment and other requirements of the
Fund into which exchanges are made.
Operations of Developing Markets Fund Following the Reorganization
There are differences in the investment objectives and some of the
investment policies of the Funds. It is not expected that Developing Markets
Fund will revise its investment objectives or policies following the
Reorganization to reflect those of Emerging Markets Fund. Rather, the Advisor
and Sub-advisor believe that substantially all of the assets held by Emerging
Markets
11
<PAGE> 22
Fund will be consistent with Developing Markets Fund's investment policies and
thus could be transferred to and held by Developing Markets Fund if the
Reorganization is approved. If the Reorganization is approved, Emerging Markets
Fund will sell any assets that are inconsistent with Developing Markets Fund's
investment policies prior to the effective time of the Reorganization, and the
proceeds thereof will be held in temporary investments or reinvested in assets
that qualify to be held by Developing Markets Fund. The need, if any, for
Emerging Markets Fund to dispose of assets prior to the effective time of the
Reorganization may result in selling securities at a disadvantageous time and
could result in Emerging Markets Fund's realizing losses that would not
otherwise have been realized.
Portfolio Management
Francesco Bertoni and Christine Rowley are primarily responsible for
the day-to-day management of the Emerging Markets Fund. Mr. Bertoni has been
Portfolio Manager for Emerging Markets Fund since 1998 and Portfolio Manager for
INVESCO (NY), Inc., an indirect wholly owned subsidiary of AMVESCAP PLC, since
June 1998. Since 1994, Mr. Bertoni has been Investment Director of INVESCO
London, also an indirect wholly-owned subsidiary of AMVESCAP PLC. Prior to
becoming Investment Director, Mr. Bertoni was Portfolio Manager for INVESCO
London from 1990 through 1994. Ms. Rowley has been Portfolio Manager for
Emerging Markets Fund since 1997 and Portfolio Manager for INVESCO (NY), Inc.,
INVESCO GT Asset Management PLC (London), and INVESCO GT Asset Management Asia
Ltd. (Hong Kong), all indirect wholly-owned subsidiaries of AMVESCAP PLC, since
1992.
Francesco Bertoni and Cheng-Hock Lau are primarily responsible for the
day-to-day management of the Developing Markets Fund. Mr. Bertoni has been
Portfolio Manager for Developing Markets Fund since 1998 and Portfolio Manager
for INVESCO (NY), Inc., an indirect wholly owned subsidiary of AMVESCAP PLC,
since June 1998. Since 1994, Mr. Bertoni has been Investment Director of INVESCO
London, also an indirect wholly-owned subsidiary of AMVESCAP PLC. Prior to
becoming Investment Director, Mr. Bertoni was Portfolio Manager for INVESCO
London from 1990 through 1994. Mr. Lau has been Portfolio Manager for Developing
Markets Fund since 1997. Mr. Lau has been Chief Investment Officer for Global
Fixed Income and Portfolio Manager for INVESCO (NY), Inc. since October 1996.
Prior to that, he was Senior Portfolio Manager for Global/International Fixed
Income for INVESCO (NY), Inc. from July 1995 through October 1996. Mr. Lau was
employed by Chancellor Capital Management, Inc. ("Chancellor Capital"), a
predecessor of INVESCO (NY), Inc. from 1995 through October 1996. From 1993
through 1995, he was Senior Vice President and Senior Portfolio Manager for
Fiduciary Trust Company International. Mr. Lau was Vice President at Bankers
Trust Company from 1991 though 1993.
COMPARISON OF PRINCIPAL RISK FACTORS
Non-Diversified Classification
Unlike Emerging Markets Fund, which is classified under the 1940 Act
as a "diversified" fund, Developing Markets Fund is classified as a
"non-diversified" fund. As a result, Developing
12
<PAGE> 23
Markets Fund is able to invest in a smaller number of issuers than if it were
classified as a "diversified" fund. To the extent that Developing Markets Fund
invests in a smaller number of issuers, the NAV of its shares may fluctuate more
widely and it may be subject to greater investment and credit risk with respect
to its portfolio.
Investing in Emerging Markets
Each Fund invests primarily in securities of issuers located in
emerging markets. Emerging markets generally are dependent heavily upon
international trade and, accordingly, have been and may continue to be affected
adversely by trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated by the
countries with which they trade. Inflation and rapid fluctuations in inflation
rates have had and may continue to have negative effects on the economies and
securities markets of certain countries with emerging markets.
Disclosure and regulatory standards in most emerging markets are, in
many respects, less stringent than in the United States and other developed
markets. There also may be a lower level of monitoring and regulation of
emerging markets and the activities of investors in those markets, and
enforcement of existing regulations has been extremely limited.
The securities markets of emerging countries are substantially smaller,
less developed, less liquid, and more volatile than the securities markets of
the developed countries. The risk also exists that an emergency situation may
arise in one or more emerging markets as a result of which trading of securities
may cease or may be substantially curtailed and prices for a Fund's portfolio
securities in those markets may not be readily available. Section 22(e) of the
1940 Act permits a registered investment company and series thereof, such as a
Fund, to suspend redemption of its shares for any period during which an
emergency exists, as determined by the SEC. Accordingly, when the Trust believes
that circumstances dictate, it will promptly apply to the SEC for a
determination that such an emergency exists. During the period commencing with
the Trust's identification of such conditions until the date of any SEC action,
the Funds' portfolio securities in the affected markets will be valued at fair
value determined in good faith by or under the direction of the Board.
Lower Quality Debt
The Developing Markets Fund normally may invest up to 50% of its total
assets in debt securities rated below investment grade. The Emerging Markets
Fund normally may invest up to 20% of its total assets in debt securities rated
below investment grade. Such investments involve a high degree of risk. 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. 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.
13
<PAGE> 24
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 period, such issuers may not have
sufficient revenues to meet their interest payment obligations. An issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting it, such as its inability to meet specific
projected business forecasts or the unavailability of additional financing.
Similarly, certain emerging market governments that issue lower quality debt
securities are among the largest debtors to commercial banks, foreign
governments and supranational organizations such as the World Bank and may not
be able or willing to make principal and/or interest repayments as they come
due. The risk of loss due to default by an 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 frequently have call or buy-back features
that permit an issuer to call or repurchase the security from the holder. In
addition, a Fund may have difficulty disposing of lower quality securities
because they may have a thin trading market.
Sovereign Debt
Each Fund may invest in sovereign debt securities of emerging market
governments, including Brady Bonds. Investments in such securities involve
special risks. The issuer of the debt or the governmental authorities that
control the repayment of the debt may be unable or unwilling to repay principal
or interest when due in accordance with the terms of the debt. Periods of
economic uncertainty may result in the volatility of market prices of sovereign
debt obligations and in turn a Fund's NAV, to a greater extent than the
volatility inherent in domestic fixed income securities.
Investors also should be aware that certain sovereign debt instruments
in which a Fund may invest involve great risk. As noted above, sovereign debt
obligations issued by emerging market governments generally are deemed to be the
equivalent in terms of quality to securities rated below investment grade by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's, a division of
The McGraw-Hill Companies, Inc. ("S&P"). Those securities are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations and involve
major risk exposure to adverse conditions. Some of those securities, with
respect to which the issuer currently may not be paying interest or may be in
payment default, may be comparable to securities rated D by S&P or C by Moody's.
A Fund may have difficulty disposing of and valuing certain sovereign debt
obligations because there may be a limited trading market for those securities.
Because there is no liquid secondary market for many of these securities, each
Fund anticipates that they could be sold only to a limited number of dealers or
institutional investors.
14
<PAGE> 25
Currency Risk
Because a Fund may invest substantially in securities denominated in
currencies other than the U.S. dollar and may hold foreign currencies, it will
be affected favorably or unfavorably by exchange control regulations or changes
in the exchange rates between those currencies and the U.S. dollar. Changes in
currency exchange rates will affect the NAV of a Fund's shares and also may
affect the value of dividends and interest earned by a Fund and gains and losses
realized by it.
Many of the currencies of emerging market countries have experienced
steady devaluations relative to the U.S. dollar, and major devaluations have
occurred in certain countries. Any devaluations in the currencies in which a
Fund's portfolio securities are denominated may have a detrimental impact on a
Fund.
Options, Futures, and Foreign Currency Transactions
Each Fund is authorized to enter into options, futures, and forward
currency transactions. These transactions involve certain risks, which include:
(1) dependence on the Advisor's ability to predict movements in the prices of
individual securities, fluctuations in the general securities markets, and
movements in interest rates and currency markets; (2) imperfect correlation, or
even no correlation, between movements in the price of forward contracts,
options, futures contracts, or options thereon and movements in the price of the
currency or security hedged or used for cover; (3) the fact that skills and
techniques needed to trade options, futures contracts, and options thereon or to
use forward currency contracts are different from those needed to select the
securities in which a Fund invests; (4) lack of assurance that a liquid
secondary market will exist for any particular option, futures contract, or
option thereon at any particular time; (5) the possible loss of principal under
certain conditions; and (6) the possible inability of a Fund to purchase or sell
a portfolio security at a time when it would otherwise be favorable for it to do
so, or the possible need for a Fund to sell a security at a disadvantageous
time, due to the need for a Fund to maintain "cover" or to set aside securities
in connection with hedging transactions.
FINANCIAL HIGHLIGHTS
Shown below are financial highlights concerning income and capital
changes for one Class A, one Class B, and one Advisor Class share of Developing
Markets Fund for the periods shown. This information is supplemented by the
financial statements and accompanying notes appearing in Developing Markets Fund
Annual Report to Shareholders for the year ended October 31, 1998, ten months
ended October 31, 1997, and the previous three fiscal years ended December 31,
1996, which are incorporated herein by this reference. The financial statements
and notes for each of the years in the five fiscal year period ended October 31,
1998 and the financial information in the tables below, have been audited by
______________________, independent accountants, whose report thereon is
included in the Developing Markets Fund Annual and Semi-Annual Reports to
Shareholders. Interested parties may receive, without charge, copies of
Developing Market Fund's Annual Report to Shareholders dated October 31, 1998,
15
<PAGE> 26
upon request made to AIM Distributors at the address or telephone number
appearing on the cover page of this Proxy Statement/Prospectus.
G.T. Global Developing Markets Fund, Inc. ("Predecessor Fund") was a
closed-end investment company whose single class of shares traded on the New
York Stock Exchange. On October 31, 1997, Developing Markets Fund, which had no
previous operating history, acquired the assets and assumed the liabilities of
the Predecessor Fund. The fees and expenses of Developing Markets Fund differ
from those of the Predecessor Fund. Developing Markets Fund's fiscal year ends
October 31, rather that December 31, which was the Predecessor Fund's fiscal
year end.
16
<PAGE> 27
<TABLE>
<CAPTION>
Class A+
-----------------------------------------------------------------
January 11,
Ten months 1994
Year ended ended (commencement
October 31, October 31, of operations)
(unaudited) Year ended December 31, to December 31,
-----------------------------------------------------------------
1998(d) 1997(e) 1996(e) 1995(e) 1994(e)
------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period............... $ 12.56 $ 13.84 $ 11.60 $ 12.44 $ 15.00
--------- --------- --------- --------- ---------
Income From Investment operations:
Net investment income (loss).................... 0.39*o 0.25 0.53 0.72 0.35
Net realized and unrealized gain (loss) on (5.10) (1.53) 2.19 (0.84) (2.46)
investments..................................... --------- --------- --------- --------- ---------
Net increase (decrease) from investment
operations (4.71) (1.28) 2.72 (0.12) (2.11)
Redemption fees retained 0.28 -- -- -- --
--------- --------- --------- --------- ---------
Distributions to shareholders:
From net investment income...................... (0.60) -- (0.48) (0.72) (0.35)
From net realized gain on investments........... -- -- -- -- (0.10)
--------- --------- --------- --------- ---------
Total distribution............................ (0.60) -- (0.48) (0.72) (0.45)
--------- --------- --------- --------- ---------
Net asset value, end of period..................... $ 7.53 $ 12.56 $ 13.84 $ 11.60 $ 12.44
========= ========= ========= ========= =========
Market value, end of period N/A $ 11.81 $ 11.63 $ 9.75 $ 9.75
========= ========= ========= ========= =========
Total investment return (based on market value) N/A 1.62%(b) 24.18% 6.60% (32.16)%(b)
Total investment return (based on net asset value) (37.09)%(c) (9.25)%(b) 23.59% (0.95)% (14.07)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's) $87,517 $457,379 $504,012 $422,348 $452,872
Ratio of net investment income (loss) to average
net assets:
With expense reductions and reimbursement ...... 3.84% 2.03%(a) 4.07% 6.33% 2.75%(a)
Without expense reductions and reimbursement.... 3.43% 1.95%(a) 4.04% 6.30% 2.75%(a)
Ratio of operating expenses to average net assets:
With expense reductions and reimbursement ...... 1.73% 1.75%(a) 1.82% 1.77% 2.01%(a)
Without expense reductions and reimbursement 2.14% 1.83%(a) 1.85% 1.80% 2.01%(a)
Ratio of interest expense to average net assets+++ 0.20% N/A N/A N/A N/A
Portfolio turnover rate+++ 111% 184%(a) 138 75% 56%
</TABLE>
- -------------------------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges
(d) These selected per share data were calculated based upon average
shares outstanding during the period (e) These financial highlights
provide per share information of G.T. Global Developing Markets Fund,
Inc. ("Predecessor Fund") (See Note 1 to Notes to Financial
Statements) for the periods up to and including October 31, 1997. The
fees and expenses of the Fund differ from those of the Predecessor
Fund.
* Net investment income per share reflects an interest payment received
from the conversion of Vnesheconombank loan agreements of $0.14 per
share for Class A, Class B and Advisor Class.
o Before reimbursement, the net investment income per share would have
been reduced by $0.04 for Class A, Class B and Advisor Class.
+ All capital shares issued and outstanding on October 31, 1997 were
reclassified as Class A shares.
++ Commencing November 1, 1997, the Fund began offering Class B and
Advisor Class shares.
+++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
17
<PAGE> 28
<TABLE>
<CAPTION>
Advisor
Class B++ Class++
---------------------------------
Year ended Year ended
October 31, October 31,
---------------------------------
1998(d) 1998(d)
------- -------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period............................... $ 12.56 $ 12.56
--------- ---------
Income From Investment operations:
Net investment income (loss).................................... 0.31*o 0.40*o
Net realized and unrealized gain (loss) on investments.......... (5.06) (5.09)
--------- ---------
Net increase (decrease) from investment operations (4.75) (4.69)
--------- ---------
Redemption fees retained 0.28 0.28
Distributions to shareholders:
From net investment income...................................... (0.60) (0.60)
From net realized gain on investments........................... -- --
Total distributions........................................... (0.60) (0.60)
--------- ---------
Net asset value, end of period..................................... $ 7.49 $ 7.55
========= =========
Total investment return (c)........................................ (39.76)%(c) (42.63)%(c)
Ratios and supplemental data:
Net assets, end of period (in 000's)............................... $ 154 $ 29
Ratio of net investment income (loss) to average net assets:
With expense reductions and reimbursement ...................... 3.09% 4.09%
Without expense reductions and reimbursement.................... 2.68% 3.68%
Ratio of operating expenses to average net assets:
With expense reductions and reimbursement ...................... 2.48% 1.48%
Without expense reductions and reimbursement 2.89% 1.89%
Ratio of interest expense to average net assets+++ 0.20% 0.20%
Portfolio turnover rate+++ 111% 111%
</TABLE>
- -----------------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges
(d) These selected per share data were calculated based upon average
shares outstanding during the period
* Net investment income per share reflects an interest payment received
from the conversion of Vnesheconombank loan agreements of $0.14 per
share for Class A, Class B and Advisor Class.
o Before reimbursement, the net investment income per share would have
been reduced by $0.04 for Class A, Class B and Advisor Class.
+ All capital shares issued and outstanding on October 31, 1997 were
reclassified as Class A shares.
++ Commencing November 1, 1997, the Fund began offering Class B and
Advisor Class shares.
+++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
18
<PAGE> 29
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION
Terms of the Reorganization
The terms and conditions under which the Reorganization may be
consummated are set forth in the Plan. Significant provisions of the Plan are
summarized below; however, this summary is qualified in its entirety by
reference to the Plan, a copy of which is attached as Appendix I to this Proxy
Statement/Prospectus.
The Reorganization
The Plan contemplates (a) Developing Markets Fund's acquiring on the
Closing Date the assets of Emerging Markets Fund in exchange solely for
Developing Markets Fund's shares and its assumption of Emerging Markets Fund's
liabilities and (b) the constructive distribution of those shares to Emerging
Markets Fund shareholders. Emerging Markets Fund's assets include all cash, cash
equivalents, securities, receivables, and other property owned by it as of the
close of regular trading on the New York Stock Exchange on the business day next
preceding the Closing Date ("Valuation Time") (collectively, "Assets").
Developing Markets Fund will assume from Emerging Markets Fund all its debts,
liabilities, obligations and duties of whatever kind or nature as of the
Valuation Time (collectively, "Liabilities"); provided, however, that Emerging
Markets Fund will use its best efforts, to the extent practicable, to discharge
all of its known Liabilities prior to the Valuation Time. Developing Markets
Fund also will deliver its shares to Emerging Markets Fund, which then will be
constructively distributed to Emerging Markets Fund's shareholders.
The value of the Assets to be acquired, and the amount of the
Liabilities to be assumed, by Developing Markets Fund and the NAV of a Class A,
Class B, and Advisor Class share of Developing Markets Fund will be determined
as of the Valuation Time. Where market quotations are readily available,
portfolio securities will be valued based upon such market quotations, provided
the quotations adequately reflect, in the Advisor's judgment, the fair value of
the security. Where such market quotations are not readily available, securities
will be valued based upon appraisals received from a pricing service using a
computerized matrix system or based upon appraisals derived from information
concerning the security or similar securities received from recognized dealers
in those securities. The amortized cost method of valuation generally will be
used to value debt instruments with 60 days or less remaining to maturity,
unless the Board determines that this method does not represent fair value. All
other securities and assets will be valued at fair value as determined in good
faith by or under the direction of the Board.
On, or as soon as practicable after, the Closing Date, Emerging Markets
Fund will distribute to its shareholders of record the Developing Markets Fund's
shares it receives, by Class, so that each Emerging Markets Fund shareholder
will receive a number of full and fractional shares of the Corresponding Class
or Classes of Developing Markets Fund shares equal in value to the shareholder's
holdings in Emerging Markets Fund. Such distribution will be
19
<PAGE> 30
accomplished by opening accounts on the books of Developing Markets Fund in the
names of Emerging Markets Fund's shareholders and by transferring thereto the
shares of each Class previously credited to the account of Emerging Markets Fund
on those books. Fractional shares in each Class of Developing Markets Fund will
be rounded to the third decimal place.
Immediately after the Reorganization, each former shareholder of
Emerging Markets Fund will own shares of the Class of Developing Markets Fund
that will equal the value of that shareholder's shares of the Corresponding
Class of Emerging Markets Fund immediately prior to the Reorganization. Because
shares of each Class of Developing Markets Fund will be issued at NAV in
exchange for the net assets attributable to the Corresponding Class of Emerging
Markets Fund, the aggregate value of shares of each Class of Developing Markets
Fund so issued will equal the aggregate value of shares of the Corresponding
Class of Emerging Markets Fund. The NAV per share of Developing Markets Fund
will be unchanged by the transactions. Thus, the Reorganization will not result
in a dilution of any shareholder interest.
Description of Securities to be Issued
The Trust is registered with the SEC as an open-end management
investment company. Pursuant to the Trust's Declaration of Trust, the Trust may
issue an unlimited number of shares. Each share of a Fund represents an equal
proportionate interest with other shares in that Fund, has a par value of $0.01
per share, has equal earnings, assets, and voting privileges, except as noted in
the prospectus for each Fund, 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 by the Board. The trustees have established
Developing Markets Fund as one of its series and have authorized the public
offering of three Classes of shares of that Fund, designated Class A, Class B,
and Advisor Class shares. Each share in a Class represents an equal
proportionate interest in Developing Markets Fund's assets with each other share
in that Class. Shares of Developing Markets Fund entitle their holders to one
vote per full share and fractional votes for fractional shares held, except that
each Class has exclusive voting rights on matters pertaining to its plan of
distribution. Shares of a Fund, when issued, are fully paid and nonassessable.
The Classes of Developing Markets Fund differ as follows: (1) each
Class has exclusive voting rights on matters pertaining to its plan of
distribution; (2) Class A shares are subject to an initial sales charge; (3)
Class B shares bear ongoing distribution fees, are subject to a CDSC upon
certain redemptions, and convert to Class A shares after a certain period; (4)
Advisor Class shares have no initial sales charge or CDSC, bear no service or
distribution fees, and may be purchased only by certain categories of
purchasers; and (5) each Class may bear differing amounts of certain
Class-specific expenses. Each share of each Class of Developing Markets Fund is
entitled to participate equally in dividends and other distributions and the
proceeds of any liquidation, except that because of the higher expenses
resulting from the distribution fees borne by the Class A and Class B shares,
dividends on those shares are expected to be lower than those for Advisor Class
shares of the Fund. Dividends on each Class also might be affected differently
by the allocation of other Class-specific expenses.
Purchases, Redemptions, and Exchanges of Shares
20
<PAGE> 31
Shares of each Fund are available through A I M Fund Services, Inc.
("Transfer Agent") or through any dealer authorized by A I M Distributors to
sell shares of the AIM Funds. The minimum initial investment in each Fund is
$500; each additional investment must be $50 or more. These minimums may be
waived or reduced for investments by employees of AIM or its affiliates, certain
pension plans and retirement accounts, and participants in a Fund's automatic
investment plan.
If the Reorganization is approved, purchases of all Classes of Emerging
Markets Fund's shares will cease on _______ __, 199_, so that its shares will no
longer be available for purchase or exchange starting on ______ __, 199_ (the
next business day). If the Meeting is adjourned and the Reorganization is
approved on a later date, Emerging Markets Fund's shares will no longer be
available for purchase or exchange on the business day to following the date on
which the Reorganization is approved and all contingencies have been met.
Redemptions of Emerging Markets Fund's shares and exchanges of those shares for
shares of other AIM Funds may be effected through the Closing Date.
The rights and privileges of the shareholders of each Class of Emerging
Markets Fund Shares will be effectively unchanged by the Reorganization.
Accordingly, the Reorganization will have no effect on the holding period of
Class B shares of Emerging Markets Fund for purposes of calculating any
applicable CDSC. Similarly, the Reorganization will have no effect on the
policies regarding the ability of investors to qualify for reduced or waived
sales charges, as currently in effect for Emerging Markets Fund.
Shares of each Fund may be exchanged for shares of the Corresponding
Class of other AIM Funds, and shares of each Fund may be acquired through an
exchange of shares of the Corresponding Class of other AIM Funds, as provided in
each Fund's prospectus. No initial sales charge will be imposed on the shares
being acquired, and no CDSC will be imposed on the shares being disposed of,
through an exchange. However, a CDSC may apply to redemptions of an AIM Fund's
Class B shares acquired through an exchange. Exchanges will be subject to
minimum investment and other requirements of the Fund into which exchanges are
made.
Dividends and Other Distributions
Dividends from each Fund's net investment income, if any, are
distributed annually. Any net capital gain (the excess of net long-term capital
gain over net short-term capital loss) and net short-term capital gain realized
from the sale of portfolio securities and net gains from foreign currency
transactions are also generally distributed annually. Shareholders of each Fund
may reinvest dividends and other distributions in additional Fund shares of the
distributing class (or in shares of the Corresponding Class of other AIM Funds)
on the payment date at those shares' NAV that day or receive the distribution
amount in cash. Each Fund may make additional distributions if necessary to
avoid a 4% excise tax on certain undistributed ordinary income and capital
gains.
On or before the Closing Date, Emerging Markets Fund will declare as a
distribution substantially all of its net investment income, net capital gain,
net short-term capital gain, and net
21
<PAGE> 32
gains from foreign currency transactions in order to maintain its tax status as
a regulated investment company. Developing Markets Fund also may declare and
distribute as a dividend to its shareholders, on or before the Closing Date,
substantially all of any previously undistributed net investment income. The
consummation of the Reorganization is subject to a number of conditions set
forth in the Plan, some of which may be waived by Emerging Markets Fund. In
addition, the Plan may be amended in any mutually agreeable manner, except that
no amendment may be made subsequent to the Meeting that would have a material
adverse effect on the shareholders' interests.
Accounting Treatment
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to Developing Markets Fund of the assets
transferred to it by Emerging Markets Fund will be the same as Emerging Markets
Fund's book cost basis of such assets.
Federal Tax Considerations
The exchange of Emerging Markets Fund's Assets for Developing Markets
Fund shares and Developing Markets Fund's assumption of the Liabilities of
Emerging Markets Fund is intended to qualify for federal income tax purposes as
a tax-free reorganization under section 368 of the Code. The Trust will receive
an opinion of Kirkpatrick & Lockhart LLP, its counsel substantially to the
effect that:
(i) Developing Markets Fund's acquisition of the Assets in exchange
solely for Developing Markets Fund shares and Developing Markets Fund's
assumption of the Liabilities, followed by Emerging Markets Fund's
distribution of those shares to its shareholders constructively in
exchange for their Emerging Markets Fund shares, will constitute a
"reorganization" within the meaning of section 368(a)(1) of the Code,
and each Fund will be "a party to a reorganization" within the meaning
of section 368(b) of the Code;
(ii) No gain or loss will be recognized to Emerging Markets Fund on the
transfer to Developing Markets Fund of the Assets in exchange solely
for Developing Markets Fund shares and Developing Markets Fund's
assumption of the Liabilities or on the subsequent distribution of
those shares to Emerging Markets Fund's shareholders in constructive
exchange for their Emerging Markets Fund shares;
(iii) No gain or loss will be recognized to Developing Markets Fund on
its receipt of the Assets in exchange solely for Developing Markets
Fund shares and its assumption of the Liabilities;
(iv) Developing Markets Fund's basis for the Assets will be the same as
the basis thereof in Emerging Markets Fund's hands immediately before
the Reorganization, and
22
<PAGE> 33
Developing Markets Fund's holding period for the Assets will include
Emerging Markets Fund's holding period therefor;
(v) An Emerging Markets Fund shareholder will recognize no gain or loss
on the constructive exchange of all its Emerging Markets Fund shares
solely for Developing Markets Fund shares pursuant to the
Reorganization; and
(vi) An Emerging Markets Fund shareholder's basis for the Developing
Markets Fund shares to be received by it in the Reorganization will be
the same as the basis for its Emerging Markets Fund shares to be
constructively surrendered in exchange for those Developing Market Fund
shares, and its holding period for those Developing Market Fund shares
will include its holding period for those Emerging Markets Fund shares,
provided they are held as capital assets by the shareholder on the
Closing Date.
The opinion may state that no opinion is expressed as to the effect of
the Reorganization on the Funds or any shareholder with respect to any asset as
to which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Utilization by Developing Markets Fund after the Reorganization of
pre-Reorganization capital losses realized by Emerging Markets Fund could be
subject to limitation in future years under the Code.
Shareholders of Emerging Markets Fund should consult their tax advisers
regarding the effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, those shareholders also should
consult their tax advisers as to state and local tax consequences, if any, of
the Reorganization.
ORGANIZATION OF THE FUNDS
The Trust is an open-end management investment company organized as a
Delaware business trust. Emerging Markets Fund commenced operations on May 18,
1992 as a series of G.T. Investment Funds, Inc. (the "Company"), the Trust's
predecessor entity. Developing Markets Fund commenced operations on November 1,
1997 as a series of the Company, as the successor (in a reorganization) to G.T.
Global Developing Markets, Inc., a closed-end investment company that commenced
operations on January 11, 1994. On September 4, 1998, the Trust acquired the
assets and assumed the liabilities of the Company. The operations of the Trust,
as a Delaware business trust, are governed by its Agreement and Declaration of
Trust, as amended (the "Declaration of Trust") and Delaware law.
23
<PAGE> 34
OWNERSHIP OF EMERGING MARKETS FUND AND DEVELOPING MARKETS FUND SHARES
Listed below is the name, address and percent ownership of each person
who as of _______ _ , 199_, to the knowledge of the Trust, owned beneficially
five percent or more of any class of the outstanding shares of Emerging Markets
Fund and Developing Markets Fund, respectively:
[Management does not know of any person who beneficially owns 5% or
more of Emerging Markets Fund Shares.]
EMERGING MARKETS FUND
<TABLE>
<S> <C> <C> <C>
NUMBER OF SHARES PERCENT BENEFICIAL
NAME AND ADDRESS CLASS OF SHARES OWNED OWNERSHIP
</TABLE>
DEVELOPING MARKETS FUND
<TABLE>
<S> <C> <C> <C>
NUMBER OF SHARES PERCENT BENEFICIAL
NAME AND ADDRESS CLASS OF SHARES OWNED OWNERSHIP
</TABLE>
To the best of the knowledge of the Trust, the beneficial ownership of
shares of Emerging Markets Fund by officers or trustees of the Trust as a group
constituted less than one percent of the outstanding shares of such fund as of
_______ _, 199_. To the best of the knowledge of the Trust, the beneficial
ownership of shares of Developing Markets Fund by officers or trustees of the
Trust as a group constituted less than one percent of the outstanding shares of
such fund as of ________ _, 199_.
CAPITALIZATION
The following table shows the capitalization of each Fund as of October
31, 1998 and on a pro forma combined basis (unaudited) as of that date, giving
effect to the Reorganization.
<TABLE>
<CAPTION>
DEVELOPING MARKETS FUND: EMERGING MARKETS FUND: PRO FORMA CLASS A
CLASS A CLASS A COMBINED
------- ------- --------
<S> <C> <C> <C>
Net Assets $87,517,225 $43,925,435 $131,442,660
Shares Outstanding 11,616,154 5,964, 824 17,446,312
</TABLE>
24
<PAGE> 35
<TABLE>
<S> <C> <C> <C>
Net Asset Value Per $7.53 $7.36 $7.53
Share
</TABLE>
<TABLE>
<CAPTION>
DEVELOPING MARKETS FUND: EMERGING MARKETS FUND: PRO FORMA CLASS B
CLASS B CLASS B COMBINED
------------------------ ---------------------- -----------------
<S> <C> <C> <C>
Net Assets $153,941 $49,439,410 $49,593,351
Shares Outstanding 20,565 6,894,258 6,620,273
Net Asset Value Per $7.49 $7.17 $7.49
Share
</TABLE>
<TABLE>
<CAPTION>
DEVELOPING MARKETS FUND: EMERGING MARKETS FUND: PRO FORMA ADVISOR CLASS
ADVISOR CLASS ADVISOR CLASS COMBINED
------------------------ ---------------------- -----------------------
<S> <C> <C> <C>
Net Assets $29,288 $37,736 $67,024
Shares Outstanding 3,877 5,067 8,877
Net Asset Value Per $7.55 $7.45 $7.55
Share
</TABLE>
LEGAL MATTERS
Certain legal matters concerning the Trust and its participation in the
Reorganization, the issuance of shares of Developing Markets Fund in connection
with the Reorganization, and the tax consequences of the Reorganization will be
passed upon by Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W.,
Washington, D.C. 20036-1800, counsel to the Trust.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statements of
Additional Information do not contain all the information set forth in the
registration statements and the exhibits relating thereto and annual reports
which the Trust has filed with the Securities and Exchange Commission ("SEC")
pursuant to the requirements of the 1933 Act and the 1940 Act, to which
reference is hereby made. The SEC file number for the Trust's registration
statement containing the Prospectus and Statement of Additional Information
relating to Emerging Markets Fund is Registration No. 33-19338. Such Prospectus
and Statement of Additional Information are incorporated herein by reference.
The SEC file number for the Trust's registration statement containing the
Prospectus and Statement of Additional Information relating to Developing
Markets Fund is Registration No. 33-19338. Such Prospectus and Statement of
Additional Information are incorporated herein by reference.
25
<PAGE> 36
The Trust is subject to the informational requirements of the 1940 Act
and in accordance therewith files reports and other information with the SEC.
Reports, proxy statements, registration statements and other information filed
by the Trust (including the Registration Statement of the Trust relating to the
Developing Markets Fund on Form N-14 of which this Proxy Statement/Prospectus is
a part and which is hereby incorporated by reference) may be inspected without
charge and copied at the public reference facilities maintained by the SEC at
Room 1014, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the following regional offices of the SEC: 7 World Trade Center, New York,
N.Y. 10048; and 500 West Madison Street, l4th Floor, Chicago, IL 6066l. Copies
of such material may also be obtained from the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at the prescribed rates.
The SEC maintains an internet web site at http://www.sec.gov that contains
information regarding the Trust and other registrants that file electronically
with the SEC.
ADDITIONAL INFORMATION ABOUT EMERGING MARKETS FUND AND DEVELOPING MARKETS FUND
For more information with respect to the Trust and Emerging Markets
Fund concerning the following topics, please refer to Emerging Markets Fund
Prospectus, dated September 8, 1998, as indicated: (i) see "Summary," "The
Fund," "Investment Program," "Management" and "General Information" for further
information regarding the Trust and Emerging Markets Fund; (ii) see discussion
in "Summary," "Investment Program," "Management" and "General Information" for
further information regarding management of Emerging Markets Fund; (iii) see
"Summary," "Management," "Organization of the Trust," "Dividends, Distributions
and Tax Matters" and "General Information" for further information regarding the
shares of Emerging Markets Fund; (iv) see "Management," "How to Purchase
Shares," "Terms and Conditions of Purchase of the AIM Funds," "Special Plans,"
"Exchange Privilege," "Determination of Net Asset Value" and "How to Redeem
Shares" for further information regarding the purchase, redemption and
repurchase of shares of Emerging Markets Fund.
For more information with respect to the Trust and Developing Markets
Fund concerning the following topics, please refer to Developing Markets Fund
Prospectus, dated September 8, 1998 and attached as Appendix II to this Proxy
Statement/Prospectus, as indicated: (i) see "Summary," "The Fund," "Investment
Program," "Management" and "General Information" for further information
regarding the Trust and Developing Market Fund; (ii) see discussion in
"Summary," "Investment Program," "Management" and "General Information" for
further information regarding management of Developing Markets Fund; (iii) see
"Summary," "Management," "Organization of the Trust," "Dividends, Distributions
and Tax Matters" and "General Information" for further information regarding the
shares of Developing Markets Fund; (iv) see "Management," "How to Purchase
Shares," "Terms and Conditions of Purchase of the AIM Funds," "Special Plans,"
"Exchange Privilege," "Determination of Net Asset Value" and
26
<PAGE> 37
"How to Redeem Shares" for further information regarding the purchase,
redemption and repurchase of shares of Developing Markets Fund.
EXPERTS
The audited financial statements of the Funds incorporated by
reference herein and in their respective Statements of Additional Information
have been audited by __________________________, independent accountants, whose
reports thereon are included in the Funds' respective Annual Reports to
Shareholders for the fiscal year ended October 31, 1998. The financial
statements audited by PricewaterhouseCoopers LLP have been incorporated herein
by reference in reliance on its reports given on its authority as experts in
auditing and accounting.
27
<PAGE> 38
APPENDIX I
PLAN OF REORGANIZATION
AND TERMINATION
between
AIM EMERGING MARKETS FUND
and
AIM DEVELOPING MARKETS FUND
each a portfolio of
AIM INVESTMENT FUNDS
November 30, 1998
<PAGE> 39
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1 Exchange of Assets for Shares and Assumption of Liabilities . . . . . . . . . . . . . . . . . . . 4
Section 2.2 Computation of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Redemption Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4 Delivery of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.6 Issuance of Acquiring Fund's Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.7 Identification of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.8 Discharge of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.9 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3 CONDITIONS PRECEDENT TO ACQUIRING FUND'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1 Acquired Fund's Shares; Liabilities; Business Operations . . . . . . . . . . . . . . . . . . . . . 6
Section 3.2 Court Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.3 Concentration of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.4 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.5 RIC Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.8 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.9 Shareholder Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.10 Closing Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.11 Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 4 CONDITIONS PRECEDENT TO ACQUIRED FUND'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.1 Registration of Acquiring Fund's Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.2 Court Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.3 RIC Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.4 Ownership of Acquired Fund's Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.5 Reacquisition of Acquiring Fund's Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.6 Disposition of the Acquired Fund's Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.7 Continuation of Acquired Fund's Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.8 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.9 Closing Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.10 Post-Reorganization Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.11 Concentration of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 5 CONDITIONS PRECEDENT TO BOTH FUNDS' OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.1 Shareholder Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.2 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.3 Intercompany Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.4 Value of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
i
<PAGE> 40
<TABLE>
<S> <C>
Section 5.5 Value of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 6 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.3 Obligations of AIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
ii
<PAGE> 41
PLAN OF REORGANIZATION AND TERMINATION
This PLAN OF REORGANIZATION AND TERMINATION, effective as of November
30, 1998 ("Plan"), is adopted by AIM Investment Funds, a Delaware business
trust ("AIF"), acting on behalf of AIM Emerging Markets Fund (the "Acquired
Fund") and AIM Developing Markets Fund (the "Acquiring Fund"), each a separate
segregated portfolio of assets ("series") of AIF. (The Acquiring Fund and the
Acquired Fund are sometimes referred to collectively as the "Funds" and
individually as a "Fund.")
WITNESSETH
WHEREAS, AIF is an investment company registered with the U.S.
Securities and Exchange Commission ("SEC") under the Investment Company Act (as
defined below) that offers separate series of its shares representing interests
in its investment portfolios, the Acquired Fund and the Acquiring Fund, for
sale to the public; and
WHEREAS, A I M Advisors, Inc. provides investment advisory services to
both Funds; and
WHEREAS, the Acquired Fund owns securities in which the Acquiring Fund
is permitted to invest; and
WHEREAS, the Acquired Fund desires to provide for its reorganization
through the transfer of all of its assets to the Acquiring Fund in exchange
solely for the assumption by the Acquiring Fund of all of the liabilities of
the Acquired Fund and the issuance by AIF of shares of the Acquiring Fund in
the manner set forth in this Plan; and
WHEREAS, this Plan is intended to be and is adopted by AIF as a "plan
of reorganization" within the meaning of Treas. Reg. Section 1.368-2(g),
promulgated under Section 368(a) of the Code.
NOW, THEREFORE, AIF hereby adopts this Plan.
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Plan
(including the foregoing recitals), the terms defined in the introductory
paragraph shall apply and the following terms shall have the respective
meanings set forth in this Section 1.1 (such definitions to be equally
applicable to both the singular and plural forms of the terms herein defined):
"Acquired Fund's Advisor Class Shares" means issued and outstanding
Advisor Class shares of beneficial interest in the Acquired Fund issued by AIF.
"Acquired Fund's Class A Shares" means issued and outstanding Class A
shares of beneficial interest in the Acquired Fund issued by AIF.
<PAGE> 42
"Acquired Fund's Class B Shares" means issued and outstanding Class B
shares of beneficial interest in the Acquired Fund issued by AIF.
"Acquired Fund's Net Value" means the total value of the Assets less
the amount of the Liabilities.
"Acquired Fund's Required Shareholder Vote" shall have the meaning set
forth in Section 3.11 of this Plan.
"Acquired Fund's Shareholders" means the holders of record as of the
Effective Time of all the Acquired Fund's Shares.
"Acquired Fund's Shareholders Meeting" means a meeting of the
shareholders of the Acquired Fund convened in accordance with applicable law
and the Agreement and Declaration of Trust of AIF to consider and vote upon the
approval of this Plan and the transactions contemplated by this Plan.
"Acquired Fund's Shares" means the Acquired Fund's Advisor Class
Shares, Class A Shares, and Class B Shares.
"Acquiring Fund's Advisor Class Shares" means Advisor Class shares of
beneficial interest in the Acquiring Fund issued by AIF.
"Acquiring Fund's Class A Shares" means Class A shares of beneficial
interest in the Acquiring Fund issued by AIF.
"Acquiring Fund's Class B Shares" means Class B shares of beneficial
interest in the Acquiring Fund issued by AIF.
"Acquiring Fund's Shares" means the Acquiring Fund's Advisor Class
Shares, Class A Shares, and Class B Shares issued pursuant to Sections 2.1 and
2.6 of this Plan.
"AIF Registration Statement" means the registration statement on Form
N-1A of AIF, as amended, Registration No. 33-19338.
"AIF N-14 Registration Statement" means the registration statement on
Form N-14 of AIF as in effect on the Closing Date.
"Assets" means, without limitation, all cash, cash equivalents,
securities, receivables (including interest and dividends receivable), claims
and rights of action, rights to register shares under applicable securities
laws, books and records, deferred and prepaid expenses shown as assets on the
Acquired Fund's books, and other property owned by the Acquired Fund at the
Valuation Time.
"Business Day" means a day on which the NYSE is open for trading [AND
THE CUSTODIAN IS OPEN FOR BUSINESS?]
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<PAGE> 43
"Closing" means the delivery of the Assets to the Acquiring Fund, the
assumption of all the Liabilities and the issuance of the Acquiring Fund's
Shares as described in Section 2.1 of this Plan.
"Closing Date" means February 12, 1999, or such other date as AIF may
determine.
"Code" means the Internal Revenue Code of 1986, as amended, and all
rules and regulations adopted pursuant thereto.
"Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of each Fund.
"Effective Time" means 8:00 a.m. Central time on the Closing Date.
"Fund" means the Acquired Fund or the Acquiring Fund.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted pursuant thereto.
"Liabilities" means (except as otherwise provided herein) all of the
Acquired Fund's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Valuation Time, and whether or not specifically referred to in this Plan.
Notwithstanding the foregoing, the Acquired Fund shall use its best efforts, to
the extent practicable, to discharge all of its known Liabilities prior to the
Valuation Time.
"Lien" means any pledge, lien, security interest, charge, claim, or
encumbrance of any kind.
"NYSE" means the New York Stock Exchange.
"Open-End Investment Company" means an open-end management investment
company operating under the Investment Company Act.
"Person" means an individual or a corporation, partnership, joint
venture, association, trust, unincorporated organization, or other entity.
"Reorganization" means the acquisition of the Assets by the Acquiring
Fund in exchange solely for the assumption by the Acquiring Fund of all of the
Liabilities and the issuance by AIF of the Acquiring Fund's Shares, which shall
be issued by AIF directly to the Acquired Fund's Shareholders (in liquidation
of the Acquired Fund) as described in this Plan, and the termination of the
Acquired Fund as a designated series of shares of AIF.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted pursuant thereto.
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<PAGE> 44
"Valuation Time" means the close of regular trading on the NYSE, or
such other time as AIF may determine, on the Business Day next preceding the
Closing Date.
ARTICLE 2
THE REORGANIZATION
Section 2.1 Exchange of Assets for Shares and Assumption of
Liabilities. At the Effective Time, the Acquired Fund shall assign, sell,
convey, transfer, and deliver all of its Assets to the Custodian for the
account of the Acquiring Fund. In exchange therefor, the Acquiring Fund shall
(a) issue and deliver to the Acquired Fund the number of
full and fractional (to the third decimal place) (i) Class A Acquiring
Fund's Shares determined by dividing the Acquired Fund's Net Value
attributable to the Class A Acquired Fund's Shares by the net asset
value per Class A Acquiring Fund's Share, (ii) Class B Acquiring
Fund's Shares determined by dividing the Acquired Fund's Net Value
attributable to the Class B Acquired Fund's Shares by the net asset
value per Class B Acquiring Fund's Share, and (iii) Advisor Class
Acquiring Fund's Shares determined by dividing the Acquired Fund's Net
Value attributable to the Advisor Class Acquired Fund's Shares by the
net asset value per Advisor Class Acquiring Fund's Share, and
(b) assume all of the Liabilities.
Such transactions shall all take place at the Closing.
Section 2.2 Computation of Net Asset Value. (a) The net asset
value per share of each class of the Acquiring Fund's Shares and the Acquired
Fund's Net Value shall, in each case, be determined as of the Valuation Time.
(b) The net asset value per share of each class of the Acquiring
Fund's Shares shall be computed in accordance with the policies and procedures
of the Acquiring Fund as described in the AIF Registration Statement.
(c) The Acquired Fund's Net Value shall be computed in accordance
with the policies and procedures of the Acquired Fund as described in the AIF
Registration Statement.
(d) All computations of value pursuant to this Section 2.2 shall
be made by or under the direction of A I M Advisors, Inc.
(e) If, immediately before the Valuation Time, (i) the NYSE is
closed to trading or trading thereon is restricted or (ii) trading or the
reporting of trading on the NYSE or elsewhere is disrupted, so that accurate
appraisal of the Acquired Fund's Net Value and the net asset value per share of
the Acquiring Fund's Shares is impracticable, the Effective Time shall be
postponed until the first Business Day after the day when such trading shall
have been fully resumed and such reporting shall have been restored.
Section 2.3 Redemption Requests. The share transfer books of the
Acquired Fund will be permanently closed as of the Effective Time, and only
requests for the redemption of the
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<PAGE> 45
Acquired Fund's Shares received in proper form prior to the Effective Time
shall be accepted by the Acquired Fund. Redemption requests thereafter
received by the Acquired Fund shall be deemed to be redemption requests for the
applicable class of the Acquiring Fund's Shares (assuming that the transactions
contemplated by this Plan have been consummated) to be distributed to the
Acquired Fund's Shareholders under this Plan.
Section 2.4 Delivery of Assets. (a) AIF shall instruct the
Custodian, no later than three Business Days preceding the Closing Date, to
deliver the Assets to the Acquiring Fund at the Effective Time, by transferring
ownership of the Assets from the Acquired Fund's account with the Custodian to
the Acquiring Fund's account therewith. The Custodian shall deliver at the
Closing a certificate of an authorized officer thereof stating that such
delivery of the Assets will be effectuated in accordance with such
instructions.
(b) If delivery cannot be made in the manner contemplated by
Section 2.4(a) of securities held by the Acquired Fund that were purchased
thereby but not yet delivered to it or its broker or brokers by the Effective
Time, then such undelivered securities shall be credited to the Acquiring
Fund's account with the Custodian on such delivery.
Section 2.5 Dissolution. As soon as reasonably practicable after
the Closing Date, but no later than six months thereafter, the Acquired Fund's
status as a designated series of shares of AIF shall be terminated.
Section 2.6 Issuance of Acquiring Fund's Shares. At the
Effective Time, each Acquired Fund's Shareholder (a) holding Acquired Fund's
Class A Shares shall be issued that number of full and fractional Acquiring
Fund's Class A Shares having an aggregate net asset value equal to the
aggregate net asset value of the Acquired Fund's Class A Shares held by such
Acquired Fund's Shareholder at the Effective Time, (b) holding Acquired Fund's
Class B Shares shall be issued that number of full and fractional Acquiring
Fund's Class B Shares having an aggregate net asset value equal to the
aggregate net asset value of the Acquired Fund's Class B Shares held by such
Acquired Fund's Shareholder at the Effective Time, and (c) holding Acquired
Fund's Advisor Class Shares shall be issued that number of full and fractional
Acquiring Fund's Advisor Class Shares having an aggregate net asset value equal
to the aggregate net asset value of the Acquired Fund's Advisor Class Shares
held by such Acquired Fund's Shareholder at the Effective Time. (In each case,
fractional shares shall be calculated to the third decimal place.) All
Acquired Fund's Shares shall thereupon be canceled on the books of AIF. AIF
shall provide instructions to the Funds' transfer agent with respect to the
Acquiring Fund's Shares to be issued to the Acquired Fund's Shareholders. AIF
shall record on its books the ownership of the Acquiring Fund's Class A Shares,
the Acquiring Fund's Class B Shares, and the Acquiring Fund's Advisor Class
Shares by Acquired Fund's Shareholders and shall forward a confirmation of such
ownership to the Acquired Fund's Shareholders. No redemption or repurchase of
such shares credited to former Acquired Fund's Shareholders in respect of the
Acquired Fund's Shares represented by unsurrendered share certificates shall be
permitted until such certificates have been surrendered to AIF for cancellation
or, if such certificates are lost or misplaced, until lost certificate
affidavits have been executed and delivered to AIF.
5
<PAGE> 46
Section 2.7 Identification of Assets. AIF's fund accounting and
pricing agent shall deliver at the Closing a certificate of an authorized
officer thereof verifying that the information (including adjusted basis and
holding period, by lot) concerning the Assets, including all portfolio
securities, as reflected on the Acquiring Fund's books immediately following
the Closing, does or will conform to such information on the Acquired Fund's
books immediately before the Closing.
Section 2.8 Discharge of Liabilities. The Acquired Fund shall
use its reasonable best efforts to discharge all of its known Liabilities, so
far as may be possible, prior to the Closing Date.
Section 2.9 Transfer Taxes. Any transfer taxes payable upon
issuance of the Acquiring Fund's Shares in a name other than that of the
registered holder on the Acquired Fund's books of the Acquired Fund's Shares
constructively exchanged therefor shall be paid by the person to whom such
Acquiring Fund's Shares are to be issued, as a condition of such transfer.
ARTICLE 3
CONDITIONS PRECEDENT TO ACQUIRING FUND'S OBLIGATIONS
The Acquiring Fund's obligations hereunder shall be subject to
satisfaction of the following conditions at or before the Effective Time.
Section 3.1 Acquired Fund's Shares; Liabilities; Business
Operations. (a) There is no plan or intention by Acquired Fund's Shareholders
who own 5% or more of the Acquired Fund's Shares, and to the knowledge of AIF's
management the remaining Acquired Fund's Shareholders have no present plan or
intention, of selling, exchanging, redeeming, or otherwise disposing of a
number of the Acquiring Fund's Shares to be received by them in connection with
the Reorganization that would reduce the Acquired Fund's Shareholders'
ownership of issued and outstanding shares of beneficial interest in the
Acquiring Fund to a number of shares having a value, as of the Closing Date, of
less than 50% of the value of all of the formerly outstanding Acquired Fund's
Shares as of the same date. For purposes of this representation, shares of
either Fund held by the Acquired Fund's Shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the Reorganization will be
considered in making this representation, except for shares that have been, or
will be, redeemed by either Fund in the ordinary course of its business as a
series of an Open-End Investment Company.
(b) At the time of the Reorganization, the Acquired Fund shall not
have outstanding any warrants, options, convertible securities, or any other
type of right pursuant to which any Person could acquire Acquired Fund's
Shares, except for the right of investors to acquire Acquired Fund's Shares at
net asset value in the ordinary course of its business as a series of an
Open-End Investment Company.
(c) From the date it commenced operations and ending on the
Closing Date, the Acquired Fund will have conducted its "historic business"
(within the meaning of Section 1.368-1(d)(2) of the Income Tax Regulations
under the Code) in a substantially unchanged manner. In anticipation of the
Reorganization, the Acquired Fund will not dispose of Assets that, in the
aggregate, will result in less than 50% of its "historic business assets"
(within the meaning of Section 1.368-1(d)(3) of those regulations) being
transferred to the Acquiring Fund.
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<PAGE> 47
Section 3.2 Court Jurisdiction. The Acquired Fund is not under
the jurisdiction of a court in a proceeding under Title 11 of the United States
Code or similar case within the meaning of Section 368(a)(3)(A) of the Code.
Section 3.3 Concentration of Assets. Not more than 25% of the
value of the total Assets (excluding cash, cash equivalents, and U.S.
government securities) is invested in the stock and securities of any one
issuer, and not more than 50% of the value of such Assets is invested in the
stock and securities of five or fewer issuers.
Section 3.4 Assets. The Acquired Fund has, and upon delivery of
the Assets the Acquiring Fund will receive, good and marketable title to all
Assets, free and clear of all Liens.
Section 3.5 RIC Status. The Acquired Fund is a "fund" as defined
in section 851(g)(2) of the Code; it qualified for treatment as a regulated
investment company under Subchapter M of the Code ("RIC") for each past taxable
year since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; and it has no
earnings and profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it. The Assets shall be invested at all times
through the Effective Time in a manner that ensures compliance with the
foregoing.
Section 3.6 Dividend and/or Other Distribution. At or
immediately before the Effective Time, the Acquired Fund will declare and pay
to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without
regard to any deduction for dividends paid) and substantially all of its
realized net capital gain, if any, for the current taxable year through the
Effective Time.
Section 3.7 Distribution. The Acquiring Fund's Shares are not
being acquired for the purpose of any distribution thereof, other than in
accordance with the terms of this Plan.
Section 3.8 Liabilities. The Liabilities were incurred by the
Acquired Fund in the ordinary course of business.
Section 3.9 Shareholder Expenses. The Acquired Fund's
Shareholders will pay their own expenses, if any, incurred in connection with
the Reorganization.
Section 3.10 Closing Certificate. An officer of AIF, in such
person's capacity as such officer and not as an individual, will prepare and
deliver at the Closing, on behalf of the Acquired Fund, a certificate, dated as
of the Closing Date, to the effect that the Acquired Fund has satisfied all
conditions specified in this Plan.
Section 3.11 Voting Requirements. The vote of a majority of the
Acquired Fund's Shares cast at a meeting at which a quorum is present (the
"Acquired Fund's Required Shareholder Vote") is the only vote of the holders of
any class or series of shares of beneficial interest in the Acquired Fund
necessary to approve this Plan and the transactions contemplated by this Plan.
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<PAGE> 48
ARTICLE 4
CONDITIONS PRECEDENT TO ACQUIRED FUND'S OBLIGATIONS
The Acquired Fund's obligations hereunder shall be subject to
satisfaction of the following conditions at or before the Effective Time.
Section 4.1 Registration of Acquiring Fund's Shares. (a) The
Acquiring Fund's Shares to be issued pursuant to Sections 2.1 and 2.6 shall, on
the Closing Date, be duly registered under the Securities Act by the AIF N-14
Registration Statement.
(b) The Acquiring Fund's Shares to be issued pursuant to Sections
2.1 and 2.6 of this Plan are duly authorized and on the Closing Date will be
validly issued and fully paid and non-assessable and will conform to the
description thereof contained in the AIF N-14 Registration Statement. At the
time of the Reorganization, the Acquiring Fund shall not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any Person could acquire shares of beneficial interest in the
Acquiring Fund, except for the right of investors to acquire such shares at net
asset value in the normal course of its business as a series of an Open-End
Investment Company.
Section 4.2 Court Jurisdiction. The Acquiring Fund is not under
the jurisdiction of a court in a proceeding under Title 11 of the United States
Code or similar case within the meaning of Section 368(a)(3)(A) of the Code.
Section 4.3 RIC Status. The Acquiring Fund is a "fund" as
defined in section 851(g)(2) of the Code; it qualified for treatment as a RIC
for each past taxable year since it commenced operations and will continue to
meet all the requirements for such qualification for its current taxable year;
and it has no earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M did not apply to it.
Section 4.4 Ownership of Acquired Fund's Shares. The Acquiring
Fund does not directly or indirectly own, nor will it have owned at any time
during the five-year period ending on the Closing Date, directly or indirectly,
any shares of the Acquired Fund.
Section 4.5 Reacquisition of Acquiring Fund's Shares. The
Acquiring Fund has no plan or intention (a) to issue additional shares of
beneficial interest therein following the Reorganization, except for shares
issued in the ordinary course of its business as a series of an Open-End
Investment Company, or (b) to reacquire any of the Acquiring Fund's Shares
issued in the Reorganization, except to the extent that the Acquiring Fund is
required by the Investment Company Act to redeem any of its shares presented
for redemption at net asset value in the ordinary course of that business.
Section 4.6 Disposition of the Acquired Fund's Assets. The
Acquiring Fund has no plan or intention to sell or otherwise dispose of any of
the Assets, other than in the ordinary course of its business and to the extent
necessary to maintain its status as a RIC.
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<PAGE> 49
Section 4.7 Continuation of Acquired Fund's Business. Following
the Reorganization, the Acquiring Fund will continue the "historic business"
(within the meaning of Section 1.368-1(d)(2) of the Income Tax Regulations
under the Code) of the Acquired Fund or use a significant portion of the
Acquired Fund's historic business assets (within the meaning of Section
1.368-1(d)(3) of those regulations) in a business.
Section 4.8 Consideration. No consideration other than the
Acquiring Fund's Shares (and the Acquiring Fund's assumption of the
Liabilities) will be issued in exchange for the Assets in connection with the
Reorganization.
Section 4.9 Closing Certificate. An officer of AIF, in such
person's capacity as such officer and not as an individual, will prepare and
deliver at the Closing, on behalf of the Acquiring Fund, a certificate, dated
as of the Closing Date, to the effect that the Acquiring Fund has satisfied all
conditions specified in this Plan.
Section 4.10 Post-Reorganization Transactions. There is no plan
or intention for the Acquiring Fund to be dissolved or merged into another
business trust or a corporation or any "fund" thereof (within the meaning of
section 851(g)(2) of the Code) following the Reorganization.
Section 4.11 Concentration of Assets. Immediately after the
Reorganization, (a) not more than 25% of the value of the Acquiring Fund's
total assets (excluding cash, cash items, and U.S. government securities) will
be invested in the stock and securities of any one issuer and (b) not more than
50% of the value of such assets will be invested in the stock and securities of
five or fewer issuers.
ARTICLE 5
CONDITIONS PRECEDENT TO BOTH FUNDS' OBLIGATIONS
Each Fund's obligations hereunder shall be subject to
satisfaction of the following conditions at or before the Effective Time.
Section 5.1 Shareholder Vote. This Plan, the Reorganization, and
related matters shall have been approved and adopted at the Acquired Fund's
Shareholders Meeting by the shareholders of the Acquired Fund on the record
date therefor by the Acquired Fund's Required Shareholder Vote.
Section 5.2 Transfer of Assets. Pursuant to the Reorganization,
the Acquired Fund will transfer to the Acquiring Fund, and the Acquiring Fund
will acquire, at least 90% of the fair market value of the net assets, and at
least 70% of the fair market value of the gross assets, held by the Acquired
Fund immediately before the Reorganization. For the purposes of this
calculation, any amounts used by the Acquired Fund to pay its Reorganization
expenses and redemptions and distributions made by it immediately before the
Reorganization (except for (a) distributions made to conform to its policy of
distributing all or substantially all of its income and gains to avoid the
obligation to pay federal income tax and/or the excise tax under section 4982
of the Code and (b) redemptions not made as part of the Reorganization) will be
included as assets thereof held immediately before the Reorganization.
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<PAGE> 50
Section 5.3 Intercompany Indebtedness. There is no intercompany
indebtedness between the Funds that was issued or acquired, or will be settled,
at a discount.
Section 5.4 Value of Shares. The aggregate fair market value of
the Acquiring Fund's Class A Shares to be received by the Acquired Fund's
Shareholders will be approximately equal to the aggregate fair market value of
the Acquired Fund's Class A Shares constructively surrendered in exchange
therefor; the aggregate fair market value of the Acquiring Fund's Class B
Shares to be received by the Acquired Fund's Shareholders will be approximately
equal to the aggregate fair market value of the Acquired Fund's Class B Shares
constructively surrendered in exchange therefor; and the aggregate fair market
value of the Acquiring Fund's Advisor Class Shares to be received by the
Acquired Fund's Shareholders will be approximately equal to the aggregate fair
market value of the Acquired Fund's Advisor Class Shares constructively
surrendered in exchange therefor.
Section 5.5 Value of Assets. The fair market value on a going
concern basis of the Assets will equal or exceed the sum of the Liabilities to
be assumed by the Acquiring Fund plus the Liabilities to which the Assets are
subject.
Section 5.6 Tax Opinion AIF shall have received an opinion of
Kirkpatrick & Lockhart LLP ("Counsel"), addressed to and in form and substance
satisfactory to AIF, as to the federal income tax consequences mentioned below
("Tax Opinion"). In rendering the Tax Opinion, Counsel may assume satisfaction
of all the conditions set forth in Articles 3 through 5 (other than in this
Section 5.6), and treat them as representations by AIF to Counsel, and may
rely, as to any factual matters, exclusively and without independent
verification, on such representations and any other representations made to
Counsel by responsible officers of AIF. The Tax Opinion shall be substantially
to the effect that, based on the facts and assumptions stated therein, for
federal income tax purposes:
(a) The Acquiring Fund's acquisition of the Assets in
exchange solely for the Acquiring Fund's Shares and the Acquiring
Fund's assumption of the Liabilities, followed by the Acquired Fund's
distribution of those shares to the Acquired Fund's Shareholders
constructively in exchange for their Acquired Fund's Shares, will
constitute a reorganization within the meaning of section 368(a)(1)(C)
or (D), as applicable, of the Code, and each Fund will be "a party to
a reorganization" within the meaning of section 368(b) of the Code;
(b) No gain or loss will be recognized to the Acquired
Fund on the transfer to the Acquiring Fund of the Assets in exchange
solely for the Acquiring Fund's Shares and the Acquiring Fund's
assumption of the Liabilities or on the subsequent distribution of
those shares to the Acquired Fund's Shareholders in constructive
exchange for their Acquired Fund's Shares;
(c) No gain or loss will be recognized to the Acquiring
Fund on its receipt of the Assets in exchange solely for the Acquiring
Fund's Shares and its assumption of the Liabilities;
(d) The Acquiring Fund's basis for the Assets will be the
same as the basis thereof in the Acquired Fund's hands immediately
before the Reorganization, and the Acquiring Fund's holding period for
the Assets will include the Acquired Fund's holding period therefor;
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<PAGE> 51
(e) An Acquired Fund's Shareholder will recognize no gain
or loss on the constructive exchange of all its Acquired Fund's Shares
solely for Acquiring Fund's Shares pursuant to the Reorganization; and
(f) An Acquired Fund's Shareholder's basis for the
Acquiring Fund's Shares to be received by it in the Reorganization
will be the same as the basis for its Acquired Fund's Shares to be
constructively surrendered in exchange for those Acquiring Fund's
Shares, and its holding period for those Acquiring Fund's Shares will
include its holding period for those Acquired Fund's Shares, provided
they are held as capital assets by the Acquired Fund's Shareholder at
the Effective Time.
Notwithstanding subparagraphs (b) and (d), the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Acquired Fund's Shareholder with respect to any asset as to which any
unrealized gain or loss is required to be recognized for federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting.
Section 5.7 Expenses. Each Fund shall bear the expenses it
incurs in connection with this Plan and the Reorganization and other
transactions contemplated hereby.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Termination. AIF's trustees may terminate this Plan
and abandon the Reorganization at any time prior to the Closing Date if
circumstances develop that, in their judgment, make proceeding with the
Reorganization inadvisable for either Fund.
Section 6.2 Governing Law. This Plan shall be construed and
interpreted according to the laws of the State of Delaware applicable to
contracts made and to be performed wholly within such state; provided that, in
the case of any conflict between such laws and the federal securities laws, the
latter shall govern.
Section 6.3 Obligations of AIF. No officer, trustee, or
shareholder of AIF shall be personally liable for the liabilities or
obligations of AIF incurred hereunder.
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APPENDIX II
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
CLASS A AND CLASS B SHARES OF
AIM DEVELOPING MARKETS FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM DEVELOPING MARKETS FUND (the
"Fund"), which is one of several series investment portfolios comprising AIM
Investment Funds (the "Trust"), an open-end, series, management investment
company. The Fund is a non-diversified portfolio which primarily seeks long-
term capital appreciation. Its secondary investment objective is income, to the
extent consistent with seeking capital appreciation. The Fund normally invests
substantially all of its assets in issuers in the developing (or "emerging")
markets of Asia, Europe, Latin America and elsewhere. A majority of the Fund's
assets ordinarily is invested in emerging market equity securities. The Fund
also invests in emerging market debt securities, which are selected based on
their potential to provide a combination of capital appreciation and current
income.
The Fund is designed for long-term investors and not as a trading vehicle. The
Fund does not represent a complete investment program, nor is it suitable for
all investors. The Fund may invest significantly in equity and high yield, high
risk ("lower quality") debt securities that are predominantly speculative.
Investments of this type are subject to a greater risk of loss of principal and
interest. The Fund's investments in securities of issuers in developing markets
involves special considerations and risks that are not typically associated with
investments in securities of issuers in the United States or in other more
established markets. Investors should carefully assess the risks associated with
an investment in the Fund.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information dated
September 8, 1998 has been filed with the Securities and Exchange Commission
(the "SEC") and is incorporated herein by reference. The Statement of Additional
Information is available without charge upon written request to the Trust at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173 or by calling
1-800-347-4246. The SEC maintains a Web site at http://www.sec.gov that contains
the Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund. Additional information about the Fund may
also be obtained from http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 53
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................ 2
THE FUND............................... 4
Table of Fees and Expenses........... 4
Financial Highlights................. 5
Performance.......................... 6
Investment Program................... 6
Risk Factors......................... 10
Management........................... 14
Organization of the Trust............ 16
INVESTOR'S GUIDE TO THE AIM FAMILY OF
FUNDS--Registered Trademark--........ A-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction to The AIM Family of
Funds............................. A-1
How to Purchase Shares............... A-1
Terms and Conditions of Purchase of
the AIM Funds..................... A-2
Special Plans........................ A-9
Exchange Privilege................... A-12
How to Redeem Shares................. A-14
Determination of Net Asset Value..... A-19
Dividends, Distributions and Tax
Matters........................... A-19
General Information.................. A-23
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND
The Fund is a non-diversified series of the Trust.
INVESTMENT OBJECTIVES. The Fund's primary investment objective is long-term
capital appreciation; its secondary objective is income, to the extent
consistent with seeking capital appreciation.
PRINCIPAL INVESTMENTS. The Fund normally invests a majority of its assets in
emerging market equity securities and also may invest in emerging market debt
securities.
INVESTMENT MANAGERS. The Fund is managed by A I M Advisors, Inc. ("AIM") and
is sub-advised and sub-administered by INVESCO (NY), Inc. (the "Sub-advisor").
AIM and the Sub-advisor and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-advisor are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
AIM was organized in 1976 and, together with its subsidiaries, currently advises
approximately 90 investment company portfolios.
PURCHASING SHARES. Investors may select Class A or Class B shares of the Fund
which are offered by this Prospectus at an offering price that reflects
differing sales charges and expense levels. See "Terms and Conditions of
Purchase of the AIM Funds Sales Charges and Dealer Concessions." Pursuant to a
separate prospectus, the Fund also offers Advisor Class shares, which represent
interests in the Fund. The Advisor Class has different distribution
arrangements.
CLASS A SHARES -- Shares are offered at net asset value plus any applicable
initial sales charge.
CLASS B SHARES -- Shares are offered at net asset value without an initial
sales charge, and are subject to a maximum contingent deferred sales charge of
5% on certain redemptions made within six years from the date such shares were
purchased. Class B shares automatically convert to Class A shares of the Fund
eight years following the end of the calendar month in which a purchase was
made. Class B shares are subject to higher expenses than Class A shares.
Initial investments in any class of shares must be at least $500 and
additional investments must be at least $50. The minimum initial investment is
modified for investments through tax-qualified retirement plans and accounts
initially established with an Automatic Investment Plan. The distributor of the
Fund's shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares" and "Special Plans."
SUITABILITY FOR INVESTORS. An investor in Class A or Class B shares of the
Fund should consider the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the shares are expected to
be held, and other circumstances. Investors should consider whether, during the
anticipated life of their investment in the Fund, the accumulated distribution
fees and any applicable contingent deferred sales charges on Class B shares
prior to conversion would be less than the initial sales charge and accumulated
distribution fees on Class A shares purchased at the same time, and to what
extent such differential would be offset by the higher return on Class A shares.
To assist investors in making this determination, the table under the caption
"Table of Fees and Expenses" sets forth examples of the charges applicable to
each class of shares. Class A shares will normally be more beneficial than Class
B shares to the investor who qualifies for reduced initial sales charges, as
described below. Therefore, AIM Distributors will reject any order for purchase
of more than $250,000 for Class B shares.
2
<PAGE> 54
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds"). Class
A and Class B shares of the Fund may be exchanged for shares of other funds in
The AIM Family of Funds in the manner and subject to the policies and charges
set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Class A shareholders of the Fund may redeem all or a portion
of their shares at net asset value on any business day, generally without
charge. A contingent deferred sales charge of 1% may apply to certain
redemptions where a purchase of more than $1 million is made at net asset value.
See "How to Redeem Shares -- Contingent Deferred Sales Charge Program for Large
Purchases."
Class B shareholders of the Fund may redeem all or a portion of their shares
at net asset value on any business day, less a contingent deferred sales charge
for redemptions made within six years from the date such shares were purchased.
Class B shares redeemed after six years from the date such shares were purchased
will not be subject to any contingent deferred sales charge. See "How to Redeem
Shares -- Multiple Distribution System."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be reinvested at net asset value without
payment of a sales charge in the Fund's shares or may be invested in shares of
the other funds in The AIM Family of Funds. See "Dividends, Distributions and
Tax Matters" and "Special Plans."
RISK FACTORS. There is no assurance that the Fund will achieve its investment
objectives. The Fund's net asset value per share will fluctuate, reflecting
fluctuations in the market value of its portfolio holdings.
The Fund invests in foreign securities. Investments in foreign securities
involve risks relating to political and economic developments abroad and the
differences between the regulations to which U.S. and foreign issuers are
subject. Individual foreign economies also may differ favorably or unfavorably
from the U.S. economy. Changes in foreign currency exchange rates will affect
the Fund's net asset value, earnings, and gains and losses realized on sales of
securities. Securities of foreign companies may be less liquid and their prices
more volatile than those of securities of comparable U.S. companies. The Fund
normally invests substantially all of its assets in issuers in emerging markets.
Such investments entail greater risks than investing in issuers in developed
markets. The Fund may engage in certain foreign currency, options and futures
transactions to attempt to hedge against the overall level of investment and
currency risk associated with its present or planned investments. Such
transactions involve certain risks and transaction costs. The value of debt
securities held by the Fund generally fluctuates inversely with interest rate
movements. Certain investment grade debt securities may possess speculative
qualities. The Fund may invest in below investment grade debt securities.
Investments of this type are subject to a greater risk of loss of principal and
interest. See "Investment Program" and "Risk Factors."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
3
<PAGE> 55
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Class A and Class B shares of the Fund are reflected in the following table(1):
<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
<S> <C> <C>
Shareholder Transaction Costs(2):
Maximum sales charge on purchases of shares (as a % of
offering price)........................................ 4.75% None
Sales charges on reinvested distributions to
shareholders........................................... None None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)........ None 5.00%
Redemption Charges........................................ None None
Exchange Fees............................................. None None
Annual Fund Operating Expenses(3): (as a % of average net
assets)
Investment management and administration fees............. 0.98% 0.98%
12b-1 distribution and service fees....................... 0.50% 1.00%
Other expenses (after estimated reimbursements and
waivers)............................................... 0.52% 0.52%
---- ----
Total Fund Operating Expenses..................... 2.00% 2.50%
==== ====
</TABLE>
(1) This table is intended to assist investors in understanding the various
costs and expenses associated with investing in the Fund. Long-term
shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by National Association of Securities
Dealers, Inc. rules regarding investment companies.
(2) Sales charge waivers are available for Class A and Class B shares, and
reduced sales charge purchase plans are available for Class A shares. The
maximum 5% contingent deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter, reaching zero after six years. See
"Terms and Conditions of Purchase of the AIM Funds -- Reductions in Initial
Sales Charges."
(3) Expenses are estimated based on the fees and expenses the Fund is expected
to incur during its initial fiscal year as an open-end fund and AIM's
undertaking to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate
of 2.00% and 2.50% of the average daily net assets of the Fund's Class A
shares and Class B shares, respectively. AIM has voluntarily agreed to
continue this limitation through May 31, 2000. Without reimbursements and
waivers, "Other expenses" and "Total Fund Operating Expenses" are estimated
to be 0.65% and 2.13%, respectively, for Class A shares and 0.65% and
2.63%, respectively, for Class B shares. "Other expenses" include custody,
transfer agent, legal and audit fees and other operating expenses. See
"Management" herein and in the Statement of Additional Information for more
information.
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES. An investor would have directly or
indirectly paid the following expenses at the end of the periods shown on a
$1,000 investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS(3)
------ ------- ------- -----------
<S> <C> <C> <C> <C>
Class A Shares(1).................................. $67 $108 $151 $270
Class B Shares:
Assuming a complete redemption at end of
period(2).......................................... $77 $111 $157 $274
Assuming no redemption........................... $26 $ 79 $135 $274
</TABLE>
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes deduction of the applicable contingent deferred sales charge.
(3) For Class B shares, this number reflects the conversion to Class A shares
eight years following the end of the calendar month in which a purchase was
made.
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT EXPENSES, MAY
BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN THE EXAMPLE OF
A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC APPLICABLE TO ALL
MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND DOES NOT REPRESENT
THE FUND'S PROJECTED OR ACTUAL PERFORMANCE.
4
<PAGE> 56
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The table below provides condensed financial information concerning income and
capital changes for Class A and Class B shares of the Fund for the periods
shown. This information is supplemented by the financial statements and
accompanying notes appearing in the Statement of Additional Information. The
financial statements and notes, for the fiscal year ended October 31, 1997 and
the semi-annual period ended April 30, 1998 have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report thereon is
also included in the Statement of Additional Information. The Predecessor Fund
was a closed-end investment company whose single class of shares traded on the
New York Stock Exchange ("NYSE"). On October 31, 1997, the Fund, which had no
previous operating history, acquired the assets and assumed the liabilities of
G.T. Global Developing Markets Fund, Inc. (the "Predecessor Fund"). On that
date, all shareholders of the Predecessor Fund received Class A shares of the
Fund. The fees and expenses of the Fund will differ from those of the
Predecessor Fund. The Fund's fiscal year end will be October 31, rather than
December 31, which was the Predecessor Fund's fiscal year end.
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
(SUCCESSOR TO G.T. GLOBAL DEVELOPING MARKETS FUND, INC.)
<TABLE>
<CAPTION>
CLASS A+ CLASS B++
---------------------------------------------------------------------- ----------
JANUARY 11, 1994
SIX MONTHS TEN MONTHS YEAR ENDED (COMMENCEMENT SIX MONTHS
ENDED ENDED DECEMBER 31, OF OPERATIONS) TO ENDED
APRIL 30, OCTOBER 31, ------------------- DECEMBER 31, APRIL 30,
1998(d) 1997(e) 1996(e) 1995(e) 1994(e) 1998(d)
---------- ----------- -------- -------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period......... $ 12.56 $ 13.84 $ 11.60 $ 12.44 $ 15.00 $ 12.56
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income....................... 0.23*O 0.25 0.53 0.72 0.35 0.21*O
Net realized and unrealized gain (loss) on
investments............................... -- (1.53) 2.19 (0.84) (2.46) (0.01)
-------- -------- -------- -------- -------- --------
Net increase (decrease) from investment
operations.............................. 0.23 (1.28) 2.72 (0.12) (2.11) 0.20
-------- -------- -------- -------- -------- --------
Redemption fees retained (Note 4)............ 0.23 -- -- -- -- 0.23
-------- -------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income.................. (0.60) -- (0.48) (0.72) (0.35) (0.60)
From net realized gain on investments....... -- -- -- -- (0.10) --
-------- -------- -------- -------- -------- --------
Total distributions....................... (0.60) -- (0.48) (0.72) (0.45) (0.60)
-------- -------- -------- -------- -------- --------
Net asset value, end of period............... $ 12.42 $ 12.56 $ 13.84 $ 11.60 $ 12.44 $ 12.39
======== ======== ======== ======== ======== ========
Market value, end of period.................. $ N/A $ 11.81 $ 11.63 $ 9.75 9.75
======== ======== ======== ======== ======== ========
Total investment return (based on market
value).................................. N/A 1.62%(b) 24.18% 6.60% (32.16)%(b)
Total investment return (based on net
asset value)............................ 3.68%(b)(c) (9.25)%(b) 23.59% (0.95)% (14.07)%(b) 3.36%(b)(c)
Ratios and supplemental data:
Net assets, end of period (in 000's)......... $208,169 $457,379 $504,012 $422,348 $452,872 $ 207
Ratio of net investment income to average net
assets:
With expense reductions and reimbursement... 3.06%(a) 2.03%(a) 4.07% 6.33% 2.75%(a) 2.32%(a)
Without expense reductions and
reimbursement............................. 2.56%(a) 1.95%(a) 4.04% 6.30% 2.75%(a) 1.82%(a)
Ratio of operating expenses to average net
assets:
With expense reductions and
reimbursements............................ 1.72%(a) 1.71%(a) 1.82% 1.77% 2.01%(a) 2.46%(a)
Without expense reductions and
reimbursement............................. 2.22%(a) 1.83%(a) 1.85% 1.80% 2.01%(a) 2.96%(a)
Ratio of interest expense to average net
assets+++................................... 0.22%(a) N/A N/A N/A N/A 0.22%(a)
Portfolio turnover rate+++................... 99%(a) 184%(a) 138% 75% 56%(a) 99%(a)
Average commission rate per share paid on
portfolio transactions+++................... $ 0.0017 $ 0.0023 $0.0022 N/A N/A $ 0.0017
</TABLE>
- ---------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon the average shares
outstanding during the period.
(e) These financial highlights provide per share information of G.T. Global
Developing Markets Fund, Inc. the Predecessor Fund (See Note 1 to Notes to
Financial Statements) for the periods up to and including October 31, 1997.
The fees and expenses of the Fund differ from those of the Predecessor Fund.
* Before reimbursement the net investment income per share would have been
reduced by $0.03 for Class A, and Class B shares.
O Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements. Without such a payment
net investment would have been $0.09 and $0.07 per share for Class A and B,
respectively.
+ All capital shares issued and outstanding October 31, 1997 were reclassified
as Class A shares.
++ Commencing November 1, 1997, the Fund began offering Class B and Advisor
Class shares.
+++ Portfolio turnover rate, average commission rate and ratio of interest
expense to average net assets are calculated on the basis of the Fund as
whole without distinguishing between the classes of shares issued.
N/A Not Applicable.
---------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY NUMBER AVERAGE AMOUNT
AMOUNT OF DEBT AVERAGE AMOUNT OF REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT OF DEBT OUTSTANDING OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ---------- -------------- ------------------- ---------------------- --------------
<S> <C> <C> <C> <C>
Six Months ended April 30, 1998.................. $-- $3,299,756 21,283,681 $ 0.155
October 31, 1997................................. $-- $ 379,964 36,416,667 $0.0104
</TABLE>
Average amount of debt outstanding during the period is computed on a daily
basis.
5
<PAGE> 57
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. Standardized total return
for Class A shares reflects the deduction of the Fund's maximum front-end sales
charge at the time of purchase. Standardized total return for Class B shares
reflects the deduction of the maximum applicable contingent deferred sales
charge on a redemption of shares held for the period.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Fund. Such practices will
have the effect of increasing the Fund's total return. The performance of the
Fund will vary from time to time and past results are not necessarily
representative of future results. The Fund's performance is a function of its
portfolio management in selecting the type and quality of portfolio securities
and is affected by operating expenses of the Fund as well as by general market
conditions.
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
INVESTMENT OBJECTIVES. The Fund's primary investment objective is long-term
capital appreciation; its secondary objective is income, to the extent
consistent with seeking capital appreciation. The Fund normally invests
substantially all of its assets in issuers in the developing (or "emerging")
markets of Asia, Europe, Latin America and elsewhere. A majority of the Fund's
assets normally are invested in emerging market equity securities. The Fund may
invest in the following types of equity securities: common stock, preferred
stock, securities convertible into common stock, American Depositary Receipts,
Global Depositary Receipts, rights and warrants to acquire such securities and
substantially similar forms of equity with comparable risk characteristics. The
Fund may also invest in emerging market debt securities that will be selected
based on their potential to provide a combination of capital appreciation and
current income. There can be no assurance the Fund will achieve its investment
objectives.
INVESTMENT POLICIES. For purposes of the Fund's operations, emerging markets
consist of all countries determined by the Sub-advisor to have developing or
emerging economies and markets. These countries generally include every country
in the world except the United States, Canada, Japan, Australia, New Zealand and
most countries located in Western Europe. See "Investment Objectives and
Policies" in the Statement of Additional Information for a complete list of all
the countries that the Fund does not currently consider to be emerging markets.
For purposes of the Fund's policy of normally investing substantially all of
its assets in issuers in emerging markets, the Fund will consider investment in
the following emerging markets:
Algeria
Argentina
Bolivia
Botswana
Brazil
Bulgaria
Chile
China
Colombia
Costa Rica
Cyprus
Czech Republic
Dominican Republic
Ecuador
Egypt
El Salvador
Finland
Ghana
Greece
Hong Kong
Hungary
India
Indonesia
Israel
Ivory Coast
Jamaica
Jordan
Kazakhstan
Kenya
Lebanon
Malaysia
Mauritius
Mexico
Morocco
Nicaragua
Nigeria
Oman
Pakistan
Panama
Paraguay
Peru
Philippines
6
<PAGE> 58
Poland
Portugal
Republic of Slovakia
Russia
Singapore
Slovenia
South Africa
South Korea
Sri Lanka
Swaziland
Taiwan
Thailand
Turkey
Ukraine
Uruguay
Venezuela
Zambia
Zimbabwe
Although the Fund considers each of the above-listed countries eligible for
investment, it will not be invested in all such markets at all times. Moreover,
investing in some of those markets currently may not be desirable or feasible,
due to the lack of adequate custody arrangements for the Fund's assets, overly
burdensome repatriation and similar restrictions, the lack of organized and
liquid securities markets, unacceptable political risks or for other reasons.
As used in this Prospectus, an issuer in an emerging market is an entity (1)
for which the principal securities trading market is an emerging market, as
defined above, (2) that (alone or on a consolidated basis) derives 50% or more
of its total revenues from business in emerging markets, provided that, in the
Sub-advisor's view, the value of such issuer's securities will tend to reflect
emerging market developments to a greater extent than developments elsewhere, or
(3) organized under the laws of, or with a principal office in, an emerging
market.
In selecting investments, the Sub-advisor seeks to identify those countries
and industries where economic and political factors, including currency
movements, are likely to produce above-average growth rates over the long term.
The Sub-advisor seeks those emerging markets that have strongly developing
economies and in which the markets are becoming more sophisticated. The Sub-
advisor then invests in those companies in such countries and industries that it
believes are best positioned and managed to take advantage of these economic and
political factors. The Sub-advisor believes that the issuers of securities in
emerging markets often have sales and earnings growth rates that exceed those in
developed countries and that such growth rates may in turn be reflected in more
rapid share price appreciation.
As opportunities to invest in securities in other emerging markets develop,
the Fund expects to expand and further broaden the group of emerging markets in
which it invests. In some cases, investments in debt securities could provide
the Fund with access to emerging markets in the early stages of their economic
development, when equity securities are not yet generally available or, in the
Sub-advisor's view, do not yet present an acceptable investment alternative.
While the Fund generally is not restricted in the portion of its assets that may
be invested in a single region, under normal conditions its assets will be
invested in issuers in at least four countries, and it will not invest more than
25% of its assets in issuers in one country. The Fund's holdings of any one
foreign currency together with securities denominated in or indexed to such
currency will not exceed 40% of its assets.
CERTAIN INVESTMENT STRATEGIES AND POLICIES. In pursuit of its objectives and
policies, the Fund may employ one or more of the following strategies in order
to enhance investment results:
INVESTMENTS IN DEBT SECURITIES. The Fund may invest up to 50% of its total
assets in the following types of emerging market debt securities: (1) debt
securities issued or guaranteed by governments, their agencies,
instrumentalities or political subdivisions, or by government owned, controlled
or sponsored entities, including central banks (collectively, "Sovereign Debt"),
including Brady Bonds; (2) interests in issuers organized and operated for the
purpose of restructuring the investment characteristics of Sovereign Debt; (3)
debt securities issued by banks and other business entities; and (4) debt
securities denominated in or indexed to the currencies of emerging markets. Debt
securities held by the Fund may take the form of bonds, notes, bills,
debentures, bank debt obligations, short-term paper, loan participations,
assignments and interests issued by entities organized and operated for the
purpose of restructuring the investment characteristics of any of the foregoing.
There is no requirement with respect to the maturity or duration of debt
securities in which the Fund may invest.
There is no limitation on the percentage of the Fund's assets that may be
invested in debt securities that are rated below investment grade. Investment in
below investment grade debt securities involves a high degree of risk and can be
speculative. These debt securities are the equivalent of high yield, high risk
bonds, commonly known as "junk bonds." Debt securities in which the Fund will
invest may not be rated; if rated, it is expected that such ratings will be
below investment grade. See "Risk Factors -- Risks Associated with Debt
Securities" and "-- Risks Associated with Below Investment Grade Debt
Securities."
The Fund may invest in "Brady Bonds," which are debt restructurings that
provide for the exchange of cash and loans for newly issued bonds. Brady Bonds
have been issued by the countries of Albania, Argentina, Brazil, Bulgaria, Costa
Rica, Dominican Republic, Ecuador, Ivory Coast, Jordan, Mexico, Nigeria, Panama,
Peru, Philippines, Poland, Uruguay, Venezuela and Vietnam, and are expected to
be issued by other emerging market countries. As of the date of this Prospectus,
the Fund is not aware of the occurrence of any payment defaults on Brady Bonds.
Investors should recognize, however, that Brady Bonds do not have a long payment
history. In addition, Brady Bonds are often rated below investment grade.
The Fund may invest in either collateralized or uncollateralized Brady Bonds.
U.S. dollar-denominated collateralized Brady Bonds, which may be fixed rate par
bonds or floating rate discount bonds, are collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payments on such bonds generally are collateralized by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of floating rate
7
<PAGE> 59
bonds, initially is equal to at least one year's rolling interest payments based
on the applicable interest rate at the time of issuance and is adjusted at
regular intervals thereafter.
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, relative interest rate levels and/or
the creditworthiness of issuers.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Sub-advisor may employ a temporary defensive investment strategy
for the Fund if it determines such a strategy to be warranted due to market,
economic or political conditions. Under a defensive strategy, the Fund may hold
cash (U.S. dollars, foreign currencies or multinational currency units such as
Euros) and/or invest any portion or all of its assets in high quality money
market instruments of U.S. or foreign issuers. In addition, for temporary
defensive purposes, most or all of the Fund's investments may be made in the
United States and denominated in U.S. dollars. To the extent the Fund adopts a
temporary defensive posture, it will not be invested so as to directly achieve
its investment objectives. In addition, pending investment of proceeds from new
sales of Fund shares or in order to meet ordinary daily cash needs, the Fund may
hold cash (U.S. dollars, foreign currencies or multinational currency units) and
may invest in foreign or domestic high quality money market instruments. For a
description of money market instruments, see "Temporary Defensive Strategies" in
the "Investment Objectives and Policies" section of the Statement of Additional
Information.
BORROWING AND REVERSE REPURCHASE AGREEMENTS. In connection with meeting
requests for the redemption of Fund shares, the Fund may borrow from banks or
may borrow through reverse repurchase agreements. The Fund also may borrow up to
5% of its total assets for temporary or emergency purposes other than to meet
redemptions, but total borrowings may not exceed 33 1/3% of its total assets.
However, the Fund will not purchase securities while borrowings in excess of 5%
of its total assets are outstanding. Any borrowing by the Fund may cause greater
fluctuation in the value of its shares than would be the case if it did not
borrow.
A reverse repurchase agreement is a borrowing transaction in which the Fund
transfers possession of a security to another party, such as a bank or
broker/dealer, in return for cash and agrees to repurchase the security in the
future at an agreed-upon price that includes an interest component.
SECURITIES LENDING. The Fund may lend its portfolio securities to
broker/dealers or to other institutional investors. Securities lending allows
the Fund to retain ownership of the securities loaned and, at the same time,
enhances the Fund's total return. The Fund limits its loans of portfolio
securities to an aggregate of 30% of the value of its total assets, measured at
the time any such loan is made. While a loan is outstanding, the borrower must
maintain with the Fund's custodian collateral consisting of cash, U.S.
government securities or certain irrevocable letters of credit equal to at least
100% of the value of the borrowed securities plus any accrued interest or such
other collateral as permitted by the Fund's investment program and regulatory
agencies, and as approved by the Board. 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 if the borrower fails financially.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. To attempt to increase
return, the Fund may write call options on securities. This strategy will be
employed only when, in the opinion of the Sub-advisor, the size of the premium
the Fund receives for writing the option is adequate to compensate it against
the risk that appreciation in the underlying security may not be fully realized
if the option is exercised. The Fund also is authorized to write put options to
attempt to enhance return, although it does not currently intend to do so.
The Fund may also use forward currency contracts, futures contracts, options
on securities, options on currencies, options on indices and options on futures
contracts to attempt to hedge against the overall level of investment and
currency risk normally associated with its 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). The
Fund may enter into such instruments up to the full value of its portfolio
assets. See "Options, Futures and Currency Strategies" in the Statement of
Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Fund 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. The Fund may enter into forward currency
contracts either with respect to specific transactions or with respect to its
portfolio positions. The Fund also may purchase and sell put and call options on
currencies, futures contracts on currencies and options on such futures
contracts to hedge its portfolio against movements in exchange rates.
Only a limited market, if any, currently exists for options and futures
transactions relating to currencies of most emerging markets, to securities
denominated in such currencies or to securities of issuers domiciled or
principally engaged in business in such emerging markets. To the extent that
such a market does not exist, the Sub-advisor may not be able to effectively
hedge its investment in such markets.
In addition, the Fund 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 Fund or that the Sub-advisor intends to include in the
Fund's portfolio. The Fund also may purchase and sell put and call options on
stock indices to hedge against overall fluctuations in the securities markets or
in a specific market sector.
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Further, the Fund may sell index futures contracts and may purchase put
options or write call options on such futures contracts to protect against a
general market or a specific market sector decline that could adversely affect
the Fund's portfolio. The Fund also may purchase index futures contracts and
purchase call options or write put options on such contracts to hedge against a
general market or market sector advance and thereby attempt to lessen the cost
of future securities acquisitions. Similarly, the Fund 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.
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Fund may be able to
invest in certain countries solely or primarily through governmentally
authorized investment vehicles or companies, some of which may be investment
vehicles or companies that are advised by the Sub-advisor or its affiliates
("Affiliated Funds"). Pursuant to the Investment Company Act of 1940, as amended
(the "1940 Act"), the Fund generally may invest up to 10% of its total assets in
the aggregate in shares of other investment companies and up to 5% of its total
assets in any one investment company, as long as each investment does not
represent more than 3% of the outstanding voting stock of the acquired
investment company at the time of investment.
Investment in other investment companies may involve the payment of
substantial premiums above the value of their portfolio securities and multiple
layering of fees and expenses and is subject to limitations under the 1940 Act
and market availability. The Fund does not intend to invest in other investment
companies unless, in the judgment of the Sub-advisor, the potential benefits of
such investment justify the payment of any applicable premium or sales charge.
As a shareholder in another investment company, the Fund would bear its ratable
share of that company's expenses, including its advisory and administration
fees. At the same time the Fund would continue to pay its own management fees
and other expenses. AIM and the Sub-advisor will waive their advisory fees to
the extent that the Fund invests in an Affiliated Fund.
PRIVATIZATIONS. The governments in some emerging markets have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-advisor believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Fund in privatizations in appropriate
circumstances. In certain emerging markets, the ability of foreign entities such
as the Fund to participate in privatizations may be limited by local law or the
terms on which the Fund may be permitted to participate may be less advantageous
than those afforded local investors. There can be no assurance that governments
in emerging markets will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Fund 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 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 the Fund will purchase
or sell when-issued securities and 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 Fund. If the Fund
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 the Fund enters into a transaction on a
when-issued or forward commitment basis, the Fund will segregate cash or liquid
securities equal to the value of the when-issued or forward commitment
securities with its custodian bank and will mark to market daily such assets.
There is a risk that the securities may not be delivered and that the Fund may
incur a loss.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund may invest in fixed and floating
rate loans ("Loans") arranged through private negotiations between a foreign
entity and one or more financial institutions ("Lenders"). The majority of the
Fund's investments in Loans in emerging markets is expected to be in the form of
participations in Loans ("Participations") and assignments of portions of Loans
from third parties ("Assignments"). Participations typically will result in the
Fund having a contractual relationship only with the Lender, not with the
borrower. The Fund will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In connection with purchasing Participations, the Fund generally will
have no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the loan, nor any rights of set-off against the borrower,
and the Fund may not directly benefit from any collateral supporting the Loan in
which it has purchased the Participation. As a result, the Fund will assume the
credit risk of both the borrower and the Lender that is selling the
Participation.
In the event of the insolvency of the Lender selling a Participation, the Fund
may be treated as a general creditor of the Lender and may not benefit from any
set-off between the Lender and the borrower. The Fund will acquire
Participations only if the Lender interpositioned between the Fund and the
borrower is determined by the Sub-advisor to be creditworthy. When the Fund
purchases Assignments from Lenders, the Fund will acquire direct rights against
the borrower on the Loan. However, because Assignments are arranged through
private negotiations between potential assignees and assignors, the rights and
obligations acquired by the Fund as the purchaser of an Assignment may differ
from, and be more limited than, those held by the assigning Lender.
ZERO COUPON SECURITIES. The Fund may invest in certain zero coupon securities
that are "stripped" U.S. Treasury notes and bonds. The Fund also may invest in
zero coupon and other deep discount securities issued by foreign governments and
domestic and foreign corporations, including certain Brady Bonds and other
foreign debt, and in payment-in-kind securities. Zero coupon securities pay no
interest to holders prior to maturity, and payment-in-kind securities pay
"interest" in the form of additional securities. How-
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ever, a portion of the original issue discount on zero coupon securities and the
interest on payment-in-kind securities will be included in the Fund's income.
Accordingly, for the Fund to continue to qualify for tax treatment as a
regulated investment company and to avoid a certain excise tax (see "Taxes" in
the Statement of Additional Information), it may be required to distribute an
amount that is greater than the total amount of cash it actually receives. These
distributions may be made from the Fund's cash assets or, if necessary, from the
proceeds of sales of portfolio securities. The Fund will not be able to purchase
additional income-producing securities with cash used to make such
distributions, and its current income ultimately may be reduced as a result.
Zero coupon and payment-in-kind securities usually trade at a deep discount from
their face or par value and will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.
INDEXED COMMERCIAL PAPER. The Fund may invest without limitation in commercial
paper that is indexed to certain specific foreign currency exchange rates. The
terms of such commercial paper provide that its principal amount is adjusted
upwards or downwards (but not below zero) at maturity to reflect changes in the
exchange rate between two currencies while the obligation is outstanding. The
Fund will purchase such commercial paper with the currency in which it is
denominated and, at maturity, will receive interest and principal payments
thereon in that currency, but the amount of principal payable by the issuer at
maturity will change in proportion to the change (if any) in the exchange rate
between the two specified currencies between the date the instrument is issued
and the date the instrument matures. While such commercial paper entails the
risk of loss of principal, the potential for realizing gains as a result of
changes in foreign currency exchange rates enables the Fund to hedge against a
decline in the U.S. dollar value of investments denominated in foreign
currencies while seeking to provide an attractive money market rate of return.
The Fund will not purchase such commercial paper for speculation.
OTHER INDEXED SECURITIES. The Fund may invest in certain other indexed
securities, which are securities whose prices are indexed to the prices of other
securities, securities indices, currencies, precious metals or other commodities
or other financial indicators. Indexed securities typically, but not always, are
debt securities or deposits whose value at maturity or coupon rate is determined
by reference to a specific instrument or statistic. The performance of indexed
securities depends to a great extent on the performance of the security,
currency or other instrument to which they are indexed and also may be
influenced by interest rate changes in the United States and abroad. At the same
time, indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more volatile
than the underlying instruments. New forms of indexed securities continue to be
developed. The Fund may invest in such securities to the extent consistent with
its investment objectives.
OTHER INFORMATION. The Fund's investment objectives may not be changed without
the approval of a majority of its outstanding voting securities. A "majority of
its outstanding voting securities" means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares. In addition, the
Fund has adopted certain investment limitations that also may not be changed
without shareholder approval. A complete description of these limitations is
included in the Statement of Additional Information. Unless specifically noted,
the Fund's investment policies described in this Prospectus and in the Statement
of Additional Information may be changed by the Trust's Board of Trustees
without shareholder approval. The Fund's policies regarding lending, and the
percentage of Fund assets that may be committed to borrowing, are fundamental
policies and may not 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 the Fund's investment policies or restrictions.
The Fund is authorized to engage in Short Sales, although it currently has no
intention of doing so, and may purchase American Depositary Receipts, American
Depositary Shares, Global Depositary Receipts and European Depositary Receipts.
See "Short Sales" and "Depositary Receipts," respectively, in the "Investment
Objectives and Policies" section of the Statement of Additional Information.
- --------------------------------------------------------------------------------
RISK FACTORS
GENERAL. There is no assurance that the Fund will achieve its investment
objectives. Investing in the Fund entails a substantial degree of risk, and an
investment in the Fund should be considered speculative. Investors are strongly
advised to consider carefully the special risks involved in investing in
emerging markets, which are in addition to the usual risks of investing in
developed markets around the world.
The Fund's net asset value will fluctuate, reflecting fluctuations in the
market value of its portfolio positions and its net currency exposure. 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 an issuer, if any, remaining after all more senior claims have
been satisfied. The value of equity securities held by the Fund will fluctuate
in response to general market and economic developments, as well as developments
affecting the particular issuers of such securities.
In addition, the value of debt securities held by the Fund generally will
fluctuate with the perceived creditworthiness of the issuers of such securities
and interest rates.
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NON-DIVERSIFIED CLASSIFICATION. The Fund is classified under the 1940 Act as a
"non-diversified" fund. As a result, the Fund will be able to invest in a
smaller number of issuers than if it was classified under the 1940 Act as a
"diversified" fund. To the extent that the Fund invests in a smaller number of
issuers, the net asset value of its shares may fluctuate more widely and it may
be subject to greater investment and credit risk with respect to its portfolio.
FOREIGN INVESTING. Investing in foreign securities entails certain risks. The
securities of non-U.S. issuers generally will not be registered with, nor the
issuers thereof be subject to, the reporting requirements of, the SEC.
Accordingly, there may be less publicly available information about foreign
securities and issuers than is available about domestic securities and issuers.
Foreign companies generally are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies. In addition, certain costs attributable to
foreign investing, such as custody charges, are higher than those attributable
to domestic investing. Securities of some foreign companies are less liquid and
their prices may be more volatile than securities of comparable domestic
companies. The Fund's net investment income from foreign issuers may be subject
to non-U.S. withholding taxes, thereby reducing that income.
Investing in some foreign countries involves risks relating to potential
political and economic instability within such countries and the risks of
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investment and on repatriation of capital
invested. In the event of such expropriation, nationalization or other
confiscation, the Fund could lose its entire investment in that market.
Moreover, 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, currency depreciation,
resource self-sufficiency and balance of payments positions. Investments in
foreign government securities involve special risks, including the risk that the
government issuers may be unable or unwilling to repay principal or interest
when due.
INVESTING IN EMERGING MARKETS. Emerging markets generally are dependent
heavily upon international trade and, accordingly, have been and may continue to
be affected adversely by trade barriers, exchange controls, managed adjustments
in relative currency values and other protectionist measures imposed or
negotiated by the countries with which they trade. Inflation and rapid
fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain countries with
emerging markets.
Disclosure and regulatory standards in many respects are less stringent than
in the United States and other major markets. There also may be a lower level of
monitoring and regulation of emerging markets and the activities of investors in
such markets, and enforcement of existing regulations has been extremely
limited.
In addition, brokerage commissions, custodial services and other costs
relating to investment in foreign markets generally are more expensive than in
the United States, particularly with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
The inability of the Fund to make intended securities purchases due to
settlement problems could cause it to miss attractive investment opportunities.
Inability to dispose of a portfolio security caused by settlement problems could
result either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
developed countries. The risk also exists that an emergency situation may arise
in one or more emerging markets as a result of which trading of securities may
cease or may be substantially curtailed and prices for the Fund's portfolio
securities in such markets may not be readily available. Section 22(e) of the
1940 Act permits a registered investment company, such as the Fund, to suspend
redemption of its shares for any period during which an emergency exists, as
determined by the SEC. Accordingly, when the Fund believes that circumstances
dictate, it will promptly apply to the SEC for a determination that such an
emergency exists. During the period commencing with the Fund's identification of
such conditions until the date of any SEC action, the Fund's portfolio
securities in the affected markets will be valued at fair value determined in
good faith by or under the direction of the Trust's Board of Trustees.
RISKS ASSOCIATED WITH DEBT SECURITIES. The value of the debt securities held
by the Fund generally will vary inversely with market interest rates. If
interest rates in a market fall, the Fund's debt securities issued by
governments or companies in that market ordinarily will increase in value. If
market interest rates increase, however, the debt securities owned by the Fund
in that market will likely decrease in value.
RISKS ASSOCIATED WITH BELOW INVESTMENT GRADE DEBT SECURITIES. The Fund may
invest up to 50% of its total assets in debt securities rated below investment
grade. Such investments involve a high degree of risk.
Debt rated Baa by Moody's Investors Service, Inc. ("Moody's") is considered by
Moody's to have speculative characteristics. Debt rated BB, B, CCC, CC or C by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), and
debt rated Ba, B, Caa, Ca or C by Moody's is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. 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 are also generally considered to be subject
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to greater risk than securities with higher ratings with regard to a
deterioration of general economic conditions. These foreign debt securities are
the equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting it, such as its inability to meet specific
projected business forecasts or the unavailability of additional financing.
Similarly, certain emerging market governments that issue lower quality debt
securities are among the largest debtors to commercial banks, foreign
governments and supranational organizations such as the World Bank and may not
be able or willing to make principal and/or interest repayments as they come
due. 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 frequently have call or buy-back features that
would permit an issuer to call or repurchase the security from the Fund. In
addition, the Fund 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 the Fund 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 Fund to obtain accurate market quotations for purposes of
valuing its portfolio. The Fund may also acquire lower quality debt securities
during an initial underwriting or that 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 Fund may invest
include (1) potential adverse publicity, (2) heightened sensitivity to general
economic or political conditions and (3) the likely adverse impact of a major
economic recession.
The Fund 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 its
portfolio holdings, and the Fund may have limited legal recourse in the event of
a default. Debt securities issued by governments in emerging markets can differ
from debt obligations issued by private entities in that remedies from defaults
generally must be pursued in the courts of the defaulting government, and legal
recourse is therefore somewhat diminished. Political conditions, in terms of a
government's willingness to meet the terms of its debt obligations, also are of
considerable significance. There can be no assurance that the holders of
commercial bank debt may not contest payments to the holders of debt securities
issued by governments in emerging markets in the event of default by the
governments under commercial bank loan agreements.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
securities for which no readily available market exists, so-called "illiquid
securities." Illiquid securities may be more difficult to value than liquid
securities, and the sale of illiquid securities generally will require more time
and result in higher brokerage charges or dealer discounts and other selling
expenses than the sale of liquid securities. Moreover, illiquid securities often
sell at a price lower than similar securities that are liquid.
CURRENCY RISK. Because the Fund may invest substantially in securities
denominated in currencies other than the U.S. dollar, and since the Fund may
hold foreign currencies, it will be affected favorably or unfavorably by
exchange control regulations or changes in the exchange rates between such
currencies and the U.S. dollar. Changes in currency exchange rates will affect
the net asset value of the Fund's shares and also may affect the value of
dividends and interest earned by the Fund and gains and losses realized by it.
Currencies generally are evaluated on the basis of fundamental economic criteria
(e.g., relative inflation and interest rate levels and trends, growth rate
forecasts, balance of payments status and economic policies) as well as
technical and political data. Exchange rates are determined by the forces of
supply and demand in the foreign exchange markets. These forces are affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. If the
currency in which a security is denominated appreciates against the U.S. dollar,
the dollar value of the security will increase. Conversely, a decline in the
exchange rate of the currency would adversely affect the value of the security
expressed in dollars.
Many of the currencies of emerging market countries have experienced steady
devaluations relative to the U.S. dollar, and major devaluations have
historically occurred in certain countries. Any devaluations in the currencies
in which the Fund's portfolio securities are denominated may have a detrimental
impact on the Fund.
Some countries also may have fixed currencies whose values against the U.S.
dollar are not independently determined. In addition, there is a risk that
certain countries may restrict the free conversion of their currencies into
other currencies. Further, certain currencies may not be internationally traded.
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Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, and Spain are members of the European Economic and
Monetary Union (the "EMU"). The EMU intends to establish a common European
currency for participating countries which will be known as the "euro." It is
anticipated that each participating country will supplement its existing
currency with the euro on January 1, 1999, and will replace its existing
currency with the euro on July 1, 2002. Any other European country that is a
member of the European Union and satisfies the criteria for participation in the
EMU may elect to participate in the EMU and may supplement its existing currency
with the euro after January 1, 1999.
The expected introduction of the euro presents unique risks and uncertainties,
including whether the payment and operational systems of banks and other
financial institutions will be ready by January 1, 1999; how outstanding
financial contracts will be treated after January 1, 1999; the establishment of
exchange rates for existing currencies and the euro; and the creation of
suitable clearing and settlement systems for the euro. These and other factors
could cause market disruptions before or after the introduction of the euro and
could adversely affect the value of securities held by the Fund.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. The Fund is authorized to
enter into options, futures and forward currency transactions. These
transactions involve certain risks, which include: (1) dependence on the
Sub-advisor's ability to predict movements in the prices of individual
securities, fluctuations in the general securities markets and movements in
interest rates and currency markets; (2) imperfect correlation, or even no
correlation, between movements in the price of forward contracts, options,
futures contracts or options thereon and movements in the price of the currency
or security hedged or used for cover; (3) the fact that skills and techniques
needed to trade options, futures contracts and options thereon or to use forward
currency contracts are different from those needed to select the securities in
which the Fund invests; (4) lack of assurance that a liquid secondary market
will exist for any particular option, futures contract or option thereon at any
particular time; (5) the possible loss of principal under certain conditions;
and (6) the possible inability of the Fund to purchase or sell a portfolio
security at a time when it would otherwise be favorable for it to do so, or the
possible need for the Fund to sell a security at a disadvantageous time, due to
the need for the Fund to maintain "cover" or to set aside securities in
connection with hedging transactions.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund may have difficulty disposing of
Assignments and Participations. The liquidity of such securities is limited, and
the Fund anticipates that such securities could be sold only to a limited number
of institutional investors. The lack of a liquid secondary market could have an
adverse impact on the value of such securities and on the Fund's ability to
dispose of particular Assignments or Participations when necessary to meet its
liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for the Fund to assign a value to those securities for purposes of
valuing its portfolio and calculating its net asset value.
SOVEREIGN DEBT. The Fund may invest in sovereign debt securities of emerging
market governments, including Brady Bonds. Investments in such securities
involve special risks. The issuer of the debt or the governmental authorities
that control the repayment of the debt may be unable or unwilling to repay
principal or interest when due in accordance with the terms of such debt.
Periods of economic uncertainty may result in the volatility of market prices of
sovereign debt obligations and in turn the Fund's net asset value, to a greater
extent than the volatility inherent in domestic fixed income securities.
A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor's policy
toward principal international lenders and the political constraints to which a
sovereign debtor may be subject. Emerging market governments could default on
their sovereign debt. Such sovereign debtors also may be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
abroad to reduce principal and interest arrearages on their debt. The commitment
on the part of these governments, agencies and others to make such disbursements
may be conditioned on a sovereign debtor's implementation of economic reforms
and/or economic performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due may result in the cancellation of such
third parties' commitments to lend funds to the sovereign debtor, which may
further impair such debtor's ability or willingness to timely service its debts.
The occurrence of political, social or diplomatic changes in one or more of
the countries issuing sovereign debt could adversely affect the Fund's
investments. Emerging markets are faced with social and political issues, and
some of them have experienced high rates of inflation in recent years and have
extensive internal debt. Among other effects, high inflation and internal debt
service requirements may adversely affect the cost and availability of future
domestic sovereign borrowing to finance governmental programs and may have other
adverse social, political and economic consequences. Political changes or a
deterioration of a country's domestic economy or balance of trade may affect its
willingness to service its sovereign debt. Although the Sub-advisor intends to
manage the Fund in a manner that will minimize the exposure to such risks, there
can be no assurance that adverse political changes will not cause the Fund to
suffer a loss of interest or principal on any of its holdings.
In recent years, some of the emerging market countries in which the Fund
expects to invest have encountered difficulties in servicing their sovereign
debt obligations. Some of these countries have withheld payments of interest
and/or principal of sovereign debt. These difficulties have also led to
agreements to restructure external debt obligations -- in particular, commercial
bank loans -- typically by rescheduling principal payments, reducing interest
rates and extending new credits to finance interest payments on existing
13
<PAGE> 65
debt. In the future, holders of emerging market sovereign debt securities may be
requested to participate in similar rescheduling of such debt. Certain emerging
market countries are among the largest debtors to commercial banks and foreign
governments. Currently, Brazil, Mexico and Argentina are the largest debtors
among developing countries. At times certain emerging market countries have
declared moratoria on the payment of principal and interest on external debt;
such a moratorium is currently in effect in certain emerging market countries.
There is no bankruptcy proceeding by which a creditor may collect in whole or in
part sovereign debt on which an emerging market government has defaulted.
The ability of emerging market governments to make timely payments on their
sovereign debt securities is likely to be influenced strongly by a country's
balance of trade and its access to trade and other international credits. A
country whose exports are concentrated in a few commodities could be vulnerable
to a decline in the international prices of one or more of such commodities.
Increased protectionism on the part of a country's trading partners could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any. To the extent that a country receives payment for its
exports in currencies other than hard currencies, its ability to make hard
currency payments could be affected.
As noted above, sovereign debt obligations issued by emerging market
governments generally are deemed to be the equivalent in terms of quality to
securities rated below investment grade by Moody's and S&P. Such securities are
regarded as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligations
and involve major risk exposure to adverse conditions. Some of such securities,
with respect to which the issuer currently may not be paying interest or may be
in payment default, may be comparable to securities rated D by S&P or C by
Moody's. The Fund may have difficulty disposing of and valuing certain sovereign
debt obligations because there may be a limited trading market for such
securities. Because there is no liquid secondary market for many of these
securities, the Fund anticipates that such securities could be sold only to a
limited number of dealers or institutional investors.
- --------------------------------------------------------------------------------
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Fund. The Trust's Board of Trustees has approved all significant agreements
between the Trust on the one side and persons or companies furnishing services
to the Fund on the other, including the investment management and administration
agreement with AIM, the investment sub-advisory and sub-administration agreement
between AIM and the Sub-advisor, the agreements with AIM Distributors regarding
distribution of the Fund's shares, the custody agreement and the transfer agency
agreement. The day-to-day operations of the Fund are delegated to the officers
of the Trust, subject always to the investment objectives and policies of the
Fund and to the general supervision of the Trust's Board of Trustees. See "Board
of Trustees and Executive Officers" in the Statement of Additional Information
for information on the Trust's Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-advisor as the Fund's investment managers and administrators include
determining the composition of the Fund's portfolio and placing orders to buy,
sell or hold particular securities; furnishing corporate officers and clerical
staff; providing office space, services and equipment; and supervising all
matters relating to the Fund's operation. For these services, the Fund pays AIM
investment management and administration fees, computed daily and paid monthly,
based on its average daily net assets, at the annualized rate of 0.975% on the
first $500 million, 0.95% on the next $500 million, 0.925% on the next $500
million and 0.90% on amounts thereafter. Out of the aggregate fees payable by
the Fund, AIM pays the Sub-advisor sub-advisory and sub-administration fees
equal to 40% of the aggregate fees AIM receives from the Fund. The investment
management and administration fees paid by the Fund are higher than those paid
by most mutual funds. The Fund pays all expenses not assumed by AIM, the
Sub-advisor, AIM Distributors or other agents. AIM has undertaken to limit the
Fund's expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the annual rate of 2.00% and 2.50% of the average
daily net assets of the Fund's Class A and Class B shares, respectively.
AIM also serves as the Fund's pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, G.T. Global
Variable Investment Series and G.T. Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment manager to the Fund pursuant to a master investment management and
administrative services agreement (the "Advisory Agreement"). AIM was organized
in 1976 and, together with its subsidiaries, manages or advises approximately 90
investment company portfolios encompassing a broad range of investment
objectives. The Sub-advisor, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-advisor to the Fund pursuant to an investment sub-advisory and
sub-administration agreement. Prior to May 29, 1998, the Sub-advisor was known
as Chancellor LGT Asset Management, Inc. On May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of the Sub-advisor,
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included the Sub-advisor and
certain other affiliates. As a result of this transaction, the Sub-advisor is
now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to the sale, the
Sub-advisor and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
14
<PAGE> 66
AIM and the Sub-advisor and their worldwide asset management affiliates
provide investment management and/or administrative services to institutional,
corporate and individual clients around the world. AIM and the Sub-advisor are
both indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and
New York offices, AIM and the Sub-advisor draw upon the expertise, personnel,
data and systems of other offices in Atlanta, Boston, Dallas, Denver,
Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong, London, Singapore,
Sydney, Tokyo and Toronto. In managing the Fund, the Sub-advisor employs a team
approach, taking advantage of its investment resources around the world.
The investment professionals primarily responsible for the portfolio
management of the Fund are as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
----------- -------------------- -------------------
<S> <C> <C>
Francesco Bertoni Portfolio Manager Portfolio Manager for the Sub-advisor since June
London since 1998 1998. Investment Director of INVESCO Asset
Management Ltd. (London) ("INVESCO London"), an
affiliate of the Sub-advisor, since 1994.
Portfolio Manager for INVESCO London from 1990 to
1994.
Cheng-Hock Lau Portfolio Manager Chief Investment Officer for Global Fixed Income
New York since 1997 and Portfolio Manager for the Sub-advisor since
October 1996. Senior Portfolio Manager for
Global/International Fixed Income for the
Sub-advisor from July 1995 to October 1996.
Employed by Chancellor Capital Management, Inc., a
predecessor of the Sub-advisor, from 1995 to
October 1996. Senior Vice President and Senior
Portfolio Manager for Fiduciary Trust Company
International from 1993 to 1995. Vice President at
Bankers Trust Company from 1991 to 1993.
</TABLE>
In placing securities orders for the Fund's portfolio transactions, the
Sub-advisor seeks to obtain the best net results. Consistent with its obligation
to obtain the best net results, the Sub-advisor may consider a broker/dealer's
sale of shares of the AIM Funds as a factor in considering through whom
portfolio transactions will be effected. Brokerage transactions may be executed
through affiliates of AIM or the Sub-advisor. High portfolio turnover (over
100%) involves correspondingly greater brokerage commissions and other
transaction costs that the Fund will bear directly and could result in the
realization of net capital gains which would be taxable when distributed to
shareholders. See "Dividends, Distributions and Tax Matters."
DISTRIBUTOR. The Trust has entered into a Master Distribution Agreement on
behalf of Class A shares of the Fund, and has entered into a Master Distribution
Agreement, on behalf of Class B shares of the Fund (individually referred to as
a "Distribution Agreement" or collectively as the "Distribution Agreements.")
with AIM Distributors, a registered broker-dealer and a wholly owned subsidiary
of AIM, to act as the distributor of Class A and Class B shares of the Fund.
Certain Trustees and officers of the Trust are affiliated with AIM Distributors.
The Distribution Agreements provide AIM Distributors with the exclusive right
to distribute shares of the Fund directly and through institutions with whom AIM
Distributors has entered into selected dealer agreements. Under the Distribution
Agreement for the Class B shares, AIM Distributors sells Class B shares of the
Fund at net asset value subject to a contingent deferred sales charge
established by AIM Distributors. AIM Distributors is authorized to advance to
institutions through whom Class B shares are sold a sales commission under
schedules established by AIM Distributors. The Distribution Agreement for the
Class B shares provides that AIM Distributors (or its assignee or transferee)
will receive 0.75% (of the total 1.00% payable under the distribution plan
applicable to Class B shares) of the Fund's average daily net assets
attributable to Class B shares attributable to the sales efforts of AIM
Distributors and its predecessor. In the event the Class B shares Distribution
Agreement is terminated, AIM Distributors would continue to receive payments of
asset based sales charges in respect of the outstanding Class B shares
attributable to the distribution efforts of AIM Distributors and its
predecessor; provided, however, that a complete termination of the Class B
shares master distribution plan (as defined in the plan) would terminate all
payments by the Fund of asset based sales charges and service fees to AIM
Distributors. Termination of the Class B shares distribution plan or
Distribution Agreement does not affect the obligation of Class B shareholders to
pay contingent deferred sales charges.
DISTRIBUTION PLANS. Class A Plan. The Trust has adopted a Master Distribution
Plan applicable to Class A shares of the Fund (the "Class A Plan") pursuant to
Rule 12b-1 under the 1940 Act, to compensate AIM Distributors for the purpose of
financing any activity that is intended to result in the sale of Class A shares
of the Fund.
Under the Class A Plan, the Trust may compensate AIM Distributors an aggregate
amount of 0.50% of the average daily net assets of Class A shares of the Fund on
an annualized basis.
15
<PAGE> 67
The Class A 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 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 shares of the Fund and who provide continuing
personal services to their customers who own Class A shares of the Fund. The
service fees payable to selected institutions are calculated at the annual rate
of 0.25% of the average daily net asset value of those Fund shares that are held
in such institution's customers' accounts which were purchased on or after a
prescribed date set forth in the Plan.
Of the aggregate amount payable under the Class A 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 Plan. The Class A 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
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 Plan on behalf of the Fund. Thus, under the Class A 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. Payments pursuant to the
Plans are subject to any applicable limitations imposed by rules of the National
Association of Securities Dealers, Inc.
Class B Plan. The Trust has also adopted a master distribution plan applicable
to Class B shares of the Fund (the "Class B Plan"). Under the Class B Plan, the
Fund pays distribution expenses at an annual rate of 1.00% of the average daily
net assets attributable to the Fund's Class B shares. Of such amount the Fund
pays a service fee of 0.25% of the average daily net assets attributable to the
Fund's Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee would
constitute an asset-based sales charge. Amounts paid in accordance with the
Class B Plan with respect to the Fund may be used to finance any activity
primarily intended to result in the sale of Class B shares of the Fund.
Both Plans. Activities that may be financed under the Class A Plan and the
Class B Plan (collectively, the "Plans") include, but are not limited to:
printing of prospectuses and statements of additional information and reports
for other than existing shareholders, overhead, preparation and distribution of
advertising material and sales literature, expense of organizing and conducting
sales seminars, supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements, and the cost of administering the Plans. These amounts
payable by the Fund under the Plans need not be directly related to the expenses
actually incurred by AIM Distributors on behalf of the Fund. Thus, even if AIM
Distributors' actual expenses exceed the fee payable to AIM Distributors
thereunder at any given time, the Trust will not be obligated to pay more than
that fee, and if AIM Distributors' expenses are less than the fee it receives,
AIM Distributors will retain the full amount of the fee. Payments pursuant to
the Plans are subject to any applicable limitations imposed by rules of the
National Association of Securities Dealers, Inc.
Each of the Plans may be terminated at any time by a vote of the majority of
those Trustees who are not "interested persons" of the Trust or by a vote of the
holders of the majority of the outstanding shares of the applicable class.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Fund on an agency basis, may
receive payments from the Fund pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent, for the Fund in
making such payments. The Fund will obtain a representation from such financial
institutions that they will either be licensed as dealers as required under
applicable state law, or that they will not engage in activities which would
constitute acting as a "dealer" as defined under applicable state law. Financial
intermediaries and any other person entitled to receive compensation for selling
Fund shares may receive different compensation for selling shares of one class
over another.
For additional information concerning the operation of the Plans see the
Statement of Additional Information.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST
The Trust was organized as a Delaware business trust on May 7, 1998. On
September 8 , 1998, the Trust acquired the assets of and assumed the liabilities
of AIM Investment Funds, Inc., a Maryland corporation. The Fund constitutes one
of thirteen separate and distinct series portfolios of the Trust. From time to
time, the Trust may establish other funds, each corresponding to a distinct
investment portfolio and a distinct series of the Trust's shares of beneficial
interest. Shares of each fund are entitled to one vote per share (with
proportional voting for fractional shares) and are freely transferable.
Shareholders have no preemptive rights. Other than the automatic conversion of
Class B shares to Class A shares, there are no conversion rights.
On any matter submitted to a vote of shareholders, shares of the Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of its investment
management arrangements. In addition, shares of a particular class of the Fund
may vote on matters affecting only that class. The shares of the Fund and the
Trust's other
16
<PAGE> 68
series will be voted in the aggregate on other matters, such as the election of
Trustees and ratification of the selection of the Trust's independent
accountants.
Normally there will be no annual meeting of shareholders in any year, except
as required under the 1940 Act. Shares of the Fund and the Trust's other series
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 Agreement and 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 shares of the
Fund and is entitled to such dividends and distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
by 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. Shares of the Fund, when issued, are
fully paid and nonassessable.
LEGAL COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800 acts as counsel to the Trust and the
Fund.
17
<PAGE> 69
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Registered Trademark--
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM ADVISOR FLEX FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM ADVISOR INTERNATIONAL VALUE FUND AIM GLOBAL RESOURCES FUND
AIM ADVISOR LARGE CAP VALUE FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM ADVISOR MULTIFLEX FUND AIM GLOBAL TRENDS FUND
AIM ADVISOR REAL ESTATE FUND AIM GLOBAL UTILITIES FUND
AIM AGGRESSIVE GROWTH FUND AIM HIGH INCOME MUNICIPAL FUND
AIM ASIAN GROWTH FUND AIM HIGH YIELD FUND
AIM BALANCED FUND AIM INCOME FUND
AIM BASIC VALUE FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM BLUE CHIP FUND AIM INTERNATIONAL EQUITY FUND
AIM CAPITAL DEVELOPMENT FUND AIM INTERNATIONAL GROWTH FUND
AIM CHARTER FUND AIM JAPAN GROWTH FUND
AIM CONSTELLATION FUND AIM LATIN AMERICAN GROWTH FUND
AIM DEVELOPING MARKETS FUND AIM LIMITED MATURITY TREASURY FUND
AIM DOLLAR FUND(*) AIM MID CAP EQUITY FUND
AIM EMERGING MARKETS FUND AIM MONEY MARKET FUND(*)
AIM EMERGING MARKETS DEBT FUND AIM MUNICIPAL BOND FUND
AIM EUROPEAN DEVELOPMENT FUND AIM NEW PACIFIC GROWTH FUND
AIM EUROPE GROWTH FUND AIM SELECT GROWTH FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AND AIM SMALL CAP OPPORTUNITIES FUND
SERVICES FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM GLOBAL GOVERNMENT INCOME FUND AIM TAX-EXEMPT CASH FUND(*)
AIM GLOBAL GROWTH FUND AIM TAX-FREE INTERMEDIATE FUND
AIM GLOBAL GROWTH & INCOME FUND AIM VALUE FUND
AIM GLOBAL HEALTH CARE FUND AIM WEINGARTEN FUND
AIM GLOBAL INCOME FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
(*) Class A shares of AIM TAX-EXEMPT CASH FUND and AIM DOLLAR FUND and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND are offered to investors at net
asset value, without payment of a sales charge, as described below. Other
funds, including the Class A, Class B and Class C shares of AIM MONEY MARKET
FUND, are sold with an initial sales charge or subject to a contingent
deferred sales charge upon redemption, as described below.
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds ("AIM Funds"), an investor must submit a fully completed new Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by A I M Distributors, Inc. ("AIM
Distributors") to sell shares of the AIM Funds.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment is
$500, except for accounts initially established through an Automatic Investment
Plan, which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for an Individual Retirement Arrangement ("IRA") or Roth IRA is $250.
There are no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, Simplified Employee Pension
("SEP") accounts, Savings Incentive Match Plans for Employee IRA ("SIMPLE IRA")
accounts, 403(b) plans or 457 (state deferred compensation) plans (except that
the minimum initial investment for salary deferrals for such plans is $25 per
fund investment), or for investment of dividends and distributions of any of the
AIM Funds into any existing AIM
A-1
<PAGE> 70
Funds account. Notwithstanding the foregoing, the minimum initial investment
applicable to AIM Small Cap Opportunities Fund is $10,000.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus, as well as
Advisor Class shares of certain AIM Funds, are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his dealer should call AFS' Client Services Department
at (800) 959-4246 prior to sending a wire to receive a reference number for the
wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
HOW TO PURCHASE ADDITIONAL SHARES. Additional shares may be purchased directly
through AIM Distributors or through any dealer who has entered into an agreement
with AIM Distributors. The minimum investment for subsequent purchases is $50.
The minimum employee salary deferral investment for participants in
money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or 457 plans is
$25. Notwithstanding the foregoing, the minimum subsequent purchases of shares
of AIM Small Cap Opportunities Fund is $1,000. There are no such minimum
investment requirements for investment of dividends and distributions of any of
the AIM Funds into any other existing AIM Funds account.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional shares by electronic funds
transfer, please contact the Client Services Department of AFS for details.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE
CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND, AIM
AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BASIC
VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND,
AIM CONSTELLATION FUND, AIM DEVELOPING MARKETS FUND, AIM DOLLAR FUND, AIM
EMERGING MARKETS FUND, AIM EMERGING MARKETS DEBT FUND, AIM EUROPEAN DEVELOPMENT
FUND, AIM EUROPE GROWTH FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL SERVICES FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL GROWTH &
INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL
INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL TELECOMMUNICATIONS
FUND, AIM GLOBAL TRENDS FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH INCOME
MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM INTERNATIONAL GROWTH FUND,
AIM JAPAN GROWTH FUND, AIM LATIN AMERICAN GROWTH FUND, AIM LIMITED MATURITY
TREASURY FUND, AIM MID CAP EQUITY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL
BOND FUND, AIM NEW PACIFIC GROWTH FUND, AIM SELECT GROWTH FUND, AIM SMALL CAP
GROWTH FUND, AIM SMALL CAP OPPORTUNITIES FUND, AIM STRATEGIC INCOME FUND,AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND, AIM TAX-FREE
INTERMEDIATE FUND, AIM VALUE FUND, AIM WEINGARTEN FUND and AIM WORLDWIDE GROWTH
FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM LIMITED MATURITY
TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND
and AIM TAX-FREE INTERMEDIATE FUND), the "Multiple Class Funds," may be
purchased at their respective net asset value plus a sales charge as indicated
below, except that Class A shares of AIM DOLLAR FUND and AIM TAX-EXEMPT CASH
FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold without a
sales charge and Class B shares (the "Class B shares") and Class C shares (the
"Class C shares") of the Multiple Class Funds which offer such classes are sold
at net asset value subject to a contingent deferred sales charge payable upon
certain redemptions. Class B shares of AIM DOLLAR FUND, however, may be acquired
only by an exchange of shares of another AIM Fund. These contingent deferred
sales charges are described under the caption "How to Redeem Shares -- Multiple
Distribution System." Securities dealers and other persons entitled to receive
compensation for selling or servicing shares of a Multiple Class Fund may
receive different compensation for selling or servicing one particular class of
shares over
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<PAGE> 71
another class in the same Multiple Class Fund. Factors an investor should
consider prior to purchasing Class A, Class B or Class C shares (or, if
applicable, AIM Cash Reserve Shares) of a Multiple Class Fund are described
below under "Special Information Relating to Multiple Class Funds." For
information on purchasing any of the AIM Funds and to receive a prospectus,
please call (800) 347-4246. As described below, the sales charge otherwise
applicable to a purchase of shares of a fund may be reduced if certain
conditions are met. In order to take advantage of a reduced sales charge, the
prospective investor or his dealer must advise AIM Distributors that the
conditions for obtaining a reduced sales charge have been met. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
The following Multiple Class Funds sometimes are referred to herein as the
"AIM/GT Funds": AIM AMERICA VALUE FUND, AIM DEVELOPING MARKETS FUND, AIM DOLLAR
FUND, AIM EMERGING MARKETS FUND, AIM EMERGING MARKETS DEBT FUND, AIM EUROPE
GROWTH FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL
FINANCIAL SERVICES FUND, AIM GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH &
INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL INFRASTRUCTURE FUND, AIM
GLOBAL RESOURCES FUND, AIM GLOBAL TELECOMMUNICATIONS FUND, AIM GLOBAL TRENDS
FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM LATIN AMERICAN
GROWTH FUND, AIM MID CAP GROWTH FUND, AIM NEW PACIFIC GROWTH FUND, AIM SMALL CAP
EQUITY FUND, AIM STRATEGIC INCOME FUND and AIM WORLDWIDE GROWTH FUND.
The following tables show the sales charge and dealer concession at various
investment levels for the AIM Funds.
SALES CHARGES AND DEALER CONCESSIONS
GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds include Class A shares of each of AIM ADVISOR FLEX FUND, AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, AIM AGGRESSIVE GROWTH FUND, AIM BASIC VALUE FUND, AIM ASIAN
GROWTH FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND,
AIM CONSTELLATION FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM EUROPE GROWTH FUND,
AIM GLOBAL UTILITIES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM INTERNATIONAL
EQUITY FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM MID CAP
EQUITY FUND, AIM MONEY MARKET FUND, AIM NEW PACIFIC GROWTH FUND, AIM SELECT
GROWTH FUND, AIM SMALL CAP GROWTH FUND, AIM SMALL CAP OPPORTUNITIES FUND, AIM
VALUE FUND, AIM WEINGARTEN FUND and AIM WORLDWIDE GROWTH FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION(1) PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
- ---------------
(1) AIM Small Cap Opportunities Fund will not accept any single purchase in
excess of $250,000.
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
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<PAGE> 72
GROUP II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: the Class A shares of each of AIM ADVISOR REAL ESTATE FUND,
AIM BALANCED FUND, AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM
EMERGING MARKETS DEBT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL SERVICES FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE
FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL
RESOURCES FUND, AIM GLOBAL TELECOMMUNICATIONS FUND, AIM GLOBAL TRENDS FUND, AIM
HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM LATIN AMERICAN GROWTH FUND, AIM MUNICIPAL BOND
FUND, AIM STRATEGIC INCOME FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are the Class A shares of each of AIM LIMITED MATURITY TREASURY
FUND and AIM TAX-FREE INTERMEDIATE FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million of more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to
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<PAGE> 73
a contingent deferred sales charge, for all AIM Funds other than Class A shares
of each of AIM LIMITED MATURITY TREASURY FUND and AIM TAX-FREE INTERMEDIATE FUND
as follows: 1% of the first $2 million of such purchases, plus 0.80% of the next
$1 million of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in excess of $20 million of such purchases. See
"Contingent Deferred Sales Charge Program for Large Purchases." AIM Distributors
may make payments to dealers and institutions who are dealers of record for
purchases of $1 million or more of Class A shares (or shares which normally
involve payment of initial sales charges), and which are sold at net asset value
and are not subject to a contingent deferred sales charge, in an amount up to
0.10% of such purchases of Class A shares of AIM LIMITED MATURITY TREASURY FUND,
and in an amount up to 0.25% of such purchases of Class A shares of AIM TAX-FREE
INTERMEDIATE FUND.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.00% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price of the Class C
shares sold by the dealer or institution, and will consist of a sales commission
of 0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. After the first full year, AIM Distributors will make such
payments quarterly to dealers and institutions based on the average net asset
value of Class C shares which are attributable to shareholders for whom the
dealers and institutions are designated as dealers of record. These commissions
on Class C shares are not paid on sales to investors exempt from the CDSC,
including Class C shareholders of record on April 30, 1995 who purchase
additional shares in any of the Funds on or after May 1, 1995, and in
circumstances where AIM Distributors grants an exemption on particular
transactions.
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of regular trading on the New York Stock Exchange ("NYSE"), which is
generally 4:00 p.m. Eastern Time (and which is hereinafter referred to as "NYSE
Close"), on any business day of an AIM Fund will be confirmed at the price next
determined. Orders received after NYSE Close will be confirmed at the price
determined on the next business day of the AIM Fund. Certain financial
institutions (or their designees) may be authorized to accept purchase orders on
behalf of the AIM Funds. Orders received by authorized institutions (or their
designees) before NYSE Close will be deemed to have been received by an AIM Fund
on such day and will be effected that day, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. It is the responsibility of the dealer/financial institution to ensure
that all orders are transmitted on a timely basis to the Transfer Agent. Any
loss resulting from the dealer/financial institution's failure to submit an
order within the prescribed time frame will be borne by that dealer/financial
institution. Please see "How to Purchase Shares -- Purchases by Wire" for
information on obtaining a reference number for wire orders, which will
facilitate the handling of such orders and ensure prompt credit to an investor's
account. A "business day" of an AIM Fund is any day on which the NYSE is open
for business. It is expected that the NYSE will be closed during the next twelve
months on Saturdays and Sundays and on the days on which New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class Funds
currently offer two or more classes of shares through separate distribution
systems (the "Multiple Distribution System"). Although each class of shares of a
particular Multiple Class Fund represents an interest in the same portfolio of
investments, each class is subject to a different distribution structure and, as
a result, differing expenses. This Multiple Distribution System allows investors
to select the class that is best suited to the investor's needs and objectives.
In considering the options afforded by the Multiple Distribution System,
investors should consider both the applicable initial sales charge or contingent
deferred sales charge, as well as the ongoing expenses borne by each class of
shares and other relevant factors, such as whether his or her investment goals
are long-term or short-term.
CLASS A SHARES generally are sold subject to the initial sales charges
described above and are subject to the other fees and expenses described
herein. Class A shares of AIM MONEY MARKET FUND are designed to meet the
needs of an investor who wishes to establish a dollar cost averaging
program, pursuant to which Class A shares an investor owns may be exchanged
at net asset value for Class A shares of another Multiple Class Fund or
shares of another AIM Fund which is not a Multiple Class Fund, subject to
the terms and conditions described under the caption "Exchange
Privilege -- Terms and Conditions of Exchanges."
A-5
<PAGE> 74
CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Rule 12b-1 Plan payments of 1.00%
per annum on the average daily net assets of a Multiple Class Fund
attributable to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the date such shares were purchased are subject to a
contingent deferred sales charge ranging from 5% for redemptions made
within the first year to 1% for redemptions made within the sixth year. No
contingent deferred sales charge will be imposed if Class B shares are
redeemed after six years from the date such shares were purchased.
Redemptions of Class B shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and other distributions)
eight years from the end of the calendar month in which the purchase of
Class B shares was made. Class B shares of AIM GLOBAL TRENDS FUND that were
outstanding on May 29, 1998 and which are continuously held by the
shareholder, automatically convert to Class A shares of AIM GLOBAL TRENDS
FUND seven years from the end of the calendar month in which the purchase
of such Class B shares was made. If a shareholder exchanges Class B shares
of AIM GLOBAL TRENDS FUND that were outstanding on, and continuously held
since, May 29, 1998 for Class B shares of any other AIM Fund, such Class B
shares will be subject to the eight year conversion feature applicable to
Class B shares of all other AIM Funds. Following such conversion of their
Class B shares, investors will be relieved of the higher Rule 12b-1 Plan
payments associated with Class B shares. See "Management -- Distribution
Plans."
AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold without an
initial sales charge and are not subject to a contingent deferred sales
charge; however, they are subject to the other fees and expenses described
in the prospectus for AIM MONEY MARKET FUND.
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon Eastern Time or NYSE Close on any
business day of the Fund will be confirmed at the price next determined. Net
asset value is normally determined at 12:00 noon Eastern Time and NYSE Close on
each business day of AIM MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO AIM MONEY MARKET FUND, AIM TAX-EXEMPT CASH
FUND and AIM DOLLAR FUND (THE "MONEY MARKET FUNDS"). Because each Money Market
Fund uses the amortized cost method of valuing the securities it holds and
rounds its per share net asset value to the nearest whole cent, it is
anticipated that the net asset value of the shares of such funds will remain
constant at $1.00 per share. However, there is no assurance that each Money
Market Fund can maintain a $1.00 net asset value per share. In order to earn
dividends with respect to AIM MONEY MARKET FUND on the same day that a purchase
is made, purchase payments in the form of federal funds must be received by the
Transfer Agent before 12:00 noon Eastern Time on that day. Purchases made by
payments in any other form, or payments in the form of federal funds received
after such time but prior to NYSE Close, will begin to earn dividends on the
next business day following the date of purchase. The Money Market Funds
generally will not issue share certificates but will record investor holdings in
noncertificate form and regularly advise the shareholder of his ownership
position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of Class A shares of the AIM Funds that
are otherwise subject to an initial sales charge, provided that such purchases
are made by a "purchaser" as hereinafter defined. Purchases of Class A shares of
AIM TAX-EXEMPT CASH FUND and AIM DOLLAR FUND, AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and Class B and Class C shares of the Multiple Class Funds
will not be taken into account in determining whether a purchase qualifies for a
reduction in initial sales charges.
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<PAGE> 75
The term "purchaser" means:
- an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, Roth IRA, a single-participant
money-purchase/profit-sharing plan or an individual participant in a 403(b)
plan (unless such 403(b) plan qualifies as the purchaser as defined below);
- a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
- a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
- a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP"), or Savings Incentive Match
Plans for Employees IRA ("SIMPLE IRA") where the employer has notified AIM
Distributors in writing that all of its related employee SEP, SARSEP or
SIMPLE IRA accounts should be linked;
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
- the discretionary advised accounts of A I M Advisors, Inc. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge provided herein.
(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for (i) Class A
shares of AIM DOLLAR FUND, AIM TAX-EXEMPT CASH FUND, and AIM Cash Reserve Shares
of AIM MONEY MARKET FUND and (ii) Class B and Class C shares of the Multiple
Class Funds) within the following 13 consecutive months. By marking the LOI
section on the account application and by signing the account application, the
purchaser indicates that he understands and agrees to the terms of the LOI and
is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gain distributions
will not be applied to the LOI. At any time during the 13-month period after
meeting the original obligation, a purchaser may revise his intended investment
amount upward by submitting a written and signed request. Such a revision will
not change the original expiration date. By signing an LOI, a purchaser is not
making a binding commitment to purchase additional shares, but if purchases made
within the 13-month period do not total the amount specified, the investor will
pay the increased amount of sales charge as described below. Purchases made
within 90 days before signing an LOI will be applied toward completion of the
LOI. The LOI effective date will be the date of the first purchase with the
90-day period. The Transfer Agent will process necessary adjustments upon the
expiration or completion date of the LOI. Purchases made more than 90 days
before signing an LOI will be applied toward completion of the LOI based on the
value of the shares purchased calculated at the public offering price on the
effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
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<PAGE> 76
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
Any investor who purchased shares of the AIM/GT Funds pursuant to a LOI
entered into prior to June 1, 1998 may continue to make such purchases under the
terms of such LOI. See "How to Purchase and Redeem Shares" in the Statement of
Additional Information.
(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM DOLLAR FUND, AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and (ii) Class B and Class C shares of the Multiple Class
Funds) at the time of the proposed purchase. Rights of accumulation are also
available to holders of the Connecticut General Guaranteed Account, established
for tax-qualified group annuities, for contracts purchased on or before June 30,
1992. To determine whether or not a reduced initial sales charge applies to a
proposed purchase, AIM Distributors takes into account not only the money which
is invested upon such proposed purchase, but also the value of all shares of the
AIM Funds (except for (i) Class A shares of AIM DOLLAR FUND, AIM TAX-EXEMPT CASH
FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND and (ii) Class B and
Class C shares of the Multiple Class Funds) owned by such purchaser, calculated
at their then current public offering price. If a purchaser so qualifies for a
reduced sales charge, the reduced sales charge applies to the total amount of
money then being invested by such purchaser and not just to the portion that
exceeds the breakpoint above which a reduced sales charge applies. For example,
if a purchaser already owns qualifying shares of any AIM Fund with a value of
$20,000 and wishes to invest an additional $20,000 in a fund with a maximum
initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will
apply to the full $20,000 purchase and not just to the $15,000 in excess of the
$25,000 breakpoint. To qualify for obtaining the discount applicable to a
particular purchase, the purchaser or his dealer must furnish AFS with a list of
the account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and other distributions from
a fund (see "Dividends, Distributions and Tax Matters"); (b) exchanges of shares
of certain other funds (see "Exchange Privilege"); (c) use of the reinstatement
privilege (see "How to Redeem Shares"); or (d) a merger, consolidation or
acquisition of assets of a fund.
Shareholders of record of Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
shares of the particular AIM Fund(s) whose shares they owned on such date, at
net asset value (without payment of a sales charge) for as long as they
continuously own Class A shares of such AIM Fund(s) having a market value of at
least $500. In addition, discretionary advised clients of any investment
advisors whose clients held Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A shares of the applicable AIM
Fund(s) at the net asset value of such shares.
The following persons may purchase Class A shares of the AIM Funds through AIM
Distributors without payment of an initial sales charge: (a) A I M Management
Group Inc. ("AIM Management") and its affiliated companies; (b) any current or
retired officer, director, trustee or employee, or any member of the immediate
family (including spouse, children, parents and parents of spouse) of any such
person, of AIM Management or its affiliates or of certain mutual funds which are
advised or managed by AIM; or any trust established exclusively for the benefit
of such persons; (c) any employee benefit plan established for employees of AIM
Management or its affiliates; (d) any current or retired officer, director,
trustee or employee, or any member of the immediate family (including spouse,
children, parents and parents of spouse) of any such person, or of CIGNA
Corporation or of any of its affiliated companies, or of First Data Investor
Services Group (formerly The Shareholder Services Group, Inc.); (e) any
investment company sponsored by CIGNA Investments, Inc. or any of its affiliated
companies for the benefit of its directors' deferred compensation plans; (f)
discretionary advised clients of AIM or AIM Capital; (g) registered
representatives and employees of dealers who have entered into agreements with
AIM Distributors (or financial institutions that have arrangements with such
dealers with respect to the sale of shares of the AIM Funds) and any member of
the immediate family (including spouse, children, parents and parents of spouse)
of any such person, provided that purchases at net asset value are permitted by
the policies of such person's employer; (h) certain broker-dealers, investment
advisers or bank trust departments that provide asset allocation, similar
specialized investment services or investment company transaction services for
their customers, that charge a minimum annual fee for such services, and that
have entered into an agreement with AIM Distributors with respect to their use
of the AIM Funds in connection with such services; (i) any employee or any
member of the immediate family (including spouse, children, parents and parents
of spouse) of any employee, of Triformis Inc.; (j) shareholders of the AIM/GT
Funds as of April 30, 1987 who since that date continually have owned shares of
one or more of the AIM/GT Funds; and (k) certain former AMA Investment Advisers'
shareholders who became shareholders of the AIM Global Health Care Fund in
October 1989, and who have continuously held shares in the AIM/GT Funds since
that time.
In addition, shares of any AIM Fund (except AIM Small Cap Opportunities Fund)
may be purchased at net asset value, without payment of a sales charge, by
pension, profit-sharing or other employee benefit plans created pursuant to a
plan qualified under Section 401 of the Code or plans under Section 457 of the
Code, or employee benefit plans created pursuant to Section 403(b) of the
A-8
<PAGE> 77
Code and sponsored by nonprofit organizations defined under Section 501(c)(3) of
the Code. Such plans will qualify for purchases at net asset value provided that
(1) the total amount invested in the plan is at least $1,000,000, (2) the
sponsor signs a $1,000,000 LOI, (3) such shares are purchased by an
employer-sponsored plan with at least 100 eligible employees, or (4) all of the
plan's transactions are executed through a single financial institution or
service organization who has entered into an agreement with AIM Distributors
with respect to their use of the AIM Funds in connection with such accounts.
Section 403(b) plans sponsored by public educational institutions will not be
eligible for net asset value purchases based on the aggregate investment made by
the plan or the number of eligible employees. Participants in such plans will be
eligible for reduced sales charges based solely on the aggregate value of their
individual investments in the applicable AIM Fund. PLEASE NOTE THAT TAX-EXEMPT
FUNDS ARE NOT APPROPRIATE INVESTMENTS FOR SUCH PLANS. AIM Distributors may pay
investment dealers or other financial service firms for share purchases of the
Load Funds (as defined under the caption "Exchange Privilege") sold at net asset
value to an employee benefit plan in accordance with this paragraph as follows:
1% of the first $2 million of such purchases, plus 0.80% of the next $1 million
of such purchases, plus 0.50% of the next $17 million of such purchases, plus
0.25% of amounts in excess of $20 million of such purchases and up to 0.10% of
the net asset value of any Class A shares of AIM LIMITED MATURITY TREASURY FUND
sold at net asset value to an employee benefit plan in accordance with this
paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A shares of such funds may also be purchased at net asset
value by other unit investment trusts approved by the Board of Directors of AIM
Equity Funds, Inc. Unit holders of such trusts may elect to invest cash
distributions from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND at net asset value, including: (a) distributions of any
dividend income or other income received by such trusts; (b) distributions of
any net capital gains received in respect of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sales of Class A shares of
AIM WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such
trusts; and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided: (a) that the investment in Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND is effected within 30 days of such
redemption or repurchase; and (b) that the unit holder or his dealer provides
AIM Distributors with a letter which: (i) identifies the name, address and
telephone number of the dealer who sold to the unit holder the units to be
redeemed or repurchased; and (ii) states that the investment in Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND is being funded exclusively by
the proceeds from the redemption or repurchase of units of such trusts.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns shares which are not subject to a contingent deferred sales charge, can
arrange for monthly, quarterly or annual amounts (but not less than $50) to be
drawn against the balance of his account in the designated AIM Fund.
Shareholders who own shares subject to a contingent deferred sales charge, can
only arrange for monthly or quarterly withdrawals under a Systematic Withdrawal
Plan. Payment of this amount can be made on any day of the month the shareholder
specifies, except the thirtieth or thirty-first day of each month in which a
payment is to be made. A minimum account balance of $5,000 is required to
establish a Systematic Withdrawal Plan, but there is no requirement thereafter
to maintain any minimum investment. With respect to shares subject to a
contingent deferred sales charge (all classes) no contingent deferred sales
charge will be imposed on withdrawals made under a Systematic Withdrawal Plan,
provided that the amounts withdrawn under such a plan do not exceed on an annual
basis 12% of the account value at the time the shareholder elects to participate
in the Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to
shares subject to a contingent deferred sales charge that
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<PAGE> 78
exceed on an annual basis 12% of such account will be subject to a contingent
deferred sales charge on the amounts exceeding 12% of the account value at the
time the shareholder elects to participate in the Systematic Withdrawal Plan.
Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested to shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic Withdrawal Plan, the Transfer Agent redeems sufficient full
and fractional shares at their net asset value in effect at the time of each
such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C shares of the Multiple Class Funds, and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND), it is disadvantageous to effect such
purchases while a Systematic Withdrawal Plan is in effect.
The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make regular systematic
investments may establish an Automatic Investment Plan. Under this plan
withdrawal is made on the shareholder's bank account in the amount specified by
the shareholder (minimum $50 per investment, per account) and on a day or
date(s) specified by the shareholder. The proceeds are invested in shares of the
designated AIM Fund at the applicable offering price determined on the date of
the withdrawal. An Automatic Investment Plan may be discontinued upon 10 days'
prior notice to the Transfer Agent or AIM Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; dividends and distributions attributable to Class C
shares may be reinvested in Class C shares of the same fund or in Class C shares
of another Multiple Class Fund; and dividends and distributions attributable to
AIM Cash Reserve Shares of AIM MONEY MARKET FUND may be reinvested in additional
shares of such fund, in Class A shares of another Multiple Class Fund or in
shares of another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" for a description
of payment dates for these options. In order to qualify to have dividends and
distributions of one AIM Fund invested in shares of another AIM Fund, the
following conditions must be satisfied: (a) the shareholder must have an account
balance in the dividend paying fund of at least $5,000; (b) the account must be
held in the name of the shareholder (i.e., the account may not be held in
nominee name); and (c) the shareholder must have requested and completed an
authorization relating to the reinvestment of dividends into another AIM Fund.
An authorization may be given on the account application or on an authorization
form available from AIM Distributors. An AIM Fund will waive the $5,000 minimum
account value requirement if the shareholder has an account in the fund selected
to receive the dividends and distributions with a value of at least $500.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." The account from
which exchanges are to be made must have a value of at least $5,000 when a
shareholder elects to begin this program, and the exchange minimum is $50 per
transaction. All of the accounts that are part of this program must have
identical registrations. The net asset value of shares purchased under this
program may vary, and may be more or less advantageous than if shares were not
exchanged automatically. There is no charge for entering the Dollar Cost
Averaging program. Sale charges may apply, as described under the caption
"Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM
TAX-EXEMPT CASH FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the
following prototype retirement plans available to corporations, individuals and
employees of non-profit organizations and public schools: combination
money-purchase/profit-sharing plans; 403(b) plans; IRA plans; Roth IRA plans;
SARSEP plans; SEP plans; and SIMPLE IRA plans (collectively, "retirement
accounts"). Information concerning these plans, including the custodian's fees
and the forms necessary to adopt such plans, can be obtained by calling or
writing the AIM Funds or AIM Distributors. Shares of the AIM Funds are also
available for investment through existing 401(k) plans (for both individuals and
employers) adopted under the Code. The plan custodian currently imposes an
annual $10 maintenance fee with respect to each retirement account for which it
serves as the custodian. This fee is generally charged in December. Each AIM
Fund and/or the custodian reserve the right to change this maintenance fee and
to initiate an establishment fee (not to exceed its cost).
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of AIM Funds. The Program
automatically rebalances holdings of AIM Funds to the established allocation on
a periodic basis. Under the Program, a shareholder may predesig-
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<PAGE> 79
nate, on a percentage basis, how the total value of his or her holdings in a
minimum of two, and a maximum of ten, AIM Funds ("Personal Portfolio") is to be
rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more AIM Funds in the shareholder's Personal Portfolio for shares of
the same class(es) of one or more other AIM Funds in the shareholder's Personal
Portfolio. See "Exchange Privilege." If shares of the AIM Fund(s) in a
shareholder's Personal Portfolio have appreciated during a rebalancing period,
the Program will result in shares of AIM Fund(s) that have appreciated most
during the period being exchanged for shares of AIM Fund(s) that have
appreciated least. SUCH EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A
SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE MAY BE, FOR FEDERAL INCOME
TAX PURPOSES. See "Dividends, Distributions and Tax Matters -- Dividends and
Distributions." Participation in the Program does not assure that a shareholder
will profit from purchases under the Program nor does it prevent or lessen
losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular AIM Fund would be 2% or less.
In predesignating percentages, shareholders must use whole percentages and
totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an AIM Fund's shares. The
AIM Funds and AIM Distributors reserve the right to modify, suspend, or
terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which AIM Funds
or what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Shareholders participating in
the Program may also participate in the Right of Accumulation, LOI, and
Automatic Investment Plan. Certain dealers/financial institutions may charge a
fee for establishing accounts relating to the Program. Investors should contact
their dealers/financial institutions or AIM Distributors for more information.
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- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds, listed below
and referred to herein as the "Load Funds," are sold at a public offering price
that includes a maximum sales charge of 5.50% or 4.75% of the public offering
price of such shares; Class A shares (or shares which normally involve the
payment of initial sales charges) of certain of the AIM Funds, listed below and
referred to herein as the "Lower Load Funds," are sold at a public offering
price that includes a maximum sales charge of 1.00% of the public offering price
of such shares; and Class A shares or shares of certain other funds, listed
below and referred to herein as the "No Load Funds," are sold at net asset
value, without payment of a sales charge.
<TABLE>
<S> <C> <C>
LOAD FUNDS: LOWER LOAD FUNDS:
----------- -----------------
AIM ADVISOR FLEX FUND -- AIM GLOBAL INCOME AIM LIMITED MATURITY TREASURY FUND
CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR INTERNATIONAL AIM GLOBAL INFRASTRUCTURE AIM TAX-FREE INTERMEDIATE FUND
VALUE FUND -- CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR LARGE CAP AIM GLOBAL RESOURCES NO LOAD FUNDS:
VALUE FUND -- CLASS A FUND -- CLASS A --------------
AIM ADVISOR MULTIFLEX AIM GLOBAL TELECOMMUNICATIONS AIM MONEY MARKET FUND
FUND -- CLASS A FUND -- CLASS A -- AIM CASH RESERVE SHARES
AIM ADVISOR REAL ESTATE AIM GLOBAL TRENDS AIM TAX-EXEMPT CASH FUND -- CLASS A
FUND -- CLASS A FUND -- CLASS A AIM DOLLAR FUND -- CLASS A
AIM AGGRESSIVE GROWTH AIM GLOBAL UTILITIES
FUND -- CLASS A FUND -- CLASS A
AIM ASIAN GROWTH AIM HIGH INCOME MUNICIPAL
FUND -- CLASS A FUND -- CLASS A
AIM BALANCED FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A
AIM BASIC VALUE AIM INCOME FUND -- CLASS A
FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT
AIM BLUE CHIP FUND -- CLASS A FUND -- CLASS A
AIM CAPITAL DEVELOPMENT AIM INTERNATIONAL EQUITY
FUND -- CLASS A FUND -- CLASS A
AIM CHARTER FUND -- CLASS A AIM INTERNATIONAL GROWTH
AIM CONSTELLATION FUND -- CLASS A
FUND -- CLASS A AIM JAPAN GROWTH FUND -- CLASS A
AIM DEVELOPING MARKETS AIM LATIN AMERICAN GROWTH
FUND -- CLASS A FUND -- CLASS A
AIM EMERGING MARKETS AIM MID CAP EQUITY
FUND -- CLASS A FUND -- CLASS A
AIM EMERGING MARKETS DEBT AIM MONEY MARKET
FUND -- CLASS A FUND -- CLASS A
AIM EUROPE GROWTH AIM MUNICIPAL BOND
FUND -- CLASS A FUND -- CLASS A
AIM EUROPEAN DEVELOPMENT AIM NEW PACIFIC GROWTH
FUND -- CLASS A FUND -- CLASS A
AIM GLOBAL AGGRESSIVE GROWTH AIM SELECT GROWTH FUND -- CLASS A
FUND -- CLASS A AIM SMALL CAP GROWTH
AIM GLOBAL CONSUMER PRODUCTS FUND -- CLASS A
AND SERVICES FUND -- CLASS A AIM SMALL CAP OPPORTUNITIES
AIM GLOBAL FINANCIAL SERVICES FUND -- CLASS A
FUND -- CLASS A AIM STRATEGIC INCOME
AIM GLOBAL GOVERNMENT INCOME FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM GLOBAL GROWTH OF CONNECTICUT -- CLASS A
FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM GLOBAL GROWTH & AIM WEINGARTEN FUND -- CLASS A
INCOME FUND -- CLASS A AIM WORLDWIDE GROWTH
AIM GLOBAL HEALTH CARE FUND -- CLASS A
FUND -- CLASS A
</TABLE>
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<PAGE> 81
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund on
the terms described on the chart below, except that (i) Load Fund share
purchases of $1,000,000 or more which are subject to a contingent deferred sales
charge may not be exchanged for Lower Load Funds or for AIM TAX-EXEMPT CASH FUND
(AND CLASS A SHARES OF AIM DOLLAR FUND); (II) LOWER LOAD FUND SHARE PURCHASES OF
$1,000,000 OR MORE AND AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND, AIM
TAX-EXEMPT CASH FUND AND AIM DOLLAR FUND PURCHASES MAY BE EXCHANGED FOR LOAD
FUND SHARES IN AMOUNTS OF $1,000,000 OR MORE WHICH WILL THEN BE SUBJECT TO A
CONTINGENT DEFERRED SALES CHARGE; HOWEVER, FOR PURPOSES OF CALCULATING THE
CONTINGENT DEFERRED SALES CHARGES ON THE LOAD FUND SHARES ACQUIRED, THE 18-MONTH
PERIOD SHALL BE COMPUTED FROM THE DATE OF SUCH EXCHANGE; (iii) Class A shares
may be exchanged for Class A shares; (iv) Class B shares may be exchanged only
for Class B shares; (v) Class C shares may only be exchanged for Class C shares;
and (vi) AIM Cash Reserve Shares of AIM MONEY MARKET FUND may not be exchanged
for Class A, Class B or Class C shares of AIM MONEY MARKET FUND. Class C shares
of AIM Small Cap Opportunities Fund are currently not available.
DEPENDING UPON THE FUND FROM WHICH AND INTO WHICH AN EXCHANGE IS BEING MADE,
SHARES BEING ACQUIRED IN AN EXCHANGE MAY BE ACQUIRED AT THEIR OFFERING PRICE OR
AT THEIR NET ASSET VALUE (WITHOUT PAYMENT OF A SALES CHARGE) AS SET FORTH IN THE
TABLE BELOW FOR SHARES INITIALLY PURCHASED PRIOR TO MAY 1, 1994:
<TABLE>
<CAPTION>
MULTIPLE CLASS FUNDS:
LOWER LOAD NO LOAD ------------------------------
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B CLASS C
----- -------------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load Funds.. Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund or any Fund or any Lower Load
Lower Load Fund. Fund; otherwise,
Offering Price.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load Funds.. Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable Not Applicable
acquired upon exchange of any
Load Fund. Otherwise, difference
in sales charge will apply.
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund. Fund or any Lower Load
Difference in sales charge will Fund; otherwise,
apply if No Load shares were Offering Price.
acquired upon exchange of Lower
Load Fund shares.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
Class C........ Not Applicable Not Applicable Not Applicable Not Applicable Net Asset Value
</TABLE>
An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A, Class B and Class C shares of a Multiple Class Fund
cannot be exchanged for each other) except that AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may be exchanged for Class A shares of another Multiple Class
Fund; (b) the dollar amount of the exchange must be at least equal to the
minimum investment applicable to the shares of the fund acquired through such
exchange; (c) the shares of the fund acquired through exchange must be qualified
for sale in the state in which the shareholder resides; (d) the exchange must be
made between accounts having identical registrations and addresses; (e) the full
amount of the purchase price for the shares being exchanged must have already
been received by the fund; (f) the account from which shares have been exchanged
must be coded as having a certified taxpayer identification number on file or,
in the alternative, an appropriate IRS Form W-8 (certificate of foreign status)
or Form W-9 (certifying exempt status) must have been received by the fund; (g)
newly acquired shares (through either an initial or subsequent investment) are
held in an account for at least ten busi-
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<PAGE> 82
ness days, and all other shares are held in an account for at least one day,
prior to the exchange; and (h) certificates representing shares must be returned
before shares can be exchanged. There is no fee for exchanges among the AIM
Funds.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received after NYSE Close will result in the redemption of shares at their net
asset value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. Normally, shares of an AIM Fund to be acquired
by exchange are purchased at their net asset value or applicable offering price,
as the case may be, determined on the date that such request is received, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is determined that a fund would be materially disadvantaged
by an immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into a fund paying daily dividends (See "Dividends, Distributions and
Tax Matters -- Dividends and Distributions," below), and the release of the
exchange proceeds is delayed for the foregoing five-day period, such shareholder
will not begin to accrue dividends until the sixth business day after the
exchange. Shares purchased by check may not be exchanged until it is determined
that the check has cleared, which may take up to ten business days from the date
that the check is received. See "Terms and Conditions of Purchase of the AIM
Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AFS. The request should contain the account registration and
account number, the dollar amount or number of shares to be exchanged, and the
names of the funds from which and into which the exchange is to be made. The
request should comply with all of the requirements for redemption by mail,
except those required for redemption of IRAs. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AFS at (800) 959-4246. If a shareholder is unable to reach
AFS by telephone, he may also request exchanges by telegraph or use overnight
courier services to expedite exchanges by mail, which will be effective on the
business day received by the Transfer Agent as long as such request is received
prior to NYSE Close. The Transfer Agent and AIM Distributors will not be liable
for any loss, expense or cost arising out of any telephone exchange request that
they reasonably believe to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
Social Security Number and current address, and mailings of confirmations
promptly after the transaction.
EXCHANGES OF CLASS B AND CLASS C SHARES. A contingent deferred sales charge
will not be imposed in connection with exchanges among Class B or Class C
shares. For purposes of determining a shareholder's holding period of Class B or
Class C shares in the calculation of the applicable contingent deferred sales
charge, the period of time during which Class B or Class C shares were held
prior to an exchange will be added to the holding period of the applicable Class
B or Class C shares acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. Although
a contingent deferred sales charge may be applicable to certain redemptions as
described below, there is no redemption fee imposed when shares are redeemed or
repurchased; however, dealers may charge service fees for handling repurchase
transactions.
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<PAGE> 83
MULTIPLE DISTRIBUTION SYSTEM. Class B Shares. Class B shares purchased under
the Multiple Distribution System may be redeemed on any business day of a
Multiple Class Fund at the net asset value per share next determined following
receipt of the redemption order, as described under the caption "Timing and
Pricing of Redemption Orders," less the applicable contingent deferred sales
charge shown in the table below. No deferred sales charge will be imposed (i) on
redemptions of Class B shares following six years from the date such shares were
purchased, (ii) on Class B shares acquired through reinvestments of dividends
and distributions attributable to Class B shares or (iii) on amounts that
represent capital appreciation in the shareholder's account above the purchase
price of the Class B shares.
<TABLE>
<CAPTION>
YEARS CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
-------- -------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and other distributions; third, of shares
held for more than six years from the date such shares were purchased; and
fourth, of shares held less than six years from the date such shares were
purchased. The applicable sales charge will be applied against the lesser of the
current market value of shares redeemed or their original cost.
Class B shares that are acquired during a tender offer by AIM Floating Rate
Fund ("Floating Rate Fund") pursuant to an exchange will be subject, in lieu of
the contingent deferred sales charge described above, to a contingent deferred
sales charge equivalent to the early withdrawal charge on the shares of the
Floating Rate Fund. For purposes of computing such early withdrawal charge, the
holding period of Class B shares being redeemed will include the holding period
of the Floating Rate Fund shares prior to exchange.
Class C Shares. Class C shares purchased under the Multiple Distribution
System may be redeemed on any business day of a Multiple Class Fund at the net
asset value per share next determined following receipt of the redemption order,
as described under the caption "Timing and Pricing of Redemption Orders," less a
1% contingent deferred sales charge. No deferred sales charge will be imposed
(i) on redemptions of Class C shares following one year from the date such
shares were purchased; (ii) on Class C shares acquired through reinvestment of
dividends and distributions attributable to Class C shares; (iii) on amounts
that represent capital appreciation in the shareholder's account above the
purchase price of the Class C shares; (iv) on redemptions of additional
purchases of shares of AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE
FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, and AIM
ADVISOR REAL ESTATE FUND, by shareholders of record on April 30, 1995 of these
funds (shareholders whose broker/dealers maintain a single omnibus account with
the Transfer Agent on behalf of those shareholders, perform sub-accounting
functions with respect to those shareholders, and are unable to segregate
shareholders of record prior to April 30, 1995 from shareholders whose accounts
were opened after that date will be subject to a CDSC on all purchases made
after March 1, 1996).
Waivers. Contingent deferred sales charges on Class B and Class C shares will
be waived on redemptions (1) following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust (provided AIM Distributors is notified of such death or
post-purchase disability at the time of the redemption request and is provided
with satisfactory evidence of such death or post-purchase disability), (2) in
connection with certain distributions from IRAs, custodial accounts maintained
pursuant to Code Section 403(b), deferred compensation plans qualified under
Code Section 457 and plans qualified under Code Section 401 (collectively,
"Retirement Plans"), (3) pursuant to a Systematic Withdrawal Plan, provided that
amounts withdrawn under such plan do not exceed on an annual basis 12% of the
value of the shareholder's investment in Class B or Class C shares at the time
the shareholder elects to participate in the Systematic Withdrawal Plan, (4)
effected pursuant to the right of a Multiple Class Fund to liquidate a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the designated minimum account size described in the
prospectus of such Multiple Class Fund, (5) effected by AIM of its investment in
Class B or Class C shares and (6) of Class C shares where such investor's dealer
of record, due to the nature of the investor's account, notifies AIM
Distributors prior to the time of investment that the dealer waives the payment
otherwise payable to the dealer described in the last paragraph under the
caption "Terms and Conditions of Purchase of the AIM Funds -- All Groups of AIM
Funds."
Waiver category (1) above applies only to redemptions of Class B or Class C
shares held at the time of death or initial determination of post-purchase
disability.
Waiver category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or
beneficiaries who are age 70 1/2 or older, and only with respect to that
portion of such distributions which does not exceed 12% annually of the
participant's or beneficiary's account value in a particular AIM Fund;
A-15
<PAGE> 84
(ii) in-kind transfers of assets where the participant or beneficiary
notifies AIM Distributors of such transfer no later than the time such
transfer occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement
Plan invested in Class B or Class C shares of one or more Multiple Class
Funds;
(iv) tax-free returns of excess contributions or returns of excess
deferral amounts; and
(v) distributions upon the death or disability (as defined in the
Code) of the participant or beneficiary.
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B and Class C shares of a Multiple Class Fund and purchases
of shares of the No Load Funds and Lower Load Funds, A CONTINGENT DEFERRED SALES
CHARGE OF 1% APPLIES TO PURCHASES OF $1,000,000 OR MORE THAT ARE REDEEMED WITHIN
18 MONTHS OF THE DATE OF PURCHASE. For a description of the AIM Funds
participating in the program, see "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions." This charge will be 1% of the
lesser of the value of the shares redeemed (excluding reinvested dividends and
capital gains distributions) or the total original cost of such shares. In
determining whether a contingent deferred sales charge is payable, and the
amount of any such charge, shares not subject to the contingent deferred sales
charge are redeemed first (including shares purchased by reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-MONTH PERIOD, (i) shares of any
Load Fund or AIM Cash Reserve shares of AIM MONEY MARKET FUND or Class A shares
of AIM DOLLAR FUND which were acquired through an exchange of shares which
previously were subject to the 1% contingent deferred sales charge will be
credited with the period of time such exchanged shares were held, and (ii)
shares of any Load Fund which are subject to the 1% contingent deferred sales
charge and which were acquired through an exchange of shares of a Lower Load or
a No Load Fund which previously were not subject to the 1% contingent deferred
sales charge will not be credited with the period of time such exchanged shares
were held. The charge will be waived in the following circumstances: (l)
redemptions of shares by employee benefit plans ("Plans") qualified under
Sections 401 or 457 of the Code, or Plans created under Section 403(b) of the
Code and sponsored by nonprofit organizations as defined under Section 501(c)(3)
of the Code, where shares are being redeemed in connection with employee
terminations or withdrawals, and (a) the total amount invested in a Plan is at
least $1,000,000, (b) the sponsor of a Plan signs a letter of intent to invest
at least $1,000,000 in one or more of the AIM Funds, or (c) the shares being
redeemed were purchased by an employer-sponsored Plan with at least 100 eligible
employees; provided, however, that Plans created under Section 403(b) of the
Code which are sponsored by public educational institutions shall qualify under
(a), (b) or (c) above on the basis of the value of each Plan participant's
aggregate investment in the AIM Funds, and not on the aggregate investment made
by the Plan or on the number of eligible employees; (2) redemptions of shares
following the death or post-purchase disability, as defined in Section 72(m)(7)
of the Code, of a shareholder or a settlor of a living trust; (3) redemptions of
shares purchased at net asset value by private foundations or endowment funds
where the initial amount invested was at least $1,000,000; (4) redemptions of
shares purchased by an investor in amounts of $1,000,000 or more where such
investor's dealer of record, due to the nature of the investor's account,
notifies AIM Distributors prior to the time of investment that the dealer waives
the payments otherwise payable to the dealer as described in the third paragraph
under the caption "Terms and Conditions of Purchase of the AIM Funds -- All
Groups of AIM Funds;" and (5) pursuant to a Systematic Withdrawal Plan, provided
that amounts withdrawn under such plan do not exceed on an annual basis 12% of
the value of the shareholder's investment in Class A shares at the time the
shareholder elects to participate in the Systematic Withdrawal Plan.
Shareholders who purchased $500,000 or more of Class A shares of the AIM/GT
Funds prior to June 1, 1998 are entitled to certain waivers of the contingent
deferred sales charge on those shares as described in the Statement of
Additional Information under "How to Purchase and Redeem Shares."
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
In addition to these requirements, shareholders who have invested in a fund to
establish as IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares; (a) a statement
as to whether or not the shareholder has attained age 59 1/2, and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.
A-16
<PAGE> 85
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
this account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
EXPEDITED REDEMPTIONS (AIM Cash Reserve shares of AIM MONEY MARKET FUND
ONLY). If a redemption order is received prior to 11:30 a.m. Eastern Time, the
redemption will be effective on that day and AIM MONEY MARKET FUND will endeavor
to transmit payment on that same business day. If the redemption order is
received after 11:30 a.m. and prior to NYSE Close, the redemption will be made
at the next determined net asset value and payment will generally be transmitted
on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and Class A shares of AIM DOLLAR FUND). After completing the
appropriate authorization form, shareholders may use checks to effect
redemptions from AIM TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM MONEY
MARKET FUND and Class A shares of AIM DOLLAR FUND. This privilege does not apply
to retirement accounts or qualified plans. Checks may be drawn in any amount of
$250 or more. Checks drawn against insufficient shares in the account, against
shares held less than ten business days, or in amounts of less than the
applicable minimum will be returned to the payee. The payee of the check may
cash or deposit it in the same way as an ordinary bank check. When a check is
presented on the Transfer Agent for payment, the Transfer Agent will cause a
sufficient number of shares of such fund to be redeemed to cover the amount of
the check. Shareholders are entitled to dividends on the shares redeemed through
the day on which the check is presented to the Transfer Agent for payment.
TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds
(other than AIM MONEY MARKET FUND) are redeemed at their net asset value next
computed after a request for redemption in proper form (including signature
guarantees and other required documentation for written redemptions) is received
by the Transfer Agent or certain financial institutions (or their designees) who
are authorized to accept redemption orders on behalf of the AIM Funds, provided
that such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders, except that shares that are subject to a contingent
deferred sales charge, may be subject to the imposition of deferred sales
charges that will be deducted from the redemption proceeds. See "Multiple
Distribution System" and "Contingent Deferred Sales Charge Program for Large
Purchases." Orders for the redemption of shares received in proper form prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer/financial institution to
ensure that all orders are transmitted on a timely basis. Any resulting loss
from the dealer/financial institution's failure to submit a request for
redemption within the prescribed time frame will be borne by that
dealer/financial institution. Telephone redemption requests must be made by NYSE
Close on any business day of an AIM Fund and will be confirmed at the price
determined as of the close of that day. No AIM Fund will accept requests which
specify a particular date for redemption or which specify any special
conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone
A-17
<PAGE> 86
exchange and telephone redemption authorization forms; (7) changes in previously
designated wiring or electronic funds transfer instructions, and (8) written
redemptions or exchanges of shares previously reported as lost, whether or not
the redemption amount is under $50,000 or the proceeds are to be sent to the
address of record. These requirements may be waived or modified upon notice to
shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the NYSE Medallion Signature Program,
provided that in either event, the amount of the transaction involved does not
exceed the surety coverage amount indicated on the medallion. For information
regarding whether a particular institution or organization qualifies as an
"eligible guarantor institution," an investor should contact the Client Services
Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY). Within ninety (90) days of a
redemption, a shareholder may invest all or part of the redemption proceeds in
Class A shares of any AIM Fund at the net asset value next computed after
receipt by the Transfer Agent of the funds to be reinvested; provided, however,
if the redemption was made from Class A shares of either AIM LIMITED MATURITY
TREASURY FUND or AIM TAX-FREE INTERMEDIATE FUND, the reinvested proceeds will be
subject to the difference in sales charge between the shares redeemed and the
shares the proceeds are reinvested in. The shareholder must ask the Transfer
Agent for such privilege at the time of reinvestment. A realized gain on the
redemption is taxable, and reinvestment will not alter the taxes due on any
capital gains, except under the circumstances described below. If there has been
a loss on the redemption and shares of the same fund are repurchased, all of the
loss may not be tax deductible, depending on the timing and amount reinvested.
Under the Code, if the redemption proceeds of fund shares on which a sales
charge was paid are reinvested in shares of the same fund, or exchanged for
shares of another AIM Fund, at a reduced sales charge within 90 days of the
payment of the sales charge, the shareholder's basis in the fund shares redeemed
may not include the amount of the sales charge paid, thereby reducing the loss
or increasing the gain recognized from the redemption; however, the
shareholder's basis in the fund shares purchased will include the sales charge.
Each AIM Fund may amend, suspend or cease offering the privilege at any time as
to shares redeemed after the date of such amendment, suspension or cessation.
This privilege may only be exercised once each year by a shareholder with
respect to each AIM Fund.
Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares and who subsequently reinvest a portion or
all of the value of the redeemed shares in Class A shares of any AIM Fund within
ninety (90) days after such redemption may do so at net asset value if such
privilege is claimed at the time of reinvestment. Such reinvested proceeds will
not be subject to either a front-end sales charge at the time of reinvestment or
an additional contingent deferred sales charge upon subsequent redemption. In
order to exercise this reinvestment privilege, the shareholder must notify the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B or Class C shares.
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<PAGE> 87
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon Eastern Time and NYSE Close with
respect to AIM MONEY MARKET FUND) on each "business day" of a fund as previously
defined. In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time)
on a particular day, the net asset value of an AIM Fund's share will be
determined as of the close of the NYSE on such day. For purposes of defining net
asset value per share, futures and options contracts generally will be valued 15
minutes after the close of trading of the NYSE. The net asset value per share is
calculated by subtracting a class' liabilities from its assets and dividing the
result by the total number of class shares outstanding. The determination of net
asset value per share is made in accordance with generally accepted accounting
principles. Among other items, liabilities include accrued expenses and
dividends payable, and total assets include portfolio securities valued at their
market value, as well as income accrued but not yet received. Securities for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the supervision of the fund's officers and
in accordance with methods which are specifically authorized by its governing
Board of Directors or Trustees. Short-term obligations with maturities of 60
days or less, and the securities held by the Money Market Funds, are valued at
amortized cost as reflecting fair value. AIM HIGH INCOME MUNICIPAL FUND, AIM
MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT and AIM TAX-FREE
INTERMEDIATE FUND value variable rate securities that have an unconditional
demand or put feature exercisable within seven days or less at par, which
reflects the market value of such securities.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM ADVISOR FLEX FUND..................... declared and paid quarterly quarterly annually
AIM ADVISOR INTERNATIONAL VALUE FUND...... declared and paid annually annually annually
AIM ADVISOR LARGE CAP VALUE FUND.......... declared and paid quarterly quarterly annually
AIM ADVISOR MULTIFLEX FUND................ declared and paid quarterly quarterly annually
AIM ADVISOR REAL ESTATE FUND.............. declared and paid quarterly quarterly annually
AIM AGGRESSIVE GROWTH FUND................ declared and paid annually annually annually
AIM ASIAN GROWTH FUND..................... declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BASIC VALUE FUND...................... declared and paid annually annually annually
AIM BLUE CHIP FUND........................ declared and paid annually annually annually
AIM CAPITAL DEVELOPMENT FUND.............. declared and paid annually annually annually
AIM CHARTER FUND.......................... declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND............... declared and paid annually annually annually
AIM DOLLAR FUND........................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND................. declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND............ declared and paid monthly annually annually
AIM EUROPE GROWTH FUND.................... declared and paid annually annually annually
AIM EUROPEAN DEVELOPMENT FUND............. declared and paid annually annually annually
AIM GLOBAL AGGRESSIVE GROWTH FUND......... declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES
FUND.................................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES FUND........ declared and paid annually annually annually
</TABLE>
A-19
<PAGE> 88
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM GLOBAL GOVERNMENT INCOME FUND......... declared and paid monthly annually annually
AIM GLOBAL GROWTH FUND.................... declared and paid annually annually annually
AIM GLOBAL GROWTH & INCOME FUND........... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND............... declared and paid annually annually annually
AIM GLOBAL INCOME FUND.................... declared daily; paid monthly annually annually
AIM GLOBAL INFRASTRUCTURE FUND............ declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND................. declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS FUND........ declared and paid annually annually annually
AIM GLOBAL TRENDS FUND.................... declared and paid annually annually annually
AIM GLOBAL UTILITIES FUND................. declared daily; paid monthly annually annually
AIM HIGH INCOME MUNICIPAL FUND............ declared daily; paid monthly annually annually
AIM HIGH YIELD FUND....................... declared daily; paid monthly annually annually
AIM INCOME FUND........................... declared daily; paid monthly annually annually
AIM INTERMEDIATE GOVERNMENT FUND.......... declared daily; paid monthly annually annually
AIM INTERNATIONAL EQUITY FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND............. declared and paid annually annually annually
AIM JAPAN GROWTH FUND..................... declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND............ declared and paid annually annually annually
AIM LIMITED MATURITY TREASURY FUND........ declared daily; paid monthly annually annually
AIM MID CAP EQUITY FUND................... declared and paid annually annually annually
AIM MONEY MARKET FUND..................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................... declared daily; paid monthly annually annually
AIM NEW PACIFIC GROWTH FUND............... declared and paid annually annually annually
AIM SELECT GROWTH FUND.................... declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND................. declared and paid annually annually annually
AIM SMALL CAP OPPORTUNITIES FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND................. declared and paid monthly annually annually
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT... declared daily; paid monthly annually annually
AIM TAX-EXEMPT CASH FUND.................. declared daily; paid monthly at least annually annually
AIM TAX-FREE INTERMEDIATE FUND............ declared daily; paid monthly annually annually
AIM VALUE FUND............................ declared and paid annually annually annually
AIM WEINGARTEN FUND....................... declared and paid annually annually annually
AIM WORLDWIDE GROWTH FUND................. declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each AIM Fund may make
additional distributions, if necessary, to avoid a non-deductible 4% federal
excise tax on certain undistributed income and capital gain (the "Excise Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to a class are reinvested in additional
shares of such class, absent an election by a shareholder to receive cash or to
have such dividends and distributions reinvested in like shares of another
Multiple Class Fund, to the extent permitted. For funds that do not declare a
dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the ex-dividend date. For funds that declare
a dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or the
dividend portion thereof, in cash, or to invest such dividends and distributions
in shares of another fund in the AIM Funds; provided that (i) dividends and
distributions attributable to Class B shares may only be reinvested in Class B
shares, (ii) dividends and distributions attributable to Class C shares may only
be reinvested in Class C shares, (iii) dividends and distributions attributable
to Class A shares may not be reinvested in Class B or Class C shares, and (iv)
dividends and distributions attributable to the AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may not be reinvested in the Class A shares of that Fund or in
any Class B or Class C shares. Investors who have not previously selected such a
reinvestment option on the account application form may contact the Transfer
Agent at any time to obtain a form to authorize such reinvestments in another
AIM Fund. Such reinvestments into the AIM Funds are not subject to sales
charges, and shares so purchased are automatically credited to the account of
the shareholder.
Dividends on Class B and Class C shares of an AIM Fund are expected to be
lower than dividends for Class A shares of that fund or AIM Cash Reserve Shares
because of higher distribution fees paid by Class B and Class C shares.
Dividends on all shares may also be affected by other class-specific expenses.
A-20
<PAGE> 89
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares, except for "exempt-interest dividends" paid by
AIM HIGH INCOME MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND
FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND
(the "Tax-Exempt Funds"), which are exempt from federal income tax. With respect
to tax-exempt shareholders, dividends and distributions from the AIM Funds are
not subject to federal income taxation to the extent permitted under the
applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR REAL ESTATE FUND, AIM ASIAN GROWTH FUND,
AIM DEVELOPING MARKETS FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS FUND, AIM
EMERGING MARKETS DEBT FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GOVERNMENT INCOME FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL TRENDS FUND, AIM HIGH
YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL
EQUITY FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM LATIN
AMERICAN GROWTH FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MONEY MARKET FUND,
AIM NEW PACIFIC GROWTH FUND, AIM STRATEGIC INCOME FUND or any of the Tax-Exempt
Funds will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year. No gain or loss will be recognized by shareholders upon
the automatic conversion of Class B shares of a Multiple Class Fund into Class A
shares of such fund.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
A-21
<PAGE> 90
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may affect the amount of social security and railroad retirement
benefits subject to federal income tax, may affect the deductibility of interest
on certain indebtedness of a shareholder, and may have other collateral federal
income tax consequences. In addition, the Tax-Exempt Funds may invest in
Municipal Securities the interest on which will constitute an item of tax
preference and which therefore could give rise to a federal alternative minimum
tax liability for certain shareholders; each Tax-Exempt Fund may invest up to
20% of its net assets in such securities and other taxable securities. For
additional information concerning the alternative minimum tax and certain
collateral tax consequences of the receipt of exempt-interest dividends, see the
Statements of Additional Information applicable to the Tax-Exempt Funds.
The Tax-Exempt Funds may pay dividends to shareholders that are taxable, but
will endeavor to avoid investments that would result in taxable dividends. The
percentage of dividends that constitutes exempt-interest dividends, and the
percentage thereof (if any) that constitutes items of tax preference, will be
determined annually. These percentages may differ from the actual percentages
for any particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional fund shares.
Distributions of net capital gain will be taxable as long-term capital gains,
whether received in cash or additional fund shares and regardless of the length
of time a shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM GLOBAL GOVERNMENT INCOME FUND, AIM
GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HIGH INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP EQUITY FUND,
AIM SMALL CAP GROWTH FUND, AIM STRATEGIC INCOME FUND -- SPECIAL TAX INFORMATION.
Certain states exempt from income taxes dividends paid by mutual funds
attributable to interest on U.S. Treasury and certain other U.S. government
obligations. Investors should consult with their own tax advisors concerning the
availability of such exemption.
AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ASIAN GROWTH FUND, AIM DEVELOPING
MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH FUND, AIM EUROPEAN
DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL CONSUMER
PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL SERVICES FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INCOME FUND, AIM GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND,
AIM GLOBAL TELECOMMUNICATIONS FUND, AIM GLOBAL UTILITIES FUND, AIM INTERNATIONAL
EQUITY FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM LATIN
AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND, AIM WORLDWIDE GROWTH
FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is eligible to do
so, each of these funds may elect to pass through to its shareholders credits
for foreign taxes paid. If a fund makes such an election, a shareholder who
receives a distribution (1) will be required to include in gross income his
proportionate share of foreign taxes allocable to the distribution and (2) may
claim a credit or deduction for such share for his taxable year in which the
distribution is received, subject to the general limitations imposed on the
allowance of foreign tax credits and deductions. Shareholders should also note
that certain gains or losses attributable to fluctuations in exchange rates or
foreign currency forward contracts may increase or decrease the amount of income
of the fund available for distribution to shareholders and should note that if,
for any fund, such losses exceed other income during a taxable year, the fund
would not be able to pay ordinary income dividends for that year.
A-22
<PAGE> 91
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM LIMITED MATURITY TREASURY FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE
INTERMEDIATE FUND, for which The Bank of New York, 90 Washington Street, 11th
Floor, New York, New York 10286, serves as custodian. Chase Bank of Texas, N.A.,
P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for retail
purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each AIM Fund's transfer agent and dividend
payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be viewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-23
<PAGE> 92
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Give Social Security GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for the Requester of Form W-9 (which can be obtained
from the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF-07/98
B-1
<PAGE> 93
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney-in-fact to surrender for redemption any and all unissued
shares held by the Transfer Agent in the designated account(s), or in any other
account with any of the AIM Funds, present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and
mailing address of the shares to be purchased are identical to the registration
of the shares being redeemed. An investor acknowledges by signing the form that
he understands and agrees that the Transfer Agent and AIM Distributors may not
be liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction. The Transfer Agent
reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone exchange privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any exchanges must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "Exchange Privilege -- Exchanges
by Mail").
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by the Transfer Agent in the designated account(s), present
or future, with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption. An investor acknowledges by signing the
form that he understands and agrees that the Transfer Agent and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any redemptions must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "How to Redeem
Shares -- Redemptions by Mail").
MCF-07/98
B-2
<PAGE> 94
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
Investment Manager
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Sub-Advisor
INVESCO (NY), Inc.
50 California Street, 27th Floor
San Francisco, CA 94111
Principal Underwriter
A I M Distributors, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Independent Accountants
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
For more complete information about any other fund in The AIM Family of
Funds--Registered Trademark--, including charges and expenses, please call (800)
347-4246 or write to A I M Distributors, Inc. and request a free prospectus.
Please read the prospectus carefully before you invest or send money.
DVM-PRO-1
<PAGE> 95
AIM DEVELOPING MARKETS FUND
AIM EMERGING MARKETS FUND
PORTFOLIOS OF AIM INVESTMENT FUNDS
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 347-4246
STATEMENT OF ADDITIONAL INFORMATION
(1999 Special Meeting of Shareholders of AIM Emerging Markets Fund)
This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the Combined Proxy Statement and Prospectus
dated December ___, 1998 of AIM Investment Funds (the "Company") for use in
connection with the Special Meeting of Shareholders of AIM Emerging Markets Fund
("Emerging Markets Fund") to be held on February ___, 1999. Copies of the
Combined Proxy Statement and Prospectus may be obtained at no charge by writing
the Company at the address shown above or by calling 1-800-347-4246.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement and Prospectus.
A Statement of Additional Information for the Company dated September
8, 1998, as supplemented on September 28, 1998, has been filed with the
Securities and Exchange Commission and is attached hereto as Appendix I which is
incorporated herein by this reference.
The date of this Statement of Additional Information is December ___,
1998.
TABLE OF CONTENTS
Appendix I - AIM Investment Funds Statement of Additional Information
<PAGE> 96
APPENDIX I
STATEMENT OF
ADDITIONAL INFORMATION
CLASS A AND CLASS B SHARES OF
AIM DEVELOPING MARKETS FUND
AIM EMERGING MARKETS FUND
AIM LATIN AMERICAN GROWTH FUND
(SERIES PORTFOLIOS OF
AIM INVESTMENT FUNDS)
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 FUNDS, A COPY OF WHICH MAY BE OBTAINED FREE
OF CHARGE FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 347-4246
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 8, 1998
RELATING TO THE AIM DEVELOPING MARKETS FUND PROSPECTUS, THE AIM EMERGING MARKETS
FUND PROSPECTUS
AND THE AIM LATIN AMERICAN GROWTH FUND PROSPECTUS EACH DATED SEPTEMBER 8, 1998
<PAGE> 97
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE FUNDS......................... 4
The Trust and Its Shares.................................. 4
INVESTMENT OBJECTIVES AND POLICIES.......................... 5
Investment Objectives..................................... 5
Selection of Equity Investments........................... 5
Investments in Other Investment Companies................. 6
Depositary Receipts....................................... 6
Warrants or Rights........................................ 7
Lending of Portfolio Securities........................... 7
Commercial Bank Obligations............................... 7
Repurchase Agreements..................................... 7
Borrowing, Reverse Repurchase Agreements and "Roll"
Transactions........................................... 8
Short Sales............................................... 8
Temporary Defensive Strategies............................ 9
Samurai and Yankee Bonds.................................. 9
Debt Conversions.......................................... 9
Premium Securities........................................ 10
Indexed Debt Securities................................... 10
Structured Investments.................................... 10
Stripped Income Securities................................ 10
Floating and Variable Rate Income Securities.............. 11
Swaps, Caps, Floors and Collars........................... 11
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................... 11
Special Risks of Options, Futures and Currency
Strategies............................................. 11
Writing Call Options...................................... 12
Writing Put Options....................................... 13
Purchasing Put Options.................................... 13
Purchasing Call Options................................... 13
Index Options............................................. 15
Interest Rate, Currency and Stock Index Futures........... 15
Options on Futures Contracts.............................. 17
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies.......................... 17
Forward Contracts......................................... 18
Foreign Currency Strategies -- Special Considerations..... 18
Cover..................................................... 19
RISK FACTORS................................................ 19
Illiquid Securities....................................... 19
Foreign Securities........................................ 20
INVESTMENT LIMITATIONS...................................... 25
Developing Markets Fund................................... 25
Emerging Markets Fund..................................... 26
Latin American Fund....................................... 28
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 29
Portfolio Trading and Turnover............................ 30
MANAGEMENT.................................................. 31
Trustees and Executive Officers........................... 31
Investment Management and Administration Services......... 33
</TABLE>
2
<PAGE> 98
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE DISTRIBUTION PLANS...................................... 34
The Class A Plan.......................................... 34
The Class B Plan.......................................... 34
Both Plans................................................ 34
THE DISTRIBUTOR............................................. 37
Expenses of the Funds..................................... 38
NET ASSET VALUE DETERMINATION............................... 38
HOW TO PURCHASE AND REDEEM SHARES........................... 39
QUALIFYING FOR A REDUCED FRONT-END SALES CHARGE............. 40
PROGRAMS AND SERVICES FOR SHAREHOLDERS...................... 40
DIVIDEND ORDER.............................................. 40
TAXES....................................................... 41
General................................................... 41
Foreign Taxes............................................. 41
Passive Foreign Investment Companies...................... 41
Non-U.S. Shareholders..................................... 42
Options, Futures and Foreign Currency Transactions........ 42
MISCELLANEOUS INFORMATION................................... 43
Custodian................................................. 43
Transfer Agency and Accounting Agency Services............ 43
Independent Accountants................................... 43
Shareholder Liability..................................... 43
Name...................................................... 44
Control Persons and Principle Holders of Securities....... 44
INVESTMENT RESULTS.......................................... 45
Total Return Quotations................................... 45
Other Information Regarding Standard Total and
Non-Standard Total Returns for Developing Markets
Fund................................................... 48
Performance Information................................... 48
APPENDIX.................................................... 50
Description of Bond Ratings............................... 50
Description of Commercial Paper Ratings................... 51
Absence of Rating......................................... 51
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 99
INTRODUCTION
This Statement of Additional Information relates to the Class A and Class B
shares of AIM Developing Markets Fund ("Developing Markets Fund"), AIM Emerging
Markets Fund ("Emerging Markets Fund") and AIM Latin American Growth Fund
("Latin American Fund") (each, a "Fund," and collectively, the "Funds").
Developing Markets Fund and Latin American Fund each is a non-diversified, and
Emerging Markets Fund is a diversified series of AIM Investment Funds (the
"Trust"), a registered open-end management investment company organized as a
Delaware business trust. On October 31, 1997, the Developing Markets Fund, which
had no prior operating history, acquired the assets and assumed the liabilities
of G.T. Global Developing Markets Fund, Inc. (the "Predecessor Fund"), a
closed-end investment company.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for, and INVESCO (NY), Inc. (the "Sub-advisor") serves as the
investment sub-advisor and sub-administrator for the Funds.
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 the fund
being considered for investment. This information for Developing Markets Fund is
included in a separate Prospectus dated September 8, 1998, for Emerging Markets
Fund is included in a separate Prospectus dated September 8, 1998 and for Latin
American Fund is included in a separate Prospectus dated September 8, 1998.
Additional copies of the Prospectuses and 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.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Funds. Some of the
information required to be in this Statement of Additional Information is also
included in the Prospectus; and, in order to avoid repetition, reference will be
made to sections of the Prospectus. Additionally, the Prospectus and this
Statement of Additional Information omit certain information contained in the
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 FUNDS
THE TRUST AND ITS SHARES
The Trust previously operated under the name G.T. Investment Funds, Inc.,
which was organized as a Maryland corporation on October 29, 1987. The Trust was
reorganized on September 8, 1998 as a Delaware business trust, and is registered
with the SEC as a diversified open-end series management investment company. The
Trust currently consists of the following portfolios: AIM Global Financial
Services Fund, AIM Global Infrastructure Fund, AIM Global Resources Fund, AIM
Global Consumer Products and Services Fund, AIM Global Healthcare Fund, AIM
Global Telecommunications Fund, AIM Global Government Income Fund, AIM Global
High Income Fund, AIM Strategic Income Fund, AIM Global Growth and Income Fund,
AIM Emerging Markets Fund, AIM Developing Markets Fund, and AIM Latin American
Growth Fund. Each of these funds has three separate classes: Class A, Class B
and Advisor Class shares. All historical financial and other information
contained in this Statement of Additional Information for periods prior to
September 8, 1998, is that of the series of G.T. Investment Funds, Inc. (renamed
AIM Investment Funds, Inc.).
This Statement of Additional Information relates solely to the Class A and B
shares of the Fund.
The term "majority of the outstanding shares" of the Trust, of a particular
Fund or of a particular class of a Fund means, respectively, the vote of the
lesser of (a) 67% or more of the shares of the Trust, such Fund or such class
present at a meeting of the Trust's shareholders, if the holders of more than
50% of the outstanding shares of the Trust, such Fund or such class are present
or represented by proxy, or (b) more than 50% of the outstanding shares of the
Trust, such Fund or such class.
Class A, Class B and Advisor Class shares of each Fund have equal rights and
privileges. Each share of a particular class is entitled to one vote, to
participate equally in dividends and distributions declared by the Trust's Board
of Trustees with respect to the class of such 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.
4
<PAGE> 100
Shareholders of the Funds do not have cumulative voting rights, and therefore
the holders of more than 50% of the outstanding shares of all Funds 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.
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
Developing Markets Fund. The primary investment objective of Developing
Markets Fund is long-term capital appreciation. Its secondary investment
objective is income, to the extent consistent with seeking capital appreciation.
The Fund normally invests substantially all of its assets in issuers in the
developing (or "emerging") markets of Asia, Europe, Latin America and elsewhere.
The Fund does not consider the following countries to be emerging markets:
Australia, Austria, Belgium, Canada, Denmark, England, Finland, France, Germany,
Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Spain, Sweden,
Switzerland and the United States.
Emerging Markets Fund. The investment objective of Emerging Markets Fund is
long-term growth of capital. The Fund seeks this objective by investing, under
normal circumstances, at least 65% of its total assets in equity securities of
companies in emerging markets. The Fund does not consider the following
countries to be emerging markets: Australia, Austria, Belgium, Canada, Denmark,
England, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New
Zealand, Norway, Spain, Sweden, Switzerland and United States. The Fund normally
may invest up to 35% of its assets in a combination of (i) debt securities of
government or corporate issuers in emerging markets; (ii) equity and debt
securities of issuers in developed countries, including the United States; (iii)
securities of issuers in emerging markets not included in the list of emerging
markets set forth in the Fund's current Prospectus, if investing therein becomes
feasible and desirable subsequent to the date of the Fund's current Prospectus;
and (iv) cash and money market instruments.
In determining what countries constitute emerging markets with respect to
Developing Market Fund and Emerging Markets Fund, the Sub-advisor will consider,
among other things, data, analysis, and classification of countries published or
disseminated by the International Bank for Reconstruction and Development
(commonly known as the World Bank) and the International Finance Corporation
("IFC").
Latin American Fund. The investment objective of Latin American Fund is
capital appreciation. The Fund will normally invest at least 65% of its total
assets in securities of a broad range of Latin American issuers. Under current
market conditions, the Fund expects to invest primarily in equity and debt
securities issued by companies and governments in Mexico, Chile, Brazil and
Argentina. Though the Fund can normally invest up to 35% of its total assets in
U.S. securities, the Fund reserves the right to be primarily invested in U.S.
securities for temporary defensive purposes or pending investment of the
proceeds of the offering made hereby.
SELECTION OF EQUITY INVESTMENTS
In determining the appropriate distribution of investments among various
countries and geographic regions for the Funds, the Sub-advisor ordinarily
considers the following factors: prospects for relative economic growth among
the different countries in which a Fund may invest; expected levels of
inflation; government policies influencing business conditions; the outlook for
currency relationships; and the range of the individual investment opportunities
available to international investors.
In analyzing companies for investment by each Fund, the Sub-advisor ordinarily
looks for one or more of the following characteristics: an above-average
earnings growth per share; high return on invested capital; healthy balance
sheet; sound financial and accounting policies and overall financial strength;
strong competitive advantages; effective research and product development and
marketing; efficient service; pricing flexibility; strength of management; and
general operating characteristics which will enable the companies to compete
successfully in their respective marketplaces. In certain countries,
governmental restrictions and other limitations on investment may affect the
maximum percentage of equity ownership in any one company by the Funds. 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.
Although the Funds value their assets daily in terms of U.S. dollars, the
Funds do not intend to convert their holdings of foreign currencies into U.S.
dollars on a daily basis. The Funds 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 are buying and
selling various currencies.
5
<PAGE> 101
Thus, a dealer may offer to sell a foreign currency to the Funds at one rate,
while offering a lesser rate of exchange should a Fund desire to sell that
currency to the dealer.
There may be times when, in the opinion of the Sub-advisor, prevailing market,
economic or political conditions warrant reducing the proportion of each Fund's
assets invested in equity securities and increasing the proportion held in cash
or short-term obligations denominated in U.S. dollars or other currencies. A
portion of each Fund's assets may be held in U.S. dollars or short-term
interest-bearing dollar-denominated securities to provide for ongoing expenses
and redemptions.
The Funds may be prohibited under the Investment Company Act of 1940, as
amended ("1940 Act"), from purchasing the securities of any foreign company
that, in its most recent fiscal year, derived more than 15% of its gross
revenues from securities-related activities ("securities-related companies"). In
a number of countries, including those in Latin America, commercial banks act as
securities broker/dealers, investment advisors and underwriters or otherwise
engage in securities-related activities, which may limit the Fund's ability to
hold securities issued by such banks. The Fund has obtained an exemption from
the SEC to permit it to invest in certain of these securities subject to certain
restrictions.
For investment purposes, an issuer is typically considered as located in a
particular country if it (a) is incorporated under the laws of or has its
principal office in that country, or (b) it normally derives 50% or more of its
total revenue from business in that country. However, these are not absolute
requirements, and certain companies incorporated in a particular country and
considered by the Sub-advisor to be located in that country may have substantial
off-shore operations or subsidiaries and/or export sales exceeding in size the
assets or sales in that country.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Funds may invest in the securities of investment companies (including
investment vehicles or companies advised by the Sub-advisor or its affiliates
("Affiliated Funds")) within the limits of the 1940 Act. These limitations
currently provide that, in general, each Fund may purchase shares of a
closed-end investment company unless (a) such a purchase would cause the Fund to
own in the aggregate more than 3 percent of the total outstanding voting stock
of the investment company or (b) such a purchase would cause the Fund to have
more than 5 percent of its total assets invested in the investment company or
more than 10 percent of its total assets invested in an aggregate of all such
investment companies. Investment in such investment companies may also involve
the payment of substantial premiums above the value of such companies' portfolio
securities. The Funds do not intend to invest in such investment companies
unless, in the judgment of the Sub-advisor, the potential benefits of such
investments justify the payment of any applicable premiums. The return on such
securities will be reduced by operating expenses of such companies including
payments to the investment managers of those investment companies. With respect
to investments in Affiliated Funds, the Sub-advisor waives its advisory fee to
the extent that such fees are based on assets of the Fund invested in Affiliated
Funds.
Certain countries in which the Funds invest presently may be made only by
acquiring shares of other investment companies with local governmental approval
to invest in those countries. At such time as direct investment in those
countries is allowed, the Funds anticipate investing directly in those markets.
DEPOSITARY RECEIPTS
Each Fund may hold equity securities of foreign issuers in the form of
American Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs"),
Global Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs"),
or other securities convertible into securities of eligible issuers. These
securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. ADRs and ADSs typically are 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 Depository Receipts ("CDRs"), are issued in Europe typically
by foreign banks and trust companies and evidence ownership of either foreign or
domestic securities. GDRs are similar to EDRs and are designed for use in
several international financial markets. Generally, ADRs and ADSs in registered
form are designed for use in United States securities markets and EDRs in bearer
form are designed for use in European securities markets. For purposes of each
Fund's investment policies, a Fund's investments in ADRs, ADSs, GDRs 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
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<PAGE> 102
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 depositary. 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
Fund may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by each Fund in connection with other
securities or separately and provide a Fund 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 PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Funds may make secured
loans of portfolio securities amounting to not more than 30% (in the case of
Developing Markets Fund and Emerging Markets Fund) or 25% (in the case of Latin
American Fund) of its total assets. Securities loans are made to broker/dealers
or institutional investors pursuant to agreements requiring that the loans
continuously be secured by collateral at least equal at all times to the value
of the securities lent plus any accrued interest, "marked to market" on a daily
basis. The Funds may pay reasonable administrative and custodial fees in
connection with loans of its securities. While the securities loan is
outstanding with respect to a Fund, the Fund 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.
The Fund will have a right to call each loan and obtain the securities within
the stated settlement period. The Fund will not have the right to vote equity
securities while they are lent, but it may call in a loan in anticipation of any
important vote. Loans will be made only to firms deemed by the Sub-advisor to be
of good standing and will not be made unless, in the judgment of the
Sub-advisor, the consideration to be earned from such loans would justify the
risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each Fund'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, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject a Fund to investment risks that are
different in some respects from those of investments in obligations of domestic
issuers. Although a Fund typically will acquire obligations issued and supported
by the credit of U.S. or foreign banks having total assets at the time of
purchase in excess of $1 billion, this $1 billion figure is not an investment
policy or restriction of any Fund. 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 a Fund purchases a security
from a bank or recognized securities dealer and simultaneously commits to resell
that security to the bank or dealer at an agreed upon price, date, and market
rate of interest unrelated to the coupon rate or maturity of the purchased
security. 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 a Fund if the other party
to the repurchase agreement becomes bankrupt, the Funds intend to enter into
repurchase agreements only with banks and dealers believed by the Sub-advisor to
present
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<PAGE> 103
minimum credit risks in accordance with guidelines established by the Trust's
Board of Trustees. The Sub-advisor will review and monitor the creditworthiness
of such institutions under the Board's general supervision.
The Funds 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, a Fund
would suffer a loss. If the financial institution which is party to the
repurchase agreement petitions for bankruptcy or otherwise becomes subject to
bankruptcy or other liquidation proceedings, there may be restrictions on a
Fund's ability to sell the collateral and the Fund could suffer a loss. However,
with respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, each Fund intends to comply
with provisions under the U.S. Bankruptcy Code that would allow it immediately
to resell the collateral. There is no limitation on the amount of a Fund's
assets that may be subject to repurchase agreements at any given time. The Funds
will not enter into a repurchase agreement with a maturity of more than seven
days if, as a result, more than 15% (for Emerging Markets Fund and Developing
Markets Fund) or 10% (for Latin American Fund) of the value of its net assets
would be invested in such repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
No Fund's borrowings will exceed 33 1/3% of the Fund's total assets, i.e.,
each Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of a Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, within three days (excluding
Sundays and holidays) of such event the Fund 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 Fund also may borrow up to
5% of its total assets for temporary or emergency purposes other than to meet
redemptions. Any borrowing by a Fund may cause greater fluctuation in the value
of its shares than would be the case if the Fund did not borrow.
The Funds' fundamental investment limitations permit them to borrow money for
leveraging purposes. Developing Market Fund, however, currently is prohibited,
pursuant to a non-fundamental investment policy, from borrowing money in order
to purchase securities. In addition, Emerging Markets Fund and Latin American
Fund currently are prohibited, pursuant to a non-fundamental investment policy,
from purchasing securities during times when outstanding borrowings represent
more than 5% of its assets. Nevertheless, this policy may be changed in the
future by a vote of a majority of the Trust's Board of Trustees. If a Fund
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 Fund's net asset value. When the
income and gains on securities purchased with the proceeds of borrowings exceed
the costs of such borrowings, the Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if such income and
gains fail to exceed such costs, the Fund's earnings or net asset value would
decline faster than would otherwise be the case.
Each Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which a Fund transfers possession of a
security to another party, such as a bank or broker/dealer in return for cash,
and agrees to repurchase the security in the future at an agreed upon price,
which includes an interest component. Emerging Markets Fund also may engage in
"roll" borrowing transactions which involve the Fund's sale of Government
National Mortgage Association certificates or other securities together with a
commitment (for which the Fund may receive a fee) to purchase similar, but not
identical, securities at a future date. Each Fund will segregate with a
custodian, liquid assets in an amount sufficient to cover its obligations under
"roll" transactions (for Emerging Markets Fund) and reverse repurchase
agreements with broker/dealers. No segregation is required for reverse
repurchase agreements with banks.
SHORT SALES
The Fund may make short sales of securities, although it has no current
intention of doing so. A short sale is a transaction in which the Fund sells a
security in anticipation that the market price of that security will decline.
The Fund may make short sales (i) as a form of hedging to offset potential
declines in long positions in securities it owns, or anticipates acquiring, and
(ii) in order to maintain portfolio flexibility.
When a Fund 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 Fund 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.
A Fund's obligation to replace the borrowed security when the borrowing is
called or expires will be secured by collateral deposited with the intermediary.
The Fund 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%
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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 the Fund on such security, the Fund
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 the Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund will realize a gain.
Any gain will be decreased, and any loss increased, by the transaction costs
associated with the transaction. Although the Fund's gain is limited by the
price at which it sold the security short, its potential loss is theoretically
unlimited.
Neither Emerging Markets Fund nor Latin American Fund will make a short sale
if, after giving effect to such sale, the market value of the securities sold
short exceeds 25% of the value of its total assets or the Fund's aggregate short
sales of the securities of any one issuer exceed the lesser of 2% of the Fund's
net assets or 2% of the securities of any class of the issuer. Moreover, these
Funds may engage in short sales only with respect to securities listed on a
national securities exchange. These Funds may make short sales "against the box"
without respect to such limitations. In this type of short sale, at the time of
the sale the Fund owns the security it has sold short or has the immediate and
unconditional right to acquire at no additional cost the identical security.
Developing Markets Fund may only make short sales "against the box." The Fund
might make a short sale "against the box" in order to hedge against market risks
when the Sub-advisor believes that the price of a security may decline, causing
a decline in the value of a security owned by the Fund or a security convertible
into or exchangeable for such security. In such case, any future losses in the
Fund's long position should be reduced by a gain in the short position.
Conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses in the long position
are reduced will depend upon the amount of the securities sold short relative to
the amount of the securities the Fund owns, either directly or indirectly, and,
in the case where the Fund owns convertible securities, changes in the
investment values or conversion premiums of such securities. There will be
certain additional transaction costs associated with short sales "against the
box," but the Fund will endeavor to offset these costs with income from the
investment of the cash proceeds of short sales.
TEMPORARY DEFENSIVE STRATEGIES
The Funds may invest in the following types of money market instruments (i.e.,
debt instruments with less than 12 months remaining until maturity) denominated
in U.S. dollars or other currencies (in the case of Latin American Fund, the
currency of any Latin American country): (a) obligations issued or guaranteed by
the U.S. or foreign governments (in the case of Latin American Fund, the
government of any Latin American country), their agencies, instrumentalities or
municipalities; (b) obligations of international organizations designed or
supported by multiple foreign governmental entities to promote economic
reconstruction or development; (c) finance company obligations, corporate
commercial paper and other short-term commercial obligations; (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances); (e) repurchase agreements with respect to the
foregoing; and (f) other substantially similar short-term debt securities with
comparable characteristics.
The Funds may invest in commercial paper rated as low as A-3 by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") or P-3 by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, determined by the Manager
to be of comparable quality. Obligations rated A-3 and P-3 are considered by S&P
and Moody's, respectively, to have an acceptable capacity for timely repayment.
However, these securities may be more vulnerable to adverse effects of changes
in circumstances than obligations carrying higher designations.
SAMURAI AND YANKEE BONDS
Subject to its fundamental investment restrictions, Developing Markets Fund
and Emerging Markets Fund may invest in yen-denominated bonds sold in Japan by
non-Japanese issuers ("Samurai bonds"), and may invest in dollar-denominated
bonds sold in the United States by non-U.S. issuers ("Yankee bonds"). As
compared with bonds issued in their countries of domicile, such bond issues
normally carry a higher interest rate but are less actively traded. It is the
policy of each of these Funds to invest in Samurai or Yankee bond issues only
after taking into account considerations of quality and liquidity, as well as
yield. In the case of Emerging Markets Fund, these bonds would be issued by
governments which are members of the Organization for Economic Cooperation and
Development or have AAA ratings.
DEBT CONVERSIONS
Several Latin American countries have adopted debt conversion programs,
pursuant to which investors may use external debt of a country, directly or
indirectly, to make investments in local companies. The terms of the various
programs vary
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from country to country, although each program includes significant restrictions
on the application of the proceeds received in the conversion and on the
remittance of profits on the investment and of the invested capital. Latin
American Fund intends to acquire Sovereign Debt, as defined in the Prospectus,
to hold and trade in appropriate circumstances as described in the Prospectus,
as well as to participate in Latin American debt conversion programs. The
Sub-advisor will evaluate opportunities to enter into debt conversion
transactions as they arise but does not currently intend to invest more than 5%
of the Fund's assets in such programs.
PREMIUM SECURITIES
Developing Markets Fund may invest in income securities bearing coupon rates
higher than prevailing market rates. Such "premium" securities are typically
purchased at prices greater than the principal amounts payable on maturity. The
Fund will not amortize the premium paid for such securities in calculating its
net investment income. As a result, in such cases the purchase of such
securities provides the Fund a higher level of investment income distributable
to shareholders on a current basis than if the Fund purchased securities bearing
current market rates of interest. If securities purchased by the Fund at a
premium are called or sold prior to maturity, the Fund will realize a loss to
the extent the call or sale price is less than the purchase price. Additionally,
the Fund will realize a loss if it holds such securities to maturity.
INDEXED DEBT SECURITIES
Developing Markets Fund may invest in debt securities issued by banks and
other business entities not located in developing market countries that are
indexed to certain specific foreign currency exchange rates, interest rates or
other reference rates. The terms of such securities provide that their principal
amount is adjusted upwards or downwards (but ordinarily not below zero) at
maturity to reflect changes in the exchange rate between two currencies (or
other rates) while the obligations are outstanding. While such securities offer
the potential for an attractive rate of return, they also entail the risk of
loss of principal. New forms of such securities continue to be developed. The
Fund may invest in such securities to the extent consistent with its investment
objectives.
STRUCTURED INVESTMENTS
Developing Markets Fund may invest a portion of its assets in interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of Sovereign Debt. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, of specified instruments (such as commercial bank loans or Brady Bonds)
and the issuance by that entity of one or more classes of securities
("Structured Investments") backed by, or representing interests in, the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Investments to create securities
with different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Investments is dependent on the extent of the cash
flow on the underlying instruments. Because Structured Investments of the type
in which the Fund anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments.
Developing Markets Fund is permitted to invest in a class of Structured
Investments that is either subordinated or not subordinated to the right of
payment of another class. Subordinated Structured Investments typically have
higher yields and present greater risks than unsubordinated Structured
Investments.
Certain issuers of Structured Investments may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, Developing Markets Fund's
investment in these Structured Investments may be limited by the restrictions
contained in the 1940 Act described above under "Investment Objectives and
Policies -- Investments in Other Investment Companies." Structured Investments
are typically sold in private placement transactions, and there currently is no
active trading market for Structured Investments.
STRIPPED INCOME SECURITIES
Developing Markets Fund may invest a portion of its assets in stripped income
securities, which are obligations representing an interest in all or a portion
of the income or principal components of an underlying or related security, a
pool of securities or other assets. In the most extreme case, one class will
receive all of the interest (the "interest only class" or the "IO class"), while
the other class will receive all of the principal (the "principal-only class" or
the "PO class"). The market values of stripped income securities tend to be more
volatile in response to changes in interest rates than are conventional income
securities.
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FLOATING AND VARIABLE RATE INCOME SECURITIES
Developing Markets Fund may invest a portion of its assets in floating or
variable rate income securities. Income securities may provide for floating or
variable rate interest or dividend payments. The floating or variable rate may
be determined by reference to a known lending rate, such as a bank's prime rate,
a certificate of deposit rate or the London Inter Bank Offered Rate (LIBOR).
Alternatively, the rate may be determined through an auction or remarketing
process. The rate also may be indexed to changes in the values of interest rate
or securities indexes, currency exchange rates or other commodities. The amount
by which the rate paid on an income security may increase or decrease may be
subject to periodic or lifetime caps. Floating and variable rate income
securities include securities whose rates vary inversely with changes in market
rates of interest. Such securities may also pay a rate of interest determined by
applying a multiple to the variable rate. The extent of increases and decreases
in the value of securities whose rates vary inversely with changes in market
rates of interest generally will be larger than comparable changes in the value
of an equal principal amount of a fixed rate security having similar credit
quality, redemption provisions and maturity.
SWAPS, CAPS, FLOORS AND COLLARS
Developing Markets Fund may enter into interest rate, currency and index swaps
and may purchase or sell related caps, floors and collars and other derivative
instruments. The Fund expects to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a technique for managing
the portfolio's duration (i.e., the price sensitivity to changes in interest
rates) or to protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. The Fund intends to use these
transactions as hedges and will not sell interest rate caps, floors or collars
if it does not own securities or other instruments providing an income stream
roughly equivalent to what the Fund may be obligated to pay.
Interest rate swaps involve the exchange by Developing Markets Fund with
another party of their respective commitments to pay or receive interest (for
example, an exchange of floating rate payments for fixed rate payments) with
respect to a notional amount of principal. A currency swap is an agreement to
exchange cash flows on a notional amount based on changes in the values of the
reference indices.
The purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments on a notional principal amount
from the party selling the floor to the extent that a specified index falls
below a predetermined interest rate or amount. A collar is a combination of a
cap and a floor that preserves a certain return within a predetermined range of
interest rates or values.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Sub-advisor's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes
in the prices of individual securities. While the Sub-advisor is
experienced in the use of these instruments, there can be no assurance that
any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used
in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can
also reduce opportunity for gain by offsetting the positive effect of
favorable price movements in the hedged investments. For example, if a Fund
entered into a short hedge because the Sub-advisor projected a decline in
the price of a security in
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the Fund'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 Fund could suffer a loss. In either such case, the Fund would have been
in a better position had it not hedged at all.
(4) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties (i.e.,
instruments other than purchased options). If the Fund were unable to close
out its positions in such instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the position
expired or matured. The requirements might impair the Fund's ability to
sell a portfolio security or make an investment at a time when it would
otherwise be favorable to do so, or require that the Fund sell a portfolio
security at a disadvantageous time. A Fund'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 Funds.
WRITING CALL OPTIONS
Each Fund may write (sell) call options on securities, indices and currencies.
Call options generally will be written on securities and currencies that, in the
opinion of the Sub-advisor are not expected to make any major price moves in the
near future but that, over the long term, are deemed to be attractive
investments for a Fund.
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 may be assigned an
exercise notice, requiring him 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 Fund's investment objective. When writing a call option, a Fund, in return
for the premium, gives up the opportunity for profit from a price increase in
the underlying security or currency above the exercise price, and retains the
risk of loss should the price of the security or currency decline. Unlike one
who owns securities or currencies not subject to an option, a Fund 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 a Fund has written expires, the Fund
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 Fund 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 Funds do not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Funds' 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 a Fund will be obligated to
sell the security or currency at less than its market value.
The premium that a Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium a Fund will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the underlying investment, and
the length of the option period. In determining whether a particular call option
should be written, the Sub-advisor will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit a Fund to write another
call option on the underlying security or currency with either a different
exercise price, expiration date or both.
Each Fund will pay transaction costs in connection with the writing of options
and in entering into closing purchase contracts. Transaction costs relating to
options activity normally are higher than those applicable to purchases and
sales of portfolio securities.
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The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or currencies at the time the options
are written. From time to time, a Fund 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.
A Fund 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 the Fund.
WRITING PUT OPTIONS
Each Fund 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 identical substantially to that of call options.
A Fund generally would write put options in circumstances where the
Sub-advisor wishes to purchase the underlying security or currency for the
Fund's portfolio at a price lower than the current market price of the security
or currency. In such event, the Fund 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 Fund would also receive interest on debt
securities or currencies maintained to cover the exercise price of the option,
this technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying security or currency would decline below the exercise price less
the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the Fund will be obligated
to sell the security or currency at more than its market value.
PURCHASING PUT OPTIONS
Each Fund may purchase put options on securities, indices and currencies. As
the holder of a put option, a Fund 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. A Fund may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire.
A Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund to protect against an anticipated decline
in the value of the security or currency. Such protection is provided only
during the life of the put option when the Fund, 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.
A Fund also may purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, the Fund 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 Fund 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 Fund may purchase call options on securities, indices and currencies. As
the holder of a call option, a Fund 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. A Fund may enter
into closing sale transactions with respect to such options, exercise them or
permit them to expire.
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Call options may be purchased by a Fund for the purpose of acquiring the
underlying security or currency for its portfolio. Utilized in this fashion, the
purchase of call options would enable the Fund 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 also may be useful to a Fund 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 Fund 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.
A Fund also may 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 a Fund 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 Fund and the
realization of a loss on the underlying security or currency. Accordingly, the
Fund could purchase a call option on the same underlying security or currency,
which could be exercised to fulfill the Fund's delivery obligations under its
written call (if it is exercised). This strategy could allow the Fund to avoid
selling the portfolio security or currency at a time when it has an unrealized
loss; however, the Fund 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 a
Fund's total assets at the time of purchase.
Each Fund may attempt to accomplish objectives similar to those involved in
its use of Forward Contracts by purchasing put or call options on currencies. A
put option gives a Fund as purchaser the right (but not the obligation) to sell
a specified amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration date. A call option gives a Fund 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. A Fund 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
the Fund 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 a
Fund 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. A Fund will not purchase an OTC option unless it believes that daily
valuations for such options are readily obtainable. OTC options differ from
exchange-traded options in that OTC options are transacted with dealers directly
and not through a clearing corporation (which 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. A Fund may also sell OTC options and, in connection therewith,
segregate assets or cover its obligations with respect to OTC options written by
the Fund. The assets used as cover for OTC options written by the Fund will be
considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Fund 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.
A Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. Each Fund intends to
purchase or write only those exchange-traded options for which there appears to
be a liquid secondary market. 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 each
Fund will enter into OTC options only with contra parties that are expected to
be capable of entering into closing transactions with the Fund, there is no
assurance that the Funds 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, a Fund might be unable to close out an OTC option position at
any time prior to its expiration.
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INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or
futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. When a Fund 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 Fund 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 a Fund
buys a call on an index, it pays a premium and has the same rights as to such
call as are indicated above. When a Fund 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 Fund's exercise of the put, to deliver to the Fund 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 a Fund writes a put on an
index, it receives a premium and the purchaser has the right, prior to the
expiration date, to require the Fund to deliver to it an amount of cash equal to
the difference between the closing level of the index and the exercise price
times the multiplier, if the closing level is less than the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, a Fund cannot, as a practical matter, acquire and hold
a portfolio containing exactly the same securities as underlie the index and, as
a result, bears a risk that the value of the securities held will vary from the
value of the index.
Even if a Fund 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, a Fund, 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 a Fund 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 Fund 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
Each Fund may enter into interest rate or currency futures contracts, and may
enter into 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 prices in order to establish more definitely
the effective return on securities or currencies held or intended to be acquired
by the Fund. A Fund's transactions 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 and stock prices.
A Fund will only 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.
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Although techniques other than sales and purchases of Futures Contracts could
be used to reduce a Fund's exposure to interest rate, currency exchange rate and
stock market fluctuations, a Fund 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. An
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 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 the securities 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 are usually closed
out before the delivery date. Closing out an open Futures Contract sale or
purchase is effected by entering into an offsetting Futures Contract purchase or
sale, respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, a Fund realizes a gain; if it is
more, a Fund realizes a loss. Conversely, if the offsetting sale price is more
than the original purchase price, a Fund realizes a gain; if it is less, the
Fund realizes a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that a Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If a Fund is not able to enter into an offsetting
transaction, the Fund 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 Fund.
Each Fund'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 the Fund owns, or Futures Contracts
will be purchased to protect the Fund against an increase in the price of
securities or currencies it has committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by a Fund in order to initiate Futures trading and to maintain the
Fund's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to assure a
Fund's performance under the Futures Contract. The margin required for a
particular Futures Contract is set by the exchange on which the Futures Contract
is traded and may be modified significantly 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 a Fund entered into the Futures Contract will
be made on a daily basis as the price of the underlying security, currency or
index fluctuates making the Futures Contract more or less valuable, a process
known as marking-to-market.
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 a Fund'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
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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 Contract 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
Contract and option prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of positions and subjecting some traders to substantial
losses.
If a Fund 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 Fund would continue to be subject to
market risk with respect to the position. In addition, except in the case of
purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the 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 a Fund 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.
A Fund 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 a Fund enters into Futures Contracts, options on Futures
Contracts, and options on foreign currencies traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums required to establish those
positions (excluding the amount by which options
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are "in-the-money") will not exceed 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. 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
Trust's Board of Trustees without a shareholder vote. This limitation does not
limit the percentage of the Fund's assets at risk to 5%.
FORWARD CONTRACTS
A Forward Contract is an obligation, usually arranged with a commercial bank
or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. A Fund either
may accept or make delivery of the currency at the maturity of the Forward
Contract. The Fund may also, if its contra party agrees, prior to maturity,
enter into a closing transaction involving the purchase or sale of an offsetting
contract.
A Fund engages in forward currency transactions in anticipation of, or to
protect itself against, fluctuations in exchange rates. A Fund 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, the Fund
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, the Fund 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 Fund will enter into such Forward
Contracts with major U.S. or foreign banks and securities or currency dealers in
accordance with the guidelines approved by the Trust's Board of Trustees.
Each Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. 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 a Fund 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 Fund 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
Fund 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 a Fund
to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Fund to sell a
currency, the Fund either may sell a portfolio 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 the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, a Fund 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. The Fund 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 a Fund 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 usually are 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 a Fund 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
Each Fund 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
Fund's securities are denominated. Such currency hedges can protect against
price movements in a security that a Fund owns or
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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.
A Fund 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, a Fund 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, a Fund 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, a Fund 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 a Fund) expose the Fund to an obligation to another
party. No Fund will 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. The Funds 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 a Fund's assets are used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
RISK FACTORS
ILLIQUID SECURITIES
Developing Markets Fund and Emerging Markets Fund each may invest up to 15% of
its net assets, and Latin American Fund up to 10% of its net assets, in illiquid
securities. Securities may be considered illiquid if a Fund cannot reasonably
expect within seven days to sell the security for approximately the amount at
which the Fund values such securities. 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 the sale
of liquid securities, such as securities eligible for trading on U.S. securities
exchanges or in the over-the-counter 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 not subject to restrictions on
resale.
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, a Fund may be obligated to
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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 Fund may be
permitted to sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop, the Fund 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 ("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
a Fund, however, could affect adversely the marketability of such portfolio
securities and the Fund might be unable to dispose of such securities promptly
or at favorable prices.
With respect to liquidity determinations generally, the Trust's Board of
Trustees has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Sub-advisor in accordance with
procedures approved by the Board. The Sub-advisor takes into account a number of
factors in reaching liquidity decisions, including (i) the frequency of trading
in the security, (ii) the number of dealers who make quotes for the security,
(iii) the number of dealers who have undertaken to make a market in the
security, (iv) the number of other potential purchasers and (v) the nature of
the security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited and the mechanics of transfer). The
Sub-advisor monitors the liquidity of securities in each Fund's portfolio and
periodically reports such determinations to the Board. If the liquidity
percentage restriction of a Fund is satisfied at the time of investment, a later
increase in the percentage of illiquid securities held by the Fund 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 a Fund increases above the applicable
limit, the Sub-advisor will take appropriate steps to bring the aggregate amount
of illiquid assets back within the prescribed limitations as soon as reasonably
practicable, taking into account the effect of any disposition on the Fund.
FOREIGN SECURITIES
Political, Social and Economic Risks. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, a Fund could lose its entire investment in
any such country.
In addition, even though opportunities for investment may exist in emerging
markets, any change in the leadership or policies of the governments of those
countries or in the leadership or policies of any other government which
exercises a significant influence over those countries, may halt the expansion
of or reverse the liberalization of foreign investment policies now occurring
and thereby eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian
regimes, the governments of a number of Latin American countries previously
expropriated large quantities of real and personal property similar to the
property which will be represented by the securities purchased by the Funds. The
claims of property owners against those governments were never finally settled.
There can be no assurance that any property represented by securities purchased
by the Funds will not also be expropriated, nationalized, or otherwise
confiscated. If such confiscation were to occur, the Funds could lose their
entire investment in such countries. The Funds' investments would similarly be
adversely affected by exchange control regulation in any of those countries.
Religious and Ethnic Stability. Certain countries in which the Funds may
invest may have groups that advocate radical religious or revolutionary
philosophies or support ethnic independence. Any disturbance on the part of such
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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 a Fund'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
the Funds invest and adversely affect the value of the Funds' 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 the Funds. These restrictions
or controls may at times limit or preclude investment in certain securities and
may increase the cost and expenses of the Funds. 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. 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. The Funds 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 securities held by the Funds 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 the Funds 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 and the U.S. government. In addition, where public
information is available, it may be less reliable than such information
regarding U.S. issuers. Issuers of securities on 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. In
addition, for companies that keep accounting records in local currency,
inflation accounting rules in some Latin American countries require, for both
tax and accounting purposes, that certain assets and liabilities be restated on
the company's balance sheet in order to express items in terms of currency of
constant purchasing power. Inflation accounting may indirectly generate losses
or profits.
Currency Fluctuations. Because the Funds, under normal circumstances, each
will invest a substantial portion of its total assets in the securities of
foreign issuers which are denominated in foreign currencies, the strength or
weakness of the U.S. dollar against such foreign currencies will account for
part of each Fund'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 a Fund's holdings of securities and cash denominated in such
currency and, therefore, will cause an overall decline in the Fund's net asset
value and any net investment income and capital gains derived from such
securities to be distributed in U.S. dollars to shareholders of that Fund.
Moreover, if the value of the foreign currencies in which a Fund receives its
income falls relative to the U.S. dollar between receipt of the income and the
making of Fund distributions, the Fund may be required to liquidate securities
in order to make distributions if the Fund 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 movement
of interest rates, the pace of business activity in certain other countries and
the United States, and other economic and financial conditions affecting the
world economy.
Although the Funds value their assets daily in terms of U.S. dollars, they do
not intend to convert their holdings of foreign currencies into U.S. dollars on
a daily basis. The Funds will do so from time to time, and investors should be
aware
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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 are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one
rate, while offering a lesser rate of exchange should a Fund desire to sell that
currency to the dealer.
Certain Latin American countries may have managed currencies which 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 dollar. Certain Latin
American countries also may restrict the free conversion of their currency into
foreign currencies, including the U.S. dollar. There is no significant foreign
exchange market for certain currencies and it would, as a result, be difficult
for the Funds to engage in foreign currency transactions designed to protect the
value of the Funds' interests in securities denominated in such currencies.
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 the Funds are
uninvested and no return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive opportunities. Inability to dispose of a portfolio security due
to settlement problems either could result in losses to a Fund due to subsequent
declines in value of the portfolio security or, if the Fund has entered into a
contract to sell the security, could result in possible liability to the
purchaser. The Sub-advisor will consider such difficulties when determining the
allocation of the Funds' assets, although the Sub-advisor does not believe that
such difficulties will have a material adverse effect on the Funds' portfolio
trading activities.
Each Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian, (ii) maintaining appropriate safeguards
to protect a Fund's investments and (iii) possible difficulties in obtaining and
enforcing judgments against such custodians.
A high proportion of the shares of many Latin American companies may be held
by a limited number of persons, which may further limit the number of shares
available for investment by the Funds, particularly the Latin American Fund. A
limited number of issuers in most, if not all, Latin American securities markets
may represent a disproportionately large percentage of market capitalization and
trading value. The limited liquidity of Latin American securities markets also
may affect a Fund's ability to acquire or dispose of securities at the price and
time it wishes to do so. In addition, certain Latin American securities markets,
including those of Argentina, Brazil, Chile and Mexico, are susceptible to being
influenced by large investors trading significant blocks of securities or by
large dispositions of securities resulting from the failure to meet margin calls
when due.
The high volatility of certain Latin American securities markets is evidenced
by dramatic movements in the Brazilian and Mexican markets in recent years. This
market volatility may result in greater volatility in a Fund's net asset value
than would be the case for companies investing in domestic securities. If a Fund
were to experience unexpected net redemptions, it could be forced to sell
securities in its portfolio without regard to investment merit, thereby
decreasing the asset base over which Fund expenses can be spread and possibly
reducing the Fund's rate of return.
Withholding Taxes. Each Fund'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 where
those taxes may be recaptured. See "Taxes."
Concentration. To the extent a Fund 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 Emerging Markets. Investing in equity
securities of companies in emerging markets may entail greater risks than
investing in equity securities in developed countries. These risks include (i)
less social, political and economic stability; (ii) the small current size of
the markets for such securities and the currently low or nonexistent volume of
trading, which result in a lack of liquidity and in greater price volatility;
(iii) certain national policies which may restrict a Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign taxation; and (v) the
absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property.
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Investing in the securities of companies in emerging markets, including the
markets of Latin America and certain Asian markets such as Taiwan, Malaysia and
Indonesia, 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 into U.S.
dollars and on repatriation of capital invested. In the event of such
expropriation, nationalization or other confiscation by any country, a Fund
could lose its entire investment in any such country.
Emerging securities markets such as the markets of Latin America 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 including countries in Latin America have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. This has, in turn lead to high interest rates, extreme measures
by governments to keep inflation in check and a generally debilitating effect on
economic growth. 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 including countries in Latin America.
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 the ability of Developing Markets Fund and Emerging
Markets Fund 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 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.
Many of the Asia Pacific region countries may be subject to a greater degree
of social, political and economic instability than is the case in the United
States. Such instability may result from, among other things, the following: (i)
authoritarian governments or military involvement in political and economic
decision making, and changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious and racial disaffection. Such
social, political and economic instability could significantly disrupt the
principal financial markets in which Developing Markets Fund and Emerging
Markets Fund invest and adversely affect the value of such Funds' assets. In
addition, asset expropriations or future confiscatory levels of taxation
possibly may affect the Funds.
Several of the Asia Pacific region countries have, or in the past have had,
hostile relationships with neighboring nations or have experienced internal
insurgency. Thailand has experienced border conflicts with Laos and Cambodia,
and India is
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engaged in border disputes with several of its neighbors, including China and
Pakistan. An uneasy truce exists between North Korea and South Korea, and the
recurrence of hostilities remains possible. Reunification of North Korea and
South Korea could have a detrimental effect on the economy of South Korea. Also,
China continues to claim sovereignty over Taiwan and recently has conducted
military maneuvers near Taiwan.
The economies of most of the Asia Pacific region countries are heavily
dependent upon international trade and are accordingly affected by protective
trade barriers and the economic conditions of their trading partners,
principally the United States, Japan, China and the European Community. The
enactment by the United States or other principal trading partners of
protectionist trade legislation, reduction of foreign investment in the local
economies and general declines in the international securities markets could
have a significant adverse effect upon the securities markets of the Asia
Pacific region countries. In addition, the economies of some of the Asia Pacific
region countries, Australia and Indonesia, for example, are vulnerable to
weakness in world prices for their commodity exports, including crude oil.
China recently assumed sovereignty over Hong Kong in July 1997. Although China
has committed by treaty to preserve the economic and social freedoms enjoyed in
Hong Kong for fifty years, the continuation of the current form of the economic
system in Hong Kong will depend on the actions of the government of China. In
addition, such assumption of sovereignty has increased sensitivity in Hong Kong
to political developments and statements by public figures in China. Business
confidence in Hong Kong, therefore, can be significantly affected by such
developments and statements, which in turn can affect markets and business
performance.
In addition, there is a continuing risk that the Hong Kong dollar will be
devalued and a risk of possible loss of investor confidence in the Hong Kong
markets and dollar. However, factors exist that are likely to mitigate this
risk. First, China has stated its intention to implement a "one country, two
systems" policy, which would preserve monetary sovereignty and leave control in
the hands of the Hong Kong Monetary Authority ("HKMA").
Second, fixed rate parity with the U.S. dollar is seen as critical to
maintaining investors' confidence in the transition to Chinese rule, and,
therefore, it is anticipated that, if international investors lose confidence in
Hong Kong dollar assets, the HKMA would intervene to support the currency,
though such intervention cannot be assured. Third, Hong Kong's and China's
sizable combined foreign exchange reserve may be used to support the value of
the Hong Kong dollar, provided that China does not appropriate such reserves for
other uses, which is not anticipated but cannot be assured. Finally, China would
be likely to experience significant adverse political and economic consequences
if confidence in the Hong Kong dollar and the territory assets were to be
endangered.
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.
It should be noted that some Latin American countries require governmental
approval for the repatriation of investment income, capital or the proceeds of
securities sales by foreign investors. For instance, at present, capital
invested directly in Chile cannot under most circumstances be repatriated for at
least one year. The Funds, particularly Latin American Fund, 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.
Sovereign Debt. Sovereign Debt generally offers high yields, reflecting not
only perceived credit risk, but also the need to compete with other local
investments in domestic financial markets. Certain Latin American countries are
among the largest debtors to commercial banks and foreign governments. A
sovereign debtor's willingness or ability to repay principal and interest due in
a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the
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debt service burden to the economy as a whole, the sovereign debtor's policy
towards the International Monetary Fund and the political constraints to which a
sovereign debtor may be subject. Sovereign debtors may default on their
Sovereign Debt. Sovereign debtors may also be dependent on expected
disbursements from foreign governments, multilateral agencies and others abroad
to reduce principal and interest arrearages on their debt. The commitment on the
part of these governments, agencies and others to make such disbursements may be
conditioned on a sovereign debtor's implementation of economic reforms and/or
economic performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due, may result in the cancellation of such
third parties' commitments to lend funds to the sovereign debtor, which may
further impair such debtor's ability or willingness to timely service its debts.
In recent years, some of the Latin American countries in which the Funds
expect to invest have encountered difficulties in servicing their Sovereign
Debt. Some of these countries have withheld payments of interest and/or
principal of Sovereign Debt. These difficulties have also led to agreements to
restructure external debt obligations -- in particular, commercial bank loans,
typically by rescheduling principal payments, reducing interest rates and
extending new credits to finance interest payments on existing debt. In the
future, holders of Sovereign Debt may be requested to participate in similar
reschedulings of such debt.
The ability of Latin American governments to make timely payments on their
Sovereign Debt is likely to be influenced strongly by a country's balance of
trade and its access to trade and other international credits. A country whose
exports are concentrated in a few commodities could be vulnerable to a decline
in the international prices of one or more of such commodities. Increased
protectionism on the part of a country's trading partners could also adversely
affect its exports. Such events could diminish a country's trade account
surplus, if any. To the extent that a country receives payment for its exports
in currencies other than hard currencies, its ability to make hard currency
payments could be affected.
The occurrence of political, social or diplomatic changes in one or more of
the countries issuing Sovereign Debt could adversely affect a Fund's
investments. The countries issuing such instruments are faced with social and
political issues and some of them have experienced high rates of inflation in
recent years and have extensive internal debt. Among other effects, high
inflation and internal debt service requirements may adversely affect the cost
and availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their Sovereign Debt. While the Sub-advisor intends to manage each Fund's
portfolio in a manner that will minimize the exposure to such risks, there can
be no assurance that adverse political changes will not cause the Funds to
suffer losses of interest or principal on any of their holdings.
Periods of economic uncertainty may result in the volatility of market prices
of Sovereign Debt and in turn, a Fund's net asset value, to a greater extent
than the volatility inherent in domestic securities. The value of Sovereign Debt
will likely vary inversely with changes in prevailing interest rates, which are
subject to considerable variance in the international market. If a Fund were to
experience unexpected net redemptions, it may be forced to sell Sovereign Debt
in its portfolio without regard to investment merit, thereby decreasing its
asset base over which Fund expenses can be spread and possibly reducing its rate
of return.
INVESTMENT LIMITATIONS
DEVELOPING MARKETS FUND
Developing Markets Fund has adopted the following investment limitations as
fundamental policies which (unless otherwise noted) may not be changed without
approval of a majority of the Fund's outstanding shares.
Developing Markets Fund may 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 Developing Markets 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) purchase any security if, as a result of that purchase, 25% or
more of Developing Markets Fund's total assets would be invested in
securities of issuers having their principal business activities in the
same industry, except that this limitation does not apply to securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities;
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(3) engage in the business of underwriting securities of other
issuers, except to the extent that Developing Markets 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 Developing Markets 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, but Developing Markets 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) 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.
Notwithstanding any other investment policy, Developing Markets 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.
For purposes of the concentration policy of Developing Markets Fund contained
in limitation (2) above, the Fund intends to comply with the SEC staff position
that securities issued or guaranteed as to principal and interest by any one
single foreign government, or by all supranational organizations in the
aggregate, are considered to be securities of issuers in the same industry.
In addition, to comply with federal tax requirements for qualification as a
"regulated investment company" ("RIC"), Developing Markets Fund's investments
will be limited so that, at the close of each quarter of its taxable year, (a)
not more than 25% of the value of its total assets is invested in the securities
(other than U.S. government securities or the securities of other RICs) of any
one issuer and (b) at least 50% of the value of its total assets is represented
by cash and cash items, U.S. government securities, securities of other RICs and
other securities, with these other securities limited, in respect of any one
issuer, to an amount that does not exceed 5% of the value of its total assets
and that does not represent more than 10% of the issuer's outstanding voting
securities ("Diversification Requirements"). These tax-related limitations may
be changed by the Trust's Board of Trustees to the extent necessary to comply
with changes to applicable tax requirements.
The following investment policy of Developing Markets Fund is not a
fundamental policy and may be changed by vote of the Trust's Board of Trustees
without shareholder approval: Developing Markets Fund will not purchase
securities on margin, provided that the Fund may obtain short-term credits as
may be necessary for the clearance of purchases and sales of securities, and
further provided 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 contracts or derivative instruments.
Investors should refer to the Developing Markets Fund's Prospectus for further
information with respect to the Developing Markets 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.
EMERGING MARKETS FUND
Emerging Markets Fund has adopted the following investment limitations as
fundamental policies which (unless otherwise noted) may not be changed without
approval of a majority of the Fund's outstanding shares.
Emerging Markets Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or
more of Emerging Markets Fund's total assets would be invested in
securities of issuers having their principal business activities in the
same industry, except that this limitation does not apply to securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities;
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(2) 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 Emerging Markets 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;
(3) Purchase or sell physical commodities, but Emerging Markets 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;
(4) Engage in the business of underwriting securities of other
issuers, except to the extent that Emerging Markets Fund might be
considered an underwriter under the federal securities laws in connection
with its disposition of portfolio securities;
(5) 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;
(6) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of Emerging Markets 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; or
(7) Purchase securities of any one issuer if, as a result, more than
5% of Emerging Markets 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.
Notwithstanding any other investment policy, Emerging Markets 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.
For purposes of Emerging Markets Fund's concentration policy contained in
limitation (1) above, the Fund intends to comply with the SEC staff position
that securities issued or guaranteed as to principal and interest by any single
foreign government or any supranational organizations in the aggregate are
considered to be securities of issuers in the same industry.
The following operating policies of Emerging Markets Fund are not fundamental
policies and may be changed by vote of the Trust's Board of Trustees without
shareholder approval. Emerging Markets Fund may not:
(1) Invest in securities of an issuer if the investment would cause
Emerging Markets 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) 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 Emerging Markets Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund has entered into;
(4) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% of the value of Emerging Markets
Fund's total assets, except that the Fund may purchase securities when
outstanding borrowings represent less than 5% of the Fund's assets;
(5) Purchase securities on margin, provided that Emerging Markets Fund
may obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided 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 contracts or derivative instruments; or
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(6) 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 Emerging Markets Fund's Prospectus for further
information with respect to the Emerging Markets 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.
LATIN AMERICAN FUND
Latin American Fund has adopted the following investment limitations as
fundamental policies which (unless otherwise noted) may not be changed without
approval of a majority of the Fund's outstanding shares.
Latin American Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or
more of Latin American Fund's total assets would be invested in securities
of issuers having their principal business activities in the same industry,
except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities;
(2) 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 Latin American 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;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that Latin American 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 Latin American 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; or
(6) Purchase or sell physical commodities, but Latin American 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.
Notwithstanding any other investment policy, Latin American 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.
For purposes of Latin American Fund's concentration policy contained in
limitation (1), above, the Fund intends to comply with the SEC staff position
that securities issued or guaranteed as to principal and interest by any single
foreign government are considered to be securities of issuers in the same
industry.
The following operating policies of Latin American Fund are not fundamental
policies and may be changed by vote of the Trust's Board of Trustees without
shareholder approval. Latin American Fund may not:
(1) Invest in securities of an issuer if the investment would cause
Latin American 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 10% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a
readily available market;
28
<PAGE> 124
(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 Latin American Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund has entered into;
(5) Make any additional investments while borrowings exceed 5% of
Latin American Fund's total assets;
(6) Purchase securities on margin, provided that Latin American Fund
may obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided 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 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.
Latin American Fund has the authority to invest up to 10% of its total assets
in shares of other investment companies pursuant to the 1940 Act. The Fund 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.
Investors should refer to the Latin American Fund's Prospectus for further
information with respect to the Latin American 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.
EXECUTION OF PORTFOLIO TRANSACTIONS
Subject to policies established by the Trust's Board of Trustees, the
Sub-advisor is responsible for the execution of each Fund's portfolio
transactions and the selection of broker/dealers who execute such transactions
on behalf of the Funds. In executing portfolio transactions, the Sub-advisor
seeks the best net results for each Fund, taking into account such factors as
the price (including the applicable brokerage commission or dealer spread), size
of the order, difficulty of execution and operational facilities of the firm
involved. Although the Sub-advisor generally seeks reasonably competitive
commission rates and spreads, payment of the lowest commission or spread is not
necessarily consistent with the best net results. While the Funds may engage in
soft dollar arrangements for research services, as described below, the Funds
have no obligation to deal with any broker/dealer or group of broker/dealers in
the execution of portfolio transactions.
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of each Fund, the Sub-advisor may select brokers
to execute a Fund's portfolio transactions, on the basis of the research and
brokerage services they provide to the Sub-advisor for its use in managing the
Fund 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 brokers are in addition to, and not in
lieu of, the services required to be performed by the Sub-advisor under the
investment management and administration contracts. A commission paid to such
brokers may be higher than that which another qualified broker would have
charged for effecting the same transaction, provided that the Sub-advisor
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-advisor to
a Fund and its other clients and that the total commissions paid by the Fund
will be reasonable in relation to the benefits it received over the long term.
Research services may also be received from dealers who execute Fund
transactions in OTC markets.
The Sub-advisor may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by a Fund toward payment of the Fund's expenses, such as
transfer agent and custodian fees.
29
<PAGE> 125
Investment decisions for each Fund and for other investment accounts managed
by the Sub-advisor are made independently of each other in light of differing
conditions. However, the same investment decision occasionally may be made for
two or more of such accounts including the Funds. 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 a Fund is concerned, in other cases, the Sub-advisor
believes that coordination and the ability to participate in volume transactions
will be beneficial to that Fund.
Under a policy adopted by the Trust's Board of Trustees, and subject to the
policy of obtaining the best net results, the Sub-advisor may consider a
broker/dealer's sale of the shares of a Fund and the other funds for which AIM
or the Sub-advisor serves as investment manager in selecting brokers and 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 Funds and such other funds.
Each Fund contemplates purchasing most foreign equity securities in
over-the-counter markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. The fixed commissions paid in
connection with most such foreign stock transactions generally are higher than
negotiated commissions on U.S. transactions. There generally is less government
supervision and regulation of foreign stock exchanges and brokers than in the
United States. Foreign security settlements may in some instances be subject to
delays and related administrative uncertainties.
Foreign equity securities may be held by each Fund in the form of ADRs, ADSs,
EDRs, GDRs, CDRs or securities convertible into foreign equity securities. ADRs,
ADSs, EDRs, GDRs 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 a Fund may invest generally are traded in the OTC markets.
Each Fund contemplates that, consistent with the policy of obtaining the best
net results, brokerage transactions may be conducted through certain companies
affiliated with AIM or the Sub-advisor. The Trust's Board of Trustees has
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to ensure
that all brokerage commissions paid to such affiliates are reasonable and fair
in the context of the market in which they are operating. Any such transactions
will be effected and related compensation paid only in accordance with
applicable SEC regulations.
The Funds may engage in certain principal and agency transactions with banks
and their affiliates that own 5% or more of the outstanding voting securities of
a Fund, provided the conditions of an exemptive order received by the Funds from
the SEC are met. In addition, a Fund may purchase or sell a security from or to
another AIM Fund provided the Funds follow procedures adopted by the Boards of
Directors/Trustees of the various AIM Funds, including the Trust. These inter-
fund transactions do not generate brokerage commissions but may result in
custodial fees or taxes or other related expenses.
For the fiscal years ended December 31, 1997, 1996 and 1995, the Predecessor
Fund paid aggregate brokerage commissions of $2,212,022, $1,580,879 and
$1,311,090, respectively. For the fiscal years ended October 31, 1997, 1996 and
1995, Emerging Markets Fund paid aggregate brokerage commissions of $3,274,528,
$3,648,347 and $3,307,402, respectively. For the fiscal years ended October 31,
1997, 1996 and 1995, Latin American Fund paid aggregate brokerage commissions of
$2,719,660, $2,094,634 and $891,513, respectively.
PORTFOLIO TRADING AND TURNOVER
Each Fund engages in portfolio trading when the Sub-advisor has concluded that
the sale of a security owned by the Fund and/or the purchase of another security
of better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value, or a security may be
purchased in anticipation of a market rise. Consistent with each Fund's
investment objective, a security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two securities.
Although none of the Funds generally intends to trade for short-term profits,
the securities in a Fund's portfolio will be sold whenever management believes
it is appropriate to do so, without regard to the length of time a particular
security may have been held. Portfolio turnover rate is calculated by dividing
the lesser of sales or purchases of portfolio securities by a Fund's average
month-end portfolio values, excluding short-term investments. The portfolio
turnover rate will not be a limiting factor when the Sub-advisor deems portfolio
changes appropriate. Higher portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs that a Fund will bear directly
and may result in the realization of net capital gains that are taxable when
distributed to that Fund's shareholders. For the fiscal years ended December 31,
1997 and 1996, the Predecessor Fund's portfolio turnover rates were 184% and
30
<PAGE> 126
138%, respectively. For the fiscal years ended October 31, 1997 and 1996,
Emerging Markets Fund's portfolio turnover rates were 150% and 104%,
respectively. Latin American Fund's portfolio turnover rates for the fiscal
years ended October 31, 1997 and 1996 were 130% and 101%, respectively.
MANAGEMENT
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below. Unless otherwise
indicated, the address of each Executive Officer is 11 Greenway Plaza, Suite
100, Houston, Texas 77046.
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION WITH REGISTRANT
--------------------- ------------------------------ ------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (51) Trustee, Chairman of the Board Director, President and Chief Executive
and President 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 Officer,
San Francisco, CA 94104 Plantagenet Holdings, Ltd. (an
investment banking firm); Director,
Anderson Capital Management, Inc. since
1988; Director, PremiumWear, Inc.
(formerly Munsingwear, Inc.) (a casual
apparel company); Director, "R" Homes,
Inc. and various other companies; and
Trustee, each of the other investment
companies registered under the 1940 Act
that is sub-advised or sub-
administered by the Sub-advisor.
FRANK S. BAYLEY (59) Trustee Partner, law firm of Baker & McKenzie;
Two Embarcadero Center Director and Chairman, C.D. Stimson
Suite 2400 Company (a private investment company);
San Francisco, CA 94111 and Trustee, each of the other
investment companies registered under
the 1940 Act that is sub-advised or
sub-administered by the Sub-advisor.
ARTHUR C. PATTERSON (54) Trustee Managing Partner, Accel Partners (a
428 University Avenue venture capital firm); Director,
Palo Alto, CA 94301 Viasoft and PageMart, Inc. (both public
software companies) and several other
privately held software and
communications companies; and Trustee,
each of the other investment companies
registered under the 1940 Act that is
sub-advised or sub-administered by the
Sub-advisor.
</TABLE>
- ---------------
*A Trustee who is an "interested person" of the Trust and A I M Advisors, Inc.,
as defined in the 1940 Act.
31
<PAGE> 127
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION WITH REGISTRANT
--------------------- ------------------------------ ------------------------------------
<S> <C> <C>
RUTH H. QUIGLEY (63) Trustee Private investor; President, Quigley
1055 California Street Friedlander & Co., Inc. (a financial
San Francisco, CA 94108 advisory services firm) from 1984 to
1986; and Trustee, each of the other
investment companies registered under
the 1940 Act that is sub-advised or
sub-administered by the Sub-advisor.
+JOHN J. ARTHUR (53) Vice President Director, Senior Vice President and
Treasurer, A I M Advisors, Inc.; Vice
President and Treasurer, A I M
Management Group Inc., A I M Capital
Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and
Fund Management Company.
KENNETH W. CHANCEY (53) Vice President and Principal Senior Vice President -- Mutual Fund
50 California Street Accounting Officer Accounting, the Sub-advisor since 1997;
San Francisco, CA 94111 Vice President -- Mutual Fund
Accounting, the Sub-advisor from 1992
to 1997.
MELVILLE B. COX (54) Vice President Vice President and Chief Compliance
Officer, A I M Advisors, Inc., A I M
Capital Management, Inc., A I M
Distributors, Inc., A I M Fund
Services, Inc. and Fund Management
Company.
GARY T. CRUM (50) Vice President Director and President, A I M Capital
Management, Inc.; Director and Senior
Vice President, A I M Management Group
Inc. and A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and
AMVESCAP PLC.
HELGE K. LEE (52) Vice President and Secretary Chief Legal and Compliance
50 California Street Officer -- North America, the
San Francisco, CA 94111 Sub-advisor since October 1997;
Secretary and Chief Legal and
Compliance Officer, INVESCO (NY) Asset
Management, Inc., INVESCO (NY), Inc.,
GT Global Investor Services, Inc. and
G.T. Insurance since August 1997;
Secretary and Chief Legal and
Compliance Officer, GT Global from
August 1997 to April 1998; Executive
Vice President of the Asset Management
Division of Liechtenstein Global Trust
AG, from October 1996 to May 1998;
Senior Vice President, General Counsel
and Secretary of INVESCO (NY) Asset
Management, Inc., INVESCO (NY), Inc.,
GT Global, GT Global Investor Services,
Inc. and G.T. Insurance from May 1994
to October 1996; and Senior Vice
President, General Counsel and
Secretary of Strong/Corneliuson
Management, Inc. and Secretary of each
of the Strong Funds from October 1991
to May 1994.
</TABLE>
- ---------------
+Mr. Arthur and Ms. Relihan are married to each other.
32
<PAGE> 128
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION WITH REGISTRANT
--------------------- ------------------------------ ------------------------------------
<S> <C> <C>
+CAROL F. RELIHAN (43) Vice President Director, Senior Vice President,
General Counsel and Secretary, A I M
Advisors, Inc.; Vice President, General
Counsel and Secretary, A I M Management
Group Inc.; Director, Vice President
and General Counsel, Fund Management
Company; Vice President and General
Counsel, A I M Fund Services, Inc.; and
Vice President, A I M Capital
Management, Inc. and A I M
Distributors, Inc.
DANA R. SUTTON (39) Vice President and Assistant Vice President and Fund Controller,
Treasurer A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer,
Fund Management Company.
</TABLE>
- ---------------
+Mr. Arthur and Ms. Relihan are married to each other.
The Board of Trustees has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and its
funds and recommending firms to serve as independent auditors for the Trust. All
of the Trust's Trustees also serve as directors or trustees of some or all of
the other investment companies managed, administered or advised by AIM. All of
the Trust's executive officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM. Each Trustee
who is not a director, officer or employee of the Sub-advisor or any 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. For the fiscal
year ended October 31, 1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss
Quigley, who are not directors, officers or employees of the Sub-advisor or any
affiliated company, received total compensation of $38,650, $38,650, $27,850 and
$38,650, respectively, from the Trust for their services as Trustees. For the
fiscal year ended October 31, 1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and
Miss Quigley, who are not directors, officers or employees of the Sub-advisor or
any other affiliated company, received total compensation of $117,304, $114,386,
$88,350 and $111,688, respectively, from the investment companies managed or
administered by AIM and sub-advised or sub-administered by the Sub-advisor for
which he or she serves as a Director or Trustee. Fees and expenses disbursed to
the Trustees contained no accrued or payable pension or retirement benefits. As
of August 10, 1998, the Officers and Trustees and their families as a group
owned in the aggregate beneficially or of record less than 1% of the outstanding
shares of the Funds or of all the Trust's series in the aggregate.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as each Fund's investment manager and administrator under an
investment management and administration contract ("Management Contract")
between the Trust and AIM. The Sub-advisor serves as the sub-advisor and sub-
administrator to each Fund under a sub-advisory and sub-administration contract
between AIM and the Sub-advisor ("Sub-Management Contract," and together with
the Management Contract, the "Management Contracts"). As investment managers and
administrators, AIM and the Sub-advisor make all investment decisions for the
Funds and administer each Fund's affairs. Among other things, AIM and the
Sub-advisor furnish the services and pay the compensation and travel expenses of
persons who perform the executive, administrative, clerical and bookkeeping
functions of the Trust and the Funds, and provide suitable office space,
necessary small office equipment and utilities.
The Management Contracts for each Fund may be renewed for one-year terms,
provided that any such renewal has been specifically approved at least annually
by (i) the Trust's Board of Trustees, or by the vote of a majority of a Fund's
outstanding voting securities (as defined in the 1940 Act) and (ii) a majority
of Trustees who are not parties to the Management Contracts or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contracts provide that with respect to each Fund, the Trust or each
of AIM or the Sub-advisor may terminate the Management Contracts without penalty
upon sixty days' written notice. The Management Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
33
<PAGE> 129
For the fiscal years ended October 31, 1997, 1996 and 1995, the Predecessor
Fund of Developing Markets Fund paid investment management and administration
fees to the Sub-advisor in the amounts of $7,383,823, $7,864,840 and $6,878,640,
respectively. For the fiscal years ended October 31, 1997, 1996 and 1995,
Emerging Markets Fund paid investment management and administration fees to the
Sub-advisor in the amounts of $3,907,922, $4,883,626 and $5,410,744,
respectively. For the fiscal years ended October 31, 1997, 1996 and 1995, Latin
American Fund paid investment management and administration fees to the
Sub-advisor in the amounts of $3,538,586, $3,365,375 and $3,913,429,
respectively.
THE DISTRIBUTION PLANS
THE CLASS A PLAN
The Trust has adopted a Master Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act relating to the Class A shares of the Funds (the "Class A Plan").
The Class A 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. Of such amounts, each Fund pays a service fee of 0.25% of the
average daily net assets attributable to Class A shares to selected dealers and
other institutions which furnish continuing personal shareholder services to
their customers who purchase and own Class A shares. Activities appropriate for
financing under the Class A 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 Plan.
THE CLASS B PLAN
The Trust has also adopted a Master Distribution Plan pursuant to Rule 12b-1
under the 1940 Act relating to Class B shares of the Funds (the "Class B Plan",
and collectively with the Class A Plan, the "Plans"). Under the Class B Plan,
each 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,
each 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. AIM Distributors may transfer and sell its
rights to payments under the Class B Plan in order to finance distribution
expenditures in respect of Class B shares.
BOTH PLANS
Pursuant to an incentive program, AIM Distributors may enter into agreements
("Shareholder Service Agreements") with investment dealers selected from time to
time by AIM Distributors for the provision of distribution assistance in
connection with the sale of the Funds' 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 Funds; 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 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 any capital gains distributions
automatically in the Funds' shares; and providing such other information and
services as the Funds 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 Funds; 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
34
<PAGE> 130
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 Funds 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, each 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 Funds during such period at the annual rate of 0.25% of
the average daily net asset value of the Funds' 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 each 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 Funds
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 Funds and their respective classes.
AIM Distributors does not act as principal, but rather as agent for the Funds,
in making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Funds and not of AIM Distributors.
Prior to June 1, 1998, the Trust had adopted a different Rule 12b-1 plan, that
operated as a "reimbursement-type" plan (the "Prior Plan"). The information
provided below relates to payments made under the Prior Plan, which provided for
payments to GT Global Inc., the distributor of the Funds at the time the Prior
Plan was in effect.
For the fiscal year ended October 31, 1997, each Fund paid the following
amounts under the Prior Plan:
<TABLE>
<CAPTION>
% OF CLASS
AVERAGE DAILY
NET ASSETS
-----------------
CLASS A CLASS B CLASS A CLASS B
---------- ---------- ------- -------
<S> <C> <C> <C> <C>
Emerging Markets Fund........................ $ 977,082 $2,022,092 .50% 1.00%
Latin American Growth Fund................... $1,011,259 $1,587,737 .50% 1.00%
Developing Markets Fund(1)................... $ N/A $ N/A .50% 1.00%
</TABLE>
Actual fees by category paid by each Fund with regard to the Class A shares
during the year ended October 31, 1997 follows:
<TABLE>
<CAPTION>
DEVELOPING EMERGING LATIN AMERICAN
MARKETS FUND(1) MARKETS FUND GROWTH FUND
---------------- ------------ --------------
<S> <C> <C> <C>
CLASS A
Compensation to Underwriters to partially
offset other marketing expenses........... $ N/A $195,416 $202,252
Compensation to Dealers including finder's
fees...................................... $ N/A $781,666 $809,007
</TABLE>
- ---------------
(1) The Developing Markets Fund adopted a Master Distribution Plan pursuant to
Rule 12b-1 under the 1940 Act relating to the Class A shares and Class B
shares of the Fund on May 29, 1998.
35
<PAGE> 131
Actual fees by category paid by each Fund with regard to the Class B Shares
during the year ended October 31, 1997 as follows:
<TABLE>
<CAPTION>
DEVELOPING EMERGING LATIN AMERICAN
MARKETS FUND MARKETS FUND GROWTH FUND
------------ ------------ --------------
<S> <C> <C> <C>
CLASS B
Compensation to Underwriters to partially offset
upfront dealer commissions and other
marketing costs.............................. N$/A $1,516,569 $1,190,803
Compensation to Dealers......................... N$/A $ 505,523 $ 396,934
</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 each Fund and their
respective shareholders.
The Plans do not obligate the Funds 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 Funds 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 of a majority of
the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
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 Plan is amended in a manner which
the Board of Trustees determines would materially increase the charges paid
under the Class A Plan, the Class B shares of the Funds will no longer convert
into Class A shares of the same Funds 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 Funds which is identical in all material respects to the Class A shares as
they existed prior to the implementation of the amendment and (ii) ensure that
the existing Class B shares of the Funds 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 Plan and the Class B Plan are:
(i) the Class A 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 each Fund, as compared to 1.00% of such assets of each 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 or 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.
36
<PAGE> 132
THE DISTRIBUTOR
Information concerning AIM Distributors and the continuous offering of the
Funds' 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 and Class
B shares of the Funds were approved by the Board of Trustees 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 Funds'
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
Funds.
AIM Distributors expects to pay sales commissions from its own resources to
dealers and institutions who sell Class B 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.
The Trust (on behalf of any class of any 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 Class B shareholders to
pay contingent deferred sales charges.
The following chart reflects the total sales charges paid in connection with
the sale of Class A shares of each Fund and the amount retained by GT Global,
Inc., the Trust's distributor prior to June 1, 1998, for the fiscal year ended
October 31, 1997.
<TABLE>
<CAPTION>
1997
-------------------
SALES AMOUNT
CHARGES RETAINED
-------- --------
<S> <C> <C>
Emerging Markets Fund....................................... $181,914 $39,500
Latin American Growth Fund.................................. $168,598 $50,871
Developing Markets Fund..................................... $ N/A $ N/A
</TABLE>
- ---------------
(1) Developing Markets Fund pays AIM Distributors sales charges on sales of
Class A shares of the Fund, retains certain amounts of such charges and
reallows other amounts of such charges to brokers/dealers who sell shares.
The following chart reflects the contingent deferred sales charges paid by
Class A and Class B shareholders for the fiscal years ended October 31, 1997,
1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Emerging Markets Fund......................... $1,594,794 $1,287,272 $1,115,487
Latin American Growth Fund.................... $ 923,769 $ 843,024 $ 760,248
Developing Markets Fund (1)................... $ N/A $ N/A $ N/A
</TABLE>
- ---------------
(1) Developing Markets Fund pays AIM Distributors a contingent deferred sales
charge with respect to redemptions of Class B shares and certain Class A
shares.
37
<PAGE> 133
EXPENSES OF THE FUNDS
Each Fund pays all expenses not assumed by AIM, the Sub-advisor, AIM
Distributors and other agents. These expenses include, in addition to the
advisory, distribution, transfer agency, pricing and accounting agency and
brokerage fees discussed above, legal and audit expenses, custodian fees,
trustees' fees, organizational fees, fidelity bond and other insurance premiums,
taxes, extraordinary expenses and the expenses of reports and prospectuses sent
to existing investors. The allocation of general Trust expenses and expenses
shared among the Funds and other funds organized as series of the Trust are
allocated on a basis deemed fair and equitable, which may be based on the
relative net assets of the Funds or the nature of the services performed and
relative applicability to the Funds. Expenditures, including costs incurred in
connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. The ratio of each Fund's expenses to its relative net assets can be
expected to be higher than the expense ratios of funds investing solely in
domestic securities, since the cost of maintaining the custody of foreign
securities and the rate of investment management fees paid by each Fund
generally are higher than the comparable expenses of such other funds.
NET ASSET VALUE DETERMINATION
The net asset value per share of each 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) of each business day of the Funds. 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 a 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 a Fund's
securities, cash and other assets (including interest accrued but not collected)
attributable to a particular class, less all its liabilities (including accrued
expenses and dividends payable) attributable to that class, by the total number
of shares outstanding of that class. Determination of each Fund's net asset
value per share is made in accordance with generally accepted accounting
principles.
Each equity security held by a Fund is valued at its last sales price on the
exchange where the security is principally traded or, lacking any sales on a
particular day, the security is valued at the mean between the closing bid and
asked prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. Each security reported on the
NASDAQ National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the mean between the closing bid and asked
prices on that day. Debt securities are valued on the basis of prices provided
by an independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, developments related to special securities, yield, quality, coupon
rate, maturity, type of issue, individual trading characteristics and other
market data. Securities for which market quotations are not readily available or
are questionable are valued at fair value as determined in good faith by or
under the supervision of the Trust's officers in a manner specifically
authorized by the Board of Trustees. Short-term obligations having 60 days or
less to maturity are valued on the basis of amortized cost. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of each Fund's shares are determined at such
times. Foreign currency exchange rates are also generally determined prior to
the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which such
values are determined and the close of the NYSE which will not be reflected in
the computation of a Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
38
<PAGE> 134
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner in which shares of the Funds may be
purchased appears in the Funds' Prospectuses under the headings "How to Purchase
Shares," "Terms and Conditions of Purchase of the AIM Funds" and "Special
Plans."
The sales charge normally deducted on purchases of Class A shares is used to
compensate AIM Distributors and participating dealers for their expenses
incurred in connection with the distribution of the Funds' Class A shares. Since
there is little expenses 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, and certain
other persons whose purchases result in relatively low expenses of distribution,
be permitted to purchase Class A shares of the Funds through AIM Distributors
without payment of a sales charge. The persons who may purchase Class A shares
of the Funds without a sales charge are set forth in the Funds' Prospectuses. In
addition, the Funds offer programs such as Right of Accumulation and Letter of
Intent, which are described in the prospectuses and are designed to permit
investors to aggregate purchases of different funds, or separate purchases over
time, in order to qualify for a lower sales charge rate. See "Terms and
Conditions of Purchase of the AIM Funds -- Reductions in Initial Sales Charges"
in the prospectuses.
Class A shares that are subject to a contingent deferred sales charge and that
were purchased before June 1, 1998 are entitled to the following waivers from
the contingent deferred sales charge otherwise due upon redemption: (1) minimum
required distributions made in connection with an IRA, Keogh Plan or custodial
account under Section 403(b) of the Code or other retirement plan following
attainment of age 70 1/2; (2) total or partial redemptions resulting from a
distribution following retirement in the case of a tax-qualified
employer-sponsored retirement plan; (3) when a redemption results from a
tax-free return of an excess contribution pursuant to Section 408(d)(4) or (5)
of the Code or from the death or disability of the employee; (4) redemptions
pursuant to the Fund's right to liquidate a shareholder's account involuntarily;
(5) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in AIM Funds, which are
permitted to be made without penalty pursuant to the Code, other than tax-free
rollovers or transfers of assets, and the proceeds of which are reinvested in
AIM Funds; (6) redemptions made in connection with participant-directed
exchanges between options in an employer-sponsored benefit plan; (7) redemptions
made for the purpose of providing cash to fund a loan to a participant in a
tax-qualified retirement plan; (8) redemptions made in connection with a
distribution from any retirement plan or account that is permitted in accordance
with the provisions of Section 72(t)(2) of the Code, and the regulations
promulgated thereunder; (9) redemptions made in connection with a distribution
from any retirement plan or account that involves the return of an excess
deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of the Code;
(10) redemptions made in connection with a distribution from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the Code to a
participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon
hardship of the covered employee (determined pursuant to Treasury Regulation
Section 1.401(k)-1(d)(2)); and (11) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
Class B shares purchased before June 1, 1998 are subject to the following
waivers from the contingent deferred sales charge otherwise due upon redemption,
in addition to the waivers provided for redemptions of currently issued Class B
shares as described in the Prospectus: (1) total or partial redemptions
resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement; (2) minimum required distributions
made in connection with an IRA, Keogh Plan or custodial account under Section
403(b) of the Code or other retirement plan following attainment of age 70 1/2;
(3) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in AIM Funds, which are
permitted to be made without penalty pursuant to the Code, other than tax-free
rollovers or transfers of assets, and the proceeds of which are reinvested in
AIM Funds; (4) redemptions made in connection with participant-directed
exchanges between options in an employer-sponsored benefit plan; (5) redemptions
made for the purpose of providing cash to fund a loan to a participant in a
tax-qualified retirement plan; (6) redemptions made in connection with a
distribution from any retirement plan or account that is permitted in accordance
with the provisions of Section 72(t)(2) of the Code, and the regulations
promulgated thereunder; (7) redemptions made in connection with a distribution
from a qualified profit-sharing or stock bonus plan described in Section 401(k)
of the Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of
the Code upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (8) redemptions made by or for the
benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof where such entities are prohibited or limited
by applicable law from paying a sales charge or commission.
39
<PAGE> 135
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 Funds
for shares of the other AIM Funds is set forth in the prospectuses under the
heading "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in the
Prospectuses under the heading "How to Redeem Shares." In addition to the Funds'
obligation to redeem shares, AIM Distributors may also repurchase shares as an
accommodation to shareholders. To effect a repurchase, those dealers who have
executed Selected Dealer Agreements with AIM Distributors must phone orders to
the order desk of the Funds at (800) 959-4246 and guarantee delivery of all
required documents in good order. A repurchase is effected at the net asset
value per share of the applicable Fund next determined after the repurchase
order is received. Such an arrangement is subject to timely receipt by A I M
Fund Services, Inc. ("AFS"), the Funds' transfer agent, of all required
documents in good order. If such documents are not received within a reasonable
time after the order is placed, the order is subject to cancellation. While
there is no charge imposed by a Fund or by AIM Distributors (other than any
applicable contingent deferred sales charge) 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.
A 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 in the prospectuses under the heading
"Determination of Net Asset Value.".
QUALIFYING FOR A REDUCED FRONT-END SALES CHARGE
As described in each prospectus, the front-end sales charge for Class A shares
is calculated by multiplying an investor's total investment by the applicable
sales charge rate. The applicable rate varies with the amount invested. The
Funds offer programs such as Right of Accumulation and Letter of Intent, which
are described in the prospectus, and are designed to permit investors to
aggregate purchases of different funds, or separate purchases over time, in
order to qualify for a lower sales charge rate. See "Terms and Conditions of
Purchase of the AIM Funds -- Reductions in Initial Sales Charges" in the
prospectus.
PROGRAMS AND SERVICES FOR SHAREHOLDERS
The Funds provide certain services for shareholders and certain investment or
redemption programs. See "Exchange Privilege" and "How to Redeem Shares" in the
Prospectus. All inquiries concerning these programs should be made directly to
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, toll free
at (800) 959-4246.
DIVIDEND ORDER
Dividends may be paid to someone other than the registered owner, or sent to
an address other than the address of record. (Please note that signature
guarantees are required to effect this option.) An investor also may direct that
his or her dividends be invested in one of the AIM Funds and there is no sales
charge for these investments; initial investment minimums apply. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" in the Prospectus.
To effect this option, please contact your authorized dealer. For more
information concerning AIM Funds other than the Funds, please obtain a current
prospectus by contacting your authorized dealer, by writing to A I M Fund
Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, or by calling toll
free (800) 959-4246.
40
<PAGE> 136
TAXES
GENERAL
Each Fund is treated as a separate corporation for federal income tax
purposes. To continue to qualify for treatment as a RIC under the Code, each
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, net short-term capital gain and net gains from certain foreign currency
transactions) ("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 foreign currencies, or other income (including
gains from options, Futures or Forward Contracts) derived with respect to its
business of investing in securities or those currencies ("Income Requirement");
and (2) the Diversification Requirements.
Dividends and other distributions declared by a Fund in, 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.
Each Fund will be subject to a nondeductible 4% excise tax ("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.
FOREIGN TAXES
Dividends and interest received by each Fund, and gains realized thereby, may
be subject to income, withholding or other taxes imposed by foreign countries
and U.S. possessions ("foreign taxes") that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate foreign taxes, however, and many foreign
countries do not impose taxes on capital gains in respect of investments by
foreign investors. If more than 50% of the value of a Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, the
Fund will be eligible to, and may, file an election with the Internal Revenue
Service that will enable its shareholders, in effect, to receive the benefit of
the foreign tax credit with respect to any foreign taxes paid by it. Pursuant to
the election, the Fund would treat those taxes as dividends paid to its
shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his share of those taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents income from
foreign and U.S. possessions sources as his own income from those sources and
(3) either deduct the taxes deemed paid by him in computing his taxable income
or, alternatively, use the foregoing information in calculating the foreign tax
credit against his federal income tax. Each Fund will report to its shareholders
shortly after each taxable year their respective shares of the Fund's foreign
taxes and income from sources within, and taxes paid to, foreign countries and
U.S. possessions if it makes this election. Pursuant to the Taxpayer Relief Act
of 1997 ("Tax Act"), individuals who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign taxes included on Form 1099 and
all of whose foreign source income is "qualified passive income" may elect each
year to be exempt from the extremely complicated foreign tax credit limitation
and will be able to claim a foreign tax credit without having to file the
detailed Form 1116 that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
Each Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (i.e., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that
individually own, directly, indirectly or constructively, at least 10% of that
voting power) as to which a Fund is a U.S. shareholder (effective with respect
to each Fund for its taxable year beginning November 1, 1998) -- that, in
general, meets either of the following tests: (1) at least 75% of its gross
income is passive or (2) an average of at least 50% of its assets produce, or
are held for the production of, passive income. Under certain circumstances, a
Fund will be subject to federal income tax on a portion of any "excess
distribution" received on, or of any gain from the disposition of, stock of a
PFIC (collectively
41
<PAGE> 137
"PFIC income"), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC income
will be included in the Fund's investment company taxable income and,
accordingly, will not be taxable to it to the extent it distributes that income
to its shareholders.
If a Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's ordinary earnings and net capital gain (i.e., the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not received by the Fund from the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for its taxable year beginning November 1, 1998, each Fund may elect
to "mark to market" its stock in any PFIC. "Marking-to-market," in this context,
means including in ordinary income each taxable year the excess, if any, of the
fair market value of the stock over a Fund's adjusted basis therein as of the
end of that year. Pursuant to the election, a Fund also will be allowed to
deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted
basis in PFIC stock over the fair market value thereof as of the taxable
year-end, but only to the extent of any net mark-to-market gains with respect to
that stock included in income by the Fund for prior taxable years. A Fund's
adjusted basis in each PFIC's stock subject to the election will be adjusted to
reflect the amounts of income included and deductions taken thereunder.
Regulations proposed in 1992 provided a similar election with respect to the
stock of certain PFICs.
NON-U.S. SHAREHOLDERS
Dividends paid by a 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 a 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 a
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.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
Each Fund's use of hedging transactions, such as selling (writing) and
purchasing options and Futures and entering into Forward Contracts, involves
complex rules that will determine, for federal income tax purposes, the amount,
character and timing of recognition of the gains and losses a Fund realizes in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
options, Futures and Forward Contracts derived by a Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement.
Futures and Forward Contracts that are subject to section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by a Fund at the end of its taxable year generally
will be deemed to have been sold at that time at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. That 60% portion
will qualify for the reduced maximum tax rates on noncorporate taxpayers' net
capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than 18 months.
Section 988 of the Code also may apply to gains and losses from transactions
in foreign currencies, foreign-currency-denominated debt securities and options,
Futures and Forward Contracts on foreign currencies ("Section 988" gains and
losses). Each Section 988 gain or loss generally is computed separately and
treated as ordinary income or loss. In the case of overlap between sections 1256
and 988, special provisions determine the character and timing of any income,
gain or loss. The Funds attempt to monitor section 988 transactions to minimize
any adverse tax impact.
If a Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted
basis -- and enters into a "constructive sale" of the same or substantially
similar property, the Fund will be treated as having made an actual sale
thereof, with the result that gain will be recognized at that time. A
constructive sale generally consists of a short sale, an offsetting notional
42
<PAGE> 138
principal contract or Futures or Forward Contract entered into by a Fund or a
related person with respect to the same or substantially similar property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting each 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 Funds.
MISCELLANEOUS INFORMATION
AIM was organized in 1976, and, together with its subsidiaries, manages or
advises approximately 90 investment company portfolios encompassing a broad
range of investment objectives. 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 Fund's principal underwriter, AIM Distributors. AIM
Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire
Square, London, EC2M 4YR, England. AMVESCAP PLC and its subsidiaries are
independent investment management groups that have a significant presence in the
institutional and retail segment of the investment management industry in North
America and Europe, and a growing presence in Asia.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 02110, acts as custodian of each Fund's assets. State Street is
authorized to establish and has established separate accounts in foreign
currencies and to cause securities of each Fund to be held in separate accounts
outside the United States in the custody of non-U.S. banks.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agency and Service Agreement between the Trust and AFS, a
registered transfer agent and wholly-owned subsidiary of AIM, provides that AFS
will perform certain shareholder services for the Funds for a fee per account
serviced. The Transfer Agency and Service Agreement provides that AFS will
receive a per account fee plus out-of-pocket expenses to process orders for
purchases, redemptions and exchanges of shares; prepare and transmit payments
for dividends and distributions declared by the Funds; maintain shareholder
accounts and provide shareholders with information regarding the Funds and their
accounts. The Transfer Agency and Service Agreement became effective on
September 8, 1998. The Sub-advisor serves as each Fund's pricing and accounting
agent. For the fiscal years ended October 31, 1997, 1996 and 1995, Emerging
Markets Fund paid accounting services fees to the Sub-advisor of $103,144,
$125,349 and $33,216, and Latin American Fund paid accounting services fees of
$90,733, $86,436 and $24,138, respectively.
INDEPENDENT ACCOUNTANTS
The Funds' independent accountants are PricewaterhouseCoopers LLP.
PricewaterhouseCoopers LLP conducts an annual audit of each Fund, assists in the
preparation of the Funds' federal and state income tax returns and consults with
the Trust and the Funds as to matters of accounting, regulatory filings, and
federal and state income taxation.
The audited financial statements of the Trust included in this Statement of
Additional Information have been examined by PricewaterhouseCoopers LLP, as
stated in their opinion appearing herein and are included in reliance upon such
opinion given upon the authority of that firm as experts in accounting and
auditing.
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of the Trust enjoy the same limitations
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.
43
<PAGE> 139
NAME
Prior to May 29, 1998, Developing Markets Fund, Emerging Markets Fund and
Latin American Fund operated under the names GT Global Developing Markets Fund,
GT Global Emerging Markets Fund, and GT Global Latin America Growth Fund,
respectively.
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 each Fund's equity
securities as of August 10, 1998, and the percentage of the outstanding shares
held by such holders are set forth below:
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
---- ------------------------- -------- ------------
<S> <C> <C> <C>
Developing Markets Olde Discount 55.67% -0-
Fund -- Class B FBO 05012322
751 Griswold Street
Detroit, Michigan 48226-3224
Raymond James & Assoc. Inc. CSDN 7.64% -0-
Mary Lynn James IRA
1215 W. Los Angeles Circle
Broken Arrow, Oklahoma 74011-4215
Smith Barney Inc. 5.16% -0-
150926032
388 Greenwich Street
New York, New York 10013-2339
PaineWebber FBO 5.06% -0-
Joseph McDonald & Mildred McDonald JJWRO
379 Quarry Pond Court
Moriches, New York 11955-1706
Developing Markets G.T. Capital Holdings, Inc. 401(k) FBO 57.04% -0-
Fund -- Advisor Class Account 041-66-4510
Attn: Human Resources
50 California St. 27th Floor
San Francisco, CA 94111-4624
G.T. Capital Holdings, Inc. 401(k) FBO 13.34% -0-
Account 556-33-9792
Attn: Human Resources
50 California St. 27th Floor
San Francisco, California 94111-4624
G.T. Capital Holdings, Inc. 401(k) FBO 8.19% -0-
Account 561-49-0015
50 California Street, 27th Floor
San Francisco, California 94111-4624
Attn: Human Resources
Emerging Markets Fund -- Wells Fargo Bank NA TTEE FBO 28.45% -0-
Advisor Class LGT Asset Management AC 5000201000
Serp Prft Shr Pln ###-##-####
P O Box 9800 MAC 9137-027
Calabasas, CA 91372-0800
Emerging Markets Fund -- MLPF&S for the Sold Benefit of its 5.72% -0-
Class A Customers, Security #970E1
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Latin American G.T. Capital Holdings, Inc. 401(k) FBO 8.48% -0-
Fund -- Advisor Class Account 102505451
50 California Street, 27th Floor
San Francisco, California 94111-4624
Attn: Human Resources
</TABLE>
- ---------------
*The Trust has no knowledge as to whether all or any portion of the shares owned
of record are also owned beneficially.
44
<PAGE> 140
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
---- ------------------------- -------- ------------
<S> <C> <C> <C>
G.T. Capital Holdings, Inc. 401(k)FBO 5.35% -0-
Acct ####-##-####
50 California Street, 27th Floor
San Francisco, California 94111-4624
Attn: Human Resources
Wells Fargo Bank NA TTEE FBO 6.45% -0-
LGT Asset Management AC 5000201000
Serp Prft Shr Pln ###-##-####
P O Box 9800 MAC 9137-027
Calabasas, CA 91372-0800
Latin American Fund -- MLPF&S for the Sold Benefit of its 7.99% -0-
Class A Customers, Security #970E1
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
- ---------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return, as described in each
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>
The standard total returns of Developing Market's Predecessor Fund (recomputed
for Class A shares to reflect the deduction of the maximum sales charge of 4.75%
for Class A shares), stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
DEVELOPING DEVELOPING
MARKETS FUND MARKETS FUND
PERIOD (CLASS A) (CLASS B)
------ ------------ ------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997............................. (9.59)% (9.68)%
Jan. 11, 1994 (commencement of operations) through Oct. 31,
1997...................................................... (2.47)% (1.90)%
</TABLE>
Class B shares of Developing Markets Fund have not been in operation for a
full year since the Fund's conversion from a closed-end to an open-end fund.
45
<PAGE> 141
The standard total returns for the Class A and Class B shares of Emerging
Markets Fund, stated as average annualized total returns for the periods shown,
were:
<TABLE>
<CAPTION>
EMERGING MARKETS EMERGING MARKETS
PERIOD FUND (CLASS A) FUND (CLASS B)
------ ---------------- ----------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997....................... (18.51)% (19.16)%
Oct. 31, 1992 through Oct. 31, 1997................... 2.30% n/a
April 1, 1993 (commencement of operations) through
Oct. 31, 1997....................................... n/a 1.81%
May 18, 1992 (commencement of operations) through Oct.
31, 1997............................................ 1.57% n/a
</TABLE>
The standard total returns for the Class A and Class B shares of Latin
American Fund, stated as average annualized total returns for the periods shown,
were:
<TABLE>
<CAPTION>
LATIN AMERICAN LATIN AMERICAN
PERIOD FUND (CLASS A) FUND (CLASS B)
------ -------------- --------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997.......................... 3.34% 3.04%
Oct. 31, 1992 through Oct. 31, 1997...................... 7.01% n/a
April 1, 1993 (commencement of operations) through Oct.
31, 1997............................................... n/a 5.20%
Aug. 13, 1991 (commencement of operations) through Oct.
31, 1997............................................... 7.23% n/a
</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>
The average annual non-standard total returns of Developing Markets Fund's
Predecessor Fund, stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
PERIOD
------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. (5.10)%
Jan. 11, 1994 (commencement of operations) through Oct. 31,
1997...................................................... (1.21)%
</TABLE>
The average annual non-standard total returns for the Class A and Class B
shares of Emerging Markets Fund, stated as average annualized total returns for
the periods shown, were:
<TABLE>
<CAPTION>
EMERGING MARKETS EMERGING MARKETS
PERIOD FUND (CLASS A) FUND (CLASS B)
------ ---------------- ----------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997....................... (14.45)% (14.91)%
Oct. 31, 1992 through Oct. 31, 1997................... 3.30% n/a
April 1, 1993 (commencement of operations) through
Oct. 31, 1997....................................... n/a 2.21%
May 18, 1992 (commencement of operations) through Oct.
31, 1997............................................ 2.48% n/a
</TABLE>
46
<PAGE> 142
The average annual non-standard total returns for the Class A and Class B
shares of Latin American Fund, stated as average annualized total returns for
the periods shown, were:
<TABLE>
<CAPTION>
LATIN AMERICAN LATIN AMERICAN
PERIOD FUND (CLASS A) FUND (CLASS B)
------ -------------- ---------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997.......................... 8.52% 8.04%
Oct. 31, 1991 through Oct. 31, 1997...................... 8.06% n/a
April 1, 1993 (commencement of operations) through Oct.
31, 1997............................................... n/a 5.56%
Aug. 13, 1991 (commencement of operations) through Oct.
31, 1997............................................... 8.07% n/a
</TABLE>
Cumulative total return across a stated period may be calculated as follows:
(n)
P(1+V) =ERV
<TABLE>
<S> <C> <C> <C>
Where P = a hypothetical initial payment of $1,000.
V = cumulative total return assuming payment of all of, a stated
portion of, or none of, the applicable maximum sales load at
the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.
</TABLE>
The cumulative total return of Developing Markets Fund's Predecessor Fund (not
recomputed to take sales charges into account) for the period January 11, 1994
(commencement of operations) through October 31, 1997 was (4.53)%.
The cumulative total return of Developing Market's Predecessor Fund
(recomputed for Class A shares to reflect the deduction of the maximum sales
charge of 4.75% for Class A shares), stated as aggregate total returns for the
periods shown, were:
<TABLE>
<CAPTION>
DEVELOPING DEVELOPING
MARKETS FUND MARKETS FUND
PERIOD (CLASS A) (CLASS B)
------ ------------ ------------
<S> <C> <C>
Jan. 11, 1994 (commencement of operations) through Oct.
31, 1997................................................ (9.08)% (7.04)%
</TABLE>
Class B shares of Developing Markets Fund have not been in operation for a
full year since the Fund's conversion from a closed-end to an open-end fund.
The cumulative total returns (not taking sales charges into account) for the
Class A and Class B shares of Emerging Markets Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
EMERGING MARKETS EMERGING MARKETS
PERIOD FUND (CLASS A) FUND (CLASS B)
------ ---------------- ----------------
<S> <C> <C>
April 1, 1993 (commencement of operations) through
Oct. 31, 1997....................................... n/a 10.55%
May 18, 1992 (commencement of operations)through Oct.
31, 1997............................................ 14.32% n/a
</TABLE>
The aggregate cumulative total returns (taking sales charges into account) for
the Class A and B shares of Emerging Markets Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
EMERGING MARKETS EMERGING MARKETS
PERIOD FUND (CLASS A) FUND (CLASS B)
------ ---------------- ----------------
<S> <C> <C>
April 1, 1993 (commencement of operations) through
Oct. 31, 1997....................................... n/a 8.55%
May 18, 1992 (commencement of operations) through Oct.
31, 1997............................................ 8.89% n/a
</TABLE>
The cumulative total returns (not taking sales charges into account) for the
Class A and Class B shares of Latin American Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
LATIN AMERICAN LATIN AMERICAN
PERIOD FUND (CLASS A) FUND (CLASS B)
------ -------------- --------------
<S> <C> <C>
April 1, 1993 (commencement of operations) through Oct.
31, 1997................................................ n/a 28.14%
Aug. 13, 1991 (commencement of operations) through Oct.
31, 1996................................................ 62.00% n/a
</TABLE>
47
<PAGE> 143
The aggregate cumulative total returns (taking sales charges into account) for
the Class A and B shares of Latin American Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
LATIN AMERICAN LATIN AMERICAN
PERIOD FUND (CLASS A) FUND (CLASS B)
------ -------------- --------------
<S> <C> <C>
April 1, 1993 (commencement of operations) through Oct.
31, 1997................................................ n/a 26.14%
Aug. 13, 1991 (commencement of operations) through Oct.
31, 1997................................................ 54.303% n/a
</TABLE>
OTHER INFORMATION REGARDING STANDARD TOTAL AND NON-STANDARD TOTAL RETURNS FOR
DEVELOPING MARKETS FUND
The standard total and non-standard total return data of Developing Markets
Fund are based on the performance of the Predecessor Fund as a closed-end
investment company. The standard total return data, however, have been
recomputed to reflect the deduction of the current maximum sales charge of 4.75%
for Class A shares which went into effect on November 1, 1997. Future
performance of Developing Markets Fund will be effected by expenses that it will
incur as a series of an open-end investment company.
PERFORMANCE INFORMATION
Total return and yield figures for the Funds are neither fixed nor guaranteed,
and no Fund's principal is insured. Performance quotations reflect historical
information and should not be considered representative of a 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 Funds may provide performance
information in reports, sales literature and advertisements. The Funds may also,
from time to time, quote information about the Funds published or aired by
publications or other media entities which contain articles or segments relating
to investment results or other data about one or more of the Funds. 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
Consumer Reports
Economist
EuroMoney
FACS of the Week
Financial Planning
Financial Product News
Financial World
Forbes
Fortune
Global Finance
Hartford Courant Inc.
Institutional Investor
Insurance Forum
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
Pension World
Pensions & Investments
Personal Investor
Financial Services Week
Philadelphia Inquirer
Smart Money
USA Today
U.S. News & World Report
Wall Street Journal
Washington Post
CNN
CNBC
PBS
The Funds and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
each Fund with the following, or compare each 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)
48
<PAGE> 144
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
Each 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 Funds or AIM
Distributors. Advertising for the Funds may from time to time include
discussions of general economic conditions and interest rates. Advertising for
the Funds may also include reference to the use of those Funds as part of an
individual's overall retirement investment program. From time to time, sales
literature and/or advertisements for any of the Funds may disclose (i) the
largest holdings in the Fund's portfolio, (ii) certain selling group members
and/or (iii) certain institutional shareholders.
From time to time, the Funds' sales literature and/or advertisements may
discuss generic topics pertaining to the mutual fund industry. This includes,
but is not limited to, literature addressing general information about mutual
funds, 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.
49
<PAGE> 145
APPENDIX
DESCRIPTION OF BOND RATINGS
Moody's Investors Service, Inc. ("Moody's") rates the debt securities issued
by various entities from "Aaa" to "C." Investment grade ratings are the first
four categories: Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bond 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 -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Ba -- Bonds which are rated Ba
are judged to have speculative elements; their future cannot be considered as
well-assured. Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded during other good and bad times
over the future. Uncertainty of position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest. Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings. C -- Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by
S&P. The obligor's capacity to meet its financial commitment on the obligation
is extremely strong. AA -- An obligation rated "AA" differs from the highest
rated obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong. A -- An obligation rated
"A" is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories. BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation. BB, B, CCC, CC, C -- Obligations rated "BB," "B,"
"CCC," "CC," and "C" are regarded as having significant speculative
characteristics. "BB" indicates the least degree of speculation and "C" the
highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions. BB -- An obligation rated "BB" is less
vulnerable to nonpayment than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation. B -- An obligation rated "B" is more
vulnerable to nonpayment than obligations rated "BB," but the obligor currently
has the capacity to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the obligor's
capacity or willingness to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments on this obligation
are being continued. D -- An obligation rated "D" is in payment default. The "D"
rating category is used when payments on an obligation 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. The "D" rating also
will be used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.
50
<PAGE> 146
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 COMMERCIAL PAPER RATINGS
Moody's employs the designation "Prime-1" to indicate commercial paper having
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. Issues rated Prime-2 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.
S&P ratings of commercial paper are graded into several categories ranging
from "A-1" for the highest quality obligations to "D" for the lowest. Issues in
the "A" category are delineated with numbers 1, 2, and 3 to indicate the
relative degree of safety. 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 payments on issues with this
designation is satisfactory; however, the relative degree of safety is not as
high as for issues designated "A-1."
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 Caa. 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 Company ranks in the
lower end of its generic rating category.
51
<PAGE> 147
FINANCIAL STATEMENTS
FS
<PAGE> 148
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
REPORT OF INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------------------
To the Shareholders and Board of Directors of AIM Developing Markets Fund
("Fund"):
We have audited the accompanying statement of assets and liabilities of AIM
Developing Markets Fund (formerly GT Global Developing Markets Fund), including
the portfolio of investments, as of April 30, 1998, the related statement of
operations for the six months then ended, the statements of changes in net
assets for the six months then ended, for the ten months ended October 31, 1997
and for the year ended December 31, 1996, and the financial highlights for each
of the periods indicated therein. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1998, by correspondence with the custodians and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of AIM
Developing Markets Fund as of April 30, 1998, the results of its operations for
the six months then ended, the changes in its net assets for the six months then
ended, for the ten months ended October 31, 1997 and for the year ended December
31, 1996, and the financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JUNE 17, 1998
FS-1
<PAGE> 149
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (16.8%)
Telecomunicacoes Brasileiras S.A. (Telebras): ............. BRZL -- -- 3.6
TELEPHONE NETWORKS
ADR{\/} ................................................. -- 40,191 $ 4,895,254 --
Common .................................................. -- 25,866,258 2,567,399 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ........... MEX 43,283 2,450,900 1.2
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ........................ PERU 104,070 2,302,549 1.1
TELEPHONE NETWORKS
Pick'n Pay Stores Ltd.: ................................... SAFR -- -- 1.0
RETAILERS-OTHER
Common .................................................. -- 1,087,304 2,065,931 --
"N" ..................................................... -- 11,602 21,126 --
Magyar Tavkozlesi Rt. - ADR-/- {\/} ....................... HGRY 59,100 1,743,450 0.8
TELEPHONE NETWORKS
Philippine Long Distance Telephone Co.: ................... PHIL -- -- 0.7
TELEPHONE - LONG DISTANCE
Common .................................................. -- 36,900 990,449 --
ADR{\/} ................................................. -- 19,000 513,000 --
Mahanagar Telephone Nigam Ltd. ............................ IND 229,700 1,458,413 0.7
TELECOM - OTHER
Cifra, S.A. de C.V. "V" ................................... MEX 820,662 1,443,668 0.7
RETAILERS-OTHER
Grupo Televisa, S.A. de C.V. - GDR-/- {\/} ................ MEX 34,300 1,406,300 0.7
BROADCASTING & PUBLISHING
Carso Global Telecom "A1" ................................. MEX 295,300 1,133,087 0.5
TELEPHONE NETWORKS
Telefonica de Argentina S.A. - ADR{\/} .................... ARG 27,528 1,061,549 0.5
TELEPHONE NETWORKS
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP ................................................... BRZL 4,531,127 1,030,252 0.5
BUSINESS & PUBLIC SERVICES
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ......... CHLE 39,302 985,006 0.5
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP)-/- ............ BRZL 3,195,000 834,025 0.4
TELEPHONE NETWORKS
Nortel Inversora S.A. - ADR{\/} ........................... ARG 23,500 699,125 0.3
TELEPHONE NETWORKS
Vimpel-Communications - ADR-/- {\/} ....................... RUS 12,900 696,600 0.3
WIRELESS COMMUNICATIONS
Telecom Argentina S.A. - ADR{\/} .......................... ARG 15,800 568,800 0.3
TELEPHONE NETWORKS
Hellenic Telecommunications Organization S.A. ............. GREC 19,730 565,042 0.3
TELEPHONE NETWORKS
Genting Bhd. .............................................. MAL 154,000 516,108 0.3
LEISURE & TOURISM
Guangshen Railway Co., Ltd. ............................... HK 2,606,000 487,857 0.2
TRANSPORTATION - ROAD & RAIL
Rostelecom - ADR-/- {\/} .................................. RUS 20,600 441,613 0.2
TELEPHONE - LONG DISTANCE
Telekom Malaysia Bhd. ..................................... MAL 143,000 432,865 0.2
TELEPHONE NETWORKS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-2
<PAGE> 150
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
Danubius Hotel and Spa Rt.-/- ............................. HGRY 16,320 $ 398,870 0.2
LEISURE & TOURISM
Telecomunicacoes do Parana (TELPAR) ....................... BRZL 616,000 351,769 0.2
TELECOM - OTHER
Malaysia International Shipping Bhd. - Foreign ............ MAL 192,000 337,297 0.2
TRANSPORTATION - SHIPPING
Indian Hotels Co., Ltd. ................................... IND 23,150 308,987 0.2
LEISURE & TOURISM
Advanced Info. Service - Foreign .......................... THAI 43,800 306,373 0.1
WIRELESS COMMUNICATIONS
Telecomunicacoes de Minas Gerais - Telemig ................ BRZL 1,787,700 275,933 0.1
TELECOM - OTHER
Tanjong PLC ............................................... MAL 116,000 266,486 0.1
LEISURE & TOURISM
Santa Isabel S.A. - ADR{\/} ............................... CHLE 13,514 222,981 0.1
RETAILERS-FOOD
Migros Turk T.A.S. ........................................ TRKY 220,300 216,110 0.1
RETAILERS-FOOD
Pakistan Telecommunications Co., Ltd. - GDR-/- {\/} ....... PAK 2,900 200,100 0.1
TELEPHONE NETWORKS
Super Sol Ltd. ............................................ ISRL 60,231 189,953 0.1
RETAILERS-FOOD
Berjaya Sports Toto Bhd. .................................. MAL 76,000 181,784 0.1
LEISURE & TOURISM
Trade House GUM - ADR{\/} ................................. RUS 32,660 163,300 0.1
RETAILERS-OTHER
Goody's S.A. .............................................. GREC 4,850 129,792 0.1
RESTAURANTS
Siam Makro Public Co., Ltd. - Foreign ..................... THAI 45,000 74,028 --
RETAILERS-OTHER
------------
34,934,131
------------
Finance (16.2%)
Alpha Credit Bank ......................................... GREC 17,700 1,867,438 0.9
BANKS-REGIONAL
Uniao de Bancos Brasileiros S.A. (Unibanco): .............. BRZL -- -- 0.9
BANKS-MONEY CENTER
Units ................................................... -- 14,649,042 1,127,470 --
GDR-/- {\/} ............................................. -- 18,510 735,773 --
State Bank of India Ltd. .................................. IND 218,400 1,584,762 0.8
BANKS-MONEY CENTER
Turkiye Garanti Bankasi AS-/- ............................. TRKY 29,372,000 1,558,274 0.8
BANKS-REGIONAL
ABSA Group Ltd. ........................................... SAFR 172,076 1,490,020 0.7
BANKS-REGIONAL
Commercial International Bank: ............................ EGPT -- -- 0.6
BANKS-MONEY CENTER
144A GDR{.} {\/} ........................................ -- 43,400 735,630 --
Common .................................................. -- 23,940 411,606 --
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-3
<PAGE> 151
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Yapi ve Kredi Bankasi AS .................................. TRKY 23,117,092 $ 1,133,871 0.5
BANKS-REGIONAL
Bank Hapoalim Ltd. ........................................ ISRL 416,100 1,117,568 0.5
BANKS-REGIONAL
Credicorp Ltd. - ADR{\/} .................................. PERU 66,220 1,109,185 0.5
BANKS-MONEY CENTER
Akbank T.A.S. ............................................. TRKY 12,775,000 1,086,962 0.5
BANKS-REGIONAL
Cathay Life Insurance Co., Ltd. ........................... TWN 251,000 1,004,914 0.5
INSURANCE-BROKER
Grupo Financiero Banamex Accival, S.A. de C.V. "B"-/- ..... MEX 308,800 966,139 0.5
BANKS-MONEY CENTER
National Bank of Greece S.A. .............................. GREC 5,400 950,232 0.5
BANKS-MONEY CENTER
Liberty Life Association of Africa Ltd. ................... SAFR 27,600 934,112 0.5
INSURANCE-LIFE
C.G. Smith Ltd. ........................................... SAFR 178,600 883,721 0.4
INVESTMENT MANAGEMENT
China Development Corp.-/- ................................ TWN 303,000 822,520 0.4
BANKS-MONEY CENTER
Banco de Galicia y Buenos Aires, S.A. de C.V. - ADR{\/} ... ARG 28,872 707,364 0.3
BANKS-MONEY CENTER
Standard Bank Investment Corporation Ltd. ................. SAFR 11,900 704,226 0.3
BANKS-MONEY CENTER
Kazkommertsbank Co. - GDR-/- {\/} ......................... KAZ 26,600 698,250 0.3
BANKS-REGIONAL
Banco Frances del Rio de la Plata S.A. - ADR{\/} .......... ARG 23,368 679,133 0.3
BANKS-MONEY CENTER
Aksigorta AS .............................................. TRKY 9,123,000 675,778 0.3
INSURANCE - MULTI-LINE
Banco do Estado de Sao Paulo S.A. - Banespa ............... BRZL 9,930,000 659,974 0.3
BANKS-REGIONAL
Hua Nan Commercial Bank ................................... TWN 267,000 647,862 0.3
BANKS-MONEY CENTER
Ergo Bank S.A. ............................................ GREC 6,800 640,489 0.3
BANKS-REGIONAL
National Societe Generale Bank ............................ EGPT 24,000 603,439 0.3
BANKS-MONEY CENTER
Nedcor Ltd. ............................................... SAFR 20,500 584,265 0.3
BANKS-REGIONAL
Banco Santander Chile - ADR{\/} ........................... CHLE 40,700 569,800 0.3
BANKS-REGIONAL
MISR International Bank - Reg S GDR-/- {c} {\/} ........... EGPT 45,000 562,500 0.3
BANKS-MONEY CENTER
Banco de A. Edwards - ADR{\/} ............................. CHLE 34,994 562,091 0.3
BANKS-MONEY CENTER
Bank Leumi Le - Israel .................................... ISRL 249,668 456,496 0.2
BANKS-REGIONAL
Turkiye Is Bankasi (Isbank) "C" ........................... TRKY 3,608,400 455,114 0.2
BANKS-MONEY CENTER
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-4
<PAGE> 152
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} .................................................. CHLE 25,086 $ 448,412 0.2
INVESTMENT MANAGEMENT
National Development Bank-/- .............................. SLNKA 116,300 431,898 0.2
BANKS-REGIONAL
Bank Slaski S.A. .......................................... POL 4,766 408,635 0.2
BANKS-MONEY CENTER
Banco Rio de La Plata S.A. - ADR-/- {\/} .................. ARG 26,900 369,875 0.2
BANKS-MONEY CENTER
Bank of the Philippine Islands ............................ PHIL 147,000 367,041 0.2
BANKS-MONEY CENTER
Commercial Bank of Greece S.A. ............................ GREC 5,800 364,968 0.2
BANKS-MONEY CENTER
Inversiones y Representaciones S.A. (IRSA) - GDR{\/} ...... ARG 9,000 349,875 0.2
REAL ESTATE
Liberty Investors Ltd. .................................... SAFR 61,400 312,924 0.2
INVESTMENT MANAGEMENT
Muslim Commercial Bank Ltd.-/- ............................ PAK 367,300 291,839 0.1
BANKS-MONEY CENTER
Global Menkul Degerler AS-/- .............................. TRKY 12,103,256 290,769 0.1
SECURITIES BROKER
F.I.B.I. Holdings Ltd. .................................... ISRL 1,520 269,696 0.1
BANKS-REGIONAL
Ayala Land, Inc. .......................................... PHIL 633,600 249,169 0.1
REAL ESTATE
National Mortgage Bank of Greece .......................... GREC 3,040 231,197 0.1
BANKS-REGIONAL
OTP Bank Rt. .............................................. HGRY 4,270 202,446 0.1
BANKS-MONEY CENTER
Malayan Banking Bhd. ...................................... MAL 66,000 196,216 0.1
BANKS-MONEY CENTER
Egyptian American Bank SAE ................................ EGPT 5,363 137,129 0.1
BANKS-MONEY CENTER
Shinhan Bank-/- ........................................... KOR 24,300 94,652 --
BANKS-MONEY CENTER
Samsung Fire & Marine Insurance-/- ........................ KOR 260 76,929 --
INSURANCE - MULTI-LINE
Kookmin Bank - GDR-/- {\/} ................................ KOR 10,400 68,224 --
BANKS-MONEY CENTER
Bangkok Bank Public Co., Ltd. - Foreign ................... THAI 20,600 51,767 --
BANKS-MONEY CENTER
Thai Farmers Bank Public Co., Ltd. - Foreign .............. THAI 17,200 39,435 --
BANKS-MONEY CENTER
------------
33,980,074
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-5
<PAGE> 153
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (13.3%)
Centrais Eletricas Brasileiras S.A. (Eletrobras): ......... BRZL -- -- 1.6
ELECTRICAL & GAS UTILITIES
"B" ADR{\/} ............................................. -- 118,958 $ 2,661,685 --
Common-/- ............................................... -- 9,090,500 373,637 --
"B" Preferred ........................................... -- 4,460,000 198,955 --
Petroleo Brasileiro S.A. (Petrobras) Preferred ............ BRZL 11,865,398 3,009,152 1.4
OIL
Sasol Ltd. ................................................ SAFR 223,556 2,256,577 1.1
ENERGY SOURCES
LUKoil Holding - ADR{\/} .................................. RUS 31,666 2,058,290 1.0
OIL
Unified Energy Systems - Reg S GDR-/- {c} {\/} ............ RUS 57,100 1,827,200 0.9
ELECTRICAL & GAS UTILITIES
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} .... BRZL 36,144 1,752,984 0.8
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ........................................ ARG 37,260 1,299,443 0.6
ENERGY SOURCES
Empresa Nacional de Electricidad S.A. - ADR{\/} ........... CHLE 67,677 1,180,118 0.6
ELECTRICAL & GAS UTILITIES
Light - Participacoes S.A. ................................ BRZL 4,613,750 1,129,733 0.5
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} .................................... CHLE 37,038 1,090,306 0.5
ELECTRICAL & GAS UTILITIES
Bombay Suburban Electric Supply (BSES) Ltd. ............... IND 199,850 921,959 0.4
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. .................... BRZL 2,271,290 913,680 0.4
ELECTRICAL & GAS UTILITIES
Cukurova Elektrik AS ...................................... TRKY 308,000 887,928 0.4
ELECTRICAL & GAS UTILITIES
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} ........ HGRY 26,400 805,860 0.4
ENERGY SOURCES
Manila Electric Co. "B" ................................... PHIL 281,300 800,704 0.4
ELECTRICAL & GAS UTILITIES
Gener S.A. - ADR{\/} ...................................... CHLE 33,092 740,434 0.4
ELECTRICAL & GAS UTILITIES
The Hub Power Co., Ltd. - GDR-/- {\/} ..................... PAK 24,800 626,200 0.3
ENERGY SOURCES
Perez Companc S.A. "B" .................................... ARG 71,460 429,518 0.2
OIL
Irkutskenergo - ADR{\/} ................................... RUS 43,300 422,175 0.2
ELECTRICAL & GAS UTILITIES
Surgutneftegaz - ADR{\/} .................................. RUS 54,820 383,740 0.2
OIL
Ingwe Coal Corp. .......................................... SAFR 87,200 312,384 0.2
COAL
Petronas Gas Bhd. ......................................... MAL 124,000 301,622 0.1
OIL
Chilectra S.A. - ADR{\/} .................................. CHLE 10,630 293,654 0.1
ELECTRICAL & GAS UTILITIES
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-6
<PAGE> 154
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Companhia Brasileira de Petroleo Ipiranga S.A.
Preferred ................................................ BRZL 19,148,000 $ 249,502 0.1
OIL
Electricity Generating Public Co., Ltd. - Foreign ......... THAI 126,100 245,013 0.1
ELECTRICAL & GAS UTILITIES
Tenaga Nasional Bhd. ...................................... MAL 108,000 217,459 0.1
ELECTRICAL & GAS UTILITIES
PTT Exploration and Production Public Co., Ltd. -
Foreign .................................................. THAI 14,000 147,979 0.1
OIL
Korea Electric Power Corp. ................................ KOR 10,500 143,146 0.1
ELECTRICAL & GAS UTILITIES
Companhia Paranaense de Energia - Copel ................... BRZL 10,185,000 117,571 0.1
ELECTRICAL & GAS UTILITIES
Transportadora de Gas del Sur S.A. (TGS) - ADR{\/} ........ ARG 2,000 23,125 --
GAS PRODUCTION & DISTRIBUTION
Banpu Public Co., Ltd. - Foreign .......................... THAI 3,000 20,674 --
COAL
------------
27,842,407
------------
Materials/Basic Industry (10.8%)
Suez Cement Co. - Reg S GDR{c} {\/} ....................... EGPT 118,295 2,413,218 1.2
CEMENT
Helioplis Housing ......................................... EGPT 17,100 2,211,315 1.1
BUILDING MATERIALS & COMPONENTS
Kimberly-Clark de Mexico, S.A. de C.V. "A" ................ MEX 406,179 1,997,326 1.0
PAPER/PACKAGING
Companhia Vale do Rio Doce Preferred ...................... BRZL 55,700 1,315,173 0.6
METALS - STEEL
De Beers Centenary AG - Linked Unit{.:} ................... SAFR 42,900 1,112,301 0.5
MISC. MATERIALS & COMMODITIES
Industrias Penoles S.A. (CP) .............................. MEX 255,003 1,053,731 0.5
METALS - NON-FERROUS
Reliance Industries Ltd. - GDR-/- {\/} .................... IND 114,420 1,044,083 0.5
CHEMICALS
Cemex, S.A. de C.V. "CPO" ................................. MEX 203,800 1,020,203 0.5
CEMENT
Apasco, S.A. de C.V. ...................................... MEX 147,133 1,000,574 0.5
CEMENT
SA Iron & Steel Industrial Corporation Ltd. (ISCOR) ....... SAFR 2,706,606 873,185 0.4
METALS - STEEL
Anglo American Platinum Corporation Ltd. .................. SAFR 44,900 718,045 0.3
METALS - NON-FERROUS
Compania de Minas Buenaventura S.A. - ADR{\/} ............. PERU 44,400 688,200 0.3
METALS - NON-FERROUS
Ameriyah Cement Co. ....................................... EGPT 32,500 629,464 0.3
CEMENT
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ......... CHLE 13,500 586,406 0.3
CHEMICALS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-7
<PAGE> 155
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Hindalco Industries Ltd.: ................................. IND -- -- 0.2
METALS - NON-FERROUS
GDR{\/} ................................................. -- 26,200 $ 510,900 --
Common .................................................. -- 1,634 31,083 --
Siderca S.A. "A" .......................................... ARG 213,000 513,381 0.2
METALS - STEEL
Larsen & Toubro Ltd. - Reg S GDR{c} {\/} .................. IND 37,800 498,015 0.2
CEMENT
Grupo Mexico S.A.: ........................................ MEX -- -- 0.2
METALS - NON-FERROUS
"B" ..................................................... -- 133,100 432,143 --
"L" ..................................................... -- 300 956 --
Nan Ya Plastics Corp. ..................................... TWN 208,000 343,828 0.2
PLASTICS & RUBBER
AECI Ltd. ................................................. SAFR 65,400 323,602 0.2
CHEMICALS
Turk Sise ve Cam Fabrikalari AS-/- ........................ TRKY 6,248,550 306,485 0.1
GLASS
Titan Cement Co., S.A. .................................... GREC 3,400 291,033 0.1
BUILDING MATERIALS & COMPONENTS
Kuala Lumpur Kepong Bhd. .................................. MAL 123,000 287,554 0.1
FOREST PRODUCTS
Makhteshim Chemical Works Ltd.-/- ......................... ISRL 31,439 267,009 0.1
CHEMICALS
Pannonplast Rt. ........................................... HGRY 5,842 247,894 0.1
MISC. MATERIALS & COMMODITIES
Torah Portland Cement Co. ................................. EGPT 11,150 236,436 0.1
CEMENT
Golden Hope Plantations Bhd. .............................. MAL 189,000 235,995 0.1
FOREST PRODUCTS
Fauji Fertilizer Co., Ltd. ................................ PAK 116,300 229,432 0.1
CHEMICALS
Grupo Cementos de Chihuahua, S.A. de C.V. "B" ............. MEX 202,900 216,554 0.1
CEMENT
Engro Chemicals Pakistan Ltd. ............................. PAK 90,270 201,238 0.1
CHEMICALS
Formosa Plastics Corp. .................................... TWN 113,000 193,646 0.1
CHEMICALS
Agros Holding S.A. "C"-/- ................................. POL 6,953 153,646 0.1
MISC. MATERIALS & COMMODITIES
HI Cement Corp. ........................................... PHIL 1,178,000 141,184 0.1
CEMENT
Malakoff Bhd. ............................................. MAL 50,000 132,432 0.1
FOREST PRODUCTS
Israel Chemicals Ltd. ..................................... ISRL 101,158 122,029 0.1
CHEMICALS
Pohang Iron & Steel Co., Ltd. ............................. KOR 2,130 115,508 0.1
METALS - STEEL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-8
<PAGE> 156
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Maderas y Sinteticos S.A. - ADR{\/} ....................... CHLE 7,000 $ 66,938 --
MISC. MATERIALS & COMMODITIES
------------
22,762,145
------------
Multi-Industry/Miscellaneous (9.8%)
The Saudi Arabian Investment Fund Ltd.-/- {\/} ............ UK 281,000 2,214,280 1.1
COUNTRY FUNDS
Barlow Ltd. ............................................... SAFR 216,924 2,097,326 1.0
CONGLOMERATE
Central Asia Regional Growth Fund(::) -/- {\/} ............ IRE 175,000 1,862,000 0.9
COUNTRY FUNDS
Haci Omer Sabanci Holding AS .............................. TRKY 24,915,100 1,820,623 0.9
CONGLOMERATE
Rembrandt Group Ltd. ...................................... SAFR 185,300 1,687,046 0.8
CONGLOMERATE
NASR (El) City Company For Housing & Construction ......... EGPT 23,005 1,413,024 0.7
MISCELLANEOUS
Koc Holding AS ............................................ TRKY 6,419,150 1,362,222 0.7
CONGLOMERATE
Grupo Carso, S.A. de C.V. "A1" ............................ MEX 200,900 1,266,595 0.6
MULTI-INDUSTRY
Sanluis Corporacion, S.A. de C.V. ......................... MEX 172,177 914,754 0.4
CONGLOMERATE
Koor Industries Ltd. - ADR{\/} ............................ ISRL 32,643 828,316 0.4
CONGLOMERATE
Dogan Sirketler Grubu Holding AS-/- ....................... TRKY 13,003,000 741,913 0.4
MULTI-INDUSTRY
GT Taiwan Fund-/- +X+ {\/} ................................ TWN 49,751 703,483 0.3
COUNTRY FUNDS
John Keells Holdings Ltd.-/- .............................. SLNKA 125,000 661,741 0.3
MULTI-INDUSTRY
Anglo American Corporation of South Africa Ltd. ........... SAFR 10,920 646,231 0.3
CONGLOMERATE
Empresas La Moderna, S.A. de C.V. "A"-/- .................. MEX 80,400 402,949 0.2
MULTI-INDUSTRY
Ayala Corp. ............................................... PHIL 813,300 360,451 0.2
CONGLOMERATE
Quinenco S.A. - ADR-/- {\/} ............................... CHLE 34,700 357,844 0.2
CONGLOMERATE
Alfa, S.A. de C.V. "A" .................................... MEX 63,000 344,380 0.2
CONGLOMERATE
Antofagasta Holdings PLC .................................. UK 46,200 252,246 0.1
CONGLOMERATE
ONA (Omnium Nord Africain) S.A. "A" ....................... MOR 1,320 139,891 0.1
CONGLOMERATE
------------
20,077,315
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-9
<PAGE> 157
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (6.8%)
South African Breweries Ltd. .............................. SAFR 48,392 $ 1,624,400 0.8
BEVERAGES - ALCOHOLIC
Hindustan Lever Ltd. ...................................... IND 40,650 1,615,144 0.8
PERSONAL CARE/COSMETICS
ITC Ltd. .................................................. IND 79,900 1,586,827 0.8
TOBACCO
Fomento Economico Mexicano, S.A. de C.V. "B" .............. MEX 206,556 1,531,490 0.7
BEVERAGES - ALCOHOLIC
Gruma S.A. "B"-/- ......................................... MEX 423,373 973,708 0.5
FOOD
A-Ahram Beverages Co. S.A.E. - 144A GDR{.} {\/} ........... EGPT 28,114 894,025 0.4
BEVERAGES - ALCOHOLIC
Embotelladora Andina S.A. "B" - ADR{\/} ................... CHLE 41,497 840,314 0.4
BEVERAGES - NON-ALCOHOLIC
Eastern Tobacco Co. ....................................... EGPT 31,185 710,312 0.3
TOBACCO
C.G. Smith Foods Ltd. ..................................... SAFR 41,000 641,069 0.3
FOOD
Compania Cervecerias Unidas S.A. - ADR{\/} ................ CHLE 18,100 500,013 0.2
BEVERAGES - ALCOHOLIC
Hellenic Bottling Co. S.A. ................................ GREC 12,620 469,847 0.2
BEVERAGES - NON-ALCOHOLIC
Rothmans of Pall Mall Bhd. ................................ MAL 48,800 405,568 0.2
TOBACCO
San Miguel Corp. "B" ...................................... PHIL 244,000 402,097 0.2
BEVERAGES - ALCOHOLIC
Companhia Cervejaria Brahma Preferred ..................... BRZL 563,721 367,269 0.2
BEVERAGES - ALCOHOLIC
SUN Brewing Ltd. - GDR-/- {\/} ............................ RUS 19,500 347,826 0.2
BEVERAGES - ALCOHOLIC
Far Eastern Textile Ltd. .................................. TWN 359,000 326,661 0.2
TEXTILES & APPAREL
Pepsi-Gemex S.A. - GDR-/- {\/} ............................ MEX 22,400 303,800 0.1
BEVERAGES - NON-ALCOHOLIC
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) ................. POL 1,639 163,224 0.1
BEVERAGES - ALCOHOLIC
Carlsberg Brewery Malaysia Bhd. ........................... MAL 33,900 118,192 0.1
BEVERAGES - ALCOHOLIC
Oriental Weavers "C"-/- ................................... EGPT 5,600 116,855 0.1
TEXTILES & APPAREL
Nong Shim Co., Ltd. ....................................... KOR 2,100 91,551 --
FOOD
Erciyas Biracilik ve Malt Sanayii AS ...................... TRKY 111,000 18,000 --
BEVERAGES - ALCOHOLIC
------------
14,048,192
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-10
<PAGE> 158
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Technology (2.4%)
Asustek Computer Inc. - Reg. S GDR-/- {c} {\/} ............ TWN 122,448 $ 2,525,490 1.2
COMPUTERS & PERIPHERALS
Formula Systems Ltd.-/- ................................... ISRL 16,415 634,454 0.3
SOFTWARE
Alcatel Teletas Telekomunikasyon Endustri ve Ticaret AS ... TRKY 2,885,500 456,365 0.2
TELECOM TECHNOLOGY
Tadiran Ltd. .............................................. ISRL 10,100 393,379 0.2
TELECOM TECHNOLOGY
Delta Electronics, Inc. ................................... TWN 98,000 359,660 0.2
COMPUTERS & PERIPHERALS
Clal Electronics Industries Ltd. .......................... ISRL 2,054 293,333 0.1
SEMICONDUCTORS
Samsung Electronics (1/2 of Common Share) - GDR{\/} ....... KOR 9,900 277,200 0.1
SEMICONDUCTORS
United Microelectronics Corporation Ltd.-/- ............... TWN 128,000 240,704 0.1
SEMICONDUCTORS
------------
5,180,585
------------
Consumer Durables (2.1%)
Bajaj Auto Ltd. ........................................... IND 79,200 1,188,798 0.6
AUTOMOBILES
Imperial Holdings Ltd. .................................... SAFR 52,840 721,615 0.3
AUTOMOBILES
Hon Hai Precision Industry-/- ............................. TWN 101,000 588,171 0.3
CONSUMER ELECTRONICS
Qingling Motors Co., Ltd.{*} .............................. CHNA 1,022,000 442,024 0.2
AUTOMOBILES
Tata Engineering and Locomotive Co., Ltd. - GDR{\/} ....... IND 48,000 349,200 0.2
AUTOMOBILES
Mahindra & Mahindra Ltd. .................................. IND 43,300 315,395 0.2
AUTOMOBILES
Ford Otomotiv Sanayi AS ................................... TRKY 324,000 233,514 0.1
AUTOMOBILES
Tofas Turk Otomobil Fabrikasi AS .......................... TRKY 4,219,000 219,608 0.1
AUTOMOBILES
Arcelik AS ................................................ TRKY 1,601,300 179,525 0.1
APPLIANCES & HOUSEHOLD DURABLES
------------
4,237,850
------------
Health Care (1.7%)
Ranbaxy Laboratories Ltd. ................................. IND 79,850 1,334,857 0.6
MEDICAL TECHNOLOGY & SUPPLIES
Teva Pharmaceutical Industries Ltd. ....................... ISRL 24,700 1,047,539 0.5
PHARMACEUTICALS
Richter Gedeon Rt. - Reg S GDR{c} {\/} .................... HGRY 6,002 640,714 0.3
PHARMACEUTICALS
Egypt International Pharmaceutical Industries Co.
(EIPICO) ................................................. EGPT 7,000 499,927 0.2
PHARMACEUTICALS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-11
<PAGE> 159
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Health Care (Continued)
EGIS Rt. .................................................. HGRY 4,750 $ 247,724 0.1
PHARMACEUTICALS
Medison Co., Ltd. ......................................... KOR 8,200 67,174 --
MEDICAL TECHNOLOGY & SUPPLIES
------------
3,837,935
------------
Capital Goods (1.7%)
NICE-Systems Ltd.-/- ...................................... ISRL 13,650 568,935 0.3
TELECOM EQUIPMENT
Taiwan Semiconductor Manufacturing Co.-/- ................. TWN 121,000 522,975 0.3
MACHINERY & ENGINEERING
Corporacion GEO, S.A. de C.V. "B"-/- ...................... MEX 51,700 357,688 0.2
CONSTRUCTION
ECI Telecommunications Ltd.{\/} ........................... ISRL 10,600 323,300 0.2
TELECOM EQUIPMENT
Arabian International Construction-/- ..................... EGPT 6,298 296,159 0.1
CONSTRUCTION
Netas Telekomunik-/- ...................................... TRKY 670,200 249,564 0.1
TELECOM EQUIPMENT
Elektrim Spolka Akcyjna S.A. .............................. POL 13,472 192,514 0.1
ELECTRICAL PLANT/EQUIPMENT
Samsung Display Devices Co. ............................... KOR 3,090 153,921 0.1
ELECTRICAL PLANT/EQUIPMENT
Daewoo Heavy Industries ................................... KOR 30,600 151,510 0.1
INDUSTRIAL COMPONENTS
Samsung Electro-Mechanics Co. ............................. KOR 6,600 138,427 0.1
ELECTRICAL PLANT/EQUIPMENT
Sindo Ricoh Co. ........................................... KOR 3,300 116,180 0.1
OFFICE EQUIPMENT
Delta Electronics (Thailand) Public Co., Ltd. - Foreign ... THAI 6,200 63,927 --
ELECTRICAL PLANT/EQUIPMENT
LG Electronics ............................................ KOR 4,148 49,403 --
ELECTRICAL PLANT/EQUIPMENT
Madeco S.A. - ADR{\/} ..................................... CHLE 2,000 32,000 --
INDUSTRIAL COMPONENTS
------------
3,216,503
------------ -----
TOTAL EQUITY INVESTMENTS (cost $168,597,232) ................ 170,117,137 81.6
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (13.4%)
Argentina (1.1%)
Republic of Argentina:
Par Bond Series L, 5.75% (6% at 4/99) due 3/31/23++ ... USD 1,270,000 967,581 0.5
Global Bond, 9.75% due 9/19/27 ........................ USD 419,000 404,021 0.2
Global Bond, 11.375% due 1/30/17 ...................... USD 358,000 396,038 0.2
Discount Bond, 6.625% due 3/31/23+ .................... USD 415,000 357,678 0.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-12
<PAGE> 160
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Brazil (2.1%)
Republic of Brazil:
C Bond, 5% (8% at 4/00) due 4/15/14 (Effective rate at
year end is 8%, including "payment-in-kind" bonds.)[.]
++ ................................................... USD 5,175,697 $ 4,289,359 2.1
Debt Conversion Bond Series L, 6.6875% due 4/15/12+ ... USD 124,000 98,580 --
Bulgaria (0.9%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
(2.5% at 7/98) due 7/28/12++ ......................... USD 1,500,000 1,014,375 0.5
Interest Arrears Bond, 6.625% due 7/28/11+ ............ USD 1,000,000 790,625 0.4
Croatia (0.4%)
Croatian Government Series A, 6.625% due 7/31/10+ ....... USD 1,000,000 898,125 0.4
Ecuador (0.4%)
Republic of Ecuador:
Past Due Interest Bond, 6.625% due 2/27/15[.]+ ........ USD 578,588 371,743 0.2
Past Due Interest Bond, 6.625% due 2/27/15 -
Registered[.]+ ....................................... USD 535,194 343,862 0.2
Jordan (0.9%)
Kingdom of Jordan, 5% (5.5% at 12/98) due 12/23/23 ...... USD 2,500,000 1,825,000 0.9
Korea (0.3%)
Republic of Korea, 8.875% due 4/15/08 ................... USD 670,000 660,654 0.3
Pakistan (0.1%)
Republic of Pakistan, 6% due 2/26/02 - Reg S{c} ......... USD 285,000 268,613 0.1
Panama (0.4%)
Republic of Panama:
Interest Reduction Bond, 3.75% (4% at 7/98) due
7/17/14++ ............................................ USD 1,173,000 921,538 0.4
8.875% due 9/30/27 .................................... USD 67,000 65,627 --
Peru (0.3%)
Republic of Peru, Past Due Interest Bond, 4% (4.5% at
7/98) due 3/7/17++ ..................................... USD 946,000 645,054 0.3
Philippines (0.3%)
Republic of Philippines, 8.875% due 4/15/08 - 144A{.} ... USD 320,000 316,512 0.2
Bangko Sentral Pilipinas, 8.6% due 6/15/27 .............. USD 226,000 205,991 0.1
Russia (5.5%)
Bank of Foreign Economic Affairs (Vnesheconombank)
Interest Notes, 6.72% due 12/15/15+ .................... USD 10,601,311 7,646,196 3.7
Bank of Foreign Economic Affairs (Vnesheconombank)
Principal Loans, 3.36% due 12/15/20+ ................... USD 5,774,860 3,667,036 1.8
Venezuela (0.7%)
Republic of Venezuela, 9.25% due 9/15/27{j} ............. USD 1,734,000 1,535,891 0.7
------------
Total Government & Government Agency Obligations (cost
$26,379,949) ............................................... 27,690,099
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-13
<PAGE> 161
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (3.4%)
Argentina (0.7%)
Telefonica de Argentina, 9.125% due 5/7/08 - 144A{.} .... USD 1,504,000 $ 1,511,009 0.7
Brazil (1.0%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ........ USD 942,000 946,710 0.5
Banco Hipotecario Espana, 10% due 4/17/03 - 144A{.} ..... USD 710,000 717,988 0.3
Comtel Brasileira Ltd. "A", 10.75% due 9/26/04 -
144A{.} ................................................ USD 165,000 169,125 0.1
Banco Do Brasil (Cayman), 9.375% due 6/15/07 ............ USD 122,000 120,170 0.1
China (0.4%)
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} ....... USD 960,000 764,976 0.4
Hong Kong (0.3%)
Road King Infrastructure, 9.5% due 7/15/07 - 144A{.} .... USD 700,000 571,760 0.3
Korea (0.2%)
L.G.-Caltex Oil Corp., 12.75% due 3/31/01 - 144A{.} ..... USD 511,000 519,943 0.2
Pohang Iron & Steel, 2% due 10/9/00 ..................... JPY 5,500,000 36,996 --
Korea Development Bank, 4.35% due 5/25/99 ............... JPY 1,500,000 10,770 --
Malaysia (0.1%)
Tenaga Nasional Bhd., 7.875% due 6/15/04 - 144A{.} ...... USD 226,000 213,379 0.1
Petroliam Nasional Bhd.:
7.125% due 8/15/05 - 144A{.} .......................... USD 94,000 83,308 --
7.625% due 10/15/26 - 144A{.} ......................... USD 88,000 76,868 --
Mexico (0.2%)
Petroleos Mexicanos:
9.25% due 3/30/18 - 144A{.} ........................... USD 440,000 430,100 0.2
9.5% due 9/15/27 - 144A{.} ............................ USD 4,000 4,010 --
Russia (0.5%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ................................................ USD 851,000 1,025,455 0.5
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ...... USD 5,000 4,425 --
------------
Total Corporate Bonds (cost $7,326,458) ..................... 7,206,992
------------
Structured Notes (0.2%)
Korea (0.2%)
Fixed Rate Trust Certificate 13.55% due 2/15/02[::]
(Issued by a newly created Delaware Business Trust,
collateralized by triple A paper. This trust certificate
has a credit risk component linked to the value of a
referenced security: Korean Development Bank 1.875%
2002.) (cost $470,000) ................................. USD 470,000 467,650 0.2
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $34,176,407) ........... 35,364,741 17.0
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Delta Electronics (Thailand) Public Co., Ltd. (UNAV NP
RTS), due 5/15/98 - Foreign .............................. THAI 3,100 31,161 --
ELECTRICAL PLANT/EQUIPMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-14
<PAGE> 162
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Samsung Electronics Rights, due 5/27/98 - GDR 144A{.}
{\/} ..................................................... KOR 788 7,835 --
SEMICONDUCTORS
Samsung Development Rights, due 5/13/98 ................... KOR 444 $ 7,717 --
ELECTRICAL PLANT/EQUIPMENT
------------ -----
TOTAL RIGHTS (cost $27,062) ................................. 46,713 --
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Belle Corp. Warrants, expire 2002 (cost $0) ............... PHIL 659,400 1,893 --
------------ -----
OIL
TOTAL INVESTMENTS (cost $202,800,701) * .................... 205,530,484 98.6
Other Assets and Liabilities ................................ 2,882,202 1.4
------------ -----
NET ASSETS .................................................. $208,412,686 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{*} Security is denominated in Hong Kong Dollars.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
{.:} Each Centenary Linked Unit consists of 1 registered deferred share
of De Beers Consolidated Mine + 1 Centenary Depositary Receipt.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (See Note 1 of Notes to Financial Statements).
+X+ The GT Global Developing Markets Fund (the "Fund") has invested in
the GT Global Taiwan Fund, a fund managed by LGT Asset Management
Ltd. who is an affiliate of the Fund's manager, Chancellor LGT
Asset Management, Inc.
+ The coupon rate shown on floating rate note represents the rate at
period end.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
[.] Bond pays stated or additional interest with "payment-in-kind"
(PIK) bonds.
[::] Certain events may cause the contract to terminate prior to date
shown.
{j} All or part of the Fund's holdings in this security is segregated
as collateral for extended settlement of derivative instruments.
(See Note 1 of Notes to Financial Statements.)
* For Federal income tax purposes, cost is $204,117,118 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 17,708,574
Unrealized depreciation: (16,295,208)
-------------
Net unrealized appreciation: $ 1,413,366
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
The accompanying notes are an integral part of the financial statements.
FS-15
<PAGE> 163
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
The Fund's Portfolio of Investments at April 30, 1998, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {d}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) .................. 3.1 1.8 4.9
Brazil (BRZL/BRL) .................... 11.7 3.1 14.8
Bulgaria (BUL/LEV) ................... 0.9 0.9
Chile (CHLE/CLP) ..................... 4.1 4.1
China (CHNA/RMB) ..................... 0.2 0.4 0.6
Croatia (CRT/HRK) .................... 0.4 0.4
Ecuador (ECDR/ECS) ................... 0.4 0.4
Egypt (EGPT/EGP) ..................... 5.8 5.8
Greece (GREC/GRD) .................... 2.7 2.7
Hong Kong (HK/HKD) ................... 0.2 0.3 0.5
Hungary (HGRY/HUF) ................... 2.0 2.0
India (IND/INR) ...................... 6.2 6.2
Ireland (IRE/IEP) .................... 0.9 0.9
Israel (ISRL/ILS) .................... 3.1 3.1
Jordan (JDN/JOD) ..................... 0.9 0.9
Kazakhstan (KAZ/KTS) ................. 0.3 0.3
Korea (KOR/KRW) ...................... 0.7 0.7 1.4
Malaysia (MAL/MYR) ................... 1.8 0.1 1.9
Mexico (MEX/MXN) ..................... 9.3 0.2 9.5
Morocco (MOR/MAD) .................... 0.1 0.1
Pakistan (PAK/PKR) ................... 0.7 0.1 0.8
Panama (PAN/PND) ..................... 0.4 0.4
Peru (PERU/PES) ...................... 1.9 0.3 2.2
Philippines (PHIL/PHP) ............... 1.9 0.3 2.2
Poland (POL/PLZ) ..................... 0.5 0.5
Russia (RUS/SUR) ..................... 3.1 6.0 9.1
South Africa (SAFR/ZAR) .............. 9.6 9.6
Sri Lanka (SLNKA/LKR) ................ 0.5 0.5
Taiwan (TWN/TWD) ..................... 4.1 4.1
Thailand (THAI/THB) .................. 0.3 0.3
Turkey (TRKY/TRL) .................... 5.6 5.6
United Kingdom (UK/GBP) .............. 1.2 1.2
United States (US/USD) ............... 1.4 1.4
Venezuela (VENZ/VEB) ................. 0.7 0.7
------ ----- --- -----
Total ............................... 81.6 17.0 1.4 100.0
------ ----- --- -----
------ ----- --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $208,412,686.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
APRIL 30, 1998
<TABLE>
<CAPTION>
MARKET VALUE CONTRACT DELIVERY UNREALIZED
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE APPRECIATION
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Japanese Yen............................ 37,065 122.90001 7/31/98 $ 2,308
Japanese Yen............................ 10,953 121.89997 7/31/98 778
-------------- --------------
Total Contracts to Sell (Receivable
amount $51,104)...................... 48,018 3,086
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 0.02%.
Total Open Forward Foreign Currency
Contracts............................ $ 3,086
--------------
--------------
</TABLE>
- ----------------
See Note 1 of Notes to Financial Statements.
The accompanying notes are an integral part of the financial statements.
FS-16
<PAGE> 164
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
STATEMENT OF ASSETS
AND LIABILITIES
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $202,800,701) (Note 1)................ $205,530,484
U.S. currency....................................................... $ 444,445
Foreign currencies (cost $2,551,489)................................ 2,543,606 2,988,051
----------
Receivable for securities sold.................................................. 4,460,160
Interest receivable............................................................. 772,897
Dividends receivable............................................................ 682,025
Receivable from Chancellor LGT Asset Management, Inc. (Note 2).................. 540,059
Unamortized organizational costs (Note 1)....................................... 50,225
Receivable for Fund shares sold................................................. 4,417
Receivable for open forward foreign currency contracts (Note 1)................. 3,086
------------
Total assets.................................................................. 215,031,404
------------
Liabilities:
Payable for securities purchased................................................ 5,089,190
Payable for Fund shares repurchased............................................. 760,558
Payable for investment management and administration fees (Note 2).............. 422,779
Payable for professional fees................................................... 105,562
Payable for transfer agent fees (Note 2)........................................ 71,387
Payable for service and distribution expenses (Note 2).......................... 50,898
Payable for custodian fees...................................................... 17,067
Payable for printing and postage expenses....................................... 16,019
Payable for Directors' fees and expenses (Note 2)............................... 13,860
Payable for registration and filing fees........................................ 10,941
Payable for fund accounting fees (Note 2)....................................... 4,224
Other accrued expenses.......................................................... 56,233
------------
Total liabilities............................................................. 6,618,718
------------
Net assets........................................................................ $208,412,686
------------
------------
Class A:
Net asset value and redemption price per share ($208,168,793 DIVIDED BY 16,756,318
shares outstanding).............................................................. $ 12.42
------------
------------
Maximum offering price per share (100/95.25 of $12.42) *.......................... $ 13.04
------------
------------
Class B:+
Net asset value and offering price per share ($207,318 DIVIDED BY 16,731 shares
outstanding)..................................................................... $ 12.39
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($36,575
DIVIDED BY 2,941 shares outstanding)............................................. $ 12.44
------------
------------
Net assets consist of:
Paid in capital (Note 4)........................................................ $303,197,267
Undistributed net investment income............................................. 1,755,638
Accumulated net realized loss on investments and foreign currency
transactions................................................................... (99,259,192)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies..................................................................... (10,810)
Net unrealized appreciation of investments...................................... 2,729,783
------------
Total -- representing net assets applicable to capital shares outstanding......... $208,412,686
------------
------------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-17
<PAGE> 165
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
STATEMENT OF OPERATIONS
Six months ended April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income........................................................................... $ 4,633,495
Dividend income (net of foreign withholding tax of $104,449).............................. 2,423,523
Securities lending income................................................................. 155,608
-----------
Total investment income................................................................. 7,212,626
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 1,130,939
Transfer agent fees (Note 2).............................................................. 392,250
Professional fees......................................................................... 354,647
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 298,300
Class B.................................................................... 709 299,009
-----------
Interest expense (Note 1)................................................................. 260,016
Printing and postage expenses............................................................. 147,676
Custodian fees............................................................................ 83,146
Registration and filing fees.............................................................. 78,500
Fund accounting fees (Note 2)............................................................. 37,617
Amortization of organization costs (Note 1)............................................... 35,087
Directors' fees and expenses (Note 2)..................................................... 15,204
Other expenses............................................................................ 4,477
-----------
Total expenses before reductions........................................................ 2,838,568
-----------
Expenses reimbursed by Chancellor LGT Asset Management, Inc. (Note 2)................. (540,059)
Expense reductions (Note 5)........................................................... (40,839)
-----------
Total net expenses...................................................................... 2,257,670
-----------
Net investment income....................................................................... 4,954,956
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized loss on investments............................................. (41,994,248)
Net realized loss on foreign currency transactions........................... (1,662,852)
-----------
Net realized loss during the period..................................................... (43,657,100)
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies........................................... 196,235
Net change in unrealized appreciation of investments......................... 43,290,356
-----------
Net unrealized appreciation during the period........................................... 43,486,591
-----------
Net realized and unrealized loss on investments and foreign currencies...................... (170,509)
-----------
Net increase in net assets resulting from operations........................................ $ 4,784,447
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-18
<PAGE> 166
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIX MONTHS ENDED TEN MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997 DECEMBER 31, 1996
---------------- ---------------- -----------------
Decrease in net assets
Operations:
Net investment income....................................... $ 4,954,956 $ 9,089,483 $ 19,406,553
Net realized gain (loss) on investments and foreign currency
transactions............................................... (43,657,100) 45,653,300 945,154
Net change in unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign
currencies................................................. 196,235 (297,303) 91,835
Net change in unrealized appreciation (depreciation) of
investments................................................ 43,290,356 (101,078,671) 78,628,364
---------------- ---------------- -----------------
Net increase (decrease) in net assets resulting from
operations............................................... 4,784,447 (46,633,191) 99,071,906
---------------- ---------------- -----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income.................................. (11,843,408) -- (17,407,047)
Class B:
Distributions to shareholders: (Note 1)
From net investment income.................................. (1,499) -- --
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income.................................. (46) -- --
---------------- ---------------- -----------------
Total distributions....................................... (11,844,953) -- (17,407,047)
---------------- ---------------- -----------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested............ 11,481,861 -- --
Decrease from capital shares repurchased.................... (253,387,857) -- --
---------------- ---------------- -----------------
Net increase (decrease) from capital share transactions... (241,905,996) -- --
---------------- ---------------- -----------------
Total decrease in net assets.................................. (248,966,502) (46,633,191) 81,664,859
Net assets:
Beginning of period......................................... 457,379,188 504,012,379 422,347,520
---------------- ---------------- -----------------
End of period *............................................. $ 208,412,686 $ 457,379,188 $504,012,379
---------------- ---------------- -----------------
---------------- ---------------- -----------------
* Includes undistributed net investment income of............ $ 1,755,638 $ 8,645,635 $ 363,782
---------------- ---------------- -----------------
---------------- ---------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-19
<PAGE> 167
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
---------------------------------------------------------------------------
JANUARY 11, 1994
(COMMENCEMENT
SIX MONTHS TEN MONTHS YEAR ENDED OF OPERATIONS)
ENDED ENDED DECEMBER 31, TO
APRIL 30, OCTOBER 31, ----------------------- DECEMBER 31,
1998 (d) 1997 (e) 1996 (e) 1995 (e) 1994 (e)
---------- ----------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.56 $ 13.84 $ 11.60 $ 12.44 $ 15.00
---------- ----------- --------- --------- ----------------
Income from investment operations:
Net investment income................. 0.23*{/\} 0.25 0.53 0.72 0.35
Net realized and unrealized gain
(loss) on investments................ -- (1.53) 2.19 (0.84) (2.46)
---------- ----------- --------- --------- ----------------
Net increase (decrease) from
investment operations.............. 0.23 (1.28) 2.72 (0.12) (2.11)
---------- ----------- --------- --------- ----------------
Redemption fees retained (Note 4)..... 0.23 -- -- -- --
---------- ----------- --------- --------- ----------------
Distributions to shareholders:
From net investment income.......... (0.60) -- (0.48) (0.72) (0.35)
From net realized gain on
investments........................ -- -- -- -- (0.10)
---------- ----------- --------- --------- ----------------
Total distributions............... (0.60) -- (0.48) (0.72) (0.45)
---------- ----------- --------- --------- ----------------
Net asset value, end of period.......... $ 12.42 $ 12.56 $ 13.84 $ 11.60 $ 12.44
---------- ----------- --------- --------- ----------------
---------- ----------- --------- --------- ----------------
Market value, end of period......... $ N/A $ 11.81 $ 11.63 $ 9.75 $ 9.75
---------- ----------- --------- --------- ----------------
---------- ----------- --------- --------- ----------------
Total investment return (based on
market value)...................... N/A 1.62%(b) 24.18% 6.60% (32.16)% (b)
Total investment return (based on
net asset value)................... 3.68%(b)(c) (9.25)%(b) 23.59% (0.95)% (14.07)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $208,169 $457,379 $504,012 $422,348 $452,872
Ratio of net investment income to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 3.06%(a) 2.03%(a) 4.07% 6.33% 2.75% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.56%(a) 1.95%(a) 4.04% 6.30% 2.75% (a)
Ratio of operating expenses to average
net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.72%(a) 1.75%(a) 1.82% 1.77% 2.01% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.22%(a) 1.83%(a) 1.85% 1.80% 2.01% (a)
Ratio of interest expense to average net
assets (Note 1)+++..................... 0.22%(a) N/A N/A N/A N/A
Portfolio turnover rate................. 99%(a) 184%(a) 138% 75% 56%
Average commission rate per share paid
on portfolio transactions.............. $ 0.0017 $ 0.0023 $ 0.0022 N/A N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
(e) These financial highlights provide per share information of G.T.
Global Developing Markets Fund, Inc. ("Predecessor Fund") (See Note 1
to Notes to Financial Statements) for the periods up to and including
October 31, 1997. The fees and expenses of the Fund differ from those
of the Predecessor Fund.
{/\} Net investment income per share reflects an interest payment received
from the conversion of Vnesheconombank loan agreements. Without such a
payment net investment would have been $0.09, $0.07 and $0.13 per
share for Class A, B, and Advisor, respectively.
* Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.03 for Class
A, B, and Advisor.
+ All capital shares issued and outstanding October 31, 1997 were
reclassified as Class A shares.
++ Commencing November 1, 1997, the Fund began offering Class B and
Advisor Class shares.
+++ Portfolio turnover rate, average commission rate, and ratio of
interest expense to average net assets are calculated on the basis of
the Fund as whole without distinguishing between the classes of shares
issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-20
<PAGE> 168
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++ ADVISOR CLASS++
----------------- -----------------
SIX MONTHS SIX MONTHS
ENDED ENDED
APRIL 30, 1998(d) APRIL 30, 1998(d)
----------------- -----------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.56 $ 12.56
----------------- -----------------
Income from investment operations:
Net investment income................. 0.21*{/\} 0.27*{/\}
Net realized and unrealized gain
(loss) on investments................ (0.01) (0.02)
----------------- -----------------
Net increase (decrease) from
investment operations.............. 0.20 0.25
----------------- -----------------
Redemption fees retained (Note 4)..... 0.23 0.23
----------------- -----------------
Distributions to shareholders:
From net investment income.......... (0.60) (0.60)
From net realized gain on
investments........................ -- --
----------------- -----------------
Total distributions............... (0.60) (0.60)
----------------- -----------------
Net asset value, end of period.......... $ 12.39 $ 12.44
----------------- -----------------
----------------- -----------------
Total investment return (based on
net asset value)................... 3.36% (b)(c) 3.88% (b)(c)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 207 $ 37
Ratio of net investment income to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.32% (a) 3.32% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 1.82% (a) 2.82% (a)
Ratio of operating expenses to average
net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.46% (a) 1.46% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.96% (a) 1.96% (a)
Ratio of interest expense to average net
assets (Note 1)+++..................... 0.22% (a) 0.22% (a)
Portfolio turnover rate................. 99% (a) 99% (a)
Average commission rate per share paid
on portfolio transactions.............. $0.0017 $0.0017
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
{/\} Net investment income per share reflects an interest payment received
from the conversion of Vnesheconombank loan agreements. Without such a
payment net investment would have been $0.09, $0.07 and $0.13 per
share for Class A, B, and Advisor, respectively.
* Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.03 for Class
A, B, and Advisor.
+ All capital shares issued and outstanding October 31, 1997 were
reclassified as Class A shares.
++ Commencing November 1, 1997, the Fund began offering Class B and
Advisor Class shares.
+++ Portfolio turnover rate, average commission rate, and ratio of
interest expense to average net assets are calculated on the basis of
the Fund as whole without distinguishing between the classes of shares
issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-21
<PAGE> 169
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
NOTES TO
FINANCIAL STATEMENTS
April 30, 1998
- -------------------------------------------------------------------------------
The following Notes to Financial Statements are for the period ending April 30,
1998, and unless otherwise indicated reflect facts as of that date. Please see
"Note 6 -- Subsequent Events" for a discussion of certain changes which took
place after April 30, 1998.
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 6)
GT Global Developing Markets Fund ("Fund") is a separate series of G.T.
Investment Funds, Inc. ("Company"). Effective June 1, 1998, the Company was
renamed AIM Investment Funds, Inc. and the Fund was renamed AIM Developing
Markets Fund. The Company is organized as a Maryland corporation and is
registered under the Investment Company Act of 1940, as amended ("1940 Act"), as
an open-end management investment company. The Company has thirteen series of
shares in operation, each series corresponding to a distinct portfolio of
investments.
On October 31, 1997, at the close of business, the Fund acquired the assets and
assumed the liabilities of G.T. Global Developing Markets Fund, Inc., a Maryland
corporation registered under the 1940 Act as a non-diversified closed-end
management investment company ("Predecessor Fund"), in exchange for Class A
shares of the Fund in a tax-free reorganization of the Predecessor Fund.
Shareholders of the Predecessor Fund approved the reorganization on October 20,
1997. Prior to October 28, 1997 the Closed-End Fund's shares traded on the New
York Stock Exchange.
Commencing November 1, 1997, the Fund began to offer Class A, Class B, and
Advisor Class shares, each of which has equal rights as to assets and voting
privileges except that Class A and Class B each has exclusive voting rights with
respect to its distribution plan. Investment income, realized and unrealized
capital gains and losses, and the common expenses of the Fund are allocated on a
pro rata basis to each class based on the relative net assets of each class to
the total net assets of the Fund. Each class of shares differs in its respective
service and distribution expenses, and may differ in its transfer agent,
registration, and certain other class-specific fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by Chancellor LGT Asset
Management, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
asked prices for securities or, if such prices are not available, at prices for
securities of comparative maturity, quality and type; however, when the Manager
deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used. Short-term investments with a maturity of 60 days
or less are valued at amortized cost, adjusted for foreign exchange translation
and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Fund's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Fund's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
existing from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term investments, forward foreign currency contracts, sales
of foreign currencies, currency gains or
FS-22
<PAGE> 170
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
losses realized between the trade and settlement dates on securities
transactions, and the differences between the amounts of dividends, interest,
and foreign withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at year end, resulting from
changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. The Fund could be exposed to risk if a counterparty is
unable to meet the terms of a contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on an exchange is valued at its last bid price,
or, in the case of an over-the-counter option, is valued at the average of the
last bid prices obtained from brokers, unless a quotation from only one broker
is available, in which case only that broker's price will be used. If an option
expires on its stipulated expiration date or if the Fund enters into a closing
purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock and
bond markets and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock and bond
markets and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to collection of income on securities, income is
recorded net of all
FS-23
<PAGE> 171
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the market
risk if the other party to the transaction fails to deliver and causes the Fund
to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At April 30, 1998, stocks with an aggregate value of approximately $13,962,416
were on loan to brokers. The loans were secured by cash collateral of
$14,552,194 received by the Fund. For international securities, cash collateral
is received by the Fund against loaned securities in an amount at least equal to
105% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 103% of the market value of
the loaned securities during the period of the loan. For domestic securities,
cash collateral is received by the Fund against loaned securities in an amount
at least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of each loan. The
cash collateral is invested in a securities lending trust which consists of a
portfolio of high quality short duration securities whose average effective
duration is restricted to 120 days or less. For the six months ended April 30,
1998, the Fund received securities lending income of $155,608.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$54,472,976 which expires in 2003.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
aggregated $353,775. These expenses are being amortized on a straightline basis
over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(O) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
The Fund may trade securities on a when-issued or forward commitment basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Fund will
generally purchase these securities with the intention of acquiring such
securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Portfolio of Investments. The Fund
has purchased and sold when-issued securities during the period and has set
aside liquid securities as collateral for these commitments.
(P) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager ("GT Funds"), has a line of credit with each of BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the Fund and
the GT Funds to borrow an aggregate maximum amount of $250,000,000. The Fund is
limited to borrowing up to 33 1/3% of the value of each Fund's total assets. On
April 30, 1998, the Fund had no loans outstanding.
For the six months ended April 30, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $7,671,408, with a weighted average interest rate of 6.29%.
Interest expense for the Fund for the six months ended April 30, 1998 was
$210,460. Other interest expense charges amounted to $49,556.
2. RELATED PARTIES (SEE ALSO NOTE 6)
For the period ended April 30, 1998, Chancellor LGT Asset Management, Inc. was
the Fund's investment manager and administrator. The Fund pays the Manager
investment management and administration fees at the annualized rate of 0.975%
on the first $500 million of average daily net assets of the Fund; 0.95% on the
FS-24
<PAGE> 172
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
next $500 million; 0.925% on the next $500 million and 0.90% on amounts
thereafter. These fees are computed daily and paid monthly.
For the period ended April 30, 1998, GT Global, Inc. ("GT Global"), an affiliate
of the Manager, serves as the Fund's distributor. The Fund offers Class A, Class
B, and Advisor Class shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the six months ended April 30, 1998, GT Global did not
retain any of such sales charges. Purchases of Class A shares exceeding $500,000
may be subject to a contingent deferred sales charge ("CDSC") upon redemption,
in accordance with the Fund's current prospectus. GT Global did not collect
CDSCs for the six months ended April 30, 1998. GT Global also makes ongoing
shareholder servicing and trail commission payments to dealers whose clients
hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global, from its own resources, pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the six months ended April 30, 1998, GT Global did not collect
any CDSCs. In addition, GT Global makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class B shares.
Pursuant to the then effective separate distribution plans adopted under 1940
Act Rule 12b-1 by the Company's Board of Directors with respect to the Fund's
Class A shares ("Class A Plan") and Class B shares ("Class B Plan"), the Fund
reimbursed GT Global for a portion of its shareholder servicing and distribution
expenses. Under that Class A Plan, the Fund was permitted to pay GT Global a
service fee at the annualized rate of up to 0.25% of the average daily net
assets of the Fund's Class A shares for GT Global's expenditures incurred in
servicing and maintaining shareholder accounts, and was permitted to pay GT
Global a distribution fee at the annualized rate of up to 0.50% of the average
daily net assets of the Fund's Class A shares, less any amounts paid by the Fund
as the aforementioned service fee, for GT Global's expenditures incurred in
providing services as distributor. All expenses for which GT Global was
reimbursed under the Class A Plan would have been incurred within one year of
such reimbursement.
For the period ended April 30, 1998, pursuant to that Class B Plan, the Fund was
permitted to pay GT Global a service fee at the annualized rate of up to 0.25%
of the average daily net assets of the Fund's Class B shares for GT Global's
expenditures incurred in servicing and maintaining shareholder accounts, and was
permitted to pay GT Global a distribution fee at the annualized rate of up to
0.75% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually were permitted to be
carried forward for reimbursement in subsequent years as long as that Plan
continued in effect.
The Manager and GT Global voluntarily undertook to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.00%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by the waivers by
the Manager of investment management and administration fees, waivers by GT
Global of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or GT Global of portions of the Fund's other
operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting and general transfer agent services, GT Services receives
an annual maintenance fee of $17.50 per account, a new account fee of $4.00 per
account, a per transaction fee of $1.75 for all transactions other than
exchanges and a per exchange fee of $2.25. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager or any of its affiliated companies $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Director.
3. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 1998, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $120,141,572 and $302,645,182, respectively. There were
no purchases of U.S. government obligations by the Fund for the period. Sales of
U.S. government obligations by the Fund were $7,170,550 for the period.
4. CAPITAL SHARES
At April 30, 1998, there were 6,000,000,000 shares of the Company's common stock
authorized, at $0.0001 par value. Of this amount, 200,000,000 were classified as
shares of GT Global Developing Markets Fund; 400,000,000 were classified as
shares of GT Global Government Income Fund; 200,000,000 were classified as
shares of GT Global Health Care Fund; 200,000,000 were classified as shares of
GT Global Strategic Income Fund; 200,000,000 were classified as shares of GT
Global Currency Fund (inactive); 200,000,000 were classified as shares of GT
Global Growth & Income Fund; 200,000,000 were classified as shares of GT Global
Small Companies Fund
FS-25
<PAGE> 173
AIM DEVELOPING MARKETS FUND
(FORMERLY GT GLOBAL DEVELOPING MARKETS FUND)
(inactive); 200,000,000 were classified as shares of GT Global Latin America
Growth Fund; 200,000,000 were classified as shares of GT Global Emerging Markets
Fund; 400,000,000 were classified as shares of GT Global Telecommunications
Fund; 200,000,000 were classified as shares of GT Global High Income Fund;
200,000,000 were classified as shares of GT Global Financial Services Fund;
200,000,000 were classified as shares of GT Global Natural Resources Fund;
200,000,000 were classified as shares of GT Global Infrastructure Fund; and
200,000,000 were classified as shares of GT Global Consumer Products and
Services Fund. The shares of each of the foregoing series of the Company were
divided equally into two classes, designated Class A and Class B common stock.
With respect to the issuance of Advisor Class shares, 100,000,000 shares were
classified as shares of each of the fifteen series of the Company and designated
as Advisor Class common stock. 1,100,000,000 shares remain unclassified.
Transactions in capital shares of the Fund were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998
-----------------------------------
CLASS A SHARES AMOUNT
- ---------------------------------------- --------------- ------------------
<S> <C> <C>
Shares sold............................. 252,838 $ 3,022,409
Shares issued in connection with
reinvestment of distributions......... 676,249 8,202,878
--------------- ------------------
929,087 11,225,287
Shares repurchased including those
purchased in connection with open
ending of the Fund on 11/1/97*........ (20,589,436) (253,365,429)
--------------- ------------------
Net decrease............................ (19,660,349) $ (242,140,142)
--------------- ------------------
--------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C>
Shares sold............................. 18,606 $ 220,436
Shares issued in connection with
reinvestment of distributions......... 124 1,499
--------------- ------------------
18,730 221,935
Shares repurchased...................... (1,999) (22,428)
--------------- ------------------
Net increase............................ 16,731 $ 199,507
--------------- ------------------
--------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C>
Shares sold............................. 2,937 $ 34,593
Shares issued in connection with
reinvestment of distributions......... 4 46
--------------- ------------------
2,941 34,639
Shares repurchased...................... -- --
--------------- ------------------
Net increase............................ 2,941 $ 34,639
--------------- ------------------
--------------- ------------------
</TABLE>
- --------------
* The redemption amount for Class A redemptions is net of a 2% redemption fee of
$4,923,187 incurred in the period from November 1, 1997 to April 30, 1998 in
connection with redemptions upon the open ending of the Fund.
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the six months ended April 30, 1998, the Fund's
expenses were reduced by $40,839 under these arrangements.
6. SUBSEQUENT EVENTS
On May 29, 1998, Liechtenstein Global Trust ("LGT"), the former indirect parent
organization of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"),
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included Chancellor LGT and
certain other affiliates. As a result of this transaction, Chancellor LGT was
renamed INVESCO (NY), Inc. and is now an indirect wholly-owned subsidiary of
AMVESCAP PLC. In connection with this transaction, A I M Advisors, Inc. ("AIM"),
an indirect wholly-owned subsidiary of AMVESCAP PLC, became the investment
adviser and administrator of the Fund and INVESCO (NY), Inc. became the
sub-adviser and sub-administrator of the Fund. In addition, A I M Distributors,
Inc. replaced GT Global, Inc. as the Fund's principal underwriter, and the Fund
became subject to compensation-type Rule 12b-1 plans of distribution, which
replaced the Fund's former reimbursement-type Rule 12b-1 plans of distribution.
All of the changes became effective as of the close of business on May 29, 1998.
FS-26
<PAGE> 174
GT GLOBAL DEVELOPING MARKETS FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
GT Global Developing Markets Fund ("Fund"):
We have audited the accompanying statement of assets and liabilities of GT
Global Developing Markets Fund (formerly G.T. Global Developing Markets Fund,
Inc.), including the portfolio of investments, as of October 31, 1997, the
related statement of operations for the ten months then ended and for the year
ended December 31, 1996, the statements of changes in net assets for the ten
months then ended and for each of the two years in the period ended December 31,
1996, and the financial highlights for each of the periods indicated therein.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Developing Markets Fund as of October 31, 1997, the results of its
operations for the ten months then ended and for the year ended December 31,
1996, the changes in its net assets for the ten months then ended and for each
of the two years in the period ended December 31, 1996, and the financial
highlights for the periods indicated therein, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
FS-27
<PAGE> 175
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (13.0%)
LUKoil Holding - ADR{\/} ................................ RUS 97,586 $ 8,172,833 1.8
OIL
Sasol Ltd. .............................................. SAFR 537,556 6,481,964 1.4
ENERGY SOURCES
Petroleo Brasileiro S.A. (Petrobras) Preferred .......... BRZL 27,126,040 5,044,302 1.1
OIL
C.A. La Electricidad de Caracas ......................... VENZ 3,443,139 4,526,264 1.0
ELECTRICAL & GAS UTILITIES
Companhia Energetica de Minas Gerais (CEMIG) -
ADR{\/} ................................................ BRZL 94,834 3,793,360 0.8
ELECTRICAL & GAS UTILITIES
Centrais Eletricas Brasileiras S.A. (Eletrobras): ....... BRZL -- -- 0.8
ELECTRICAL & GAS UTILITIES
"B" ADR{\/} ........................................... -- 118,958 2,617,076 --
Preferred ............................................. -- 2,112,000 913,846 --
Chilgener S.A. - ADR{\/} ................................ CHLE 124,972 3,374,244 0.7
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} .................................. CHLE 94,858 3,130,314 0.7
ELECTRICAL & GAS UTILITIES
Empresa Nacional de Electricidad S.A. - ADR{\/} ......... CHLE 127,657 2,569,097 0.6
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ...................................... ARG 68,960 2,206,720 0.5
OIL
The Hub Power Co., Ltd. - GDR-/- {\/} ................... PAK 70,300 2,196,875 0.5
ENERGY SOURCES
Light - Participacoes S.A. .............................. BRZL 7,485,850 1,914,922 0.4
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. .................. BRZL 5,322,290 1,767,016 0.4
ELECTRICAL & GAS UTILITIES
Surgutneftegaz - ADR-/- {\/} ............................ RUS 174,640 1,484,440 0.3
OIL
PTT Exploration and Production Public Co., Ltd. -
Foreign ................................................ THAI 138,800 1,415,622 0.3
OIL
Unified Energy Systems - Reg S GDR-/- {c} {\/} .......... RUS 40,700 1,271,875 0.3
ELECTRICAL & GAS UTILITIES
Manila Electric Co. "B" ................................. PHIL 361,110 1,111,108 0.2
ELECTRICAL & GAS UTILITIES
Bombay Suburban Electric Supply (BSES) Ltd. ............. IND 200,000 1,004,209 0.2
ELECTRICAL & GAS UTILITIES
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} ...... HGRY 43,600 942,850 0.2
ENERGY SOURCES
Mosenergo: .............................................. RUS -- -- 0.2
ELECTRICAL & GAS UTILITIES
ADR-/- {\/} ........................................... -- 10,964 460,488 --
144A ADR{.} {\/} ...................................... -- 10,000 420,000 --
Korea Electric Power Corp. - ADR{\/} .................... KOR 93,330 764,139 0.2
ELECTRICAL & GAS UTILITIES
Electricity Generating Public Co., Ltd. - Foreign ....... THAI 447,200 745,333 0.2
ELECTRICAL & GAS UTILITIES
Perez Companc S.A. ...................................... ARG 100,460 629,257 0.1
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-28
<PAGE> 176
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Tenaga Nasional Bhd. .................................... MAL 235,000 $ 508,261 0.1
ELECTRICAL & GAS UTILITIES
Yukong Ltd. ............................................. KOR 10,980 148,688 --
OIL
Guangdong Electric Power Development Co., Ltd. "B"{*} ... CHNA 201,000 113,371 --
ENERGY SOURCES
------------
59,728,474
------------
Multi-Industry/Miscellaneous (11.6%)
Barlow Ltd. ............................................. SAFR 657,524 6,629,920 1.4
CONGLOMERATE
PT Telekomunikasi Indonesia ............................. INDO 5,018,500 4,683,001 1.0
MULTI-INDUSTRY
Anglo American Corporation of South Africa Ltd. ......... SAFR 104,020 4,498,162 1.0
CONGLOMERATE
Grupo Carso, S.A. de C.V. "A1" .......................... MEX 567,700 3,610,164 0.8
MULTI-INDUSTRY
Delta Corporation Ltd. (subdivision)-/- ................. ZBBW 2,472,400 3,520,823 0.8
MULTI-INDUSTRY
ITC Ltd.: ............................................... IND -- -- 0.7
MULTI-INDUSTRY
Common ................................................ -- 136,000 2,102,842 --
GDR-/- {\/} ........................................... -- 44,370 811,971 --
Billiton PLC-/- ......................................... SAFR 980,865 2,875,301 0.6
CONGLOMERATE
The Saudi Arabian Investment Fund Ltd.-/- {\/} .......... UK 281,000 2,810,000 0.6
COUNTRY FUNDS
PT Gudang Garam ......................................... INDO 949,500 2,697,744 0.6
MULTI-INDUSTRY
China Resources Enterprise Ltd. ......................... HK 870,000 2,386,028 0.5
CONGLOMERATE
Shanghai Industrial Holdings Ltd. ....................... HK 471,000 2,096,041 0.5
MULTI-INDUSTRY
Sanluis Corporacion, S.A. de C.V. ....................... MEX 263,477 2,044,708 0.4
CONGLOMERATE
Central Asia Regional Growth Fund-/- {\/} ............... IRE 210,000 1,999,200 0.4
COUNTRY FUNDS
Malaysian Resources Corp., Bhd. ......................... MAL 2,396,000 1,425,077 0.3
CONGLOMERATE
Koc Holding AS .......................................... TRKY 3,234,900 1,216,923 0.3
CONGLOMERATE
Empresas La Moderna, S.A. de C.V. "A"-/- ................ MEX 240,600 1,181,389 0.3
MULTI-INDUSTRY
NASR (El) City Company For Housing & Construction-/- .... EGPT 17,005 1,175,296 0.3
MISCELLANEOUS
PT Bimantara Citra ...................................... INDO 1,219,000 1,120,529 0.2
MULTI-INDUSTRY
PT Hanjaya Mandala Sampoerna ............................ INDO 590,500 1,032,141 0.2
MULTI-INDUSTRY
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-29
<PAGE> 177
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
Koor Industries Ltd.: ................................... ISRL -- -- 0.2
CONGLOMERATE
ADR{\/} ............................................... -- 22,043 $ 471,169 --
Common ................................................ -- 2,850 294,482 --
Graboplast Rt. .......................................... HGRY 13,452 725,231 0.2
MISCELLANEOUS
GT Taiwan Fund-/- +X+ {\/} .............................. TWN 49,751 626,368 0.1
COUNTRY FUNDS
Quinenco S.A. - ADR-/- {\/} ............................. CHLE 32,400 473,850 0.1
CONGLOMERATE
Discount Investment Corp. ............................... ISRL 11,613 316,356 0.1
MULTI-INDUSTRY
------------
52,824,716
------------
Services (11.3%)
Telecomunicacoes Brasileiras S.A. (Telebras): ........... BRZL -- -- 2.3
TELEPHONE NETWORKS
ADR{\/} ............................................... -- 57,481 5,834,322 --
Common ................................................ -- 49,594,258 4,408,329 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ......... MEX 176,363 7,627,700 1.7
TELEPHONE NETWORKS
Compania Anonima Nacional Telefonos de Venezuela (CANTV)
- ADR{\/} .............................................. VENZ 114,579 5,012,831 1.1
TELEPHONE NETWORKS
Pick'n Pay Stores Ltd.: ................................. SAFR -- -- 0.8
RETAILERS-OTHER
Common ................................................ -- 1,889,154 2,847,477 --
"N" ................................................... -- 780,702 1,071,234 --
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ....... CHLE 128,402 3,563,156 0.8
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ...................... PERU 155,070 3,062,633 0.7
TELEPHONE NETWORKS
Cifra, S.A. de C.V.: .................................... MEX -- -- 0.3
RETAILERS-OTHER
"C" ................................................... -- 636,000 1,104,431 --
"A" ................................................... -- 306,000 563,626 --
"B" ................................................... -- 66,334 132,509 --
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP-/- .............................................. BRZL 9,188,127 1,666,932 0.4
BUSINESS & PUBLIC SERVICES
Mahanagar Telephone Nigam Ltd. .......................... IND 233,600 1,627,623 0.4
TELECOM - OTHER
Telefonica de Argentina S.A. - ADR{\/} .................. ARG 55,228 1,553,288 0.3
TELEPHONE NETWORKS
Indian Hotels Co., Ltd.: ................................ IND -- -- 0.2
LEISURE & TOURISM
GDR-/- {\/} ........................................... -- 35,200 607,200 --
Common ................................................ -- 25,850 418,541 --
Migros Turk T.A.S. ...................................... TRKY 848,300 890,294 0.2
RETAILERS-FOOD
Portugal Telecom S.A. - Registered ...................... PORT 20,551 843,433 0.2
TELEPHONE NETWORKS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-30
<PAGE> 178
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
TelecomAsia Corp. - Foreign-/- .......................... THAI 1,878,600 $ 841,164 0.2
TELEPHONE NETWORKS
PT Citra Marga Nusaphala Persada ........................ INDO 2,847,000 812,862 0.2
BUSINESS & PUBLIC SERVICES
PT Indosat .............................................. INDO 344,500 779,683 0.2
TELECOM - OTHER
Santa Isabel S.A. - ADR{\/} ............................. CHLE 40,666 752,321 0.2
RETAILERS-FOOD
Sonae Investimentos-Sociedade Gestora de Participacoes
Sociais S.A. ........................................... PORT 18,602 695,194 0.2
RETAILERS-OTHER
Danubius Hotel and Spa Rt.-/- ........................... HGRY 21,940 686,611 0.2
LEISURE & TOURISM
Konsortium Perkapalan Bhd. .............................. MAL 267,000 501,277 0.1
TRANSPORTATION - SHIPPING
Pakistan Telecommunications Co., Ltd. - GDR-/- {\/} ..... PAK 6,000 486,000 0.1
TELEPHONE NETWORKS
Advanced Info. Service - Foreign ........................ THAI 85,700 460,478 0.1
WIRELESS COMMUNICATIONS
Investec-Consultoria Internacional S.A.-/- .............. PORT 14,612 457,144 0.1
BROADCASTING & PUBLISHING
Super Sol Ltd. .......................................... ISRL 154,231 443,830 0.1
RETAILERS-FOOD
BEC World Public Co., Ltd. - Foreign .................... THAI 77,800 406,418 0.1
BROADCASTING & PUBLISHING
Estabelecimentos Jeronimo Martins & Filho, Sociedade
Gestora de Participacoes Sociais S.A. .................. PORT 3,854 252,110 0.1
RETAILERS-OTHER
Siam Makro Public Co., Ltd. - Foreign-/- ................ THAI 170,000 224,129 --
RETAILERS-OTHER
PT Matahari Putra Prima ................................. INDO 1,035,000 201,811 --
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Preferred ... BRZL 495,118 129,349 --
TELEPHONE NETWORKS
Guangshen Railway Co., Ltd. ............................. HK 162,000 50,298 --
TRANSPORTATION - ROAD & RAIL
------------
51,016,238
------------
Materials/Basic Industry (10.9%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" .............. MEX 1,389,779 6,125,014 1.3
PAPER/PACKAGING
SA Iron & Steel Industrial Corp., Ltd. (ISCOR) .......... SAFR 9,521,806 4,948,964 1.1
METALS - STEEL
Sappi Ltd. .............................................. SAFR 587,133 3,722,985 0.8
FOREST PRODUCTS
Helwan Portland Cement Co.-/- ........................... EGPT 166,230 3,507,942 0.8
CEMENT
Suez Cement Co. - Reg S GDR{c} {\/} ..................... EGPT 158,195 3,282,546 0.7
CEMENT
Apasco S.A. ............................................. MEX 428,533 2,617,387 0.6
CEMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-31
<PAGE> 179
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Industrias Penoles S.A. (CP) ............................ MEX 634,803 $ 2,527,808 0.6
METALS - NON-FERROUS
Ameriyah Cement Co.-/- .................................. EGPT 94,500 2,390,294 0.5
CEMENT
De Beers Centenary AG - Linked Unit{=} .................. SAFR 78,000 1,861,622 0.4
MISC. MATERIALS & COMMODITIES
Torah Portland Cement Co.-/- ............................ EGPT 67,950 1,858,632 0.4
CEMENT
Hindalco Industries Ltd. ................................ IND 63,600 1,660,561 0.4
METALS - NON-FERROUS
Paints & Chemical Industry: ............................. EGPT -- -- 0.3
CHEMICALS
Common-/- ............................................. -- 31,400 1,052,916 --
144A GDR{.} -/- {\/} .................................. -- 44,000 440,000 --
Pohang Iron & Steel Co., Ltd. - ADR{\/} ................. KOR 88,870 1,444,138 0.3
METALS - STEEL
Turk Sise ve Cam Fabrikalari AS-/- ...................... TRKY 16,264,000 1,396,565 0.3
GLASS
North Cairo Flour Mills-/- .............................. EGPT 32,010 1,393,376 0.3
MISC. MATERIALS & COMMODITIES
Pannonplast Rt. ......................................... HGRY 20,732 1,138,897 0.2
MISC. MATERIALS & COMMODITIES
Helioplis Housing-/- .................................... EGPT 8,000 1,094,353 0.2
BUILDING MATERIALS & COMPONENTS
Grupo Industrial Minera Mexico "L" ...................... MEX 277,300 823,598 0.2
METALS - NON-FERROUS
Maanshan Iron and Steel Co. "H"{*} ...................... CHNA 4,939,000 785,895 0.2
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ....... CHLE 12,200 632,875 0.1
CHEMICALS
Israel Chemicals Ltd. ................................... ISRL 499,158 625,750 0.1
CHEMICALS
Cosco Pacific Ltd. ...................................... HK 516,000 600,776 0.1
PAPER/PACKAGING
Cimpor-Cimentos de Portugal, SGPS S.A. .................. PORT 21,964 555,972 0.1
CEMENT
PT Aneka Tambang-/- ..................................... INDO 1,364,500 532,117 0.1
METALS - NON-FERROUS
Engro Chemicals Pakistan Ltd. ........................... PAK 137,800 435,263 0.1
CHEMICALS
HI Cement Corp. ......................................... PHIL 3,961,000 361,117 0.1
CEMENT
Cahya Mata Sarawak Bhd. ................................. MAL 355,000 345,509 0.1
BUILDING MATERIALS & COMPONENTS
Siam Cement Co., Ltd. - Foreign ......................... THAI 39,800 338,597 0.1
CEMENT
Agros Holding S.A.-/- ................................... POL 16,123 338,212 0.1
MISC. MATERIALS & COMMODITIES
Compania de Minas Buenaventura S.A. - ADR{\/} ........... PERU 16,000 287,000 0.1
METALS - NON-FERROUS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-32
<PAGE> 180
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
PT Indah Kiat Pulp & Paper Corp.Tbk ..................... INDO 709,000 $ 271,553 0.1
PAPER/PACKAGING
Fauji Fertilizer Co., Ltd. .............................. PAK 116,300 258,997 0.1
MISC. MATERIALS & COMMODITIES
------------
49,657,231
------------
Finance (8.3%)
ABSA Group Ltd. ......................................... SAFR 761,136 4,509,849 1.0
BANKS-REGIONAL
Uniao Bancos Brasileiras "A" Preferred .................. BRZL 142,972,483 3,628,783 0.8
BANKS-MONEY CENTER
State Bank of India Ltd.: ............................... IND -- -- 0.7
BANKS-MONEY CENTER
Common ................................................ -- 267,000 1,931,961 --
GDR{\/} ............................................... -- 71,640 1,318,176 --
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} ................................................ CHLE 142,366 2,384,631 0.5
INVESTMENT MANAGEMENT
Egyptian American Bank SAE-/- ........................... EGPT 57,663 1,857,088 0.4
BANKS-MONEY CENTER
Commercial International Bank: .......................... EGPT -- -- 0.4
BANKS-MONEY CENTER
144A GDR{.} {\/} ...................................... -- 58,000 1,261,500 --
Common ................................................ -- 23,940 553,789 --
Banco de A. Edwards - ADR{\/} ........................... CHLE 100,934 1,753,728 0.4
BANKS-MONEY CENTER
Credicorp Ltd. - ADR{\/} ................................ PERU 94,800 1,700,475 0.4
BANKS-MONEY CENTER
Global Menkul Degerler AS-/- ............................ TRKY 69,103,256 1,601,182 0.4
SECURITIES BROKER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} ................................................ PAN 37,631 1,495,832 0.3
OTHER FINANCIAL
Turkiye Is Bankasi (Isbank) "C" ......................... TRKY 15,098,500 1,461,119 0.3
BANKS-MONEY CENTER
Banco Frances del Rio de la Plata S.A. - ADR{\/} ........ ARG 48,968 1,205,837 0.3
BANKS-MONEY CENTER
Aksigorta A.S. .......................................... TRKY 15,080,000 1,171,573 0.3
INSURANCE - MULTI-LINE
Liberty Life Association of Africa Ltd. ................. SAFR 37,400 933,056 0.2
INSURANCE-LIFE
BPI-SGPS S.A. ........................................... PORT 40,637 914,217 0.2
BANKS-MONEY CENTER
Yapi ve Kredi Bankasi AS ................................ TRKY 29,106,092 888,639 0.2
BANKS-REGIONAL
Kookmin Bank - GDR-/- {\/} .............................. KOR 128,480 822,272 0.2
BANKS-MONEY CENTER
Ayala Land, Inc. "B" .................................... PHIL 1,723,800 675,278 0.1
REAL ESTATE
Bank Leumi Le - Israel .................................. ISRL 406,668 624,411 0.1
BANKS-REGIONAL
Metroplex Bhd. .......................................... MAL 1,751,000 610,141 0.1
REAL ESTATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-33
<PAGE> 181
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Turkiye Garanti Bankasi AS .............................. TRKY 11,565,600 $ 599,025 0.1
BANKS-REGIONAL
Bank Hapoalim Ltd. ...................................... ISRL 244,830 579,448 0.1
BANKS-REGIONAL
Muslim Commercial Bank Ltd.-/- .......................... PAK 546,500 558,844 0.1
BANKS-MONEY CENTER
JSC Kazkommertsbank Co. - GDR-/- {\/} (.) ............... KAZ 26,600 558,600 0.1
BANKS-REGIONAL
SM Prime Holdings, Inc. ................................. PHIL 2,664,600 470,670 0.1
REAL ESTATE
Thai Farmers Bank Public Co., Ltd. - Foreign ............ THAI 166,400 455,323 0.1
BANKS-REGIONAL
Bank Slaski S.A. ........................................ POL 7,316 426,767 0.1
BANKS-MONEY CENTER
Banco Santander Chile - ADR{\/} ......................... CHLE 28,100 365,300 0.1
BANKS-REGIONAL
Land and House Public Co., Ltd. - Foreign ............... THAI 392,300 341,555 0.1
REAL ESTATE
Belle Corp.-/- .......................................... PHIL 3,297,000 300,581 0.1
REAL ESTATE
Malaysian Assurance Alliance Bhd. ....................... MAL 116,200 209,432 --
INSURANCE - MULTI-LINE
Bangkok Bank Public Co., Ltd. - Foreign ................. THAI 56,400 196,418 --
BANKS-MONEY CENTER
C & P Homes, Inc. ....................................... PHIL 1,382,000 104,339 --
REAL ESTATE
------------
38,469,839
------------
Consumer Non-Durables (6.5%)
South African Breweries Ltd. ............................ SAFR 226,892 6,037,874 1.3
BEVERAGES - ALCOHOLIC
Fomento Economico Mexicano, S.A. de C.V. "B" ............ MEX 738,356 5,217,126 1.1
BEVERAGES - ALCOHOLIC
Gruma S.A. "B"-/- ....................................... MEX 883,073 3,468,838 0.8
FOOD
Companhia Cervejaria Brahma Preferred ................... BRZL 4,662,721 2,918,430 0.6
BEVERAGES - ALCOHOLIC
C.G. Smith Foods Ltd. ................................... SAFR 174,000 2,496,050 0.5
FOOD
Eastern Tobacco Co.-/- .................................. EGPT 90,785 2,276,300 0.5
TOBACCO
A-Ahram Beverages Co. S.A.E. - 144A GDR{.} -/- {\/} ..... EGPT 62,514 1,719,135 0.4
BEVERAGES - ALCOHOLIC
Embotelladora Andina S.A.: .............................. CHLE -- -- 0.4
BEVERAGES - NON-ALCOHOLIC
"B" ADR{\/} ........................................... -- 41,497 850,689 --
"A" ADR{\/} ........................................... -- 34,400 825,600 --
Hindustan Lever Ltd. .................................... IND 40,650 1,438,245 0.3
PERSONAL CARE/COSMETICS
San Miguel Corp. "B" .................................... PHIL 851,600 958,353 0.2
BEVERAGES - ALCOHOLIC
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-34
<PAGE> 182
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (Continued)
Compania Cervecerias Unidas S.A. ADR{\/} ................ CHLE 36,800 $ 897,000 0.2
BEVERAGES - ALCOHOLIC
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) ............... POL 4,461 333,293 0.1
BEVERAGES - ALCOHOLIC
Reliance Industries Ltd. - GDR-/- {\/} (.) .............. IND 12,100 255,008 0.1
TEXTILES & APPAREL
Kuala Lumpur Kepong Bhd. ................................ MAL 60,000 144,187 --
OTHER CONSUMER GOODS
La Tondena Distillers, Inc. ............................. PHIL 137,900 84,469 --
BEVERAGES - ALCOHOLIC
------------
29,920,597
------------
Technology (2.3%)
Asustek Computer Inc. - Reg. S GDR-/- {c} {\/} .......... TWN 830,248 10,149,782 2.2
COMPUTERS & PERIPHERALS
Clal Electronics Industries Ltd. ........................ ISRL 2,754 399,041 0.1
SEMICONDUCTORS
LG Information & Communication .......................... KOR 2,728 156,860 --
TELECOM TECHNOLOGY
------------
10,705,683
------------
Capital Goods (1.6%)
New World Infrastructure Ltd.-/- ........................ HK 1,076,000 2,129,728 0.5
CONSTRUCTION
Cheung Kong Infrastructure Holdings ..................... HK 643,000 1,663,648 0.4
CONSTRUCTION
United Engineers Ltd. ................................... MAL 428,000 1,015,680 0.2
CONSTRUCTION
Irkutskenergo - ADR-/- {\/} ............................. RUS 68,712 927,612 0.2
ELECTRICAL PLANT/EQUIPMENT
Daewoo Heavy Industries ................................. KOR 99,000 577,500 0.1
INDUSTRIAL COMPONENTS
Elektrim Spolka Akcyjna S.A. ............................ POL 58,947 555,592 0.1
ELECTRICAL PLANT/EQUIPMENT
ECI Telecommunications Ltd.{\/} ......................... ISRL 16,200 447,525 0.1
TELECOM EQUIPMENT
Sungmi Telecom Electronics Co. .......................... KOR 184 8,999 --
TELECOM EQUIPMENT
------------
7,326,284
------------
Health Care (1.6%)
Egypt International Pharmaceutical Industries Co.
(EIPICO) ............................................... EGPT 33,200 2,402,118 0.5
PHARMACEUTICALS
Richter Gedeon Rt. - Reg S GDR{c} {\/} .................. HGRY 17,552 1,632,336 0.4
PHARMACEUTICALS
Ranbaxy Laboratories Ltd. ............................... IND 79,850 1,555,391 0.3
MEDICAL TECHNOLOGY & SUPPLIES
Teva Pharmaceutical Industries Ltd. ..................... ISRL 25,548 1,189,452 0.3
PHARMACEUTICALS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-35
<PAGE> 183
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Health Care (Continued)
PT Kalbe Farma - Foreign ................................ INDO 479,000 $ 293,538 0.1
PHARMACEUTICALS
------------
7,072,835
------------
Consumer Durables (1.4%)
Arcelik AS .............................................. TRKY 12,233,800 1,367,315 0.3
APPLIANCES & HOUSEHOLD
Bajaj Auto Ltd. ......................................... IND 79,200 1,261,094 0.3
AUTOMOBILES
Qingling Motors Co., Ltd.{*} ............................ CHNA 1,671,000 1,091,662 0.2
AUTOMOBILES
Tata Engineering and Locomotive Co., Ltd.: .............. IND -- -- 0.2
AUTOMOBILES
GDR{\/} ............................................... -- 48,000 499,200 --
Common ................................................ -- 25,000 219,069 --
Samsung Electronics Co. - 144A GDR{.} -/- {\/} .......... KOR 34,850 705,713 0.2
CONSUMER ELECTRONICS
PT Astra International, Inc. ............................ INDO 785,000 584,923 0.1
AUTOMOBILES
Mahindra & Mahindra Ltd. ................................ IND 43,300 430,653 0.1
AUTOMOBILES
------------
6,159,629
------------ -----
TOTAL EQUITY INVESTMENTS (cost $359,966,965) .............. 312,881,526 68.5
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (10.1%)
Argentina (1.2%)
Republic of Argentina:
Global Bond, 11.375% due 1/30/17 .................... USD 2,741,000 2,617,655 0.6
Par Bond Series L, 5.5% due 3/31/23++ ............... USD 2,690,000 1,830,881 0.4
Global Bond, 11% due 10/9/06 ........................ USD 720,000 713,700 0.2
Brazil (0.4%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24++ ............................................ USD 3,020,000 1,996,975 0.4
Bulgaria (2.1%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12++ ...................................... USD 9,017,000 4,914,265 1.1
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro+ .............................................. USD 7,099,000 4,663,156 1.0
Ecuador (0.4%)
Republic of Ecuador, Discount Bond, 6.6875% due 2/28/25
- Euro+ .............................................. USD 2,845,000 1,998,613 0.4
Mexico (2.2%)
United Mexican States:
Discount Bond Series A, 6.6925% due 12/31/19+ +/+ ... USD 6,110,000 5,533,369 1.2
Global Bond, 9.875% due 1/15/07 ..................... USD 1,615,000 1,633,169 0.4
Global Bond, 11.375% due 9/15/16 .................... USD 1,455,000 1,547,756 0.3
Global Bond, 11.5% due 5/15/26 ...................... USD 1,421,000 1,534,680 0.3
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-36
<PAGE> 184
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Panama (0.6%)
Republic of Panama, Interest Reduction Bond, 3.75% due
7/17/14++ ............................................ USD 3,536,000 $ 2,486,250 0.6
Peru (0.3%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17++ ............................................. USD 2,533,000 1,443,810 0.3
South Africa (0.8%)
Republic of South Africa, 13% due 8/31/10{j} .......... ZAR 20,173,000 3,807,589 0.8
United States (1.6%)
United States Treasury:
6.375% due 8/15/27 .................................. USD 4,032,000 4,149,180 0.9
5.875% due 9/30/02 .................................. USD 3,033,000 3,049,587 0.7
Venezuela (0.5%)
Republic of Venezuela, Par Bond Series A, 6.75% due
3/31/20+/+ ........................................... USD 2,543,000 2,128,173 0.5
------------
Total Government & Government Agency Obligations (cost
$49,316,056) ............................................. 46,048,808
------------
Sovereign Debt (4.9%)
Russia (4.9%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- {j} ............................... USD 22,635,000 20,131,003 4.4
Participation ** -/- ................................ DEM 4,186,000 2,227,112 0.5
------------
Total Sovereign Debt (cost $12,006,889) ................... 22,358,115
------------
Corporate Bonds (3.2%)
Argentina (0.5%)
Supermercados Norte, 10.875% due 2/9/04 - 144A{.} ..... USD 1,193,000 1,109,490 0.3
Acindar Industrial Argentina, 11.25% due 2/15/04 ...... USD 661,000 654,390 0.2
Brazil (0.2%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ...... USD 1,107,000 1,079,325 0.2
China (0.6%)
Panda Global Energy Co., 12.5% due 4/15/04{.} ......... USD 2,139,000 2,010,660 0.4
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} ..... USD 960,000 876,000 0.2
Dominican Republic (0.1%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............. USD 652,000 645,480 0.1
Hong Kong (0.1%)
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} .............................................. USD 700,000 652,750 0.1
India (0.2%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ......... USD 1,093,000 954,189 0.2
Indonesia (0.1%)
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} .............................................. USD 653,000 574,640 0.1
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-37
<PAGE> 185
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Mexico (0.8%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} .......................... USD 2,104,000 $ 1,930,420 0.4
8.85% due 9/15/07 - 144A{.} ......................... USD 1,050,000 1,009,313 0.2
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} .............................................. USD 996,000 1,088,130 0.2
Russia (0.4%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} .............................................. USD 851,000 1,144,595 0.3
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} .... USD 555,000 488,400 0.1
South Africa (0.2%)
Eskom, 11% due 6/1/08 ................................. ZAR 4,990,000 826,527 0.2
------------
Total Corporate Bonds (cost $15,533,169) .................. 15,044,309
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $76,856,114) ......... 83,451,232 18.2
------------ -----
<CAPTION>
UNDERLYING
NOMINAL VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Federal Republic of Brazil Debt Conversion Bond, Call
Option, strike 82.25, expires 1/12/98 (cost
$312,660) .............................................. USD 17,370,000 126,732 --
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
PT Matahari Putra Prima Rights, expire 12/3/97 .......... INDO 2,070,000 115,320 --
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Rights,
expire 11/12/97 ........................................ BRZL 257,975 234 --
TELEPHONE NETWORKS
------------ -----
TOTAL RIGHTS (cost $0) .................................... 115,554 --
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Belle Corp. Warrants, expire 2002 (cost $0) ............. PHIL 659,400 122 --
------------ -----
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-38
<PAGE> 186
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ----------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57%, collateralized by $34,850,000 U.S. Treasury Bond,
8.875% due 8/15/17 (market value of collateral is
$45,720,975, including accrued interest).
(cost $44,816,933) .................................... $ 44,816,933 9.8
------------ -----
TOTAL INVESTMENTS (cost $481,952,672) * .................. 441,392,099 96.5
Other Assets and Liabilities .............................. 15,987,089 3.5
------------ -----
NET ASSETS ................................................ $457,379,188 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
+X+ The GT Global Developing Markets Fund (the "Fund") has invested in
the GT Global Taiwan Fund, a fund managed by LGT Asset Management
Ltd. who is an affiliate of the Fund's manager, Chancellor LGT
Asset Management, Inc.
** Underlying loan agreement currently in default.
{j} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities. See Note 1 to the
Financial Statements.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
+ The coupon rate shown on floating rate note represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{*} Security denominated in Hong Kong Dollars.
{=} Each Centenary Linked Unit consists of 1 registered deferred share
of De Beers Consolidated Mine + 1 Centenary Depositary Receipt.
(.) Restricted securities: At October 31, 1997, the Fund owned the
following restricted securities constituting 0.2% of net assets
which may not be publicly sold without registration under the
Securities Act of 1933 (Note 1). Additional information on the
securities is as follows:
<TABLE>
<CAPTION>
ACQUISITION MARKET VALUE
DESCRIPTION DATE SHARES COST PER SHARE
- ------------------------------ ------------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
JSC Kazkommertsbank Co. -
GDR.......................... 7/15/97 26,600 $ 500,080 $ 21.00
Reliance Industries - GDR..... 5/20/94 12,100 223,850 21.08
</TABLE>
* For Federal income tax purposes, cost is $483,269,089 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,262,525
Unrealized depreciation: (68,139,515)
-------------
Net unrealized depreciation: $ (41,876,990)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
FS-39
<PAGE> 187
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {d}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) .................. 1.2 1.7 2.9
Brazil (BRZL/BRL) .................... 7.6 0.6 8.2
Bulgaria (BUL/LEV) ................... 2.1 2.1
Chile (CHLE/CLP) ..................... 4.8 4.8
China (CHNA/RMB) ..................... 0.4 0.6 1.0
Dominican Republic (DR/USD) .......... 0.1 0.1
Ecuador (ECDR/ECS) ................... 0.4 0.4
Egypt (EGPT/EGP) ..................... 5.7 5.7
Hong Kong (HK/HKD) ................... 2.0 0.1 2.1
Hungary (HGRY/HUF) ................... 1.2 1.2
India (IND/INR) ...................... 3.8 0.2 4.0
Indonesia (INDO/IDR) ................. 2.9 0.1 3.0
Ireland (IRE/IEP) .................... 0.4 0.4
Israel (ISRL/ILS) .................... 1.2 1.2
Kazakhstan (KAZ/KTS) ................. 0.1 0.1
Korea (KOR/KRW) ...................... 1.0 1.0
Malaysia (MAL/MYR) ................... 0.9 0.9
Mexico (MEX/MXN) ..................... 8.1 3.0 11.1
Pakistan (PAK/PKR) ................... 0.9 0.9
Panama (PAN/PND) ..................... 0.3 0.6 0.9
Peru (PERU/PES) ...................... 1.2 0.3 1.5
Philippines (PHIL/PHP) ............... 0.8 0.8
Poland (POL/PLZ) ..................... 0.4 0.4
Portugal (PORT/PTE) .................. 0.9 0.9
Russia (RUS/SUR) ..................... 2.8 5.3 8.1
South Africa (SAFR/ZAR) .............. 10.5 1.0 11.5
Taiwan (TWN/TWD) ..................... 2.3 2.3
Thailand (THAI/THB) .................. 1.2 1.2
Turkey (TRKY/TRL) .................... 2.4 2.4
United Kingdom (UK/GBP) .............. 0.6 0.6
United States (US/USD) ............... 1.6 13.3 14.9
Venezuela (VENZ/VEB) ................. 2.1 0.5 2.6
Zimbabwe (ZBBW/ZWD) .................. 0.8 0.8
------ ----- ----- -----
Total ............................... 68.5 18.2 13.3 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $457,379,188.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE CONTRACT DELIVERY UNREALIZED
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 1,681,647 1.84950 11/06/97 $ (113,656)
Indonesian Rupiahs...................... 1,114,206 3610.00000 11/05/97 (6,173)
South African Rands..................... 3,338,977 5.04500 1/30/98 (73,645)
-------------- --------------
Total Contracts to Sell (Receivable
amount $5,941,356)................... 6,134,830 (193,474)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 1.34%.
Total Open Forward Foreign Currency
Contracts............................ $ (193,474)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-40
<PAGE> 188
GT GLOBAL DEVELOPING MARKETS FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $481,952,672) (Note 1).......................... $441,392,099
U.S. currency................................................................. $1,159,740
Foreign currencies (cost $14,108,834)......................................... 14,122,604 15,282,344
----------
Receivable for securities sold............................................................ 13,029,046
Interest receivable....................................................................... 1,251,368
Dividends receivable...................................................................... 366,109
Unamortized organizational costs (Note 1)................................................. 85,312
Miscellaneous receivable.................................................................. 11,894
-----------
Total assets............................................................................ 471,418,172
-----------
Liabilities:
Payable for securities purchased.......................................................... 12,905,923
Payable for investment management and administration fees (Note 2)........................ 722,480
Payable for open forward foreign currency contracts (Note 1).............................. 193,474
Payable for professional fees............................................................. 39,732
Payable for printing and postage expenses................................................. 37,656
Payable for custodian fees................................................................ 30,062
Payable for Directors' fees and expenses (Note 2)......................................... 15,494
Payable for transfer agent fees (Note 2).................................................. 5,964
Payable for fund accounting fees (Note 2)................................................. 4,387
Payable for registration and filing fees.................................................. 2,127
Other accrued expenses.................................................................... 81,685
-----------
Total liabilities....................................................................... 14,038,984
-----------
Net assets.................................................................................. $457,379,188
-----------
-----------
Class A:
Net asset value per share ($457,379,188 DIVIDED BY 36,416,667 shares outstanding)........... $ 12.56
-----------
-----------
Net assets consist of:
Paid in capital (Note 4).................................................................. $545,103,263
Undistributed net investment income....................................................... 8,645,635
Accumulated net realized loss on investments and foreign currency transactions............ (55,602,092)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (207,045)
Net unrealized depreciation of investments................................................ (40,560,573)
-----------
Total -- representing net assets applicable to capital shares outstanding................... $457,379,188
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-41
<PAGE> 189
GT GLOBAL DEVELOPING MARKETS FUND
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED
OCTOBER 31, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Investment income: (Note 1)
Interest income........................................................... $11,436,242 $20,641,051
Dividend income (net of foreign withholding tax of $365,717 and $420,409,
respectively)............................................................ 5,481,523 7,351,830
Other income.............................................................. -- 74,487
------------- -------------
Total investment income................................................. 16,917,765 28,067,368
------------- -------------
Expenses:
Investment management fees (Note 2)....................................... 6,274,911 6,673,159
Administration fees (Note 2).............................................. 1,108,912 1,191,681
Custodian fees (Note 1)................................................... 317,289 332,166
Fund accounting fees (Note 2)............................................. 108,484 119,321
Professional fees......................................................... 92,091 101,382
Printing and postage expenses............................................. 33,504 65,880
Transfer agent fees (Note 2).............................................. 63,520 190,834
Amortization of organization costs (Note 1)............................... 58,930 70,949
Directors' fees and expenses (Note 2)..................................... 25,536 38,064
Registration and filing fees.............................................. -- 3,000
Other expenses............................................................ 119,278 37,139
------------- -------------
Total expenses before reductions........................................ 8,202,455 8,823,575
Expense reductions (Notes 1 & 5)...................................... (374,173) (162,760)
------------- -------------
Total net expenses...................................................... 7,828,282 8,660,815
------------- -------------
Net investment income....................................................... 9,089,483 19,406,553
------------- -------------
Net realized and unrealized gain (loss) on investments and foreign
currencies: (Note 1)
Net realized gain on investments.......................................... 46,804,651 1,845,666
Net realized loss on foreign currency transactions........................ (1,151,351) (900,512)
------------- -------------
Net realized gain during the periods.................................... 45,653,300 945,154
------------- -------------
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................. (297,303) 91,835
Net change in unrealized appreciation (depreciation) of investments....... (101,078,671) 78,628,364
------------- -------------
Net unrealized appreciation (depreciation) during the periods........... (101,375,974) 78,720,199
------------- -------------
Net realized and unrealized gain (loss) on investments and foreign
currencies................................................................. (55,722,674) 79,665,353
------------- -------------
Net increase (decrease) in net assets resulting from operations............. $(46,633,191) $99,071,906
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-42
<PAGE> 190
GT GLOBAL DEVELOPING MARKETS FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, ------------------------
1997 1996 1995
------------- ----------- -----------
<S> <C> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income.......................................... $ 9,089,483 $ 19,406,553 $ 26,375,900
Net realized gain (loss) on investments and foreign currency
transactions.................................................. 45,653,300 945,154 (78,379,558)
Net change in unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currencies... (297,303) 91,835 (3,021)
Net change in unrealized appreciation (depreciation) of
investments................................................... (101,078,671) 78,628,364 47,401,359
------------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations.................................................. (46,633,191) 99,071,906 (4,605,320)
------------- ----------- -----------
Distributions to shareholders: (Note 1)
From net investment income..................................... -- (17,407,047) (26,292,834)
------------- ----------- -----------
Capital share transactions: (Note 4)
Adjustment to estimate of initial offering expenses............ -- -- 373,757
------------- ----------- -----------
Total increase (decrease) in net assets...................... (46,633,191) 81,664,859 (30,524,397)
Net assets:
Beginning of period............................................ 504,012,379 422,347,520 452,871,917
------------- ----------- -----------
End of period *................................................ $457,379,188 $504,012,379 $422,347,520
------------- ----------- -----------
------------- ----------- -----------
* Includes undistributed net investment income (loss) of........ $ 8,645,635 $ 363,782 $ (7,034)
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-43
<PAGE> 191
GT GLOBAL DEVELOPING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.
<TABLE>
<CAPTION>
JANUARY 11, 1994
(COMMENCEMENT
TEN MONTHS YEAR ENDED OF OPERATIONS)
ENDED DECEMBER 31, TO
OCTOBER 31, ---------------------- DECEMBER 31,
1997 1996 1995 1994
----------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 13.84 $ 11.60 $ 12.44 $ 15.00
----------- ---------- ---------- ----------------
Income from investment operations:
Net investment income................. 0.25 0.53 0.72 0.35
Net realized and unrealized gain
(loss) on investments................ (1.53) 2.19 (0.84) (2.46)
----------- ---------- ---------- ----------------
Net increase (decrease) from
investment operations.............. (1.28) 2.72 (0.12) (2.11)
----------- ---------- ---------- ----------------
Distributions to shareholders:
From net investment income............ -- (0.48) (0.72) (0.35)
From net realized gain on
investments.......................... -- -- -- (0.10)
----------- ---------- ---------- ----------------
Total distributions................. -- (0.48) (0.72) (0.45)
----------- ---------- ---------- ----------------
Net asset value, end of period.......... $ 12.56 $ 13.84 $ 11.60 $ 12.44
----------- ---------- ---------- ----------------
----------- ---------- ---------- ----------------
Market value, end of period............. $ 11.81 $ 11.63 $ 9.75 $ 9.75
----------- ---------- ---------- ----------------
----------- ---------- ---------- ----------------
Total investment return (based on market
value)................................. 1.62%(b) 24.18% 6.60% (32.16)% (b)
Total investment return (based on net
asset value)........................... (9.25)%(b) 23.59% (0.95)% (14.07)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 457,379 $ 504,012 $ 422,348 $ 452,872
Ratio of net investment income to
average net assets..................... 2.03%(a) 4.07% 6.33% 2.75% (a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.75%(a) 1.82% 1.77% 2.01% (a)
Without expense reductions............ 1.83%(a) 1.85% 1.80% 2.01% (a)
Portfolio turnover rate................. 184%(a) 138% 75% 56%
Average commission rate per share paid
on portfolio transactions.............. $ 0.0023 $ 0.0022 N/A N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
N/A Not Applicable.
These financial highlights provide per share financial information of G.T.
Global Developing Markets Fund, Inc. ("Predecessor Fund") for the periods
shown. The fees and expenses of the Fund differ from those of the
Predecessor Fund (See Note 2).
The accompanying notes are an integral part of the financial statements.
FS-44
<PAGE> 192
GT GLOBAL DEVELOPING MARKETS FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Developing Markets Fund ("Fund") is a separate series of G.T.
Investment Funds, Inc. ("Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as an open-end management investment company. The Company
has thirteen series of shares in operation, each series corresponding to a
distinct portfolio of investments.
On October 31, 1997, at the close of business, the Fund acquired the assets and
assumed the liabilities of G.T. Global Developing Markets Fund, Inc., a Maryland
corporation registered under the 1940 Act as a non-diversified closed-end
management investment company ("Predecessor Fund"), in exchange for Class A
shares of the Fund in a tax-free reorganization of the Predecessor Fund.
Shareholders of the Predecessor Fund approved the reorganization on October 20,
1997. Prior to October 28, 1997 the Closed-End Fund's shares traded on the New
York Stock Exchange. As a result of the reorganization of the Predecessor Fund
into the Fund, the Fund has a fiscal year end of October 31 to coincide with the
fiscal years of the other series of the Company. Class A shares of the Fund
issued in connection with the reorganization of the Predecessor Fund will be
subject to a 2% redemption fee for redemptions until May 1, 1998. The financial
statements presented are the financial statements for the Predecessor Fund.
Commencing November 1, 1997, the Fund began to offer Class A, Class B, and
Advisor Class shares, each of which has equal rights as to assets and voting
privileges except that Class A and Class B each has exclusive voting rights with
respect to its distribution plan. Investment income, realized and unrealized
capital gains and losses, and the common expenses of the Fund are allocated on a
pro rata basis to each class based on the relative net assets of each class to
the total net assets of the Fund. Each class of shares differs in its respective
service and distribution expenses, and may differ in its transfer agent,
registration, and certain other class-specific fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by Chancellor LGT Asset
Management, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
asked prices for securities or, if such prices are not available, at prices for
securities of comparative maturity, quality and type; however, when the Manager
deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used. Short-term investments with a maturity of 60 days
or less are valued at amortized cost, adjusted for foreign exchange translation
and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Fund's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Fund's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
existing from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term investments, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from
FS-45
<PAGE> 193
GT GLOBAL DEVELOPING MARKETS FUND
changes in the value of assets and liabilities other than investments in
securities at year end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. The Fund could be exposed to risk if a counterparty is
unable to meet the terms of a contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock and
bond markets and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock and bond
markets and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to collection of income on securities, income is
recorded net of all withholding tax with any rebate recorded when received. The
Fund may trade securities on other than normal settlement terms. This may
increase the market risk if the other party to the transaction fails to deliver
and causes the Fund to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $29,571,465
were on loan to brokers. The loans were secured by cash collateral of
$33,239,507 received by the Fund. For international
FS-46
<PAGE> 194
GT GLOBAL DEVELOPING MARKETS FUND
securities, cash collateral is received by the Fund against loaned securities in
an amount at least equal to 105% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less than
103% of the market value of the loaned securities during the period of the loan.
For domestic securities, cash collateral is received by the Fund against loaned
securities in an amount at least equal to 102% of the market value of the loaned
securities at the inception of each loan. This collateral must be maintained at
not less than 100% of the market value of the loaned securities during the
period of each loan. For the period ended October 31, 1997, the Fund received
securities lending income of $302,308 which was used to reduce the Fund's
custodian fees and administrative expenses.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$54,472,976 which expires in 2003.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
aggregated $353,775. These expenses are being amortized on a straightline basis
over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the period, restricted
securities (excluding 144A issues) are shown at the end of the Fund's Portfolio
of Investments.
(O) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
The Fund may trade securities on a when-issued or forward commitment basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Fund will
generally purchase these securities with the intention of acquiring such
securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Portfolio of Investments. The Fund
has purchased and sold when-issued securities during the period and has set
aside liquid securities as collateral for these commitments.
(P) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager ("GT Funds"), has a line of credit with each of BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the GT Funds
to borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of the Fund's total assets. On October 31,
1997, the Fund had no loans outstanding.
For the period ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $12,607,909, with a weighted average interest rate of 6.29%.
Interest expense for the Fund for the period ended October 31, 1997 was $24,241,
and is included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
(A) PREDECESSOR FUND THROUGH OCTOBER 31, 1997
Chancellor LGT Asset Management, Inc. was the Predecessor Fund's investment
manager and administrator. The Predecessor Fund paid the Manager investment
management fees, which were computed weekly and paid monthly, at the annualized
rate of 1.40% of the funds average weekly net assets. The Manager also acted as
administrator of the Predecessor Fund and paid the Manager administration fees,
which were computed and paid monthly, at an annualized rate of 0.25% of the
Fund's average weekly net assets.
The Manager was the pricing and accounting agent for the Predecessor Fund. The
monthly fee for these services to the Manager was a percentage, not to exceed
0.03% annually, of the Predecessor Fund's average daily net assets. The annual
fee rate was derived by applying 0.03% to the first $5 billion of assets of all
registered mutual funds advised by the Manager and 0.02% to the assets in excess
of
FS-47
<PAGE> 195
GT GLOBAL DEVELOPING MARKETS FUND
$5 billion and allocating the result according to the Predecessor Fund's average
daily net assets.
The Predecessor Fund paid each of its Directors who was not an employee, officer
or director of the Manager or any of its affiliated companies $5,000 per year
plus $300 for each meeting of the board or any committee thereof attended by the
Director.
(B) THE FUND COMMENCING NOVEMBER 1, 1997
Chancellor LGT Asset Management, Inc. is the Fund's investment manager and
administrator. The Fund pays the Manager investment management and
administration fees at the annualized rate of 0.975% on the first $500 million
of average daily net assets of the Fund; 0.95% on the next $500 million; 0.925%
on the next $500 million and 0.90% on amounts thereafter. These fees are
computed daily and paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Fund's
distributor. The Fund offers Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. Purchases of Class A shares exceeding $500,000 may be subject to
a contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Fund's current prospectus. GT Global also makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class A
shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global, from its own resources, pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. In addition, GT Global makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class B shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.00%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by the waivers by
the Manager of investment management and administration fees, waivers by GT
Global of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or GT Global of portions of the Fund's other
operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting and general transfer agent services, GT Services receives
an annual maintenance fee of $17.50 per account, a new account fee of $4.00 per
account, a per transaction fee of $1.75 for all transactions other than
exchanges and a per exchange fee of $2.25. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager or any of its affiliated companies $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Director.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $736,422,573 and $765,404,012, respectively. Purchases
of U.S. government obligations by the Fund were $7,226,388 for the year. There
were no sales of U.S. government obligations by the Fund for the year.
4. CAPITAL SHARES
At October 31, 1997, the Predecessor Fund was authorized to issue 100 million
shares of capital stock, $0.001 par value, all of which was classified as Common
Stock.
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of GT Global Developing Markets Fund; 400,000,000 were
classified as shares of GT
FS-48
<PAGE> 196
GT GLOBAL DEVELOPING MARKETS FUND
Global Government Income Fund; 200,000,000 were classified as shares of GT
Global Health Care Fund; 200,000,000 were classified as shares of GT Global
Strategic Income Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of GT Global
Latin America Growth Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; 200,000,000 were classified as shares of GT Global Financial
Services Fund; 200,000,000 were classified as shares of GT Global Natural
Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; and 200,000,000 were classified as shares of GT Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fourteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified.
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended October 31, 1997, the Fund's expenses
were reduced by $71,865 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
For its fiscal year ended October 31, 1997, the total amount of income received
by the Fund from sources within foreign countries and possessions of the United
States was approximately $.7797 per share (representing an approximate total of
$15,509,507). The total amount of taxes paid by the Fund to such countries was
approximately $.0213 per share (representing an approximate total of $424,399).
FS-49
<PAGE> 197
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of AIM Emerging Markets Fund
(formerly GT Global Emerging Markets Fund) and
Board of Directors of AIM Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of AIM
Emerging Markets Fund (formerly GT Global Emerging Markets Fund), one of the
funds organized as a series of AIM Investment Funds, Inc., including the
portfolio of investments, as of April 30, 1998, the related statement of
operations for the six months then ended, the statements of changes in net
assets for the six months then ended and for the year ended October 31, 1997,
and the financial highlights for each of the periods indicated therein. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1998 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of AIM
Emerging Markets Fund as of April 30, 1998, the results of its operations for
the six months then ended, the changes in its net assets for the six months then
ended and for the year ended October 31, 1997, and the financial highlights for
each of the periods indicated therein, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JUNE 17, 1998
FS-50
<PAGE> 198
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (19.8%)
Telecomunicacoes Brasileiras S.A. (Telebras): ............. BRZL -- -- 4.6
TELEPHONE NETWORKS
ADR{\/} ................................................. -- 50,962 $ 6,207,802 --
Common .................................................. -- 30,136,813 2,991,280 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ........... MEX 51,127 2,895,066 1.4
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ........................ PERU 119,250 2,638,406 1.3
TELEPHONE NETWORKS
Pick'n Pay Stores Ltd.: ................................... SAFR -- -- 1.1
RETAILERS-OTHER
Common .................................................. -- 1,191,699 2,264,287 --
"N" ..................................................... -- 25,198 45,883 --
Magyar Tavkozlesi Rt. - ADR-/- {\/} ....................... HGRY 67,990 2,005,705 1.0
TELEPHONE NETWORKS
Cifra, S.A. de C.V. "V" ................................... MEX 1,080,730 1,901,166 0.9
RETAILERS-OTHER
Grupo Televisa, S.A. de C.V. - GDR-/- {\/} ................ MEX 41,300 1,693,300 0.8
BROADCASTING & PUBLISHING
Philippine Long Distance Telephone Co.: ................... PHIL -- -- 0.7
TELEPHONE - LONG DISTANCE
ADR{\/} ................................................. -- 30,200 815,400 --
Common .................................................. -- 21,500 577,091 --
Carso Global Telecom "A1" ................................. MEX 339,700 1,303,453 0.6
TELEPHONE NETWORKS
Mahanagar Telephone Nigam Ltd.: ........................... IND -- -- 0.6
TELECOM - OTHER
GDR-/- {\/} ............................................. -- 43,300 694,965 --
Common .................................................. -- 84,400 535,873 --
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP ................................................... BRZL 5,368,655 1,220,682 0.6
BUSINESS & PUBLIC SERVICES
Telefonica de Argentina S.A. - ADR{\/} .................... ARG 30,983 1,194,782 0.6
TELEPHONE NETWORKS
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ......... CHLE 47,107 1,180,619 0.6
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP)-/- ............ BRZL 3,945,000 1,029,805 0.5
TELEPHONE NETWORKS
Nortel Inversora S.A. - ADR{\/} ........................... ARG 27,900 830,025 0.4
TELEPHONE NETWORKS
Vimpel-Communications - ADR-/- {\/} ....................... RUS 14,700 793,800 0.4
WIRELESS COMMUNICATIONS
Telecom Argentina S.A. - ADR{\/} .......................... ARG 19,400 698,400 0.3
TELEPHONE NETWORKS
Hellenic Telecommunications Organization S.A. ............. GREC 24,180 692,484 0.3
TELEPHONE NETWORKS
Genting Bhd. .............................................. MAL 183,000 613,297 0.3
LEISURE & TOURISM
Guangshen Railway Co., Ltd. ............................... HK 3,195,000 598,121 0.3
TRANSPORTATION - ROAD & RAIL
Telekom Malaysia Bhd. ..................................... MAL 171,000 517,622 0.3
TELEPHONE NETWORKS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-51
<PAGE> 199
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
Rostelecom - ADR-/- {\/} .................................. RUS 24,100 $ 516,644 0.3
TELEPHONE - LONG DISTANCE
Danubius Hotel and Spa Rt.-/- ............................. HGRY 19,037 465,275 0.2
LEISURE & TOURISM
Malaysia International Shipping Bhd. - Foreign ............ MAL 240,000 421,622 0.2
TRANSPORTATION - SHIPPING
Telecomunicacoes do Parana (TELPAR) ....................... BRZL 719,000 410,588 0.2
TELECOM - OTHER
Advanced Info. Service - Foreign .......................... THAI 54,600 381,917 0.2
WIRELESS COMMUNICATIONS
Telecomunicacoes de Minas Gerais - Telemig ................ BRZL 2,245,200 346,548 0.2
TELECOM - OTHER
Tanjong PLC ............................................... MAL 142,000 326,216 0.2
LEISURE & TOURISM
Pakistan Telecommunications Co., Ltd. - GDR-/- {\/} ....... PAK 3,700 255,300 0.1
TELEPHONE NETWORKS
Berjaya Sports Toto Bhd. .................................. MAL 98,000 234,405 0.1
LEISURE & TOURISM
Migros Turk T.A.S. ........................................ TRKY 238,400 233,866 0.1
RETAILERS-FOOD
Santa Isabel S.A. - ADR{\/} ............................... CHLE 12,144 200,376 0.1
RETAILERS-FOOD
Trade House GUM - ADR{\/} ................................. RUS 38,320 191,600 0.1
RETAILERS-OTHER
Super Sol Ltd. ............................................ ISRL 56,545 178,328 0.1
RETAILERS-FOOD
Goody's S.A. .............................................. GREC 6,230 166,723 0.1
RESTAURANTS
Siam Makro Public Co., Ltd. - Foreign ..................... THAI 53,400 87,847 --
RETAILERS-OTHER
Indian Hotels Co., Ltd. ................................... IND 2,700 36,037 --
LEISURE & TOURISM
------------
40,392,606
------------
Finance (19.1%)
Alpha Credit Bank ......................................... GREC 21,400 2,257,807 1.1
BANKS-REGIONAL
Uniao de Bancos Brasileiros S.A. (Unibanco): .............. BRZL -- -- 1.0
BANKS-MONEY CENTER
Units{=} ................................................ -- 16,569,429 1,275,274 --
GDR-/- {\/} ............................................. -- 21,670 861,383 --
Turkiye Garanti Bankasi AS-/- ............................. TRKY 37,629,400 1,996,355 1.0
BANKS-REGIONAL
ABSA Group Ltd. ........................................... SAFR 176,757 1,530,553 0.8
BANKS-REGIONAL
Yapi ve Kredi Bankasi AS .................................. TRKY 27,168,347 1,332,582 0.7
BANKS-REGIONAL
Bank Hapoalim Ltd. ........................................ ISRL 494,510 1,328,163 0.7
BANKS-REGIONAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-52
<PAGE> 200
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- - ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Commercial International Bank: ............................ EGPT -- -- 0.6
BANKS-MONEY CENTER
144A GDR{.} {\/} ........................................ -- 63,000 $ 1,067,850 --
Common .................................................. -- 14,000 240,705 --
Credicorp Ltd. - ADR{\/} .................................. PERU 77,770 1,302,648 0.6
BANKS-MONEY CENTER
Akbank T.A.S. ............................................. TRKY 15,141,000 1,288,273 0.6
BANKS-REGIONAL
Cathay Life Insurance Co., Ltd. ........................... TWN 319,000 1,277,161 0.6
INSURANCE-BROKER
National Bank of Greece S.A. .............................. GREC 6,700 1,178,992 0.6
BANKS-MONEY CENTER
Grupo Financiero Banamex Accival, S.A. de C.V. "B"-/- ..... MEX 374,300 1,171,068 0.6
BANKS-MONEY CENTER
State Bank of India Ltd. .................................. IND 146,487 1,062,944 0.5
BANKS-MONEY CENTER
Liberty Life Association of Africa Ltd. ................... SAFR 30,100 1,018,723 0.5
INSURANCE-LIFE
China Development Corp.-/- ................................ TWN 353,000 958,250 0.5
BANKS-MONEY CENTER
C.G. Smith Ltd. ........................................... SAFR 189,300 936,665 0.5
INVESTMENT MANAGEMENT
Nedcor Ltd. ............................................... SAFR 30,400 866,423 0.4
BANKS-REGIONAL
Standard Bank Investment Corporation Ltd. ................. SAFR 13,930 824,358 0.4
BANKS-MONEY CENTER
Ergo Bank S.A. ............................................ GREC 8,600 810,030 0.4
BANKS-REGIONAL
Aksigorta AS .............................................. TRKY 10,482,500 776,481 0.4
INSURANCE - MULTI-LINE
Hua Nan Commercial Bank ................................... TWN 318,000 771,611 0.4
BANKS-MONEY CENTER
Banco do Estado de Sao Paulo S.A. - Banespa ............... BRZL 11,550,000 767,643 0.4
BANKS-REGIONAL
National Societe Generale Bank ............................ EGPT 30,000 754,298 0.4
BANKS-MONEY CENTER
MISR International Bank - Reg S GDR-/- {c} {\/} ........... EGPT 57,300 716,250 0.4
BANKS-MONEY CENTER
Banco de Galicia y Buenos Aires, S.A. de C.V. - ADR{\/} ... ARG 28,226 691,537 0.3
BANKS-MONEY CENTER
Banco de A. Edwards - ADR{\/} ............................. CHLE 42,284 679,187 0.3
BANKS-MONEY CENTER
Banco Frances del Rio de la Plata S.A. - ADR{\/} .......... ARG 23,178 673,611 0.3
BANKS-MONEY CENTER
Turkiye Is Bankasi (Isbank) "C" ........................... TRKY 4,775,900 602,366 0.3
BANKS-MONEY CENTER
Bank Leumi Le - Israel .................................... ISRL 298,645 546,046 0.3
BANKS-REGIONAL
Kazkommertsbank Co. - GDR-/- {\/} ......................... KAZ 19,530 512,663 0.3
BANKS-REGIONAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-53
<PAGE> 201
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} .................................................. CHLE 28,448 $ 508,508 0.3
INVESTMENT MANAGEMENT
Bank Slaski S.A. .......................................... POL 5,773 494,974 0.2
BANKS-MONEY CENTER
Commercial Bank of Greece S.A. ............................ GREC 7,460 469,425 0.2
BANKS-MONEY CENTER
Banco Santander Chile - ADR{\/} ........................... CHLE 33,100 463,400 0.2
BANKS-REGIONAL
National Development Bank-/- .............................. SLNKA 120,200 446,381 0.2
BANKS-REGIONAL
Banco Rio de La Plata S.A. - ADR-/- {\/} .................. ARG 32,100 441,375 0.2
BANKS-MONEY CENTER
Inversiones y Representaciones S.A. (IRSA) - GDR{\/} ...... ARG 10,750 417,906 0.2
REAL ESTATE
Bank of the Philippine Islands ............................ PHIL 145,200 362,547 0.2
BANKS-MONEY CENTER
F.I.B.I. Holdings Ltd. .................................... ISRL 1,851 328,426 0.2
BANKS-REGIONAL
Liberty Investors Ltd. .................................... SAFR 63,600 324,137 0.2
INVESTMENT MANAGEMENT
Muslim Commercial Bank Ltd.-/- ............................ PAK 403,000 320,204 0.2
BANKS-MONEY CENTER
Ayala Land, Inc. .......................................... PHIL 807,600 317,596 0.2
REAL ESTATE
Global Menkul Degerler AS-/- .............................. TRKY 13,011,257 312,583 0.2
SECURITIES BROKER
National Mortgage Bank of Greece .......................... GREC 3,810 289,757 0.1
BANKS-REGIONAL
OTP Bank Rt. .............................................. HGRY 5,370 254,599 0.1
BANKS-MONEY CENTER
Malayan Banking Bhd. ...................................... MAL 83,000 246,757 0.1
BANKS-MONEY CENTER
Egyptian American Bank SAE ................................ EGPT 7,490 191,515 0.1
BANKS-MONEY CENTER
Shinhan Bank-/- ........................................... KOR 26,400 102,831 0.1
BANKS-MONEY CENTER
Samsung Fire & Marine Insurance-/- ........................ KOR 300 88,764 --
INSURANCE - MULTI-LINE
Kookmin Bank - GDR-/- {\/} ................................ KOR 12,100 79,376 --
BANKS-MONEY CENTER
Bangkok Bank Public Co., Ltd. - Foreign ................... THAI 24,110 60,587 --
BANKS-MONEY CENTER
Thai Farmers Bank Public Co., Ltd. - Foreign .............. THAI 19,300 44,250 --
BANKS-MONEY CENTER
Housing Development Finance Corp. ......................... IND 5 407 --
OTHER FINANCIAL
------------
38,644,205
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-54
<PAGE> 202
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (15.2%)
Petroleo Brasileiro S.A. (Petrobras) Preferred ............ BRZL 13,807,080 $ 3,501,577 1.7
OIL
Centrais Eletricas Brasileiras S.A. (Eletrobras): ......... BRZL -- -- 1.5
ELECTRICAL & GAS UTILITIES
"B" - ADR{\/} ........................................... -- 89,855 2,010,506 --
"B" Preferred ........................................... -- 13,148,000 586,515 --
Common-/- ............................................... -- 10,494,500 431,344 --
LUKoil Holding - ADR{\/} .................................. RUS 36,976 2,403,440 1.2
OIL
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} .... BRZL 44,739 2,169,842 1.1
ELECTRICAL & GAS UTILITIES
Sasol Ltd. ................................................ SAFR 214,407 2,164,227 1.1
ENERGY SOURCES
Unified Energy Systems - Reg S GDR-/- {c} {\/} ............ RUS 67,500 2,160,000 1.1
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ........................................ ARG 45,665 1,592,567 0.8
ENERGY SOURCES
Empresa Nacional de Electricidad S.A. - ADR{\/} ........... CHLE 80,362 1,401,312 0.7
ELECTRICAL & GAS UTILITIES
Light - Participacoes S.A. ................................ BRZL 5,481,073 1,342,108 0.7
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} .................................... CHLE 44,268 1,303,139 0.6
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. .................... BRZL 2,772,561 1,115,328 0.6
ELECTRICAL & GAS UTILITIES
Cukurova Elektrik AS ...................................... TRKY 358,000 1,032,072 0.5
ELECTRICAL & GAS UTILITIES
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} ........ HGRY 32,360 987,789 0.5
ENERGY SOURCES
Gener S.A. - ADR{\/} ...................................... CHLE 37,873 847,408 0.4
ELECTRICAL & GAS UTILITIES
The Hub Power Co., Ltd. - GDR-/- {\/} ..................... PAK 24,750 624,938 0.3
ENERGY SOURCES
Manila Electric Co. "B" ................................... PHIL 201,900 574,697 0.3
ELECTRICAL & GAS UTILITIES
Irkutskenergo - ADR{\/} ................................... RUS 52,000 507,000 0.3
ELECTRICAL & GAS UTILITIES
Perez Companc S.A. "B" .................................... ARG 77,418 465,329 0.2
OIL
Surgutneftegaz - ADR{\/} .................................. RUS 63,555 444,885 0.2
OIL
Petronas Gas Bhd. ......................................... MAL 153,000 372,162 0.2
OIL
Chilectra S.A. - ADR{\/} .................................. CHLE 13,100 361,888 0.2
ELECTRICAL & GAS UTILITIES
Ingwe Coal Corp. .......................................... SAFR 100,200 358,955 0.2
COAL
Pakistan State Oil Co., Ltd. .............................. PAK 65,184 329,102 0.2
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-55
<PAGE> 203
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Companhia Brasileira de Petroleo Ipiranga S.A.
Preferred ................................................ BRZL 23,126,000 $ 301,336 0.1
OIL
BSES Ltd. - Reg. S GDR-/- {c} {\/} ........................ IND 18,330 301,070 0.1
ELECTRICAL & GAS UTILITIES
Electricity Generating Public Co., Ltd. - Foreign ......... THAI 127,400 247,539 0.1
ELECTRICAL & GAS UTILITIES
Tenaga Nasional Bhd. ...................................... MAL 122,000 245,649 0.1
ELECTRICAL & GAS UTILITIES
PTT Exploration and Production Public Co., Ltd. -
Foreign .................................................. THAI 16,600 175,461 0.1
OIL
Korea Electric Power Corp. ................................ KOR 12,500 170,412 0.1
ELECTRICAL & GAS UTILITIES
Companhia Paranaense de Energia - Copel ................... BRZL 8,012,000 92,487 --
ELECTRICAL & GAS UTILITIES
Transportadora de Gas del Sur S.A. (TGS) - ADR{\/} ........ ARG 2,400 27,750 --
GAS
Banpu Public Co., Ltd. - Foreign .......................... THAI 2,600 17,917 --
COAL
------------
30,667,751
------------
Materials/Basic Industry (12.7%)
Suez Cement Co. - Reg S GDR{c} {\/} ....................... EGPT 140,235 2,860,794 1.4
CEMENT
Helioplis Housing ......................................... EGPT 20,165 2,607,671 1.3
BUILDING MATERIALS & COMPONENTS
Kimberly-Clark de Mexico, S.A. de C.V. "A" ................ MEX 492,744 2,422,997 1.2
PAPER/PACKAGING
Companhia Vale do Rio Doce Preferred ...................... BRZL 69,200 1,633,931 0.8
METALS - STEEL
Industrias Penoles S.A. (CP) .............................. MEX 289,887 1,197,880 0.6
METALS - NON-FERROUS
Reliance Industries Ltd. - GDR-/- {\/} .................... IND 121,000 1,104,125 0.5
CHEMICALS
Apasco, S.A. de C.V. ...................................... MEX 159,381 1,083,866 0.5
CEMENT
De Beers Centenary AG - Linked Unit{.:} ................... SAFR 41,800 1,083,780 0.5
MISC. MATERIALS & COMMODITIES
Cemex, S.A. de C.V.: ...................................... MEX -- -- 0.5
CEMENT
"CPO" ................................................... -- 171,700 859,514 --
"A" ..................................................... -- 43,400 217,256 --
SA Iron & Steel Industrial Corporation Ltd. (ISCOR) ....... SAFR 2,970,244 958,238 0.5
METALS - STEEL
Anglo American Platinum Corporation Ltd. .................. SAFR 51,600 825,191 0.4
METALS - NON-FERROUS
Ameriyah Cement Co. ....................................... EGPT 42,386 820,937 0.4
CEMENT
Compania de Minas Buenaventura S.A. - ADR{\/} ............. PERU 50,900 788,950 0.4
METALS - NON-FERROUS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-56
<PAGE> 204
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Hindalco Industries Ltd.: ................................. IND -- -- 0.3
METALS - NON-FERROUS
"GDR"{\/} ............................................... -- 34,200 $ 666,900 --
Common .................................................. -- 1,802 34,278 --
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ......... CHLE 14,670 637,228 0.3
CHEMICALS
Larsen & Toubro Ltd. - Reg S GDR{c} {\/} .................. IND 37,100 488,793 0.2
CEMENT
Grupo Mexico S.A. "L" ..................................... MEX 147,100 468,914 0.2
METALS - NON-FERROUS
Siderca S.A. "A" .......................................... ARG 187,600 452,161 0.2
METALS - STEEL
Nan Ya Plastics Corp. ..................................... TWN 255,000 421,520 0.2
PLASTICS & RUBBER
Kuala Lumpur Kepong Bhd. .................................. MAL 153,000 357,689 0.2
FOREST PRODUCTS
Titan Cement Co., S.A. .................................... GREC 4,000 342,392 0.2
BUILDING MATERIALS & COMPONENTS
AECI Ltd. ................................................. SAFR 66,900 331,024 0.2
CHEMICALS
Makhteshim Chemical Works Ltd.-/- ......................... ISRL 37,330 317,040 0.2
CHEMICALS
Pannonplast Rt. ........................................... HGRY 7,188 305,009 0.2
MISC. MATERIALS & COMMODITIES
Torah Portland Cement Co. ................................. EGPT 14,100 298,990 0.1
CEMENT
Dhan Fibres Ltd.-/- ....................................... PAK 4,273,000 291,010 0.1
CHEMICALS
Turk Sise ve Cam Fabrikalari AS-/- ........................ TRKY 5,880,600 288,438 0.1
GLASS
Golden Hope Plantations Bhd. .............................. MAL 227,000 283,443 0.1
FOREST PRODUCTS
Grupo Cementos de Chihuahua, S.A. de C.V. "B" ............. MEX 241,000 257,218 0.1
CEMENT
Formosa Plastics Corp. .................................... TWN 127,000 217,637 0.1
CHEMICALS
HI Cement Corp. ........................................... PHIL 1,623,000 194,517 0.1
CEMENT
Agros Holding S.A. "C"-/- ................................. POL 8,726 192,826 0.1
MISC. MATERIALS & COMMODITIES
Malakoff Bhd. ............................................. MAL 66,000 174,811 0.1
FOREST PRODUCTS
Engro Chemicals Pakistan Ltd. ............................. PAK 77,924 173,714 0.1
CHEMICALS
Israel Chemicals Ltd. ..................................... ISRL 130,676 157,637 0.1
CHEMICALS
Fauji Fertilizer Co., Ltd. ................................ PAK 71,900 141,841 0.1
CHEMICALS
Pohang Iron & Steel Co., Ltd. ............................. KOR 2,310 125,269 0.1
METALS - STEEL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-57
<PAGE> 205
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Maderas y Sinteticos S.A. - ADR{\/} ....................... CHLE 8,400 $ 80,325 --
MISC. MATERIALS & COMMODITIES
Associated Cement Cos., Ltd. .............................. IND 51 2,009 --
CEMENT
Dewan Salman Fibre Ltd.-/- ................................ PAK 4 2 --
CHEMICALS
------------
26,167,765
------------
Multi-Industry/Miscellaneous (10.6%)
Haci Omer Sabanci Holding AS: ............................. TRKY -- -- 1.1
CONGLOMERATE
Common .................................................. -- 27,128,500 1,982,363 --
Reg S ADR-/- {c} {\/} ................................... -- 10,700 193,938 --
Barlow Ltd. ............................................... SAFR 220,377 2,130,711 1.0
CONGLOMERATE
The Saudi Arabian Investment Fund Ltd.-/- {\/} ............ UK 263,400 2,075,592 1.0
COUNTRY FUNDS
Rembrandt Group Ltd. ...................................... SAFR 213,660 1,945,247 1.0
CONGLOMERATE
NASR (El) City Company For Housing & Construction ......... EGPT 27,170 1,668,849 0.8
MISCELLANEOUS
Central Asia Regional Growth Fund-/- {\/} (::) ............ IRE 156,000 1,659,840 0.8
COUNTRY FUNDS
Koc Holding AS ............................................ TRKY 7,734,450 1,641,345 0.8
CONGLOMERATE
Grupo Carso, S.A. de C.V. "A1" ............................ MEX 251,000 1,582,456 0.8
MULTI-INDUSTRY
Dogan Sirketler Grubu Holding AS-/- ....................... TRKY 15,917,000 908,177 0.4
MULTI-INDUSTRY
Sanluis Corporacion, S.A. de C.V. ......................... MEX 160,832 854,479 0.4
CONGLOMERATE
Koor Industries Ltd. - ADR{\/} ............................ ISRL 31,615 802,231 0.4
CONGLOMERATE
John Keells Holdings Ltd.-/- .............................. SLNKA 143,750 761,003 0.4
MULTI-INDUSTRY
Anglo American Corporation of South Africa Ltd. ........... SAFR 12,207 722,393 0.4
CONGLOMERATE
Romanian Growth Fund-/- ................................... ROM 75,800 526,810 0.3
COUNTRY FUNDS
Empresas La Moderna, S.A. de C.V. "A"-/- .................. MEX 97,800 490,155 0.2
MULTI-INDUSTRY
Ayala Corp. ............................................... PHIL 803,400 356,064 0.2
CONGLOMERATE
Alfa, S.A. de C.V. "A" .................................... MEX 64,000 349,847 0.2
CONGLOMERATE
Antofagasta Holdings PLC .................................. UK 56,300 307,390 0.2
CONGLOMERATE
Quinenco S.A. - ADR-/- {\/} ............................... CHLE 27,900 287,719 0.1
CONGLOMERATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-58
<PAGE> 206
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
ONA (Omnium Nord Africain) S.A. "A" ....................... MOR 1,590 $ 168,505 0.1
CONGLOMERATE
KEC International Ltd. .................................... IND 300 287 --
MISCELLANEOUS
------------
21,415,401
------------
Consumer Non-Durables (8.2%)
Fomento Economico Mexicano, S.A. de C.V. "B" .............. MEX 277,610 2,058,313 1.0
BEVERAGES - ALCOHOLIC
Hindustan Lever Ltd. ...................................... IND 51,000 2,026,379 1.0
PERSONAL CARE/COSMETICS
ITC Ltd. .................................................. IND 92,128 1,829,677 0.9
TOBACCO
South African Breweries Ltd. .............................. SAFR 53,912 1,809,693 0.9
BEVERAGES - ALCOHOLIC
Gruma S.A. "B"-/- ......................................... MEX 495,083 1,138,632 0.6
FOOD
A-Ahram Beverages Co. S.A.E. - 144A GDR{.} {\/} ........... EGPT 33,135 1,053,693 0.5
BEVERAGES - ALCOHOLIC
Eastern Tobacco Co. ....................................... EGPT 43,845 998,674 0.5
TOBACCO
Embotelladora Andina S.A. "B" - ADR{\/} ................... CHLE 42,247 855,502 0.4
BEVERAGES - NON-ALCOHOLIC
Compania Cervecerias Unidas S.A. - ADR{\/} ................ CHLE 21,346 589,683 0.3
BEVERAGES - ALCOHOLIC
Hellenic Bottling Co. S.A. ................................ GREC 15,140 563,667 0.3
BEVERAGES - NON-ALCOHOLIC
C.G. Smith Foods Ltd. ..................................... SAFR 33,000 515,982 0.3
FOOD
San Miguel Corp. "B" ...................................... PHIL 309,000 509,213 0.3
BEVERAGES - ALCOHOLIC
Companhia Cervejaria Brahma Preferred ..................... BRZL 663,129 432,034 0.2
BEVERAGES - ALCOHOLIC
SUN Brewing Ltd. - GDR-/- {\/} ............................ RUS 22,600 403,122 0.2
BEVERAGES - ALCOHOLIC
Far Eastern Textile Ltd. .................................. TWN 428,000 389,445 0.2
TEXTILES & APPAREL
Rothmans of Pall Mall Bhd. ................................ MAL 45,900 381,466 0.2
TOBACCO
Pepsi-Gemex S.A. - GDR-/- {\/} ............................ MEX 26,300 356,694 0.2
BEVERAGES - NON-ALCOHOLIC
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) ................. POL 2,018 200,968 0.1
BEVERAGES - ALCOHOLIC
Carlsberg Brewery Malaysia Bhd. ........................... MAL 44,500 155,149 0.1
BEVERAGES - ALCOHOLIC
Nong Shim Co., Ltd. ....................................... KOR 2,000 87,191 --
FOOD
Oriental Weavers "C"-/- ................................... EGPT 3,400 70,948 --
TEXTILES & APPAREL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-59
<PAGE> 207
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (Continued)
Erciyas Biracilik ve Malt Sanayii AS ...................... TRKY 136,000 $ 22,054 --
BEVERAGES - ALCOHOLIC
------------
16,448,179
------------
Technology (2.7%)
Asustek Computer Inc. - Reg. S GDR-/- {c} {\/} ............ TWN 128,164 2,643,383 1.3
COMPUTERS & PERIPHERALS
Formula Systems Ltd.-/- ................................... ISRL 16,415 634,454 0.3
SOFTWARE
Alcatel Teletas Telekomunikasyon Endustri ve Ticaret AS ... TRKY 3,198,100 505,806 0.3
TELECOM TECHNOLOGY
Delta Electronics, Inc. ................................... TWN 120,000 440,400 0.2
COMPUTERS & PERIPHERALS
Clal Electronics Industries Ltd. .......................... ISRL 2,459 351,172 0.2
SEMICONDUCTORS
Samsung Electronics (1/2 of Common Share) - GDR{\/} ....... KOR 11,300 316,400 0.2
SEMICONDUCTORS
United Microelectronics Corporation Ltd.-/- ............... TWN 158,000 297,119 0.1
SEMICONDUCTORS
Tadiran Ltd. .............................................. ISRL 7,000 272,639 0.1
TELECOM TECHNOLOGY
------------
5,461,373
------------
Health Care (2.1%)
Teva Pharmaceutical Industries Ltd. ....................... ISRL 29,600 1,255,350 0.6
PHARMACEUTICALS
Ranbaxy Laboratories Ltd. ................................. IND 75,000 1,253,779 0.6
MEDICAL TECHNOLOGY & SUPPLIES
Richter Gedeon Rt. - Reg S GDR{c} {\/} .................... HGRY 7,266 775,646 0.4
PHARMACEUTICALS
Egypt International Pharmaceutical Industries Co.
(EIPICO) ................................................. EGPT 9,000 642,763 0.3
PHARMACEUTICALS
EGIS Rt. .................................................. HGRY 5,920 308,743 0.2
PHARMACEUTICALS
Medison Co., Ltd. ......................................... KOR 10,200 83,559 --
MEDICAL TECHNOLOGY & SUPPLIES
------------
4,319,840
------------
Consumer Durables (1.8%)
Imperial Holdings Ltd. .................................... SAFR 58,161 794,282 0.4
AUTOMOBILES
Hon Hai Precision Industry-/- ............................. TWN 120,400 701,146 0.3
CONSUMER ELECTRONICS
Qingling Motors Co., Ltd.{*} .............................. CHNA 1,475,000 637,951 0.3
AUTOMOBILES
Tata Engineering and Locomotive Co., Ltd.: ................ IND -- -- 0.3
AUTOMOBILES
GDR{\/} ................................................. -- 84,000 611,100 --
Common .................................................. -- 980 6,859 --
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-60
<PAGE> 208
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Durables (Continued)
Mahindra & Mahindra Ltd. - GDR{\/} ........................ IND 42,600 $ 317,370 0.2
AUTOMOBILES
Ford Otomotiv Sanayi AS ................................... TRKY 377,000 271,712 0.1
AUTOMOBILES
Tofas Turk Otomobil Fabrikasi AS .......................... TRKY 4,909,000 255,524 0.1
AUTOMOBILES
Arcelik AS ................................................ TRKY 2,024,800 227,005 0.1
APPLIANCES & HOUSEHOLD DURABLES
BEC World Public Co., Ltd. ................................ THAI 6,100 32,238 --
CONSUMER ELECTRONICS
------------
3,855,187
------------
Capital Goods (1.8%)
NICE-Systems Ltd.-/- ...................................... ISRL 15,910 663,132 0.3
TELECOM EQUIPMENT
Taiwan Semiconductor Manufacturing Co.-/- ................. TWN 145,000 626,706 0.3
MACHINERY & ENGINEERING
Corporacion GEO, S.A. de C.V. "B"-/- ...................... MEX 63,800 441,403 0.2
CONSTRUCTION
ECI Telecommunications Ltd.{\/} ........................... ISRL 13,100 399,550 0.2
TELECOM EQUIPMENT
Arabian International Construction-/- ..................... EGPT 7,319 344,170 0.2
CONSTRUCTION
Netas Telekomunik-/- ...................................... TRKY 724,500 269,784 0.1
TELECOM EQUIPMENT
Elektrim Spolka Akcyjna S.A. .............................. POL 15,630 223,352 0.1
ELECTRICAL PLANT/EQUIPMENT
Samsung Display Devices Co. ............................... KOR 3,690 183,809 0.1
ELECTRICAL PLANT/EQUIPMENT
Daewoo Heavy Industries ................................... KOR 36,240 179,436 0.1
INDUSTRIAL COMPONENTS
Samsung Electro-Mechanics Co. ............................. KOR 6,200 130,037 0.1
ELECTRICAL PLANT/EQUIPMENT
Sindo Ricoh Co. ........................................... KOR 3,100 109,139 0.1
OFFICE EQUIPMENT
Delta Electronics (Thailand) Public Co., Ltd. - Foreign ... THAI 8,000 82,487 --
ELECTRICAL PLANT/EQUIPMENT
LG Electronics ............................................ KOR 5,225 62,230 --
ELECTRICAL PLANT/EQUIPMENT
Madeco S.A. - ADR{\/} ..................................... CHLE 2,400 38,400 --
INDUSTRIAL COMPONENTS
------------
3,753,635
------------ -----
TOTAL EQUITY INVESTMENTS (cost $185,429,876) ................ 191,125,942 94.0
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-61
<PAGE> 209
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (1.2%)
Pakistan (0.1%)
Republic of Pakistan, 6% due 2/26/02 - Reg S{c} ......... USD 250,000 $ 235,625 0.1
Russia (1.1%)
Bank for Foreign Economic Affairs (Venesheconombank)
Interest Notes, 6.72% due 12/15/15+ .................... USD 3,000,000 2,163,750 1.1
------------
Total Government & Government Agency Obligations (cost
$2,264,540) ................................................ 2,399,375
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $2,264,540) ............ 2,399,375 1.2
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Delta Electronics (Thailand) Public Co., Ltd. (UNAV NP
RTS), due 5/15/98 - Foreign .............................. THAI 4,000 40,207 --
ELECTRICAL PLANT/EQUIPMENT
Samsung Development Rights, due 5/13/98 ................... KOR 530 9,210 --
ELECTRICAL PLANT/EQUIPMENT
Samsung Electronics Rights, due 5/27/98 - GDR 144A{.}
{\/} ..................................................... KOR 899 8,943 --
SEMICONDUCTORS
------------ -----
TOTAL RIGHTS (cost $34,933) ................................. 58,360 --
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Belle Corp. Warrants, expire 2002 (cost $0) ............... PHIL 708,400 2,034 --
------------ -----
OIL
TOTAL INVESTMENTS (cost $187,729,349) * .................... 193,585,711 95.2
Other Assets and Liabilities ................................ 9,695,248 4.8
------------ -----
NET ASSETS .................................................. $203,280,959 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (See Note 1 of Notes to Financial Statements).
{\/} U.S. currency denominated.
{*} Security denominated in Hong Kong Dollars.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
{.:} Each Centenary Linked Unit consists of 1 registered deferred share
of De Beers Consolidated Mine + 1 Centenary Depositary Receipt.
+ The coupon rate shown on floating rate note represents the rate at
period end.
{=} Each unit represents one preferred share of Unibanco and one
preferred "B" share of Unibanco Holdings.
* For Federal income tax purposes, cost is $189,023,855 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 21,939,088
Unrealized depreciation: (17,377,232)
-------------
Net unrealized appreciation: $ 4,561,856
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
The accompanying notes are an integral part of the financial statements.
FS-62
<PAGE> 210
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at April 30, 1998, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {d}
-------------------------------------------
FIXED INCOME,
RIGHTS &
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) .................. 3.5 3.5
Brazil (BRZL/BRL) .................... 14.2 14.2
Chile (CHLE/CLP) ..................... 4.5 4.5
China (CHNA/RMB) ..................... 0.3 0.3
Egypt (EGPT/EGP) ..................... 7.0 7.0
Greece (GREC/GRD) .................... 3.3 3.3
Hong Kong (HK/HKD) ................... 0.3 0.3
Hungary (HGRY/HUF) ................... 2.6 2.6
India (IND/INR) ...................... 5.2 5.2
Ireland (IRE/IEP) .................... 0.8 0.8
Israel (ISRL/ILS) .................... 3.7 3.7
Kazakhstan (KAZ/KTS) ................. 0.3 0.3
Korea (KOR/KRW) ...................... 0.9 0.9
Malaysia (MAL/MYR) ................... 2.2 2.2
Mexico (MEX/MXN) ..................... 11.0 11.0
Morocco (MOR/MAD) .................... 0.1 0.1
Pakistan (PAK/PKR) ................... 1.1 0.1 1.2
Peru (PERU/PES) ...................... 2.3 2.3
Philippines (PHIL/PHP) ............... 2.0 2.0
Poland (POL/PLZ) ..................... 0.5 0.5
Romania (ROM/ROL) .................... 0.3 0.3
Russia (RUS/SUR) ..................... 3.8 1.1 4.9
South Africa (SAFR/ZAR) .............. 10.8 10.8
Sri Lanka (SLNKA/LKR) ................ 0.6 0.6
Taiwan (TWN/TWD) ..................... 4.2 4.2
Thailand (THAI/THB) .................. 0.4 0.4
Turkey (TRKY/TRL) .................... 6.9 6.9
United Kingdom (UK/GBP) .............. 1.2 1.2
United States (US/USD) ............... 4.8 4.8
------ --- --- -----
Total ............................... 94.0 1.2 4.8 100.0
------ --- --- -----
------ --- --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $203,280,959.
The accompanying notes are an integral part of the financial statements.
FS-63
<PAGE> 211
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
STATEMENT OF ASSETS
AND LIABILITIES
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $187,729,349) (Note 1)...... $193,585,711
U.S. currency............................................. $ 738
Foreign currencies (cost $8,611,907)...................... 8,665,582 8,666,320
----------
Receivable for Fund shares sold....................................... 3,696,199
Receivable for securities sold........................................ 3,162,673
Dividends receivable.................................................. 805,918
Receivable from Chancellor LGT Asset Management, Inc. (Note 2)........ 459,815
Interest receivable................................................... 90,413
------------
Total assets........................................................ 210,467,049
------------
Liabilities:
Payable for loan outstanding (Note 1)................................. 3,353,000
Payable for securities purchased...................................... 1,872,212
Payable for Fund shares repurchased................................... 788,130
Payable for investment management and administration fees (Note 2).... 479,744
Payable for transfer agent fees (Note 2).............................. 243,519
Payable for printing and postage expenses............................. 131,413
Payable for service and distribution expenses (Note 2)................ 123,207
Payable for custodian fees............................................ 57,525
Payable for professional fees......................................... 33,130
Payable for registration and filing fees.............................. 22,556
Payable for fund accounting fees (Note 2)............................. 4,139
Payable for Directors' fees and expenses (Note 2)..................... 1,115
Other accrued expenses................................................ 76,400
------------
Total liabilities................................................... 7,186,090
------------
Net assets.............................................................. $203,280,959
------------
------------
Class A:
Net asset value and redemption price per share ($100,647,556 DIVIDED BY
8,035,606 shares outstanding).......................................... $ 12.53
------------
------------
Maximum offering price per share (100/95.25 of $12.53) *................ $ 13.15
------------
------------
Class B:+
Net asset value and offering price per share ($100,831,448 DIVIDED BY
8,244,890 shares outstanding).......................................... $ 12.23
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption price per
share ($1,801,955 DIVIDED BY 142,562 shares outstanding)............... $ 12.64
------------
------------
Net assets consist of:
Paid in capital (Note 4).............................................. $246,288,977
Undistributed net investment income................................... 73,763
Accumulated net realized loss on investments and foreign currency
transactions......................................................... (48,990,457)
Net unrealized appreciation on translation of assets and liabilities
in foreign currencies................................................ 52,314
Net unrealized appreciation of investments............................ 5,856,362
------------
Total -- representing net assets applicable to capital shares
outstanding............................................................ $203,280,959
------------
------------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-64
<PAGE> 212
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
STATEMENT OF OPERATIONS
Six months ended April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $111,452).............................. $ 2,595,058
Securities lending income................................................................. 85,994
Interest income........................................................................... 73,454
-----------
Total investment income................................................................. 2,754,506
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 1,027,785
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 249,648
Class B.................................................................... 540,658 790,306
-----------
Transfer agent fees (Note 2).............................................................. 778,300
Interest expense (Note 1)................................................................. 347,489
Custodian fees............................................................................ 121,000
Printing and postage expenses............................................................. 108,600
Professional fees......................................................................... 68,214
Registration and filing fees.............................................................. 47,060
Fund accounting fees (Note 2)............................................................. 27,756
Directors' fees and expenses (Note 2)..................................................... 6,878
Other expenses (Note 1)................................................................... 5,429
-----------
Total expenses before reductions........................................................ 3,328,817
-----------
Expenses reimbursed by Chancellor LGT Asset Management, Inc........................... (609,815)
Expense reductions (Note 5)........................................................... (38,259)
-----------
Total net expenses...................................................................... 2,680,743
-----------
Net investment income....................................................................... 73,763
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized loss on investments............................................. (35,414,012)
Net realized loss on foreign currency transactions........................... (2,083,497)
-----------
Net realized loss during the period..................................................... (37,497,509)
Net change in unrealized appreciation on translation of assets and
liabilities in foreign currencies........................................... 672,976
Net change in unrealized appreciation of investments......................... 40,080,042
-----------
Net unrealized appreciation during the period........................................... 40,753,018
-----------
Net realized and unrealized gain on investments and foreign currencies...................... 3,255,509
-----------
Net increase in net assets resulting from operations........................................ $ 3,329,272
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-65
<PAGE> 213
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
---------------- ----------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income (loss)........................................ $ 73,763 $ (1,050,632)
Net realized gain (loss) on investments and foreign currency
transactions....................................................... (37,497,509) 26,113,895
Net change in unrealized appreciation (depreciation) on translation
of assets and liabilities in foreign currencies.................... 672,976 (282,179)
Net change in unrealized appreciation (depreciation) of
investments........................................................ 40,080,042 (52,070,476)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations... 3,329,272 (27,289,392)
---------------- ----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income.......................................... -- (37,319)
In excess of net investment income.................................. -- (104,807)
Advisor Class: (Note 1)
Distributions to shareholders:
From net investment income.......................................... -- (4,161)
In excess of net investment income.................................. -- (11,686)
---------------- ----------------
Total distributions............................................... -- (157,973)
---------------- ----------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested.................... 296,466,663 1,140,272,411
Decrease from capital shares repurchased............................ (339,416,025) (1,314,030,266)
---------------- ----------------
Net decrease from capital share transactions...................... (42,949,362) (173,757,855)
---------------- ----------------
Total decrease in net assets.......................................... (39,620,090) (201,205,220)
Net assets:
Beginning of period................................................. 242,901,049 444,106,269
---------------- ----------------
End of period....................................................... $ 203,280,959* $ 242,901,049*
---------------- ----------------
---------------- ----------------
* Includes undistributed net investment income of.................... $ 73,763 $ --
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-66
<PAGE> 214
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994 1993
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.20 $ 14.26 $ 13.85 $ 18.81 $ 14.42 $ 11.10
---------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income (loss).......... 0.02* -- 0.11 0.13 (0.02) 0.02**
Net realized and unrealized gain
(loss) on investments................ 0.31 (2.05) 0.30 (4.32) 4.68 3.38
---------- --------- --------- --------- --------- ---------
Net increase (decrease) from
investment operations.............. 0.33 (2.05) 0.41 (4.19) 4.66 3.40
---------- --------- --------- --------- --------- ---------
Distributions to shareholders:
From net investment income............ -- -- -- -- (0.01) (0.08)
From net realized gain on
investments.......................... -- -- -- (0.77) (0.26) --
In excess of net investment income.... -- (0.01) -- -- -- --
---------- --------- --------- --------- --------- ---------
Total distributions................. -- (0.01) -- (0.77) (0.27) (0.08)
---------- --------- --------- --------- --------- ---------
Net asset value, end of period.......... $ 12.53 $ 12.20 $ 14.26 $ 13.85 $ 18.81 $ 14.42
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
Total investment return (c)............. 2.79%(b) (14.45)% 2.96% (23.04)% 32.58% 30.90%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $100,648 $113,319 $224,964 $252,457 $417,322 $187,808
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.31%(a) (0.01)% 0.76% 0.89% (0.11)% 0.1%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.30)%(a) (0.09)% 0.64% 0.87% N/A (0.11)%
Ratio of operating expenses to average
net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.96%(a) 2.10% 1.96% 2.12% 2.06% 2.4%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.57%(a) 2.18% 2.08% 2.14% N/A 2.61%
Ratio of interest expense to average net
assets (Note 1)++++.................... 0.33%(a) N/A N/A N/A N/A N/A
Portfolio turnover rate++++............. 117%(a) 150% 104% 114% 100% 99%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0016 $ 0.0015 $ 0.0040 N/A N/A N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.03.
** Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02.
*** Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02.
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate, average commission rate, and ratio of
interest expense to average net assets are calculated on the basis of
the Fund as a whole without distinguishing between the classes of
shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-67
<PAGE> 215
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++
---------------------------------------------------------------------------
APRIL 1,
SIX MONTHS 1993
ENDED YEAR ENDED OCTOBER 31, TO
APRIL 30, --------------------------------------------- OCTOBER 31,
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994 1993
---------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.94 $ 14.02 $ 13.68 $ 18.68 $ 14.39 $ 11.47
---------- --------- --------- --------- --------- -----------
Income from investment operations:
Net investment income (loss).......... (0.01) * (0.08) 0.04 0.06 (0.12) 0.00***
Net realized and unrealized gain
(loss) on investments................ 0.30 (2.00) 0.30 (4.29) 4.67 2.92
---------- --------- --------- --------- --------- -----------
Net increase (decrease) from
investment operations.............. 0.29 (2.08) 0.34 (4.23) 4.55 2.92
---------- --------- --------- --------- --------- -----------
Distributions to shareholders:
From net investment income............ -- -- -- -- -- --
From net realized gain on
investments.......................... -- -- -- (0.77) (0.26) --
In excess of net investment income.... -- -- -- -- -- --
---------- --------- --------- --------- --------- -----------
Total distributions................. -- -- -- (0.77) (0.26) --
---------- --------- --------- --------- --------- -----------
Net asset value, end of period.......... $ 12.23 $ 11.94 $ 14.02 $ 13.68 $ 18.68 $ 14.39
---------- --------- --------- --------- --------- -----------
---------- --------- --------- --------- --------- -----------
Total investment return (c)............. 2.51%(b) (14.91)% 2.49% (23.37)% 31.77% 25.5% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $100,831 $127,658 $216,004 $225,861 $291,289 $32,318
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.19)%(a) (0.51)% 0.26% 0.39% (0.61)% (0.4)% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.80)%(a) (0.59)% 0.14% 0.37% N/A (0.61)% (a)
Ratio of operating expenses to average
net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.46%(a) 2.60% 2.46% 2.62% 2.56% 2.9% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 3.07%(a) 2.68% 2.58% 2.64% N/A 3.11% (a)
Ratio of interest expense to average net
assets (Note 1)++++.................... 0.33%(a) N/A N/A N/A N/A N/A
Portfolio turnover rate++++............. 117%(a) 150% 104% 114% 100% 99%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0016 $ 0.0015 $ 0.0040 N/A N/A N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.03.
** Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02.
*** Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02.
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate, average commission rate, and ratio of
interest expense to average net assets are calculated on the basis of
the Fund as a whole without distinguishing between the classes of
shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-68
<PAGE> 216
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+++
-----------------------------------------------
SIX MONTHS YEAR ENDED OCTOBER JUNE 1, 1995
ENDED 31, TO
APRIL 30, ------------------- OCTOBER 31,
1998 (d) 1997 (d) 1996 (d) 1995
---------- -------- -------- ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.27 $ 14.38 $ 13.88 $14.71
---------- -------- -------- ------------
Income from investment operations:
Net investment income (loss).......... 0.05* 0.05 0.18 0.08
Net realized and unrealized gain
(loss) on investments................ 0.32 (2.05) 0.32 (0.91)
---------- -------- -------- ------------
Net increase (decrease) from
investment operations.............. 0.37 (2.00) 0.50 (0.83)
---------- -------- -------- ------------
Distributions to shareholders:
From net investment income............ -- (0.03) -- --
From net realized gain on
investments.......................... -- -- -- --
In excess of net investment income.... -- (0.08) -- --
---------- -------- -------- ------------
Total distributions................. -- (0.11) -- --
---------- -------- -------- ------------
Net asset value, end of period.......... $ 12.64 $ 12.27 $ 14.38 $13.88
---------- -------- -------- ------------
---------- -------- -------- ------------
Total investment return (c)............. 3.10%(b) (14.05)% 3.60% (5.71)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 1,802 $ 1,924 $ 3,139 $1,675
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.81%(a) 0.49% 1.26% 1.39% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 0.20%(a) 0.41% 1.14% 1.37% (a)
Ratio of operating expenses to average
net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.46%(a) 1.60% 1.46% 1.62% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.07%(a) 1.68% 1.58% 1.64% (a)
Ratio of interest expense to average net
assets (Note 1)++++.................... 0.33%(a) N/A N/A N/A
Portfolio turnover rate++++............. 117%(a) 150% 104% 114%
Average commission rate per share paid
on portfolio transactions++++.......... $0.0016 $0.0015 $0.0040 N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.03.
** Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02.
*** Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02.
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate, average commission rate, and ratio of
interest expense to average net assets are calculated on the basis of
the Fund as a whole without distinguishing between the classes of
shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-69
<PAGE> 217
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
NOTES TO
FINANCIAL STATEMENTS
April 30, 1998
- --------------------------------------------------------------------------------
The following Notes to Financial Statements are for the period ending April 30,
1998, and unless otherwise indicated reflect facts as of that date. Please see
"Note 6 -- Subsequent Events" for a discussion of certain changes which took
place after April 30, 1998.
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 6)
GT Global Emerging Markets Fund ("Fund") is a separate series of G.T. Investment
Funds, Inc. ("Company"). Effective June 1, 1998, the Company was renamed AIM
Investment Funds, Inc. and the Fund was renamed AIM Emerging Markets Fund. The
Company is organized as a Maryland corporation and is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as a diversified,
open-end management investment company. The Company has thirteen series of
shares in operation, each series corresponding to a distinct portfolio of
investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or in the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued , or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by Chancellor LGT Asset
Management, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when GT
Capital deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with a maturity of 60
days or less are valued at amortized cost adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records are maintained in U.S. dollars. The market values of
foreign securities, currency holdings, and other assets and liabilities are
recorded in the books and records of the Fund after translation to U.S. dollars
based on the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are translated at
prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, U.S. government securities or other
high quality debt securities of which the value,
FS-70
<PAGE> 218
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
including accrued interest, is at least equal to the amount to be repaid to the
Fund under each agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. The Fund could be exposed to risk if a counterparty is
unable to meet the terms of the contract or if the value of the currency changes
unfavorably. The Fund may enter into Forwards Contracts in connection with
planned purchases or sales of securities, or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on an exchange is valued at its last bid price,
or, in the case of an over-the-counter option, is valued at the average of the
last bid prices obtained from brokers. If an option expires on its stipulated
expiration date or if the Fund enters into a closing purchase transaction, a
gain or loss is realized without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is extinguished.
If a written call option is exercised, a gain or loss is realized from the sale
of the underlying security and the proceeds of the sale are increased by the
premium originally received. If a written put option is exercised, the cost of
the underlying security purchased would be decreased by the premium originally
received. The Fund can write options only on a covered basis, which, for a call,
requires that the Fund hold the underlying securities and, for a put, requires
the Fund to set aside cash, U.S. government securities, or other liquid
securities in an amount not less than the exercise price or otherwise provide
adequate cover at all times while the put option is outstanding. The Fund may
use options to manage its exposure to the stock market and to fluctuations in
currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund would realize a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund would
realize a gain or loss, depending on whether proceeds from the closing sale
transaction are greater or less than the cost of the option. If the Fund
exercises a call option, the cost of the securities acquired by exercising the
call is increased by the premium paid to buy the call. If the Fund exercises a
put option, it realizes a gain or loss from the sale of the underlying security,
and the proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock market
and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At April 30, 1998, stocks with an aggregate value of approximately $16,035,409
were on loan to brokers. The loans were secured by cash collateral of
$16,583,830 received by the Fund. For international securities, cash collateral
is received by the Fund against loaned securities in an amount at least equal to
105% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 103% of the market value of
the loaned securities during the period of the loan. For domestic
FS-71
<PAGE> 219
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
securities, cash collateral is received by the Fund against loaned securities in
the amount at least equal to 102% of the market value of the loaned securities
at the inception of each loan. This collateral must be maintained at not less
than 100% of the market value of the loaned securities during the period of each
loan. The cash collateral is invested in a securities lending trust which
consists of a portfolio of high quality short duration securities whose average
effective duration is restricted to 120 days or less. For the six months ended
April 30, 1998, the Fund received securities lending fees of $85,994.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$10,198,442, of which $5,776,568 expires in 2003 and $4,421,874 expires in 2004.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(L) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(M) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(N) LINE OF CREDIT
The Fund, along with certain other funds ("GT Funds") advised and/or
administered by the Manager, has a line of credit with each of BankBoston and
State Street Bank & Trust Company. The arrangements with the banks allow the
Fund and the GT Funds to borrow an aggregate maximum amount of $250,000,000. The
Fund is limited to borrowing up to 33 1/3% of the value of its total assets. On
April 30, 1998, the Fund had $3,353,000 in loans outstanding.
For the six months ended April 30, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $10,572,144, with a weighted average interest rate of 6.29%.
Interest expense for the Fund for the six months ended April 30, 1998 was
$334,748. Other interest expense charges amounted to $12,741.
2. RELATED PARTIES (SEE ALSO NOTE 6)
For the period ended April 30, 1998, Chancellor LGT Asset Management, Inc. was
the Fund's investment manager and administrator. The Fund pays investment
management and administration fees to the Manager at the annualized rate of
0.975% on the first $500 million of average daily net assets of the Fund; 0.95%
on the next $500 million; 0.925% on the next $500 million and 0.90% on amounts
thereafter. These fees are computed daily and paid monthly.
For the period ended April 30, 1998, GT Global, Inc. ("GT Global"), an affiliate
of the Manager, serves as the Fund's distributor. The Fund offers Class A, Class
B, and Advisor Class shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the six months ended April 30, 1998, GT Global retained
$8,591 of such sales charges. Purchases of Class A shares exceeding $500,000 may
be subject to a contingent deferred sales charge ("CDSC") upon redemption, in
accordance with the Fund's current prospectus. GT Global collected CDSCs in the
amount of $1,590 for the six months ended April 30, 1998. GT Global also makes
ongoing shareholder servicing and trail commission payments to dealers whose
clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global, from its own resources, pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the six months ended April 30, 1998, GT Global collected CDSCs
in the amount of $565,010. In addition, GT Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to the then effective separate distribution plans adopted under 1940
Act Rule 12b-1 by the Company's Board of Directors with respect to the Fund's
Class A shares ("Class A Plan") and Class B
FS-72
<PAGE> 220
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
shares ("Class B Plan"), the Fund reimbursed GT Global for a portion of its
shareholder servicing and distribution expenses. Under that Class A Plan, the
Fund was permitted to pay GT Global a service fee at the annualized rate of up
to 0.25% of the average daily net assets of the Fund's Class A shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Class A Plan would
have been incurred within one year of such reimbursement.
For the period ended April 30, 1998, pursuant to that Class B Plan, the Fund was
permitted to pay GT Global a service fee at the annualized rate of up to 0.25%
of the average daily net assets of the Fund's Class B shares for GT Global's
expenditures incurred in servicing and maintaining shareholder accounts, and was
permitted to pay GT Global a distribution fee at the annualized rate of up to
0.75% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually were permitted to be
carried forward for reimbursement in subsequent years as long as that Plan
continued in effect.
The Manager and GT Global voluntarily undertook to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.00%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by GT Global
of payments under the Class A Plan and/or Class B Plan and/or reimbursements by
the Manager or GT Global of portions of the Fund's other operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services receives
an annual maintenance fee of $17.50 per account, a new account fee of $4.00 per
account, a per transaction fee of $1.75 for all transactions other than
exchanges and per exchange fee of $2.25. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 1998, purchases and sales of investment
securities by the Fund, other than short-term investments, aggregated
$123,495,635 and $178,354,580 respectively. There were no purchases or sales of
U.S. government obligations by the Fund for the six months ended April 30, 1998.
4. CAPITAL SHARES
At April 30, 1998, there were 6,000,000,000 shares of the Company's common stock
authorized, at $0.0001 par value. Of this amount, 200,000,000 were classified as
shares of the Fund; 400,000,000 were classified as shares of GT Global
Government Income Fund; 200,000,000 were classified as shares of GT Global
Developing Markets Fund; 200,000,000 were classified as shares of GT Global
Health Care Fund; 200,000,000 were classified as shares of GT Global Strategic
Income Fund; 200,000,000 were classified as shares of GT Global Currency Fund
(inactive); 200,000,000 were classified as shares of GT Global Growth & Income
Fund; 200,000,000 were classified as shares of GT Global Small Companies Fund
(inactive); 200,000,000 were classified as shares of GT Global Latin America
Growth Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; 200,000,000 were classified as shares of GT Global Financial
Services Fund; 200,000,000 were classified as shares of GT Global Natural
Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; and 200,000,000 were classified as shares of GT Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fifteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified. Transactions in capital shares of the Fund were as follows:
FS-73
<PAGE> 221
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 17,134,342 $ 200,989,101 57,294,454 $ 859,844,827
Shares issued in connection with
reinvestment of distributions......... -- -- 8,654 123,333
----------- ------------- ----------- -------------
17,134,342 200,989,101 57,303,108 859,968,160
Shares repurchased...................... (18,390,591) (216,637,505) (63,783,507) (962,241,730)
----------- ------------- ----------- -------------
Net decrease............................ (1,256,249) $ (15,648,404) (6,480,399) $(102,273,570)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 4,798,521 $ 55,553,088 16,394,355 $ 245,887,976
Shares repurchased...................... (7,248,568) (83,530,468) (21,109,926) (316,251,415)
----------- ------------- ----------- -------------
Net decrease............................ (2,450,047) $ (27,977,380) (4,715,571) $ (70,363,439)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 3,375,138 $ 39,924,474 2,213,447 $ 34,400,471
Shares issued in connection with
reinvestment of distributions......... -- -- 1,106 15,804
----------- ------------- ----------- -------------
3,375,138 39,924,474 2,214,553 34,416,275
Shares repurchased...................... (3,389,407) (39,248,052) (2,275,943) (35,537,121)
----------- ------------- ----------- -------------
Net increase (decrease)................. (14,269) $ 676,422 (61,390) $ (1,120,846)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the six months ended April 30, 1998, the Fund's
expenses were reduced by $38,259 under these arrangements.
6. SUBSEQUENT EVENTS
On May 29, 1998, Liechtenstein Global Trust ("LGT"), the former indirect parent
organization of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"),
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included Chancellor LGT and
certain other affiliates. As a result of this transaction, Chancellor LGT was
renamed INVESCO (NY), Inc. and is now an indirect wholly-owned subsidiary of
AMVESCAP PLC. In connection with this transaction, A I M Advisors, Inc. ("AIM"),
an indirect wholly-owned subsidiary of AMVESCAP PLC, became the investment
adviser and administrator of the Fund and INVESCO (NY), Inc. became the
sub-adviser and sub-administrator of the Fund. In addition, A I M Distributors,
Inc. replaced GT Global, Inc. as the Fund's principal underwriter, and the Fund
became subject to compensation-type Rule 12b-1 plans of distribution, which
replaced the Fund's former reimbursement-type Rule 12b-1 plans of distribution.
All of the changes became effective as of the close of business on May 29, 1998.
FS-74
<PAGE> 222
GT GLOBAL EMERGING MARKETS FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of GT Global Emerging Markets Fund and
Board of Directors of G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Emerging Markets Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the portfolio of investments, as of October
31, 1997, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Emerging Markets Fund as of October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
FS-75
<PAGE> 223
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Energy (18.6%)
LUKoil Holding - ADR{\/} ................................. RUS 68,826 $ 5,764,178 2.4
OIL
Sasol Ltd. ............................................... SAFR 402,507 4,853,515 2.0
ENERGY SOURCES
Petroleo Brasileiro S.A. (Petrobras) Preferred ........... BRZL 22,113,561 4,112,192 1.7
OIL
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} ... BRZL 85,389 3,415,560 1.4
ELECTRICAL & GAS UTILITIES
C.A. La Electricidad de Caracas .......................... VENZ 2,529,153 3,324,761 1.4
ELECTRICAL & GAS UTILITIES
Centrais Eletricas Brasileiras S.A.-Eletrobras "B" -
ADR{\/} ................................................. BRZL 133,855 2,944,810 1.2
ELECTRICAL & GAS UTILITIES
Chilgener S.A. - ADR{\/} ................................. CHLE 88,263 2,383,101 1.0
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} ................................... CHLE 64,238 2,119,854 0.9
ELECTRICAL & GAS UTILITIES
Empresa Nacional de Electricidad S.A. - ADR{\/} .......... CHLE 100,922 2,031,055 0.8
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. ................... BRZL 5,020,561 1,666,841 0.7
ELECTRICAL & GAS UTILITIES
Light - Participacoes S.A. ............................... BRZL 6,360,473 1,627,044 0.7
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ....................................... ARG 49,065 1,570,080 0.7
OIL
The Hub Power Co., Ltd. - GDR-/- {\/} .................... PAK 49,150 1,535,938 0.6
ENERGY SOURCES
Unified Energy Systems - Reg S GDR-/- {c} {\/} ........... RUS 37,000 1,156,246 0.5
ELECTRICAL & GAS UTILITIES
Surgutneftegaz - ADR-/- {\/} ............................. RUS 123,235 1,047,498 0.4
OIL
PTT Exploration and Production Public Co., Ltd. -
Foreign ................................................. THAI 101,800 1,038,259 0.4
OIL
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} ....... HGRY 35,800 774,175 0.3
ENERGY SOURCES
Manila Electric Co. "B" .................................. PHIL 236,700 728,308 0.3
ELECTRICAL & GAS UTILITIES
Mosenergo - 144A ADR{.} {\/} ............................. RUS 15,000 630,000 0.3
ELECTRICAL & GAS UTILITIES
Electricity Generating Public Co., Ltd. - Foreign ........ THAI 329,100 548,500 0.2
ELECTRICAL & GAS UTILITIES
Perez Companc S.A. ....................................... ARG 74,818 468,642 0.2
OIL
Tenaga Nasional Bhd. ..................................... MAL 194,000 419,585 0.2
ELECTRICAL & GAS UTILITIES
Korea Electric Power Corp. - ADR{\/} ..................... KOR 44,271 362,469 0.2
ELECTRICAL & GAS UTILITIES
BSES Ltd. - Reg. S GDR{c} ................................ IND 19,100 296,050 0.1
ELECTRICAL & GAS UTILITIES
Yukong Ltd. .............................................. KOR 7,543 102,145 --
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-76
<PAGE> 224
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Guangdong Electric Power Development Co., Ltd. "B"+X+ .... CHNA 127,800 $ 72,084 --
ENERGY SOURCES
Pakistan State Oil Co., Ltd. ............................. PAK 20 216 --
OIL
------------
44,993,106
------------
Multi-Industry/Miscellaneous (16.1%)
Barlow Ltd. .............................................. SAFR 407,077 4,104,623 1.7
CONGLOMERATE
Anglo American Corporation of South Africa Ltd. .......... SAFR 82,607 3,572,195 1.5
CONGLOMERATE
Delta Corporation Ltd. (subdivision)-/- .................. ZBBW 2,187,074 3,114,504 1.3
MULTI-INDUSTRY
PT Telekomunikasi Indonesia .............................. INDO 3,075,500 2,869,896 1.2
MULTI-INDUSTRY
Grupo Carso, S.A. de C.V. "A1" ........................... MEX 396,200 2,519,547 1.0
MULTI-INDUSTRY
ITC Ltd.: ................................................ IND -- -- 1.0
MULTI-INDUSTRY
Common ................................................. -- 123,928 1,916,184 --
GDR-/- {\/} ............................................ -- 25,987 475,562 --
The Saudi Arabian Investment Fund Ltd.-/- {\/} ........... UK 211,000 2,110,000 0.9
COUNTRY FUNDS
PT Gudang Garam .......................................... INDO 625,500 1,777,187 0.7
MULTI-INDUSTRY
China Resources Enterprise Ltd. .......................... HK 623,000 1,708,616 0.7
CONGLOMERATE
Malaysian Resources Corp., Bhd. .......................... MAL 2,556,000 1,520,240 0.6
CONGLOMERATE
Shanghai Industrial Holdings Ltd. ........................ HK 339,000 1,508,616 0.6
MULTI-INDUSTRY
Central Asia Regional Growth Fund-/- {\/} ................ IRE 156,000 1,485,120 0.6
COUNTRY FUNDS
NASR (El) City Company For Housing & Construction-/- ..... EGPT 18,870 1,304,195 0.5
MISCELLANEOUS
Billiton PLC-/- .......................................... SAFR 395,102 1,158,199 0.5
CONGLOMERATE
Sanluis Corporacion, S.A. de C.V. ........................ MEX 145,432 1,128,622 0.5
CONGLOMERATE
John Keells Holdings Ltd. ................................ SLNKA 183,000 934,142 0.4
MULTI-INDUSTRY
Empresas La Moderna, S.A. de C.V. "A"-/- ................. MEX 186,000 913,293 0.4
MULTI-INDUSTRY
PT Bimantara Citra ....................................... INDO 965,000 887,047 0.4
MULTI-INDUSTRY
Romanian Growth Fund{\/} ................................. ROM 75,800 784,530 0.3
COUNTRY FUNDS
Koc Holding AS ........................................... TRKY 1,827,500 687,480 0.3
CONGLOMERATE
Rembrandt Group Ltd. ..................................... SAFR 77,200 633,971 0.3
CONGLOMERATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-77
<PAGE> 225
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
Koor Industries Ltd. - ADR{\/} ........................... ISRL 22,315 $ 476,983 0.2
CONGLOMERATE
PT Hanjaya Mandala Sampoerna ............................. INDO 262,000 457,953 0.2
MULTI-INDUSTRY
Discount Investment Corp. ................................ ISRL 12,474 339,811 0.1
MULTI-INDUSTRY
Quinenco S.A. - ADR-/- {\/} .............................. CHLE 21,500 314,438 0.1
CONGLOMERATE
KEC International Ltd.-/- ................................ IND 160,500 162,280 0.1
MISCELLANEOUS
------------
38,865,234
------------
Services (15.6%)
Telecomunicacoes Brasileiras S.A. (Telebras): ............ BRZL -- -- 3.0
TELEPHONE NETWORKS
ADR{\/} ................................................ -- 37,332 3,789,198 --
Common ................................................. -- 38,472,813 3,419,767 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} .......... MEX 122,827 5,312,268 2.2
TELEPHONE NETWORKS
Compania Anonima Nacional Telefonos de Venezuela (CANTV) -
ADR{\/} ................................................. VENZ 85,004 3,718,925 1.5
TELEPHONE NETWORKS
Pick'n Pay Stores Ltd.: .................................. SAFR -- -- 1.4
RETAILERS-OTHER
Common ................................................. -- 1,646,589 2,481,865 --
"N" .................................................... -- 719,798 987,665 --
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ........ CHLE 84,227 2,337,299 1.0
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ....................... PERU 100,740 1,989,615 0.8
TELEPHONE NETWORKS
Cifra, S.A. de C.V.: ..................................... MEX -- -- 0.6
RETAILERS-OTHER
"C" .................................................... -- 593,000 1,029,760 --
"A" .................................................... -- 275,000 506,527 --
"B" .................................................... -- 26,656 53,248 --
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP-/- ............................................... BRZL 7,509,655 1,362,419 0.6
BUSINESS & PUBLIC SERVICES
Telefonica de Argentina S.A. - ADR{\/} ................... ARG 42,183 1,186,397 0.5
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP) Preferred .... BRZL 3,388,663 885,282 0.4
TELEPHONE NETWORKS
TelecomAsia Corp. - Foreign-/- ........................... THAI 1,521,400 681,224 0.3
TELEPHONE NETWORKS
Santa Isabel S.A. - ADR{\/} .............................. CHLE 36,543 676,046 0.3
RETAILERS-FOOD
PT Indosat ............................................... INDO 264,500 598,625 0.3
TELECOM - OTHER
Danubius Hotel and Spa Rt.-/- ............................ HGRY 19,037 595,762 0.2
LEISURE & TOURISM
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-78
<PAGE> 226
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
PT Citra Marga Nusaphala Persada ......................... INDO 2,073,000 $ 591,873 0.2
BUSINESS & PUBLIC SERVICES
Mahanagar Telephone Nigam Ltd. ........................... IND 84,400 588,062 0.2
TELECOM - OTHER
Portugal Telecom S.A. - Registered ....................... PORT 13,630 559,388 0.2
TELEPHONE NETWORKS
Sonae Investimentos-Sociedade Gestora de Participacoes
Sociais S.A. ............................................ PORT 14,423 539,017 0.2
RETAILERS-OTHER
Migros Turk T.A.S. ....................................... TRKY 479,400 503,132 0.2
RETAILERS-FOOD
Investec-Consultoria Internacional S.A.-/- ............... PORT 15,692 490,933 0.2
BROADCASTING & PUBLISHING
Super Sol Ltd. ........................................... ISRL 127,545 367,036 0.2
RETAILERS-FOOD
Advanced Info. Service - Foreign ......................... THAI 68,300 366,985 0.2
WIRELESS COMMUNICATIONS
Indian Hotels Co., Ltd. .................................. IND -- -- 0.1
LEISURE & TOURISM
GDR-/- {\/} ............................................ -- 20,200 348,450 --
Common ................................................. -- 3,000 48,573 --
Konsortium Perkapalan Bhd. ............................... MAL 182,000 341,694 0.1
TRANSPORTATION - SHIPPING
Pakistan Telecommunications Co., Ltd. - GDR-/- {\/} ...... PAK 3,700 299,700 0.1
TELEPHONE NETWORKS
Guangshen Railway Co., Ltd. .............................. HK 924,000 286,882 0.1
TRANSPORTATION - ROAD & RAIL
Vimpel-Communications - ADR-/- {\/} ...................... RUS 8,500 278,375 0.1
WIRELESS COMMUNICATIONS
BEC World Public Co., Ltd. - Foreign ..................... THAI 53,000 276,866 0.1
BROADCASTING & PUBLISHING
Estabelecimentos Jeronimo Martins & Filho, Sociedade
Gestora de Participacoes Sociais S.A. ................... PORT 4,141 270,885 0.1
RETAILERS-OTHER
Himachal Futuristic Communications Ltd. .................. IND 450,000 241,423 0.1
TELECOM - OTHER
PT Matahari Putra Prima .................................. INDO 1,109,000 216,240 0.1
RETAILERS-APPAREL
------------
38,227,406
------------
Materials/Basic Industry (15.5%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" ............... MEX 1,012,344 4,461,588 1.8
PAPER/PACKAGING
SA Iron & Steel Industrial Corp., Ltd. (ISCOR) ........... SAFR 6,948,244 3,611,353 1.5
METALS - STEEL
Suez Cement Co. - Reg S GDR{c} {\/} ...................... EGPT 169,935 3,526,151 1.5
CEMENT
Sappi Ltd. ............................................... SAFR 427,859 2,713,035 1.1
FOREST PRODUCTS
Helwan Portland Cement Co.-/- ............................ EGPT 104,210 2,199,138 0.9
CEMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-79
<PAGE> 227
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Ameriyah Cement Co.-/- ................................... EGPT 84,386 $ 2,134,469 0.9
CEMENT
Industrias Penoles S.A. (CP) ............................. MEX 452,187 1,800,625 0.7
METALS - NON-FERROUS
Torah Portland Cement Co.-/- ............................. EGPT 60,900 1,665,794 0.7
CEMENT
De Beers Centenary AG - Linked Unit ...................... SAFR 68,900 1,644,432 0.7
MISC. MATERIALS & COMMODITIES
Apasco S.A. .............................................. MEX 254,481 1,554,315 0.6
CEMENT
North Cairo Flour Mills-/- ............................... EGPT 30,170 1,313,282 0.5
MISC. MATERIALS & COMMODITIES
Helioplis Housing-/- ..................................... EGPT 8,500 1,162,750 0.5
BUILDING MATERIALS & COMPONENTS
Pannonplast Rt. .......................................... HGRY 18,188 999,145 0.4
MISC. MATERIALS & COMMODITIES
Pohang Iron & Steel Co., Ltd.: ........................... KOR -- -- 0.5
METALS - STEEL
ADR{\/} ................................................ -- 52,475 852,719 --
Common ................................................. -- 2,580 114,060 --
Paints & Chemical Industry-/- ............................ EGPT 20,500 687,413 0.3
CHEMICALS
Grupo Industrial Minera Mexico "L" ....................... MEX 231,300 686,975 0.3
METALS - NON-FERROUS
Cimpor-Cimentos de Portugal, SGPS S.A. ................... PORT 23,585 597,004 0.2
CEMENT
Cosco Pacific Ltd. ....................................... HK 462,000 537,904 0.2
PAPER/PACKAGING
Hindalco Industries Ltd. ................................. IND 19,350 505,218 0.2
METALS - NON-FERROUS
Siam Cement Co., Ltd. - Foreign .......................... THAI 57,200 486,627 0.2
CEMENT
Israel Chemicals Ltd. .................................... ISRL 386,976 485,117 0.2
CHEMICALS
Maanshan Iron and Steel Co. "H"+X+ ....................... CHNA 2,874,000 457,312 0.2
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ........ CHLE 8,500 440,938 0.2
CHEMICALS
PT Aneka Tambang-/- ...................................... INDO 940,000 366,574 0.2
METALS - NON-FERROUS
Dhan Fibres Ltd.-/- ...................................... PAK 4,273,000 325,286 0.1
CHEMICALS
Turk Sise ve Cam Fabrikalari AS-/- ....................... TRKY 3,564,000 306,035 0.1
GLASS
HI Cement Corp. .......................................... PHIL 3,197,000 291,464 0.1
CEMENT
Engro Chemicals Pakistan Ltd. ............................ PAK 85,412 269,787 0.1
CHEMICALS
Agros Holding S.A.-/- .................................... POL 11,876 249,123 0.1
MISC. MATERIALS & COMMODITIES
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-80
<PAGE> 228
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Cahya Mata Sarawak Bhd. .................................. MAL 229,000 $ 222,878 0.1
BUILDING MATERIALS & COMPONENTS
Compania de Minas Buenaventura S.A. - ADR{\/} ............ PERU 11,800 211,663 0.1
METALS - NON-FERROUS
PT Indah Kiat Pulp & Paper Corp. Tbk ..................... INDO 517,000 198,015 0.1
PAPER/PACKAGING
Associated Cement Cos., Ltd. ............................. IND 5,086 163,542 0.1
CEMENT
Fauji Fertilizer Co., Ltd. ............................... PAK 71,900 160,119 0.1
MISC. MATERIALS & COMMODITIES
Dewan Salman Fibre Ltd.-/- ............................... PAK 4 3 --
CHEMICALS
------------
37,401,853
------------
Finance (15.1%)
State Bank of India Ltd. ................................. IND 646,650 4,679,037 1.9
BANKS-REGIONAL
Uniao Bancos Brasileiras "A" Preferred ................... BRZL 155,867,458 3,956,070 1.6
BANKS-MONEY CENTER
ABSA Group Ltd. .......................................... SAFR 631,687 3,742,844 1.5
BANKS-REGIONAL
Egyptian American Bank SAE-/- ............................ EGPT 72,790 2,344,266 1.0
BANKS-MONEY CENTER
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} ................................................. CHLE 114,258 1,913,822 0.8
INVESTMENT MANAGEMENT
Malayan Banking Bhd. ..................................... MAL 401,800 1,556,990 0.6
BANKS-MONEY CENTER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} ................................................. PAN 36,337 1,444,396 0.6
OTHER FINANCIAL
Global Menkul Degerler AS-/- ............................. TRKY 60,574,257 1,403,558 0.6
SECURITIES BROKER
Banco de A. Edwards - ADR{\/} ............................ CHLE 74,184 1,288,947 0.5
BANKS-MONEY CENTER
Credicorp Ltd. - ADR{\/} ................................. PERU 67,200 1,205,400 0.5
BANKS-MONEY CENTER
Aksigorta A.S. ........................................... TRKY 14,655,000 1,138,555 0.5
INSURANCE - MULTI-LINE
Commercial International Bank ............................ EGPT -- -- 0.4
BANKS-MONEY CENTER
144A GDR{.} {\/} ....................................... -- 37,000 804,750 --
Common ................................................. -- 14,000 323,853 --
Liberty Life Association of Africa Ltd. .................. SAFR 36,900 920,582 0.4
INSURANCE-LIFE
Banco Frances del Rio de la Plata S.A. - ADR{\/} ......... ARG 34,978 861,333 0.4
BANKS-MONEY CENTER
Turkiye Is Bankasi (Isbank) "C" .......................... TRKY 8,527,300 825,208 0.3
BANKS-MONEY CENTER
Kookmin Bank - GDR-/- {\/} ............................... KOR 100,650 644,160 0.3
BANKS-MONEY CENTER
BPI-SGPS S.A. ............................................ PORT 27,269 613,475 0.3
BANKS-MONEY CENTER
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-81
<PAGE> 229
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Thai Farmers Bank Public Co., Ltd. - Foreign ............. THAI 205,700 $ 562,861 0.2
BANKS-REGIONAL
SM Prime Holdings, Inc. .................................. PHIL 2,860,800 505,326 0.2
REAL ESTATE
Yapi ve Kredi Bankasi AS ................................. TRKY 16,419,347 501,299 0.2
BANKS-REGIONAL
C.G. Smith Ltd. .......................................... SAFR 109,100 476,320 0.2
INVESTMENT MANAGEMENT
Nedcor Ltd. .............................................. SAFR 22,000 461,954 0.2
BANKS-REGIONAL
Bank Hapoalim Ltd. ....................................... ISRL 191,250 452,638 0.2
BANKS-REGIONAL
Metroplex Bhd. ........................................... MAL 1,242,000 432,779 0.2
REAL ESTATE
JSC Kazkommertsbank Co. - GDR-/- {\/} .................... KAZ 19,530 410,130 0.2
BANKS-REGIONAL
Muslim Commercial Bank Ltd.-/- ........................... PAK 379,600 388,174 0.2
BANKS-MONEY CENTER
Bank Leumi Le - Israel ................................... ISRL 242,645 372,565 0.2
BANKS-REGIONAL
Turkiye Garanti Bankasi AS ............................... TRKY 6,533,800 338,410 0.1
BANKS-REGIONAL
Bank Slaski S.A. ......................................... POL 5,773 336,758 0.1
BANKS-MONEY CENTER
Belle Corp.-/- ........................................... PHIL 3,542,000 322,917 0.1
REAL ESTATE
Ayala Land, Inc. "B" ..................................... PHIL 670,000 262,464 0.1
REAL ESTATE
Banco Santander Chile - ADR{\/} .......................... CHLE 18,800 244,400 0.1
BANKS-REGIONAL
Land and House Public Co., Ltd. - Foreign ................ THAI 273,000 237,687 0.1
REAL ESTATE
Malaysian Assurance Alliance Bhd. ........................ MAL 79,100 142,565 0.1
INSURANCE - MULTI-LINE
Bangkok Bank Public Co., Ltd. - Foreign .................. THAI 39,600 137,910 0.1
BANKS-MONEY CENTER
C & P Homes, Inc. ........................................ PHIL 1,487,000 112,266 0.1
REAL ESTATE
HDFC Bank Ltd. ........................................... IND 500 1,118 --
BANKS-MONEY CENTER
Housing Development Finance Corp.-/- ..................... IND 5 422 --
OTHER FINANCIAL
------------
36,368,209
------------
Consumer Non-Durables (9.0%)
South African Breweries Ltd. ............................. SAFR 158,112 4,207,554 1.7
BEVERAGES - ALCOHOLIC
Fomento Economico Mexicano, S.A. de C.V. "B" ............. MEX 530,710 3,749,927 1.5
BEVERAGES - ALCOHOLIC
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-82
<PAGE> 230
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (Continued)
Gruma S.A. "B"-/- ........................................ MEX 678,283 $ 2,664,393 1.1
FOOD
Eastern Tobacco Co.-/- ................................... EGPT 99,245 2,488,422 1.0
TOBACCO
Companhia Cervejaria Brahma Preferred .................... BRZL 3,909,129 2,446,752 1.0
BEVERAGES - ALCOHOLIC
C.G. Smith Foods Ltd. .................................... SAFR 123,000 1,764,449 0.7
FOOD
A-Ahram Beverages Co. S.A.E. - 144A GDR{.} -/- {\/} ...... EGPT 48,235 1,326,463 0.5
BEVERAGES - ALCOHOLIC
Embotelladora Andina S.A. "B" - ADR{\/} .................. CHLE 51,047 1,046,464 0.4
BEVERAGES - NON-ALCOHOLIC
San Miguel Corp. "B" ..................................... PHIL 877,800 987,838 0.4
BEVERAGES - ALCOHOLIC
Compania Cervecerias Unidas S.A. ADR{\/} ................. CHLE 30,046 732,371 0.3
BEVERAGES - ALCOHOLIC
Graboplast Rt. (Australian Certificates) ................. HGRY 10,319 556,323 0.2
OTHER CONSUMER GOODS
Kuala Lumpur Kepong Bhd. ................................. MAL 108,000 259,537 0.1
OTHER CONSUMER GOODS
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) ................ POL 3,416 255,218 0.1
BEVERAGES - ALCOHOLIC
La Tondena Distillers, Inc. .............................. PHIL 149,400 91,513 --
BEVERAGES - ALCOHOLIC
------------
22,577,224
------------
Technology (3.7%)
Asustek Computer Inc. - Reg. S GDR-/- {c} {\/} ........... TWN 695,564 8,503,270 3.5
COMPUTERS & PERIPHERALS
Clal Electronics Industries Ltd. ......................... ISRL 2,159 312,828 0.1
SEMICONDUCTORS
LG Information & Communication ........................... KOR 1,956 112,470 0.1
TELECOM TECHNOLOGY
------------
8,928,568
------------
Capital Goods (2.5%)
New World Infrastructure Ltd.-/- ......................... HK 929,000 1,838,771 0.8
CONSTRUCTION
Cheung Kong Infrastructure Holdings ...................... HK 586,000 1,516,171 0.6
CONSTRUCTION
United Engineers Ltd. .................................... MAL 318,000 754,641 0.3
CONSTRUCTION
Irkutskenergo - ADR-/- {\/} .............................. RUS 48,200 650,700 0.3
ELECTRICAL PLANT/EQUIPMENT
Daewoo Heavy Industries .................................. KOR 86,000 501,667 0.2
INDUSTRIAL COMPONENTS
Elektrim Spolka Akcyjna S.A. ............................. POL 45,830 431,961 0.2
ELECTRICAL PLANT/EQUIPMENT
ECI Telecommunications Ltd.{\/} .......................... ISRL 9,100 251,388 0.1
TELECOM EQUIPMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-83
<PAGE> 231
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Capital Goods (Continued)
Sungmi Telecom Electronics Co. ........................... KOR 189 $ 9,247 --
TELECOM EQUIPMENT
Gujarat Telephone Cables-/- .............................. IND 6,200 853 --
TELECOM EQUIPMENT
------------
5,955,399
------------
Consumer Durables (2.3%)
Bajaj Auto Ltd. - GDR{\/} ................................ IND 81,000 1,441,800 0.6
AUTO PARTS
Arcelik AS ............................................... TRKY 9,393,800 1,049,901 0.4
APPLIANCES & HOUSEHOLD DURABLES
Qingling Motors Co., Ltd.+X+ ............................. CHNA 1,475,000 963,616 0.4
AUTOMOBILES
Tata Engineering and Locomotive Co., Ltd. ................ IND 107,410 941,208 0.4
AUTOMOBILES
Samsung Electronics Co.: ................................. KOR -- -- 0.3
CONSUMER ELECTRONICS
Common ................................................. -- 14,801 586,279 --
144A GDR{.} -/- {\/} ................................... -- 8,200 166,050 --
PT Astra International, Inc. ............................. INDO 592,000 441,114 0.2
AUTOMOBILES
------------
5,589,968
------------
Health Care (1.8%)
Ranbaxy Laboratories Ltd. ................................ IND 75,000 1,460,918 0.6
MEDICAL TECHNOLOGY & SUPPLIES
Richter Gedeon Rt. - Reg S GDR{c} {\/} ................... HGRY 14,046 1,306,278 0.5
PHARMACEUTICALS
Teva Pharmaceutical Industries Ltd. ...................... ISRL 16,640 774,717 0.3
PHARMACEUTICALS
Egypt International Pharmaceutical Industries Co.
(EIPICO) ................................................ EGPT 10,000 723,529 0.3
PHARMACEUTICALS
PT Kalbe Farma ........................................... INDO 524,000 321,114 0.1
PHARMACEUTICALS
Core Healthcare .......................................... IND 50 20 --
PHARMACEUTICALS
------------
4,586,576
------------ -----
TOTAL EQUITY INVESTMENTS (cost $277,841,143) ............... 243,493,543 100.2
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
PT Matahari Putra Prima Rights, expire 12/3/97 ........... INDO -- 123,565 0.1
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Rights, expire
11/12/97 ................................................ BRZL -- 224 --
TELEPHONE NETWORKS
------------ -----
TOTAL RIGHTS (cost $0) ..................................... 123,789 0.1
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-84
<PAGE> 232
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Belle Corp. Warrants, expire 2002 (cost $0) .............. PHIL 708,400 $ 131 --
OIL
------------ -----
TOTAL INVESTMENTS (cost $277,841,143) * ................... 243,617,463 100.3
Other Assets and Liabilities ............................... (716,414) (0.3)
------------ -----
NET ASSETS ................................................. $242,901,049 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
+X+ Denominated in Hong Kong Dollars.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
* For Federal income tax purposes, cost is $279,135,649 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 17,948,897
Unrealized depreciation: (53,467,083)
-------------
Net unrealized depreciation: $ (35,518,186)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
FS-85
<PAGE> 233
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) .................. 1.8 1.8
Brazil (BRZL/BRL) .................... 12.3 12.3
Chile (CHLE/CLP) ..................... 6.4 6.4
China (CHNA/RMB) ..................... 0.6 0.6
Egypt (EGPT/EGP) ..................... 9.0 9.0
Hong Kong (HK/HKD) ................... 3.0 3.0
Hungary (HGRY/HUF) ................... 1.6 1.6
India (IND/INR) ...................... 5.4 5.4
Indonesia (INDO/IDR) ................. 3.7 0.1 3.8
Ireland (IRE/IEP) .................... 0.6 0.6
Israel (ISRL/ILS) .................... 1.6 1.6
Kazakhstan (KAZ/KTS) ................. 0.2 0.2
Korea (KOR/KRW) ...................... 1.6 1.6
Malaysia (MAL/MYR) ................... 2.3 2.3
Mexico (MEX/MXN) ..................... 10.7 10.7
Pakistan (PAK/PKR) ................... 1.2 1.2
Panama (PAN/PND) ..................... 0.6 0.6
Peru (PERU/PES) ...................... 1.4 1.4
Philippines (PHIL/PHP) ............... 1.3 1.3
Poland (POL/PLZ) ..................... 0.5 0.5
Portugal (PORT/PTE) .................. 1.2 1.2
Romania (ROM/ROL) .................... 0.3 0.3
Russia (RUS/SUR) ..................... 4.0 4.0
South Africa (SAFR/ZAR) .............. 15.4 15.4
Sri Lanka (SLNKA/LKR) ................ 0.4 0.4
Taiwan (TWN/TWD) ..................... 3.5 3.5
Thailand (THAI/THB) .................. 1.8 1.8
Turkey (TRKY/TRL) .................... 2.7 2.7
United Kingdom (UK/GBP) .............. 0.9 0.9
United States (US/USD) ............... (0.3) (0.3)
Venezuela (VENZ/VEB) ................. 2.9 2.9
Zimbabwe (ZBBW/ZWD) .................. 1.3 1.3
------ ----- ----- -----
Total ............................... 100.2 0.1 (0.3) 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $242,901,049.
The accompanying notes are an integral part of the financial statements.
FS-86
<PAGE> 234
GT GLOBAL EMERGING MARKETS FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $277,841,143) (Note 1).......................... $243,617,463
U.S. currency................................................................. $ 136,655
Foreign currencies (cost $10,678,505)......................................... 10,060,667 10,197,322
----------
Receivable for securities sold............................................................ 7,396,760
Receivable for Fund shares sold........................................................... 1,950,008
Dividends receivable...................................................................... 337,748
-----------
Total assets............................................................................ 263,499,301
-----------
Liabilities:
Payable for securities purchased.......................................................... 12,193,150
Payable for loan outstanding (Note 1)..................................................... 6,184,000
Payable for Fund shares repurchased....................................................... 1,396,848
Payable for investment management and administration fees (Note 2)........................ 246,040
Payable for service and distribution expenses (Note 2).................................... 199,887
Payable for printing and postage expenses................................................. 140,103
Payable for transfer agent fees (Note 2).................................................. 104,492
Payable for custodian fees (Note 1)....................................................... 43,774
Payable for professional fees............................................................. 42,768
Payable for registration and filing fees.................................................. 23,221
Payable for fund accounting fees (Note 2)................................................. 6,498
Payable for Directors' fees and expenses (Note 2)......................................... 4,348
Other accrued expenses.................................................................... 13,123
-----------
Total liabilities....................................................................... 20,598,252
-----------
Net assets.................................................................................. $242,901,049
-----------
-----------
Class A:
Net asset value and redemption price per share ($113,318,585 DIVIDED BY 9,291,855 shares
outstanding)............................................................................... $ 12.20
-----------
-----------
Maximum offering price per share (100/95.25 of $12.20) *.................................... $ 12.81
-----------
-----------
Class B:+
Net asset value and offering price per share ($127,658,086 DIVIDED BY 10,694,937 shares
outstanding)............................................................................... $ 11.94
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,924,378
DIVIDED BY 156,831 shares outstanding)..................................................... $ 12.27
-----------
-----------
Net assets consist of:
Paid in capital (Note 4).................................................................. $289,238,339
Accumulated net realized loss on investments and foreign currency transactions............ (11,492,948)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (620,662)
Net unrealized depreciation of investments................................................ (34,223,680)
-----------
Total -- representing net assets applicable to capital shares outstanding................... $242,901,049
-----------
-----------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-87
<PAGE> 235
GT GLOBAL EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $260,697).............................. $ 7,205,935
Interest income........................................................................... 1,168,490
-----------
Total investment income................................................................. 8,374,425
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 3,907,922
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 977,082
Class B.................................................................... 2,022,092 2,999,174
-----------
Transfer agent fees (Note 2).............................................................. 1,516,844
Custodian fees (Note 1)................................................................... 349,533
Printing and postage expenses............................................................. 237,674
Registration and filing fees.............................................................. 113,378
Fund accounting fees (Note 2)............................................................. 103,144
Audit fees................................................................................ 72,348
Legal fees................................................................................ 35,687
Amortization of organization costs (Note 1)............................................... 16,342
Directors' fees and expenses (Note 2)..................................................... 13,636
Other expenses (Note 1)................................................................... 385,661
-----------
Total expenses before reductions........................................................ 9,751,343
-----------
Expense reductions (Notes 1 & 5)...................................................... (326,286)
-----------
Total net expenses...................................................................... 9,425,057
-----------
Net investment loss......................................................................... (1,050,632)
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized gain on investments............................................. 29,128,765
Net realized loss on foreign currency transactions........................... (3,014,870)
-----------
Net realized gain during the year....................................................... 26,113,895
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies........................................... (282,179)
Net change in unrealized depreciation of investments......................... (52,070,476)
-----------
Net unrealized depreciation during the year............................................. (52,352,655)
-----------
Net realized and unrealized loss on investments and foreign currencies...................... (26,238,760)
-----------
Net decrease in net assets resulting from operations........................................ $(27,289,392)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-88
<PAGE> 236
GT GLOBAL EMERGING MARKETS FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income (loss)............................................. $ (1,050,632) $ 2,628,437
Net realized gain (loss) on investments and foreign currency
transactions............................................................ 26,113,895 (5,528,958)
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................ (282,179) 31,246
Net change in unrealized appreciation (depreciation) of investments...... (52,070,476) 22,530,391
-------------- --------------
Net increase (decrease) in net assets resulting from operations........ (27,289,392) 19,661,116
-------------- --------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............................................... (37,319) --
In excess of net investment income....................................... (104,807) --
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............................................... (4,161) --
In excess of net investment income....................................... (11,686) --
-------------- --------------
Total distributions.................................................... (157,973) --
-------------- --------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 1,140,272,411 1,443,673,824
Decrease from capital shares repurchased................................. (1,314,030,266) (1,499,221,358)
-------------- --------------
Net decrease from capital share transactions........................... (173,757,855) (55,547,534)
-------------- --------------
Total decrease in net assets............................................... (201,205,220) (35,886,418)
Net assets:
Beginning of year........................................................ 444,106,269 479,992,687
-------------- --------------
End of year *............................................................ $ 242,901,049 $ 444,106,269
-------------- --------------
-------------- --------------
* Includes undistributed net investment income of........................ $ -- $ 41,480
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-89
<PAGE> 237
GT GLOBAL EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (d) 1996 (d) 1995 (d) 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.26 $ 13.85 $ 18.81 $ 14.42 $ 11.10
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... -- 0.11 0.13 (0.02) 0.02*
Net realized and unrealized gain
(loss) on investments................ (2.05) 0.30 (4.32) 4.68 3.38
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (2.05) 0.41 (4.19) 4.66 3.40
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- (0.01) (0.08)
From net realized gain on
investments.......................... -- -- (0.77) (0.26) --
In excess of net investment income.... (0.01) -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.01) -- (0.77) (0.27) (0.08)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 12.20 $ 14.26 $ 13.85 $ 18.81 $ 14.42
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. (14.45)% 2.96% (23.04)% 32.58% 30.90%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 113,319 $ 224,964 $ 252,457 $ 417,322 $ 187,808
Ratio of net investment income (loss) to
average net assets..................... (0.01)% 0.76% 0.89% (0.11)% 0.1%*
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.10% 1.96% 2.12% 2.06% 2.4%*
Without expense reductions............ 2.18% 2.08% 2.14% N/A N/A
Portfolio turnover rate++++............. 150% 104% 114% 100% 99%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0015 $ 0.0040 N/A N/A N/A
</TABLE>
- ----------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02 for the year ended October 31, 1993.
Without such reimbursements, the expense ratios would have been 2.61%
and the ratio of net investment income to average net assets would
have been 0.36% (See Note 2).
* * Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02. Without such reimbursements, the
expense ratio would have been 3.63% and the ratio of net investment
income to average net assets would have been (0.76%) (see Note 2).
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-90
<PAGE> 238
GT GLOBAL EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++
-----------------------------------------------------------
APRIL 1,
1993
YEAR ENDED OCTOBER 31, TO
---------------------------------------------- OCTOBER 31,
1997 (d) 1996 (d) 1995 (d) 1994 1993
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.02 $ 13.68 $ 18.68 $ 14.39 $ 11.47
---------- ---------- ---------- ---------- -----------
Income from investment operations:
Net investment income (loss).......... (0.08) 0.04 0.06 (0.12) 0.00**
Net realized and unrealized gain
(loss) on investments................ (2.00) 0.30 (4.29) 4.67 2.92
---------- ---------- ---------- ---------- -----------
Net increase (decrease) from
investment operations.............. (2.08) 0.34 (4.23) 4.55 2.92
---------- ---------- ---------- ---------- -----------
Distributions to shareholders:
From net investment income............ -- -- -- -- --
From net realized gain on
investments.......................... -- -- (0.77) (0.26) --
In excess of net investment income.... -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Total distributions................. -- -- (0.77) (0.26) --
---------- ---------- ---------- ---------- -----------
Net asset value, end of period.......... $ 11.94 $ 14.02 $ 13.68 $ 18.68 $ 14.39
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
Total investment return (c)............. (14.91)% 2.49% (23.37)% 31.77% 25.5%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 127,658 $ 216,004 $ 225,861 $ 291,289 $ 32,318
Ratio of net investment income (loss) to
average net assets..................... (0.51)% 0.26% 0.39% (0.61)% (0.4)%**(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.60% 2.46% 2.62% 2.56% 2.9%**(a)
Without expense reductions............ 2.68% 2.58% 2.64% N/A N/A
Portfolio turnover rate++++............. 150% 104% 114% 100% 99%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0015 $ 0.0040 N/A N/A N/A
<CAPTION>
ADVISOR CLASS+++
----------------------------------------
YEAR JUNE 1, 1995
ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 (d) 1996 (d) 1995
----------- ----------- -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.38 $ 13.88 $ 14.71
----------- ----------- -------------
Income from investment operations:
Net investment income (loss).......... 0.05 0.18 0.08
Net realized and unrealized gain
(loss) on investments................ (2.05) 0.32 (0.91)
----------- ----------- -------------
Net increase (decrease) from
investment operations.............. (2.00) 0.50 (0.83)
----------- ----------- -------------
Distributions to shareholders:
From net investment income............ (0.03) -- --
From net realized gain on
investments.......................... -- -- --
In excess of net investment income.... (0.08) -- --
----------- ----------- -------------
Total distributions................. (0.11) -- --
----------- ----------- -------------
Net asset value, end of period.......... $ 12.27 $ 14.38 $ 13.88
----------- ----------- -------------
----------- ----------- -------------
Total investment return (c)............. (14.05)% 3.60% (5.71)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 1,924 $ 3,139 $ 1,675
Ratio of net investment income (loss) to
average net assets..................... 0.49% 1.26% 1.39%(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.60% 1.46% 1.62%(a)
Without expense reductions............ 1.68% 1.58% 1.64%(a)
Portfolio turnover rate++++............. 150% 104% 114%
Average commission rate per share paid
on portfolio transactions++++.......... $0.0015 $ 0.0040 N/A
</TABLE>
- ----------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02 for the year ended October 31, 1993.
Without such reimbursements, the expense ratios would have been 2.61%
and the ratio of net investment income to average net assets would
have been 0.36% (See Note 2).
* * Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02. Without such reimbursements, the
expense ratio would have been 3.63% and the ratio of net investment
income to average net assets would have been (0.76%) (see Note 2).
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-91
<PAGE> 239
GT GLOBAL EMERGING MARKETS FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Emerging Markets Fund ("Fund") is a separate series of G.T. Investment
Funds, Inc. ("Company"). The Company is organized as a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as a diversified, open-end management investment company. The Company has
thirteen series of shares in operation, each series corresponding to a distinct
portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or in the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued , or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by Chancellor LGT Asset
Management, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when GT
Capital deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments are valued at
amortized cost adjusted for foreign exchange translation and market fluctuation,
if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records are maintained in U.S. dollars. The market values of
foreign securities, currency holdings, and other assets and liabilities are
recorded in the books and records of the Fund after translation to U.S. dollars
based on the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are translated at
prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, U.S. government securities or other
high quality debt securities of which the value, including accrued interest, is
at least equal to the amount to be repaid to the Fund under each agreement at
its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract
FS-92
<PAGE> 240
GT GLOBAL EMERGING MARKETS FUND
fluctuates with changes in currency exchange rates. The Forward Contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the Forward Contract is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. The Fund could be
exposed to risk if a counterparty is unable to meet the terms of the contract or
if the value of the currency changes unfavorably. The Fund may enter into
Forwards Contracts in connection with planned purchases or sales of securities,
or to hedge against adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the Fund hold the underlying securities
and, for a put, requires the Fund to set aside cash, U.S. government securities,
or other liquid, high grade debt securities in an amount not less than the
exercise price or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund may use options to manage its exposure to the
stock market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund would realize a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund would
realize a gain or loss, depending on whether proceeds from the closing sale
transaction are greater or less than the cost of the option. If the Fund
exercises a call option, the cost of the securities acquired by exercising the
call is increased by the premium paid to buy the call. If the Fund exercises a
put option, it realizes a gain or loss from the sale of the underlying security,
and the proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock market
and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $17,629,705
were on loan to brokers. The loans were secured by cash collateral of
$18,687,600 received by the Fund. For international securities, cash collateral
is received by the Fund against loaned securities in an amount at least equal to
105% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 103% of the market value of
the loaned securities during the period of the loan. For domestic securities,
cash collateral is received by the Fund against loaned securities in the amount
at least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of each loan. For
the year ended October 31, 1997, the Fund received fees of $186,729 which were
used to reduce the Fund's custodian and administrative expenses.
FS-93
<PAGE> 241
GT GLOBAL EMERGING MARKETS FUND
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$10,198,442, of which $5,776,568 expires in 2003 and $4,421,874 expires in 2004.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its initial
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $150,006. These
expenses were being amortized on a straightline basis over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(O) LINE OF CREDIT
The Fund, along with certain other funds ("GT Funds") advised or administered by
the Manager, has a line of credit with each of BankBoston and State Street Bank
& Trust Company. The arrangements with the banks allow the Fund and the GT Funds
to borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of each Fund's total assets. On October 31,
1997, the Fund had $6,184,000 in loans outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $9,375,490 with a weighted average interest rate of 6.37%.
Interest expense for the Fund for the year ended October 31, 1997 was $165,714,
included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Fund's investment manager and
administrator. Fund pays investment management and administration fees to the
Manager at the annualized rate of 0.975% on the first $500 million of average
daily net assets of the Fund; 0.95% on the next $500 million; 0.925% on the next
$500 million and 0.90% on amounts thereafter. These fees are computed daily and
paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Fund's
distributor. The Fund offers Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the year ended October 31, 1997, GT Global retained $39,500
of such sales charges. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge ("CDSC") upon redemption, in
accordance with the Fund's current prospectus. GT Global collected CDSCs in the
amount of $13,158 for the year ended October 31, 1997. GT Global also makes
ongoing shareholder servicing and trail commission payments to dealers whose
clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global, from its own resources, pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of $1,581,636. In addition, GT Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT
FS-94
<PAGE> 242
GT GLOBAL EMERGING MARKETS FUND
Global a distribution fee at the annualized rate of up to 0.50% of the average
daily net assets of the Fund's Class A shares, less any amounts paid by the Fund
as the aforementioned service fee, for GT Global's expenditures incurred in
providing services as distributor. All expenses for which GT Global is
reimbursed under the Class A Plan will have been incurred within one year of
such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.40% 2.90%, and 1.90% of the average
daily net assets of the Fund's Class A, Class B and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by GT Global
of payments under the Class A Plan and/or Class B Plan and/or reimbursements by
the Manager or GT Global of portions of the Fund's other operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 2.00%, 2.50% and 1.50% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and LGT and GT Global, is the transfer agent of the Fund. For performing
shareholder servicing, reporting, and general transfer agent services, GT
Services receives an annual maintenance fee of $17.50 per account, a new account
fee of $4.00 per account, a per transaction fee of $1.75 for all transactions
other than exchanges and per exchange fee of $2.25. GT Services also is
reimbursed by the Fund for its out-of-pocket expenses for such items as postage,
forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the period then ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than short-term investments, aggregated
$551,048,488 and $663,636,335 respectively. There were no purchases or sales of
U.S. government obligations by the Fund for the year ended October 31, 1997.
4. CAPITAL SHARES
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of the Fund; 400,000,000 were classified as shares of GT
Global Government Income Fund; 200,000,000 were classified as shares of GT
Global Developing Markets Fund; 200,000,000 were classified as shares of GT
Global Health Care Fund; 200,000,000 were classified as shares of GT Global
Strategic Income Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of GT Global
Latin America Growth Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; 200,000,000 were classified as shares of GT Global Financial
Services Fund; 200,000,000 were classified as shares of GT Global Natural
Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; and 200,000,000 were classified as shares of GT Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fifteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified. Transactions in capital shares of the Fund were as follows:
FS-95
<PAGE> 243
GT GLOBAL EMERGING MARKETS FUND
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 57,294,454 $ 859,844,827 75,574,030 $1,106,260,084
Shares issued in connection with
reinvestment of distributions......... 8,654 123,333 -- --
----------- ------------- ----------- -------------
57,303,108 859,968,160 75,574,030 1,106,260,084
Shares repurchased...................... (63,783,507) (962,241,730) (78,034,654) (1,146,692,253)
----------- ------------- ----------- -------------
Net decrease............................ (6,480,399) $(102,273,570) (2,460,624) $ (40,432,169)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 16,394,355 $ 245,887,976 22,439,885 $ 323,192,109
Shares repurchased...................... (21,109,926) (316,251,415) (23,539,619) (339,644,019)
----------- ------------- ----------- -------------
Net decrease............................ (4,715,571) $ (70,363,439) (1,099,734) $ (16,451,910)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,213,447 $ 34,400,471 966,362 $ 14,221,631
Shares issued in connection with
reinvestment of distributions......... 1,106 15,804 -- --
----------- ------------- ----------- -------------
2,214,553 34,416,275 966,362 14,221,631
Shares repurchased...................... (2,275,943) (35,537,121) (868,859) (12,885,086)
----------- ------------- ----------- -------------
Net increase (decrease)................. (61,390) $ (1,120,846) 97,503 $ 1,336,545
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended October 31, 1997, the Fund's expenses
were reduced by $139,557 under these arrangements.
6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities by the
Fund are defined in the Investment Company Act of 1940 as an affiliated company.
There were no investments in affiliated companies at October 31, 1997.
Transactions during the period with companies that are or were affiliates are as
follows:
<TABLE>
<CAPTION>
NET
PURCHASES SALES REALIZED DIVIDEND
COST PROCEEDS GAIN INCOME
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sun Brewing Ltd. - 144A GDR............................................................... -- -- -- --
</TABLE>
FS-96
<PAGE> 244
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of AIM Latin American Growth Fund and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of AIM
Latin American Growth Fund (formerly GT Global Latin America Growth Fund), one
of the funds organized as a series of A I M Investment Funds, Inc., including
the portfolio of investments, as of April 30, 1998, the related statement of
operations for the six months then ended, the statements of changes in net
assets for the six months then ended and for the year ended October 31, 1997,
and the financial highlights for each of the periods indicated therein. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of AIM
Latin American Growth Fund as of April 30, 1998, the results of operations for
the six months then ended, the changes in its net assets for the six months then
ended and for the year ended October 31, 1997, and the financial highlights for
each of the periods indicated therein, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JUNE 17, 1998
FS-97
<PAGE> 245
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
PORTFOLIO OF INVESTMENTS
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (29.0%)
Telecomunicacoes Brasileiras S.A. (Telebras): ............. BRZL -- -- 8.5
TELEPHONE NETWORKS
ADR{\/} ................................................. -- 104,140 $ 12,685,554 --
Common .................................................. -- 82,307,027 8,169,521 --
Nortel Inversora S.A. - ADR{\/} ........................... ARG 170,200 5,063,450 2.1
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP): .............. BRZL -- -- 2.0
TELEPHONE NETWORKS
Preferred ............................................... -- 7,873,727 2,678,513 --
Common-/- ............................................... -- 8,857,100 2,312,063 --
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP ................................................... BRZL 21,222,622 4,825,432 2.0
BUSINESS & PUBLIC SERVICES
Cifra, S.A. de C.V.: ...................................... MEX -- -- 2.0
RETAILERS-OTHER
"C" ..................................................... -- 1,894,600 3,225,517 --
"V" ..................................................... -- 505,530 889,303 --
"V" - ADR{\/} ........................................... -- 37,489 656,058 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ........... MEX 82,800 4,688,550 1.9
TELEPHONE NETWORKS
Grupo Televisa, S.A. de C.V. - GDR-/- {\/} ................ MEX 110,900 4,546,900 1.9
BROADCASTING & PUBLISHING
Telefonica del Peru S.A. - ADR{\/} ........................ PERU 195,700 4,329,863 1.8
TELEPHONE NETWORKS
Controladora Comercial Mexicana, S.A. de C.V.: ............ MEX -- -- 1.5
RETAILERS-FOOD
UBC[.] .................................................. -- 2,682,000 3,324,793 --
GDR{\/} ................................................. -- 13,900 342,288 --
Telefonica de Argentina S.A. - ADR{\/} .................... ARG 90,900 3,505,331 1.4
TELEPHONE NETWORKS
Telecomunicacoes do Rio de Janeiro S.A. (TELERJ)
Preferred ................................................ BRZL 21,618,581 3,403,012 1.4
TELEPHONE NETWORKS
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ......... CHLE 119,700 2,999,981 1.2
TELEPHONE NETWORKS
Carso Global Telecom "A1" ................................. MEX 477,700 1,832,969 0.7
TELEPHONE NETWORKS
Santa Isabel S.A. - ADR{\/} ............................... CHLE 36,684 605,286 0.2
RETAILERS-FOOD
El Puerto de Liverpool, S.A. de C.V. ...................... MEX 283,200 417,946 0.2
RETAILERS-OTHER
Supermercados Unimarc S.A. - ADR (Chile)-/- {\/} .......... CHLE 33,000 356,813 0.1
RETAILERS-FOOD
Cintra S.A. ............................................... MEX 165,800 160,515 0.1
TRANSPORTATION - AIRLINES
------------
71,019,658
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-98
<PAGE> 246
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (23.7%)
Centrais Eletricas Brasileiras S.A. (Eletrobras): ......... BRZL -- -- 4.2
ELECTRICAL & GAS UTILITIES
"B" Preferred ........................................... -- 122,369,830 $ 5,458,754 --
Common-/- ............................................... -- 119,990,000 4,931,815 --
Petroleo Brasileiro S.A. (Petrobras) Preferred ............ BRZL 38,899,000 9,865,072 4.0
OIL
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} .... BRZL 112,200 5,441,700 2.2
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. .................... BRZL 11,949,000 4,806,769 2.0
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} .................................... CHLE 146,900 4,324,369 1.8
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ........................................ ARG 119,500 4,167,563 1.7
ENERGY SOURCES
Empresa Nacional de Electricidad S.A. - ADR{\/} ........... CHLE 223,400 3,895,538 1.6
ELECTRICAL & GAS UTILITIES
Harken Energy Corp.-/- .................................... US 568,300 3,658,431 1.5
OIL
Gener S.A. - ADR{\/} ...................................... CHLE 121,819 2,725,700 1.1
ELECTRICAL & GAS UTILITIES
Companhia Brasileira de Petroleo Ipiranga S.A.
Preferred ................................................ BRZL 173,785,000 2,264,448 0.9
OIL
Light - Participacoes S.A. ................................ BRZL 8,815,400 2,158,559 0.9
ELECTRICAL & GAS UTILITIES
C.A. La Electricidad de Caracas ........................... VENZ 3,289,577 2,021,991 0.8
ELECTRICAL & GAS UTILITIES
Perez Companc S.A. "B" .................................... ARG 198,696 1,194,282 0.5
OIL
Companhia Paulista de Forca e Luz ......................... BRZL -- -- 0.3
ELECTRICAL & GAS UTILITIES
Common .................................................. -- 5,030,000 695,007 --
Preferred ............................................... -- 13,535 1,587 --
Companhia Paranaense de Energia - Copel ................... BRZL 45,050,000 520,035 0.2
ELECTRICAL & GAS UTILITIES
------------
58,131,620
------------
Finance (13.0%)
Uniao de Bancos Brasileiros S.A. (Unibanco) Units{=} ...... BRZL 83,494,700 6,426,208 2.6
BANKS-MONEY CENTER
Banco Frances del Rio de la Plata S.A. - ADR{\/} .......... ARG 108,700 3,159,094 1.3
BANKS-MONEY CENTER
Banco Rio de La Plata S.A. - ADR-/- {\/} .................. ARG 213,300 2,932,875 1.2
BANKS-MONEY CENTER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} .................................................. PAN 76,135 2,721,826 1.1
OTHER FINANCIAL
Grupo Financiero Banorte, S.A. de C.V. "B"-/- ............. MEX 1,640,271 2,711,192 1.1
BANKS-MONEY CENTER
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} .................................................. CHLE 149,900 2,679,463 1.1
INVESTMENT MANAGEMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-99
<PAGE> 247
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Banco BHIF - ADR{\/} ...................................... CHLE 195,500 $ 2,431,531 1.0
BANKS-MONEY CENTER
Credicorp Ltd. - ADR{\/} .................................. PERU 124,782 2,090,099 0.9
BANKS-MONEY CENTER
Banco de A. Edwards - ADR{\/} ............................. CHLE 125,100 2,009,419 0.8
BANKS-MONEY CENTER
Grupo Financiero Banamex Accival, S.A. de C.V. "B"-/- ..... MEX 479,900 1,501,458 0.6
BANKS-MONEY CENTER
Inversiones y Representaciones S.A. (IRSA) - GDR{\/} ...... ARG 36,000 1,399,500 0.6
REAL ESTATE
Banco de Galicia y Buenos Aires, S.A. de C.V. - ADR{\/} ... ARG 42,100 1,031,450 0.4
BANKS-MONEY CENTER
Banco Wiese - ADR{\/} ..................................... PERU 131,400 706,275 0.3
BANKS-MONEY CENTER
------------
31,800,390
------------
Materials/Basic Industry (12.8%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" ................ MEX 1,895,100 9,318,880 3.8
PAPER/PACKAGING
Apasco, S.A. de C.V. ...................................... MEX 717,000 4,875,939 2.0
CEMENT
Companhia Vale do Rio Doce Preferred ...................... BRZL 193,403 4,566,577 1.9
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ......... CHLE 95,100 4,130,906 1.7
CHEMICALS
Industrias Penoles S.A. (CP) .............................. MEX 634,600 2,622,309 1.1
METALS - NON-FERROUS
Grupo Mexico S.A. "L" ..................................... MEX 412,324 1,314,374 0.5
METALS - NON-FERROUS
Siderca S.A. "A" .......................................... ARG 543,400 1,309,725 0.5
METALS - STEEL
Grupo Cementos de Chihuahua, S.A. de C.V. "B" ............. MEX 1,026,500 1,095,580 0.4
CEMENT
Corcemar S.A. ............................................. ARG 158,000 948,095 0.4
CEMENT
Corporacion Venezolana de Cementos, S.A.C.A.: ............. VENZ -- -- 0.3
CEMENT
"A" ..................................................... -- 347,758 454,148 --
"B" ..................................................... -- 161,928 211,769 --
Compania de Minas Buenaventura S.A. - ADR{\/} ............. PERU 36,000 558,000 0.2
METALS - NON-FERROUS
------------
31,406,302
------------
Multi-Industry/Miscellaneous (8.1%)
Grupo Carso, S.A. de C.V. "A1" ............................ MEX 871,100 5,491,941 2.2
MULTI-INDUSTRY
Alfa, S.A. de C.V. "A" .................................... MEX 830,100 4,537,619 1.9
CONGLOMERATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-100
<PAGE> 248
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
Itausa Investimentos Itau S.A. Preferred .................. BRZL 3,833,289 $ 3,251,675 1.3
MULTI-INDUSTRY
Desc, S.A. de C.V. - ADR{\/} .............................. MEX 93,800 2,702,613 1.1
CONGLOMERATE
Sanluis Corporacion, S.A. de C.V. ......................... MEX 455,500 2,420,012 1.0
CONGLOMERATE
Empresas La Moderna, S.A. de C.V. "A"-/- .................. MEX 287,000 1,438,388 0.6
MULTI-INDUSTRY
------------
19,842,248
------------
Consumer Non-Durables (6.9%)
Fomento Economico Mexicano, S.A. de C.V. "B" .............. MEX 976,750 7,242,019 3.0
BEVERAGES - ALCOHOLIC
Compania Cervecerias Unidas S.A. - ADR{\/} ................ CHLE 128,300 3,544,288 1.4
BEVERAGES - ALCOHOLIC
Companhia Cervejaria Brahma Preferred ..................... BRZL 3,006,000 1,958,435 0.8
BEVERAGES - ALCOHOLIC
Grupo Industrial Maseca, S.A. de C.V. "B" ................. MEX 2,653,900 1,917,576 0.8
FOOD
Pepsi-Gemex S.A. - GDR-/- {\/} ............................ MEX 122,800 1,665,475 0.7
BEVERAGES - NON-ALCOHOLIC
Embotelladora Andina S.A. - ADR{\/} ....................... CHLE 15,000 338,438 0.1
BEVERAGES - NON-ALCOHOLIC
Sudamtex de Venezuela "B" - ADR{\/} ....................... VENZ 32,592 138,516 0.1
TEXTILES & APPAREL
Mavesa S.A. - ADR{\/} ..................................... VENZ 24,090 96,360 --
FOOD
Cerveceria Backus & Johnston S.A. "T" ..................... PERU 75,905 59,133 --
BEVERAGES - ALCOHOLIC
------------
16,960,240
------------
Capital Goods (1.3%)
Corporacion GEO, S.A. de C.V. "B"-/- ...................... MEX 271,000 1,874,923 0.8
CONSTRUCTION
ARA, S.A. de C.V.-/- ...................................... MEX 230,000 1,148,642 0.5
CONSTRUCTION
------------
3,023,565
------------
Consumer Durables (0.5%)
Brasmotor S.A. Preferred .................................. BRZL 8,532,000 1,182,617 0.5
APPLIANCES & HOUSEHOLD DURABLES
------------ -----
TOTAL EQUITY INVESTMENTS (cost $228,528,134) ................ 233,366,640 95.3
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-101
<PAGE> 249
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (0.0%)
Brazil (0.0%)
Companhia Vale do Rio Doce - Non Convertible (cost
$0) .................................................... BRL 276,400 -- --
------------ -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- - ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated April 30, 1998, with State Street Bank & Trust Co.,
due May 1, 1998, for an effective yield of 5.44%,
collateralized by $8,935,000 U.S. Treasury Bills, 6.125%
due 8/31/98 (market value of collateral is $9,046,688,
including accrued interest). (cost $8,868,000) ........... $ 8,868,000 3.6
------------ -----
TOTAL INVESTMENTS (cost $237,396,134) * .................... 242,234,640 98.9
Other Assets and Liabilities ................................ 2,658,295 1.1
------------ -----
NET ASSETS .................................................. $244,892,935 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
[.] Each unit represents 3 "B" shares and 1 "C" share.
{=} Each unit represents one preferred share of Unibanco and one
preferred "B" share of Unibanco Holdings.
* For Federal income tax purposes, cost is $237,686,922 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 24,173,992
Unrealized depreciation: (19,626,274)
-------------
Net unrealized appreciation: $ 4,547,718
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at April 30, 1998, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-----------------------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- ------------------------------------------------------------------------ ----------- ----------------- ---------
<S> <C> <C> <C>
Argentina (ARG/ARS) .................................................... 10.1 10.1
Brazil (BRZL/BRL) ...................................................... 35.7 35.7
Chile (CHLE/CLP) ....................................................... 12.1 12.1
Mexico (MEX/MXN) ....................................................... 30.4 30.4
Panama (PAN/PND) ....................................................... 1.1 1.1
Peru (PERU/PES) ........................................................ 3.2 3.2
United States (US/USD) ................................................. 1.5 4.7 6.2
Venezuela (VENZ/VEB) ................................................... 1.2 1.2
----- --- ---------
Total ................................................................. 95.3 4.7 100.0
----- --- ---------
----- --- ---------
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $244,892,935.
The accompanying notes are an integral part of the financial statements.
FS-102
<PAGE> 250
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
STATEMENT OF ASSETS
AND LIABILITIES
April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $237,396,134) (Note 1).......................... $242,234,640
U.S. currency................................................................. $ 427
Foreign currencies (cost $7,378,125).......................................... 7,381,624 7,382,051
----------
Dividends receivable...................................................................... 2,201,350
Receivable for Fund shares sold........................................................... 199,570
Receivable from Chancellor LGT Asset Management, Inc. (Note 2)............................ 195,122
Interest receivable....................................................................... 2,619
------------
Total assets............................................................................ 252,215,352
------------
Liabilities:
Payable for securities purchased.......................................................... 3,531,832
Payable for Fund shares repurchased....................................................... 2,891,492
Payable for investment management and administration fees (Note 2)........................ 306,451
Payable for transfer agent fees (Note 2).................................................. 217,388
Payable for service and distribution expenses (Note 2).................................... 147,048
Payable for printing and postage expenses................................................. 67,469
Payable for custodian fees................................................................ 49,709
Payable for professional fees............................................................. 45,778
Payable for registration and filing fees.................................................. 6,621
Payable for fund accounting fees (Note 2)................................................. 2,722
Payable for Directors' fees and expenses (Note 2)......................................... 158
Other accrued expenses.................................................................... 55,749
------------
Total liabilities....................................................................... 7,322,417
------------
Net assets.................................................................................. $244,892,935
------------
------------
Class A:
Net asset value and redemption price per share ($131,814,677 DIVIDED BY 6,364,611 shares
outstanding)............................................................................... $ 20.71
------------
------------
Maximum offering price per share (100/95.25 of $20.71) *.................................... $ 21.74
------------
------------
Class B:+
Net asset value and offering price per share ($112,321,626 DIVIDED BY 5,507,298 shares
outstanding)............................................................................... $ 20.40
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($756,632 DIVIDED
BY 36,559 shares outstanding).............................................................. $ 20.70
------------
------------
Net assets consist of:
Paid in capital (Note 4).................................................................. $250,779,254
Undistributed net investment income....................................................... 891,469
Accumulated net realized loss on investments and foreign currency transactions............ (11,599,724)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (16,570)
Net unrealized appreciation of investments................................................ 4,838,506
------------
Total -- representing net assets applicable to capital shares outstanding................... $244,892,935
------------
------------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-103
<PAGE> 251
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
STATEMENT OF OPERATIONS
Six months ended April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $275,465)............................... $3,895,778
Securities lending income.................................................................. 92,678
Interest income............................................................................ 74,780
----------
Total investment income.................................................................. 4,063,236
----------
Expenses:
Investment management and administration fees (Note 2)..................................... 1,294,289
Service and distribution expenses: (Note 2)
Class A...................................................................... $ 355,309
Class B...................................................................... 611,111 966,420
----------
Transfer agent fees (Note 2)............................................................... 579,200
Interest expense (Note 1).................................................................. 208,858
Printing and postage expenses.............................................................. 96,111
Custodian fees............................................................................. 92,129
Professional fees.......................................................................... 79,345
Registration and filing fees............................................................... 48,630
Fund accounting fees (Note 2).............................................................. 35,020
Directors' fees and expenses (Note 2)...................................................... 5,249
Other expenses............................................................................. 6,335
----------
Total expenses before reimbursement...................................................... 3,411,586
----------
Expenses reimbursed by Chancellor LGT Asset Management, Inc. (Note 2).................. (245,122)
----------
Total net expenses....................................................................... 3,166,464
----------
Net investment income........................................................................ 896,772
----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized gain on investments............................................... 3,786,790
Net realized loss on foreign currency transactions............................. (156,400)
----------
Net realized gain during the period...................................................... 3,630,390
Net change in unrealized depreciation on translation of assets and liabilities
in foreign currencies......................................................... (9,849)
Net change in unrealized appreciation of investments........................... 13,997,378
----------
Net unrealized appreciation during the period............................................ 13,987,529
----------
Net realized and unrealized gain on investments and foreign currencies....................... 17,617,919
----------
Net increase in net assets resulting from operations......................................... $18,514,691
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-104
<PAGE> 252
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
---------------- ----------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income......................................................... $ 896,772 $ 1,116,958
Net realized gain on investments and foreign currency transactions............ 3,630,390 84,545,615
Net change in unrealized appreciation (depreciation) on translation of assets
and liabilities in foreign currencies........................................ (9,849) 25,640
Net change in unrealized appreciation (depreciation) of investments........... 13,997,378 (47,707,162)
---------------- ----------------
Net increase in net assets resulting from operations........................ 18,514,691 37,981,051
---------------- ----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income.................................................... (219,488) --
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income.................................................... (5,487) --
---------------- ----------------
Total distributions......................................................... (224,975) --
---------------- ----------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested.............................. 410,769,788 1,267,100,757
Decrease from capital shares repurchased...................................... (477,746,631) (1,327,093,718)
---------------- ----------------
Net decrease from capital share transactions................................ (66,976,843) (59,992,961)
---------------- ----------------
Total decrease in net assets.................................................... (48,687,127) (22,011,910)
Net assets:
Beginning of period........................................................... 293,580,062 315,591,972
---------------- ----------------
End of period *............................................................... $ 244,892,935 $ 293,580,062
---------------- ----------------
---------------- ----------------
* Includes undistributed net investment income of.............................. $ 891,469 $ 219,672
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-105
<PAGE> 253
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994 (d) 1993 (d)
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 19.50 $ 17.95 $ 15.38 $ 26.11 $ 19.78 $ 15.59
---------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income (loss).......... 0.09* 0.11 0.09 0.15 (0.08) 0.18**
Net realized and unrealized gain
(loss) on investments................ 1.15 1.44 2.59 (9.28) 6.75 5.21
---------- --------- --------- --------- --------- ---------
Net increase (decrease) from
investment operations.............. 1.24 1.55 2.68 (9.13) 6.67 5.39
---------- --------- --------- --------- --------- ---------
Distributions to shareholders:
From net investment income............ (0.03) -- (0.08) -- (0.19) (0.12)
From net realized gain on
investments.......................... -- -- -- (1.60) (0.15) (1.08)
In excess of net investment income.... -- -- (0.03) -- -- --
---------- --------- --------- --------- --------- ---------
Total distributions................. (0.03) -- (0.11) (1.60) (0.34) (1.20)
---------- --------- --------- --------- --------- ---------
Net asset value, end of period.......... $ 20.71 $ 19.50 $ 17.95 $ 15.38 $ 26.11 $ 19.78
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
Total investment return (c)............. 6.50%(b) 8.52% 17.52% (37.16)% 34.10% 37.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $131,815 $159,496 $177,373 $182,462 $336,960 $129,280
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Note 1)............ 0.90%(a) 0.52% 0.46% 0.86% (0.29)% 1.29%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 0.71%(a) 0.42% 0.39% 0.85% N/A 1.2%
Ratio of operating expenses to average
net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Note 1)............ 1.99%(a) 1.96% 2.03% 2.11% 2.04% 2.4%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.18%(a) 2.06% 2.10% 2.12% N/A 2.49%
Ratio of interest expense to average net
assets (Note 1)++++.................... 0.16%(a) N/A N/A N/A N/A N/A
Portfolio turnover rate++++............. 27%(a) 130% 101% 125% 155% 112%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0016 $ 0.0007 $ 0.0005 N/A N/A N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02.
** Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02.
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate, average commission rate, and ratio of
interest expense to average net assets are calculated on the basis of
the Fund as a whole without distinguishing between the classes of
shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-106
<PAGE> 254
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++
--------------------------------------------------------------------------
SIX MONTHS APRIL 1, 1993
ENDED YEAR ENDED OCTOBER 31, TO
APRIL 30, --------------------------------------------- OCTOBER 31,
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994 (d) 1993 (d)
---------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 19.23 $ 17.78 $ 15.21 $ 25.94 $ 19.75 $ 16.26
---------- --------- --------- --------- --------- -------------
Income from investment operations:
Net investment income (loss).......... 0.04* 0.01 (0.00) 0.06 (0.22) (0.07)
Net realized and unrealized gain
(loss) on investments................ 1.13 1.44 2.59 (9.19) 6.74 3.56
---------- --------- --------- --------- --------- -------------
Net increase (decrease) from
investment operations.............. 1.17 1.45 2.59 (9.13) 6.52 3.49
---------- --------- --------- --------- --------- -------------
Distributions to shareholders:
From net investment income............ -- -- (0.01) -- (0.18) --
From net realized gain on
investments.......................... -- -- -- (1.60) (0.15) --
In excess of net investment income.... -- -- (0.01) -- -- --
---------- --------- --------- --------- --------- -------------
Total distributions................. -- -- (0.02) (1.60) (0.33) --
---------- --------- --------- --------- --------- -------------
Net asset value, end of period.......... $ 20.40 $ 19.23 $ 17.78 $ 15.21 $ 25.94 $ 19.75
---------- --------- --------- --------- --------- -------------
---------- --------- --------- --------- --------- -------------
Total investment return (c)............. 6.19%(b) 8.04% 17.02% (37.42)% 33.33% 21.5% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $112,322 $133,448 $137,400 $134,527 $211,673 $13,576
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Note 1)............ 0.40%(a) 0.02% (0.04)% 0.36% (0.79)% (0.7)% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 0.21%(a) (0.08)% (0.11)% 0.35% N/A N/A
Ratio of operating expenses to average
net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Note 1)............ 2.49%(a) 2.46% 2.53% 2.61% 2.54% 2.9% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.68%(a) 2.56% 2.60% 2.62% N/A N/A
Ratio of interest expense to average net
assets (Note 1)++++.................... 0.16%(a) N/A N/A N/A N/A N/A
Portfolio turnover rate++++............. 27%(a) 130% 101% 125% 155% 112%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0016 $ 0.0007 $ 0.0005 N/A N/A N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02.
** Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02.
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate, average commission rate, and ratio of
interest expense to average net assets are calculated on the basis of
the Fund as a whole without distinguishing between the classes of
shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-107
<PAGE> 255
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+++
-----------------------------------------------
SIX MONTHS YEAR ENDED JUNE 1, 1995
ENDED OCTOBER 31, TO
APRIL 30, ------------------- OCTOBER 31,
1998 (d) 1997 (d) 1996 (d) 1995
---------- -------- -------- ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 19.57 $ 17.94 $ 15.40 $15.95
---------- -------- -------- ------------
Income from investment operations:
Net investment income (loss).......... 0.13* 0.19 0.17 0.09
Net realized and unrealized gain
(loss) on investments................ 1.15 1.44 2.58 (0.64)
---------- -------- -------- ------------
Net increase (decrease) from
investment operations.............. 1.28 1.63 2.75 (0.55)
---------- -------- -------- ------------
Distributions to shareholders:
From net investment income............ (0.15) -- (0.14) --
From net realized gain on
investments.......................... -- -- -- --
In excess of net investment income.... -- -- (0.07) --
---------- -------- -------- ------------
Total distributions................. (0.15) -- (0.21) --
---------- -------- -------- ------------
Net asset value, end of period.......... $ 20.70 $ 19.57 $ 17.94 $15.40
---------- -------- -------- ------------
---------- -------- -------- ------------
Total investment return (c)............. 6.64%(b) 8.91% 18.16% (3.45)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 757 $ 636 $ 818 $ 369
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Note 1)............ 1.40%(a) 1.02% 0.96% 1.36% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 1.21%(a) 0.92% 0.89% 1.35% (a)
Ratio of operating expenses to average
net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Note 1)............ 1.49%(a) 1.46% 1.53% 1.61% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 1.68%(a) 1.56% 1.60% 1.62% (a)
Ratio of interest expense to average net
assets (Note 1)++++.................... 0.16%(a) N/A N/A N/A
Portfolio turnover rate++++............. 27%(a) 130% 101% 125%
Average commission rate per share paid
on portfolio transactions++++.......... $0.0016 $0.0007 $0.0005 N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02.
** Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02.
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate, average commission rate, and ratio of
interest expense to average net assets are calculated on the basis of
the Fund as a whole without distinguishing between the classes of
shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-108
<PAGE> 256
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
NOTES TO
FINANCIAL STATEMENTS
April 30, 1998
- --------------------------------------------------------------------------------
The following Notes to Financial Statements are for the period ending April 30,
1998, and unless otherwise indicated reflect facts as of that date. Please see
"Note 5 -- Subsequent Events" for a discussion of certain changes which took
place after April 30, 1998.
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 5)
GT Global Latin America Growth Fund ("Fund") is a separate series of GT
Investment Funds, Inc. ("Company"). Effective June 1, 1998, the Company was
renamed A I M Investment Funds, Inc. and the Fund was renamed AIM Latin American
Growth Fund. The Company is organized as a Maryland corporation and is
registered under the Investment Company Act of 1940, as amended ("1940 Act"), as
a non-diversified, open-end management investment company. The Company has
thirteen series of shares in operation, each series corresponding to a distinct
portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by Chancellor LGT Asset
Management, Inc. ("the Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with maturity of 60
days or less are valued at amortized cost adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records are maintained in U.S. dollars. The market values of
foreign securities, currency holdings, and other assets and liabilities are
recorded in the books and records of the Fund after translation to U.S. dollars
based on the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are translated at
prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which
FS-109
<PAGE> 257
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
the value, including accrued interest, is at least equal to the amount to be
repaid to the Fund under each agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. Forward Contracts involve market risk in excess of the
amount shown in the Fund's "Statement of Assets and Liabilities." The Fund could
be exposed to risk if a counterparty is unable to meet the terms of the contract
or if the value of the currency changes unfavorably. The Fund may enter into
Forward Contracts in connection with planned purchases or sales of securities,
or to hedge against adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on an exchange is valued at its last bid price,
or, in the case of an over-the-counter option, is valued at the average of the
last bid prices obtained from brokers. If an option expires on its stipulated
expiration date or if the Fund enters into a closing purchase transaction, a
gain or loss is realized without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is extinguished.
If a written call option is exercised, a gain or loss is realized from the sale
of the underlying security and the proceeds of the sale are increased by the
premium originally received. If a written put option is exercised, the cost of
the underlying security purchased would be decreased by the premium originally
received. The Fund can write options only on a covered basis, which, for a call,
requires that the fund hold the underlying securities and, for a put, requires
the Fund to maintain in a segregated account cash, U.S. government securities,
or other liquid securities in an amount not less than the exercise price or
otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock or
bond market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock or bond
market and to fluctuations in currency values or interest rates. At April 30,
1998, the fund had no open futures contracts.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Interest income is recorded on the
accrual basis. Where a high level of uncertainty exists as to its collection,
income is recorded net of all withholding tax with any rebate recorded when
received. The Fund may trade securities on other than normal settlement terms.
This may increase the risk if the other party to the transaction fails to
deliver and causes the Fund to subsequently invest at less advantageous prices.
(H) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any
FS-110
<PAGE> 258
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
excise tax under Section 4982 of the Code. Therefore, no provision has been made
for Federal taxes on income, capital gains, or unrealized appreciation of
securities held, and excise tax on income and capital gains. The Fund currently
has a capital loss carry forward of $14,939,326, of which $8,211,999 expires in
2003 and $6,727,327 expires in 2004.
(I) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(J) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(K) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(L) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(M) PORTFOLIO SECURITIES LOANED
At April 30, 1998, stocks with an aggregate value of approximately $29,932,877
were on loan to brokers. The loans were secured by cash collateral of
$30,797,802. For international securities, cash collateral is received by the
Fund against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by the Fund against loaned securities in an amount at
least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of the loan. The
cash collateral is invested in a securities lending trust which consists of a
portfolio of high quality short duration securities whose average effective
duration is restricted to 120 days or less. For the six months ended April 30,
1998, the Fund received $92,678 of income from securities lending.
(N) LINE OF CREDIT
The Fund, along with certain other funds ("GT Funds") advised and/or
administered by the Manager, has a line of credit with each of BankBoston and
State Street Bank & Trust Company. The arrangements with the banks allow the
Fund and the GT Funds to borrow an aggregate maximum amount of $250,000,000. The
Fund is limited to borrowing up to 33 1/3% of the value of each Fund's total
assets. On April 30, 1998, the Fund had no loans outstanding.
For the six months ended April 30, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $8,818,847, with a weighted average interest rate of 6.28%.
Interest expense for the Fund for the six months ended April 30, 1998, was
$201,369. Other interest expense charges amounted to $7,489.
2. RELATED PARTIES (SEE ALSO NOTE 5)
For the period ended April 30, 1998, Chancellor LGT Asset Management, Inc. was
the Fund's investment manager and administrator. The Fund pays investment
management and administration fees to the Manager at the annualized rate of
0.975% of the first $500 million of average daily net assets of the Fund; 0.95%
of the next $500 million; 0.925% of the next $500 million and 0.90% on amounts
thereafter. These fees are computed daily and paid monthly.
For the period ended April 30, 1998, GT Global Inc. ("GT Global"), an affiliate
of the Manager, is the Fund's distributor. The Fund offers Class A, Class B and
Advisor Class shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the period ended April 30, 1998, GT Global retained $15,816
of such sales charges. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge ("CDSC") upon redemption, in
accordance with the Fund's current prospectus. GT Global collected CDSCs in the
amount of $74 for the period ended April 30, 1998. GT Global also makes ongoing
shareholder servicing and trail commission payments to dealers whose clients
hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the six months ended April 30, 1998, GT Global collected CDSCs
in the amount of $513,130. In addition, GT Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
FS-111
<PAGE> 259
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
Pursuant to the then effective separate distribution plans adopted under 1940
Act Rule 12b-1 by the Company's Board of Directors with respect to the Fund's
Class A shares ("Class A Plan") and Class B shares ("Class B Plan"), the Fund
reimbursed GT Global for a portion of its shareholder servicing and distribution
expenses. Under that Class A Plan, the Fund was permitted to pay GT Global a
service fee at the annualized rate of up to 0.25% of the average daily net
assets of the Fund's Class A shares for GT Global's expenditures incurred in
servicing and maintaining shareholder accounts, and was permitted to pay GT
Global a distribution fee at the annualized rate of up to 0.50% of the average
daily net assets of the Fund's Class A shares, less any amounts paid by the Fund
as the aforementioned service fee, for GT Global's expenditures incurred in
providing services as distributor. All expenses for which GT Global was
reimbursed under the Class A Plan would have been incurred within one year of
such reimbursement.
For the period ended April 30, 1998, pursuant to that Class B Plan, the Fund was
permitted to pay GT Global a service fee at the annualized rate of up to 0.25%
of the average daily net assets of the Fund's Class B shares for GT Global's
expenditures incurred in servicing and maintaining shareholder accounts, and was
permitted to pay GT Global a distribution fee at the annualized rate of up to
0.75% of the average daily net assets of the Fund's Class B Shares for GT
Global's expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually were permitted to be
carried forward for reimbursement in subsequent years as long as that Plan
continued in effect.
The Manager and GT Global voluntarily undertook to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.00%, 2.50%, and 1.50% of the average
net assets of the Fund's Class A, Class B and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by GT Global
of payments under the Class A Plan and/or Class B Plan and/or reimbursements by
the Manager or GT Global of portions of the Fund's other operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services receives
an annual maintenance fee of $17.50 per account, a new account fee of $4.00 per
account, a per transaction fee of $1.75 for all transactions other than
exchanges and a per exchange fee of $2.25. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the results according to the Funds average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 1998, purchases and sales of investment
securities by the Fund, other than short-term investments, aggregated
$36,018,185 and $101,582,285. There were no purchases or sales of U.S.
government obligations for the six months ended April 30, 1998.
4. CAPITAL SHARES
At April 30, 1998, there were 6,000,000,000 shares of the Company's common stock
authorized, at $0.0001 par value. Of this amount, 200,000,000 were classified as
shares of the Fund; 400,000,000 were classified as shares of GT Global
Government Income Fund; 200,000,000 were classified as shares of GT Global
Developing Markets Fund; 200,000,000 were classified as shares of GT Global
Health Care Fund; 200,000,000 were classified as shares of GT Global Strategic
Income Fund; 200,000,000 were classified as shares of GT Global Currency Fund
(inactive); 200,000,000 were classified as shares of GT Global Growth & Income
Fund; 200,000,000 were classified as shares of GT Global Small Companies Fund
(inactive); 200,000,000 were classified as shares of GT Global Natural Resources
Fund; 200,000,000 were classified as shares of GT Global Infrastructure Fund;
400,000,000 were classified as shares of GT Global Telecommunications Fund;
200,000,000 were classified as shares of GT Global Emerging Markets Fund; and
200,000,000 were classified as shares of GT Global Financial Services Fund;
200,000,000 were classified as shares of GT Global High Income Fund; and
200,000,000 were classified as shares of GT Global Consumer Products and
Services Fund. The shares of each of the foregoing series of the Company were
divided equally into two classes, designated Class A and Class B common stock.
With respect to the issuance of Advisor Class shares, 100,000,000 shares were
classified as shares of each of the fifteen series of the Company and designated
as Advisor Class common stock. 1,100,000,000 shares remain unclassified.
Transactions in capital shares of the Fund were as follows:
FS-112
<PAGE> 260
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 13,405,201 $ 265,384,384 46,171,230 $ 937,785,689
Shares issued in connection with
reinvestment of distributions......... 8,768 183,853 -- --
--------------- ------------------ --------------- ------------------
13,413,969 265,568,237 46,171,230 937,785,689
Shares repurchased...................... (15,226,871) (303,415,633) (47,874,889) (980,118,186)
--------------- ------------------ --------------- ------------------
Net decrease............................ (1,812,902) $ (37,847,396) (1,703,659) $ (42,332,497)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 6,421,237 $ 124,959,479 14,424,170 $ 299,346,687
Shares issued in connection with
reinvestment of distributions......... -- -- -- --
--------------- ------------------ --------------- ------------------
6,421,237 124,959,479 14,424,170 299,346,687
Shares repurchased...................... (7,853,666) (154,120,468) (15,210,392) (316,506,347)
--------------- ------------------ --------------- ------------------
Net decrease............................ (1,432,429) $ (29,160,989) (786,222) $ (17,159,660)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 1,027,199 $ 20,236,630 1,448,623 $ 29,968,381
Shares issued in connection with
reinvestment of distributions......... 260 5,442 -- --
--------------- ------------------ --------------- ------------------
1,027,459 20,242,072 1,448,623 29,968,381
Shares repurchased...................... (1,023,376) (20,210,530) (1,461,777) (30,469,185)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. 4,083 $ 31,542 (13,154) $ (500,804)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
5. SUBSEQUENT EVENTS
On May 29, 1998, Liechtenstein Global Trust ("LGT"), the former indirect parent
organization of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"),
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included Chancellor LGT and
certain other affiliates. As a result of this transaction, Chancellor LGT was
renamed INVESCO (NY), Inc. and is now an indirect wholly-owned subsidiary of
AMVESCAP PLC. In connection with this transaction, A I M Advisors, Inc. ("AIM"),
an indirect wholly-owned subsidiary of AMVESCAP PLC, became the investment
adviser and administrator of the Fund and INVESCO (NY), Inc. became the
sub-adviser and sub-administrator of the Fund. In addition, A I M Distributors,
Inc. replaced GT Global, Inc. as the Fund's principal underwriter and the Fund
became subject to compensation-type Rule 12b-1 plans of distribution, which
replaced the Fund's former reimbursement-type Rule 12b-1 plans of distribution.
All of the changes became effective as of the close of business on May 29, 1998.
FS-113
<PAGE> 261
GT GLOBAL LATIN AMERICA GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of GT Global Latin America Growth Fund and Board of
Directors of G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Latin America Growth Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the portfolio of investments, as of October
31, 1997, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Latin America Growth Fund as of October 31, 1997, the results of
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
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<PAGE> 262
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (28.3%)
Telecomunicacoes Brasileiras S.A. (Telebras): ............. BRZL -- -- 10.4
TELEPHONE NETWORKS
ADR{\/} ................................................. -- 208,900 $ 21,203,350 --
Common .................................................. -- 106,900,000 9,502,114 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ........... MEX 170,500 7,374,125 2.5
TELEPHONE NETWORKS
Cifra, S.A. de C.V.: ...................................... MEX -- -- 2.3
RETAILERS-OTHER
"C" ..................................................... -- 3,340,500 5,800,868 --
"B" - ADR{\/} ........................................... -- 335,792 648,079 --
"A" ..................................................... -- 104,372 192,244 --
Compania Anonima Nacional Telefonos de Venezuela (CANTV) -
ADR{\/} .................................................. VENZ 147,400 6,448,750 2.2
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ........................ PERU 254,100 5,018,475 1.7
TELEPHONE NETWORKS
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP-/- ................................................ BRZL 26,748,622 4,852,798 1.7
BUSINESS & PUBLIC SERVICES
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ......... CHLE 163,000 4,523,250 1.5
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP): .............. BRZL -- -- 1.2
TELEPHONE NETWORKS
Preferred ............................................... -- 11,109,390 2,902,308 --
Common-/- ............................................... -- 2,802,000 597,306 --
Santa Isabel S.A. - ADR{\/} ............................... CHLE 181,100 3,350,350 1.1
RETAILERS-FOOD
Telecomunicacoes do Rio de Janeiro S.A. (TELERJ)
Preferred ................................................ BRZL 34,694,581 3,304,546 1.1
TELEPHONE NETWORKS
Controladora Comercial Mexicana, S.A. de C.V.: ............ MEX -- -- 1.0
RETAILERS-FOOD
UBC ..................................................... -- 2,682,000 2,665,940 --
GDR{\/} ................................................. -- 13,900 276,263 --
Telefonica de Argentina S.A. - ADR{\/} .................... ARG 90,900 2,556,563 0.9
TELEPHONE NETWORKS
Grupo Televisa, S.A. de C.V. - GDR-/- {\/} ................ MEX 47,000 1,457,000 0.5
BROADCASTING & PUBLISHING
Supermercados Unimarc S.A. - ADR (Chile){\/} -/- .......... CHLE 33,000 495,000 0.2
RETAILERS-FOOD
------------
83,169,329
------------
Energy (24.6%)
Centrais Eletricas Brasileiras S.A. (Eletrobras): ......... BRZL -- -- 4.7
ELECTRICAL & GAS UTILITIES
"B" Preferred ........................................... -- 20,252,000 8,762,885 --
Common-/- ............................................... -- 11,999,000 4,843,573 --
Petroleo Brasileiro S.A. (Petrobras) Preferred ............ BRZL 48,642,000 9,045,365 3.1
OIL
C.A. La Electricidad de Caracas ........................... VENZ 5,672,038 7,456,318 2.5
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. .................... BRZL 17,602,000 5,843,915 2.0
ELECTRICAL & GAS UTILITIES
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-115
<PAGE> 263
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Enersis S.A. - ADR{\/} .................................... CHLE 174,500 $ 5,758,500 2.0
ELECTRICAL & GAS UTILITIES
Empresa Nacional de Electricidad S.A. - ADR{\/} ........... CHLE 254,300 5,117,788 1.7
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ........................................ ARG 148,900 4,764,800 1.6
OIL
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} .... BRZL 112,200 4,488,000 1.5
ELECTRICAL & GAS UTILITIES
Harken Energy Corp.-/- .................................... US 674,500 4,426,406 1.5
OIL
Chilgener S.A. - ADR{\/} .................................. CHLE 121,819 3,289,113 1.1
ELECTRICAL & GAS UTILITIES
Light - Participacoes S.A. ................................ BRZL 10,585,000 2,707,701 0.9
ELECTRICAL & GAS UTILITIES
Companhia Brasileira de Petroleo Ipiranga S.A.
Preferred ................................................ BRZL 173,785,000 2,522,279 0.9
OIL
Perez Companc S.A. "B" .................................... ARG 377,196 2,362,665 0.8
OIL
Compania Paulista de Forca e Luz .......................... BRZL 5,030,000 736,842 0.3
ELECTRICAL & GAS UTILITIES
------------
72,126,150
------------
Materials/Basic Industry (13.4%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" ................ MEX 2,614,000 11,520,383 3.9
PAPER/PACKAGING
Apasco, S.A. de C.V. ...................................... MEX 1,331,000 8,129,461 2.8
CEMENT
Companhia Vale do Rio Doce Preferred ...................... BRZL 306,600 5,923,966 2.0
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ......... CHLE 95,100 4,933,313 1.7
CHEMICALS
Grupo Industrial Minera Mexico "L" ........................ MEX 1,406,724 4,178,055 1.4
METALS - NON-FERROUS
Industrias Penoles S.A. (CP) .............................. MEX 978,200 3,895,228 1.3
METALS - NON-FERROUS
Corporacion Venezolana de Cementos, S.A.C.A.: ............. VENZ -- -- 0.3
CEMENT
"A" ..................................................... -- 347,758 704,225 --
"B" ..................................................... -- 161,928 324,987 --
------------
39,609,618
------------
Multi-Industry/Miscellaneous (10.6%)
Alfa, S.A. de C.V. "A" .................................... MEX 1,356,600 9,942,984 3.4
CONGLOMERATE
Grupo Carso, S.A. de C.V. "A1" ............................ MEX 1,357,000 8,629,545 2.9
MULTI-INDUSTRY
Sanluis Corporacion, S.A. de C.V.-/- ...................... MEX 830,200 6,442,750 2.2
CONGLOMERATE
Desc, S.A. de C.V. - ADR{\/} .............................. MEX 93,800 3,177,475 1.1
CONGLOMERATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-116
<PAGE> 264
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
Empresas La Moderna, S.A. de C.V. "A"-/- .................. MEX 355,000 $ 1,743,114 0.6
MULTI-INDUSTRY
Commercial Del Plata-/- ................................... ARG 697,410 1,032,786 0.4
CONGLOMERATE
------------
30,968,654
------------
Finance (9.9%)
Uniao Bancos Brasileiras "A" Preferred .................... BRZL 247,114,000 6,271,997 2.1
BANKS-MONEY CENTER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} .................................................. PAN 89,035 3,539,141 1.2
OTHER FINANCIAL
Banco BHIF - ADR-/-{\/} ................................... CHLE 195,500 3,396,813 1.2
BANKS-MONEY CENTER
Grupo Financiero Banorte "B"-/- ........................... MEX 2,279,000 3,138,743 1.1
BANKS-MONEY CENTER
Credicorp Ltd. - ADR{\/} .................................. PERU 140,320 2,516,990 0.9
BANKS-MONEY CENTER
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} .................................................. CHLE 149,900 2,510,825 0.9
INVESTMENT MANAGEMENT
Banco Provincial S.A. ..................................... VENZ 1,196,992 2,390,332 0.8
BANKS-MONEY CENTER
Banco de A. Edwards - ADR{\/} ............................. CHLE 125,100 2,173,613 0.7
BANKS-MONEY CENTER
Banco Frances del Rio de la Plata S.A. - ADR{\/} .......... ARG 58,000 1,428,250 0.5
BANKS-MONEY CENTER
ARA, S.A. de C.V.-/- ...................................... MEX 230,000 848,383 0.3
REAL ESTATE
Banco Wiese - ADR{\/} ..................................... PERU 131,400 730,913 0.2
BANKS-MONEY CENTER
------------
28,946,000
------------
Consumer Non-Durables (8.1%)
Fomento Economico Mexicano, S.A. de C.V. "B" .............. MEX 1,274,500 9,005,449 3.1
BEVERAGES - ALCOHOLIC
Grupo Industrial Maseca, S.A. de C.V. "B" ................. MEX 4,980,000 4,830,898 1.6
FOOD
Companhia Cervejaria Brahma Preferred ..................... BRZL 6,838,000 4,279,949 1.5
BEVERAGES - ALCOHOLIC
Compania Cervecerias Unidas S.A. - ADR{\/} ................ CHLE 138,800 3,383,250 1.2
BEVERAGES - ALCOHOLIC
Mavesa S.A. - ADR{\/} ..................................... VENZ 147,500 1,106,250 0.4
FOOD
Sudamtex de Venezuela "B" - ADR{\/} ....................... VENZ 53,200 691,600 0.2
TEXTILES & APPAREL
Embotelladora Andina S.A. - ADR{\/} ....................... CHLE 15,000 360,000 0.1
BEVERAGES - NON-ALCOHOLIC
Cerveceria Backus & Johnston S.A. "T" ..................... PERU 75,905 69,463 --
BEVERAGES - ALCOHOLIC
------------
23,726,859
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-117
<PAGE> 265
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Durables (0.9%)
Brasmotor S.A. Preferred .................................. BRZL 18,327,000 $ 2,576,819 0.9
APPLIANCES & HOUSEHOLD DURABLES
------------ -----
TOTAL EQUITY INVESTMENTS (cost $290,305,760) ................ 281,123,429 95.8
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Telecomunicacoes do Rio de Janeiro S.A. (TELERJ) Rights -
Preferred, expire 11/12/97 ............................... BRZL 1,689,830 22,993 --
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP) Rights, expire
11/12/97 ................................................. BRZL 513,280 466 --
TELEPHONE NETWORKS
------------ -----
TOTAL RIGHTS (cost $0) ...................................... 23,459 --
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (0.0%)
Brazil (0.0%)
Companhia Vale do Rio Doce - Non Convertible (cost
$0) .................................................... BRL 276,400 -- --
------------ -----
TOTAL INVESTMENTS (cost $290,305,760) * .................... 281,146,888 95.8
Other Assets and Liabilities ................................ 12,433,174 4.2
------------ -----
NET ASSETS .................................................. $293,580,062 100.0
------------ -----
------------ -----
</TABLE>
- --------------
{\/} U.S. currency denominated.
-/- Non-income producing security.
* For Federal income tax purposes, cost is $290,596,548 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,409,562
Unrealized depreciation: (35,859,222)
-------------
Net unrealized depreciation: $ (9,449,660)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
FS-118
<PAGE> 266
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS{d}
-----------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ----- ------- -----
<S> <C> <C> <C>
Argentina (ARG/ARS) .................. 4.2 4.2
Brazil (BRZL/BRL) .................... 34.3 34.3
Chile (CHLE/CLP) ..................... 13.4 13.4
Mexico (MEX/MXN) ..................... 32.0 32.0
Panama (PAN/PND) ..................... 1.2 1.2
Peru (PERU/PES) ...................... 2.8 2.8
United States (US/USD) ............... 1.5 4.2 5.7
Venezuela (VENZ/VEB) ................. 6.4 6.4
----- ------- -----
Total ............................... 95.8 4.2 100.0
----- ------- -----
----- ------- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $293,580,062.
The accompanying notes are an integral part of the financial statements.
FS-119
<PAGE> 267
GT GLOBAL LATIN AMERICA GROWTH FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $290,305,760) (Note 1)............................. $281,146,888
U.S. currency..................................................................... $ 924
Foreign currencies (cost $44,025)................................................. 44,033 44,957
---------
Receivable for Fund shares sold.............................................................. 14,119,361
Receivable for securities sold............................................................... 4,099,448
Dividends receivable......................................................................... 686,435
Miscellaneous receivable..................................................................... 19,727
-----------
Total assets............................................................................... 300,116,816
-----------
Liabilities:
Payable for loan outstanding (Note 1)........................................................ 3,238,000
Payable for Fund shares repurchased.......................................................... 2,418,769
Payable for investment management and administration fees (Note 2)........................... 305,562
Payable for service and distribution expenses (Note 2)....................................... 233,877
Payable for transfer agent fees (Note 2)..................................................... 174,161
Payable for printing and postage expenses.................................................... 87,242
Payable for professional fees................................................................ 37,498
Payable for custodian fees (Note 1).......................................................... 17,552
Payable for registration and filing fees..................................................... 5,729
Payable for Directors' fees and expenses (Note 2)............................................ 5,654
Payable for fund accounting fees (Note 2).................................................... 5,612
Other accrued expenses....................................................................... 7,098
-----------
Total liabilities.......................................................................... 6,536,754
-----------
Net assets..................................................................................... $293,580,062
-----------
-----------
Class A:
Net asset value and redemption price per share ($159,496,474 DIVIDED BY 8,177,513 shares
outstanding).................................................................................. $ 19.50
-----------
-----------
Maximum offering price per share (100/95.25 of $19.50) *....................................... $ 20.47
-----------
-----------
Class B:+
Net asset value and offering price per share ($133,448,007 DIVIDED BY 6,939,727 shares
outstanding).................................................................................. $ 19.23
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($635,581 DIVIDED BY
32,476 shares outstanding).................................................................... $ 19.57
-----------
-----------
Net assets consist of:
Paid in capital (Note 4)..................................................................... $317,756,097
Undistributed net investment income.......................................................... 219,672
Accumulated net realized loss on investments and foreign currency transactions............... (15,230,114)
Net unrealized depreciation on translation of assets and liabilities in foreign currencies... (6,721)
Net unrealized depreciation of investments................................................... (9,158,872)
-----------
Total -- representing net assets applicable to capital shares outstanding...................... $293,580,062
-----------
-----------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-120
<PAGE> 268
GT GLOBAL LATIN AMERICA GROWTH FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $266,649).............................. $ 8,471,075
Interest income........................................................................... 530,160
-----------
Total investment income................................................................. 9,001,235
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 3,538,586
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 1,011,259
Class B.................................................................... 1,587,737 2,598,996
-----------
Transfer agent fees (Note 2).............................................................. 1,261,524
Custodian fees (Note 1)................................................................... 196,565
Printing and postage expenses............................................................. 175,200
Fund accounting fees (Note 2)............................................................. 90,733
Audit fees................................................................................ 73,365
Registration and filing fees.............................................................. 64,495
Legal fees................................................................................ 17,155
Directors' fees and expenses (Note 2)..................................................... 13,140
Other expenses (Note 1)................................................................... 215,751
-----------
Total expenses before reductions........................................................ 8,245,510
-----------
Expense reductions (Notes 1 & 6)...................................................... (361,233)
-----------
Total net expenses...................................................................... 7,884,277
-----------
Net investment income....................................................................... 1,116,958
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized gain on investments............................................. 85,442,902
Net realized loss on foreign currency transactions........................... (897,287)
-----------
Net realized gain during the year....................................................... 84,545,615
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies........................................... 25,640
Net change in unrealized depreciation of investments......................... (47,707,162)
-----------
Net unrealized depreciation during the year............................................. (47,681,522)
-----------
Net realized and unrealized gain on investments and foreign currencies...................... 36,864,093
-----------
Net increase in net assets resulting from operations........................................ $37,981,051
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-121
<PAGE> 269
GT GLOBAL LATIN AMERICA GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income.................................................... $ 1,116,958 $ 878,406
Net realized gain (loss) on investments and foreign currency
transactions............................................................ 84,545,615 (4,964,724)
Net change in unrealized appreciation on translation of assets and
liabilities in foreign currencies....................................... 25,640 608,089
Net change in unrealized appreciation (depreciation) of investments...... (47,707,162) 63,484,288
------------- -------------
Net increase in net assets resulting from operations................... 37,981,051 60,006,059
------------- -------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............................................... -- (842,524)
In excess of net investment income....................................... -- (381,092)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............................................... -- (93,201)
In excess of net investment income....................................... -- (42,157)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............................................... -- (4,285)
In excess of net investment income....................................... -- (1,938)
------------- -------------
Total distributions.................................................... -- (1,365,197)
------------- -------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 1,267,100,757 1,551,794,195
Decrease from capital shares repurchased................................. (1,327,093,718) (1,612,200,649)
------------- -------------
Net decrease from capital share transactions........................... (59,992,961) (60,406,454)
------------- -------------
Total decrease in net assets............................................... (22,011,910) (1,765,592)
Net assets:
Beginning of year........................................................ 315,591,972 317,357,564
------------- -------------
End of year *............................................................ $ 293,580,062 $ 315,591,972
------------- -------------
------------- -------------
* Includes undistributed net investment income of......................... $ 219,672 --
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-122
<PAGE> 270
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (a) 1996 (a) 1995 (a) 1994 (a) 1993 (a)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.95 $ 15.38 $ 26.11 $ 19.78 $ 15.59
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... 0.11 0.09 0.15 (0.08) 0.18*
Net realized and unrealized gain
(loss) on investments................ 1.44 2.59 (9.28) 6.75 5.21
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.55 2.68 (9.13) 6.67 5.39
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- (0.08) -- (0.19) (0.12)
From net realized gain on
investments.......................... -- -- (1.60) (0.15) (1.08)
In excess of net investment income.... -- (0.03) -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions................. -- (0.11) (1.60) (0.34) (1.20)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 19.50 $ 17.95 $ 15.38 $ 26.11 $ 19.78
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (d)............. 8.52% 17.52% (37.16)% 34.10% 37.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 159,496 $ 177,373 $ 182,462 $ 336,960 $ 129,280
Ratio of net investment income (loss) to
average net assets..................... 0.52% 0.46% 0.86% (0.29)% 1.3%*
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
6)................................... 1.96% 2.03% 2.11% 2.04% 2.4%*
Without expense reductions............ 2.06% 2.10% 2.12% N/A N/A
Portfolio turnover rate++++............. 130% 101% 125% 155% 112%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0007 $ 0.0005 N/A N/A N/A
</TABLE>
- ----------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02 for the year ended October 31, 1993.
Without such reimbursements, the expense ratio would have been 2.49%
and the ratio of net investment income to average net assets would
have been 1.25% for the year ended October 31, 1993.
(a) These selected per share data were calculated based upon average
shares outstanding during the period.
(b) Not annualized.
(c) Annualized.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-123
<PAGE> 271
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++
-------------------------------------------------------------
APRIL 1, 1993
YEAR ENDED OCTOBER 31, TO
---------------------------------------------- OCTOBER 31,
1997 (a) 1996 (a) 1995 (a) 1994 (a) 1993 (a)
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.78 $ 15.21 $ 25.94 $ 19.75 $ 16.26
---------- ---------- ---------- ---------- -------------
Income from investment operations:
Net investment income (loss).......... 0.01 (0.00) 0.06 (0.22) (0.07)
Net realized and unrealized gain
(loss) on investments................ 1.44 2.59 (9.19) 6.74 3.56
---------- ---------- ---------- ---------- -------------
Net increase (decrease) from
investment operations.............. 1.45 2.59 (9.13) 6.52 3.49
---------- ---------- ---------- ---------- -------------
Distributions to shareholders:
From net investment income............ -- (0.01) -- (0.18) --
From net realized gain on
investments.......................... -- -- (1.60) (0.15) --
In excess of net investment income.... -- (0.01) -- -- --
---------- ---------- ---------- ---------- -------------
Total distributions................. -- (0.02) (1.60) (0.33) --
---------- ---------- ---------- ---------- -------------
Net asset value, end of period.......... $ 19.23 $ 17.78 $ 15.21 $ 25.94 $ 19.75
---------- ---------- ---------- ---------- -------------
---------- ---------- ---------- ---------- -------------
Total investment return (d)............. 8.04% 17.02% (37.42)% 33.33% 21.5% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 133,448 $ 137,400 $ 134,527 $ 211,673 $13,576
Ratio of net investment income (loss) to
average net assets..................... 0.02% (0.04)% 0.36% (0.79)% (0.7)% (c)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
6)................................... 2.46% 2.53% 2.61% 2.54% 2.9% (c)
Without expense reductions............ 2.56% 2.60% 2.62% N/A N/A
Portfolio turnover rate++++............. 130% 101% 125% 155% 112%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0007 $ 0.0005 N/A N/A N/A
<CAPTION>
ADVISOR CLASS+++
-----------------------------------
YEAR ENDED JUNE 1, 1995
OCTOBER 31, TO
--------------------- OCTOBER 31,
1997 (a) 1996 (a) 1995
-------- ---------- ------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.94 $ 15.40 $ 15.95
-------- ---------- ------------
Income from investment operations:
Net investment income (loss).......... 0.19 0.17 0.09
Net realized and unrealized gain
(loss) on investments................ 1.44 2.58 (0.64)
-------- ---------- ------------
Net increase (decrease) from
investment operations.............. 1.63 2.75 (0.55)
-------- ---------- ------------
Distributions to shareholders:
From net investment income............ -- (0.14) --
From net realized gain on
investments.......................... -- -- --
In excess of net investment income.... -- (0.07) --
-------- ---------- ------------
Total distributions................. -- (0.21) --
-------- ---------- ------------
Net asset value, end of period.......... $ 19.57 $ 17.94 $ 15.40
-------- ---------- ------------
-------- ---------- ------------
Total investment return (d)............. 8.91% 18.16% (3.45)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 636 $ 818 $ 369
Ratio of net investment income (loss) to
average net assets..................... 1.02% 0.96% 1.36 %(c)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
6)................................... 1.46% 1.53% 1.61 %(c)
Without expense reductions............ 1.56% 1.60% 1.62 %(c)
Portfolio turnover rate++++............. 130% 101% 125 %
Average commission rate per share paid
on portfolio transactions++++.......... $0.0007 $ 0.0005 N/A
</TABLE>
- ----------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02 for the year ended October 31, 1993.
Without such reimbursements, the expense ratio would have been 2.49%
and the ratio of net investment income to average net assets would
have been 1.25% for the year ended October 31, 1993.
(a) These selected per share data were calculated based upon average
shares outstanding during the period.
(b) Not annualized.
(c) Annualized.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
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GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Latin America Growth Fund ("Fund") is a separate series of G.T.
Investment Funds, Inc. ("Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as a non-diversified, open-end management investment
company. The Company has thirteen series of shares in operation, each series
corresponding to a distinct portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by Chancellor LGT Asset
Management, Inc. ("the Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with maturity of 60
days or less are valued at amortized cost adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records are maintained in U.S. dollars. The market values of
foreign securities, currency holdings, and other assets and liabilities are
recorded in the books and records of the Fund after translation to U.S. dollars
based on the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are translated at
prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract
FS-125
<PAGE> 273
GT GLOBAL LATIN AMERICA GROWTH FUND
fluctuates with changes in currency exchange rates. The Forward Contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the Forward Contract is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. Forward Contracts
involve market risk in excess of the amount shown in the Fund's "Statement of
Assets and Liabilities." The Fund could be exposed to risk if a counterparty is
unable to meet the terms of the contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities, or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the fund hold the underlying securities
and, for a put, requires the Fund to maintain in a segregated account cash, U.S.
government securities, or other liquid securities in an amount not less than the
exercise price or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund may use options to manage its exposure to the
stock or bond market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock or bond
market and to fluctuations in currency values or interest rates. At October 31,
1997, the fund had no open futures contracts.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Interest income is recorded on the
accrual basis. Where a high level of uncertainty exists as to its collection,
income is recorded net of all withholding tax with any rebate recorded when
received. The Fund may trade securities on other than normal settlement terms.
This may increase the risk if the other party to the transaction fails to
deliver and causes the Fund to subsequently invest at less advantageous prices.
(H) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$14,939,326, of which $8,211,999 expires in 2003 and $6,727,327 expires in 2004.
(I) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in
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<PAGE> 274
GT GLOBAL LATIN AMERICA GROWTH FUND
accordance with Federal income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by the Fund
and timing differences.
(J) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(K) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(L) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(M) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $32,165,965
were on loan to brokers. The loans were secured by cash collateral of
$34,658,600. For international securities, cash collateral is received by the
Fund against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by the Fund against loaned securities in an amount at
least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of the loan. For
the year ended October 31, 1997, the Fund received $315,802 of income from
securities lending which was used to reduce custodian and administrative
expenses.
(N) LINE OF CREDIT
The Fund, along with certain other funds ("GT Funds") advised or administered by
the Manager, has a line of credit with each of BankBoston and State Street Bank
& Trust Company. The arrangements with the banks allow the Fund and the GT Funds
to borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of each Fund's total assets. On October 31,
1997, the Fund had $3,238,000 in loans outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $7,810,915, with a weighted average interest rate of 6.37%.
Interest expense for the Fund for the year ended October 31, 1997 was $98,132,
included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Funds Portfolios' investment
manager and administrator. The Fund pays investment management and
administration fees to the Manager at the annualized rate of 0.975% of the first
$500 million of average daily net assets of the Fund; 0.95% of the next $500
million; 0.925% of the next $500 million and 0.90% on amounts thereafter. These
fees are computed daily and paid monthly.
GT Global Inc. ("GT Global"), an affiliate of the Manager, is the Fund's
distributor. The Fund offers Class A, Class B and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the period ended October 31, 1997, GT Global retained
$50,871 of such sales charges. Purchases of Class A shares exceeding $500,000
may be subject to a contingent deferred sales charge ("CDSC") upon redemption,
in accordance with the Fund's current prospectus. GT Global collected CDSCs in
the amount of $282 for the year ended October 31, 1997. GT Global also makes
ongoing shareholder servicing and trail commission payments to dealers whose
clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of $923,487. In addition, GT Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
FS-127
<PAGE> 275
GT GLOBAL LATIN AMERICA GROWTH FUND
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B Shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.40%, 2.90%, and 1.90% of the average
net assets of the Fund's Class A, Class B and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by GT Global
of payments under the Class A Plan and/or Class B Plan and/or reimbursements by
the Manager or GT Global of portions of the Fund's other operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 2.00%, 2.50% and 1.50% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services receives
an annual maintenance fee of $17.50 per account, a new account fee of $4.00 per
account, a per transaction fee of $1.75 for all transactions other than
exchanges and a per exchange fee of $2.25. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the results according to the Funds average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than short-term investments, aggregated
$439,672,522 and $508,014,202. There were no purchases or sales of U.S.
government obligations for the year ended October 31, 1997.
4. CAPITAL SHARES
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of the Fund; 400,000,000 were classified as shares of GT
Global Government Income Fund; 200,000,000 were classified as shares of GT
Global Developing Markets Fund; 200,000,000 were classified as shares of GT
Global Health Care Fund; 200,000,000 were classified as shares of GT Global
Strategic Income Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of GT Global
Natural Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; and 200,000,000 were classified as shares of GT Global
Financial Services Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; and 200,000,000 were classified as shares of GT Global Consumer
Products and Services Fund. The shares of each of the foregoing series of the
Company were divided equally into two classes, designated Class A and Class B
common stock. With respect to the issuance of Advisor Class shares, 100,000,000
shares were classified as shares of each of the fifteen series of the Company
and designated as Advisor Class common stock. 1,100,000,000 shares remain
unclassified. Transactions in capital shares of the Fund were as follows:
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GT GLOBAL LATIN AMERICA GROWTH FUND
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31,1997 OCTOBER 31, 1996
-------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 46,171,230 $ 937,785,689 76,364,877 $ 1,304,172,875
Shares issued in connection with reinvestment of
distributions................................... -- -- 66,851 1,023,814
----------- ------------- ----------- ---------------
46,171,230 937,785,689 76,431,728 1,305,196,689
Shares repurchased................................ (47,874,889) (980,118,186) (78,414,835) (1,346,357,898)
----------- ------------- ----------- ---------------
Net decrease...................................... (1,703,659) $ (42,332,497) (1,983,107) $ (41,161,209)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- ----------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 14,424,170 $ 299,346,687 13,503,991 $ 230,324,732
Shares issued in connection with reinvestment of
distributions................................... -- -- 6,914 105,073
----------- ------------- ----------- ---------------
14,424,170 299,346,687 13,510,905 230,429,805
Shares repurchased................................ (15,210,392) (316,506,347) (14,627,921) (250,064,111)
----------- ------------- ----------- ---------------
Net decrease...................................... (786,222) $ (17,159,660) (1,117,016) $ (19,634,306)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- ----------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- - -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 1,448,623 $ 29,968,381 932,074 $ 16,161,478
Shares issued in connection with reinvestment of
distributions................................... -- -- 408 6,223
----------- ------------- ----------- ---------------
1,448,623 29,968,381 932,482 16,167,701
Shares repurchased................................ (1,461,777) (30,469,185) (910,792) (15,778,640)
----------- ------------- ----------- ---------------
Net increase (decrease)........................... (13,154) $ (500,804) 21,690 $ 389,061
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
</TABLE>
5. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities by the
Fund are defined in the Investment Company Act of 1940 as an affiliated company.
There were no investments in affiliated companies at October 31, 1997.
Transactions during the year with companies that were affiliates are as follows:
<TABLE>
<CAPTION>
NET
REALIZED
PURCHASES SALES GAIN DIVIDEND
AFFILIATES COST PROCEEDS (LOSS) INCOME
- -------------------------------------------------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Compania Boliviana de Energia Electrica........... $ -- $9,666,400 $2,805,315 $ 44,960
Sanluis Corporacion, S.A. de C.V.................. -- 5,738,935 2,214,183 318,107
</TABLE>
6. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended October 31, 1997, the Fund's expenses
were reduced by $45,431 under these arrangements.
FS-129
<PAGE> 277
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
STATE THE GENERAL EFFECT OF ANY CONTRACT, ARRANGEMENTS OR STATUTE UNDER
WHICH ANY DIRECTOR, OFFICER, UNDERWRITER OR AFFILIATED PERSON OF THE REGISTRANT
IS INSURED OR INDEMNIFIED IN ANY MANNER AGAINST ANY LIABILITY WHICH MAY BE
INCURRED IN SUCH CAPACITY, OTHER THAN INSURANCE PROVIDED BY ANY DIRECTOR,
OFFICER, AFFILIATED PERSON OR UNDERWRITER FOR THEIR OWN PROTECTION.
The Registrant's Agreement and Declaration of Trust dated May
7, 1998 provides, among other things, (1) that a Trustee
shall not be liable for any act, omission, or obligation of
the Registrant or any Trustee (except for liability to the
Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence, or reckless
disregard of the Trustee's duties); (2) that the Trustees and
Officers shall be indemnified by the Registrant to the
fullest extent permitted by the Delaware Business Trust Act
and other applicable law; and (3) that the shareholders and
former shareholders of the Registrant shall be held harmless
by the Registrant (or applicable portfolio or class) from
personal liability arising from their status as such, and
shall be indemnified by the Registrant (or applicable
portfolio or class) against all loss and expense arising from
such personal liability in accordance with the Registrant's
By-Laws and applicable law.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
(1) - Agreement and Declaration of Trust of the Registrant was filed as an Exhibit to Post-
Effective Amendment No. 55 to the Registration Statement on Form N-1A, filed August
26, 1998, and is hereby incorporated by reference.
(2) - Bylaws of the Registrant were filed as an exhibit to Post-Effective Amendment No. 55
to the Registration Statement on Form N-1A, filed August 26, 1998, and is hereby
incorporated by reference.
(3) - Voting Trust Agreements - None.
(4) - A copy of the form of Plan of Reorganization and Termination is attached as Appendix I
to the Prospectus contained in the Registration Statement.
(5) - Provisions of instruments defining the rights of holders of Registrant's securities are
contained in the Declaration of Trust Articles II, VI, VII, VIII and IX and By-laws
Articles IV, V, VI, VII and VIII, which were filed as an Exhibit to Post-Effective
Amendment No. 55 to the Registration Statement on Form N-1A, filed August 26, 1998,
and are hereby incorporated by reference.
(6) (a) - Investment Management and Administration Contract between Registrant and A I M
Advisors, Inc. was filed as an exhibit to Post-Effective Amendment No. 55 to the
Registration Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated
by reference.
(b) - Administration Contract between Registrant and A I M Advisors, Inc. was filed as an
</TABLE>
<PAGE> 278
<TABLE>
<S> <C>
exhibit to Post-Effective Amendment No. 55 to the Registration Statement on Form
N-1A, filed August 26, 1998, and is hereby incorporated by reference.
(c) - Sub-Administration Contract between A I M Advisors, Inc. and INVESCO (NY), Inc.
with respect to Registrant was filed as an exhibit to Post-Effective Amendment No. 55
to the Registration Statement on Form N-1A, filed August 26, 1998, and is hereby
incorporated by reference.
(d) - Sub-Advisory and Sub-Administration Contract, dated September 8, 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. 55 to the Registration Statement on Form
N-1A, dated August 26, 1998, and is hereby incorporated by reference.
(e) - Fund Accounting and Pricing Agreement between Registrant and INVESCO (NY), INC. is
filed as an exhibit to Post-Effective Amendment No. 55 to the Registration
Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated by
reference.
(7) (a) - Distribution Agreement between Registrant and A I M Distributors, Inc. with respect to
Class A shares was filed as an exhibit to Post-Effective Amendment No. 55 to the
Registration Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated
by reference.
(b) - Distribution Agreement between Registrant and A I M Distributors, Inc. with respect
to Class B shares was filed as an exhibit to Post-Effective Amendment No. 55 to the
Registration Statement on Form N-1A, filed August 26, 1998, and is hereby
incorporated by reference.
(c) - Distribution Agreement between Registrant and A I M Distributors, Inc. with respect
to Advisor Class shares was filed as an exhibit to Post-Effective Amendment No. 55
to the Registration Statement on Form N-1A, filed August 26, 1998, and is hereby
incorporated by reference.
(8) - Agreements Concerning Officers and Directors/Trustees Benefits - None.
(9) (a) - Custodian Agreement between Registrant and State Street Bank and Trust Company was
filed as an exhibit to Post-Effective Amendment No. 55 to the Registration Statement
on Form N-1A, filed August 26, 1998, and is hereby incorporated by reference.
(b) - Transfer Agency and Service Agreement between Registrant and A I M Fund Services,
Inc. was filed as an exhibit to Post-Effective Amendment No. 55 to the Registration
Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated by
reference.
(c) - Remote Access and Related Services Agreement, dated as of December 23, 1994,
between the Registrant and First Data Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.) was filed as an exhibit to Post-Effective Amendment
No. 55 to the Registration Statement on Form N-1A, filed August 26, 1998, and is
hereby incorporated by reference.
(d) - Amendment No. 1, dated October 4, 1995, to the Remote Access and Related Services
Agreement, dated as of December 23, 1994, between Registrant and First Data
</TABLE>
<PAGE> 279
<TABLE>
<S> <C>
Investor Services Group, Inc. (formerly, The Shareholder Services Group, Inc.) was
filed as an exhibit to Post-Effective Amendment No. 55 to the Registration
Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated by
reference.
(e) - Addendum No. 2, dated October 12, 1995, to the Remote Access and Related Services
Agreement, dated as of December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly, The Shareholder Services Group, Inc.) was
filed as an exhibit to Post-Effective Amendment No. 55 to the Registration
Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated by
reference.
(f) - Amendment No. 3, dated February 1, 1997, to the Remote Access and Related Services
Agreement, dated as of December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly, The Shareholder Services Group, Inc.) was
filed as an exhibit to Post-Effective Amendment No. 55 to the Registration
Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated by
reference.
(g) - Exhibit 1, effective as of August 4, 1997, to the Remote Access and Related
Services Agreement, dated as of December 23, 1994, between Registrant and First
Data Investor Services Group, Inc. (formerly, The Shareholder Services Group, Inc.)
was filed as an exhibit to Post-Effective Amendment No. 55 to the Registration
Statement on Form N-1A, filed August 26, 1998, and is hereby incorporated by
reference.
(h) - Preferred Registration Technology Escrow Agreement, dated September 10, 1997,
between Registrant and First Data Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.) was filed as an exhibit to Post-Effective Amendment
No. 55 to the Registration Statement on Form N-1A, filed August 26, 1998, and is
hereby incorporated by reference.
(10) (a) - Form of Distribution Plan adopted pursuant to Rule 12b-1 with respect to Class A shares
was filed as an Exhibit to Post-Effective Amendment No. 53 to the Registration
Statement on Form N-1A, dated May 29, 1998, and is hereby incorporated by reference.
(b) - Form of Distribution Plan adopted pursuant to Rule 12b-1 with respect to Class B
shares was filed as an Exhibit to Post-Effective Amendment No. 53 to the
Registration Statement on Form N-1A, dated May 29, 1998, and is hereby incorporated
by reference.
(c) - Rule 18f-3 Multiple Class Plan was filed as an Exhibit to Post-Effective Amendment
No. 55 to the Registration Statement on Form N-1A, dated August 26, 1998, and is
hereby incorporated by reference.
(11) (a) - Opinion and Consent of Kirkpatrick & Lockhart LLP as to the legality of the
securities being registered is filed herewith electronically.
(b) - Opinion and Consent of Delaware Counsel is filed herewith electronically.
(12) - Opinion and Consent of Kirkpatrick &Lockhart LLP supporting the tax matters and
consequences to shareholders discussed in the prospectus will be filed in an amendment
to this Registration Statement.
(13) (a) - Selected Dealer Agreement was filed as an Exhibit to Post-Effective Amendment No.
53 to the Registration Statement on Form N-1A, dated May 29, 1998, and is hereby
incorporated by reference.
</TABLE>
<PAGE> 280
<TABLE>
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(b) - Bank Sales Contract was filed as an Exhibit to Post-Effective Amendment No. 53 to
the Registration Statement on Form N-1A, dated May 29, 1998, and is hereby
incorporated by reference.
(c) - Shareholder Service Agreement was filed as an Exhibit to Post-Effective Amendment
No. 53 to the Registration Statement on Form N-1A, dated May 29, 1998, and is
hereby incorporated by reference.
(d) - Bank Shareholder Service Agreement was filed as an Exhibit to Post-Effective
Amendment No. 53 to the Registration Statement on Form N-1A, dated May 29, 1998, and
is hereby incorporated by reference.
(e) - Service Agreement for Bank Trust Department and for Broker is filed as an exhibit
to Post-Effective Amendment No. 55 to the Registration Statement on Form N-1A,
filed August 26, 1998, and is hereby incorporated by reference.
(14) - Regarding opinions, appraisals or rulings and consents relied on in preparing this
Registration Statement and required by Section 7 of the Securities Act of 1933, the
Consent of PricewaterhouseCoopers LLP will be filed in an amendment to this
Registration Statement.
(15) - Financial Statements - None.
(16) - Powers of Attorney - None.
(17) (a) - Form of Proxy
(b) - Prospectus of AIM Emerging Markets Fund
</TABLE>
ITEM 17. UNDERTAKINGS.
None.
<PAGE> 281
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement on Form N-14 to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
San Francisco, and the State of California, on the 30th day of November, 1998.
AIM INVESTMENT FUNDS
Registrant
By: /s/ ROBERT H. GRAHAM
--------------------------------
Robert H. Graham
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities indicated on the 30th day of November, 1998.
/s/ ROBERT H. GRAHAM
- ----------------------------------
Robert H. Graham President, Trustee and
Chairman of the Board
(Principal Executive Officer)
/s/ KENNETH W. CHANCEY Senior Vice President and Chief
- ---------------------------------- Financial Officer
Kenneth W. Chancey
/s/ C. DEREK ANDERSON
- ----------------------------------
C. Derek Anderson Trustee
/s/ ARTHUR C. PATTERSON
- ----------------------------------
Arthur C. Patterson Trustee
/s/ FRANK S. BAYLEY
- ----------------------------------
Frank S. Bayley Trustee
/s/ RUTH H. QUIGLEY
- ----------------------------------
Ruth H. Quigley Trustee
<PAGE> 282
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
11(a) Opinion and Consent of Kirkpatrick & Lockhart LLP as to the
legality of the securities being registered
11(b) Opinion and Consent of Delaware Counsel
17(a) Form of Proxy
17(b) Prospectus of AIM Emerging Markets Fund
<PAGE> 1
EXHIBIT (11)(a)
November 30, 1998
AIM Investment Funds
50 California Street, 27th Floor
San Francisco, California 94111
Ladies and Gentlemen:
You have requested our opinion, as counsel to AIM Investment Funds
("Trust"), as to certain matters regarding the issuance of Shares of AIM
Developing Markets Fund (the "Acquiring Portfolio"), a series of Trust, in
connection with the reorganization of AIM Emerging Markets Fund (the "Acquired
Portfolio"), a series of Trust, into the Acquiring Portfolio, as provided for in
the Plan of Reorganization and Termination, effective as of November 30, 1998
(the "Plan"). The Plan provides for the Acquired Portfolio to transfer all of
its assets to the Acquiring Portfolio in exchange solely for the issuance of the
Shares and the Acquiring Portfolio's assumption of all of the liabilities of the
Acquired Portfolio. (As used in this letter, the term "Shares" means the Class
A, Class B, and Advisor Class shares of beneficial interest in the Acquiring
Portfolio.)
As such counsel, we have examined certified or other copies, believed
by us to be genuine, of Trust's Agreement and Declaration of Trust dated as of
May 7, 1998 ("Agreement"), and Bylaws and such other documents relating to its
organization and operation as we have deemed relevant to our opinion, as set
forth herein. Our opinion is limited to the laws and facts in existence on the
date hereof, and it is further limited to the laws (other than the conflict of
law rules) of the State of Delaware that in our experience are normally
applicable to the issuance of shares of beneficial interest by business trusts
and to the Securities Act of 1933 ("1933 Act"), the Investment Company Act of
1940 ("1940 Act") and the regulations of the Securities and Exchange Commission
("SEC") thereunder. With respect to matters governed by the laws of the State of
Delaware (excluding the securities laws thereof), we have relied solely on the
opinion of Potter Anderson & Corroon, LLP, Delaware counsel to Trust, an
executed copy of which is appended hereto as Exhibit A.
<PAGE> 2
AIM Investment Funds
November 30, 1998
Page 2
Based on the foregoing, we are of the opinion that Trust has been duly
organized as a business trust under the laws of the State of Delaware and is
validly existing thereunder; that the issuance of the Shares has been duly
authorized by Trust; and that, when sold in accordance with the terms
contemplated by Trust's registration statement on Form N-14 (File No. 33-19338)
("Registration Statement"), including receipt by the Acquiring Portfolio of full
payment for the Shares and compliance with the 1933 Act and the 1940 Act, the
Shares will have been legally issued, fully paid, and non-assessable.
We note, however, that Trust is an entity of the type commonly known as
a "Delaware business trust." The Delaware Business Trust Act, 12 Del. C. ss.
3801 et seq. ("Delaware Act"), provides that shareholders of a Delaware business
trust are entitled to the same limitation of personal liability extended to
stockholders of a Delaware corporation. Thus, under Delaware law, shareholders
will not be personally liable for the obligations of Trust. This limitation of
liability may not be absolute, however, as it is possible that a non-Delaware
court would not uphold this provision of the Delaware Act.
Consistent with the Delaware Act, the Agreement includes an express
disclaimer of shareholder liability for the debts, liabilities, obligations, and
expenses incurred by, contracted for, or otherwise existing with respect to
Trust or any series (or class) thereof. The Agreement also requires that every
note, bond, contract, or other undertaking issued by or on behalf of Trust or
its trustees relating to Trust or to any series include a recitation limiting
the obligation represented thereby to Trust and its assets or to one or more
series and the assets belonging thereto (but provides that the omission of such
a recitation shall not operate to bind any shareholder or trustee of Trust).
Furthermore, the Agreement states that the debts, liabilities, obligations, and
expenses incurred by, contracted for, or otherwise existing with respect to a
particular series shall be enforceable against the assets of such series only,
and not against the assets of Trust generally or the assets belonging to any
other series. Finally, the Agreement further provides (1) for indemnification
from the assets belonging to the applicable series (or allocable to the
applicable class) for all loss and expense of any shareholder held personally
liable for the obligations of Trust or any series (or class) by virtue of
ownership of Shares of Trust or such series (or class), and (2) for Trust, on
behalf of the affected series (or class), to assume the defense of any claim
against the shareholder for any act or obligation of that series (or class).
Thus, the risk of a shareholder's incurring financial loss because of
shareholder liability is limited to circumstances in which (a) a court refused
to apply Delaware law or otherwise failed to give full effect to the Agreement
or contractual provisions limiting shareholder liability and (b) Trust was
unable to meet its obligations.
<PAGE> 3
AIM Investment Funds
November 30, 1998
Page 3
We hereby consent to this opinion accompanying the Registration
Statement when it is filed with the SEC and to the reference to our firm in the
Registration Statement.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ R. DARRELL MOUNTS
R. Darrell Mounts
<PAGE> 1
EXHIBIT 11(b)
[POTTER ANDERSON & CORROON LLP LETTERHEAD]
HERCULES PLAZA
P.O. BOX 951
WILMINGTON, DELAWARE 19899
HOME PAGE: ATTYS.PACDELAWARE.COM
E-MAIL: [email protected]
DIRECT DIAL: (302) 984-6114
AIM Investment Funds
11 Greenway Plaza
Suite 100
Houston, TX 77046
Re: Reorganization of AIM Emerging Markets Fund
into AIM Developing Markets Fund
Ladies and Gentlemen:
We have acted as special Delaware counsel for AIM Investment Funds, a Delaware
business trust (the "Trust"), in connection with the proposed issuance of shares
(collectively, the "Shares") of Class A, Class B, and Advisor Class
(collectively, the "Classes") of AIM Developing Markets Fund (the "Acquiring
Fund") pursuant to that certain Plan of Reorganization and Termination adopted
by the Trustees, effective as of November 30, 1998 (the "Plan of
Reorganization"), on behalf of the Acquiring Fund and AIM Emerging Markets Fund
(the "Acquired Fund," and together with the Acquiring Fund, the "Portfolios").
The Plan of Reorganization (a copy of which is attached hereto) provides for the
Acquired Fund to transfer all of its assets to the Acquiring Fund in exchange
solely for the issuance of the Shares and the Acquiring Fund's assumption of all
of the liabilities of the Acquired Fund. Initially capitalized terms used herein
and not otherwise defined are used herein as defined in that certain Agreement
and Declaration of Trust dated as of May 7, 1998, entered into among William J.
Guilfoyle, C. Derek Anderson, Frank S. Bayley, Arthur C. Patterson, and Ruth H.
Quigley, as Trustees, and the Shareholders of the Trust (the "Declaration").
<PAGE> 2
To Each of the Addressees Listed
on Schedule I Attached Hereto
November 30, 1998
Page 2
For purposes of giving the opinions hereinafter set forth, we have examined
only the following documents and have conducted no independent factual
investigation of our own:
1. The Certificate of Trust for the Trust, dated as of May 7,
1998, as filed in the Office of the Secretary of State of the State of Delaware
(the "Secretary of State") on May 7, 1998;
2. The Declaration;
3. The By-laws of the Trust;
4. Resolutions of the Trustees (the "Reorganization
Resolutions") approving the Plan of Reorganization;
5. The Plan of Reorganization;
6. Resolutions of the Trustees (the "18f-3
Resolutions" and, together with the Reorganization Resolutions, the
"Resolutions") adopting that certain plan pursuant to Rule 18f-3 under the
Investment Company Act of 1940 (the "18f-3 Plan");
7. A Certificate of Good Standing for the Trust, dated
November 30, 1998, obtained from the Secretary of State; and
8. The registration statement on Form N-14 filed with the
Securities and Exchange Commission on or about November 30, 1998, pursuant to
the Securities Act of 1933, as amended, covering the Shares (the "Registration
Statement").
As to certain facts material to the opinions expressed herein,
we have relied upon the representations and warranties contained in the
documents examined by us.
Based upon the foregoing, and upon an examination of such
questions of law of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Act.
2. Each Portfolio has been duly created and is validly
existing as a series under Section 3804 of the Delaware Act.
3. The Declaration constitutes the legal, valid and binding
obligation of the Trustees, enforceable against the Trustees, in accordance with
its terms.
<PAGE> 3
To Each of the Addressees Listed
on Schedule I Attached Hereto
November 30, 1998
Page 3
4. Subject to the other qualifications set forth herein
(including, without limitation, paragraph 5 below), the Shares have been duly
authorized and when (a) the actions referred to in the Plan of Reorganization
shall have occurred (including the due approval of the Plan of Reorganization by
the Shareholders of the Acquired Fund), and (b) the Shares shall have been
otherwise issued in accordance with the Declaration, the Resolutions, the Plan
of Reorganization, the 18f-3 Plan, and the By-laws, such Shares will be validly
issued, fully paid, and non-assessable undivided beneficial interests in the
assets of the Acquiring Fund.
5. When and if the actions referred to in paragraph 4 have
occurred, the holders of the Shares as beneficial owners of the Shares will be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware, except that such holders of Shares shall be obligated
to (a) pay any transfer taxes applicable to the issuance of the Shares in a name
other than the name of the registered holder on the books of the Acquired Fund,
(b) pay their own expenses, if any, incurred in connection with the transactions
contemplated by the Plan of Reorganization, and (c) provide indemnity and/or
security in connection with the issuance of replacement certificates for lost or
destroyed certificates, if any, representing such Shares, if such holders
request certificates in accordance with the By-laws and such certificates are
lost.
In addition to the assumptions and qualifications set forth
above, all of the foregoing opinions contained herein are subject to the
following assumptions, qualifications, limitations and exceptions:
a. The foregoing opinions are limited to the laws of
the State of Delaware presently in effect, excluding the securities laws
thereof. We have not considered and express no opinion on the laws of any other
jurisdiction, including, without limitation, federal laws and rules and
regulations relating thereto.
b. We have assumed that the Plan of Reorganization
does not contravene (i) any contractual restriction binding on the Trust or
either Portfolio, or (ii) any law, rule or regulation applicable to the Trust or
either Portfolio (exclusive of any Delaware law, rule or regulation). In
addition, we have assumed the legal capacity of any natural persons who are
parties to any of the documents examined by us.
c. The foregoing opinion regarding the enforceability
of the Declaration is subject to (i) applicable bankruptcy, insolvency,
moratorium, fraudulent conveyance, fraudulent transfer and similar laws relating
to or affecting creditors rights generally including, without limitation, the
Delaware Uniform Fraudulent Conveyance Act, the provisions of the United States
Bankruptcy Code and the Delaware insolvency statutes, (ii) principles of equity
including, without limitation, concepts of materiality, good faith, fair
dealing, conscionability and reasonableness (regardless of whether such
enforceability is considered in a proceeding in equity or at law), (iii)
applicable law relating to fiduciary duties, and (iv) public policy limitations
with respect to exculpation, contribution and indemnity provisions.
<PAGE> 4
To Each of the Addressees Listed
on Schedule I Attached Hereto
November 30, 1998
Page 4
d. We have assumed that all signatures on documents
examined by us are genuine, that all documents submitted to us as originals are
authentic and that all documents submitted to us as copies conform with the
originals.
e. We have assumed that the Declaration, the By-laws,
the Plan of Reorganization, the Resolutions and the 18f-3 Plan, collectively,
constitute the entire agreement with respect to the subject matter thereof,
including (i) with respect to the creation, dissolution and winding up of the
Trust and each Portfolio, (ii) the terms applicable to the Shares, and (iii) the
power and authority of the Trustees.
f. We have assumed that to the extent any additional
rights and/or preferences are stated in the 18f-3 Plan, such additional rights
and/or preferences (x) are enforceable in accordance with their terms, and (y)
do not conflict with the Certificate of Trust, the Declaration, the By-laws, the
Plan of Reorganization, or any statute, rule or regulation applicable to the
Trust or any Portfolio.
g. We have assumed that the Plan of Reorganization
has been duly adopted by the Shareholders of the Acquired Fund and that the
transactions contemplated thereby are enforceable against the Acquired Fund, the
Acquiring Fund, and the Trust in accordance with their terms.
h. We have assumed that no event set forth in
Section 9.3(a) of the Declaration has occurred with respect to the Trust or
any Portfolio.
i. Notwithstanding any provision in the Declaration
to the contrary, we note that upon the occurrence of an event set forth in
Section 9.3(a) thereof, with respect to the Trust or a Portfolio, as the case
may be, the Trust or such Portfolio, as applicable, cannot make any payments or
distributions to the Shareholders thereof until their respective creditors'
claims are either paid in full or reasonable provision for payment thereof has
been made.
j. With respect to the enforceability of any
provision of the Declaration wherein the parties provide for the appointment of
a liquidator, we note that upon the application of any beneficial owner, the
Delaware Court of Chancery has the power, upon cause shown, to wind up the
affairs of a Delaware business trust or series thereof and in connection
therewith to appoint a liquidating trustee other than the one agreed to by the
beneficial owners thereof.
k. We have assumed that none of the By-laws, the
Resolutions, the Plan of Reorganization, or the 18f-3 Plan has been amended,
modified, or revoked in any manner from the date of its adoption, and that each
of the By-laws, the Resolutions, the Plan of Reorganization, and the 18f-3 Plan
remains in full force and effect on the date hereof.
<PAGE> 5
To Each of the Addressees Listed
on Schedule I Attached Hereto
November 30, 1998
Page 5
l. We have assumed that the Trust maintains separate
and distinct records for each Portfolio and that the Trust and the Trustees hold
and account for the assets belonging to each such Portfolio separately from the
other assets of any other Portfolio and the assets of the Trust generally, if
any.
m. We note that we do not assume responsibility for
the contents of the Registration Statement.
This opinion is rendered solely for your benefit in connection
with the matters set forth herein and, without our prior written consent, may
not be furnished (except that it may be furnished to any federal, state or local
regulatory agencies or regulators having appropriate jurisdiction and entitled
to such disclosure) or quoted to, or relied upon by, any other person or entity
for any purpose. Kirkpatrick & Lockhart LLP may rely on this opinion with
respect to the matters set forth herein in connection with its opinion being
delivered on even date herewith.
We consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement.
In giving the foregoing consent, we do not thereby admit that we come within the
category of Persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
PA&C LLP /s/
<PAGE> 1
EXHIBIT 17(a)
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
...............................................................................
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES. THE TRUSTEES RECOMMEND
VOTING FOR THE PROPOSAL. TO VOTE, FILL IN BOX COMPLETELY. EXAMPLE: [X]
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
1. Proposal to approve a Plan of Reorganization and Termination |_| |_| |_|
providing for the combination of AIM Emerging Markets Fund with AIM
Developing Markets Fund.
2. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>
1
<PAGE> 2
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
...............................................................................
PROXY PROXY
PROXY SOLICITED BY THE BOARD OF TRUSTEES OF
AIM INVESTMENT FUNDS
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS OF
AIM EMERGING MARKETS FUND
FEBRUARY 10, 1999
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Special
Meeting of Shareholders of AIM Emerging Markets Fund, a portfolio of AIM
Investment Funds, to be held on February 10, 1999 at 3:00 p.m. Central time, and
at any adjournment thereof, all of the shares of AIM Emerging Markets Fund which
the undersigned would be entitled to vote if personally present. IF THIS PROXY
IS SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED FOR
THE APPROVAL OF THE PROPOSAL.
NOTE: PLEASE SIGN EXACTLY AS
YOUR NAME APPEARS ON THIS
PROXY CARD. All joint owners
should sign. When signing as
executor, administrator,
attorney, trustee or guardian
or as custodian for a minor,
please give full title as
such, if a corporation,
please sign in full corporate
name and indicate the
signer's office. If a
partner, sign in the
partnership name.
-------------------------------------
Signature
-------------------------------------
Signature (if held jointly)
Dated
-------------------------------
2
<PAGE> 1
EXHIBIT (17)(b)
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
CLASS A AND CLASS B SHARES OF
AIM EMERGING MARKETS FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM EMERGING MARKETS FUND (The
"Fund"), which is one of several series investment portfolios comprising AIM
Investment Funds (the "Trust"), an open-end, series, management investment
company. The Fund is a diversified portfolio which seeks long-term growth of
capital by investing primarily in equity securities of companies in emerging
markets.
The Fund is designed for long term investors and not as a trading vehicle. The
Fund does not represent a complete investment program, nor is it suitable for
all investors. The Fund may invest significantly in lower quality and unrated
foreign government bonds whose credit quality is generally considered the
equivalent of U.S. corporate debt securities commonly known as "junk bonds."
Investments of this type are subject to a greater risk of loss of principal and
interest. An investment in the Fund should be considered speculative and subject
to special risk factors, related primarily to the Fund's investments in emerging
markets. Purchasers should carefully assess the risks associated with an
investment in the Fund.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information dated
September 8, 1998 has been filed with the Securities and Exchange Commission
(the "SEC") and is incorporated herein by reference. The Statement of Additional
Information is available without charge upon written request to the Trust at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173 or by calling
1-800-347-4246. The SEC maintains a Web site at http://www.sec.gov that contains
the Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund. Additional information about the Fund may
also be obtained from http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 2
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................ 2
THE FUND............................... 4
Table of Fees and Expenses........... 4
Financial Highlights................. 5
Performance.......................... 6
Investment Program................... 6
Risk Factors......................... 9
Management........................... 12
Organization of the Trust............ 14
INVESTOR'S GUIDE TO THE AIM FAMILY OF
FUNDS--Registered Trademark--........ A-1
Introduction to The AIM Family of
Funds............................. A-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
How to Purchase Shares............... A-1
Terms and Conditions of Purchase of
the AIM Funds..................... A-2
Special Plans........................ A-9
Exchange Privilege................... A-12
How to Redeem Shares................. A-14
Determination of Net Asset Value..... A-19
Dividends, Distributions and Tax
Matters........................... A-19
General Information.................. A-23
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND
The Fund is a diversified series of the Trust.
INVESTMENT OBJECTIVE. The Fund seeks long-term growth of capital.
PRINCIPAL INVESTMENT. The Fund normally invests at least 65% of its total
assets in equity securities of companies in emerging markets.
INVESTMENT MANAGERS. The Fund is managed by A I M Advisors, Inc. ("AIM") and
is sub-advised and sub-administered by INVESCO (NY), Inc. (the "Sub-advisor").
AIM and the Sub-advisor and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-advisor are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
AIM was organized in 1976 and, together with its subsidiaries, currently advises
approximately 90 investment company portfolios.
PURCHASING SHARES. Investors may select Class A or Class B shares of the Fund
which are offered by this Prospectus at an offering price that reflects
differing sales charges and expense levels. See "Terms and Conditions of
Purchase of the AIM Funds -- Sales Charges and Dealer Concessions." Pursuant to
a separate prospectus, the Fund also offers Advisor Class shares, which
represent interests in the Fund. The Advisor Class has different distribution
arrangements.
CLASS A SHARES -- Shares are offered at net asset value plus any applicable
initial sales charge.
CLASS B SHARES -- Shares are offered at net asset value without an initial
sales charge and are subject to a maximum contingent deferred sales charge of 5%
on certain redemptions made within six years from the date such shares were
purchased. Class B shares automatically convert to Class A shares of the Fund
eight years following the end of the calender month in which a purchase was
made. Class B shares are subject to higher expenses than Class A shares.
Initial investments in any class of shares must be at least $500 and
additional investments must be at least $50. The minimum initial investment is
modified for investments through tax-qualified retirement plans and accounts
initially established with an Automatic Investment Plan. The distributor of the
Fund's shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares" and "Special Plans."
SUITABILITY FOR INVESTORS. An investor in Class A or Class B shares of the
Fund should consider the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the shares are expected to
be held, and other circumstances. Investors should consider whether, during the
anticipated life of their investment in the Fund, the accumulated distribution
fees and any applicable contingent deferred sales charges on Class B shares
prior to conversion would be less than the initial sales charge and accumulated
distribution fees on Class A shares purchased at the same time, and to what
extent such differential would be offset by the higher return on Class A shares.
To assist investors in making this determination, the table under the caption
"Table of Fees and Expenses" sets forth examples of the charges applicable to
each class of shares. Class A shares will normally be more beneficial than Class
B shares to the investor who qualifies for reduced initial sales charges, as
described below. Therefore, AIM Distributors will reject any order for purchase
of more than $250,000 for Class B shares.
2
<PAGE> 3
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds"). Class
A and Class B shares of the Fund may be exchanged for shares of other funds in
The AIM Family of Funds in the manner and subject to the policies and charges
set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Class A shareholders of the Fund may redeem all or a portion
of their shares at net asset value on any business day, generally without
charge. A contingent deferred sales charge of 1% may apply to certain
redemptions where a purchase of more than $1 million is made at net asset value.
See "How to Redeem Shares -- Contingent Deferred Sales Charge Program for Large
Purchases."
Class B shareholders of the Fund may redeem all or a portion of their shares
at net asset value on any business day, less a contingent deferred sales charge
for redemptions made within six years from the date such shares were purchased.
Class B shares redeemed after six years from the date such shares were purchased
will not be subject to any contingent deferred sales charge. See "How to Redeem
Shares -- Multiple Distribution System."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be reinvested at net asset value without
payment of a sales charge in the Fund's shares or may be invested in shares of
the other funds in The AIM Family of Funds. See "Dividends, Distributions and
Tax Matters" and "Special Plans."
RISK FACTORS. There is no assurance that the Fund will achieve its investment
objective. The Fund's net asset values will fluctuate, reflecting fluctuations
in the market value of its portfolio holdings.
The Fund will invest primarily in foreign securities. Investments in foreign
securities involve risks relating to political and economic developments abroad
and the differences between the regulations to which U.S. and foreign issuers
are subject. Individual foreign economies also may differ favorably or
unfavorably from the U.S. economy. Changes in foreign currency exchange rates
will affect the Fund's net asset value, earnings and gains and losses realized
on sales of securities. Securities of foreign companies may be less liquid and
their prices more volatile than those of securities of comparable U.S.
companies. The Fund may engage in certain foreign currency, options and futures
transactions to attempt to hedge against the overall level of investment and
currency risk associated with its present or planned investments. Such
transactions involve certain risks and transaction costs. The Fund may invest up
to 20% of its total assets in below investment grade debt securities.
Investments of this type are subject to a greater risk of loss of principal and
interest. See "Investment Program" and "Risk Factors."
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
3
<PAGE> 4
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Class A and Class B shares of the Fund are reflected in the following table(1):
<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
<S> <C> <C>
Shareholder Transaction Costs(2):
Maximum sales charge on purchases (as a % of offering
price)................................................. 4.75% None
Sales charges on reinvested distributions to
shareholders........................................... None None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale,
whichever is less)..................................... None 5.00%
Redemption charges........................................ None None
Exchange fees............................................. None None
Annual Fund Operating Expenses(3): (as a % of average net
assets)
Investment management and administration fees............. 0.98% 0.98%
12b-1 distribution and service fees....................... 0.50% 1.00%
Other expenses (after reimbursements and waivers)......... 0.52% 0.52%
---- ----
Total Fund Operating Expenses..................... 2.00% 2.50%
==== ====
</TABLE>
(1) This table is intended to assist investors in understanding the various
costs and expenses associated with investing in the Fund. Long-term
shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the National Association of Securities
Dealers, Inc. ("NASD") rules regarding investment companies.
(2) Sales charge waivers are available for Class A and Class B shares, and
reduced sales charge purchase plans are available for Class A shares. The
maximum 5% contingent deferred sales charge on Class B shares applies to
redemptions during the first year after purchase. The charge generally
declines by 1% annually thereafter, reaching zero after six years. See
"Terms and Conditions of Purchase of the AIM Funds -- Reductions in Initial
Sales Charges."
(3) Expenses are based on the Fund's fiscal year ended October 31, 1997
restated to reflect AIM's undertaking to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest and extraordinary
expenses) to the annual rate of 2.00% and 2.50% of the average daily net
assets of the Fund's Class A and Class B shares, respectively. AIM has
voluntarily agreed to continue this limitation through May 31, 2000. "Other
expenses" include custody, transfer agency, legal, audit and other
operating expenses. Without reimbursements and waivers, "Other expenses"
and "Total Fund Operating Expenses" would have been 0.70% and 2.18%,
respectively, for Class A Shares and 0.70% and 2.68%, respectively, for
Class B Shares of the Fund. See "Management" herein and the Statement of
Additional Information for more information.
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES. An investor would have directly or
indirectly paid the following expenses at the end of the periods shown on a
$1,000 investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS(3)
------ ------- ------- -----------
<S> <C> <C> <C> <C>
Class A Shares(1).................................. $67 $108 $151 $289
Class B Shares
Assuming a complete redemption at end of
period(2)..................................... $77 $111 $157 $274
Assuming no redemption........................... $26 $ 79 $135 $274
</TABLE>
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes deduction of the applicable contingent deferred sales charge.
(3) For Class B shares, this number reflects the conversion to Class A shares
eight years following the end of the calendar month in which a purchase was
made.
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT EXPENSES, MAY
BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN THE
HYPOTHETICAL EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATION OF THE SEC
APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND
DOES NOT REPRESENT THE FUND'S PROJECTED OR ACTUAL PERFORMANCE.
4
<PAGE> 5
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables below provide condensed financial information concerning income and
capital changes for one Class A and Class B share of each Fund. This information
is supplemented by the financial statements and accompanying notes appearing in
the Statement of Additional Information. The financial statements and notes for
the fiscal year ended October 31, 1997 and for the semi-annual period ended
April 30, 1998, have been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report thereon also is included in the Statement of
Additional Information.
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
<TABLE>
<CAPTION>
SIX MONTHS MAY 18, 1992
ENDED YEAR ENDED OCTOBER 31, (COMMENCEMENT
APRIL 30, ---------------------------------------------------- OF OPERATIONS)
1998(d) 1997(d) 1996(d) 1995(d) 1994 1993 TO OCT. 31, 1992
---------- -------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A+
Per share operating performance:
Net asset value, beginning of period... $ 12.20 $ 14.26 $ 13.85 $ 18.81 $ 14.42 $ 11.10 $ 11.43
-------- -------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income (loss)........... 0.02** -- 0.11 0.13 (0.02) 0.02* 0.07*
Net realized and unrealized gain (loss)
on investments....................... 0.31 (2.05) 0.30 (4.32) 4.68 3.38 (0.40)
-------- -------- -------- -------- -------- -------- -------
Net increase (decrease) from
investment operations.............. 0.33 (2.05) 0.41 (4.19) 4.66 3.40 (0.33)
-------- -------- -------- -------- -------- -------- -------
Distributions:
From net investment income............. -- -- -- -- (0.01) (0.08) --
From net realized gain on
investments.......................... -- -- -- (0.77) (0.26) -- --
In excess of net investment income..... -- (0.01) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------
Total distributions.................. -- (0.01) -- (0.77) (0.27) (0.08) --
-------- -------- -------- -------- -------- -------- -------
Net asset value, end of period........... $ 12.53 $ 12.20 $ 14.26 $ 13.85 $ 18.81 $ 14.42 $ 11.10
======== ======== ======== ======== ======== ======== =======
Total investment return(c)............... 2.79%(a) (14.45)% 2.96% (23.04)% 32.58% 30.90% (2.9)%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's)..... $100,648 $113,319 $224,964 $252,457 $417,322 $187,808 $84,558
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement........................ 0.31%(b) (0.01)% 0.76% 0.89% (0.11)% 0.1%* 1.7%*(b)
Without expense reductions and
reimbursement........................ 0.30%(b) (0.09)% 0.64% 0.87% N/A (0.11)% N/A
Ratio of operating expenses to average
net assets:
With expense reductions................ 1.96%(b) 2.10% 1.96% 2.12% 2.06% 2.4%* 2.4%*(b)
Without expense reductions............. 2.57%(b) 2.18% 2.08% 2.14% N/A 2.61% N/A
Ratio of interest expense to average net
assets++............................... 0.33%(b) N/A N/A N/A N/A N/A N/A
Portfolio turnover rate++................ 117%(b) 150% 104% 114% 100% 99% 32%(b)
Average commission rate per share paid on
portfolio transactions++............... $ 0.0016 $ 0.0015 $ 0.0040 N/A N/A N/A N/A
</TABLE>
- ---------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Portfolio turnover, average commission rates and ratio interest expense to
average net assets are calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
* Includes reimbursement by the Sub-advisor of Fund operating expenses of
$0.02 for the year ended October 31, 1993 and for the period from May 18,
1992 (commencement of operations) to October 31, 1992, respectively.
Without such reimbursements, the expense ratios would have been 2.61% and
2.91% and the ratio of net investment income to average net assets would
have been (0.11)% and 1.21% for the year ended October 31, 1993 and for the
period from May 18, 1992 (commencement of operations) to October 31, 1992,
respectively.
** Before reimbursement by the Sub-advisor, the net investment income per
share would have been reduced by $0.03.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
5
<PAGE> 6
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, APRIL 1, 1993
APRIL 30, ----------------------------------------- TO
1998 (d) 1997(d) 1996(d) 1995(d) 1994 OCT. 31, 1993
---------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
CLASS B+
Per share operating performance:
Net asset value, beginning of period................. $ 11.94 $ 14.02 $ 13.68 $ 18.68 $ 14.39 $ 11.47
-------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income (loss)......................... (0.01)** (0.08) 0.04 0.06 (0.12) --*
Net realized and unrealized gain (loss) on
investments........................................ 0.30 (2.00) 0.30 (4.29) 4.67 2.92
-------- -------- -------- -------- -------- -------
Net increase (decrease) from investment
operations....................................... 0.29 (2.08) 0.34 (4.23) 4.55 2.92
-------- -------- -------- -------- -------- -------
Distributions:
From net investment income........................... -- -- -- -- -- --
From net realized gain on investments................ -- -- -- (0.77) (0.26) --
In excess of net investment income................... -- -- -- -- -- --
-------- -------- -------- -------- -------- -------
Total distributions................................ -- -- -- (0.77) (0.26) --
-------- -------- -------- -------- -------- -------
Net asset value, end of period......................... $ 12.23 $ 11.94 $ 14.02 $ 13.68 $ 18.68 $ 14.39
======== ======== ======== ======== ======== =======
Total investment return(c)............................. 2.51%(a) (14.91)% 2.49% (23.37)% 31.77% 25.5%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's)................... $100,831 $127,658 $216,004 $225,861 $291,289 $32,318
Ratio of net investment income (loss) to average net
assets:
With expense reductions and reimbursement:........... (0.19)%(b) (0.51)% 0.26% 0.39% (0.61)% (0.4)%*(b)
Without expense reductions and reimbursement:........ (0.80)%(b) (0.59)% 0.14% 0.37% N/A (0.61)%(b)
Ratio of operating expenses to average net assets:
With expense reductions.............................. 2.46%(b) 2.60% 2.46% 2.62% 2.56% 2.9%*(b)
Without expense reductions........................... 3.07%(b) 2.68% 2.58% 2.64% N/A 3.11%(b)
Ratio of interest expense to average net assets++...... 0.33%(b) N/A N/A N/A N/A N/A
Portfolio turnover rate++.............................. 117%(b) 150% 104% 114% 100% 99%
Average commission rate per share paid on portfolio
transactions++....................................... $ 0.0016 $ 0.0015 $ 0.0040 N/A N/A N/A
</TABLE>
- ---------------
+ Commencing April 1, 1993, the Fund began offering Class B shares.
++ Portfolio turnover, average commission rates and ratio interest expense to
average net assets are calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
* Includes reimbursement by the Sub-advisor of Fund operating expenses of
$0.02. Without such reimbursements, the expense ratio would have been
(3.63)% and the ratio of net investment income to average net assets would
have been (0.76)%.
** Before reimbursement by the Sub-advisor, the net investment income per
share would have been reduced by $0.03.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
<TABLE>
<CAPTION>
AMOUNT OF AVERAGE MONTHLY NUMBER AVERAGE AMOUNT
DEBT AVERAGE AMOUNT OF REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT OF DEBT OUTSTANDING OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ---------- -------------- ---------------------- ---------------------- --------------
<S> <C> <C> <C> <C>
Six months ended April 30, 1998....... $3,353,000 $5,242,625 18,290,005 $ 0.287
October 31, 1997...................... $6,184,000 $2,568,627 26,177,077 $0.0981
</TABLE>
Average amount of debt outstanding during the period is computed on a daily
basis.
6
<PAGE> 7
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. Standardized total return
for Class A shares reflects the deduction of the Fund's maximum front-end sales
charge at the time of purchase. Standardized total return for Class B shares
reflects the deduction of the maximum applicable contingent deferred sales
charge on a redemption of shares held for the period.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Fund. Such practices will
have the effect of increasing the Fund's total return. The performance of the
Fund will vary from time to time and past results are not necessarily
representative of future results. The Fund's performance is a function of its
portfolio management in selecting the type and quality of portfolio securities
and is affected by operating expenses of the Fund as well as by general market
conditions.
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
INVESTMENT OBJECTIVE. The Fund's investment objective is long-term growth of
capital. Under normal circumstances, the Fund seeks its objective by investing
at least 65% of its total assets in equity securities of companies in emerging
markets. The Fund may invest in the following types of equity securities: common
stock, preferred stock, securities convertible into common stock, rights and
warrants to acquire such securities and substantially similar forms of equity
with comparable risk characteristics. There can be no assurance that the Fund
will meet its investment objective.
INVESTMENT POLICIES. For purposes of the Fund's operations, "emerging markets"
consist of all countries determined by the Sub-advisor to have developing or
emerging economies and markets. These countries generally include every country
in the world except the United States, Canada, Japan, Australia, New Zealand and
most countries located in Western Europe. See "Investment Objective and
Policies" in the Statement of Additional Information for a complete list of all
the countries that the Fund does not consider to be emerging markets.
For purposes of the Fund's policy of normally investing at least 65% of its
total assets in equity securities of issuers in emerging markets, the Fund will
consider investment in the following emerging markets:
Algeria
Argentina
Bolivia
Botswana
Brazil
Bulgaria
Chile
China
Colombia
Costa Rica
Cyprus
Czech Republic
Dominican Republic
Ecuador
Egypt
El Salvador
Finland
Ghana
Greece
Hong Kong
Hungary
India
Indonesia
Israel
Ivory Coast
Jamaica
Jordan
Kazakhstan
Kenya
Lebanon
Malaysia
Mauritius
Mexico
Morocco
Nicaragua
Nigeria
Oman
Pakistan
Panama
Paraguay
Peru
Philippines
Poland
Portugal
Republic of Slovakia
Russia
Singapore
Slovenia
South Africa
South Korea
Sri Lanka
7
<PAGE> 8
Swazilaka
Taiwan
Thailand
Turkey
Ukraine
Uruguay
Venezuela
Zambia
Zimbabwe
Although the Fund considers each of the above-listed countries eligible for
investment, it will not be invested in all such markets at all times. Moreover,
investing in some of those markets currently may not be desirable or feasible,
due to the lack of adequate custody arrangements for the Fund's assets, overly
burdensome repatriation and similar restrictions, the lack of organized and
liquid securities markets, unacceptable political risks or for other reasons.
As used in this Prospectus, an issuer in an emerging market is an entity: (i)
for which the principal securities trading market is an emerging market, as
defined above; (ii) that (alone or on a consolidated basis) derives 50% or more
of its total revenues from business in emerging markets, provided that, in the
Sub-advisor's view, the value of such issuer's securities will tend to reflect
emerging market developments to a greater extent than developments elsewhere; or
(iii) organized under the laws of, or with a principal office in, an emerging
market.
The Fund may also invest up to 35% of its total assets in (i) debt securities
of government or corporate issuers in emerging markets; (ii) equity and debt
securities of issuers in developed countries, including the United States; (iii)
securities of issuers in emerging markets not included in the list of emerging
markets above, if investing therein becomes feasible and desirable subsequent to
the date of this Prospectus; and (iv) cash and money market instruments.
The Fund invests in those emerging markets that the Sub-advisor believes have
strongly developing economies and in which the markets are becoming more
sophisticated. In selecting investments, the Sub-advisor seeks to identify those
countries and industries where economic and political factors, including
currency movements, are likely to produce above-average growth rates. The Sub-
advisor then invests in those companies in such countries and industries that
are best positioned and managed to take advantage of these economic and
political factors. The Fund ordinarily will be invested in the securities of
issuers in at least three different emerging markets. In evaluating investments
in securities of issuers in developed markets, the Sub-advisor will consider,
among other things, the business activities of the issuer in emerging markets
and the impact that developments in emerging markets are likely to have on the
issuer.
The Sub-advisor believes that the issuers of securities in emerging markets
often have sales and earnings growth rates that exceed those in developed
countries and that such growth rates may in turn be reflected in more rapid
share price appreciation. Accordingly, the Sub-advisor believes that the Fund's
policy of investing in equity securities of companies in emerging markets may
enable the Fund to achieve results superior to those produced by mutual funds
with similar objectives that invest solely in equity securities of issuers
domiciled in the United States and/or in other developed markets.
CERTAIN INVESTMENT STRATEGIES AND POLICIES. In pursuit of its objectives and
policies, the Fund may employ one or more of the following strategies in order
to enhance investment results:
INVESTMENTS IN DEBT SECURITIES. The Fund may invest in debt securities of
governmental and corporate issuers in emerging markets. Emerging market debt
securities often are rated below investment grade or not rated by U.S. rating
agencies. The Fund may invest up to 20% of its total assets in debt securities
rated below investment grade. Investment in below investment grade debt
securities involves a high degree of risk and can be speculative. These debt
securities are the equivalent of high yield, high risk bonds, commonly known as
"junk bonds." See "Risk Factors -- Risks Associated with Debt Securities."
If the rating of a debt security held by the Fund drops below a minimum rating
considered acceptable by the Sub-advisor, the Fund will dispose of any such
security as soon as practicable and consistent with the best interests of the
Fund and its shareholders.
Growth of capital in debt securities may arise as a result of favorable
changes in relative foreign exchange rates, in relative interest rate levels
and/or in the creditworthiness of issuers. The receipt of income from debt
securities owned by the Fund is incidental to its objective of long-term growth
of capital.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Sub-advisor may employ a temporary defensive investment strategy if
it determines such a strategy to be warranted due to market, economic, or
political conditions. Under a defensive strategy, the Fund temporarily may
invest up to 100% of its assets in cash (U.S. dollars, foreign currencies,
multinational currency units such as Euros) and/or high quality debt securities
or money market instruments of U.S. or foreign issuers. In addition, for
temporary defensive purposes, most or all of its investments may be made in the
United States and denominated in U.S. dollars. To the extent the Fund employs a
temporary defensive strategy, it will not be invested so as to achieve directly
its investment objective. In addition, pending investment of proceeds from new
sales of Fund shares or to meet ordinary daily cash needs, the Fund temporarily
may hold cash (U.S. dollars, foreign currencies or multinational currency units)
and may invest any portion of its assets in money market instruments. For a
description of money market instruments in which the Fund may invest, see
"Temporary Defensive Strategies" in the "Investment Objectives and Policies"
section of the Statement of Additional Information.
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Fund may be able to
invest in certain countries solely or primarily through governmentally
authorized investment vehicles or companies, some of which may be investment
vehicles or companies that are advised by the Sub-advisor or its affiliates
("Affiliated Funds"). Pursuant to the Investment Company Act of 1940 (the
8
<PAGE> 9
"1940 Act"), the Fund generally may invest up to 10% of its total assets in the
aggregate in shares of other investment companies and up to 5% of its total
assets in any one investment company, as long as each investment does not
represent more than 3% of the outstanding voting stock of the acquired
investment company at the time of investment.
Investment in other investment companies may involve the payment of
substantial premiums above the value of such investment companies' portfolio
securities and is subject to limitations under the 1940 Act and market
availability. The Fund does not intend to invest in such investment companies
unless, in the judgment of the Sub-advisor, the potential benefits of such
investment justify the payment of any applicable premium or sales charge. As a
shareholder in an investment company, the Fund would bear its ratable share of
that investment company's expenses, including its advisory and administration
fees. At the same time the Fund would continue to pay its own management fees
and other expenses. AIM and the Sub-advisor will waive their advisory fees to
the extent that the Fund invests in an Affiliated Fund.
SECURITIES LENDING. The Fund may lend its portfolio securities to
broker/dealers or to other institutional investors. Securities lending allows a
Fund to retain ownership of the securities loaned and, at the same time,
enhances the Fund's total return. At all times a loan is outstanding, the Fund's
borrower must maintain with the Fund's custodian collateral consisting of cash,
U.S. government securities or certain irrevocable letters of credit equal to at
least the value of the borrowed securities plus any accrued interest or such
other collateral as permitted by the Fund's investment program and regulatory
agencies, and as approved by the Board. The Fund limits its loans of portfolio
securities to an aggregate of 30% of the value of its total assets, measured at
the time any such loan is made. 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 loaned securities and possible loss
of rights in the collateral should the borrower fail financially.
PRIVATIZATIONS. The governments in some emerging markets have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-advisor believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Fund in privatizations in appropriate
circumstances. In certain emerging markets, the ability of foreign entities such
as the Fund to participate in privatizations may be limited by local law, or the
terms on which the Fund may be permitted to participate may be less advantageous
than those afforded local investors. There can be no assurance that governments
in emerging markets will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
BORROWING. It is a fundamental policy of the Fund that it may borrow an amount
up to 33 1/3% of its total assets in order to meet redemption requests.
Borrowing may cause greater fluctuation in the value of the Fund's shares than
would be the case if the Fund did not borrow, but also may enable the Fund to
retain favorable securities positions rather than liquidating such positions to
meet redemptions. It is a nonfundamental policy of the Fund that the Fund will
not purchase securities during times when outstanding borrowings represent 5% or
more of the Fund's total assets.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Fund 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 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 the Fund will purchase
or sell when-issued securities and 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 Fund. If the Fund
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 the Fund enters into a transaction on a
when-issued or forward commitment basis, the Fund will segregate cash or liquid
securities equal to the value of the when-issued or forward commitment
securities with its custodian bank and will mark to market daily such assets.
There is a risk that the securities may not be delivered and that the Fund may
incur a loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. The Fund 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 risk normally associated with the
portfolio. 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). The Fund may enter into such instruments up to the full
value of its portfolio assets. See "Risk Factors -- Options, Futures and Foreign
Currency Transactions" herein and "Options, Futures and Currency Strategies" in
the Statement of Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Fund 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. The Fund may enter into forward currency
contracts either with respect to specific transactions or with respect to its
portfolio positions. The Fund also may purchase and sell put and call options on
currencies, futures contracts on currencies and options on such futures
contracts to hedge against movements in exchange rates.
Only a limited market, if any, currently exists for options and futures
transactions relating to currencies of most emerging markets, to securities
denominated in such currencies or to securities of issuers domiciled or
principally engaged in business in such emerging
9
<PAGE> 10
markets. To the extent that such a market does not exist, the Sub-advisor may
not be able to effectively hedge its investment in such markets.
The Fund may purchase and sell put and call options on securities to hedge
against the risk of fluctuations in the prices of securities held by the Fund or
that the Sub-advisor intends to include in the Fund's portfolio. The Fund also
may purchase and sell put and call options on indices to hedge against overall
fluctuations in the securities markets generally or in a specific market sector.
Further, the Fund 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
adversely affect the Fund's portfolio. The Fund 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. The Fund
may use interest rate futures contracts and options thereon to hedge the debt
portion of its portfolios against changes in the general level of interest
rates.
OTHER INFORMATION. The investment objective of the Fund may not be changed
without the approval of a majority of the Fund's outstanding voting securities.
A "majority of the Fund's outstanding voting securities" means the lesser of (i)
67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented, or (ii) more than 50% of the outstanding
shares. In addition, the Fund has adopted certain investment limitations as
fundamental policies which also may not be changed without shareholder approval.
A complete description of these limitations is included in the Statement of
Additional Information. Unless specifically noted, the Fund's investment
policies described in this Prospectus and in the Statement of Additional
Information 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.
The Fund is authorized to engage in Short Sales, although it currently has no
intention of doing so, and may purchase American Depositary Receipts, American
Depositary Shares, Global Depositary Receipts and European Depositary Receipts.
See "Short Sales" and "Depositary Receipts," respectively, in the "Investment
Objectives and Policies" section of the Statement of Additional Information.
- --------------------------------------------------------------------------------
RISK FACTORS
GENERAL. There is no assurance that the Fund will achieve its investment
objective. Investing in the Fund entails a substantial degree of risk and an
investment in the Fund should be considered speculative. Investors are strongly
advised to consider carefully the special risks involved in emerging markets,
which are in addition to the usual risks of investing in developed markets
around the world.
The Fund's net asset value will fluctuate, reflecting fluctuations in the
market value of its portfolio positions and its net currency exposure. 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 an issuer, if any, remaining after all more senior claims have
been satisfied. The value of equity securities held by the Fund will fluctuate
in response to general market and economic developments, as well as developments
affecting the particular issuers of such securities.
Investing in emerging markets involves risks relating to potential political
and economic instability within such markets and the risks of expropriation,
nationalization, confiscation of assets and property or the imposition of
restrictions on foreign investment and on repatriation of capital invested. In
the event of such expropriation, nationalization or other confiscation, the Fund
could lose its entire investment in that market.
Economies in individual emerging markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging market
countries have experienced high rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain countries with
emerging markets.
Emerging markets generally are dependent heavily upon international trade and,
accordingly, have been and may continue to be affected adversely by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
Disclosure and regulatory standards in many respects are less stringent than
in the U.S. and other major markets. There also may be a lower level of
monitoring and regulation of emerging markets and the activities of investors in
such markets, and enforcement of existing regulations has been extremely
limited. In addition, the securities of non-U.S. issuers generally are not
registered with the SEC, nor are the issuers thereof usually subject to the
SEC's reporting requirements. Accordingly, there may be less publicly available
information about foreign securities and issuers than is available with respect
to U.S. securities and issuers. Foreign companies generally are not subject to
uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to
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<PAGE> 11
those applicable to U.S. companies. The Fund's net investment income and/or
capital gains from its foreign investment activities may be subject to non-U.S.
withholding taxes.
In addition, brokerage commissions, custodial services and other costs
relating to investment in foreign markets generally are more expensive than in
the United States, particularly with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
The inability of the Fund to make intended securities purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
developed countries. The risk also exists that an emergency situation may arise
in one or more emerging markets as a result of which trading of securities may
cease or may be substantially curtailed and prices for the Fund's portfolio
securities in such markets may not be readily available. Section 22(e) of the
1940 Act permits a registered investment company, such as the Fund, to suspend
redemption of its shares for any period during which an emergency exists, as
determined by the SEC. Accordingly, when the Fund believes that circumstances
dictate, it will promptly apply to the SEC for a determination that such an
emergency exists within the meaning of Section 22(e) of the 1940 Act. During the
period commencing from the Fund's identification of such conditions until the
date of any SEC action, the Fund's portfolio securities in the affected markets
will be valued at fair value determined in good faith by or under the direction
of the Trust's Board of Trustees.
RISKS ASSOCIATED WITH DEBT SECURITIES. The value of the debt securities held
by the Fund generally will vary inversely with market interest rates. If
interest rates in a market fall, the Fund's debt securities issued by
governments or companies in that market ordinarily will increase in value. If
market interest rates increase, however, the debt securities owned by the Fund
in that market will likely decrease in value.
The Fund may invest up to 20% of its total assets in debt securities rated
below investment grade. Such investments involve a high degree of risk.
Debt rated Baa by Moody's Investors Service, Inc. ("Moody's") is considered by
Moody's to have speculative characteristics. Debt rated BB, B, CCC, CC or C by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), and
debt rated Ba, B, Caa, Ca or C by Moody's is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. 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 such issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing. Lower quality debt securities are also generally considered to be
subject to greater risk than securities with higher ratings with regard to a
deterioration of general economic conditions. These foreign debt securities are
the equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. Similarly, certain emerging market governments that issue lower
quality debt securities are among the largest debtors to commercial banks,
foreign governments and supranational organizations such as the World Bank, and
may not be able or willing to make principal and/or interest repayments as they
come due. 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 frequently have call or buy-back features which
would permit an issuer to call or repurchase the security from the Fund. In
addition, the Fund 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 the Fund 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 Fund to obtain accurate market quotations
11
<PAGE> 12
for purposes of valuing the Fund's portfolio. The Fund 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 Fund 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.
The Fund 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 its
portfolio holdings, and the Fund may have limited legal recourse in the event of
a default. Debt securities issued by governments in emerging markets can differ
from debt obligations issued by private entities in that remedies from defaults
generally must be pursued in the courts of the defaulting government, and legal
recourse is therefore somewhat diminished. Political conditions, in terms of a
government's willingness to meet the terms of its debt obligations, also are of
considerable significance. There can be no assurance that the holders of
commercial bank debt may not contest payments to the holders of debt securities
issued by governments in emerging markets in the event of default by the
governments under commercial bank loan agreements.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
securities for which no readily available market exists, so-called "Illiquid
Securities."
Illiquid securities may be more difficult to value than liquid securities and
the sale of illiquid securities generally will require more time and result in
higher brokerage charges or dealer discounts and other selling expenses than the
sale of liquid securities. Moreover, illiquid securities often sell at a price
lower than similar securities that are liquid.
CURRENCY RISK. Because the Fund may invest substantially in securities
denominated in currencies other than the U.S. dollar, and since the Fund may
hold foreign currencies, the Fund will be affected favorably or unfavorably by
exchange control regulations or changes in the exchange rates between such
currencies and the U.S. dollar. Changes in currency exchange rates will
influence the value of the Fund's shares, and also may affect the value of
dividends and interest earned by the Fund and gains and losses realized by the
Fund. Currencies generally are evaluated on the basis of fundamental economic
criteria (e.g., relative inflation and interest rate levels and trends, growth
rate forecasts, balance of payments status and economic policies) as well as
technical and political data. Exchange rates are determined by the forces of
supply and demand in the foreign exchange markets. These forces are affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. If the
currency in which a security is denominated appreciates against the U.S. dollar,
the dollar value of the security will increase. Conversely, a decline in the
exchange rate of the currency would adversely affect the value of the security
expressed in dollars.
Many of the currencies of emerging market countries have experienced steady
devaluations relative to the U.S. dollar, and major devaluations have
historically occurred in certain countries. Any devaluations in the currencies
in which the Fund's portfolio securities are denominated may have a detrimental
impact on the Fund.
Some countries also may have fixed currencies whose values against the U.S.
dollar are not independently determined. In addition, there is a risk that
certain countries may restrict the free conversion of their currencies into
other currencies. Further, certain currencies may not be internationally traded.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, and Spain are members of the European Economic and
Monetary Union (the "EEMU"). The EEMU intends to establish a common European
currency for participating countries which will be known as the "euro." It is
anticipated that each participating country will supplement its existing
currency with the euro on January 1, 1999, and will replace its existing
currency with the euro on July 1, 2002. Any other European country which is a
member of the EEMU may elect to participate in the EEMU and may supplement its
existing currency with the euro after January 1, 1999.
The expected introduction of the euro presents unique risks and uncertainties,
including whether the payment and operational systems of banks and other
financial institutions will be ready by January 1, 1999; how outstanding
financial contracts will be treated after January 1, 1999; the establishment of
exchange rates for existing currencies and the euro; and the creation of
suitable clearing and settlement systems for the euro. These and other factors
could cause market disruptions before or after the introduction of the euro and
could adversely affect the value of securities held by the Fund.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. Although the Fund is
authorized to enter into options, futures and forward currency transactions, the
Fund might not enter into any such transactions. Options, futures and foreign
currency transactions involve certain risks, which include: (1) dependence on
the Sub-advisor's ability to predict movements in the prices of individual
securities, fluctuations in the general securities markets and movements in
interest rates and currency markets; (2) imperfect correlation, or even no
correlation, between movements in the price of forward contracts, options,
futures contracts or options thereon and movements in the price of the currency
or security hedged or used for cover; (3) the fact that skills and techniques
needed to trade options, futures contracts and options thereon or to use forward
currency contracts are different from those needed to select the securities in
which the Fund invests; (4) lack of assurance that a liquid secondary market
will exist for any particular option, futures contract or option thereon at any
particular time; (5) the possible loss of principal under certain conditions;
and (6) the possible inability of the Fund to purchase or sell a portfolio
security at a time when it would otherwise be favorable for it to do so, or the
possi-
12
<PAGE> 13
ble need for the Fund to sell a security at a disadvantageous time, due to the
need for the Fund to maintain "cover" or to set aside securities in connection
with hedging transactions.
- --------------------------------------------------------------------------------
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Fund. The Trust's Board of Trustees has approved all significant agreements
between the Trust on the one side and persons or companies furnishing services
to the Fund on the other, including the investment management and administration
agreement with AIM, the investment sub-advisory and sub-administration agreement
between AIM and the Sub-advisor, the agreements with AIM Distributors regarding
distribution of the Fund's shares, the custody agreement and the transfer agency
agreement. The day to day operations of the Fund are delegated to the officers
of the Trust, subject always to the investment objective and policies of the
Fund and to the general supervision of the Trust's Board of Trustees. See
"Trustees and Executive Officers" in the Statement of Additional Information for
information on the Trust's Board of Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-advisor as the Fund's investment managers and administrators include, but
are not limited to, determining the composition of the Fund's portfolio and
placing orders to buy, sell or hold particular securities; furnishing corporate
officers and clerical staff; providing office space, services and equipment; and
supervising all matters relating to the Fund's operation. For these services,
the Fund pays AIM investment management and administration fees, computed daily
and paid monthly, based on its average daily net assets, at the annualized rate
of 0.975% on the first $500 million, 0.95% on the next $500 million, 0.925% on
the next $500 million, and 0.90% on amounts thereafter. Out of the aggregate
fees payable by the Fund, AIM pays the Sub-advisor sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from the
Fund. The investment management and administration fees paid by the Fund are
higher than those paid by most mutual funds. The Fund pays all expenses not
assumed by AIM, the Sub-advisor, AIM Distributors or other agents. AIM has
undertaken to limit each Fund's expenses (exclusive of brokerage commissions,
taxes, interest and extraordinary expenses) to the annual rate of 2.00% and
2.50% of the average daily net assets of the Fund's Class A and Class B shares,
respectively.
The Sub-advisor also serves as the Fund's pricing and accounting agent. For
these services the Sub-advisor receives a fee consisting of 0.03% of the first
$5 billion of assets, and 0.02% of the assets in excess of $5 billion, of the
AIM Funds that are sub-advised by the Sub-advisor (other than AIM Eastern Europe
Fund). Each of these funds, including the Fund, pays an amount based upon its
relative net assets.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment manager to the Fund pursuant to a master investment management and
administration agreement (the "Advisory Agreement"). AIM was organized in 1976
and, together with its subsidiaries, manages or advises approximately 90
investment company portfolios encompassing a broad range of investment
objectives. The Sub-advisor, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-advisor to the Fund pursuant to an investment sub-advisory and
sub-administration agreement. Prior to May 29, 1998, the Sub-advisor was known
as Chancellor LGT Asset Management, Inc. On May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of the Sub-advisor,
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included the Sub-advisor and
certain other affiliates. As a result of this transaction, the Sub-advisor is
now an indirect wholly-owned subsidiary of AMVESCAP PLC. Prior to the sale, the
Sub-advisor and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
AIM and the Sub-advisor and their worldwide asset management affiliates
provide investment management and/or administrative services to institutional,
corporate and individual clients around the world. AIM and the Sub-advisor are
both indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and
New York offices, AIM and the Sub-advisor draw upon the expertise, personnel,
data and systems of other offices in Atlanta, Boston, Dallas, Denver,
Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong, London, Singapore,
Sydney, Tokyo and Toronto. In managing the Fund, the Sub-advisor employs a team
approach, taking advantage of its investment resources around the world.
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<PAGE> 14
The investment professionals primarily responsible for the portfolio
management of the Fund are as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- ----------- -------------------- -------------------
<S> <C> <C>
Francesco Bertoni Portfolio Manager Portfolio Manager for the Sub-advisor since June
London since 1998 1998. Investment Director of INVESCO Asset
Management Ltd. (London) ("INVESCO London"), an
affiliate of the Sub-advisor, since 1994.
Portfolio Manager for INVESCO London from 1990 to
1994.
Christine Rowley Portfolio Manager Portfolio Manager for the Sub-advisor, INVESCO GT
London since 1997 Asset Management PLC (London) and INVESCO GT Asset
Management Asia Ltd. (Hong Kong), affiliates of
the Sub-advisor, since 1992.
</TABLE>
In placing securities orders for the Fund's portfolio transactions, the
Sub-advisor seeks to obtain the best net results. Consistent with its obligation
to obtain the best net results, the Sub-advisor may consider a broker/dealer's
sale of shares of the AIM Funds as a factor in considering through whom
portfolio transactions will be effected. Brokerage transactions may be executed
through affiliates of AIM or the Sub-advisor. High portfolio turnover (over
100%) involves correspondingly greater brokerage commissions and other
transaction costs that the Fund will bear directly and could result in the
realization of net capital gains which would be taxable when distributed to
shareholders. See "Dividends, Distributions and Tax Matters."
DISTRIBUTOR. The Trust has entered into a Master Distribution Agreement on
behalf of Class A shares of the Fund, and has entered into a Master Distribution
Agreement on behalf of Class B shares of the Fund (individually referred to as a
"Distribution Agreement" or collectively as the "Distribution Agreements.") with
AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of
AIM, to act as the distributor of Class A and Class B shares of the Fund.
Certain Trustees and officers of the Trust are affiliated with AIM Distributors.
The Distribution Agreements provide AIM Distributors with the exclusive right
to distribute shares of the Fund directly and through institutions with whom AIM
Distributors has entered into selected dealer agreements. Under the Distribution
Agreement for the Class B shares, AIM Distributors sells Class B shares of the
Fund at net asset value subject to a contingent deferred sales charge
established by AIM Distributors. AIM Distributors is authorized to advance to
institutions through whom Class B shares are sold a sales commission under
schedules established by AIM Distributors. The Distribution Agreement for the
Class B shares provides that AIM Distributors (or its assignee or transferee)
will receive 0.75% (of the total 1.00% payable under the distribution plan
applicable to Class B shares) of the Fund's average daily net assets
attributable to Class B shares attributable to the sales efforts of AIM
Distributors. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset based
sales charges in respect of the outstanding Class B shares attributable to the
distribution efforts of AIM Distributors; provided, however, that a complete
termination of the Class B shares master distribution plan (as defined in the
plan) would terminate all payments by the Fund of asset based sales charges and
services fees to AIM Distributors. Termination of the Class B shares
distribution plan or Distribution Agreement does not affect the obligation of
Class B shareholders to pay contingent deferred sales charges.
DISTRIBUTION PLANS. Class A Plan. The Trust has adopted a Master Distribution
Plan applicable to Class A shares of the Fund (the "Class A Plan") pursuant to
Rule 12b-1 under the 1940 Act, to compensate AIM Distributors for the purpose of
financing any activity that is intended to result in the sale of Class A shares
of the Fund.
Under the Class A Plan, the Trust may compensate AIM Distributors an aggregate
amount of 0.50% of the average daily net assets of Class A shares of the Fund on
an annualized basis.
The Class A 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 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 shares of the Fund and who provide continuing
personal services to their customers who own Class A shares of the Fund. The
service fees payable to selected institutions are calculated at the annual rate
of 0.25% of the average daily net asset value of those Fund shares that are held
in such institution's customers' accounts which were purchased on or after a
prescribed date set forth in the Plan.
Of the aggregate amount payable under the Class A 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 Plan. The Class A 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
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 Plan on behalf of the Fund. Thus, under the Class A 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. Payments pursuant to the
Plans are subject to any applicable limitations imposed by rules of the National
Association of Securities Dealers, Inc.
14
<PAGE> 15
Class B Plan. The Trust has also adopted a master distribution plan applicable
to Class B shares of the Fund (the "Class B Plan"). Under the Class B Plan, the
Fund pays distribution expenses at an annual rate of 1.00% of the average daily
net assets attributable to the Fund's Class B shares. Of such amount the Fund
pays a service fee of 0.25% of the average daily net assets attributable to the
Fund's Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee would
constitute an asset-based sales charge. Amounts paid in accordance with the
Class B Plan with respect to the Fund may be used to finance any activity
primarily intended to result in the sale of Class B shares of the Fund.
Both Plans. Activities that may be financed under the Class A Plan and the
Class B Plan (collectively, the "Plans") include, but are not limited to:
printing of prospectuses and statements of additional information and reports
for other than existing shareholders, overhead, preparation and distribution of
advertising material and sales literature, expense of organizing and conducting
sales seminars, supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements, and the cost of administering the Plans. These amounts
payable by the Fund under the Plans need not be directly related to the expenses
actually incurred by AIM Distributors on behalf of the Fund. Thus, even if AIM
Distributors' actual expenses exceed the fee payable to AIM Distributors
thereunder at any given time, the Trust will not be obligated to pay more than
that fee, and if AIM Distributors' expenses are less than the fee it receives,
AIM Distributors will retain the full amount of the fee. Payments pursuant to
the Plans are subject to any applicable limitations imposed by rules of the
National Association of Securities Dealers, Inc.
Each of the Plans may be terminated at any time by a vote of the majority of
those Trustees who are not "interested persons" of the Trust or by a vote of the
holders of the majority of the outstanding shares of the applicable class.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Fund on an agency basis, may
receive payments from the Fund pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent, for the Fund in
making such payments. The Fund will obtain a representation from such financial
institutions that they will either be licensed as dealers as required under
applicable state law, or that they will not engage in activities which would
constitute acting as a "dealer" as defined under applicable state law. Financial
intermediaries and any other person entitled to receive compensation for selling
Fund shares may receive different compensation for selling shares of one class
over another.
For additional information concerning the operation of the Plans see the
Statement of Additional Information.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST
The Trust was organized as a Delaware business trust on May 7, 1998. On
September 8, 1998, the Trust acquired the assets of and assumed the liabilities
of AIM Investment Funds, Inc., a Maryland corporation. The Fund constitutes one
of the thirteen separate and distinct series portfolios of the Trust. From time
to time, the Trust may establish other funds, each corresponding to a distinct
investment portfolio and a distinct series of the Trust's shares of beneficial
interest. Shares of each fund are entitled to one vote per share (with
proportional voting for fractional shares) and are freely transferable.
Shareholders have no preemptive rights. Other than the automatic conversion of
Class B shares to Class A shares, there are no conversion rights.
On any matter submitted to a vote of shareholders, shares of the Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of its investment
management arrangements. In addition, shares of a particular class of the Fund
may vote on matters affecting only that class. The shares of the Fund and the
Trust's other series will be voted in the aggregate on other matters, such as
the election of Trustees and ratification of the selection of the Trust's
independent accountants.
Normally there will be no annual meeting of shareholders in any year, except
as required under the 1940 Act. Shares of the Fund and the Trust's other series
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 Agreement and 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 shares of the
Fund and is entitled to such other shares of the Fund and is entitled to such
dividends and distributions out of the income earned and gain realized on the
assets belonging to the Fund as may be declared by 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.
Shares of the Fund, when issued, are fully paid and nonassessable.
LEGAL COUNSEL The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800 acts as counsel to the Trust and the
Fund.
15
<PAGE> 16
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Registered Trademark--
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM ADVISOR FLEX FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM ADVISOR INTERNATIONAL VALUE FUND AIM GLOBAL RESOURCES FUND
AIM ADVISOR LARGE CAP VALUE FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM ADVISOR MULTIFLEX FUND AIM GLOBAL TRENDS FUND
AIM ADVISOR REAL ESTATE FUND AIM GLOBAL UTILITIES FUND
AIM AGGRESSIVE GROWTH FUND AIM HIGH INCOME MUNICIPAL FUND
AIM ASIAN GROWTH FUND AIM HIGH YIELD FUND
AIM BALANCED FUND AIM INCOME FUND
AIM BASIC VALUE FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM BLUE CHIP FUND AIM INTERNATIONAL EQUITY FUND
AIM CAPITAL DEVELOPMENT FUND AIM INTERNATIONAL GROWTH FUND
AIM CHARTER FUND AIM JAPAN GROWTH FUND
AIM CONSTELLATION FUND AIM LATIN AMERICAN GROWTH FUND
AIM DEVELOPING MARKETS FUND AIM LIMITED MATURITY TREASURY FUND
AIM DOLLAR FUND(*) AIM MID CAP EQUITY FUND
AIM EMERGING MARKETS FUND AIM MONEY MARKET FUND(*)
AIM EMERGING MARKETS DEBT FUND AIM MUNICIPAL BOND FUND
AIM EUROPEAN DEVELOPMENT FUND AIM NEW PACIFIC GROWTH FUND
AIM EUROPE GROWTH FUND AIM SELECT GROWTH FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AND AIM SMALL CAP OPPORTUNITIES FUND
SERVICES FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM GLOBAL GOVERNMENT INCOME FUND AIM TAX-EXEMPT CASH FUND(*)
AIM GLOBAL GROWTH FUND AIM TAX-FREE INTERMEDIATE FUND
AIM GLOBAL GROWTH & INCOME FUND AIM VALUE FUND
AIM GLOBAL HEALTH CARE FUND AIM WEINGARTEN FUND
AIM GLOBAL INCOME FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
(*) Class A shares of AIM TAX-EXEMPT CASH FUND and AIM DOLLAR FUND and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND are offered to investors at net
asset value, without payment of a sales charge, as described below. Other
funds, including the Class A, Class B and Class C shares of AIM MONEY MARKET
FUND, are sold with an initial sales charge or subject to a contingent
deferred sales charge upon redemption, as described below.
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds ("AIM Funds"), an investor must submit a fully completed new Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by A I M Distributors, Inc. ("AIM
Distributors") to sell shares of the AIM Funds.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment is
$500, except for accounts initially established through an Automatic Investment
Plan, which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for an Individual Retirement Arrangement ("IRA") or Roth IRA is $250.
There are no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, Simplified Employee Pension
("SEP") accounts, Savings Incentive Match Plans for Employee IRA ("SIMPLE IRA")
accounts, 403(b) plans or 457 (state deferred compensation) plans (except that
the minimum initial investment for salary deferrals for such plans is $25 per
fund investment), or for investment of dividends and distributions of any of the
AIM Funds into any existing AIM
A-1
<PAGE> 17
Funds account. Notwithstanding the foregoing, the minimum initial investment
applicable to AIM Small Cap Opportunities Fund is $10,000.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus, as well as
Advisor Class shares of certain AIM Funds, are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his dealer should call AFS' Client Services Department
at (800) 959-4246 prior to sending a wire to receive a reference number for the
wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
HOW TO PURCHASE ADDITIONAL SHARES. Additional shares may be purchased directly
through AIM Distributors or through any dealer who has entered into an agreement
with AIM Distributors. The minimum investment for subsequent purchases is $50.
The minimum employee salary deferral investment for participants in
money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or 457 plans is
$25. Notwithstanding the foregoing, the minimum subsequent purchases of shares
of AIM Small Cap Opportunities Fund is $1,000. There are no such minimum
investment requirements for investment of dividends and distributions of any of
the AIM Funds into any other existing AIM Funds account.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional shares by electronic funds
transfer, please contact the Client Services Department of AFS for details.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE
CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND, AIM
AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BASIC
VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND,
AIM CONSTELLATION FUND, AIM DEVELOPING MARKETS FUND, AIM DOLLAR FUND, AIM
EMERGING MARKETS FUND, AIM EMERGING MARKETS DEBT FUND, AIM EUROPEAN DEVELOPMENT
FUND, AIM EUROPE GROWTH FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL SERVICES FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL GROWTH &
INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL
INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL TELECOMMUNICATIONS
FUND, AIM GLOBAL TRENDS FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH INCOME
MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM INTERNATIONAL GROWTH FUND,
AIM JAPAN GROWTH FUND, AIM LATIN AMERICAN GROWTH FUND, AIM LIMITED MATURITY
TREASURY FUND, AIM MID CAP EQUITY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL
BOND FUND, AIM NEW PACIFIC GROWTH FUND, AIM SELECT GROWTH FUND, AIM SMALL CAP
GROWTH FUND, AIM SMALL CAP OPPORTUNITIES FUND, AIM STRATEGIC INCOME FUND,AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND, AIM TAX-FREE
INTERMEDIATE FUND, AIM VALUE FUND, AIM WEINGARTEN FUND and AIM WORLDWIDE GROWTH
FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM LIMITED MATURITY
TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND
and AIM TAX-FREE INTERMEDIATE FUND), the "Multiple Class Funds," may be
purchased at their respective net asset value plus a sales charge as indicated
below, except that Class A shares of AIM DOLLAR FUND and AIM TAX-EXEMPT CASH
FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold without a
sales charge and Class B shares (the "Class B shares") and Class C shares (the
"Class C shares") of the Multiple Class Funds which offer such classes are sold
at net asset value subject to a contingent deferred sales charge payable upon
certain redemptions. Class B shares of AIM DOLLAR FUND, however, may be acquired
only by an exchange of shares of another AIM Fund. These contingent deferred
sales charges are described under the caption "How to Redeem Shares -- Multiple
Distribution System." Securities dealers and other persons entitled to receive
compensation for selling or servicing shares of a Multiple Class Fund may
receive different compensation for selling or servicing one particular class of
shares over
A-2
<PAGE> 18
another class in the same Multiple Class Fund. Factors an investor should
consider prior to purchasing Class A, Class B or Class C shares (or, if
applicable, AIM Cash Reserve Shares) of a Multiple Class Fund are described
below under "Special Information Relating to Multiple Class Funds." For
information on purchasing any of the AIM Funds and to receive a prospectus,
please call (800) 347-4246. As described below, the sales charge otherwise
applicable to a purchase of shares of a fund may be reduced if certain
conditions are met. In order to take advantage of a reduced sales charge, the
prospective investor or his dealer must advise AIM Distributors that the
conditions for obtaining a reduced sales charge have been met. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
The following Multiple Class Funds sometimes are referred to herein as the
"AIM/GT Funds": AIM AMERICA VALUE FUND, AIM DEVELOPING MARKETS FUND, AIM DOLLAR
FUND, AIM EMERGING MARKETS FUND, AIM EMERGING MARKETS DEBT FUND, AIM EUROPE
GROWTH FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL
FINANCIAL SERVICES FUND, AIM GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH &
INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL INFRASTRUCTURE FUND, AIM
GLOBAL RESOURCES FUND, AIM GLOBAL TELECOMMUNICATIONS FUND, AIM GLOBAL TRENDS
FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM LATIN AMERICAN
GROWTH FUND, AIM MID CAP GROWTH FUND, AIM NEW PACIFIC GROWTH FUND, AIM SMALL CAP
EQUITY FUND, AIM STRATEGIC INCOME FUND and AIM WORLDWIDE GROWTH FUND.
The following tables show the sales charge and dealer concession at various
investment levels for the AIM Funds.
SALES CHARGES AND DEALER CONCESSIONS
GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds include Class A shares of each of AIM ADVISOR FLEX FUND, AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, AIM AGGRESSIVE GROWTH FUND, AIM BASIC VALUE FUND, AIM ASIAN
GROWTH FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND,
AIM CONSTELLATION FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM EUROPE GROWTH FUND,
AIM GLOBAL UTILITIES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM INTERNATIONAL
EQUITY FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM MID CAP
EQUITY FUND, AIM MONEY MARKET FUND, AIM NEW PACIFIC GROWTH FUND, AIM SELECT
GROWTH FUND, AIM SMALL CAP GROWTH FUND, AIM SMALL CAP OPPORTUNITIES FUND, AIM
VALUE FUND, AIM WEINGARTEN FUND and AIM WORLDWIDE GROWTH FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION(1) PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
- ---------------
(1) AIM Small Cap Opportunities Fund will not accept any single purchase in
excess of $250,000.
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
A-3
<PAGE> 19
GROUP II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: the Class A shares of each of AIM ADVISOR REAL ESTATE FUND,
AIM BALANCED FUND, AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM
EMERGING MARKETS DEBT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL SERVICES FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE
FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL
RESOURCES FUND, AIM GLOBAL TELECOMMUNICATIONS FUND, AIM GLOBAL TRENDS FUND, AIM
HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM LATIN AMERICAN GROWTH FUND, AIM MUNICIPAL BOND
FUND, AIM STRATEGIC INCOME FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are the Class A shares of each of AIM LIMITED MATURITY TREASURY
FUND and AIM TAX-FREE INTERMEDIATE FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million of more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to
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a contingent deferred sales charge, for all AIM Funds other than Class A shares
of each of AIM LIMITED MATURITY TREASURY FUND and AIM TAX-FREE INTERMEDIATE FUND
as follows: 1% of the first $2 million of such purchases, plus 0.80% of the next
$1 million of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in excess of $20 million of such purchases. See
"Contingent Deferred Sales Charge Program for Large Purchases." AIM Distributors
may make payments to dealers and institutions who are dealers of record for
purchases of $1 million or more of Class A shares (or shares which normally
involve payment of initial sales charges), and which are sold at net asset value
and are not subject to a contingent deferred sales charge, in an amount up to
0.10% of such purchases of Class A shares of AIM LIMITED MATURITY TREASURY FUND,
and in an amount up to 0.25% of such purchases of Class A shares of AIM TAX-FREE
INTERMEDIATE FUND.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.00% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price of the Class C
shares sold by the dealer or institution, and will consist of a sales commission
of 0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. After the first full year, AIM Distributors will make such
payments quarterly to dealers and institutions based on the average net asset
value of Class C shares which are attributable to shareholders for whom the
dealers and institutions are designated as dealers of record. These commissions
on Class C shares are not paid on sales to investors exempt from the CDSC,
including Class C shareholders of record on April 30, 1995 who purchase
additional shares in any of the Funds on or after May 1, 1995, and in
circumstances where AIM Distributors grants an exemption on particular
transactions.
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of regular trading on the New York Stock Exchange ("NYSE"), which is
generally 4:00 p.m. Eastern Time (and which is hereinafter referred to as "NYSE
Close"), on any business day of an AIM Fund will be confirmed at the price next
determined. Orders received after NYSE Close will be confirmed at the price
determined on the next business day of the AIM Fund. Certain financial
institutions (or their designees) may be authorized to accept purchase orders on
behalf of the AIM Funds. Orders received by authorized institutions (or their
designees) before NYSE Close will be deemed to have been received by an AIM Fund
on such day and will be effected that day, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. It is the responsibility of the dealer/financial institution to ensure
that all orders are transmitted on a timely basis to the Transfer Agent. Any
loss resulting from the dealer/financial institution's failure to submit an
order within the prescribed time frame will be borne by that dealer/financial
institution. Please see "How to Purchase Shares -- Purchases by Wire" for
information on obtaining a reference number for wire orders, which will
facilitate the handling of such orders and ensure prompt credit to an investor's
account. A "business day" of an AIM Fund is any day on which the NYSE is open
for business. It is expected that the NYSE will be closed during the next twelve
months on Saturdays and Sundays and on the days on which New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class Funds
currently offer two or more classes of shares through separate distribution
systems (the "Multiple Distribution System"). Although each class of shares of a
particular Multiple Class Fund represents an interest in the same portfolio of
investments, each class is subject to a different distribution structure and, as
a result, differing expenses. This Multiple Distribution System allows investors
to select the class that is best suited to the investor's needs and objectives.
In considering the options afforded by the Multiple Distribution System,
investors should consider both the applicable initial sales charge or contingent
deferred sales charge, as well as the ongoing expenses borne by each class of
shares and other relevant factors, such as whether his or her investment goals
are long-term or short-term.
CLASS A SHARES generally are sold subject to the initial sales charges
described above and are subject to the other fees and expenses described
herein. Class A shares of AIM MONEY MARKET FUND are designed to meet the
needs of an investor who wishes to establish a dollar cost averaging
program, pursuant to which Class A shares an investor owns may be exchanged
at net asset value for Class A shares of another Multiple Class Fund or
shares of another AIM Fund which is not a Multiple Class Fund, subject to
the terms and conditions described under the caption "Exchange
Privilege -- Terms and Conditions of Exchanges."
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CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Rule 12b-1 Plan payments of 1.00%
per annum on the average daily net assets of a Multiple Class Fund
attributable to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the date such shares were purchased are subject to a
contingent deferred sales charge ranging from 5% for redemptions made
within the first year to 1% for redemptions made within the sixth year. No
contingent deferred sales charge will be imposed if Class B shares are
redeemed after six years from the date such shares were purchased.
Redemptions of Class B shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and other distributions)
eight years from the end of the calendar month in which the purchase of
Class B shares was made. Class B shares of AIM GLOBAL TRENDS FUND that were
outstanding on May 29, 1998 and which are continuously held by the
shareholder, automatically convert to Class A shares of AIM GLOBAL TRENDS
FUND seven years from the end of the calendar month in which the purchase
of such Class B shares was made. If a shareholder exchanges Class B shares
of AIM GLOBAL TRENDS FUND that were outstanding on, and continuously held
since, May 29, 1998 for Class B shares of any other AIM Fund, such Class B
shares will be subject to the eight year conversion feature applicable to
Class B shares of all other AIM Funds. Following such conversion of their
Class B shares, investors will be relieved of the higher Rule 12b-1 Plan
payments associated with Class B shares. See "Management -- Distribution
Plans."
AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold without an
initial sales charge and are not subject to a contingent deferred sales
charge; however, they are subject to the other fees and expenses described
in the prospectus for AIM MONEY MARKET FUND.
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon Eastern Time or NYSE Close on any
business day of the Fund will be confirmed at the price next determined. Net
asset value is normally determined at 12:00 noon Eastern Time and NYSE Close on
each business day of AIM MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO AIM MONEY MARKET FUND, AIM TAX-EXEMPT CASH
FUND and AIM DOLLAR FUND (THE "MONEY MARKET FUNDS"). Because each Money Market
Fund uses the amortized cost method of valuing the securities it holds and
rounds its per share net asset value to the nearest whole cent, it is
anticipated that the net asset value of the shares of such funds will remain
constant at $1.00 per share. However, there is no assurance that each Money
Market Fund can maintain a $1.00 net asset value per share. In order to earn
dividends with respect to AIM MONEY MARKET FUND on the same day that a purchase
is made, purchase payments in the form of federal funds must be received by the
Transfer Agent before 12:00 noon Eastern Time on that day. Purchases made by
payments in any other form, or payments in the form of federal funds received
after such time but prior to NYSE Close, will begin to earn dividends on the
next business day following the date of purchase. The Money Market Funds
generally will not issue share certificates but will record investor holdings in
noncertificate form and regularly advise the shareholder of his ownership
position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of Class A shares of the AIM Funds that
are otherwise subject to an initial sales charge, provided that such purchases
are made by a "purchaser" as hereinafter defined. Purchases of Class A shares of
AIM TAX-EXEMPT CASH FUND and AIM DOLLAR FUND, AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and Class B and Class C shares of the Multiple Class Funds
will not be taken into account in determining whether a purchase qualifies for a
reduction in initial sales charges.
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The term "purchaser" means:
- an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, Roth IRA, a single-participant
money-purchase/profit-sharing plan or an individual participant in a 403(b)
plan (unless such 403(b) plan qualifies as the purchaser as defined below);
- a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
- a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
- a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP"), or Savings Incentive Match
Plans for Employees IRA ("SIMPLE IRA") where the employer has notified AIM
Distributors in writing that all of its related employee SEP, SARSEP or
SIMPLE IRA accounts should be linked;
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
- the discretionary advised accounts of A I M Advisors, Inc. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge provided herein.
(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for (i) Class A
shares of AIM DOLLAR FUND, AIM TAX-EXEMPT CASH FUND, and AIM Cash Reserve Shares
of AIM MONEY MARKET FUND and (ii) Class B and Class C shares of the Multiple
Class Funds) within the following 13 consecutive months. By marking the LOI
section on the account application and by signing the account application, the
purchaser indicates that he understands and agrees to the terms of the LOI and
is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gain distributions
will not be applied to the LOI. At any time during the 13-month period after
meeting the original obligation, a purchaser may revise his intended investment
amount upward by submitting a written and signed request. Such a revision will
not change the original expiration date. By signing an LOI, a purchaser is not
making a binding commitment to purchase additional shares, but if purchases made
within the 13-month period do not total the amount specified, the investor will
pay the increased amount of sales charge as described below. Purchases made
within 90 days before signing an LOI will be applied toward completion of the
LOI. The LOI effective date will be the date of the first purchase with the
90-day period. The Transfer Agent will process necessary adjustments upon the
expiration or completion date of the LOI. Purchases made more than 90 days
before signing an LOI will be applied toward completion of the LOI based on the
value of the shares purchased calculated at the public offering price on the
effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
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If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
Any investor who purchased shares of the AIM/GT Funds pursuant to a LOI
entered into prior to June 1, 1998 may continue to make such purchases under the
terms of such LOI. See "How to Purchase and Redeem Shares" in the Statement of
Additional Information.
(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM DOLLAR FUND, AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and (ii) Class B and Class C shares of the Multiple Class
Funds) at the time of the proposed purchase. Rights of accumulation are also
available to holders of the Connecticut General Guaranteed Account, established
for tax-qualified group annuities, for contracts purchased on or before June 30,
1992. To determine whether or not a reduced initial sales charge applies to a
proposed purchase, AIM Distributors takes into account not only the money which
is invested upon such proposed purchase, but also the value of all shares of the
AIM Funds (except for (i) Class A shares of AIM DOLLAR FUND, AIM TAX-EXEMPT CASH
FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND and (ii) Class B and
Class C shares of the Multiple Class Funds) owned by such purchaser, calculated
at their then current public offering price. If a purchaser so qualifies for a
reduced sales charge, the reduced sales charge applies to the total amount of
money then being invested by such purchaser and not just to the portion that
exceeds the breakpoint above which a reduced sales charge applies. For example,
if a purchaser already owns qualifying shares of any AIM Fund with a value of
$20,000 and wishes to invest an additional $20,000 in a fund with a maximum
initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will
apply to the full $20,000 purchase and not just to the $15,000 in excess of the
$25,000 breakpoint. To qualify for obtaining the discount applicable to a
particular purchase, the purchaser or his dealer must furnish AFS with a list of
the account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and other distributions from
a fund (see "Dividends, Distributions and Tax Matters"); (b) exchanges of shares
of certain other funds (see "Exchange Privilege"); (c) use of the reinstatement
privilege (see "How to Redeem Shares"); or (d) a merger, consolidation or
acquisition of assets of a fund.
Shareholders of record of Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
shares of the particular AIM Fund(s) whose shares they owned on such date, at
net asset value (without payment of a sales charge) for as long as they
continuously own Class A shares of such AIM Fund(s) having a market value of at
least $500. In addition, discretionary advised clients of any investment
advisors whose clients held Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A shares of the applicable AIM
Fund(s) at the net asset value of such shares.
The following persons may purchase Class A shares of the AIM Funds through AIM
Distributors without payment of an initial sales charge: (a) A I M Management
Group Inc. ("AIM Management") and its affiliated companies; (b) any current or
retired officer, director, trustee or employee, or any member of the immediate
family (including spouse, children, parents and parents of spouse) of any such
person, of AIM Management or its affiliates or of certain mutual funds which are
advised or managed by AIM; or any trust established exclusively for the benefit
of such persons; (c) any employee benefit plan established for employees of AIM
Management or its affiliates; (d) any current or retired officer, director,
trustee or employee, or any member of the immediate family (including spouse,
children, parents and parents of spouse) of any such person, or of CIGNA
Corporation or of any of its affiliated companies, or of First Data Investor
Services Group (formerly The Shareholder Services Group, Inc.); (e) any
investment company sponsored by CIGNA Investments, Inc. or any of its affiliated
companies for the benefit of its directors' deferred compensation plans; (f)
discretionary advised clients of AIM or AIM Capital; (g) registered
representatives and employees of dealers who have entered into agreements with
AIM Distributors (or financial institutions that have arrangements with such
dealers with respect to the sale of shares of the AIM Funds) and any member of
the immediate family (including spouse, children, parents and parents of spouse)
of any such person, provided that purchases at net asset value are permitted by
the policies of such person's employer; (h) certain broker-dealers, investment
advisers or bank trust departments that provide asset allocation, similar
specialized investment services or investment company transaction services for
their customers, that charge a minimum annual fee for such services, and that
have entered into an agreement with AIM Distributors with respect to their use
of the AIM Funds in connection with such services; (i) any employee or any
member of the immediate family (including spouse, children, parents and parents
of spouse) of any employee, of Triformis Inc.; (j) shareholders of the AIM/GT
Funds as of April 30, 1987 who since that date continually have owned shares of
one or more of the AIM/GT Funds; and (k) certain former AMA Investment Advisers'
shareholders who became shareholders of the AIM Global Health Care Fund in
October 1989, and who have continuously held shares in the AIM/GT Funds since
that time.
In addition, shares of any AIM Fund (except AIM Small Cap Opportunities Fund)
may be purchased at net asset value, without payment of a sales charge, by
pension, profit-sharing or other employee benefit plans created pursuant to a
plan qualified under Section 401 of the Code or plans under Section 457 of the
Code, or employee benefit plans created pursuant to Section 403(b) of the
A-8
<PAGE> 24
Code and sponsored by nonprofit organizations defined under Section 501(c)(3) of
the Code. Such plans will qualify for purchases at net asset value provided that
(1) the total amount invested in the plan is at least $1,000,000, (2) the
sponsor signs a $1,000,000 LOI, (3) such shares are purchased by an
employer-sponsored plan with at least 100 eligible employees, or (4) all of the
plan's transactions are executed through a single financial institution or
service organization who has entered into an agreement with AIM Distributors
with respect to their use of the AIM Funds in connection with such accounts.
Section 403(b) plans sponsored by public educational institutions will not be
eligible for net asset value purchases based on the aggregate investment made by
the plan or the number of eligible employees. Participants in such plans will be
eligible for reduced sales charges based solely on the aggregate value of their
individual investments in the applicable AIM Fund. PLEASE NOTE THAT TAX-EXEMPT
FUNDS ARE NOT APPROPRIATE INVESTMENTS FOR SUCH PLANS. AIM Distributors may pay
investment dealers or other financial service firms for share purchases of the
Load Funds (as defined under the caption "Exchange Privilege") sold at net asset
value to an employee benefit plan in accordance with this paragraph as follows:
1% of the first $2 million of such purchases, plus 0.80% of the next $1 million
of such purchases, plus 0.50% of the next $17 million of such purchases, plus
0.25% of amounts in excess of $20 million of such purchases and up to 0.10% of
the net asset value of any Class A shares of AIM LIMITED MATURITY TREASURY FUND
sold at net asset value to an employee benefit plan in accordance with this
paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A shares of such funds may also be purchased at net asset
value by other unit investment trusts approved by the Board of Directors of AIM
Equity Funds, Inc. Unit holders of such trusts may elect to invest cash
distributions from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND at net asset value, including: (a) distributions of any
dividend income or other income received by such trusts; (b) distributions of
any net capital gains received in respect of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sales of Class A shares of
AIM WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such
trusts; and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided: (a) that the investment in Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND is effected within 30 days of such
redemption or repurchase; and (b) that the unit holder or his dealer provides
AIM Distributors with a letter which: (i) identifies the name, address and
telephone number of the dealer who sold to the unit holder the units to be
redeemed or repurchased; and (ii) states that the investment in Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND is being funded exclusively by
the proceeds from the redemption or repurchase of units of such trusts.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
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SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns shares which are not subject to a contingent deferred sales charge, can
arrange for monthly, quarterly or annual amounts (but not less than $50) to be
drawn against the balance of his account in the designated AIM Fund.
Shareholders who own shares subject to a contingent deferred sales charge, can
only arrange for monthly or quarterly withdrawals under a Systematic Withdrawal
Plan. Payment of this amount can be made on any day of the month the shareholder
specifies, except the thirtieth or thirty-first day of each month in which a
payment is to be made. A minimum account balance of $5,000 is required to
establish a Systematic Withdrawal Plan, but there is no requirement thereafter
to maintain any minimum investment. With respect to shares subject to a
contingent deferred sales charge (all classes) no contingent deferred sales
charge will be imposed on withdrawals made under a Systematic Withdrawal Plan,
provided that the amounts withdrawn under such a plan do not exceed on an annual
basis 12% of the account value at the time the shareholder elects to participate
in the Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to
shares subject to a contingent deferred sales charge that
A-9
<PAGE> 25
exceed on an annual basis 12% of such account will be subject to a contingent
deferred sales charge on the amounts exceeding 12% of the account value at the
time the shareholder elects to participate in the Systematic Withdrawal Plan.
Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested to shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic Withdrawal Plan, the Transfer Agent redeems sufficient full
and fractional shares at their net asset value in effect at the time of each
such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C shares of the Multiple Class Funds, and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND), it is disadvantageous to effect such
purchases while a Systematic Withdrawal Plan is in effect.
The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make regular systematic
investments may establish an Automatic Investment Plan. Under this plan
withdrawal is made on the shareholder's bank account in the amount specified by
the shareholder (minimum $50 per investment, per account) and on a day or
date(s) specified by the shareholder. The proceeds are invested in shares of the
designated AIM Fund at the applicable offering price determined on the date of
the withdrawal. An Automatic Investment Plan may be discontinued upon 10 days'
prior notice to the Transfer Agent or AIM Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; dividends and distributions attributable to Class C
shares may be reinvested in Class C shares of the same fund or in Class C shares
of another Multiple Class Fund; and dividends and distributions attributable to
AIM Cash Reserve Shares of AIM MONEY MARKET FUND may be reinvested in additional
shares of such fund, in Class A shares of another Multiple Class Fund or in
shares of another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" for a description
of payment dates for these options. In order to qualify to have dividends and
distributions of one AIM Fund invested in shares of another AIM Fund, the
following conditions must be satisfied: (a) the shareholder must have an account
balance in the dividend paying fund of at least $5,000; (b) the account must be
held in the name of the shareholder (i.e., the account may not be held in
nominee name); and (c) the shareholder must have requested and completed an
authorization relating to the reinvestment of dividends into another AIM Fund.
An authorization may be given on the account application or on an authorization
form available from AIM Distributors. An AIM Fund will waive the $5,000 minimum
account value requirement if the shareholder has an account in the fund selected
to receive the dividends and distributions with a value of at least $500.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." The account from
which exchanges are to be made must have a value of at least $5,000 when a
shareholder elects to begin this program, and the exchange minimum is $50 per
transaction. All of the accounts that are part of this program must have
identical registrations. The net asset value of shares purchased under this
program may vary, and may be more or less advantageous than if shares were not
exchanged automatically. There is no charge for entering the Dollar Cost
Averaging program. Sale charges may apply, as described under the caption
"Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM
TAX-EXEMPT CASH FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the
following prototype retirement plans available to corporations, individuals and
employees of non-profit organizations and public schools: combination
money-purchase/profit-sharing plans; 403(b) plans; IRA plans; Roth IRA plans;
SARSEP plans; SEP plans; and SIMPLE IRA plans (collectively, "retirement
accounts"). Information concerning these plans, including the custodian's fees
and the forms necessary to adopt such plans, can be obtained by calling or
writing the AIM Funds or AIM Distributors. Shares of the AIM Funds are also
available for investment through existing 401(k) plans (for both individuals and
employers) adopted under the Code. The plan custodian currently imposes an
annual $10 maintenance fee with respect to each retirement account for which it
serves as the custodian. This fee is generally charged in December. Each AIM
Fund and/or the custodian reserve the right to change this maintenance fee and
to initiate an establishment fee (not to exceed its cost).
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of AIM Funds. The Program
automatically rebalances holdings of AIM Funds to the established allocation on
a periodic basis. Under the Program, a shareholder may predesig-
A-10
<PAGE> 26
nate, on a percentage basis, how the total value of his or her holdings in a
minimum of two, and a maximum of ten, AIM Funds ("Personal Portfolio") is to be
rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more AIM Funds in the shareholder's Personal Portfolio for shares of
the same class(es) of one or more other AIM Funds in the shareholder's Personal
Portfolio. See "Exchange Privilege." If shares of the AIM Fund(s) in a
shareholder's Personal Portfolio have appreciated during a rebalancing period,
the Program will result in shares of AIM Fund(s) that have appreciated most
during the period being exchanged for shares of AIM Fund(s) that have
appreciated least. SUCH EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A
SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE MAY BE, FOR FEDERAL INCOME
TAX PURPOSES. See "Dividends, Distributions and Tax Matters -- Dividends and
Distributions." Participation in the Program does not assure that a shareholder
will profit from purchases under the Program nor does it prevent or lessen
losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular AIM Fund would be 2% or less.
In predesignating percentages, shareholders must use whole percentages and
totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an AIM Fund's shares. The
AIM Funds and AIM Distributors reserve the right to modify, suspend, or
terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which AIM Funds
or what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Shareholders participating in
the Program may also participate in the Right of Accumulation, LOI, and
Automatic Investment Plan. Certain dealers/financial institutions may charge a
fee for establishing accounts relating to the Program. Investors should contact
their dealers/financial institutions or AIM Distributors for more information.
A-11
<PAGE> 27
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds, listed below
and referred to herein as the "Load Funds," are sold at a public offering price
that includes a maximum sales charge of 5.50% or 4.75% of the public offering
price of such shares; Class A shares (or shares which normally involve the
payment of initial sales charges) of certain of the AIM Funds, listed below and
referred to herein as the "Lower Load Funds," are sold at a public offering
price that includes a maximum sales charge of 1.00% of the public offering price
of such shares; and Class A shares or shares of certain other funds, listed
below and referred to herein as the "No Load Funds," are sold at net asset
value, without payment of a sales charge.
<TABLE>
<S> <C> <C>
LOAD FUNDS: LOWER LOAD FUNDS:
----------- -----------------
AIM ADVISOR FLEX FUND -- AIM GLOBAL INCOME AIM LIMITED MATURITY TREASURY FUND
CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR INTERNATIONAL AIM GLOBAL INFRASTRUCTURE AIM TAX-FREE INTERMEDIATE FUND
VALUE FUND -- CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR LARGE CAP AIM GLOBAL RESOURCES NO LOAD FUNDS:
VALUE FUND -- CLASS A FUND -- CLASS A --------------
AIM ADVISOR MULTIFLEX AIM GLOBAL TELECOMMUNICATIONS AIM MONEY MARKET FUND
FUND -- CLASS A FUND -- CLASS A -- AIM CASH RESERVE SHARES
AIM ADVISOR REAL ESTATE AIM GLOBAL TRENDS AIM TAX-EXEMPT CASH FUND -- CLASS A
FUND -- CLASS A FUND -- CLASS A AIM DOLLAR FUND -- CLASS A
AIM AGGRESSIVE GROWTH AIM GLOBAL UTILITIES
FUND -- CLASS A FUND -- CLASS A
AIM ASIAN GROWTH AIM HIGH INCOME MUNICIPAL
FUND -- CLASS A FUND -- CLASS A
AIM BALANCED FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A
AIM BASIC VALUE AIM INCOME FUND -- CLASS A
FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT
AIM BLUE CHIP FUND -- CLASS A FUND -- CLASS A
AIM CAPITAL DEVELOPMENT AIM INTERNATIONAL EQUITY
FUND -- CLASS A FUND -- CLASS A
AIM CHARTER FUND -- CLASS A AIM INTERNATIONAL GROWTH
AIM CONSTELLATION FUND -- CLASS A
FUND -- CLASS A AIM JAPAN GROWTH FUND -- CLASS A
AIM DEVELOPING MARKETS AIM LATIN AMERICAN GROWTH
FUND -- CLASS A FUND -- CLASS A
AIM EMERGING MARKETS AIM MID CAP EQUITY
FUND -- CLASS A FUND -- CLASS A
AIM EMERGING MARKETS DEBT AIM MONEY MARKET
FUND -- CLASS A FUND -- CLASS A
AIM EUROPE GROWTH AIM MUNICIPAL BOND
FUND -- CLASS A FUND -- CLASS A
AIM EUROPEAN DEVELOPMENT AIM NEW PACIFIC GROWTH
FUND -- CLASS A FUND -- CLASS A
AIM GLOBAL AGGRESSIVE GROWTH AIM SELECT GROWTH FUND -- CLASS A
FUND -- CLASS A AIM SMALL CAP GROWTH
AIM GLOBAL CONSUMER PRODUCTS FUND -- CLASS A
AND SERVICES FUND -- CLASS A AIM SMALL CAP OPPORTUNITIES
AIM GLOBAL FINANCIAL SERVICES FUND -- CLASS A
FUND -- CLASS A AIM STRATEGIC INCOME
AIM GLOBAL GOVERNMENT INCOME FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM GLOBAL GROWTH OF CONNECTICUT -- CLASS A
FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM GLOBAL GROWTH & AIM WEINGARTEN FUND -- CLASS A
INCOME FUND -- CLASS A AIM WORLDWIDE GROWTH
AIM GLOBAL HEALTH CARE FUND -- CLASS A
FUND -- CLASS A
</TABLE>
A-12
<PAGE> 28
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund on
the terms described on the chart below, except that (i) Load Fund share
purchases of $1,000,000 or more which are subject to a contingent deferred sales
charge may not be exchanged for Lower Load Funds or for AIM TAX-EXEMPT CASH FUND
(AND CLASS A SHARES OF AIM DOLLAR FUND); (II) LOWER LOAD FUND SHARE PURCHASES OF
$1,000,000 OR MORE AND AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND, AIM
TAX-EXEMPT CASH FUND AND AIM DOLLAR FUND PURCHASES MAY BE EXCHANGED FOR LOAD
FUND SHARES IN AMOUNTS OF $1,000,000 OR MORE WHICH WILL THEN BE SUBJECT TO A
CONTINGENT DEFERRED SALES CHARGE; HOWEVER, FOR PURPOSES OF CALCULATING THE
CONTINGENT DEFERRED SALES CHARGES ON THE LOAD FUND SHARES ACQUIRED, THE 18-MONTH
PERIOD SHALL BE COMPUTED FROM THE DATE OF SUCH EXCHANGE; (iii) Class A shares
may be exchanged for Class A shares; (iv) Class B shares may be exchanged only
for Class B shares; (v) Class C shares may only be exchanged for Class C shares;
and (vi) AIM Cash Reserve Shares of AIM MONEY MARKET FUND may not be exchanged
for Class A, Class B or Class C shares of AIM MONEY MARKET FUND. Class C shares
of AIM Small Cap Opportunities Fund are currently not available.
DEPENDING UPON THE FUND FROM WHICH AND INTO WHICH AN EXCHANGE IS BEING MADE,
SHARES BEING ACQUIRED IN AN EXCHANGE MAY BE ACQUIRED AT THEIR OFFERING PRICE OR
AT THEIR NET ASSET VALUE (WITHOUT PAYMENT OF A SALES CHARGE) AS SET FORTH IN THE
TABLE BELOW FOR SHARES INITIALLY PURCHASED PRIOR TO MAY 1, 1994:
<TABLE>
<CAPTION>
MULTIPLE CLASS FUNDS:
LOWER LOAD NO LOAD ------------------------------
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B CLASS C
----- -------------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load Funds.. Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund or any Fund or any Lower Load
Lower Load Fund. Fund; otherwise,
Offering Price.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load Funds.. Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable Not Applicable
acquired upon exchange of any
Load Fund. Otherwise, difference
in sales charge will apply.
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund. Fund or any Lower Load
Difference in sales charge will Fund; otherwise,
apply if No Load shares were Offering Price.
acquired upon exchange of Lower
Load Fund shares.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
Class C........ Not Applicable Not Applicable Not Applicable Not Applicable Net Asset Value
</TABLE>
An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A, Class B and Class C shares of a Multiple Class Fund
cannot be exchanged for each other) except that AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may be exchanged for Class A shares of another Multiple Class
Fund; (b) the dollar amount of the exchange must be at least equal to the
minimum investment applicable to the shares of the fund acquired through such
exchange; (c) the shares of the fund acquired through exchange must be qualified
for sale in the state in which the shareholder resides; (d) the exchange must be
made between accounts having identical registrations and addresses; (e) the full
amount of the purchase price for the shares being exchanged must have already
been received by the fund; (f) the account from which shares have been exchanged
must be coded as having a certified taxpayer identification number on file or,
in the alternative, an appropriate IRS Form W-8 (certificate of foreign status)
or Form W-9 (certifying exempt status) must have been received by the fund; (g)
newly acquired shares (through either an initial or subsequent investment) are
held in an account for at least ten busi-
A-13
<PAGE> 29
ness days, and all other shares are held in an account for at least one day,
prior to the exchange; and (h) certificates representing shares must be returned
before shares can be exchanged. There is no fee for exchanges among the AIM
Funds.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received after NYSE Close will result in the redemption of shares at their net
asset value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. Normally, shares of an AIM Fund to be acquired
by exchange are purchased at their net asset value or applicable offering price,
as the case may be, determined on the date that such request is received, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is determined that a fund would be materially disadvantaged
by an immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into a fund paying daily dividends (See "Dividends, Distributions and
Tax Matters -- Dividends and Distributions," below), and the release of the
exchange proceeds is delayed for the foregoing five-day period, such shareholder
will not begin to accrue dividends until the sixth business day after the
exchange. Shares purchased by check may not be exchanged until it is determined
that the check has cleared, which may take up to ten business days from the date
that the check is received. See "Terms and Conditions of Purchase of the AIM
Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AFS. The request should contain the account registration and
account number, the dollar amount or number of shares to be exchanged, and the
names of the funds from which and into which the exchange is to be made. The
request should comply with all of the requirements for redemption by mail,
except those required for redemption of IRAs. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AFS at (800) 959-4246. If a shareholder is unable to reach
AFS by telephone, he may also request exchanges by telegraph or use overnight
courier services to expedite exchanges by mail, which will be effective on the
business day received by the Transfer Agent as long as such request is received
prior to NYSE Close. The Transfer Agent and AIM Distributors will not be liable
for any loss, expense or cost arising out of any telephone exchange request that
they reasonably believe to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
Social Security Number and current address, and mailings of confirmations
promptly after the transaction.
EXCHANGES OF CLASS B AND CLASS C SHARES. A contingent deferred sales charge
will not be imposed in connection with exchanges among Class B or Class C
shares. For purposes of determining a shareholder's holding period of Class B or
Class C shares in the calculation of the applicable contingent deferred sales
charge, the period of time during which Class B or Class C shares were held
prior to an exchange will be added to the holding period of the applicable Class
B or Class C shares acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. Although
a contingent deferred sales charge may be applicable to certain redemptions as
described below, there is no redemption fee imposed when shares are redeemed or
repurchased; however, dealers may charge service fees for handling repurchase
transactions.
A-14
<PAGE> 30
MULTIPLE DISTRIBUTION SYSTEM. Class B Shares. Class B shares purchased under
the Multiple Distribution System may be redeemed on any business day of a
Multiple Class Fund at the net asset value per share next determined following
receipt of the redemption order, as described under the caption "Timing and
Pricing of Redemption Orders," less the applicable contingent deferred sales
charge shown in the table below. No deferred sales charge will be imposed (i) on
redemptions of Class B shares following six years from the date such shares were
purchased, (ii) on Class B shares acquired through reinvestments of dividends
and distributions attributable to Class B shares or (iii) on amounts that
represent capital appreciation in the shareholder's account above the purchase
price of the Class B shares.
<TABLE>
<CAPTION>
YEARS CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
-------- -------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and other distributions; third, of shares
held for more than six years from the date such shares were purchased; and
fourth, of shares held less than six years from the date such shares were
purchased. The applicable sales charge will be applied against the lesser of the
current market value of shares redeemed or their original cost.
Class B shares that are acquired during a tender offer by AIM Floating Rate
Fund ("Floating Rate Fund") pursuant to an exchange will be subject, in lieu of
the contingent deferred sales charge described above, to a contingent deferred
sales charge equivalent to the early withdrawal charge on the shares of the
Floating Rate Fund. For purposes of computing such early withdrawal charge, the
holding period of Class B shares being redeemed will include the holding period
of the Floating Rate Fund shares prior to exchange.
Class C Shares. Class C shares purchased under the Multiple Distribution
System may be redeemed on any business day of a Multiple Class Fund at the net
asset value per share next determined following receipt of the redemption order,
as described under the caption "Timing and Pricing of Redemption Orders," less a
1% contingent deferred sales charge. No deferred sales charge will be imposed
(i) on redemptions of Class C shares following one year from the date such
shares were purchased; (ii) on Class C shares acquired through reinvestment of
dividends and distributions attributable to Class C shares; (iii) on amounts
that represent capital appreciation in the shareholder's account above the
purchase price of the Class C shares; (iv) on redemptions of additional
purchases of shares of AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE
FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, and AIM
ADVISOR REAL ESTATE FUND, by shareholders of record on April 30, 1995 of these
funds (shareholders whose broker/dealers maintain a single omnibus account with
the Transfer Agent on behalf of those shareholders, perform sub-accounting
functions with respect to those shareholders, and are unable to segregate
shareholders of record prior to April 30, 1995 from shareholders whose accounts
were opened after that date will be subject to a CDSC on all purchases made
after March 1, 1996).
Waivers. Contingent deferred sales charges on Class B and Class C shares will
be waived on redemptions (1) following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust (provided AIM Distributors is notified of such death or
post-purchase disability at the time of the redemption request and is provided
with satisfactory evidence of such death or post-purchase disability), (2) in
connection with certain distributions from IRAs, custodial accounts maintained
pursuant to Code Section 403(b), deferred compensation plans qualified under
Code Section 457 and plans qualified under Code Section 401 (collectively,
"Retirement Plans"), (3) pursuant to a Systematic Withdrawal Plan, provided that
amounts withdrawn under such plan do not exceed on an annual basis 12% of the
value of the shareholder's investment in Class B or Class C shares at the time
the shareholder elects to participate in the Systematic Withdrawal Plan, (4)
effected pursuant to the right of a Multiple Class Fund to liquidate a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the designated minimum account size described in the
prospectus of such Multiple Class Fund, (5) effected by AIM of its investment in
Class B or Class C shares and (6) of Class C shares where such investor's dealer
of record, due to the nature of the investor's account, notifies AIM
Distributors prior to the time of investment that the dealer waives the payment
otherwise payable to the dealer described in the last paragraph under the
caption "Terms and Conditions of Purchase of the AIM Funds -- All Groups of AIM
Funds."
Waiver category (1) above applies only to redemptions of Class B or Class C
shares held at the time of death or initial determination of post-purchase
disability.
Waiver category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or
beneficiaries who are age 70 1/2 or older, and only with respect to that
portion of such distributions which does not exceed 12% annually of the
participant's or beneficiary's account value in a particular AIM Fund;
A-15
<PAGE> 31
(ii) in-kind transfers of assets where the participant or beneficiary
notifies AIM Distributors of such transfer no later than the time such
transfer occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement
Plan invested in Class B or Class C shares of one or more Multiple Class
Funds;
(iv) tax-free returns of excess contributions or returns of excess
deferral amounts; and
(v) distributions upon the death or disability (as defined in the
Code) of the participant or beneficiary.
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B and Class C shares of a Multiple Class Fund and purchases
of shares of the No Load Funds and Lower Load Funds, A CONTINGENT DEFERRED SALES
CHARGE OF 1% APPLIES TO PURCHASES OF $1,000,000 OR MORE THAT ARE REDEEMED WITHIN
18 MONTHS OF THE DATE OF PURCHASE. For a description of the AIM Funds
participating in the program, see "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions." This charge will be 1% of the
lesser of the value of the shares redeemed (excluding reinvested dividends and
capital gains distributions) or the total original cost of such shares. In
determining whether a contingent deferred sales charge is payable, and the
amount of any such charge, shares not subject to the contingent deferred sales
charge are redeemed first (including shares purchased by reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-MONTH PERIOD, (i) shares of any
Load Fund or AIM Cash Reserve shares of AIM MONEY MARKET FUND or Class A shares
of AIM DOLLAR FUND which were acquired through an exchange of shares which
previously were subject to the 1% contingent deferred sales charge will be
credited with the period of time such exchanged shares were held, and (ii)
shares of any Load Fund which are subject to the 1% contingent deferred sales
charge and which were acquired through an exchange of shares of a Lower Load or
a No Load Fund which previously were not subject to the 1% contingent deferred
sales charge will not be credited with the period of time such exchanged shares
were held. The charge will be waived in the following circumstances: (l)
redemptions of shares by employee benefit plans ("Plans") qualified under
Sections 401 or 457 of the Code, or Plans created under Section 403(b) of the
Code and sponsored by nonprofit organizations as defined under Section 501(c)(3)
of the Code, where shares are being redeemed in connection with employee
terminations or withdrawals, and (a) the total amount invested in a Plan is at
least $1,000,000, (b) the sponsor of a Plan signs a letter of intent to invest
at least $1,000,000 in one or more of the AIM Funds, or (c) the shares being
redeemed were purchased by an employer-sponsored Plan with at least 100 eligible
employees; provided, however, that Plans created under Section 403(b) of the
Code which are sponsored by public educational institutions shall qualify under
(a), (b) or (c) above on the basis of the value of each Plan participant's
aggregate investment in the AIM Funds, and not on the aggregate investment made
by the Plan or on the number of eligible employees; (2) redemptions of shares
following the death or post-purchase disability, as defined in Section 72(m)(7)
of the Code, of a shareholder or a settlor of a living trust; (3) redemptions of
shares purchased at net asset value by private foundations or endowment funds
where the initial amount invested was at least $1,000,000; (4) redemptions of
shares purchased by an investor in amounts of $1,000,000 or more where such
investor's dealer of record, due to the nature of the investor's account,
notifies AIM Distributors prior to the time of investment that the dealer waives
the payments otherwise payable to the dealer as described in the third paragraph
under the caption "Terms and Conditions of Purchase of the AIM Funds -- All
Groups of AIM Funds;" and (5) pursuant to a Systematic Withdrawal Plan, provided
that amounts withdrawn under such plan do not exceed on an annual basis 12% of
the value of the shareholder's investment in Class A shares at the time the
shareholder elects to participate in the Systematic Withdrawal Plan.
Shareholders who purchased $500,000 or more of Class A shares of the AIM/GT
Funds prior to June 1, 1998 are entitled to certain waivers of the contingent
deferred sales charge on those shares as described in the Statement of
Additional Information under "How to Purchase and Redeem Shares."
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
In addition to these requirements, shareholders who have invested in a fund to
establish as IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares; (a) a statement
as to whether or not the shareholder has attained age 59 1/2, and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.
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<PAGE> 32
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
this account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
EXPEDITED REDEMPTIONS (AIM Cash Reserve shares of AIM MONEY MARKET FUND
ONLY). If a redemption order is received prior to 11:30 a.m. Eastern Time, the
redemption will be effective on that day and AIM MONEY MARKET FUND will endeavor
to transmit payment on that same business day. If the redemption order is
received after 11:30 a.m. and prior to NYSE Close, the redemption will be made
at the next determined net asset value and payment will generally be transmitted
on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and Class A shares of AIM DOLLAR FUND). After completing the
appropriate authorization form, shareholders may use checks to effect
redemptions from AIM TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM MONEY
MARKET FUND and Class A shares of AIM DOLLAR FUND. This privilege does not apply
to retirement accounts or qualified plans. Checks may be drawn in any amount of
$250 or more. Checks drawn against insufficient shares in the account, against
shares held less than ten business days, or in amounts of less than the
applicable minimum will be returned to the payee. The payee of the check may
cash or deposit it in the same way as an ordinary bank check. When a check is
presented on the Transfer Agent for payment, the Transfer Agent will cause a
sufficient number of shares of such fund to be redeemed to cover the amount of
the check. Shareholders are entitled to dividends on the shares redeemed through
the day on which the check is presented to the Transfer Agent for payment.
TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds
(other than AIM MONEY MARKET FUND) are redeemed at their net asset value next
computed after a request for redemption in proper form (including signature
guarantees and other required documentation for written redemptions) is received
by the Transfer Agent or certain financial institutions (or their designees) who
are authorized to accept redemption orders on behalf of the AIM Funds, provided
that such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders, except that shares that are subject to a contingent
deferred sales charge, may be subject to the imposition of deferred sales
charges that will be deducted from the redemption proceeds. See "Multiple
Distribution System" and "Contingent Deferred Sales Charge Program for Large
Purchases." Orders for the redemption of shares received in proper form prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer/financial institution to
ensure that all orders are transmitted on a timely basis. Any resulting loss
from the dealer/financial institution's failure to submit a request for
redemption within the prescribed time frame will be borne by that
dealer/financial institution. Telephone redemption requests must be made by NYSE
Close on any business day of an AIM Fund and will be confirmed at the price
determined as of the close of that day. No AIM Fund will accept requests which
specify a particular date for redemption or which specify any special
conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone
A-17
<PAGE> 33
exchange and telephone redemption authorization forms; (7) changes in previously
designated wiring or electronic funds transfer instructions, and (8) written
redemptions or exchanges of shares previously reported as lost, whether or not
the redemption amount is under $50,000 or the proceeds are to be sent to the
address of record. These requirements may be waived or modified upon notice to
shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the NYSE Medallion Signature Program,
provided that in either event, the amount of the transaction involved does not
exceed the surety coverage amount indicated on the medallion. For information
regarding whether a particular institution or organization qualifies as an
"eligible guarantor institution," an investor should contact the Client Services
Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY). Within ninety (90) days of a
redemption, a shareholder may invest all or part of the redemption proceeds in
Class A shares of any AIM Fund at the net asset value next computed after
receipt by the Transfer Agent of the funds to be reinvested; provided, however,
if the redemption was made from Class A shares of either AIM LIMITED MATURITY
TREASURY FUND or AIM TAX-FREE INTERMEDIATE FUND, the reinvested proceeds will be
subject to the difference in sales charge between the shares redeemed and the
shares the proceeds are reinvested in. The shareholder must ask the Transfer
Agent for such privilege at the time of reinvestment. A realized gain on the
redemption is taxable, and reinvestment will not alter the taxes due on any
capital gains, except under the circumstances described below. If there has been
a loss on the redemption and shares of the same fund are repurchased, all of the
loss may not be tax deductible, depending on the timing and amount reinvested.
Under the Code, if the redemption proceeds of fund shares on which a sales
charge was paid are reinvested in shares of the same fund, or exchanged for
shares of another AIM Fund, at a reduced sales charge within 90 days of the
payment of the sales charge, the shareholder's basis in the fund shares redeemed
may not include the amount of the sales charge paid, thereby reducing the loss
or increasing the gain recognized from the redemption; however, the
shareholder's basis in the fund shares purchased will include the sales charge.
Each AIM Fund may amend, suspend or cease offering the privilege at any time as
to shares redeemed after the date of such amendment, suspension or cessation.
This privilege may only be exercised once each year by a shareholder with
respect to each AIM Fund.
Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares and who subsequently reinvest a portion or
all of the value of the redeemed shares in Class A shares of any AIM Fund within
ninety (90) days after such redemption may do so at net asset value if such
privilege is claimed at the time of reinvestment. Such reinvested proceeds will
not be subject to either a front-end sales charge at the time of reinvestment or
an additional contingent deferred sales charge upon subsequent redemption. In
order to exercise this reinvestment privilege, the shareholder must notify the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B or Class C shares.
A-18
<PAGE> 34
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon Eastern Time and NYSE Close with
respect to AIM MONEY MARKET FUND) on each "business day" of a fund as previously
defined. In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time)
on a particular day, the net asset value of an AIM Fund's share will be
determined as of the close of the NYSE on such day. For purposes of defining net
asset value per share, futures and options contracts generally will be valued 15
minutes after the close of trading of the NYSE. The net asset value per share is
calculated by subtracting a class' liabilities from its assets and dividing the
result by the total number of class shares outstanding. The determination of net
asset value per share is made in accordance with generally accepted accounting
principles. Among other items, liabilities include accrued expenses and
dividends payable, and total assets include portfolio securities valued at their
market value, as well as income accrued but not yet received. Securities for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the supervision of the fund's officers and
in accordance with methods which are specifically authorized by its governing
Board of Directors or Trustees. Short-term obligations with maturities of 60
days or less, and the securities held by the Money Market Funds, are valued at
amortized cost as reflecting fair value. AIM HIGH INCOME MUNICIPAL FUND, AIM
MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT and AIM TAX-FREE
INTERMEDIATE FUND value variable rate securities that have an unconditional
demand or put feature exercisable within seven days or less at par, which
reflects the market value of such securities.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM ADVISOR FLEX FUND..................... declared and paid quarterly quarterly annually
AIM ADVISOR INTERNATIONAL VALUE FUND...... declared and paid annually annually annually
AIM ADVISOR LARGE CAP VALUE FUND.......... declared and paid quarterly quarterly annually
AIM ADVISOR MULTIFLEX FUND................ declared and paid quarterly quarterly annually
AIM ADVISOR REAL ESTATE FUND.............. declared and paid quarterly quarterly annually
AIM AGGRESSIVE GROWTH FUND................ declared and paid annually annually annually
AIM ASIAN GROWTH FUND..................... declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BASIC VALUE FUND...................... declared and paid annually annually annually
AIM BLUE CHIP FUND........................ declared and paid annually annually annually
AIM CAPITAL DEVELOPMENT FUND.............. declared and paid annually annually annually
AIM CHARTER FUND.......................... declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND............... declared and paid annually annually annually
AIM DOLLAR FUND........................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND................. declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND............ declared and paid monthly annually annually
AIM EUROPE GROWTH FUND.................... declared and paid annually annually annually
AIM EUROPEAN DEVELOPMENT FUND............. declared and paid annually annually annually
AIM GLOBAL AGGRESSIVE GROWTH FUND......... declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES
FUND.................................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES FUND........ declared and paid annually annually annually
</TABLE>
A-19
<PAGE> 35
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM GLOBAL GOVERNMENT INCOME FUND......... declared and paid monthly annually annually
AIM GLOBAL GROWTH FUND.................... declared and paid annually annually annually
AIM GLOBAL GROWTH & INCOME FUND........... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND............... declared and paid annually annually annually
AIM GLOBAL INCOME FUND.................... declared daily; paid monthly annually annually
AIM GLOBAL INFRASTRUCTURE FUND............ declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND................. declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS FUND........ declared and paid annually annually annually
AIM GLOBAL TRENDS FUND.................... declared and paid annually annually annually
AIM GLOBAL UTILITIES FUND................. declared daily; paid monthly annually annually
AIM HIGH INCOME MUNICIPAL FUND............ declared daily; paid monthly annually annually
AIM HIGH YIELD FUND....................... declared daily; paid monthly annually annually
AIM INCOME FUND........................... declared daily; paid monthly annually annually
AIM INTERMEDIATE GOVERNMENT FUND.......... declared daily; paid monthly annually annually
AIM INTERNATIONAL EQUITY FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND............. declared and paid annually annually annually
AIM JAPAN GROWTH FUND..................... declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND............ declared and paid annually annually annually
AIM LIMITED MATURITY TREASURY FUND........ declared daily; paid monthly annually annually
AIM MID CAP EQUITY FUND................... declared and paid annually annually annually
AIM MONEY MARKET FUND..................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................... declared daily; paid monthly annually annually
AIM NEW PACIFIC GROWTH FUND............... declared and paid annually annually annually
AIM SELECT GROWTH FUND.................... declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND................. declared and paid annually annually annually
AIM SMALL CAP OPPORTUNITIES FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND................. declared and paid monthly annually annually
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT... declared daily; paid monthly annually annually
AIM TAX-EXEMPT CASH FUND.................. declared daily; paid monthly at least annually annually
AIM TAX-FREE INTERMEDIATE FUND............ declared daily; paid monthly annually annually
AIM VALUE FUND............................ declared and paid annually annually annually
AIM WEINGARTEN FUND....................... declared and paid annually annually annually
AIM WORLDWIDE GROWTH FUND................. declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each AIM Fund may make
additional distributions, if necessary, to avoid a non-deductible 4% federal
excise tax on certain undistributed income and capital gain (the "Excise Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to a class are reinvested in additional
shares of such class, absent an election by a shareholder to receive cash or to
have such dividends and distributions reinvested in like shares of another
Multiple Class Fund, to the extent permitted. For funds that do not declare a
dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the ex-dividend date. For funds that declare
a dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or the
dividend portion thereof, in cash, or to invest such dividends and distributions
in shares of another fund in the AIM Funds; provided that (i) dividends and
distributions attributable to Class B shares may only be reinvested in Class B
shares, (ii) dividends and distributions attributable to Class C shares may only
be reinvested in Class C shares, (iii) dividends and distributions attributable
to Class A shares may not be reinvested in Class B or Class C shares, and (iv)
dividends and distributions attributable to the AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may not be reinvested in the Class A shares of that Fund or in
any Class B or Class C shares. Investors who have not previously selected such a
reinvestment option on the account application form may contact the Transfer
Agent at any time to obtain a form to authorize such reinvestments in another
AIM Fund. Such reinvestments into the AIM Funds are not subject to sales
charges, and shares so purchased are automatically credited to the account of
the shareholder.
Dividends on Class B and Class C shares of an AIM Fund are expected to be
lower than dividends for Class A shares of that fund or AIM Cash Reserve Shares
because of higher distribution fees paid by Class B and Class C shares.
Dividends on all shares may also be affected by other class-specific expenses.
A-20
<PAGE> 36
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares, except for "exempt-interest dividends" paid by
AIM HIGH INCOME MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND
FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND
(the "Tax-Exempt Funds"), which are exempt from federal income tax. With respect
to tax-exempt shareholders, dividends and distributions from the AIM Funds are
not subject to federal income taxation to the extent permitted under the
applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR REAL ESTATE FUND, AIM ASIAN GROWTH FUND,
AIM DEVELOPING MARKETS FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS FUND, AIM
EMERGING MARKETS DEBT FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GOVERNMENT INCOME FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL TRENDS FUND, AIM HIGH
YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL
EQUITY FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM LATIN
AMERICAN GROWTH FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MONEY MARKET FUND,
AIM NEW PACIFIC GROWTH FUND, AIM STRATEGIC INCOME FUND or any of the Tax-Exempt
Funds will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year. No gain or loss will be recognized by shareholders upon
the automatic conversion of Class B shares of a Multiple Class Fund into Class A
shares of such fund.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
A-21
<PAGE> 37
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may affect the amount of social security and railroad retirement
benefits subject to federal income tax, may affect the deductibility of interest
on certain indebtedness of a shareholder, and may have other collateral federal
income tax consequences. In addition, the Tax-Exempt Funds may invest in
Municipal Securities the interest on which will constitute an item of tax
preference and which therefore could give rise to a federal alternative minimum
tax liability for certain shareholders; each Tax-Exempt Fund may invest up to
20% of its net assets in such securities and other taxable securities. For
additional information concerning the alternative minimum tax and certain
collateral tax consequences of the receipt of exempt-interest dividends, see the
Statements of Additional Information applicable to the Tax-Exempt Funds.
The Tax-Exempt Funds may pay dividends to shareholders that are taxable, but
will endeavor to avoid investments that would result in taxable dividends. The
percentage of dividends that constitutes exempt-interest dividends, and the
percentage thereof (if any) that constitutes items of tax preference, will be
determined annually. These percentages may differ from the actual percentages
for any particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional fund shares.
Distributions of net capital gain will be taxable as long-term capital gains,
whether received in cash or additional fund shares and regardless of the length
of time a shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM GLOBAL GOVERNMENT INCOME FUND, AIM
GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HIGH INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP EQUITY FUND,
AIM SMALL CAP GROWTH FUND, AIM STRATEGIC INCOME FUND -- SPECIAL TAX INFORMATION.
Certain states exempt from income taxes dividends paid by mutual funds
attributable to interest on U.S. Treasury and certain other U.S. government
obligations. Investors should consult with their own tax advisors concerning the
availability of such exemption.
AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ASIAN GROWTH FUND, AIM DEVELOPING
MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH FUND, AIM EUROPEAN
DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL CONSUMER
PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL SERVICES FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INCOME FUND, AIM GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND,
AIM GLOBAL TELECOMMUNICATIONS FUND, AIM GLOBAL UTILITIES FUND, AIM INTERNATIONAL
EQUITY FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM LATIN
AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND, AIM WORLDWIDE GROWTH
FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is eligible to do
so, each of these funds may elect to pass through to its shareholders credits
for foreign taxes paid. If a fund makes such an election, a shareholder who
receives a distribution (1) will be required to include in gross income his
proportionate share of foreign taxes allocable to the distribution and (2) may
claim a credit or deduction for such share for his taxable year in which the
distribution is received, subject to the general limitations imposed on the
allowance of foreign tax credits and deductions. Shareholders should also note
that certain gains or losses attributable to fluctuations in exchange rates or
foreign currency forward contracts may increase or decrease the amount of income
of the fund available for distribution to shareholders and should note that if,
for any fund, such losses exceed other income during a taxable year, the fund
would not be able to pay ordinary income dividends for that year.
A-22
<PAGE> 38
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM LIMITED MATURITY TREASURY FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE
INTERMEDIATE FUND, for which The Bank of New York, 90 Washington Street, 11th
Floor, New York, New York 10286, serves as custodian. Chase Bank of Texas, N.A.,
P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for retail
purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each AIM Fund's transfer agent and dividend
payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be viewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-23
<PAGE> 39
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Give Social Security GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for the Requester of Form W-9 (which can be obtained
from the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF-07/98
B-1
<PAGE> 40
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney-in-fact to surrender for redemption any and all unissued
shares held by the Transfer Agent in the designated account(s), or in any other
account with any of the AIM Funds, present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and
mailing address of the shares to be purchased are identical to the registration
of the shares being redeemed. An investor acknowledges by signing the form that
he understands and agrees that the Transfer Agent and AIM Distributors may not
be liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction. The Transfer Agent
reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone exchange privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any exchanges must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "Exchange Privilege -- Exchanges
by Mail").
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by the Transfer Agent in the designated account(s), present
or future, with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption. An investor acknowledges by signing the
form that he understands and agrees that the Transfer Agent and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any redemptions must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "How to Redeem
Shares -- Redemptions by Mail").
MCF-07/98
B-2
<PAGE> 41
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
Investment Manager
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Sub-Advisor
INVESCO (NY), Inc.
50 California Street, 27th Floor
San Francisco, CA 94111
Principal Underwriter
A I M Distributors, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Independent Accountants
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
For more complete information about any other fund in The AIM Family of
Funds--Registered Trademark--, including charges and expenses, please call (800)
347-4246 or write to A I M Distributors, Inc. and request a free prospectus.
Please read the prospectus carefully before you invest or send money.
