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[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS 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.
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TABLE OF CONTENTS
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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............ 15
INVESTOR'S GUIDE TO THE AIM FAMILY OF
FUNDS--Registered Trademark--........ A-1
Introduction to The AIM Family of
Funds............................. A-1
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How to Purchase Shares............... A-1
Terms and Conditions of Purchase of
the AIM Funds..................... A-2
Special Plans........................ A-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
APPLICATION INSTRUCTIONS............... B-1
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SUMMARY
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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. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of a least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the funds in The AIM Family of Funds on May 29, 1998; and
(e) any of the companies affiliated with AMVESCAP PLC. Pursuant to a separate
prospectus, the Fund also offers Class A and Class B shares, which represent
interests in the Fund. The Class A and Class B shares have different
distribution arrangements.
Initial investments in Advisor Class shares must be at least $500 and
additional investments must be at least $50. The distributor of the Advisor
Class shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds").
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain funds in the AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at net asset value on any business day. See "How to
Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be rein-
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vested at net asset value without payment of a sales charge in the Fund's shares
or may be invested in shares of the other funds in The AIM Family of Funds. See
"Dividends, Distributions and Tax Matters."
RISK FACTORS. There is no assurance that the Fund will achieve its investment
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.
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THE FUND
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TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following table (1):
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Shareholder Transaction Costs:
Maximum sales charge on purchases of shares (as a % of
offering price)........................................ None
Sales charges on reinvested distributions to
shareholders........................................... None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)........ None
Redemption charges........................................ None
Exchange Fees............................................. None
Annual Fund Operating Expenses(2):
(as a % of average net assets)
Investment management and administration fees............. 0.98%
12b-1 distribution and service fees....................... None
Other expenses (after estimated waivers).................. 0.52%
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Total Fund Operating Expenses..................... 1.50%
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(1)This table is intended to assist investors in understanding the various costs
and expenses associated with investing in the Fund.
(2)Expenses are estimated based on the fees and expenses the Fund is expected to
incur during its initial 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 1.50% of the
average daily net assets of the Fund's Advisor Class shares. AIM has
voluntarily agreed to continue this limitation through May 31, 2000. Without
waivers, "Other expenses" and "Total Fund Operating Expenses" are estimated
to be 0.65% and 1.63%, respectively, for Advisor Class 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. Investors purchasing Advisor
Class shares through financial planners, trust companies, bank trust
departments or registered investment advisors, or under a "wrap fee" program,
will be subject to additional fees charged by such entities or by the
sponsors of such programs. Where any account advised by one of the companies
affiliated with AMVESCAP PLC invests in Advisor Class shares of the Fund,
such account shall not be subject to duplicative advisory fees.
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:
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Advisor Class Shares........................................ $15 $48 $82 $180
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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.
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FINANCIAL HIGHLIGHTS
The table below provides condensed financial information concerning income and
capital changes for Advisor Class shares of the Fund. This information is
supplemented by the financial statements and accompanying notes appearing in the
Statement of Additional Information. The financial statement 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 also is 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.)
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ADVISOR CLASS++
SIX MONTHS ENDED
APRIL 30, 1998(d)
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Per Share Operating Performance:
Net asset value, beginning of period........................ $ 12.56
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Income from investment operations:
Net investment income..................................... 0.27*O
Net realized and unrealized gain (loss) on investments.... (0.02)
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Net increase (decrease) from investment operations...... 0.25
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Redemption fees retained.................................. 0.23
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Distributions to shareholders:
From net investment income.............................. (0.60)
From net realized gain on investments................... --
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Total distributions................................... (0.60)
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Net asset value, end of period.............................. $ 12.44
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Total investment return (based on net asset value)...... 3.88%(b)(c)
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $ 37
Ratio of net investment income to average net assets:
With expense reductions and reimbursement................. 3.32%(a)
Without expense reductions and reimbursement.............. 2.82%(a)
Ratio of operating expenses to average net assets:
With expense reductions and reimbursement................. 1.46%(a)
Without expense reductions and reimbursement.............. 1.96%(a)
Ratio of interest expense to average net assets+++.......... 0.22%(a)
Portfolio turnover rate+++.................................. 99%(a)
Average commission rate per share paid on portfolio
transactions+++........................................... $0.0017
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(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.
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 $0.13 per share for Advisor Class shares.
* Before reimbursement the net investment income per share would have been
reduced by $0.03.
+ 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.
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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
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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.
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PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
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.
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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:
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Algeria Hungary Philippines
Argentina India Poland
Bolivia Indonesia Portugal
Botswana Israel Republic of Slovakia
Brazil Ivory Coast Russia
Bulgaria Jamaica Singapore
Chile Jordan Slovenia
China Kazakhstan South Africa
Colombia Kenya South Korea
Costa Rica Lebanon Sri Lanka
Cyprus Malaysia Swaziland
Czech Republic Mauritius Taiwan
Dominican Republic Morocco Thailand
Ecuador Nicaragua Turkey
Egypt Nigeria Ukraine
El Salvador Oman Uruguay
Finland Pakistan Venezuela
Ghana Panama Zambia
Greece Paraguay Zimbabwe
Hong Kong Peru
</TABLE>
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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
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
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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.
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.
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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. However, 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
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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.
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
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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.
The Fund will also 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.
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 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."
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Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting 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.
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
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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 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
13
<PAGE> 14
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 1.50% of the average daily net
assets of the Fund's Advisor Class shares.
AIM also serves as the Fund's pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, G.T. Global
Variable Investment Series and G.T. Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment manager to the Fund pursuant to a master investment management and
administration agreement (the "Advisory Agreement"). AIM was organized in 1976
and, together with its subsidiaries, manages or advises approximately 90
investment company portfolios encompassing a broad range of investment
objectives. The Sub-advisor, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-advisor to the Fund pursuant to an investment sub-advisory and
sub-administration agreement. Prior to May 29, 1998, the Sub-advisor was known
as Chancellor LGT Asset Management, Inc. On May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of the Sub-advisor,
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included the Sub-advisor and
certain other affiliates. As a result of this transaction, the Sub-advisor is
now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to the sale, the
Sub-advisor and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
AIM and the Sub-advisor and their worldwide asset management affiliates
provide investment management and/or administrative services to institutional,
corporate and individual clients around the world. AIM and the Sub-advisor are
both indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a sig-
14
<PAGE> 15
nificant 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 (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of Advisor Class
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 Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
- --------------------------------------------------------------------------------
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 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.
15
<PAGE> 16
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.
16
<PAGE> 17
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
A-1
<PAGE> 18
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
A-2
<PAGE> 19
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
A-3
<PAGE> 20
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
A-4
<PAGE> 21
Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
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HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
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<PAGE> 22
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
A-6
<PAGE> 23
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.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
A-7
<PAGE> 24
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DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
A-8
<PAGE> 25
TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
A-9
<PAGE> 26
AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
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GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 27
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> 28
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> 29
[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-2
<PAGE> 30
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS 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> 31
- --------------------------------------------------------------------------------
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............ 13
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-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
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. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of a least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the funds in The AIM Family of Funds on May 29, 1998; and
(e) any of the companies affiliated with AMVESCAP PLC. Pursuant to a separate
prospectus, the Fund also offers Class A and Class B shares, which represent
interests in the Fund. The Class A and Class B shares have different
distribution arrangements. Initial investments in Advisor Class shares must be
at least $500 and additional investments must be at least $50. The distributor
of the Advisor Class shares is A I M Distributors, Inc. ("AIM Distributors"),
P.O. Box 4739, Houston, TX 77210-4739. See "How to Purchase Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds").
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain funds in The AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at net asset value on any business day. See "How to
Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be reinvested at net asset value without
payment of a sales charge in the Fund's shares or may be invested in shares of
the other funds in The AIM Family of Funds. See "Dividends, Distributions and
Tax Matters."
2
<PAGE> 32
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> 33
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following table(1):
<TABLE>
<S> <C>
Shareholder Transaction Costs:
Maximum sales charge on purchases (as a % of offering None
price).................................................
Sales charges on reinvested distributions to None
shareholders...........................................
Maximum deferred sales charge (as a % of net asset value None
at time of purchase or sale, whichever is less)........
Redemption charges........................................ None
Exchange fees............................................. None
Annual Fund Operating Expenses(2): (as a % of average net
assets)
Investment management and administration fees............. 0.98%
12b-1 distribution and service fees....................... None
Other expenses (after reimbursements)..................... 0.52%
----
Total Fund Operating Expenses..................... 1.50%
====
</TABLE>
(1)This table is intended to assist investors in understanding the various costs
and expenses associated with investing in the Fund.
(2)Expenses are based on the Fund's fiscal year ended October 31, 1997 restated
to reflect the current expense limits. "Other expenses" include custody,
transfer agent, legal, audit and other operating expenses. AIM has undertaken
to limit the Fund's expenses (exclusive of brokerage commissions, taxes,
interest and extraordinary expenses) to the annual rate of 1.50% of the
average daily net assets of the Fund's Advisor Class shares. AIM has
voluntarily agreed to continue this limitation through May 31, 2000. Without
reimbursements, "Other Expenses" and "Total Fund Operating Expenses" would
have been 0.70% and 1.68%, respectively, for Advisor Class shares of the
Fund. See "Management" herein and the Statement of Additional Information for
more information. Investors purchasing Advisor Class shares through financial
planners, trust companies, bank trust departments or registered investment
advisors, or under a "wrap fee" program, will be subject to additional fees
charged by such entities or by the sponsors of such programs. Where any
account advised by one of the companies affiliated with AMVESCAP PLC invests
in Advisor Class shares of the Fund, such account shall not be subject to
duplicative advisory fees.
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
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Advisor Class Shares............................. $15 $48 $82 $180
</TABLE>
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S ACTUAL 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> 34
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables below provide condensed financial information concerning income and
capital changes for one Advisor Class share of the Fund. This information is
supplemented by the financial statements and accompanying notes appearing in the
Statement of Additional Information. The financial statements and notes, for the
fiscal 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 is also included in the Statement of
Additional Information.
AIM EMERGING MARKETS FUND
(FORMERLY GT GLOBAL EMERGING MARKETS FUND)
<TABLE>
<CAPTION>
ADVISOR CLASS**
---------------------------------------------------
SIX MONTHS JUNE 1,
ENDED YEAR ENDED OCTOBER 31, 1995 TO
APRIL 30, ---------------------- OCT. 31,
1998(c) 1997(c) 1996(c) 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:
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............................ 3.10%(a) (14.05)% 3.60% (5.71)%(a)
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.................................................... 0.81%(b) 0.49% 1.26% 1.39%(b)
Ratio of operating expenses to average net assets:
With expense reductions................................... 1.46%(b) 1.60% 1.46% 1.62%(b)
Without expense reductions................................ 2.07%(b) 1.68% 1.58% 1.64%(b)
Ratio of interest expense to average net assets+............ 0.33%(b) -- -- --
Portfolio turnover rate+.................................... 117%(b) 150% 104% 114%(b)
Average commission rate per share on paid portfolio
transactions+............................................. $0.0016 $0.0015 $0.0040 N/A
</TABLE>
- ---------------
+ Portfolio turnover, average commission 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.
* Includes reimbursement by the Sub-advisor of Fund operating expenses of
$0.03.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
---------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
AVERAGE NUMBER OF AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT 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.
5
<PAGE> 35
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Fund. Such practices will
have the effect of increasing the Fund's total return. The performance of the
Fund will vary from time to time and past results are not necessarily
representative of future results. The Fund's performance is a function of its
portfolio management in selecting the type and quality of portfolio securities
and is affected by operating expenses of the Fund as well as by general market
conditions.
- --------------------------------------------------------------------------------
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:
<TABLE>
<S> <C> <C>
Algeria Hungary Peru
Argentina India Philippines
Bolivia Indonesia Poland
Botswana Israel Portugal
Brazil Ivory Coast Republic of Slovakia
Bulgaria Jamaica Russia
Chile Jordan Singapore
China Kazakhstan Slovenia
Colombia Kenya South Africa
Costa Rica Lebanon South Korea
Cyprus Malaysia Sri Lanka
Czech Republic Mauritius Swaziland
Dominican Republic Mexico Taiwan
Ecuador Morocco Thailand
Egypt Nicaragua Turkey
El Salvador Nigeria Ukraine
Finland Oman Uruguay
Ghana Pakistan Venezuela
Greece Panama Zambia
Hong Kong Paraguay Zimbabwe
</TABLE>
6
<PAGE> 36
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 objective 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 "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.
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<PAGE> 37
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 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.
8
<PAGE> 38
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 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.
9
<PAGE> 39
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 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.
10
<PAGE> 40
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 "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. 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
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.
11
<PAGE> 41
- --------------------------------------------------------------------------------
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 manager and administrator 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 1.50% the
average daily net assets of the Fund's Advisor Class shares.
AIM also serves as the Fund's pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, G.T. Global
Variable Investment Series and G.T. Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment manager to the Fund pursuant to a master investment management and
administration agreement (the "Advisory Agreement"). AIM was organized in 1976
and, together with its subsidiaries, manages or advises approximately 90
investment company portfolios encompassing a broad range of investment
objectives. The Sub-advisor, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-advisor to the Fund pursuant to an investment sub-advisory and
sub-administration agreement. Prior to May 29, 1998, the Sub-advisor was known
as Chancellor LGT Asset Management, Inc. On May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of the Sub-advisor,
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included the Sub-advisor and
certain other affiliates. As a result of this transaction, the Sub-advisor is
now an indirect wholly-owned subsidiary of AMVESCAP PLC. Prior to the sale, the
Sub-advisor and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
AIM and the Sub-advisor and their worldwide asset management affiliates
provide investment management and/or administrative services to institutional,
corporate and individual clients around the world. AIM and the Sub-advisor are
both indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and
New York offices, AIM and the Sub-advisor draw upon the expertise, personnel,
data and systems of other offices in Atlanta, Boston, Dallas, Denver,
Louisville, Miami, Portland (Oregon), 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 FUND PAST FIVE YEARS
- ----------- -------------------- -------------------
<S> <C> <C>
Francesco Bertoni Portfolio Manager Portfolio Manager for the Sub-advisor since June 1998.
London since 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, GT Asset Management
London since 1997 PLC (London) and INVESCO GT Asset Management Asia Ltd.
(Hong Kong), affiliates of the Sub-advisor, since 1992.
</TABLE>
12
<PAGE> 42
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 (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of the Advisor Class
shares of the Fund. Certain Trustees and officers of the Trust are affiliated
with AIM Distributors.
The Distribution Agreement provide AIM Distributors with the exclusive right
to distribute Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
- --------------------------------------------------------------------------------
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.
13
<PAGE> 43
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
A-1
<PAGE> 44
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
A-2
<PAGE> 45
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
A-3
<PAGE> 46
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
A-4
<PAGE> 47
Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
A-5
<PAGE> 48
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
A-6
<PAGE> 49
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.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
A-7
<PAGE> 50
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
A-8
<PAGE> 51
TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
A-9
<PAGE> 52
AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 53
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> 54
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> 55
[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.
EMM-PRO-2
<PAGE> 56
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS OF
AIM GLOBAL CONSUMER PRODUCTS
AND SERVICES FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES 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
capital growth by investing all of its investable assets in the Global Consumer
Products and Services Portfolio (the "Portfolio"), which, in turn, invests
primarily in equity securities of companies throughout the world that
manufacture, market, retail or distribute consumer products and services.
The Portfolio's investment objective is identical to that of the Fund. The
investment experience of the Fund will correspond directly with the investment
experience of the Portfolio.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
September 8, 1998, has been filed with the Securities and Exchange Commission
(the "SEC") and is incorporated herein by reference. The Statement of Additional
Information is available without charge upon written request to the Trust at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or by calling (800)
347-4246. The SEC maintains a Web site at http://www.sec.gov that contains the
Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund. Additional information about the Fund may
also be obtained from http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 57
- --------------------------------------------------------------------------------
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........................... 11
Organization of the Trust and
Portfolio......................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INVESTOR'S GUIDE TO THE AIM FAMILY OF
FUNDS--Registered Trademark--........ A-1
Introduction to The AIM Family of
Funds............................. A-1
How to Purchase Shares............... A-1
Terms and Conditions of Purchase of
the AIM Funds..................... A-2
Special Plans........................ A-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND AND THE PORTFOLIO
The Fund is a diversified series of the Trust. The Portfolio is a diversified
series of Global Investment Portfolio.
INVESTMENT OBJECTIVE. The Fund seeks long-term capital growth.
PRINCIPAL INVESTMENTS. The Fund invests all of its investable assets in the
Portfolio, which, in turn, invests primarily in equity securities of companies
throughout the world that manufacture, market, retail or distribute consumer
products and services.
INVESTMENT MANAGERS. The Portfolio is managed by A I M Advisors, Inc. ("AIM")
and is sub-advised and sub-administered by INVESCO (NY), Inc. (the
"Sub-advisor"). AIM and the Sub-advisor and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM and the
Sub-advisor are both indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC and its subsidiaries are an independent investment management group
that has a significant presence in the institutional and retail segment of the
investment management industry in North America and Europe, and a growing
presence in Asia. AIM was organized in 1976 and, together with its subsidiaries,
currently advises approximately 90 investment company portfolios.
PURCHASING SHARES. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of a least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the funds in The AIM Family of Funds that are sub-advised
by the Sub-advisor ("AIM Funds") on May 29, 1998; (e) any of the companies
composing or affiliated with AMVESCAP PLC; and (f) AIM Global Trends Fund.
Pursuant to a separate prospectus, the Fund also offers Class A and Class B
shares, which represent interests in the Fund. The Class A and Class B shares
have different distribution arrangements. Initial investments in Advisor Class
shares must be at least $500 and additional investments must be at least $50.
The distributor of the Advisor Class shares is A I M Distributors, Inc. ("AIM
Distributors"), P.O. Box 4739, Houston, TX 77210-4739. See "How to Purchase
Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds or the "AIM Funds"),
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain funds in The AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at net asset value on any business day. See "How to
Redeem Shares."
2
<PAGE> 58
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be reinvested at net asset value without
payment of a sales charge in the Fund's shares or may be invested in shares of
the other funds in The AIM Family of Funds. See "Dividends, Distributions and
Tax Matters."
RISK FACTORS. There is no assurance that the Fund or the Portfolio will
achieve its investment objective. The Fund's net asset value will fluctuate,
reflecting fluctuations in the market value of the Portfolio's portfolio
holdings. The Portfolio's policy of concentrating its investments in companies
in the consumer products and services industries may cause the Fund's net asset
value to fluctuate more than if it invested in a greater number of industries.
The Portfolio may invest 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 Portfolio 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 Portfolio 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> 59
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following table(1):
<TABLE>
<S> <C>
Shareholder Transaction Costs:
Maximum sales charge on purchases of shares (as a % of
offering price)........................................ None
Sales charges on reinvested distributions to
shareholders........................................... None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)........ None
Redemption charges........................................ None
Exchange fees............................................. None
Annual Fund Operating Expenses(2): (as a % of average net
assets)
Investment management and administration fees............. 0.98%
12b-1 distribution and service fees....................... None
Other expenses (after reimbursements)..................... 0.51%
----
Total Fund Operating Expenses..................... 1.49%
====
</TABLE>
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
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class Shares...................................... $15 $47 $82 $179
</TABLE>
(1)This table is intended to assist investors in understanding the various costs
and expenses associated with investing in the Fund.
(2)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 1.50% of the average daily net assets of the Fund's Advisor
Class shares. AIM has voluntarily agreed to continue this limitation through
May 31, 2000. "Other expenses" include custody, transfer agency, legal, audit
and other operating expenses. See "Management" herein and the Statement of
Additional Information for more information. Investors purchasing Advisor
Class shares through financial planners, trust companies, bank trust
departments or registered investment advisors, or under a "wrap fee" program,
will be subject to additional fees charged by such entities or by the
sponsors of such programs. Where any account advised by one of the companies
composing or affiliated with AMVESCAP PLC invests in Advisor Class shares of
the Fund, such account shall not be subject to duplicative advisory fees.
The Board of Trustees of the Trust believes that the aggregate per share
expenses of the Fund and its Portfolio will be approximately equal to the
expenses the Fund would incur if its assets were invested directly in the
type of securities being held by its Portfolio.
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S AND THE PORTFOLIO'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 OR THE PORTFOLIO'S
PROJECTED OR ACTUAL PERFORMANCE.
4
<PAGE> 60
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables below provide condensed financial information concerning income and
capital changes for one Advisor Class share of the Fund. This information is
supplemented by the financial statements and accompanying notes appearing in the
Statement of Additional Information. The financial statements and notes, for the
fiscal year ended October 31, 1997, have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report thereon also is included in the
Statement of Additional Information. The unaudited financial statements and
notes, for the semi-annual period ended April 30, 1998, are also included in the
Statement of Additional Information.
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
(FORMERLY GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND)
<TABLE>
<CAPTION>
ADVISOR CLASS+
------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCT. 31, JUNE 1, 1995
APRIL 30, 1998 ------------------- TO
(UNAUDITED)* 1997* 1996* OCT. 31, 1995*
-------------- ------- ------- --------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................ $ 22.50 $ 21.15 $ 14.64 $ 11.84
------- ------- ------- -------
Income from investment operations:
Net investment income (loss).............................. (0.06) (0.04) (0.13) 0.04**
Net realized and unrealized gain on investments........... 4.86 2.30 7.16 2.76
------- ------- ------- -------
Net increase from investment operations................... 4.80 2.26 7.03 2.80
------- ------- ------- -------
Distributions:
From net realized gain on investments..................... (1.89) (0.91) (0.52) --
------- ------- ------- -------
Total distributions................................. (1.89) (0.91) (0.52) --
------- ------- ------- -------
Net asset value, end of period.............................. $ 25.41 $ 22.50 $ 21.15 $ 14.64
======= ======= ======= =======
Total investment return(c).................................. 22.77%(b) 11.15% 49.50% 23.65%(b)
======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $18,141 $ 6,047 $ 7,446 $ 164
Ratio of net investment income (loss) to average net assets:
With expense reductions and reimbursement by the
Sub-advisor............................................. (0.50)%(a) (0.22)% (0.64)% 0.70%(a)
Without expense reductions and reimbursement by the
Sub-advisor............................................. (0.52)%(a) (0.37)% (0.74)% (10.61)%(a)
Ratio of expenses to average net assets:
With expense reductions and reimbursement by the
Sub-advisor............................................. 1.42%(a) 1.34% 1.74% 1.82%(a)
Without expense reductions and reimbursement by the
Sub-advisor............................................. 1.44%(a) 1.49% 1.84% 13.13%(a)
Portfolio turnover rate++................................... 169%(a) 392% 169% 240%(a)
Average commission rate per share paid on portfolio
transactions++............................................ $0.0423 $0.0319 $0.0545 N/A
</TABLE>
- ---------------
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued. The Fund invests only in the AIM Global Consumer Products and
Services Portfolio and does not engage in securities transactions.
Accordingly, the portfolio turnover and average commission rates presented
are for the AIM Global Consumer Products and Services Portfolio.
* These selected per share data were calculated based upon average shares
outstanding during the period.
** Before reimbursement by the Sub-advisor, net investment income per share
would have been reduced by $0.61.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
AVERAGE NUMBER OF AVERAGE
AMOUNT OF DEBT AMOUNT OF DEBT REGISTRANT'S SHARES AMOUNT OF DEBT
OUTSTANDING AT OUTSTANDING OUTSTANDING PER SHARE
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
- ---------- -------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Six months ended April 30, 1998......... $ -- $115,397 7,894,281 $ 0.015
October 31, 1997........................ $ -- $103,293 8,302,173 $0.0124
</TABLE>
Average amount of debt outstanding during the period is computed daily.
5
<PAGE> 61
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Fund. Such practices will
have the effect of increasing the Fund's total return. The performance of the
Fund will vary from time to time and past results are not necessarily
representative of future results. The Fund's performance is a function of its
portfolio management in selecting the type and quality of portfolio securities
and is affected by operating expenses of the Fund as well as by general market
conditions.
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
INVESTMENT OBJECTIVE. The Fund's investment objective is long-term capital
growth. It seeks its objective by investing all of its investable assets in the
Portfolio, which, in turn, invests primarily in equity securities of companies
throughout the world that manufacture, market, retail or distribute consumer
products and services. The Portfolio's investment objective is identical to that
of the Fund. There can be no assurance that the Fund or Portfolio will achieve
its investment objective.
INVESTMENT POLICIES. At least 65% of the Portfolio's total assets normally
will be invested in common and preferred stocks and warrants to acquire such
securities issued by consumer products and services companies. A "consumer
products or services" company is an entity in which (i) at least 50% of either
the revenues or earnings was derived from activities relating to consumer
products or services, or (ii) at least 50% of the assets was devoted to such
activities, based on the company's most recent fiscal year. The remainder of the
Portfolio's assets may be invested in debt securities issued by consumer
products or services companies and/or equity and debt securities of companies
outside the consumer products or services industries, which, in the opinion of
the Sub-advisor, stand to benefit from developments in such industries.
Examples of consumer products and services companies include those that
manufacture, market, retail, or distribute: durable goods (such as homes,
household goods, automobiles, boats, furniture and appliances, and computers);
non-durable goods (such as food and beverages and apparel); media,
entertainment, broadcasting, publishing and sports-related goods and services
(such as television and radio broadcast, motion pictures, wireless
communications, gaming casinos, theme parks, restaurants and lodging); and goods
and services to companies in the foregoing industries (such as advertisers,
textile companies and distribution and shipping companies).
The Portfolio expects that a significant portion of its assets may be invested
in the securities of U.S. issuers from time to time, particularly those that
market their products globally. However, consumer products and services
companies of a particular nation or region of the world are often operated and
owned in their local markets, close to their customers. These companies, the
Sub-advisor believes, may offer superior opportunities for capital growth as
compared to their larger, multinational counterparts. Certain global markets may
be more attractive than others from time to time; companies dependent on U.S.
markets, for example, may be outperformed by companies not dependent on U.S.
markets.
The Sub-advisor also believes that the demand for consumer products and
services worldwide will increase along with rising disposable incomes in both
developed and developing nations. Emerging economies, such as those in China,
Southeast Asia, Eastern Europe and Latin America, offer opportunities for the
growth and expansion of consumer markets. These regions currently comprise a
growing source of inexpensive consumer products for export and a growing source
of demand for consumer products and services as the disposable incomes of their
populations increase. In the Sub-advisor's view, these changes are likely to
create investment opportunities in companies, both local and multinational, that
are able to employ innovative manufacturing, marketing, retailing and
distribution methods to open new markets and/or expand existing markets.
6
<PAGE> 62
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:
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. The Portfolio expects that,
from time to time, a significant portion of its assets may be invested in the
securities of domestic issuers. The industry represented in the Portfolio,
however, is a global industry with significant, growing markets outside of the
United States. A sizeable proportion of the companies which comprise the
consumer products and services industries are headquartered outside of the
United States.
For these reasons, the Sub-advisor believes that a portfolio composed only of
securities of U.S. issuers does not provide the greatest potential for return
from an investment by the Portfolio. The Sub-advisor uses its financial
expertise in markets located throughout the world and the substantial global
resources of AMVESCAP PLC in attempting to identify those countries and
companies then providing the greatest potential for long-term capital
appreciation. In this fashion, the Sub-advisor seeks to enable shareholders to
capitalize on the substantial investment opportunities and the potential for
long-term growth of capital presented by the global consumer products and
services industries represented in the Portfolio.
The Sub-advisor allocates the Portfolio's assets among securities of countries
and in currency denominations where opportunities for meeting the Portfolio's
investment objective are expected to be the most attractive. The Portfolio may
invest substantially in securities denominated in one or more currencies. Under
normal conditions, the Portfolio invests in the securities of issuers located in
at least three countries, including the United States; investments in securities
of issuers in any one country, other than the United States, will represent no
more than 50% of the Portfolio's total assets.
In analyzing specific companies for possible investment, the Sub-advisor
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets.
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 Portfolio may invest up to
100% of its total assets in cash (U.S. dollars, foreign currencies or
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 the Portfolio's investments may be
made in the United States and denominated in U.S. dollars. To the extent the
Portfolio adopts a temporary defensive posture, it will not be invested so as to
achieve directly its investment objective. In addition, pending investment of
proceeds from new sales of Fund shares or to meet its ordinary daily cash needs,
the Portfolio 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 full description of money market instruments, see "Money
Market Instruments" in the "Investment Objectives and Policies" section of the
Statement of Additional Information.
PRIVATIZATIONS. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-advisor believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Portfolio in privatizations in appropriate
circumstances. In certain foreign countries, the ability of foreign entities
such as the Portfolio to participate in privatizations may be limited by local
law, or the terms on which the Portfolio may be permitted to participate may be
less advantageous than those for local investors. There can be no assurance that
foreign governments will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Portfolio may invest up to 10%
of its total assets in other investment companies, some of which may be
investment vehicles or companies that are advised by the Sub-advisor or its
affiliates ("Affiliated Funds"). As a shareholder in an investment company, the
Portfolio would bear its ratable share of that investment company's expenses,
including its advisory and administration fees. At the same time, the Portfolio
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 Portfolio
invests in an Affiliated Fund.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Portfolio
may borrow from banks or may borrow through reverse repurchase agreements and
"roll" transactions in connection with meeting requests for the redemptions of
the Fund's shares. The Portfolio also may borrow up to 5% of its total assets
for temporary or emergency purposes other than to meet redemptions of the Fund's
shares. The Portfolio may borrow up to 33 1/3% of its total assets. However, no
additional investments will be made if the Portfolio's borrowings exceed 5% of
its total assets. Any borrowing by the Portfolio may cause greater fluctuation
in the value of its shares than would be the case if the Portfolio did not
borrow.
A reverse repurchase agreement is a borrowing transaction in which the
Portfolio 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. A "roll"
borrowing transaction involves the Portfolio's sale of securities together with
its commitment (for which the Portfolio may receive a fee) to purchase similar,
but not identical, securities at a future date.
SECURITIES LENDING. The Portfolio may lend its portfolio securities to
broker/dealers or to other institutional investors. Securities lending allows
the Portfolios to retain ownership of the securities loaned and, at the same
time, enhances the Fund's total return. The Portfolio 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 Portfolio's custodian collateral consisting of
cash,
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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 Portfolio'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 should the borrower
fail financially.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES. The Portfolio may purchase debt
securities on a "when-issued" basis and may purchase or sell such securities on
a "forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. The price, which is generally expressed in yield
terms, is fixed at the time 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 Portfolio will
purchase or sell when-issued securities or enter into forward commitments only
with the intention of actually receiving or delivering the securities, as the
case may be. No income accrues on securities that have been purchased pursuant
to a forward commitment or on a when-issued basis prior to delivery to the
Portfolio. If the Portfolio disposes of the right to acquire a when-issued
security prior to its acquisition or disposes of its right to deliver or receive
against a forward commitment, it may incur a gain or loss. At the time the
Portfolio enters into a transaction on a when-issued or forward commitment
basis, the Portfolio will segregate cash or liquid securities equal to the value
of the when-issued or forward commitment securities with its custodian and will
mark to market daily such assets. There is a risk that the securities may not be
delivered and that the Portfolio may incur a loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. The Portfolio may use
forward currency contracts, futures contracts, options on securities, options on
indices, options on currencies and options on futures contracts to attempt to
hedge against the overall level of investment and currency risk normally
associated with 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 Portfolio may enter into such
instruments up to the full value of its portfolio assets. See "Risk
Factors -- Options, Futures and Forward 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 Portfolio may enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purchase or sale of a foreign currency against the
U.S. dollar or may involve two foreign currencies. The Portfolio may enter into
forward currency contracts either with respect to specific transactions or with
respect to its portfolio positions. The Portfolio 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.
In addition, the Portfolio may purchase and sell put and call options on
equity and debt securities to hedge against the risk of fluctuations in the
prices of securities held by the Portfolio or that the Sub-advisor intends to
include in the Portfolio's holdings. The Portfolio also may purchase and sell
put and call options on stock indexes to hedge against overall fluctuations in
the securities markets generally or in a specific market sector.
Further, the Portfolio may sell stock index futures contracts and may purchase
put options or write call options on such futures contracts to protect against a
general stock market decline or a decline in a specific market sector that could
affect adversely the Portfolio's holdings. The Portfolio also may purchase stock
index futures contracts and purchase call options or write put options on such
contracts to hedge against a general stock market or market sector advance and
thereby attempt to lessen the cost of future securities acquisitions. The
Portfolio may use interest rate futures contracts and options thereon to hedge
the debt portion of its portfolio against changes in the general level of
interest rates.
OTHER INFORMATION. The investment objective of the Fund may not be changed
without the approval of a majority of that Fund's outstanding voting securities.
A "majority of the Fund's outstanding voting securities" means the lesser of (i)
67% of the Fund's shares represented at a meeting at which more than 50% of the
outstanding shares are represented, or (ii) more than 50% of the outstanding
shares. In addition, the Fund has adopted certain investment limitations 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. The Fund's policies regarding
concentration and lending, and the percentage of the Fund's assets that may be
committed to borrowing, are fundamental policies and may not be changed without
shareholder approval. The investment policies of the Fund are identical to the
investment policies of the Portfolio.
The approval of the Fund and of other investors in the Portfolio, if any, is
not required to change the investment objective, policies or limitations of the
Portfolio, unless otherwise specified. Written notice shall be provided to
shareholders of the Fund thirty days prior to any changes in its corresponding
Portfolio's investment objective.
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 or Portfolio's investment policies or
restrictions.
The Portfolio 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"
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and "Depositary Receipts," respectively, in the Investment Objectives and
Policies section of the Statement of Additional Information.
OTHER INFORMATION REGARDING THE PORTFOLIO. As previously described, the Fund,
unlike mutual funds that directly acquire and manage their own portfolios of
securities, seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, which is a separate investment company.
Because a Fund will invest only in its corresponding Portfolio, the Fund's
shareholders will acquire only an indirect interest in the investments of that
Portfolio.
The Fund may redeem its investment in the Portfolio at any time, if the Board
of Trustees of the Trust determines that it is in the best interests of the Fund
and its shareholders to do so. A change in the Portfolio's investment objective,
policies or limitations that is not approved by the Board or the shareholders of
the Fund could require the Fund to redeem its interest in the Portfolio. Any
such redemption could result in a distribution in kind of portfolio securities
(as opposed to a cash distribution) by the Portfolio. Should such a distribution
occur, the Fund could incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of investments for the Fund and could
adversely affect its liquidity. Upon redemption, the Board would consider what
action might be taken, including the investment of all the investable assets of
the Fund in another pooled investment entity having substantially the same
investment objective as the Fund or the retention by the Fund of its own
investment advisor to manage its assets in accordance with its investment
objective, policies and limitations discussed herein.
In addition to selling an interest therein to the Fund, the Portfolio may sell
interests therein to other non-affiliated investment companies and/or other
institutional investors. All institutional investors in the Portfolio will pay a
proportionate share of the Portfolio's expenses and will invest in the Portfolio
on the same terms and conditions. However, if another investment company invests
any or all of its assets in a Portfolio, it would not be required to sell its
shares at the same public offering price as the Fund and may charge different
sales commissions. Therefore, investors in the Fund may experience different
returns than investors in another investment company that invests exclusively in
the Portfolio. As of the date of this Prospectus, the Fund is the only
institutional investor in the Portfolio.
The Fund may be materially affected by the actions of other large investors,
if any, in the Portfolio. For example, as with all open-end investment
companies, if a large investor were to redeem its interest in the Portfolio, (1)
the Portfolio's remaining investors could experience higher pro rata operating
expenses, thereby producing lower returns and (2) the Portfolio's security
holdings may become less diverse, resulting in increased risk. Institutional
investors in the Portfolio that have a greater pro rata ownership interest in
the Portfolio than the Fund could have effective voting control over the
operation of the Portfolio.
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RISK FACTORS
GENERAL. There is no assurance that the Fund or the Portfolio will achieve its
investment objective. The Fund's net asset values will fluctuate reflecting
fluctuations in the market value of the Portfolio's securities. 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 Portfolio will
fluctuate in response to general market and economic developments, as well as
developments affecting the particular issuers of such securities. In addition,
the value of debt securities held by the Portfolio generally will fluctuate with
changes in the perceived creditworthiness of the issuers of such securities and
interest rates.
Because the Portfolio focuses its investments on the consumer products and
services industries, an investment in it may be more volatile than that of other
investment companies that do not concentrate their investments in such a manner.
Moreover, the value of the shares of the Fund will be especially susceptible to
factors affecting the consumer products and services industries. Accordingly,
the Fund should not be considered a complete investment program.
CONSUMER PRODUCTS AND SERVICES INDUSTRIES. The performance of consumer
products and services companies, relates closely to the actual or perceived
performance of the overall economy, interest rates and consumer confidence. In
addition, changes in demographics and consumer tastes may also affect the demand
for, and success of, particular consumer products and services. Many consumer
products and services companies have unpredictable earnings, due in part to
changes in consumer tastes and intense competition. As a result, such companies
may be subject to increased share price volatility. The consumer products and
services industries may also be subject to greater government regulation,
including trade regulation, than many other industries. Changes in governmental
policy and the need for regulatory approvals may have a material effect on the
products and services offered by companies in the consumer products and services
industries. Such governmental regulations may also hamper the development of new
business opportunities.
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
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volatile than securities of comparable domestic companies. The Portfolio's
interest and dividends from foreign issuers may be subject to non-U.S.
withholding taxes, thereby reducing the Portfolio's net investment income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Portfolio, political or social instability, or diplomatic
developments which could affect the Portfolio's investments in those countries.
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, resource self-sufficiency
and balance of payments positions.
The Portfolio may invest in issuers domiciled in "emerging markets." Investing
in emerging market countries involves risks in addition to those risks involved
in foreign investing. Many emerging market countries have experienced high rates
of inflation for many years. In addition, emerging markets generally are
dependent heavily upon international trade and, accordingly, have been and
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. The securities markets of
emerging market countries are substantially smaller, less developed, less liquid
and more volatile than the securities markets of the developed countries. In
addition, issuers in emerging markets typically are subject to a greater degree
of change in earnings and business prospects than issuers in developed
countries.
The Portfolio will also be affected favorably or unfavorably by exchange
control regulations or changes in the exchange rates between foreign 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 Portfolio and gains and losses realized by the Portfolio.
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 which is a
member of the European Union and satisfies the criteria for participation in the
EMU, may elect to participate in the EMU and may supplement its existing
currency with the euro after January 1, 1999.
The expected introduction of the euro presents unique risks and uncertainties,
including whether the payment and operational systems of banks and other
financial institutions will be ready by January 1, 1999; how outstanding
financial contracts will be treated after January 1, 1999; the establishment of
exchange rates for existing currencies and the euro; and the creation of
suitable clearing and settlement systems for the euro. These and other factors
could cause market disruptions before or after the introduction of the euro and
could adversely affect the value of securities held by the Fund.
LOWER QUALITY DEBT SECURITIES. The Portfolio may invest up to 20%, of its
total assets in below investment grade debt securities, that is, rated below BBB
by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or
Baa by Moody's Investors Service, Inc. ("Moody's") or, if unrated, deemed to be
of equivalent quality in the judgment of the Sub-advisor. Such investments
involve a high degree of risk. However, the Portfolio will not invest in debt
securities that are in default as to payment of principal and interest.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by S&P and debt rated Ba, B,
Caa, Ca or C by Moody's is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. 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 lower quality debt securities are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates. See "Description of Debt Ratings" in the Statement of Additional
Information for a full discussion of Moody's and S&P's ratings.
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.
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The risk of loss due to default by the issuer is significantly greater for the
holders of lower quality securities because such securities are generally
unsecured and may be subordinated to the claims of other creditors of the
issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Portfolio. If an issuer exercises these provisions in a
declining interest rate market, the Portfolio may have to replace the security
with a lower yielding security, resulting in a decreased return for investors.
In addition, the Portfolio 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
Portfolio anticipates that such securities could be sold only to a limited
number of dealers or institutional investors. The lack of a liquid secondary
market also may have an adverse impact on market prices of such instruments and
may make it more difficult for the Portfolio to obtain accurate market
quotations for purposes of valuing its investments. The Portfolio 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 Portfolio 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 Portfolio may also incur additional expenses to the
extent it is required to seek recovery upon a default in the payment of
principal or interest on portfolio holdings, and the Portfolio may have limited
legal recourse in the event of a default.
ILLIQUID SECURITIES. The Portfolio may invest up to 15% of its net assets in
securities for which no readily available market exists, so-called "illiquid
securities." The Sub-advisor believes that carefully selected investments in
joint ventures, cooperatives, partnerships and state enterprises which are
illiquid (collectively, "Special Situations") could enable the Portfolio to
achieve capital appreciation substantially exceeding the appreciation the
Portfolio would realize if it did not make such investments. However, in order
to attempt to limit investment risk, the Portfolio will invest no more than 5%
of its total assets in Special Situations.
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.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Although the Portfolio is
authorized to enter into options, futures and forward currency transactions, the
Portfolio 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 or in the
appropriate market sector and movements in interest rates and currency markets;
(2) imperfect correlation, or even no correlation, between movements in the
price of options, forward contracts, futures contracts or options thereon and
movements in the price of the currency or security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are different from
those needed to select the securities in which the Portfolio 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 Portfolio 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 Portfolio to sell a security at a disadvantageous time, due to the need for
the Portfolio to maintain "cover" or to set aside securities in connection with
hedging transactions.
INVESTING IN SMALLER COMPANIES. While the Portfolio's holdings normally will
include securities of established suppliers of traditional products and
services, the Portfolio may invest in smaller companies which can benefit from
the development of new products and services. These smaller companies may
present greater opportunities for capital appreciation, but may also involve
greater risks than large, established issuers. Such smaller companies may have
limited product lines, markets or financial resources, and their securities may
trade less frequently and in more limited volume than the securities of larger,
more established companies. As a result, the prices of the securities of such
smaller companies may fluctuate to a greater degree than the prices of the
securities of other issuers.
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MANAGEMENT
The Trust's Board of Trustees and the Board of Trustees of the Portfolio have
overall responsibility for the operation of the Fund and the Portfolio,
respectively. The Boards have approved all significant agreements between the
Trust and the Portfolio on the one side and persons or companies furnishing
services to the Fund and the Portfolio 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 and the Portfolio are delegated to the officers of the Trust and the
Portfolio, subject always to the investment objective and policies of the Fund
and the Portfolio and to the general supervision of the Boards. See "Trustees
and Executive Officers" in the Statement of Additional Information for
information on the Trust's and the Portfolio's Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-advisor as the investment managers and administrators to the Fund and the
Portfolio include, but are not limited to, determining the composition of the
investment hold-
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ings of the Portfolio and placing orders to buy, sell or hold particular
securities. In addition, AIM and the Sub-advisor provide the following
administration services to the Portfolio and the Fund: furnishing corporate
officers and clerical staff; providing office space, services and equipment; and
supervising all matters relating to the Portfolio's and the Fund's operation.
For administration services, the Fund pays AIM administration fees computed
daily and payable monthly at the annualized rate of 0.25% of the Fund's average
daily net assets. AIM has appointed the Sub-advisor as the Fund's
sub-administrator. In addition, the Fund bears its pro rata portion of the
investment management and administration fees paid by its corresponding
Portfolio to AIM and the Sub-advisor. The Portfolio pays AIM a fee, based on the
Portfolio's average daily net assets at the annualized rate of 0.725% on the
first $500 million, 0.70% on the next $500 million, 0.675% on the next $500
million and 0.65% on all amounts thereafter. Out of its aggregate fees payable
by the Fund and the Portfolio, AIM pays the Sub-advisor sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from the
Fund and the Portfolio. The investment management and administration fees paid
by the Fund and the Portfolio 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 1.50% of the average daily net assets of the Fund's Advisor Class
shares.
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 Portfolio 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 Portfolio 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 Portfolio, the Sub-advisor employs a
team approach, taking advantage of its investment resources around the world.
The investment professional primarily responsible for the portfolio management
of the Portfolio is as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- ----------- -------------------- -------------------
<S> <C> <C>
Derek H. Webb Portfolio Manager Head of [the Theme Funds] for the Sub-advisor
San Francisco since Portfolio since 1997. Portfolio Manager for the Sub-advisor
inception in 1994 since 1994. Analyst for the Sub-advisor from 1992
to 1994.
</TABLE>
In placing orders for the Portfolio's securities 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 (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of Advisor Class
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 Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
12
<PAGE> 68
- --------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST AND PORTFOLIO
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 continue to 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 of 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 shares
do not have cumulative voting rights, which means that the holders of a majority
of the shares voting for the election of Trustees can elect all the Trustees. A
Trustee may be removed at any meeting of the shareholders of the Trust by a vote
of the shareholders owning at least two-thirds of the outstanding shares. Any
Trustee may call a special meeting of shareholders for any purpose. Furthermore,
Trustees shall promptly call a meeting of shareholders solely for the purpose of
removing one or more Trustees when requested in writing to do so by shareholders
holding 10% of the Trust's outstanding shares.
Pursuant to the Trust's 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.
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a subtrust of
Global Investment Portfolio, a Delaware business trust. Under Delaware law, the
Fund and other entities investing in the Portfolio enjoy the same limitations of
liability extended to shareholders of private, for-profit corporations. There is
a remote possibility, however, that under certain circumstances an investor in
the Portfolio may be held liable for the Portfolio's obligations. However, the
Agreement and Declaration of Trust of Global Investment Portfolio disclaims
shareholder liability for acts or obligations of the Portfolio and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Portfolio or a trustee. The Agreement and
Declaration of Trust also provides for indemnification from the Portfolio
property for all losses and expenses of any shareholder held personally liable
for the Portfolio's obligations. Thus the risk of an investor incurring
financial loss on account of such liability is limited to circumstances in which
the Portfolio itself would be unable to meet its obligations and where the other
party was held not to be bound by the disclaimer.
Whenever the Fund is requested to vote on any proposal of the Portfolio, the
Fund will hold a meeting of the Fund's shareholders and will cast its vote as
instructed by its shareholders. Shares for which no voting instructions are
received will be voted in the same proportion as the shares for which voting
instructions are received.
The Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
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, to the
Fund and to the Portfolio.
13
<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--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
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<PAGE> 70
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
A-2
<PAGE> 71
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
A-3
<PAGE> 72
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
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<PAGE> 73
Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
A-5
<PAGE> 74
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
A-6
<PAGE> 75
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.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
A-7
<PAGE> 76
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
A-8
<PAGE> 77
TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
A-9
<PAGE> 78
AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 79
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> 80
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> 81
[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.
GCPS-PRO-2
<PAGE> 82
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--REGISTERED TRADEMARK--
ADVISOR CLASS OF
AIM GLOBAL FINANCIAL SERVICES FUND
(SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
P
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM GLOBAL FINANCIAL SERVICES 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 capital
growth by investing all of its investable assets in the AIM Global Financial
Services Portfolio (the "Portfolio"), which, in turn, invests primarily in
equity securities of companies throughout the world that operate in the
financial services industries. The Portfolio's investment objective is identical
to that of the Fund. The investment experience of the Fund will correspond
directly with the investment experience of the Portfolio.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
September 8, 1998, has been filed with the Securities and Exchange Commission
(the "SEC") and, is incorporated herein by reference. The Statement of
Additional Information is available without charge upon written request to the
Trust at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or by calling
(800) 347-4246. The SEC maintains a Web site at http://www.sec.gov that contains
the Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund. Additional information about the fund may
also be obtained from http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 83
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................ 2
The Fund and the Portfolio........... 2
THE FUND............................... 4
Table of Fees and Expenses........... 4
Financial Highlights................. 5
Performance.......................... 6
Investment Program................... 6
Risk Factors......................... 10
Management........................... 12
Organization of the Trust and the
Portfolio......................... 14
INVESTOR'S GUIDE TO THE AIM FAMILY OF
FUNDS--Registered Trademark--........ A-1
Introduction to The AIM Family of
Funds............................. A-1
How to Purchase Shares............... A-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Terms and Conditions of Purchase of
the AIM Funds..................... A-2
Special Plans........................ A-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND AND THE PORTFOLIO
The Fund is a diversified series of the Trust. The Portfolio is a diversified
series of Global Investment Portfolio.
INVESTMENT OBJECTIVE. The Fund seeks long-term capital growth.
PRINCIPAL INVESTMENTS. The Fund invests all of its investable assets in the
Portfolio, which, in turn, invests primarily in equity securities of companies
throughout the world that operate in the financial services industries.
INVESTMENT MANAGERS. The Portfolio is managed by A I M Advisors, Inc. ("AIM")
and is sub-advised and sub-administered by INVESCO (NY), Inc. (the
"Sub-advisor"). AIM and the Sub-advisor and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM and the
Sub-advisor are both indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC and its subsidiaries are an independent investment management group
that has a significant presence in the institutional and retail segment of the
investment management industry in North America and Europe, and a growing
presence in Asia. AIM was organized in 1976 and, together with its subsidiaries,
currently advises approximately 90 investment company portfolios.
PURCHASING SHARES. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of at least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the funds in The AIM Family of Funds that are sub-advised
by the Sub-advisor ("AIM Funds") on May 29, 1998; (e) any of the companies
composing or affiliated with AMVESCAP PLC; and (f) AIM Global Trends Fund.
Pursuant to a separate prospectus, the Fund also offers Class A and Class B
shares, which represent interests in the Fund. The Class A and Class B shares
have different distribution arrangements.
Initial investments in Advisor Class shares must be at least $500 and
additional investments must be at least $50. The distributor of the Advisor
Class shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds").
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain funds in The AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at net asset value on any business day. See "How to
Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be rein-
2
<PAGE> 84
vested at net asset value without payment of a sales charge in the Fund's shares
or may be invested in shares of the other funds in The AIM Family of Funds. See
"Dividends, Distributions and Tax Matters."
RISK FACTORS. There is no assurance that the Fund or the Portfolio will
achieve its investment objective. The Fund's net asset value will fluctuate,
reflecting fluctuations in the market value of the Portfolio's portfolio
holdings. The Portfolio's policy of concentrating its investments in companies
in the financial services industries may cause the Fund's net asset value to
fluctuate more than if it invested in a greater number of industries.
The Portfolio may invest 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 Portfolio 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 Portfolio may invest up to 5% 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> 85
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following table(1):
<TABLE>
<S> <C>
Shareholder Transaction Costs:
Maximum sales charge on purchases of shares (as a % of None
offering price)........................................
Sales charges on reinvested distributions to None
shareholders...........................................
Maximum deferred sales charge (as a % of net asset value None
at time of purchase or sale, whichever is less)........
Redemption charges........................................ None
Exchange fees............................................. None
Annual Fund Operating Expenses(2): (as a % of average net
assets)
Investment management and administration fees............. 0.98%
12b-1 distribution and service fees....................... None
Other expenses (after reimbursements)..................... 0.52%
----
Total Fund Operating Expenses..................... 1.50%
====
</TABLE>
(1)This table is intended to assist investors in understanding the various costs
and expenses associated with investing in the Fund.
(2)Expenses are based on the Fund's fiscal year ended October 31, 1997 restated
to reflect AIM's undertaking to limit each Fund's expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the
annual rate of 1.50% of the average daily net assets of the Fund's Advisor
Class shares. AIM has voluntarily agreed to continue this limitation through
May 31, 2000. Without reimbursements, "Other Expenses" and "Total Fund
Operating Expenses" would have been 0.88% and 1.86%, respectively, for
Advisor Class shares of the Fund. "Other expenses" include custody, transfer
agency, legal, audit and other operating expenses. See "Management" herein
and the Statement of Additional Information for more information. Investors
purchasing Advisor Class shares through financial planners, trust companies,
bank trust departments or registered investment advisors, or under a "wrap
fee" program, will be subject to additional fees charged by such entities or
by the sponsors of such programs. Where any account advised by one of the
companies composing or affiliated with AMVESCAP PLC invests in Advisor Class
shares of the Fund, such account shall not be subject to duplicative advisory
fees.
The Board of Trustees of the Trust believes that the aggregate per share
expenses of the Fund and its Portfolio will be approximately equal to the
expenses the Fund would incur if its assets were invested directly in the
type of securities being held by the Portfolio.
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
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class Shares................................. $15 $48 $82 $180
</TABLE>
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S AND THE PORTFOLIO'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 OR THE PORTFOLIO'S
PROJECTED OR ACTUAL PERFORMANCE.
4
<PAGE> 86
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables below provide condensed financial information concerning income and
capital changes for one Advisor Class share
of the Fund. This information is supplemented by the financial statements and
accompanying notes appearing in the Statement of Additional Information. The
financial statements and notes, for the fiscal year ended October 31, 1997, have
been audited by PricewaterhouseCoopers LLP, independent accountants, whose
report thereon also is included in the Statement of Additional Information. The
unaudited financial statements and notes for the semi-annual period ended April
30, 1998 are also included in the Statement of Additional Information.
AIM GLOBAL FINANCIAL SERVICES FUND
(FORMERLY GT GLOBAL FINANCIAL SERVICES FUND)
<TABLE>
<CAPTION>
ADVISOR CLASS+
--------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, JUNE 1, 1995
APRIL 30, 1998 ---------------------- TO
(UNAUDITED)(d) 1997(d) 1996(d) OCTOBER 31, 1995(d)
--------------- --------- --------- -------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 17.40 $ 14.26 $ 11.95 $ 11.09
------- ------- ------- -------
Income from investment operations:
Net investment income loss)..................... 0.07 0.12 0.12* 0.09*
Net realized and unrealized gain (loss) on
investments................................... 3.57 4.01 2.36 0.77
------- ------- ------- -------
Net increase (decrease) from investment
operations.................................... 3.64 4.13 2.48 0.86
------- ------- ------- -------
Distributions:
From net investment income...................... -- -- (0.16) --
From net realized gain on investments........... (0.61) (0.99) (0.01) --
------- ------- ------- -------
Total distributions...................... (0.61) (0.99) (0.17) --
------- ------- ------- -------
Net asset value, end of period.................... $ 20.43 $ 17.40 $ 14.26 $ 11.95
======= ======= ======= =======
Total investment return(b)........................ 21.55%(c) 30.52% 20.87% 7.75%(c)
======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $12,161 $ 3,738 $ 72 $ 31
Ratio of net investment income (loss) to average
net assets:
With expense reductions and reimbursement from
the Sub-advisor............................... 0.75%(a) 0.73% 0.91% 1.96%(a)
Without expense reductions and reimbursement
from the Sub-advisor.......................... 0.70%(a) 0.66%(a) (0.16)% (4.84)%(a)
Ratio of operating expenses to average net assets:
With expense reductions and reimbursement from
the Sub-advisor............................... 1.48%(a) 1.79% 1.82% 1.84%(a)
Without expense reductions and reimbursement
from the Sub-advisor.......................... 1.53%(a) 1.86% 2.89% 8.64%(a)
Portfolio turnover rate++......................... 106%(a) 91% 103% 170%(a)
Average commission rate per share paid on
portfolio transactions++........................ $0.0015 $0.0014 $0.0080 N/A
</TABLE>
- ---------------
(a) Annualized.
(b) Total investment return does not include sales charges.
(c) Not annualized.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
* Before reimbursement by the Sub-advisor, the net investment income per
share would have been reduced by $0.13 for the year ended October 31, 1996
and $0.30 for the period ended October 31, 1995.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the class of shares
issued. The Fund invests only in the AIM Financial Services Portfolio and
does not engage in securities transactions. Accordingly, the portfolio
turnover and average commission rates presented are for the AIM Financial
Services Portfolio.
N/A Not Applicable.
---------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY NUMBER AVERAGE AMOUNT
AMOUNT OF DEBT AVERAGE AMOUNT OF OF REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT DEBT OUTSTANDING OUTSTANDING SHARE DURING
YEAR END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ---- -------------- ----------------- ---------------------- --------------
<S> <C> <C> <C> <C>
Six Months ended April 30, 1998......... $ -- $35,342 5,369,134 $0.007
</TABLE>
Average amount of debt outstanding during the period is computed on a daily
basis.
5
<PAGE> 87
- --------------------------------------------------------------------------------
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 quotes. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Fund. Such practices will
have the effect of increasing the Fund's total return. The performance of the
Fund will vary from time to time and past results are not necessarily
representative of future results. The Fund's performance is a function of its
portfolio management in selecting the type and quality of portfolio securities
and is affected by operating expenses of the Fund as well as by general market
conditions.
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
INVESTMENT OBJECTIVE. The Fund's investment objective is long-term capital
growth. It seeks its objective by investing all of its investable assets in the
Portfolio, which, in turn, invests primarily in equity securities of companies
throughout the world that operate in the financial services industries. The
Portfolio's investment objective is identical to that of the Fund. There can be
no assurance that the Fund or Portfolio will achieve its investment objective.
INVESTMENT POLICIES. At least 65% of the Portfolio's total assets normally
will be invested in common and preferred stocks and warrants to acquire such
securities issued by financial services companies. A "financial services"
company is an entity in which (i) at least 50% of either the revenues or
earnings was derived from financial services activities, or (ii) at least 50% of
the assets was devoted to such activities, based on the company's most recent
fiscal year. The remainder of the Portfolio's assets may be invested in debt
securities issued by financial services companies and/or equity and debt
securities of companies outside of the financial services industries, which, in
the opinion of the Sub-advisor, stand to benefit from developments in the
financial services industries.
Examples of financial services companies include commercial banks and savings
institutions and loan associations and their holding companies; consumer and
industrial finance companies; diversified financial services companies;
investment banks; insurance brokerages; securities brokerage and investment
advisory companies; real estate-related companies; leasing companies; and a
variety of firms in all segments of the insurance field such as multi-line,
property and casualty and life insurance and insurance holding companies.
The Sub-advisor believes an accelerating rate of global economic
interdependence will lead to significant growth in the demand for financial
services. In addition, in the Sub-advisor's view, as the industries evolve,
opportunities will emerge for those companies positioned for the future. Thus,
the Sub-advisor expects that banking and related financial institution
consolidation in the developed countries, increased demand for retail borrowing
in developing countries, a growing need for international trade-based financing,
a rising demand for sophisticated risk management, the proliferating number of
liquid securities markets around the world, and larger concentrations of
investable assets should lead to growth in financial service companies that are
positioned for the future.
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:
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. The Portfolio expects that,
from time to time, a significant portion of its assets may be invested in the
securities of domestic issuers. The industry represented in the Portfolio,
however, is a global industry with
6
<PAGE> 88
significant, growing markets outside of the United States. A sizeable proportion
of the companies which comprise the financial services industries are
headquartered outside of the United States.
For these reasons, the Sub-advisor believes that a portfolio composed only of
securities of U.S. issuers does not provide the greatest potential for return
from an investment by the Portfolio. The Sub-advisor uses its financial
expertise in markets located throughout the world and the substantial global
resources of AMVESCAP PLC in attempting to identify those countries and
companies then providing the greatest potential for long-term capital
appreciation. In this fashion, the Sub-advisor seeks to enable shareholders to
capitalize on the substantial investment opportunities and the potential for
long-term growth of capital presented by the global financial services
industries represented in the Portfolio.
The Sub-advisor allocates the Portfolio's assets among securities of countries
and in currency denominations where opportunities for meeting the Portfolio's
investment objective are expected to be the most attractive. The Portfolio may
invest substantially in securities denominated in one or more currencies. Under
normal conditions, the Portfolio invests in the securities of issuers located in
at least three countries, including the United States; investments in securities
of issuers in any one country, other than the United States, will represent no
more than 40% of the Portfolio's total assets.
In analyzing specific companies for possible investment, the Sub-advisor
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets.
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 Portfolio may invest up to
100% of its total assets in cash (U.S. dollars, foreign currencies or
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 the Portfolio's investments may be
made in the United States and denominated in U.S. dollars. To the extent the
Portfolio adopts a temporary defensive posture, it will not be invested so as to
achieve directly its investment objective. In addition, pending investment of
proceeds from new sales of Fund shares or to meet its ordinary daily cash needs,
the Portfolio 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 full description of money market instruments, see "Money
Market Instruments" in the "Investment Objectives and Policies" section of the
Statement of Additional Information.
PRIVATIZATIONS. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-advisor believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Portfolio in privatizations in appropriate
circumstances. In certain foreign countries, the ability of foreign entities
such as the Portfolio to participate in privatizations may be limited by local
law, or the terms on which the Portfolio may be permitted to participate may be
less advantageous than those for local investors. There can be no assurance that
foreign governments will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Portfolio may invest up to 10%
of its total assets in other investment companies, some of which may be
investment vehicles or companies that are advised by the Sub-advisor or its
affiliates ("Affiliated Funds"). As a shareholder in an investment company, the
Portfolio would bear its ratable share of that investment company's expenses,
including its advisory and administration fees. At the same time, the Portfolio
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 Portfolio
invests in an Affiliated Fund.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Portfolio
may borrow from banks or may borrow through reverse repurchase agreements and
"roll" transactions in connection with meeting requests for the redemptions of
the Fund's shares. The Portfolio also may borrow up to 5% of its total assets
for temporary or emergency purposes other than to meet redemptions of the Fund's
shares. The Portfolio may borrow up to 33 1/3% of its total assets. However, no
additional investments will be made if the Portfolio's borrowings exceed 5% of
its total assets. Any borrowing by the Portfolio may cause greater fluctuation
in the value of its shares than would be the case if the Portfolio did not
borrow.
A reverse repurchase agreement is a borrowing transaction in which the
Portfolio 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. A "roll"
borrowing transaction involves the Portfolio's sale of securities together with
its commitment (for which the Portfolio may receive a fee) to purchase similar,
but not identical, securities at a future date.
SECURITIES LENDING. The Portfolio may lend its portfolio securities to
broker/dealers or to other institutional investors. Securities lending allows
the Portfolio to retain ownership of the securities loaned and, at the same
time, enhances the Fund's total return. The Portfolio 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 Portfolio'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 Portfolio's investment program and
regulatory agencies, and as approved
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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 should the borrower fail financially.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES. The Portfolio may purchase debt
securities on a "when-issued" basis and may purchase or sell such securities on
a "forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. The price, which is generally expressed in yield
terms, is fixed at the time 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 Portfolio will
purchase or sell when-issued securities or enter into forward commitments only
with the intention of actually receiving or delivering the securities, as the
case may be. No income accrues on securities that have been purchased pursuant
to a forward commitment or on a when-issued basis prior to delivery to the
Portfolio. If the Portfolio disposes of the right to acquire a when-issued
security prior to its acquisition or disposes of its right to deliver or receive
against a forward commitment, it may incur a gain or loss. At the time the
Portfolio enters into a transaction on a when-issued or forward commitment
basis, the Portfolio will segregate cash or liquid securities equal to the value
of the when-issued or forward commitment securities with its custodian and will
mark to market daily such assets. There is a risk that the securities may not be
delivered and that the Portfolio may incur a loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. The Portfolio may use
forward currency contracts, futures contracts, options on securities, options on
indices, options on currencies and options on futures contracts to attempt to
hedge against the overall level of investment and currency risk normally
associated with 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 Portfolio may enter into such
instruments up to the full value of its portfolio assets. See "Risk
Factors -- Options, Futures and Forward 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 Portfolio may enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purchase or sale of a foreign currency against the
U.S. dollar or may involve two foreign currencies. The Portfolio may enter into
forward currency contracts either with respect to specific transactions or with
respect to its portfolio positions. The Portfolio 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.
In addition, the Portfolio may purchase and sell put and call options on
equity and debt securities to hedge against the risk of fluctuations in the
prices of securities held by the Portfolio or that the Sub-advisor intends to
include in the Portfolio's holdings. The Portfolio also may purchase and sell
put and call options on stock indexes to hedge against overall fluctuations in
the securities markets generally or in a specific market sector.
Further, the Portfolio may sell stock index futures contracts and may purchase
put options or write call options on such futures contracts to protect against a
general stock market decline or a decline in a specific market sector that could
affect adversely the Portfolio's holdings. The Portfolio also may purchase stock
index futures contracts and purchase call options or write put options on such
contracts to hedge against a general stock market or market sector advance and
thereby attempt to lessen the cost of future securities acquisitions. The
Portfolio may use interest rate futures contracts and options thereon to hedge
the debt portion of its portfolio against changes in the general level of
interest rates.
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 Fund's shares represented at a meeting at which more than 50% of the
outstanding shares are represented, or (ii) more than 50% of the outstanding
shares. In addition, the Fund has adopted certain investment limitations 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. The Fund's policies regarding
concentration and lending, and the percentage of the Fund's assets that may be
committed to borrowing, are fundamental policies and may not be changed without
shareholder approval. The investment policies of the Fund are identical to the
investment policies of the Portfolio.
The approval of the Fund and of other investors in the Portfolio, if any, is
not required to change the investment objective, policies or limitations of the
Portfolio, unless otherwise specified. Written notice shall be provided to
shareholders of the Fund thirty days prior to any changes in the Portfolio's
investment objective.
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 or Portfolio's investment policies or
restrictions.
The Portfolio 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 Objective and Policies" section of the Statement of Additional
Information.
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OTHER INFORMATION REGARDING THE PORTFOLIO. As previously described, the Fund,
unlike mutual funds that directly acquire and manage their own portfolios of
securities, seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, which is a separate investment company.
Because the Fund will invest only in the Portfolio, the Fund's shareholders will
acquire only an indirect interest in the investments of the Portfolio.
The Fund may redeem its investment in the Portfolio at any time, if the Board
of Trustees of the Trust determines that it is in the best interests of the Fund
and its shareholders to do so. A change in the Portfolio's investment objective,
policies or limitations that is not approved by the Board or the shareholders of
the Fund could require the Fund to redeem its interest in the Portfolio. Any
such redemption could result in a distribution in kind of portfolio securities
(as opposed to a cash distribution) by the Portfolio. Should such a distribution
occur, the Fund could incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of investments for the Fund and could
adversely affect its liquidity. Upon redemption, the Board would consider what
action might be taken, including the investment of all the investable assets of
the Fund in another pooled investment entity having substantially the same
investment objective as the Fund or the retention by the Fund of its own
investment advisor to manage its assets in accordance with its investment
objective, policies and limitations discussed herein.
In addition to selling an interest therein to the Fund, the Portfolio may sell
interests therein to other non-affiliated investment companies and/or other
institutional investors. All institutional investors in the Portfolio will pay a
proportionate share of the Portfolio's expenses and will invest in the Portfolio
on the same terms and conditions. However, if another investment company invests
any or all of its assets in the Portfolio, it would not be required to sell its
shares at the same public offering price as the Fund and may charge different
sales commissions. Therefore, investors in the Fund may experience different
returns than investors in another investment company that invests exclusively in
the Portfolio. As of the date of this Prospectus, the Fund is the only
institutional investor in the Portfolio.
The Fund may be materially affected by the actions of other large investors,
if any, in the Portfolio. For example, as with all open-end investment
companies, if a large investor were to redeem its interest in the Portfolio, (1)
the Portfolio's remaining investors could experience higher pro rata operating
expenses, thereby producing lower returns and (2) the Portfolio's security
holdings may become less diverse, resulting in increased risk. Institutional
investors in the Portfolio that have a greater pro rata ownership interest in
the Portfolio than the Fund could have effective voting control over the
operation of the Portfolio.
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RISK FACTORS
GENERAL. There is no assurance that the Fund or the Portfolio will achieve its
investment objective. The Fund's net asset values will fluctuate reflecting
fluctuations in the market value of the Portfolio's securities positions. 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 Portfolio will
fluctuate in response to general market and economic developments, as well as
developments affecting the particular issuers of such securities. In addition,
the value of debt securities held by the Portfolio generally will fluctuate with
changes in the perceived creditworthiness of the issuers of such securities and
interest rates.
Because the Portfolio focuses its investments on the financial services
industries, an investment in it may be more volatile than that of other
investment companies that do not concentrate their investments in such a manner.
Moreover, the value of the shares of the Fund will be especially susceptible to
factors affecting the financial services industries. Accordingly, the Fund
should not be considered a complete investment program.
FINANCIAL SERVICES INDUSTRIES. Financial services industries may be subject to
greater governmental regulation than many other industries and changes in
governmental policies and the need for regulatory approvals may have a material
effect on the services offered by companies in the financial services
industries. Governmental regulation may limit both the financial commitments
banks can make, including the amounts and types of loans, and the interest rates
and fees they can charge. In addition, governmental regulation in certain
foreign countries may impose interest rate controls, credit controls and price
controls.
Companies in the financial services sector are subject to rapid business
changes, significant competition, value fluctuations due to the concentration of
loans in particular industries significantly affected by economic conditions
(such as real estate or energy) and volatile performance dependent upon the
availability and cost of capital and prevailing interest rates. In addition,
general economic conditions significantly affect these companies. Credit and
other losses resulting from the financial difficulty of borrowers or other third
parties potentially may have an adverse effect on companies in these industries.
Foreign banks, particularly those of Japan, have reported financial difficulties
attributed to increased competition, regulatory changes, and general economic
difficulties.
The financial services area in the United States currently is changing
relatively rapidly as existing distinctions between various financial service
segments become less clear. For instance, recent business combinations have
included insurance, finance, and securities brokerage under single ownership.
Some primarily retail corporations have expanded into securities and insurance
fields. Investment banking, securities brokerage and investment advisory
companies are subject to government regulation and risk due to securities
trading and underwriting activities.
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Many of the investment considerations discussed in connection with banks,
savings institutions and loan associations, and finance companies also apply to
insurance companies. The performance of insurance company investments will be
subject to risk from several factors. The earnings of insurance companies will
be affected by interest rates, pricing (including severe pricing competition
from time to time), claims activity, marketing competition and general economic
conditions. Particular insurance lines also will be influenced by specific
matters. Property and casualty insurer profits may be affected by certain
weather catastrophes and other disasters. Life and health insurer profits may be
affected by mortality and morbidity rates. Individual companies may be exposed
to material risks, including reserve inadequacy, problems in investment
portfolios (due to real estate or "junk" bond holdings, for example), and the
inability to collect from reinsurance carriers. Insurance companies are subject
to extensive governmental regulation, including the imposition of maximum rate
levels, which may not be adequate for some lines of business. Proposed or
potential anti-trust or tax law changes also may affect adversely insurance
companies' policy sales, tax obligations and profitability.
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 Portfolio's interest and dividends from foreign issuers may be
subject to non-U.S. withholding taxes, thereby reducing the Portfolio's net
investment income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Portfolio, political or social instability, or diplomatic
developments which could affect the Portfolio's investments in those countries.
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, resource self-sufficiency
and balance of payments positions.
The Portfolio may invest in issuers domiciled in "emerging markets." Investing
in emerging market countries involves risks in addition to those risks involved
in foreign investing. Many emerging market countries have experienced high rates
of inflation for many years. In addition, emerging markets generally are
dependent heavily upon international trade and, accordingly, have been and
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. The securities markets of
emerging market countries are substantially smaller, less developed, less liquid
and more volatile than the securities markets of the developed countries. In
addition, issuers in emerging markets typically are subject to a greater degree
of change in earnings and business prospects than issuers in developed
countries.
The Portfolio will also be affected favorably or unfavorably by exchange
control regulations or changes in the exchange rates between foreign 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 Portfolio and gains and losses realized by the Portfolio.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, and Spain are members of the European Economic and
Monetary Union (the "EMU"). The EMU intends to establish a common European
currency for participating countries which will be known as the "euro." It is
anticipated that each participating country will supplement its existing
currency with the euro on January 1, 1999, and will replace its existing
currency with the euro on July 1, 2002. Any other European country that is a
member of the European Union and satisfies the criteria for participation in the
EMU, may elect to participate in the EMU and may supplement its existing
currency with the euro after January 1, 1999.
The expected introduction of the euro presents unique risks and uncertainties,
including whether the payment and operational systems of banks and other
financial institutions will be ready by January 1, 1999; how outstanding
financial contracts will be treated after January 1, 1999; the establishment of
exchange rates for existing currencies and the euro; and the creation of
suitable clearing and settlement systems for the euro. These and other factors
could cause market disruptions before or after the introduction of the euro and
could adversely affect the value of securities held by the Fund.
LOWER QUALITY DEBT SECURITIES. The Portfolio may invest up to 5% of its total
assets in below investment grade debt securities, that is, rated below BBB by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or Baa
by Moody's Investors Service, Inc. ("Moody's") or, if unrated, deemed to be of
equivalent quality in the judgment of the Sub-advisor. Such investments involve
a high degree of risk. However, the Portfolio will not invest in debt securities
that are in default as to payment of principal and interest.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by S&P and debt rated Ba, B,
Caa, Ca or C by Moody's is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. 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
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generally considered to be subject to greater risk than securities with higher
ratings with regard to a deterioration of general economic conditions. These
lower quality debt securities are the equivalent of high yield, high risk bonds,
commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates. See "Description of Debt Ratings" in the Statement of Additional
Information for a full discussion of Moody's and S&P's ratings.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Portfolio. If an issuer exercises these provisions in a
declining interest rate market, the Portfolio may have to replace the security
with a lower yielding security, resulting in a decreased return for investors.
In addition, the Portfolio 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
Portfolio anticipates that such securities could be sold only to a limited
number of dealers or institutional investors. The lack of a liquid secondary
market also may have an adverse impact on market prices of such instruments and
may make it more difficult for the Portfolio to obtain accurate market
quotations for purposes of valuing its investments. The Portfolio 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 Portfolio 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 Portfolio may also incur additional expenses to the
extent it is required to seek recovery upon a default in the payment of
principal or interest on portfolio holdings, and the Portfolio may have limited
legal recourse in the event of a default.
ILLIQUID SECURITIES. The Portfolio may invest up to 15% of its net assets in
securities for which no readily available market exists, so-called "illiquid
securities." The Sub-advisor believes that carefully selected investments in
joint ventures, cooperatives, partnerships and state enterprises which are
illiquid (collectively, "Special Situations") could enable the Portfolio to
achieve capital appreciation substantially exceeding the appreciation the
Portfolio would realize if it did not make such investments. However, in order
to attempt to limit investment risk, the Portfolio will invest no more than 5%
of its total assets in Special Situations.
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.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Although the Portfolio is
authorized to enter into options, futures and forward currency transactions, the
Portfolio 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 or in the
appropriate market sector and movements in interest rates and currency markets;
(2) imperfect correlation, or even no correlation, between movements in the
price of options, forward contracts, futures contracts or options thereon and
movements in the price of the currency or security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are different from
those needed to select the securities in which the Portfolio 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 Portfolio 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 Portfolio to sell a security at a disadvantageous time, due to the need for
the Portfolio to maintain "cover" or to set aside securities in connection with
hedging transactions.
INVESTING IN SMALLER COMPANIES. While the Portfolio's holdings normally will
include securities of established suppliers of traditional products and
services, the Portfolio may invest in smaller companies which can benefit from
the development of new products and services. These smaller companies may
present greater opportunities for capital appreciation, but may also involve
greater risks than large, established issuers. Such smaller companies may have
limited product lines, markets or financial resources, and their
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securities may trade less frequently and in more limited volume than the
securities of larger, more established companies. As a result, the prices of the
securities of such smaller companies may fluctuate to a greater degree than the
prices of the securities of other issuers.
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MANAGEMENT
The Trust's Board of Trustees and the Board of Trustees of the Portfolio have
overall responsibility for the operation of the Fund and the Portfolio,
respectively. The Boards have approved all significant agreements between the
Trust and the Portfolio on the one side and persons or companies furnishing
services to the Fund and the Portfolio 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 and the Portfolio are delegated to the officers of the Trust and the
Portfolio, subject always to the investment objective and policies of the Fund
and the Portfolio and to the general supervision of the Boards. See "Trustees
and Executive Officers" in the Statement of Additional Information for
information on the Trust's and the Portfolio's Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-advisor as the investment managers and administrators to the Fund and the
Portfolio include, but are not limited to, determining the composition of the
investment portfolio of the Portfolio and placing orders to buy, sell or hold
particular securities. In addition, AIM and the Sub-advisor provide the
following administration services to the Portfolio and the Fund: furnishing
corporate officers and clerical staff; providing office space, services and
equipment; and supervising all matters relating to the Portfolio's and the
Fund's operation.
For administration services, the Fund pays AIM administration fees computed
daily and payable monthly at the annualized rate of 0.25% of the Fund's average
daily net assets. AIM has appointed the Sub-advisor as the Fund's
sub-administrator. In addition, the Fund bears its pro rata portion of the
investment management and administration fees paid by the Portfolio to AIM and
the Sub-advisor. The Portfolio pays AIM a fee, based on the Portfolio's average
daily net assets at the annualized rate of 0.725% on the first $500 million,
0.70% on the next $500 million, 0.675% on the next $500 million and 0.65% on all
amounts thereafter. Out of its aggregate fees payable by the Fund and the
Portfolio, AIM pays the Sub-advisor sub-advisory and sub-administration fees
equal to 40% of the aggregate fees AIM receives from the Fund and the Portfolio.
The investment management and administration fees paid by the Fund and the
Portfolio 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
1.50% of the average daily net assets of the Fund's Advisor Class shares.
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 Portfolio 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 Portfolio 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 Portfolio, the Sub-advisor employs a
team approach, taking advantage of its investment resources around the world.
12
<PAGE> 94
The investment professional primarily responsible for the portfolio management
of the Portfolio is as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
----------- -------------------- -------------------
<S> <C> <C>
A. James Ellman Portfolio Manager Portfolio Manager for the Sub-advisor since 1995.
San Francisco since 1995 Analyst for the Sub-advisor from 1994 to 1995.
</TABLE>
In placing orders for the Portfolio's securities 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."
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, to the
Fund and to the Portfolio.
DISTRIBUTOR. The Trust has entered into a Master Distribution Agreement (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of Advisor Class
shares of the Fund. Certain Trustees and officers of the Trust are affiliated
with AIM Distributors.
The Distribution Agreement provides AIM Distributors with the exclusive right
to distribute Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST AND THE PORTFOLIO
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 of 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.
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a subtrust of
Global Investment Portfolio, a Delaware business trust. Under Delaware law, the
Fund and other entities investing in the Portfolio enjoy the same limitations of
liability extended to shareholders of private, for-profit corporations. There is
a remote possibility, however, that under certain circumstances an investor in
the Portfolio may be held liable for the Portfolio's obligations. However, the
Agreement and Declaration of Trust of Global Investment Portfolio disclaims
shareholder liability for acts or obligations of the Portfolio and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Portfolio or a trustee. The Agreement and
Declaration of Trust also provides for indemnification from the Portfolio
property for all losses and expenses of any shareholder held personally liable
for the Portfolio's obligations. Thus the risk of an investor incurring
financial loss on account of such liability is limited to circumstances in which
the Portfolio itself would be unable to meet its obligations and where the other
party was held not to be bound by the disclaimer.
Whenever the Fund is requested to vote on any proposal of the Portfolio, the
Fund will hold a meeting of the Fund's shareholders and will cast its vote as
instructed by its shareholders. Shares for which no voting instructions are
received will be voted in the same proportion as the shares for which voting
instructions are received.
13
<PAGE> 95
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 & Lockart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800 acts as counsel to the Trust, to the
Fund and to the Portfolio.
14
<PAGE> 96
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
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<PAGE> 97
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
A-2
<PAGE> 98
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
A-3
<PAGE> 99
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
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<PAGE> 100
Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
A-5
<PAGE> 101
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
A-6
<PAGE> 102
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.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
A-7
<PAGE> 103
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
A-8
<PAGE> 104
TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
A-9
<PAGE> 105
AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 106
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> 107
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> 108
[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.
GFS-PRO-2
<PAGE> 109
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS OF
AIM GLOBAL GOVERNMENT INCOME FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM GLOBAL GOVERNMENT INCOME 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 seeks a high level of
current income by investing primarily in high quality U.S. and foreign
government debt securities. The Fund's secondary objectives are capital
appreciation and protection of principal through active management of its
maturity structure and currency exposure.
This Prospectus sets forth concisely information about the Fund that prospective
investors should know before investing. It should be read carefully 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 request to the Trust at 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173, or by calling (800) 347-4246. The SEC maintains
a Web site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. Additional information about the Fund may also be obtained from
http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 110
- --------------------------------------------------------------------------------
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........................... 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-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
APPLICATION INSTRUCTIONS............... B-1
APPENDIX A............................. A-14
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND
The Fund is a non-diversified series of the Trust.
INVESTMENT OBJECTIVES. The Fund primarily seeks high current income and
secondarily seeks capital appreciation and protection of principal.
PRINCIPAL INVESTMENTS. The Fund invests primarily in high quality U.S. and
foreign government debt obligations.
INVESTMENT MANAGERS. The Fund is managed by AIM Advisors, Inc. ("AIM") and is
sub-advised and sub-administered by INVESCO (NY), Inc. (the "Sub-advisor"). AIM
and the Sub-advisor and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-advisor are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
AIM was organized in 1976 and, together with its subsidiaries, currently advises
approximately 90 investment company portfolios.
PURCHASING SHARES. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of a least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the funds in The AIM Family of Funds on May 29, 1998; and
(e) any of the companies composing or affiliated with AMVESCAP PLC.
Pursuant to a separate prospectus, the Fund also offers Class A and Class B
shares, which represent interests in the Fund. The Class A and Class B shares
have different distribution arrangements.
Initial investments in Advisor Class shares must be at least $500 and
additional investments must be at least $50. The distributor of the Advisor
Class shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds").
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain Funds in the AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at net asset value on any business day. See "How to
Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on a monthly basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be
2
<PAGE> 111
reinvested at net asset value without payment of a sales charge in the Fund's
shares or may be invested in shares of the other funds in The AIM Family of
Funds. See "Dividends, Distributions and Tax Matters."
RISK FACTORS. There is no assurance that the Fund will achieve its investment
objectives. The Fund's net asset value will fluctuate, reflecting fluctuations
in the market value of its portfolio holdings. The value of debt securities held
by the Fund generally fluctuates inversely with interest rate movements.
The Fund will invest 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. 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> 112
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following table(1):
<TABLE>
<S> <C>
Shareholder Transaction Costs:
Maximum sales charge on purchases of shares (as a % of
offering price)........................................ None
Sales charges on reinvested distributions to
shareholders........................................... None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)........ None
Redemption charges........................................ None
Exchange Fees............................................. None
Annual Fund Operating Expenses(2): (as a % of average net
assets)
Investment management and administration fees............. 0.73%
12b-1 distribution and service fees....................... None
Other expenses............................................ 0.43%
----
Total Fund Operating Expenses..................... 1.16%
====
</TABLE>
(1)This table is intended to assist investors in understanding the various costs
and expenses associated with investing in the Fund.
(2)Expenses are based on the Fund's fiscal year ended October 31, 1997. "Other
expenses" include custody, transfer agent, legal, audit and other operating
expenses. Effective November 1, 1997, AIM has voluntarily agreed to limit the
Fund's expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the annual rate of 1.40% of the average daily net
assets of the Fund's Advisor Class shares through May 31, 2000. See
"Management" herein and the Statement of Additional Information for more
information. Investors purchasing Advisor Class shares through financial
planners, trust companies, bank trust departments or registered investment
advisors, or under a "wrap fee" program, will be subject to additional fees
charged by such entities or by the sponsors of such programs. Where any
account advised by one of the companies composing or affiliated with AMVESCAP
PLC invests in Advisor Class shares of the Fund, such account shall not be
subject to duplicative advisory fees.
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
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Advisor Class Shares............................... $12 $37 $64 $142
</TABLE>
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> 113
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The table below provides condensed financial information concerning income and
capital changes for Advisor Class shares of the Fund. This information is
supplemented by the financial statements and accompanying notes appearing in the
Statement of Additional Information. The financial statements and notes for
fiscal year ended October 31, 1997 have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report thereon also is included in the
Statement of Additional Information. The unaudited financial statements and
notes, for the semi-annual period April 30, 1998, are also included in the
Statement of Additional Information.
AIM GLOBAL GOVERNMENT INCOME FUND
(FORMERLY GT GLOBAL GOVERNMENT INCOME FUND)
<TABLE>
<CAPTION>
ADVISOR CLASS+
----------------------------------------------------------
SIX MONTHS JUNE 1, 1995
ENDED YEAR ENDED OCTOBER 31, TO
APRIL 30, 1998 ----------------------- OCTOBER 31,
(UNAUDITED)(c) 1997(c) 1996(c) 1995(c)
-------------- -------- --------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................ $ 8.61 $ 8.73 $ 8.80 $ 8.98
------ ------ ------- ------
Income from investment operations:
Net investment income..................................... 0.30 0.55 0.60 0.26
Net realized and unrealized gain (loss) on investments.... 0.11 (0.13) 0.03 (0.19)
------ ------ ------- ------
Net increase (decrease) from investment operations........ 0.41 0.42 0.63 0.07
------ ------ ------- ------
Distributions:
From net investment income................................ (0.27) (0.33) (0.60) (0.25)
From net realized gain on investments..................... -- -- (0.10) --
In excess of net investment income........................ -- (0.21) -- --
In excess of net realized gain on investments............. -- -- -- --
Return of capital......................................... -- -- -- --
From sources other than net investment income............. -- -- -- --
------ ------ ------- ------
Total distributions................................ (0.27) (0.54) (0.70) (0.25)
------ ------ ------- ------
Net asset value, end of period.............................. $ 8.75 $ 8.61 $ 8.73 $ 8.80
====== ====== ======= ======
Total investment return..................................... 4.71%(a) 5.15% 7.49% 0.83%(a)
====== ====== ======= ======
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $ 196 $ 116 $ 86 $ 131
Ratio of net investment income to average net assets........ 7.04%(b) 6.39% 6.87% 7.33%(b)
Ratio of operating expenses to average net assets:
With expense reductions................................... 1.15%(b) 0.99% 0.99% 1.00%(b)
Without expense reductions................................ 1.15%(b) 1.16% 1.04% 1.03%(b)
Ratio of interest expense to average net assets++........... 0.32%(b) N/A N/A N/A
Portfolio turnover rate++................................... 211%(b) N/A N/A N/A
</TABLE>
- ---------------
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and ratio of interest expense to average net assets is
calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
---------------
<TABLE>
<CAPTION>
AVERAGE AVERAGE NUMBER OF AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT 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................... $21,178,000 $12,376,724 30,907,029 $ 0.400
October 31, 1997.................................. $ 4,451,000 $ 1,616,315 38,476,908 $0.0420
</TABLE>
Average amount of debt outstanding during the period is computed on a daily
basis.
5
<PAGE> 114
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
Yield is computed in accordance with standardized formulas described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, yield
information may not provide a basis for comparison with investments which pay a
fixed rate of interest for a stated period of time. Yield reflects investment
income net of expenses over the relevant period attributable to a Fund share,
expressed as an annualized percentage of the net asset value per share for
Advisor Class shares.
Yield is a function of the type and quality of the Fund's investments, the
maturity of the securities held in the Fund's portfolio and the operating
expense ratio of the Fund. A shareholder's investment in the Fund is not insured
or guaranteed. These factors should be carefully considered by the investor
before making an investment in the Fund.
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 yield and 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 seeks a high level of current income by
investing primarily in high quality debt securities of the U.S. and foreign
governments, their agencies and instrumentalities. Its secondary objectives are
capital appreciation and protection of principal through active management of
its maturity structure and currency exposure. There can be no assurance that the
Fund will achieve its investment objectives.
INVESTMENT POLICIES. At least 65% of the Fund's total assets normally are
invested in debt obligations issued or guaranteed by the U.S. or foreign
governments (including foreign states, provinces or municipalities) or their
agencies, authorities or instrumentalities including mortgage-backed securities
issued by agencies or instrumentalities of the U.S. Government or by foreign
governments. For purposes of this policy, the Fund considers debt obligations of
supranational entities organized or supported by several national governments,
such as the World Bank and the Asian Development Bank, to be "government
securities."
The Fund invests primarily in high quality government debt securities. "High
quality" debt securities are those rated in the top two ratings categories of
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's, a division of
The McGraw-Hill Companies, Inc. ("S&P"), or, if not rated, determined to be of
comparable quality by the Sub-advisor. A description of Moody's and S&P ratings
is included in the Appendix to this Prospectus.
The Fund currently contemplates that it will invest principally in obligations
of the United States, Canada, Japan, the Western European nations, New Zealand
and Australia, as well as in multinational currency units. Under normal market
conditions, the Fund invests in issues of not less than three different
countries; investments in the securities of any one country, other than the
United States, normally represent no more than 40% of the Fund's total assets.
The Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
the Sub-advisor to be fully exchangeable into U.S. dollars (or a multinational
currency unit) without legal restriction.
The Fund may also invest up to 35% of its total assets in: (1) foreign
government securities that are not high quality but are rated at least
"investment grade," (i.e., rated within the four highest ratings categories of
Moody's or S&P or, if not rated, determined by the Sub-advisor to be of
comparable quality); (2) corporate debt obligations of U.S. or foreign issuers
rated at least investment grade by Moody's or S&P, including debt obligations
convertible into equity securities or having attached warrants or rights to
purchase equity
6
<PAGE> 115
securities; (3) privately issued mortgage-backed and asset-backed securities
that are rated at least investment grade by Moody's or S&P, or if unrated,
determined by the Sub-advisor to be of comparable quality; and (4) common
stocks, preferred stocks and warrants to acquire such securities, provided that
the Fund will not invest more than 20% of its total assets in such securities.
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:
ASSET ALLOCATION. The Fund invests in debt obligations allocated among diverse
markets and denominated in various currencies, including U.S. dollars, or in
multinational currency units such as Euros. The Fund is designed for investors
who wish to accept the risks entailed in such investments, which are different
from those associated with a portfolio consisting entirely of securities of U.S.
issuers denominated in U.S. dollars. The Fund may purchase securities that are
issued by the government or a company or financial institution of one country
but denominated in the currency of another country (or a multinational currency
unit).
The Sub-advisor allocates the assets of the Fund in securities of issuers in
countries and in currency denominations where the combination of fixed income
market returns, the price appreciation potential of fixed income securities and
currency exchange rate movements will present opportunities primarily for high
current income and secondarily for capital appreciation (and in the case of the
Fund, secondarily for Capital Appreciation and protection of principal). In so
doing, the Sub-advisor intends to take full advantage of the different yield,
risk and return characteristics that investment in the fixed income markets of
different countries can provide for U.S. investors. Fundamental economic
strength, credit quality and currency and interest rate trends are the principal
determinants of the emphasis given to various country, geographic and industry
sectors within the Fund. Securities held by the Fund may be invested without
limitation as to maturity.
The Sub-advisor selects securities of particular issuers on the basis of its
views as to the best values then currently available in the marketplace. Such
values are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the local and world
economies, movements in the general level and term of interest rates, currency
values, political developments and variations in the supply of funds available
for investment in the world bond market relative to the demands placed upon it.
The Sub-advisor generally evaluates currencies on the basis of fundamental
economic criteria (e.g., relative inflation, interest rate levels and trends,
growth rate forecasts, balance of payments status and economic policies) as well
as technical and political data. The Sub-advisor may seek to protect the Fund
against such negative currency movements through the use of sophisticated
investment techniques. See "Options, Futures and Forward Currency Transactions."
According to the Sub-advisor, as of the date of this Prospectus, more than 50%
of the value of all outstanding government debt obligations throughout the world
is represented by obligations denominated in currencies other than the U.S.
dollar. Moreover, from time to time, the debt securities of issuers located
outside the United States have substantially outperformed the debt obligations
of U.S. issuers. Accordingly, the Sub-advisor believes that the Fund's policy of
investing in debt securities throughout the world may enable the achievement of
results superior to those produced by mutual funds with similar objectives to
those of the Fund that invest solely in debt securities of U.S. issuers.
The Fund is designed for investors who wish to accept the risks entailed in
such investments, which are different from those associated with a portfolio
consisting entirely of securities of U.S. issuers denominated in U.S. dollars.
TEMPORARY DEFENSIVE STRATEGIES. 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. Pursuant to such a defensive
strategy, the Fund temporarily may hold cash (U.S. dollars, foreign currencies
or multinational currency units) and/or invest up to 100% of its assets in high
quality debt securities or 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 employ a temporary defensive strategy, it will not be
invested so as to achieve directly its investment objectives. In addition,
pending investment of proceeds from new sales of Fund shares or to meet ordinary
daily cash needs, the Fund may hold cash (U.S. dollars, foreign currencies or
multinational currency units such as euros) and may invest in high quality
foreign or domestic money market instruments. For a full description of money
market instruments, see "Selection of Debt Investments" in the "Investment
Objectives and Policies" section of the Statement of Additional Information.
BRADY BONDS. 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
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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.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Fund may invest in
mortgage-backed and asset-backed securities of U.S. and foreign issuers,
including privately issued mortgage-backed and asset-backed securities.
Mortgage-backed securities represent direct or indirect interests in pools of
underlying mortgage loans that are secured by real property. Investors typically
receive payments out of the interest on and principal of the underlying
mortgages. Asset-backed securities are similar to mortgage-backed securities,
except that the underlying assets are other financial assets or financial
receivables, such as motor vehicle installment sales contracts, home equity
loans, leases of various types of real and personal property, and receivables
from credit cards. Any mortgage-backed and asset-backed securities purchased by
the Fund will be subject to the same rating requirements that apply to its other
investments. In addition, privately issued mortgage-backed and asset-backed
securities purchased by the Fund will be subject to the limitation of the Fund
which allows no more than 35% of its total assets to be invested in securities
of non-governmental issuers.
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 of the securities. 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 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. The Fund may invest up to 5% of its total assets in a
combination of securities purchased on a when-issued basis or with respect to
which it has entered into forward commitment agreements.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Fund may
borrow from banks or may borrow through reverse repurchase agreements and "roll"
transactions in connection with meeting requests for the redemption of Fund
shares. The Fund also may borrow up to 5% of its total assets for temporary or
emergency purposes other than to meet redemptions. However, the Fund will not
borrow for investment purposes, nor will the Fund purchase securities while
borrowings in excess of 5% of its total assets are outstanding.
The Fund may also enter into reverse repurchase agreements with a bank or
recognized securities dealer. Under a reverse repurchase agreement, the Fund
would sell securities and agree to repurchase them at a particular price at a
future date. At the time the Fund enters into a reverse repurchase agreement, it
will establish and maintain a segregated account with an approved custodian
containing cash or liquid securities having a value not less than the repurchase
price, including accrued interest. Reverse repurchase agreements involve the
risk that the market value of the securities retained in lieu of sale by the
Fund may decline below the price of the securities the Fund has sold but is
obligated to repurchase. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Fund's obligation to repurchase the securities, and the Fund's use
of the proceeds of the reverse repurchase agreement may effectively be
restricted pending such decision.
The Fund also may enter into "dollar rolls," in which the Fund sells fixed
income securities for delivery in the current month and simultaneously contracts
to repurchase substantially similar (same type, coupon and maturity) securities
on a specified future date. During the roll period, the Fund would forego
principal and interest paid on such securities. The Fund would be compensated by
the difference between the current sales price and the forward price for the
future purchase, as well as by the interest earned on the cash proceeds of the
initial sale. See "Investment Objectives and Policies" in the Statement of
Additional Information.
Reverse repurchase agreements and dollar rolls will be treated as borrowings
and will be deducted from the Fund's assets for purposes of calculating
compliance with the Fund's borrowing limitation. See "Investment Limitations" in
the Statement of Additional Information.
SECURITIES LENDING. The Fund may lend its respective 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. At all times a loan is outstanding, the Fund
requires the borrower to 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.
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ZERO COUPON SECURITIES. The Fund may invest in certain zero coupon securities
that are "stripped" U.S. Treasury notes and bonds. It may also 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. However, 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
must 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.
SYNTHETIC SECURITY POSITIONS. The Fund may utilize combinations of futures on
bonds and forward currency contracts to create investment positions that have
substantially the same characteristics as bonds of the same type as those on
which the futures contracts are written. Investment positions of this type are
generally referred to as "synthetic securities."
For example, in order to establish a synthetic security position for the Fund
that is comparable to owning a Japanese government bond, the Sub-advisor might
purchase futures contracts on Japanese government bonds in the desired principal
amount and purchase forward currency contracts for Japanese Yen in an amount
equal to the then current purchase price for such bonds in the Japanese cash
market, with each contract having approximately the same delivery date.
The Sub-advisor might roll over the futures and forward currency contract
positions before taking delivery in order to continue the Fund's investment
position, or the Sub-advisor might close out those positions, thus effectively
selling the synthetic security. Further, the amount of each contract might be
adjusted in response to market conditions and the forward currency contract
might be changed in amount or eliminated in order to hedge against currency
fluctuations.
The Sub-advisor would create synthetic security positions for the Fund when it
believes that it can obtain a better yield or achieve cost savings in comparison
to purchasing actual bonds or when comparable bonds are not readily available in
the market. Synthetic security positions are subject to the risk that changes in
the value of purchased futures contracts may differ from changes in the value of
the bonds that might otherwise have been purchased in the cash market. Also,
while the Sub-advisor believes that the cost of creating synthetic security
positions generally will be materially lower than the cost of acquiring
comparable bonds in the cash market, the Fund will incur transaction costs in
connection with each purchase of a futures or forward currency contract. The use
of futures contracts and forward currency contracts to create synthetic security
positions also is subject to substantially the same risks as those that exist
when these instruments are used in connection with hedging strategies. See
"Options, Futures and Forward Currency Transactions" below and "Options, Futures
and Currency Strategies" in the Statement of Additional Information.
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 and currency risk normally
associated with the Fund's investment. The Fund may enter into such instruments
up to the full value of its portfolio assets. See "Risk Factors -- Options,
Futures and 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 the
Fund's portfolio positions. The Fund may also 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.
In addition, 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 index futures contracts and may purchase put
options or write call options on such futures contracts to protect against a
general market or 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. The Fund may use interest rate futures contracts and
options thereon to hedge its portfolio against changes in the general level of
interest rates.
INDEXED SECURITIES. The Fund may invest in certain 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 may also be
influenced by interest rate changes in the United
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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 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 which
also may not be changed without shareholder approval. A complete description of
these limitations is included in the Statement of Additional Information. The
Fund's other investment policies described herein and in the Statement of
Additional Information may be changed by the Trust's Board of Trustees without
shareholder approval.
The Fund is authorized to make short sales of securities, although it has no
current intention of doing so. See "Investment Objectives and Policies -- Short
Sales" in the Statement of Additional Information.
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.
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RISK FACTORS
GENERAL. There is no assurance that the Fund will achieve its investment
objectives. The Fund's net asset value will fluctuate, reflecting fluctuations
in the market value of its portfolio positions and its net currency exposure.
The value of fixed income securities held by the Fund generally fluctuates
inversely with interest rate movements. Longer term bonds held by the Fund are
subject to greater interest rate risk.
NON-DIVERSIFIED CLASSIFICATION. The Fund is classified under the Investment
Company Act of 1940 (the "1940 Act") as a "non-diversified" fund. As a result,
the Fund will be able to invest in a fewer number of issuers than if it were
classified under the 1940 Act as a "diversified" fund. To the extent that the
Fund invests in a smaller number of issuers, the value of the Fund's shares may
fluctuate more widely and the Fund 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 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 those applicable to U.S. 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 interest and dividends from foreign
issuers may be subject to non-U.S. withholding taxes, thereby reducing its net
investment income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments which could affect the investments of the Fund in those countries.
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, resource self-sufficiency
and balance of payments positions.
CURRENCY RISK. Since the Fund normally invests substantially in securities
denominated in currencies other than the U.S. dollar, and because it 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 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. The exchange rates between the U.S. dollar and other currencies
are determined by supply and demand in the currency exchange markets, the
international balance of payments, governmental intervention, speculation and
other economic and political conditions. 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 U.S.
dollars.
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
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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.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The yield characteristics of
mortgage-backed and asset-backed securities differ from those of traditional
bonds. Among the major differences are that interest and principal payments are
made more frequently (usually monthly) and that principal may be prepaid at any
time because the underlying mortgage loans or other assets generally may be
prepaid at any time. Generally, prepayments on fixed-rate mortgage loans will
increase during a period of falling interest rates and decrease during a period
of rising interest rates. Mortgage-backed and asset-backed securities may also
decrease in value as a result of increasing market interest rates and, because
of prepayments, may benefit less than other bonds from declining interest rates.
Reinvestments of prepayments may occur at lower interest rates than the original
investment, thus adversely affecting the yield of the Fund. Actual prepayment
experience may cause the yield of a mortgage-backed security to differ from what
was assumed when the Fund purchased the security. The market for privately
issued mortgage-backed and asset-backed securities is smaller and less liquid
than the market for U.S. government mortgage-backed securities.
Foreign mortgage-backed securities markets are substantially smaller than U.S.
markets, but have been established in several countries, including Germany,
Denmark, Sweden, Canada and Australia, and may be developed elsewhere. Foreign
mortgage-backed securities generally are structured similar to domestic
mortgage-backed securities, and they normally present substantially similar
investment risks as well as the other risks normally associated with foreign
securities.
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
the willingness of countries to service their 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 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.
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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.
Investors should also be aware that certain sovereign debt instruments in
which the 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 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.
OPTIONS, FUTURES AND FORWARD 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 or in the appropriate
market sector and movements in interest rates and currency markets; (2)
imperfect correlation, or even no correlation, between movements in the price of
options, forward contracts, futures contracts or options thereon and movements
in the price of the currency or security hedged or used for cover; (3) the fact
that skills and techniques needed to trade options, futures contracts and
options thereon or to use forward currency contracts are different from those
needed to select the securities in which 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.
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.
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MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Fund. The Trust's Board of Trustees has approved all significant agreements
between the Trust and persons or companies furnishing services to the Fund,
including the investment management and administrative services 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 operation of the Fund is 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. See "Trustees and Executive Officers"
in the Statement of Additional Information for information on the Trustees of
the Trust.
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 investment portfolio of
the Fund and placing orders to buy, sell or hold particular securities. In
addition, AIM and the Sub-advisor provide the following administration services
to the Fund: furnishing corporate officers and clerical staff; providing office
space, services and equipment; and supervising all matters relating to the
Fund's operation.
The Fund pays AIM investment management and administration fees computed daily
and payable monthly, based on the average daily net assets, for such services at
the annualized rate of .725% on the first $500 million, .70% on the next $1
billion, .675% on the next $1 billion, and .65% 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 any other agents. Effective
November 1, 1997, AIM has undertaken to limit the expenses of the Advisor Class
shares of the Fund (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the maximum annual rate of 1.40% of the average daily
net assets of the Fund's Advisor Class shares.
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
12
<PAGE> 121
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 advisory
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-administrative
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, including investment 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 FUND PAST FIVE YEARS
----------- -------------------- -------------------
<S> <C> <C>
Cheng-Hock Lau Portfolio Manager Chief Investment Officer for Global Fixed Income
New York since 1996 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.
("Chancellor Capital"), 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.
David B. Hughes Portfolio Manager Head of Global Fixed Income, North America, and
New York since 1998 Portfolio Manager for the Sub-advisor since
January 1998. Senior Portfolio Manager for
Global/International Fixed Income for the
Sub-advisor from July 1995 to December 1997.
Employed by Chancellor Capital from July 1995 to
October 1996. Assistant Vice President of
Fiduciary Trust Company International from 1994 to
1995. Assistant Treasurer at the Bankers Trust
Company from 1991 to 1994.
</TABLE>
In placing orders for the Fund's securities 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 for the Fund 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 (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of the Advisor Class
shares of the Fund. Certain Trustees and officers of the Trust are affiliated
with AIM Distributors.
The Distribution Agreement provides AIM Distributors with the exclusive right
to distribute Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
13
<PAGE> 122
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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.
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 of 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 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.
14
<PAGE> 123
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
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<PAGE> 124
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
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<PAGE> 125
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
A-3
<PAGE> 126
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
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<PAGE> 127
Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
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HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
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REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
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as certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client
Services Department of AFS.
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DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
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DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
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TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
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AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
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GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
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APPENDIX A
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DESCRIPTION OF DEBT RATINGS
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 four
categories shown: 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 bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A -- 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.
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.
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 four categories
shown:
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.
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
A-11
<PAGE> 134
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 "A1" 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."
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.
A-12
<PAGE> 135
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> 136
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> 137
[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.
GGVI-PRO-2
<PAGE> 138
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS OF
AIM GLOBAL GROWTH & INCOME FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM GLOBAL GROWTH & INCOME 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 seeks long-term capital
appreciation together with current income. The Fund invests in a global
portfolio of both equity and debt securities, in such relative proportions as
deemed most appropriate by the Fund's investment sub-advisor, INVESCO (NY), Inc.
(the "Sub-advisor"), in view of then-current economic and market conditions.
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> 139
- --------------------------------------------------------------------------------
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
Management........................... 10
Organization of the Trust............ 11
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-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND
The Fund is a non-diversified series of the Trust.
INVESTMENT OBJECTIVE. The Fund seeks long-term capital appreciation together
with current income.
PRINCIPAL INVESTMENTS. The Fund invests primarily in blue-chip equity
securities and high quality government bonds of issuers located in the United
States and throughout the world.
INVESTMENT MANAGERS. The Fund is managed by A I M Advisors, Inc. ("AIM") and
is sub-advised and sub-administered by the Sub-advisor. AIM and the Sub-advisor
and their worldwide asset management affiliates provide investment management
and/or administrative services to institutional, corporate and individual
clients around the world. AIM and the Sub-advisor are both indirect wholly owned
subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are an
independent investment management group that has a significant presence in the
institutional and retail segment of the investment management industry in North
America and Europe, and a growing presence in Asia. AIM was organized in 1976
and, together with its subsidiaries, currently advises approximately 90
investment company portfolios.
PURCHASING SHARES. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of a least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the funds in The AIM Family of Funds on May 29, 1998; and
(e) any of the companies affiliated with AMVESCAP PLC. Pursuant to a separate
prospectus, the Fund also offers Class A and Class B shares, which represent
interests in the Fund. The Class A and Class B shares have different
distribution arrangements.
Initial investments in Advisor Class shares must be at least $500 and
additional investments must be at least $50. The distributor of the Advisor
Class shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston TX 77210-4739. See "How to Purchase Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds"),
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain funds in The AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at net asset value on any business day. See "How to
Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on a quarterly basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be reinvested at net asset value without
payment of a sales charge in the Fund's shares or may be invested in shares of
the other funds in The AIM Family of Funds. See "Dividends, Distributions and
Tax Matters."
RISK FACTORS. There is no assurance that the Fund will achieve its investment
objective. The Fund's net asset value will fluctuate, reflecting fluctuations in
the market value of its portfolio holdings. The value of debt securities held by
the Fund generally fluctuates
2
<PAGE> 140
inversely with interest rate movements. Certain investment grade debt securities
may possess speculative qualities. The Fund may invest 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. See "Investment Program."
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> 141
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following table(1):
<TABLE>
<S> <C>
Shareholder Transaction Costs:
Maximum sales charge on purchases of shares (as a % of
offering price)........................................ None
Sales charges on reinvested distributions to
shareholders........................................... None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)........ None
Redemption charges........................................ None
Exchange Fees............................................. None
Annual Fund Operating Expenses(2): (as a % of average net
assets)
Investment management and administration fees............. 0.97%
12b-1 distribution and service fees....................... None
Other expenses............................................ 0.32%
----
Total Fund Operating Expenses..................... 1.29%
====
</TABLE>
(1) THIS TABLE IS INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUND.
(2) Expenses are based on the Fund's fiscal year ended October 31, 1997. "Other
expenses" include custody, transfer agent, legal, audit and other operating
expenses. See "Management" herein and the Statement of Additional
Information for more information. Effective November 1, 1997, AIM has
voluntarily agreed to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate
of 1.40% of the average daily net assets of the Fund's Advisor Class through
May 31, 2000. Investors purchasing Advisor Class shares through financial
planners, trust companies, bank trust departments or registered investment
advisors, or under a "wrap fee" program, will be subject to additional fees
charged by such entities or by the sponsors of such programs. Where any
account advised by one of the companies affiliated with AMVESCAP PLC invests
in Advisor Class shares of the Fund, such account shall not be subject to
duplicative advisory fees.
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>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Advisor Class Shares........................................ $13 $41 $71 $156
</TABLE>
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> 142
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables below provide condensed financial information concerning income and
capital changes for Advisor Class shares of the Fund. This information is
supplemented by the financial statements and accompanying notes appearing in the
Statement of Additional Information. The financial statements and notes for the
fiscal year ended October 31, 1997 have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report thereon also is included in the
Statement of Additional Information. The unaudited financials and notes for the
semi-annual period ended April 30, 1998 are also included in the Statement of
Additional Information.
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
<TABLE>
<CAPTION>
ADVISOR CLASS*
-----------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, JUNE 1, 1995
APRIL 30, 1998 ---------------------- TO
(UNAUDITED)(a) 1997(a) 1996 OCTOBER 31, 1995
-------------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................ $ 8.20 $ 7.10 $ 6.35 $ 6.24
------- ------- ------- -------
Income from investment operations:
Net investment income..................................... 0.08 0.23 0.23 0.11
Net realized and unrealized gain (loss) on investments.... 1.33 1.13 0.82 0.13
------- ------- ------- -------
Net increase (decrease) from investment operations..... 1.41 1.36 1.05 0.24
------- ------- ------- -------
Distributions:
From net investment income................................ (0.08) (0.24) (0.26) (0.13)
From net realized gain on investments..................... (0.15) (0.02) (0.04) --
In excess of net investment income........................ (0.05) -- -- --
------- ------- ------- -------
Total distributions.................................... (0.28) (0.26) (0.30) (0.13)
------- ------- ------- -------
Net asset value, end of period.............................. $ 9.33 $ 8.20 $ 7.10 $ 6.35
======= ======= ======= =======
Total investment return........................... 17.59%(b) 19.23% 17.19% 3.83%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $ 7,509 $ 3,057 $ 3,085 $ 944
Ratio of net investment income to average net assets........ 1.87%(c) 3.09% 3.52% 4.20%(c)
Ratio of operating expenses to average net assets:
With expense reductions................................... 1.31%(c) 1.15% 1.24% 1.35%(c)
Without expense reductions................................ 1.31%(c) 1.29% 1.31% 1.39%(c)
Portfolio turnover rate +................................... 63%(c) 50% 39% 83%(c)
Average commission rate per share paid on portfolio
transactions+............................................. $0.0131 $0.0151 $0.0139 N/A
</TABLE>
- ---------------
<TABLE>
<S> <C>
+ Portfolio turnover and average commission rates are
calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Commencing June 1, 1995, the Fund began offering Advisor
Class shares.
(a) These selected per share data were calculated based upon
average shares outstanding during the year.
(b) Not annualized.
(c) Annualized.
N/A Not Applicable.
</TABLE>
<TABLE>
<CAPTION>
AVERAGE MONTHLY
AVERAGE NUMBER OF
AMOUNT OF DEBT AMOUNT OF DEBT REGISTRANT'S SHARES AVERAGE AMOUNT OF
OUTSTANDING AT OUTSTANDING OUTSTANDING DEBT PER SHARE
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
---------- -------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Six months ended April 30, 1998................. $31,902,000 $1,715,293 91,959,757 $0.0187
October 31, 1997................................ $ -- $ 77,178 92,456,411 $0.0008
</TABLE>
Average amount of debt outstanding during the period is computed on a daily
basis.
5
<PAGE> 143
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
Yield is computed in accordance with standardized formulas described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, yield
information may not provide a basis for comparison with investments which pay a
fixed rate of interest for a stated period of time. Yield reflects investment
income net of expenses over the relevant period attributable to a Fund share,
expressed as an annualized percentage of net asset value per share for Advisor
Class shares.
Yield is a function of the type and quality of the Fund's investments, the
maturity of the securities held in the Fund's portfolio and the operating
expense ratio of the Fund. A shareholder's investment in the Fund is not insured
or guaranteed. These factors should be carefully considered by the investor
before making an investment in the Fund.
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 capital
appreciation together with current income. The Fund seeks its objective by
investing in a global portfolio of both equity and debt securities, allocated
among diverse international markets. There is no assurance that the Fund will
achieve its investment objective.
INVESTMENT POLICIES. At least 65% of the Fund's total assets normally will be
invested in a combination of blue-chip equity securities and high quality
government bonds. The Fund considers an equity security to be "blue chip" if:
(i) during the issuer's most recent fiscal year the security offered an above
average dividend yield relative to the latest reported dividend yield on the
Morgan Stanley Capital International World Index; and (ii) the total equity
market capitalization of the issuer is at least $1 billion. Government bonds are
deemed to be high quality if at the time of the Fund's investment they are rated
within one of the two highest ratings categories of Moody's Investors Service,
Inc. ("Moody's") or by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ("S&P"), or, if not rated, are deemed to be of equivalent
quality in the judgment of the Sub-advisor.
Up to 35% of the Fund's total assets may be invested in other equity
securities and investment grade government and corporate debt obligations which
the Sub-advisor believes will assist the Fund in achieving its objective.
"Investment grade" debt securities are those rated within one of the four
highest ratings categories of Moody's or S&P, or, if not rated, deemed to be of
equivalent quality in the judgment of the Sub-advisor.
Equity securities that the Fund may purchase include common stocks, preferred
stocks and warrants to acquire such stocks and other equity securities.
Government bonds that the Fund may purchase include debt obligations issued or
guaranteed by the United States or foreign governments (including foreign
states, provinces or municipalities) or their agencies, authorities or
instrumentalities and debt obligations of supranational entities organized or
supported by several national governments, such as the World Bank and the Asian
Development Bank. The debt obligations held by the Fund may include debt
obligations convertible into equity securities or having attached warrants or
rights to purchase equity securities. The Fund may purchase securities that are
issued by the government or a corporation or financial institution of one nation
but denominated in the currency of another nation (or a multinational currency
unit).
According to the Sub-advisor, as of the date of this Prospectus, more than 50%
of the total equity market capitalization worldwide is represented by non-U.S.
equity securities, and more than 50% of the value of all outstanding government
debt obligations throughout
6
<PAGE> 144
the world is represented by obligations denominated in currencies other than the
U.S. dollar. Moreover, from time to time the equity and debt securities of
issuers located outside the United States have substantially outperformed the
equity and debt securities of U.S. issuers. Accordingly, the Sub-advisor
believes that the Fund's policy of investing in a global portfolio of equity and
debt securities may enable the achievement of long-term results superior to
those produced by mutual funds with a similar objective to that of the Fund that
invest solely in U.S. equity and debt securities.
CERTAIN INVESTMENT STRATEGIES AND POLICIES. In pursuit of its objective and
policies, the Fund may employ one or more of the following strategies in order
to enhance investment results:
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. Consistent with the Fund's
investment objective, the Sub-advisor employs a conservative investment style in
managing the Fund's assets. In so doing the Sub-advisor attempts to limit
volatility and risk to capital. The Sub-advisor allocates the Fund's assets
among securities of countries and in currency denominations where opportunities
for meeting the Fund's investment objective are expected to be the most
attractive. The Sub-advisor attempts to identify those countries and industries
where economic and political factors are likely to produce above-average growth
rates and to further identify companies in such countries and industries that
are best positioned and managed to benefit from these factors.
The Fund currently contemplates that it will invest principally in securities
of issuers in the United States, Canada, Japan, Western Europe, New Zealand and
Australia. The Fund may invest substantially in securities denominated in one or
more currencies. Under normal conditions, the Fund invests in issuers of not
less than three different countries and issuers of any one country, other than
the United States, will represent no more than 40% of the Fund's total assets.
The relative proportions of equity and debt securities held by the Fund at any
one time will vary, depending upon the Sub-advisor's assessment of global
political and economic conditions and the relative strengths and weaknesses of
the world equity and debt markets. To enable the Fund to respond to general
economic changes and market conditions around the world, the Fund is authorized
to invest up to 100% of its total assets in either equity securities or debt
securities.
In selecting equity securities for investment, the Sub-advisor attempts to
identify and acquire only securities it deems to represent high or improving
investment quality. Securities representing high investment quality generally
will include those of well-known, established and successful issuers that the
Sub-advisor believes will continue to be successful in the future. Securities
representing improving investment quality may include those of an issuer that
has improved its sales or earnings or of an issuer the balance sheet and
financial condition of which is improving. The Sub-advisor seeks to avoid
investing in equity securities that appear overly speculative or risky, even if
they have attractive features or investment potential.
In evaluating debt securities considered for the Fund, the Sub-advisor
analyzes their yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding local and world economies,
movements in the general level and term of interest rates, currency values,
political developments, and variations in the supply of funds available for
investment in the world bond market relative to the demands placed upon it.
There are no limitations on the maximum or minimum maturities of the debt
securities considered by the Fund or on the average weighted maturity of the
debt portion of the Fund's portfolio. Should the rating of a debt security be
revised while such security is owned by the Fund, the Sub-advisor will evaluate
what action, if any, is appropriate with respect to such security.
The Sub-advisor generally evaluates currencies 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. The Fund may seek to protect itself against
negative currency movements by engaging in hedging techniques through the use of
options, futures and forward currency contracts.
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 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 objective. 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 such as
euros) and may invest in foreign or domestic high quality money market
instruments. For a full description of money market instruments, see "Money
Market Instruments" in the "Investment Objectives and Policies" section of the
Statement of Additional Information.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Fund may
borrow from banks or may borrow through reverse repurchase agreements and "roll"
transactions in connection with meeting requests for the redemption of Fund
shares. The Fund also may borrow up to 5% of its total assets for temporary or
emergency purposes other than to meet redemptions. The Fund may borrow up to
33 1/3% of its total assets. However, the Fund will not purchase securities
while borrowings in excess of 5% of the Fund's 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 the Fund did not borrow.
7
<PAGE> 145
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 which includes an interest component. A "roll"
borrowing transaction involves the Fund's sale of securities together with its
commitment (for which the Fund may receive a fee) to purchase similar, but not
identical, securities at a future date.
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 should the borrower fail financially.
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 the Fund's net investment
income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic or
economic developments which could affect the Fund's investments in those
countries. 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, 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 and interest
when due.
The Fund will also 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.
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 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 the Fund
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 have the current
intention of so doing.
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 the Fund's 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 the
Fund's portfolio positions. The Fund also may purchase and sell put
8
<PAGE> 146
and call options on currencies, futures contracts on currencies and options on
such futures contracts to hedge the Fund's portfolio against movements in
exchange rates.
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.
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.
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 the 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) the 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.
OTHER POLICIES AND RISKS. The Fund's net asset value will fluctuate,
reflecting fluctuations in the market value of its portfolio positions. 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 changes in the
perceived creditworthiness of the issuers of such securities and movements in
interest rates. Investment grade debt securities rated Baa by Moody's are
described by Moody's as having speculative characteristics, and therefore may be
affected by economic conditions and changes in the circumstances of their
issuers to a greater extent than higher rated bonds.
The Fund may invest up to 15% of its net assets in illiquid securities and
other securities for which no readily available market exists. The Fund may also
invest up to 5% of its total assets in a combination of securities purchased on
a when-issued basis or with respect to which it has entered into forward
commitment agreements.
The Fund is classified under the Investment Company Act of 1940, as amended
("1940 Act") as a "non-diversified" fund. As a result, the Fund will be able to
invest in a fewer number of issuers than if it were classified under the 1940
Act as a "diversified" fund. To the extent that the Fund invests in a smaller
number of issuers, the value of the Fund's shares may fluctuate more widely and
the Fund may be subject to greater investment and credit risk with respect to
its portfolio.
OTHER INFORMATION. The Fund's investment objective 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 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. 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.
9
<PAGE> 147
- --------------------------------------------------------------------------------
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 objective and policies of the Fund and to
the general supervision of 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 the 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. Effective
November 1, 1997, AIM has undertaken to limit the Fund's expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the annual
rate of 1.40% of the average daily net assets of the Fund's Advisor Class
shares.
AIM also serves as the Fund's pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, G.T. Global
Variable Investment Series and G.T. Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment manager to the Fund pursuant to a master investment management and
administration agreement (the "Advisory Agreement"). AIM was organized in 1976
and, together with its subsidiaries, manages or advises approximately 90
investment company portfolios encompassing a broad range of investment
objectives. The Sub-advisor, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-advisor to the Fund pursuant to an investment sub-advisory and
sub-administration agreement. Prior to May 29, 1998, the Sub-advisor was known
as Chancellor LGT Asset Management, Inc. On May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of the Sub-advisor,
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included the Sub-advisor and
certain other affiliates. As a result of this transaction, the Sub-advisor is
now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to the sale, the
Sub-advisor and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
AIM and the Sub-advisor and their worldwide asset management affiliates
provide investment management and/or administrative services to institutional,
corporate and individual clients around the world. AIM and the Sub-advisor are
both indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and
New York offices, AIM and the Sub-advisor draw upon the expertise, personnel,
data and systems of other offices in Atlanta, Boston, Dallas, Denver,
Louisville, Miami, Portland (Oregon), 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.
10
<PAGE> 148
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 LAST FIVE YEARS
----------- -------------------- -------------------
<S> <C> <C>
Paul Griffiths Portfolio Manager Head of Global Fixed Income and Portfolio Manager
London since 1995 for the Sub- advisor and INVESCO GT Asset
Management PLC (London) ("GT London") since June
1997. Portfolio Manager from 1994 to 1997. Global
Bond Fund Manager for Lazard Investors from 1993
to 1994. Global Bond Fund Manager for Sanwa
International PLC from 1991 to 1993.
Michael Lindsell Portfolio Manager Head of Investment Strategy for Global Equities
London since 1998 and Portfolio Manager for the Sub-advisor and GT
London since 1996. Chief Investment Officer for
Japan and Portfolio Manager for INVESCO GT Asset
Management Asia Ltd. (Hong Kong) ("GT Asia") and
for the Sub-advisor from 1992 to 1996. Director of
Warburg Asset Management (Tokyo) prior to thereto.
GT London and GT Asia are affiliates of the
Sub-advisor.
John Nadell Portfolio Manager Portfolio Manager for the sub-advisor since July
London since 1998 1998 and for INVESCO GT Asset Management Japan
Ltd. (Tokyo) ("GT Tokyo") since 1996. Joined GT
Tokyo in 1994 as an Investment Analyst. Investment
Analyst at Pacific Equity Management (Oakland,
California) from 1990 to 1994. GT Tokyo is also an
affiliate of the Sub-Advisor.
</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.
DISTRIBUTOR. The Trust has entered into a Master Distribution Agreement (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of the Advisor Class
shares of the Fund. Certain Trustees and officers of the Trust are affiliated
with AIM Distributors.
The Distribution Agreement provides AIM Distributors with the exclusive right
to distribute Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
- --------------------------------------------------------------------------------
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 Company'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
Company's other funds 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,
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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.
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THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
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For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
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TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
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<PAGE> 152
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
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<PAGE> 153
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SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
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<PAGE> 154
Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
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HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
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REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
A-6
<PAGE> 156
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.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
A-7
<PAGE> 157
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
A-8
<PAGE> 158
TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
A-9
<PAGE> 159
AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 160
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> 161
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> 162
[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.
GGI-PRO-2
<PAGE> 163
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS OF
AIM GLOBAL HEALTH CARE FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM GLOBAL HEALTH CARE 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 capital
appreciation by investing primarily in equity securities of health care
companies throughout the world.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
September 8, 1998, has been filed with the Securities and Exchange Commission
(the "SEC") and is incorporated herein by reference. The Statement of Additional
Information is available without charge upon written request to the Trust at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or by calling (800)
347-4246. The SEC maintains a Web site at http://www.sec.gov that contains the
Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund. Additional information about the fund may
also be obtained from http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 164
- --------------------------------------------------------------------------------
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........................... 11
Organization of the Trust............ 12
INVESTOR'S GUIDE TO THE AIM FAMILY OF
FUNDS--Registered Trademark--........ A-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction to The AIM Family of
Funds............................. A-1
How to Purchase Shares............... A-1
Terms and Conditions of Purchase of
the AIM Funds..................... A-2
Special Plans........................ A-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
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 appreciation.
PRINCIPAL INVESTMENTS. The Fund invests primarily in equity securities of
health care companies throughout the world.
INVESTMENT MANAGERS. The Fund is managed by A I M Advisors, Inc. ("AIM") and
is sub-advised and sub-administered by INVESCO (NY), Inc. (the "Sub-advisor").
AIM and the Sub-advisor and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-advisor are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
AIM was organized in 1976 and, together with its subsidiaries, currently advises
approximately 90 investment company portfolios.
PURCHASING SHARES. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of a least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the other funds in The AIM Family of Funds that are
sub-advised by the Sub-advisor ("AIM Funds") on May 29, 1998; (e) any of the
companies composing or affiliated with AMVESCAP PLC; and (f) AIM Global Trends
Fund. Pursuant to a separate prospectus, the Fund also offers Class A and Class
B shares, which represent interests in the Fund. The Class A and Class B shares
have different distribution arrangements. Initial investments in Advisor Class
shares must be at least $500 and additional investments must be at least $50.
The distributor of the Advisor Class shares is A I M Distributors, Inc. ("AIM
Distributors"), P.O. Box 4739, Houston, TX 77210-4739. See "How to Purchase
Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds")
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain funds in The AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at the Fund's net asset value on any business day. See
"How to Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be reinvested at net asset value without
payment of a sales charge in the Fund's shares or may be invested in shares of
the other funds in The AIM Family of Funds. See "Dividends, Distributions and
Tax Matters."
2
<PAGE> 165
RISK FACTORS. There is no assurance that the Fund will achieve its investment
objective. The Fund's net asset value will fluctuate, reflecting fluctuations in
the market value of its Portfolio's portfolio holdings. The Fund's policy of
concentrating its investments in companies in its particular industries may
cause the Fund's net asset value to fluctuate more than if it invested in a
greater number of industries. The Fund may invest 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 5% 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> 166
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following tables(1):
<TABLE>
<S> <C>
Shareholder Transaction Costs:
Maximum sales charge on purchases of shares (as a % of
offering price)........................................ None
Sales charges on reinvested distributions to
shareholders........................................... None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)........ None
Redemption charges........................................ None
Exchange fees............................................. None
Annual Fund Operating Expenses(2): (as a % of average net
assets)
Investment management and administration fees............. 0.97%
12b-1 distribution and service fees....................... None
Other expenses (after reimbursements)..................... 0.33%
----
Total Fund Operating Expenses..................... 1.30%
====
</TABLE>
(1)This table is intended to assist investors in understanding the various costs
and expenses associated with investing in the Fund.
(2)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 1.50% of the average daily net assets of the Fund's Advisor
Class shares. AIM has voluntarily agreed to continue this limitation through
May 31, 2000. "Other expenses" include custody, transfer agency, legal, audit
and other operating expenses. See "Management" herein and the Statement of
Additional Information for more information. Investors purchasing Advisor
Class shares through financial planners, trust companies, bank trust
departments or registered investment advisers, or under a "wrap fee" program,
will be subject to additional fees charged by such entities or by the
sponsors of such programs. Where any account advised by one of the companies
composing or affiliated with AMVESCAP PLC invests in Advisor Class shares of
the Fund, such account shall not be subject to duplicative advisory fees.
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
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class Shares................................. $13 $ 41 $ 72 $158
</TABLE>
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> 167
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables below provide condensed financial information concerning income and
capital changes for Advisor Class 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, have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report thereon is
also included in the Statement of Additional Information. The unaudited
financial statements and notes, for the semi-annual period ended April 30, 1998,
are also included in the Statement of Additional Information.
AIM GLOBAL HEALTH CARE FUND
(FORMERLY GT GLOBAL HEALTH CARE FUND)
<TABLE>
<CAPTION>
ADVISOR CLASS**
--------------------------------------------------------
SIX MONTHS
ENDED JUNE 1, 1995
APRIL 30, YEAR ENDED OCTOBER 31, TO
1998 ----------------------- OCTOBER 31,
(UNAUDITED)* 1997* 1996* 1995
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.................. $ 28.34 $ 23.77 $ 21.88 $18.66
------- ------- ------- ------
Income from investment operations:
Net investment income (loss)........................ (0.05) (0.12) (0.05) (0.02)
Net realized and unrealized gain (loss) on
investments...................................... 0.44 6.54 4.80 3.24
------- ------- ------- ------
Net increase (decrease) from investment
operations....................................... 0.39 6.42 4.75 3.22
------- ------- ------- ------
Distributions:
From net investment income.......................... -- -- --
From net realized gain on investments............... (6.71) (1.85) (2.86) --
In excess of net realized gain on investments....... -- -- -- --
------- ------- ------- ------
Total distributions......................... (6.71) (1.85) (2.86) --
------- ------- ------- ------
Net asset value, end of period........................ $ 22.02 $ 28.34 $ 23.77 $21.88
======= ======= ======= ======
Total investment return(c)............................ 2.37% (a) 29.00% 23.82% 17.10%(a)
======= ======= ======= ======
Ratios and supplemental data:
Net assets, end of period (in 000's).................. $ 9,699 $ 6,819 $ 1,152 $ 539
Ratio of net investment income (loss) to average net
assets:
With expense reductions............................. (0.56)%(b) (0.50)% (0.21)% (0.22)%(b)
Without expense reductions.......................... (0.57)%(b) (0.53)% (0.25)% (0.28)%(b)
Ratio of expenses to average net assets:
With expense reduction.............................. 1.30%(b) 1.27% 1.30% 1.35%(b)
Without expense reduction........................... 1.31%(b) 1.30% 1.34% 1.41%(b)
Portfolio turnover rate+.............................. 156%(b) 149% 157% 99%(b)
Average commission rate per share paid on portfolio
transactions+....................................... $0.0561 $0.0490 $0.0548 N/A
</TABLE>
- ---------------
+
Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
* These selected per share data were calculated based upon average shares
outstanding during the period.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
N/A Not Applicable.
---------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
AVERAGE NUMBER OF AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT 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......... $-- $ 8,184 25,589,566 $ 0.000
October 31, 1997........................ $-- $323,288 24,106,677 $0.0134
</TABLE>
Average amount of debt outstanding during the period is completed on a daily
basis.
5
<PAGE> 168
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Fund. Such practices will
have the effect of increasing the Fund's total return. The performance of the
Fund will vary from time to time and past results are not necessarily
representative of future results. The Fund's performance is a function of its
portfolio management in selecting the type and quality of portfolio securities
and is affected by operating expenses of the Fund as well as by general market
conditions.
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
INVESTMENT OBJECTIVE. The Fund's investment objective is long-term capital
appreciation. It seeks its objective by investing primarily in equity securities
of health care companies throughout the world. There can be no assurance that
the Fund will achieve its investment objective.
INVESTMENT POLICIES. At least 65% of the Fund's total assets normally will be
invested in common and preferred stocks, and warrants to acquire such
securities, issued by health care companies. A "health care" company is an
entity in which (i) at least 50% of either the revenues or earnings was derived
from health care activities, or (ii) at least 50% of the assets was devoted to
such activities, based on the company's most recent fiscal year. The remainder
of the Fund's assets may be invested in debt securities issued by health care
companies and/or equity and debt securities of companies outside of the health
care industry, which, in the opinion of the Sub-advisor, stand to benefit from
developments in the health care industries.
Global Health Care Industries Investment. Examples of health care companies
include those that are substantially engaged in the design, manufacture or sale
of products or services used for or in connection with health care or medicine.
Such firms may include pharmaceutical companies; firms that design, manufacture,
sell or supply medical, dental and optical products, hardware or services;
companies involved in biotechnology, medical diagnostic, and biochemical
research and development; and companies involved in the ownership and/or
operation of health care facilities.
The Fund expects that, from time to time, a significant portion of its assets
may be invested in the securities of U.S. issuers. Health care industries,
however, are global industries with significant, growing markets outside of the
United States. A sizeable portion of the companies which comprise the health
care industries are headquartered outside of the United States, and many
important pharmaceutical and biotechnology discoveries and technological
breakthroughs have occurred outside of the United States, primarily in Japan,
the United Kingdom and Western Europe.
The Sub-advisor believes that the global health care industries offer
attractive long-term supply/demand dynamics. While the United States, Western
Europe, and Japan presently account for a substantial portion of health care
expenditures, this should change dramatically in the coming decade if the
populations of developing countries devote an increasing percentage of income to
health care. Additionally, the Sub-advisor believes demographics on aging point
to a significant increase in demand from the industrialized nations, as the
elderly account for a growing proportion of worldwide health care spending.
Finally, in the Sub-advisor's view, technology will continue to expand the range
of products and services offered, with new drugs, medical devices and surgical
procedures addressing medical conditions previously considered untreatable.
In addition to these underlying trends, the United States is presently
experiencing a period of rapid and profound change in its own health care
system, marked by the rise of managed care, the formation of health care
delivery networks, and widespread consolidation across all segments of the
industry. The Sub-advisor believes that this transition offers investment
opportunities in those companies acting as consolidators or otherwise gaining
market share at the expense of less efficient competitors.
6
<PAGE> 169
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:
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. The Fund expects that, from
time to time, a significant portion of its assets may be invested in the
securities of domestic issuers. The industry represented in the Fund, however,
is a global industry with significant, growing markets outside of the United
States. A sizeable proportion of the companies which comprise the health care
industries are headquartered outside of the United States.
For these reasons, the Sub-advisor believes that a portfolio composed only of
securities of U.S. issuers does not provide the greatest potential for return
from an investment by the Fund. The Sub-advisor uses its financial expertise in
markets located throughout the world and the substantial global resources of
AMVESCAP PLC in attempting to identify those countries and companies then
providing the greatest potential for long-term capital appreciation. In this
fashion, the Sub-advisor seeks to enable shareholders to capitalize on the
substantial investment opportunities and the potential for long-term growth of
capital presented by the global industries represented in the Fund.
The Sub-advisor allocates the Fund's assets among securities of countries and
in currency denominations where opportunities for meeting the Fund's investment
objective are expected to be the most attractive. The Fund may invest
substantially in securities denominated in one or more currencies. Under normal
conditions, the Fund invests in the securities of issuers located in at least
three countries, including the United States; investments in securities of
issuers in any one country, other than the United States, will represent no more
than 50% of the Fund's total assets.
In analyzing specific companies for possible investment, the Sub-advisor
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets.
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 may invest up to 100%
of its total assets in cash (U.S. dollars, foreign currencies or 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 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 achieve directly
its investment objective. In addition, pending investment of proceeds from new
sales of Fund shares or to meet its 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 full
description of money market instruments, see "Money Market Instruments" in the
"Investment Objectives and Policies" section of the Statement of Additional
Information.
PRIVATIZATIONS. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-advisor believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Fund in privatizations in appropriate
circumstances. In certain foreign countries, 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 for local investors. There can be no assurance that
foreign governments will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Fund may invest up to 10% of
its total assets in other investment companies, some of which may be investment
vehicles or companies that are advised by the Sub-advisor or its affiliates
("Affiliated Funds"). 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.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Fund may
borrow from banks or may borrow through reverse repurchase agreements and "roll"
transactions in connection with meeting requests for the redemptions of the
Fund's shares. The Fund also may borrow up to 5% of its total assets for
temporary or emergency purposes other than to meet redemptions of the Fund's
shares. The Fund may borrow up to 33 1/3% of its total assets. However, no
additional investments will be made if the Fund's borrowings exceed 5% of its
total assets. Any borrowing by the Fund may cause greater fluctuation in the
value of its shares than would be the case if the Fund 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 which includes an interest component. A "roll"
borrowing transaction involves the Fund's sale of securities together with its
commitment (for which the Fund may receive a fee) to purchase similar, but not
identical, securities at a future date.
7
<PAGE> 170
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 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 risks in lending
portfolio securities, as with other extensions of secured credit, consist of
possible delays in receiving additional collateral or in recovery of the
securities and possible loss of rights in the collateral should the borrower
fail financially.
WHEN-ISSUED OR 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 or enter into forward commitments only with the
intention of actually receiving or delivering the securities, as the case may
be. No income accrues on securities that have been purchased pursuant to a
forward commitment or on a when-issued basis prior to delivery to the 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 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 and currency 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 Forward 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.
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 indexes 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
affect adversely the Fund's holdings. 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 portfolio 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 Fund's shares represented at a meeting at which more than 50% of the
outstanding shares are represented, or (ii) more than 50% of the outstanding
shares. In addition, the Fund has adopted certain investment limitations 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. The Fund's policies regarding
concentration and lending, and the percentage of the Fund's 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"
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<PAGE> 171
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. The Fund's net asset values will fluctuate reflecting fluctuations in
the market value of the Fund's portfolio positions. 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 changes in the perceived
creditworthiness of the issuers of such securities and interest rates.
Because the Fund focuses its investments on particular industries, an
investment in each may be more volatile than that of other investment companies
that do not concentrate their investments in such a manner. Moreover, the value
of the shares of the Fund will be especially susceptible to factors affecting
the industries in which it focuses. Accordingly, the Fund should not be
considered a complete investment program.
HEALTH CARE INDUSTRIES. Health care industries generally are subject to
substantial governmental regulation. Changes in governmental policy or
regulation could have a material effect on the demand for products and services
offered by companies in the health care industries and therefore could affect
the performance of the Fund. Regulatory approvals are generally required before
new drugs and medical devices or procedures may be introduced and before the
acquisition of additional facilities by health care providers. In addition, the
products and services offered by such companies may be subject to rapid
obsolescence caused by technological and scientific advances.
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 interest and dividends from foreign issuers may be subject
to non-U.S. withholding taxes, thereby reducing the Fund's net investment
income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments which could affect the Fund's investments in those countries.
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, resource self-sufficiency
and balance of payments positions.
The Fund may invest in issuers domiciled in "emerging markets." Investing in
emerging market countries involves risks in addition to those risks involved in
foreign investing. Many emerging market countries have experienced high rates of
inflation for many years. In addition, emerging markets generally are dependent
heavily upon international trade and, accordingly, have been and 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. The securities markets of emerging
market countries are substantially smaller, less developed, less liquid and more
volatile than the securities markets of the developed countries. In addition,
issuers in emerging markets typically are subject to a greater degree of change
in earnings and business prospects than issuers in developed countries.
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.
The Fund will also be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rates between foreign currencies and the
U.S. dollar. Changes in currency exchange rates will influence the value of the
Funds' shares, and also may affect the value of dividends and interest earned by
the Fund and gains and losses realized by the Fund.
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<PAGE> 172
LOWER QUALITY DEBT SECURITIES. The Fund may invest up to 5% of its total
assets in below investment grade debt securities, that is, rated below BBB by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or Baa
by Moody's Investors Service, Inc. ("Moody's") or, if unrated, deemed to be of
equivalent quality in the judgment of the Sub-advisor. Such investments involve
a high degree of risk. However, the Fund will not invest in debt securities that
are in default as to payment of principal and interest.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by S&P and debt rated Ba, B,
Caa, Ca or C by Moody's is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. 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 lower quality debt securities are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates. See "Description of Debt Ratings" in the Statement of Additional
Information for a full discussion of Moody's and S&P's ratings.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Fund. If an issuer exercises these provisions in a declining
interest rate market, the Fund may have to replace the security with a lower
yielding security, resulting in a decreased return for investors. 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 the Fund's
portfolio investments. 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 portfolio holdings, and the Fund may have limited legal recourse in
the event of a default.
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." The Sub-advisor believes that carefully selected investments in
joint ventures, cooperatives, partnerships and state enterprises which are
illiquid (collectively, "Special Situations") could enable the Fund to achieve
capital appreciation substantially exceeding the appreciation the Fund would
realize if it did not make such investments. However, in order to attempt to
limit investment risk, the Fund will invest no more than 5% of its total assets
in Special Situations.
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.
OPTIONS, FUTURES AND FORWARD 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 or in the appropriate
market sector and movements in interest rates and currency markets; (2)
imperfect correlation, or even no correlation, between movements in the price of
options, forward contracts, futures contracts or options thereon and movements
in the price of the currency or security hedged or used for cover; (3) the fact
that
10
<PAGE> 173
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.
INVESTING IN SMALLER COMPANIES. While the Fund's portfolio normally will
include securities of established suppliers of traditional products and
services, the Fund may invest in smaller companies which can benefit from the
development of new products and services. These smaller companies may present
greater opportunities for capital appreciation, but may also involve greater
risks than large, established issuers. Such smaller companies may have limited
product lines, markets or financial resources, and their securities may trade
less frequently and in more limited volume than the securities of larger, more
established companies. As a result, the prices of the securities of such smaller
companies may fluctuate to a greater degree than the prices of the securities of
other issuers.
- --------------------------------------------------------------------------------
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 is 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 Company's 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 investment portfolio of
the Fund and placing orders to buy, sell or hold particular securities. In
addition, AIM and the Sub-advisor provide the following administration services
to the Fund: furnishing corporate officers and clerical staff; providing office
space, services and equipment; and supervising all matters relating to the
Funds' operation.
For investment management and administration services provided to the Fund,
the Fund pays AIM a fee computed daily and paid monthly based on the Fund's
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 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 1.50% of the average daily net assets of the Fund's
Advisor Class shares.
AIM also serves as the Fund's pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, G.T. Global
Variable Investment Series and G.T. Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment manager to the Fund pursuant to a master investment management and
administration agreement (the "Advisory Agreement"). AIM was organized in 1976
and, together with its subsidiaries, manages or advises approximately 90
investment company portfolios encompassing a broad range of investment
objectives. The Sub-advisor, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-advisor to the Fund pursuant to an investment sub-advisory and
sub-administration agreement. Prior to May 29, 1998, the Sub-advisor was known
as Chancellor LGT Asset Management, Inc. On May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of the Sub-advisor,
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included the Sub-advisor and
certain other affiliates. As a result of this transaction, the Sub-advisor is
now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to the sale, the
Sub-advisor and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
AIM and the Sub-advisor and their worldwide asset management affiliates
provide investment management and/or administrative services to institutional,
corporate and individual clients around the world. AIM and the Sub-advisor are
both indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and
New York offices, AIM and the Sub-advisor draw upon the expertise, personnel,
data and systems of other offices in Atlanta, Boston, Dallas, Denver,
Louisville, Miami, Portland (Oregon),
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<PAGE> 174
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 professional primarily responsible for the portfolio management
of the Fund is as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- ----------- ---------------------- -------------------
<S> <C> <C>
Michael Yellen Portfolio Manager Portfolio Manager for the Sub-advisor since 1996.
San Francisco since 1996 Research analyst for the Sub-advisor from 1994 to
1996. Securities analyst and Co-Portfolio Manager
for Franklin Resources, Inc. (San Mateo, CA) from
1991 to 1994.
</TABLE>
In placing orders for the Fund's securities 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 Family of 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 Funds will bear directly and could result in the
realization of net capital gains which would be taxable when distributed to
shareholders. See "Dividends, Other Distributions and Tax Matters."
DISTRIBUTOR. The Trust has entered into a Master Distribution Agreement (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of the Advisor Class
shares of the Fund. Certain Trustees and officers of the Trust are affiliated
with AIM Distributors.
The Distribution Agreement provides AIM Distributors with the exclusive right
to distribute Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST
The Trust was organized as a Delaware Business trust on May 7, 1998. On
September 8, 1998, the Company 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 of 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 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.
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<PAGE> 175
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
A-1
<PAGE> 176
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
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TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
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and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
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SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
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EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
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Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
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HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
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REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
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as certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client
Services Department of AFS.
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DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
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DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
A-8
<PAGE> 183
TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
A-9
<PAGE> 184
AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 185
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> 186
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> 187
[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.
GHC-PRO-2
<PAGE> 188
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS OF
AIM EMERGING MARKETS DEBT FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM EMERGING MARKETS DEBT FUND
(formerly known as AIM Global High Income 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 primarily seeks high current income and secondarily
seeks capital appreciation by investing all of its investable assets in the
Emerging Markets Debt Portfolio (the "Portfolio"), which, in turn, invests
primarily in the debt securities of issuers located in emerging markets. The
Portfolio's investment objectives are identical to those of the Fund.
The investment experience of the Fund will correspond directly with the
investment experience of the Portfolio.
THE PORTFOLIO INVESTS UP TO 100% OF ITS TOTAL ASSETS 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. PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN
INVESTMENT IN THE FUND. SEE "INVESTMENT PROGRAM" AND "RISK FACTORS."
This Prospectus sets forth concisely 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> 189
- --------------------------------------------------------------------------------
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......................... 12
Management........................... 16
Organization of the Trust and the
Portfolio......................... 17
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-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
Appendix A........................... A-11
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND
The Fund is a non-diversified series of the Trust. The Portfolio is a
non-diversified, open-end management investment company.
INVESTMENT OBJECTIVES. The Fund primarily seeks high current income and
secondarily seeks capital appreciation.
PRINCIPAL INVESTMENTS. The Fund invests all of its investable assets in the
Portfolio, which, in turn, invests primarily in debt securities of issuers
located in emerging markets.
INVESTMENT MANAGERS. The Portfolio is managed by A I M Advisors, Inc. ("AIM")
and is sub-advised and sub-administered by INVESCO (NY), Inc. (the
"Sub-advisor"). AIM and the Sub-advisor and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM and the
Sub-advisor are both indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC and its subsidiaries are an independent investment management group
that has a significant presence in the institutional and retail segment of the
investment management industry in North America and Europe, and a growing
presence in Asia. AIM was organized in 1976 and, together with its subsidiaries,
currently advises approximately 90 investment company portfolios.
PURCHASING SHARES. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of a least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the funds in The AIM Family of Funds on May 29, 1998 and;
(e) any of the companies composing or affiliated with AMVESCAP PLC. Pursuant to
a separate prospectus, the Fund also offers Class A and Class B shares, which
represent interests in the Fund. The Class A and Class B shares have different
distribution arrangements.
Initial investments in Advisor Class shares must be at least $500 and
additional investments must be at least $50. The distributor of the Advisor
Class shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds").
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain funds in The AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at net asset value on any business day. See "How to
Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on a monthly 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."
2
<PAGE> 190
RISK FACTORS. There is no assurance that the Fund or the Portfolio will
achieve its investment objectives. The Fund's net asset value will fluctuate,
reflecting fluctuations in the market value of its or its corresponding
Portfolio's securities holdings. The value of debt securities held by the
Portfolio generally fluctuates inversely with interest rate movements.
The Portfolio will invest 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 or the Portfolio'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 Portfolio will normally invest at least 65% of
its total assets in debt securities of issuers in emerging markets. Such
investments entail greater risks than investing in securities of issuers in
developed markets.
The Portfolio 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 Portfolio may invest up to 100% of its total assets in debt securities
rated below investment grade or, if not rated, determined by the Sub-advisor to
be of comparable quality. Investments of this type are subject to 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> 191
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following table(1):
<TABLE>
<S> <C>
Shareholder Transaction Costs:
Maximum sales charge on purchases of shares (as a % of
offering price)........................................ None
Sales charges on reinvested distributions to
shareholders........................................... None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)........ None
Redemption charges........................................ None
Exchange fees............................................. None
Annual Fund Operating Expenses(2): (as a % of average net
assets)
Investment management and administration fees............. 0.90%
12b-1 distribution and service fees....................... None
Other expenses............................................ 0.33%
----
Total Fund Operating Expenses..................... 1.23%
====
</TABLE>
(1)This table is intended to assist investors in understanding the various costs
and expenses associated with investing in the Fund.
(2)Expenses are based on the Fund's fiscal year ended October 31, 1997. "Other
expenses" include custody, transfer agent, legal, audit and other operating
expenses. See "Management" herein and the Statement of Additional Information
for more information. Investors purchasing Advisor Class shares through
financial planners, trust companies, bank trust departments or registered
investment advisors, or under a "wrap fee" program, will be subject to
additional fees charged by such entities or by the sponsors of such programs.
Where any account advised by one of the companies composing or affiliated
with AMVESCAP PLC invests in Advisor Class shares of the Fund, such account
shall not be subject to duplicative advisory fees. The Board of Trustees of
the Trust believes that the aggregate per share expenses of the Fund and the
Portfolio will be less than or approximately equal to the expenses which the
Fund would incur if the assets of that Fund were invested directly in the
type of securities being held by the Portfolio. Effective November 1, 1997,
AIM has voluntarily agreed to limit the Fund's expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the
annual rate of 1.40% of the average daily net assets of the Fund's Advisor
Class shares through May 31, 2000.
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
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class Shares................................. $13 $39 $68 $150
</TABLE>
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S AND THE PORTFOLIO'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 OR THE PORTFOLIO'S
PROJECTED OR ACTUAL PERFORMANCE.
4
<PAGE> 192
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The table below provides condensed financial information concerning income and
capital changes for one Advisor Class share of the Fund. This information is
supplemented by the financial statements and accompanying notes appearing in the
Statement of Additional Information. The financial statements and notes for the
fiscal year ended October 31, 1997 and the semi-annual period ended April 30,
1998, have been audited by PricewaterhouseCoopers LLP, independent accountants,
whose reports thereon appear in the Statement of Additional Information.
AIM EMERGING MARKETS DEBT FUND
(FORMERLY AIM GLOBAL HIGH INCOME FUND AND PRIOR TO THAT GT GLOBAL HIGH INCOME
FUND)
<TABLE>
<CAPTION>
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>
ADVISOR CLASS+:
Per Share Operating Performance:
Net asset value, beginning of period...................... $15.52 $14.83 $11.71 $11.44
------ ------ ------- ------
Income from investment operations:
Net investment income..................................... 0.87* 1.22 1.34 0.57
Net realized and unrealized gain (loss) on investments.... 0.36 0.93 3.05 0.17
------ ------ ------- ------
Net increase (decrease) from investment operations.......... 1.23 2.15 4.39 0.74
------ ------ ------- ------
Distributions to shareholders:
From net investment income................................ (0.86) (1.23) (1.16) (0.44)
From net realized gain on investments..................... (2.83) (0.23) (0.11) --
In excess of net realized gain on investments............. -- -- -- --
Return of capital......................................... -- -- -- (0.03)
From sources other than net investment income............. -- -- -- --
------ ------ ------- ------
Total distributions................................. (3.69) (1.46) (1.27) (0.47)
------ ------ ------- ------
Net asset value, end of period.............................. $13.06 $15.52 $14.83 $11.71
====== ====== ======= ======
Total investment return(c).......................... 9.81%(b) 14.72% 39.38% 6.54%(b)
====== ====== ======= ======
Ratios and supplemental data:
Net assets, end of period (in 000's)...................... $3,005 $3,719 $15,298 $1,463
Ratio of net investment income to average net assets........ 11.22%(a) 7.74% 9.87% 12.20%(a)
Ratio of operating expenses to average net assets:
With expense reductions (Note 1).......................... 1.33%(a) 1.18% 1.34% 1.40%(a)
Without expense reductions................................ 1.33%(a) 1.23% 1.34% 1.40%(a)
Ratio of interest expense to average net assets++........... 0.01%(a) N/A 0.04% N/A
Portfolio turnover rate++................................... 222%(a) 214% 290% 213%(a)
</TABLE>
- ---------------
<TABLE>
<C> <S>
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating 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. Without such a payment net investment income
would have been $0.66 per share.
+ Commencing June 1, 1995, the Fund began offering Advisor
Class Shares.
++ Portfolio turnover and ratio of interest expense to average
net assets is calculated on the basis of the fund as a whole
without distinguishing among the classes of shares issued.
N/A Not Applicable
</TABLE>
<TABLE>
<CAPTION>
AVERAGE MONTHLY
AVERAGE NUMBER OF AVERAGE
AMOUNT OF DEBT AMOUNT OF DEBT REGISTRANT'S SHARES AMOUNT OF DEBT
OUTSTANDING AT OUTSTANDING OUTSTANDING PER SHARE
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
- ---------- -------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Six months ended April 30, 1998......... $ -- $ 246,575 26,410,544 $ 0.009
October 31, 1997........................ $ -- $ 2,526,057 28,093,475 $0.0899
October 31, 1996........................ $ -- $ 2,431,693 30,732,727 $0.0791
October 31, 1995........................ $ -- $ -- -- $ --
October 31, 1994........................ $ -- $14,109,589 26,707,829 $0.5283
</TABLE>
Average amount of debt outstanding during the period is computed on a daily
basis.
5
<PAGE> 193
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. The Fund's total return
shows its overall change in value, including changes in share price and assuming
all the Fund's dividends and capital gain distributions are reinvested. A
cumulative total return reflects the Fund's performance over a stated period of
time. An average annual total return reflects the hypothetical compounded annual
rate of return that would have produced the same cumulative total return if the
Fund's performance had been constant over the entire period. BECAUSE AVERAGE
ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE FUND'S RETURN, INVESTORS
SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR
RESULTS. To illustrate the components of overall performance, the Fund may
separate its cumulative and average annual returns into income results and
capital gains or losses.
Yield is computed in accordance with standardized formulas described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, yield
information may not provide a basis for comparison with investments which pay a
fixed rate of interest for a stated period of time. Yield reflects investment
income net of expenses over the relevant period attributable to the Fund share,
expressed as an annualized percentage of the net asset value per share for
Advisor Class shares.
Yield is a function of the type and quality of the Fund's investments, the
maturity of the securities held in the Fund's portfolio and the operating
expense ratio of the Fund. A shareholder's investment in the Fund is not insured
or guaranteed. These factors should be carefully considered by the investor
before making an investment in the Fund.
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 yield and 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 primarily seeks high current income, and
secondarily seeks capital appreciation. It seeks its objectives by investing all
of its investable assets in the Portfolio, which in turn seeks the same
objectives as the Fund by normally investing at least 65% of its total assets in
debt securities of issuers in emerging markets. There can be no assurance that
the Fund or the Portfolio will achieve its investment objectives.
INVESTMENT POLICIES. The Portfolio intends to invest in the following types of
debt securities: bonds, notes and debentures of emerging market governments;
securities issued or guaranteed by such governments' agencies or
instrumentalities; securities issued or guaranteed by the central banks of
emerging market countries; and securities issued by other banks and companies in
such countries and securities denominated in or indexed to the currencies of
emerging markets. Under current market conditions, the Portfolio expects its
investments in emerging market securities to consist substantially of Brady
Bonds (see "General Policies -- Brady Bonds," below) and other sovereign debt
securities.
The Portfolio may also invest up to 35% of its total assets in (1) equity
securities of issuers in emerging markets included in the list below under the
caption "Emerging Markets"; (2) equity and debt securities of issuers in
developed countries, including the United States; (3) securities of issuers in
emerging markets not included in the emerging markets list, if investing therein
becomes feasible and desirable subsequent to the date of this Prospectus; and
(4) cash and money market instruments. 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's
financial condition.
Under normal circumstances, substantially all of the Portfolio's assets will
be invested in debt securities of both governmental and corporate issuers in
emerging markets. Emerging markets debt securities generally are considered to
have a credit quality below investment grade, as defined above. Lower quality
securities involve a high degree of risk and are predominantly speculative.
These debt securities are the equivalent of high yield, high risk bonds,
commonly known as "junk bonds." See "Risk Factors." Many emerging market debt
securities are not rated by U.S. ratings agencies such as Moody's and S&P. The
Portfolio's ability to achieve its investment objectives is thus more dependent
on the Sub-advisor's credit analysis. The Portfolio may invest in securities
that are in default as to payment of principal and/or interest.
6
<PAGE> 194
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:
OTHER INFORMATION REGARDING THE PORTFOLIO. As previously described, investors
should be aware that the Fund, unlike mutual funds that directly acquire and
manage their own portfolios of securities, seeks to achieve its investment
objectives by investing all of its investable assets in the Portfolio, which is
a separate investment company. Because the Fund will invest only in the
Portfolio, the Fund's shareholders will acquire only an indirect interest in the
investments of the Portfolio.
The Fund may redeem its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the Fund and its shareholders to do so. A change in the Portfolio's investment
objectives, policies or limitations that is not approved by the Board or the
shareholders of the Fund could require the Fund to redeem its interest in the
Portfolio. Any such redemption could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio. In
addition, a distribution in kind could result in a less diversified portfolio of
investments for the Fund and could adversely affect its liquidity. Upon
redemption, the Board would consider what action might be taken, including the
investment of all the investable assets of the Fund in another pooled investment
entity having substantially the same investment objectives as the Fund or the
retention by the Fund of its own investment advisor to manage its assets in
accordance with its investment objectives, policies and limitations discussed
herein.
In addition to selling an interest therein to the Fund, the Portfolio may sell
interests therein to other non-affiliated investment companies and/or other
institutional investors. All institutional investors in the Portfolio will pay a
proportionate share of the Portfolio's expenses and will invest in the Portfolio
on the same terms and conditions. However, if another investment company invests
any or all of its assets in the Portfolio, it would not be required to sell its
shares at the same public offering price as the Fund and may charge different
sales commissions. Therefore, investors in the Fund may experience different
returns than investors in another investment company that invests exclusively in
the Portfolio. As of the date of this Prospectus, the Fund is the only
institutional investor in the Portfolio.
Investors in the Fund should be aware that the Fund's investment in the
Portfolio may be materially affected by the actions of other large investors, if
any, in the Portfolio. For example, as with all open-end investment companies,
if a large investor were to redeem its interest in the Portfolio, (1) the
Portfolio's remaining investors could experience higher pro rata operating
expenses, thereby producing lower returns and (2) the Portfolio's security
holdings may become less diverse, resulting in increased risk. Institutional
investors in the Portfolio that have a greater pro rata ownership interest in
the Portfolio than the Fund could have effective voting control over the
operation of the Portfolio.
ASSET ALLOCATION. The Portfolio invests in debt obligations allocated among
diverse markets and denominated in various currencies, including U.S. dollars,
or in multinational currency units such as Euros. The Fund is designed for
investors who wish to accept the risks entailed in such investments, which are
different from those associated with a portfolio consisting entirely of
securities of U.S. issuers denominated in U.S. dollars. The Portfolio may
purchase securities that are issued by the government or a company or financial
institution of one country but denominated in the currency of another country
(or a multinational currency unit).
The Sub-advisor allocates the assets of the Portfolio in securities of issuers
in countries and in currency denominations where the combination of fixed income
market returns, the price appreciation potential of fixed income securities and
currency exchange rate movements will present opportunities primarily for high
current income and secondarily for capital appreciation. In so doing, the
Sub-advisor intends to take full advantage of the different yield, risk and
return characteristics that investment in the fixed income markets of different
countries can provide for U.S. investors. Fundamental economic strength, credit
quality and currency and interest rate trends are the principal determinants of
the emphasis given to various country, geographic and industry sectors within
the Portfolio. Securities held by the Portfolio may be invested in without
limitation as to maturity.
The Sub-advisor selects securities of particular issuers on the basis of its
views as to the best values then currently available in the marketplace. Such
values are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the local and world
economies, movements in the general level and term of interest rates, currency
values, political developments and variations in the supply of funds available
for investment in the world bond market relative to the demands placed upon it.
The Sub-advisor generally evaluates currencies on the basis of fundamental
economic criteria (e.g., relative inflation, interest rate levels and trends,
growth rate forecasts, balance of payments status and economic policies) as well
as technical and political data. The Sub-advisor may seek to protect the
Portfolio against such negative currency movements through the use of
sophisticated investment techniques. See "Options, Futures and Forward Currency
Transactions" and "Swaps, Caps, Floors and Collars."
According to the Sub-advisor, as of the date of this Prospectus, more than 50%
of the value of all outstanding government debt obligations throughout the world
is represented by obligations denominated in currencies other than the U.S.
dollar. Moreover, from time to time, the debt securities of issuers located
outside the United States have substantially outperformed the debt obligations
of U.S. issuers. Accordingly, the Sub-advisor believes that the Portfolio's
policy of investing in debt securities of issuers in emerging markets may enable
the achievement of results superior to those produced by mutual funds with
similar objectives to those of the Fund and the Portfolio that invest solely in
debt securities of U.S. issuers.
7
<PAGE> 195
The Fund is designed for investors who wish to accept the risks entailed in
such investments, which are different from those associated with a portfolio
consisting entirely of securities of U.S. issuers denominated in U.S. dollars.
TEMPORARY DEFENSIVE STRATEGIES. 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. Pursuant to such a defensive
strategy, the Portfolio temporarily may hold cash (U.S. dollars, foreign
currencies or multinational currency units such as euros) and/or invest up to
100% of its respective assets in high quality debt securities or money market
instruments of U.S. or foreign issuers. In addition, for temporary defensive
purposes, most or all of the Portfolio's investments may be made in the United
States and denominated in U.S. dollars. To the extent the Portfolio employs a
temporary defensive strategy, it will not invest so as to achieve directly its
investment objectives. In addition, pending investment of proceeds from new
sales of Fund shares or to meet ordinary daily cash needs, the Portfolio may
hold cash (U.S. dollars, foreign currencies or multinational currency units) and
may invest in high quality foreign or domestic money market instruments. For a
full description of money market instruments, see "Selection of Debt
Investments" in the "Investment Objectives and Policies" section of the
Statement of Additional Information.
EMERGING MARKET SECURITIES. The Portfolio considers "emerging markets" to
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. The Portfolio 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
Swaziland
Taiwan
Thailand
Turkey
Ukraine
Uruguay
Venezuela
Zambia
Zimbabwe
The Portfolio 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, overly burdensome repatriation
requirements and similar restrictions, the lack of organized and liquid
securities markets, unacceptable political risks or for other reasons.
As used in this Prospectus and the Statement of Additional Information, 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 revenue from
either goods produced, sales made or services performed in emerging markets; or
(iii) organized under the laws of, or with a principal office in, an emerging
market.
BRADY BONDS. The Portfolio 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 Portfolio 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 Portfolio 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
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.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Portfolio 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 Portfolio's in-
8
<PAGE> 196
vestments 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
Portfolio having a contractual relationship only with the Lender, not with the
borrower government. The Portfolio 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 Portfolio
generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the loan ("Loan Agreement"), nor any
rights of set-off against the borrower, and the Portfolio may not directly
benefit from any collateral supporting the Loan in which it has purchased the
Participation. As a result, the Portfolio 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
Portfolio 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 Portfolio will acquire
Participations only if the Lender interpositioned between the Portfolio and the
borrower is determined by the Sub-advisor to be creditworthy. When the Portfolio
purchases Assignments from Lenders, the Portfolio will acquire direct rights
against the borrower on the Loan. However, since Assignments are arranged
through private negotiations between potential assignees and assignors, the
rights and obligations acquired by the Portfolio as the purchaser of an
Assignment may differ from, and be more limited than, those held by the
assigning Lender.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Portfolio may purchase debt
securities on a "when-issued" basis and may purchase or sell such securities on
a "forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. The price, which is generally expressed in yield
terms, is fixed at the time 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 Portfolio 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 of the
securities. If the Portfolio disposes of the right to acquire a when-issued
security prior to its acquisition or disposes of its right to deliver or receive
against a forward commitment, it may incur a gain or loss. At the time the
Portfolio enters into a transaction on a when-issued or forward commitment
basis, the Portfolio will segregate cash or liquid securities equal to the value
of the when-issued or forward commitment securities with its custodian and will
mark to market daily such assets. There is a risk that the securities may not be
delivered and that the Portfolio may incur a loss.
The Portfolio may also sell securities on a "when, as and if issued" basis for
hedging purposes. Under such a transaction, the Portfolio is required to deliver
at a future date a security it does not presently hold, but which it has a right
to receive if the security is issued. Issuance of the security may not occur, in
which case the Portfolio would have no obligation to the other party, and would
not receive payment for the sale. Selling securities on a "when, as and if
issued" basis may reduce risk of loss to the extent that such a sale wholly or
partially offsets unfavorable price movements on the investments being hedged.
However, such sales also limit the amount the Portfolio can receive if the
"when, as and if issued" security is in fact issued.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Portfolio
is authorized to borrow money from banks in an amount up to 33 1/3% of its total
assets (including the amount borrowed), less all liabilities and indebtedness
other than the borrowings and may use the proceeds of such borrowings for
investment purposes. The Portfolio will borrow for investment purposes only when
the Sub-advisor believes that such borrowings will benefit the Portfolio after
taking into account considerations such as the costs of the borrowing and the
likely investment returns on the securities purchased with the borrowed monies.
Borrowing for investment purposes is known as leveraging, which is a
speculative practice. Such borrowing by the Portfolio creates the opportunity
for increased net income and appreciation but, at the same time, involves
special risk considerations. For example, leveraging might exaggerate changes in
the net asset value of Fund shares and in the yield realized by the Portfolio.
Although the principal amount of such borrowings will be fixed, the Portfolio's
assets may change in value during the time the borrowing is outstanding. By
leveraging the Portfolio, changes in net asset values, higher or lower, may be
greater in degree than if leverage was not employed. To the extent the income
derived from the assets obtained with borrowed funds exceeds the interest and
other expenses that the Portfolio will have to pay, the Portfolio's net income
will be greater than if borrowing was not used. Conversely, if the income from
the assets obtained with borrowed funds is not sufficient to cover the cost of
borrowing, the net income of the Portfolio will be less than if borrowing were
not used, and therefore the amount available for distribution to shareholders as
dividends will be reduced. The Portfolio each expects that some of its
borrowings may be made on a secured basis.
In addition to the foregoing borrowings, the Portfolio may borrow money for
temporary or emergency purposes or payments in an amount not exceeding 5% of the
value of its total assets (not including the amount borrowed) provided that the
total amount borrowed by the Portfolio for any purpose does not exceed 33 1/3%
of its total assets.
The Portfolio may also enter into reverse repurchase agreements with a bank or
recognized securities dealer. Under a reverse repurchase agreement, the
Portfolio would sell securities and agree to repurchase them at a particular
price at a future date. At the time the Portfolio enters into a reverse
repurchase agreement, it will establish and maintain a segregated account with
an approved custodian containing cash or liquid securities having a value not
less than the repurchase price, including accrued interest. Reverse repurchase
agreements involve the risk that the market value of the securities retained in
lieu of sale by the Portfolio may decline below the price of the securities the
Portfolio has sold but is obligated to repurchase. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, such buyer or its trustee or receiver may receive an extension of
time to
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determine whether to enforce the Portfolio's obligation to repurchase the
securities, and the Portfolio's use of the proceeds of the reverse repurchase
agreement may effectively be restricted pending such decision.
The Portfolio also may enter into "dollar rolls," in which the Portfolio sells
fixed income securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar (same type, coupon and maturity)
securities on a specified future date. During the roll period, the Portfolio
would forego principal and interest paid on such securities. The Portfolio would
be compensated by the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on the cash
proceeds of the initial sale. See "Investment Objectives and Policies" in the
Statement of Additional Information.
Reverse repurchase agreements and dollar rolls will be treated as borrowings
and will be deducted from the Portfolio's assets for purposes of calculating
compliance with the Portfolio's borrowing limitation. See "Investment
Limitations" in the Statement of Additional Information.
SECURITIES LENDING. The Portfolio may lend its respective 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 a Fund's total return. At all times a loan is outstanding, the
Portfolio requires the borrower to maintain with the Portfolio'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 a Fund's
investment program and regulatory agencies, and as approved by the Board. The
Portfolio 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.
ZERO COUPON SECURITIES. The Portfolio may invest in certain zero coupon
securities that are "stripped" U.S. Treasury notes and bonds. They 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. However, a portion of the
original issue discount on zero coupon securities and the "interest" on
payment-in-kind securities will be included in the Portfolio's income.
Accordingly, for a 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 its share of the total amount of cash the Portfolio
actually receives. These distributions must be made from the Fund's, or its
share of the Portfolio's cash assets or, if necessary, from the proceeds of
sales of portfolio securities. The Portfolio 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.
SYNTHETIC SECURITY POSITIONS. The Portfolio may utilize combinations of
futures on bonds and forward currency contracts to create investment positions
that have substantially the same characteristics as bonds of the same type as
those on which the futures contracts are written. Investment positions of this
type are generally referred to as "synthetic securities."
For example, in order to establish a synthetic security position the Portfolio
that is comparable to owning a Japanese government bond, the Sub-advisor might
purchase futures contracts on Japanese government bonds in the desired principal
amount and purchase forward currency contracts for Japanese Yen in an amount
equal to the then current purchase price for such bonds in the Japanese cash
market, with each contract having approximately the same delivery date.
The Sub-advisor might roll over the futures and forward currency contract
positions before taking delivery in order to continue the Portfolio's investment
position, or the Sub-advisor might close out those positions, thus effectively
selling the synthetic security. Further, the amount of each contract might be
adjusted in response to market conditions and the forward currency contract
might be changed in amount or eliminated in order to hedge against currency
fluctuations.
The Sub-advisor would create synthetic security positions for the Portfolio
when it believes that it can obtain a better yield or achieve cost savings in
comparison to purchasing actual bonds or when comparable bonds are not readily
available in the market. Synthetic security positions are subject to the risk
that changes in the value of purchased futures contracts may differ from changes
in the value of the bonds that might otherwise have been purchased in the cash
market. Also, while the Sub-advisor believes that the cost of creating synthetic
security positions generally will be materially lower than the cost of acquiring
comparable bonds in the cash market, the Portfolio will incur transaction costs
in connection with each purchase of a futures or forward currency contract. The
use of futures contracts and forward currency contracts to create synthetic
security positions also is subject to substantially the same risks as those that
exist when these instruments are used in connection with hedging strategies. See
"Options, Futures and Forward Currency Transactions" below and "Options, Futures
and Currency Strategies" in the Statement of Additional Information.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. The Portfolio may use
forward currency contracts, futures contracts, options on securities, options on
indices, options on currencies, and options on futures contracts to attempt to
hedge against the overall level of investment and currency risk normally
associated with the Portfolio's investment. The Portfolio also may enter into
interest rate, currency and index swaps and purchase or sell related caps,
floors and collars and other similar instruments. See
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"Swaps, Caps, Floors and Collars" below. 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 Portfolio may
enter into such instruments up to the full value of its portfolio assets. See
"Risk Factors -- Options, Futures and Forward 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 Portfolio may enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purchase or sale of a foreign currency against the
U.S. dollar or may involve two foreign currencies. The Portfolio may enter into
forward currency contracts either with respect to specific transactions or with
respect to the Portfolio's portfolio positions. The Portfolio 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.
In addition, the Portfolio 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 Portfolio or that the Sub-advisor intends to include in the
Portfolio's holdings. The Portfolio 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 Portfolio 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 market sector decline that could adversely affect the
Portfolio's holdings. The Portfolio 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. The Portfolio may use interest rate
futures contracts and options thereon to hedge its portfolio against changes in
the general level of interest rates.
SWAPS, CAPS, FLOORS AND COLLARS. The Portfolio may enter into interest rate,
currency and index swaps, and purchase or sell related caps, floors and collars
and other derivative instruments. The Portfolio 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 Portfolio anticipates purchasing at a later date. The Portfolio
intends to use these transactions as hedges, and neither will sell interest rate
caps or floors if it does not own securities or other instruments providing an
income stream roughly equivalent to what the Portfolio may be obligated to pay.
Interest rate swaps involve the exchange by the Portfolio 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.
INDEXED COMMERCIAL PAPER. The Portfolio may invest without limitation in
commercial paper which 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 Portfolio 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 Portfolio
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 Portfolio will not purchase such commercial paper for
speculation.
OTHER INDEXED SECURITIES. The Portfolio 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
may also 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 Portfolio 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 the Fund's outstanding voting securities. A
"majority of the Fund's outstanding voting securities" means the lesser of (i)
67% of the shares repre-
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sented 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 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 are not fundamental policies and may be changed by the
Trust's Board of Trustees without shareholder approval. The investment policies
of the Fund are identical to the investment policies of the Portfolio.
The approval of the Fund and of other investors in the Portfolio, if any, is
not required to change the investment objectives, policies or limitations of the
Portfolio, unless otherwise specified. Written notice shall be provided to
shareholders of the Fund thirty days prior to any changes in the Portfolio's
investment objectives.
The Fund is authorized to make short sales of securities, although it has no
current intention of doing so. See "Investment Objectives and Policies -- Short
Sales" in the Statement of Additional Information.
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 Portfolio's investment policies or restrictions.
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RISK FACTORS
GENERAL. There is no assurance that the Fund or the Portfolio will achieve its
investment objectives. The Portfolio's net asset value will fluctuate,
reflecting fluctuations in the market value of its portfolio positions and its
net currency exposure. The value of fixed income securities held by the
Portfolio generally fluctuates inversely with interest rate movements. Longer
term bonds held by the Portfolio are subject to greater interest rate risk.
NON-DIVERSIFIED CLASSIFICATION. The Fund and the Portfolio are classified
under the Investment Company Act of 1940 (the "1940 Act") as a "non-diversified"
fund. As a result, the Portfolio will be able to invest in a fewer number of
issuers than if it were classified under the 1940 Act as a "diversified" fund.
To the extent that the Portfolio invests in a smaller number of issuers, the
value of the Fund's shares may fluctuate more widely and the Portfolio may be
subject to greater investment and credit risk with respect to the portfolios.
FOREIGN INVESTING. Investing in foreign securities entails certain risks. 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 those applicable to U.S. 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 Portfolio's interest and dividends from
foreign issuers may be subject to non-U.S. withholding taxes, thereby reducing
their net investment income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Portfolio, political or social instability, or diplomatic
developments which could affect the investments of the Portfolio in those
countries. 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, resource
self-sufficiency and balance of payments positions.
CURRENCY RISK. Since the Portfolio normally invests substantially in
securities denominated in currencies other than the U.S. dollar, and because
they may hold foreign currencies, they 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. The exchange rates between the U.S. dollar and
other currencies are determined by supply and demand in the currency exchange
markets, the international balance of payments, governmental intervention,
speculation and other economic and political conditions. 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
U.S. dollars.
In addition, many of the currencies in emerging market countries have
experienced steady devaluations relative to the U.S. dollar and major
devaluations have historically occurred in certain countries.
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
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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.
INVESTING IN EMERGING MARKETS. Because of the special risks associated with
investing in emerging markets, an investment in the Portfolio 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 foreign markets around the world.
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 in any
emerging market, the Portfolio could lose its entire investment in that market.
Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain emerging market
countries.
Economies in 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. These economies also have been and may continue
to be affected adversely by economic conditions in the countries in which they
trade.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. 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 securities 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 Portfolio to make intended securities purchases due to
settlement problems could cause the Portfolio to forego attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result either in losses to the Portfolio due to subsequent
declines in value of the portfolio security or, if the Portfolio has entered
into a contract to sell the security, could result in possible liability to the
purchaser.
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 Portfolio's portfolio securities in
such markets may not be readily available. Section 22(e) of the 1940 Act permits
a registered investment company to suspend redemption of its shares for any
period during which an emergency exists, as determined by the SEC. Accordingly,
when the Portfolio believes that appropriate circumstances warrant, it will
promptly apply to the SEC for a determination that an emergency exists within
the meaning of Section 22(e) of the 1940 Act. During the period commencing from
the Portfolio's identification of such conditions until the date of SEC action,
the portfolio securities of the Portfolio in the affected markets will be valued
at fair value as determined in good faith by or under the direction of the
Trust's or the Portfolio's Boards of Trustees.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Portfolio may have difficulty
disposing of Assignments and Participations. The liquidity of such securities is
limited and the Portfolio 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
Portfolio's ability to dispose of particular Assignments or Participations when
necessary to meet the Portfolio's 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 Portfolio to assign a value to those
securities for purposes of valuing the Portfolio's portfolio and calculating its
net asset value.
SOVEREIGN DEBT. The Portfolio 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 a 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
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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 Portfolio'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
the willingness of countries to service their sovereign debt. Although the
Sub-advisor intends to manage the 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 Portfolio 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 Portfolio
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 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.
Investors should also be aware that certain sovereign debt instruments in
which the Portfolio 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 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 Portfolio 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 Portfolio anticipates
that such securities could be sold only to a limited number of dealers or
institutional investors.
LOWER QUALITY DEBT SECURITIES. Under normal market conditions the Portfolio
may invest up to 100% of the Portfolio's 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. 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 quality 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 higher quality securities with regard to a deterioration of general
economic conditions. These securities are the equivalent of high yield, high
risk bonds, commonly known as "junk bonds." As noted above, the Portfolio may
invest in debt securities rated below C, which are in default as to principal
and/or interest.
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 quality in response to subsequent events, so that an
issuer's
14
<PAGE> 202
current financial condition may be better or worse than a rating indicates. See
"Appendix A" for a discussion of Moody's and S&P's ratings.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Portfolio. If an issuer exercises these provisions in a
declining interest rate market, the Portfolio may have to replace the security
with a lower yielding security, resulting in a decreased return for investors.
In addition, the Portfolio may have difficulty disposing of lower quality
securities because there may be a thin trading market for such securities. There
may be no established retail secondary market for many of these securities, and
the Portfolio anticipates that such securities could be sold only to a limited
number of dealers or institutional investors. The lack of a liquid secondary
market also may have an adverse impact on market prices of such instruments and
may make it more difficult for the Portfolio to obtain accurate market
quotations for purposes of valuing the securities in the Portfolio. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of lower quality
securities, especially in a thinly traded market. The Portfolio also may acquire
lower quality debt securities during an initial underwriting or may acquire
lower quality debt securities which are sold without registration under
applicable securities laws. Such securities involve special considerations and
risks.
Factors having an adverse effect on the market value of lower rated securities
or their equivalents purchased by the Portfolio will adversely impact net asset
value of the Fund. See "Risk Factors" in the Statement of Additional
Information. In addition to the foregoing, such factors may 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 Portfolio also may 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 Portfolio 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.
As of October 31, 1997, the Portfolio had 86.59% of its total net assets in
debt securities that received a rating from Moody's and 10.29% of its total net
assets in debt securities that were not so rated. In addition, the Portfolio had
3.12%, of its total net assets in cash and net receivables. The Portfolio had
the following percentages of its total net assets invested in rated securities:
Aaa -- 7.99%, Aa -- 0.00%, A -- 0.00%, Baa -- 13.11%, Ba -- 48.56%, B -- 16.93%,
Caa -- 0.00%, Ca -- 0.00%, C -- 0.00%. Included under the unrated category are
securities held by the Portfolio's total net assets which have been determined
by the Sub-advisor to be of comparable quality to securities in the following
rating categories: Ba -- 3.22%; and B -- 7.07%. It should be noted that the
allocation of the investments of the Portfolio by rating on any given date will
vary and should not be considered representative of the future portfolio
composition of the Portfolio.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Although the Portfolio is
authorized to enter into options, futures and forward currency transactions, the
Portfolio might not enter into any such transactions. In addition, issuers in
emerging markets typically are subject to a greater degree of change in earnings
and business prospects than issuers in developed countries. 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 or in the
appropriate market sector and movements in interest rates and currency markets;
(2) imperfect correlation, or even no correlation, between movements in the
price of options, forward contracts, futures contracts or options thereon and
movements in the price of the currency or security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are different from
those needed to select the securities in which the Portfolio 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 Portfolio 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 Portfolio to sell a security at a disadvantageous time, due to the need for
the Portfolio to maintain "cover" or to set aside securities in connection with
hedging transactions.
ILLIQUID SECURITIES. The Portfolio 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 securi-
15
<PAGE> 203
ties 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.
- --------------------------------------------------------------------------------
MANAGEMENT
The Trust's and the Portfolio's Boards of Trustees have overall responsibility
for the operation of the Fund and the Portfolio, respectively. The Trust's and
Portfolio's Boards of Trustees have approved all significant agreements between
the Trust and the Portfolio on the one side and persons or companies furnishing
services to the Fund and the Portfolio 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 and the Portfolio are delegated to the officers of the Trust and the
Portfolio, subject always to the investment objective and policies of the Fund
and the Portfolio and to the general supervision of the Boards. See "Trustees
and Executive Officers" in the Statement of Additional Information for
information on the Trust's and the Portfolio's Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-advisor as the Portfolio's investment managers and administrators include,
but are not limited to, determining the composition of the investment holdings
of the Portfolio and placing orders to buy, sell or hold particular securities.
In addition, AIM and the Sub-advisor provide the following administration
services to the Fund and the Portfolio: furnishing corporate officers and
clerical staff; providing office space, services and equipment; and supervising
all matters relating to the Portfolio's operation.
The Fund pays AIM administration fees at the annualized rate of 0.25% of the
Fund's average daily net assets. AIM has appointed the Sub-advisor as the Fund's
sub-administrator. In addition, the Fund bears its pro rata portion of the
investment management and administration fees paid by the Portfolio to AIM and
the Sub-advisor. The Portfolio pays AIM such fees, based on the average daily
net assets of the Portfolio at the annualized rate of 0.475% on the first $500
million, 0.45% on the next $1 billion, 0.425% on the next $1 billion and 0.40%
on amounts thereafter, plus 2% of the Portfolio's total investment income as
stated in the Portfolio's Statement of Operations, calculated in accordance with
generally accepted accounting principles, adjusted daily for currency
revaluations, on a marked to market basis, of the Portfolio's assets; provided,
however, that during any fiscal year this amount shall not exceed 2% of the
Portfolio's total investment income calculated in accordance with generally
accepted accounting principles. Out of its aggregate fees payable by the Fund
and the Portfolio, AIM pays the Sub-advisor sub-advisory and sub-administration
fees equal to 40% of the aggregate fees AIM receives from the Fund and the
Portfolio. The investment management and administration fees paid by the Fund
and the Portfolio are higher than those paid by most mutual funds. The Fund and
Portfolio pay all expenses not assumed by AIM, the Sub-advisor, AIM Distributors
or other agents. Effective November 1, 1997, AIM has undertaken to limit the
expenses of the Advisor Class shares of the Fund (and the Fund's pro-rata
portion of the Portfolio's expenses) to the maximum annual rate of 1.40% of the
average daily net assets of the Fund's Advisor Class shares.
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 Portfolio 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 Portfolio 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 and the Portfolio, the
Sub-advisor employs a team approach, taking advantage of its investment
resources around the world.
16
<PAGE> 204
The investment professionals primarily responsible for the portfolio
management of the Portfolio are as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- ----------- -------------------- -------------------
<S> <C> <C>
Cheng-Hock Lau Portfolio Manager Chief Investment Officer and Portfolio Manager for
New York since 1997 Global Fixed Income 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.
Craig Munro Portfolio Manager Portfolio Manager for the Sub-advisor since August
New York since 1998 1997. Vice President and Senior Analyst in the
Emerging Markets Group of the Global Fixed Income
Division of Merrill Lynch Asset Management from
1993 to August 1997.
</TABLE>
In placing orders for the Portfolio's securities 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 for the Portfolio 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 or the Portfolio 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 (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of the Advisor Class
shares of the Fund. Certain Trustees and officers of the Trust are affiliated
with AIM Distributors.
The Distribution Agreement provides AIM Distributors with the exclusive right
to distribute Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST AND THE PORTFOLIO
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 of 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 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.
17
<PAGE> 205
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a Delaware
business trust. Under Delaware law, the Fund and other entities that invest in
the Portfolio enjoy the same limitations of liability extended to shareholders
of private, for-profit corporations. There is a remote possibility, however,
that under certain circumstances an investor in the Portfolio may be held liable
for the Portfolio's obligations. However, the Agreement and Declaration of Trust
of the Portfolio disclaims shareholder liability for acts or obligations of the
Portfolio and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Portfolio or
a trustee. The Agreement and Declaration of Trust also provides for
indemnification from the Portfolio property for all losses and expenses of any
shareholder held personally liable for the Portfolio's obligations. Thus the
risk of an investor incurring financial loss on account of such liability is
limited to circumstances in which the Portfolio itself would be unable to meet
its obligations and where the other party was held not to be bound by the
disclaimer.
Whenever the Fund is requested to vote on any proposal of the Portfolio, the
Fund will hold a meeting of Fund shareholders and will cast its vote as
instructed by Fund shareholders. Shares for which no voting instructions are
received will be voted in the same proportion as the shares for which voting
instructions are received.
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, to the
Fund and to the Portfolio.
18
<PAGE> 206
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
A-1
<PAGE> 207
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
A-2
<PAGE> 208
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
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SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
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EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
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Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
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HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
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REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
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as certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client
Services Department of AFS.
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DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
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DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
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TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
A-9
<PAGE> 215
AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 216
APPENDIX A
- --------------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS
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 bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A -- 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 both 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.
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.
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 fi
A-11
<PAGE> 217
nancial 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.
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 "A1" 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."
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<PAGE> 218
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> 219
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> 220
[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.
GHI-PRO-2
<PAGE> 221
APPLICATION
INSIDE
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS OF
AIM GLOBAL INFRASTRUCTURE FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM GLOBAL INFRASTRUCTURE 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 capital
growth by investing all of its investable assets in the Global Infrastructure
Portfolio (the "Portfolio"), which, in turn, invests primarily in equity
securities of companies throughout the world that design, develop or provide
products and services significant to a country's infrastructure. The Portfolio's
investment objective is identical to that of the Fund. The investment experience
of the Fund will correspond directly with the investment experience of the
Portfolio.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
September 8, 1998, has been filed with the Securities and Exchange Commission
(the "SEC") and is incorporated herein by reference. The Statement of Additional
Information is available without charge upon written request to the Trust at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or by calling (800)
347-4246. The SEC maintains a Web site at http://www.sec.gov that contains the
Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund. Additional information about the fund may
also be obtained from http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 222
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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 and the
Portfolio......................... 13
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-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND AND THE PORTFOLIO
The Fund is a diversified series of the Trust. The Portfolio is a diversified
series of Global Investment Portfolio.
INVESTMENT OBJECTIVE. The Fund seeks long-term capital growth.
PRINCIPAL INVESTMENTS. The Fund invests all of its investable assets in the
Portfolio, which, in turn, invests primarily in equity securities of companies
throughout the world that design, develop or provide products and services
significant to a country's infrastructure.
INVESTMENT MANAGERS. The Portfolio is managed by A I M Advisors, Inc. ("AIM")
and is sub-advised and sub-administered by INVESCO (NY), Inc. (the
"Sub-advisor"). AIM and the Sub-advisor and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM and the
Sub-advisor are both indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC and its subsidiaries are an independent investment management group
that has a significant presence in the institutional and retail segment of the
investment management industry in North America and Europe, and a growing
presence in Asia. AIM was organized in 1976 and, together with its subsidiaries,
currently advises approximately 90 investment company portfolios.
PURCHASING SHARES. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of a least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the other funds in The AIM Family of Funds that are
sub-advised by the Sub-advisor ("AIM Funds") on May 29, 1998; (e) any of the
companies composing or affiliated with AMVESCAP PLC; and (f) AIM Global Trends
Fund. Pursuant to a separate prospectus, the Fund also offers Class A and Class
B shares, which represent interests in the Fund. The Class A and Class B shares
have different distribution arrangements.
Initial investments in Advisor Class shares must be at least $500 and
additional investments must be at least $50. The distributor of the Advisor
Class shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds"),
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain Funds in the AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at the Fund's net asset value on any business day. See
"How to Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be rein-
2
<PAGE> 223
vested at net asset value without payment of a sales charge in the Fund's shares
or may be invested in shares of the other funds in The AIM Family of Funds. See
"Dividends, Distributions and Tax Matters."
RISK FACTORS. There is no assurance that the Fund or the Portfolio will
achieve its investment objective. The Fund's net asset value will fluctuate,
reflecting fluctuations in the market value of the Portfolio's portfolio
holdings. The Portfolio's policy of concentrating its investments in companies
that design, develop or provide products and services significant to a country's
infrastructure may cause the Fund's net asset value to fluctuate more than if it
invested in a greater number of industries. The Portfolio may invest 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 Portfolio 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 Portfolio 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> 224
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following table(1):
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Costs:
Maximum sales charge on purchases of shares (as a % of
offering price)........................................ None
Sales charges on reinvested distributions to
shareholders........................................... None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)........ None
Redemption charges........................................ None
Exchange fees............................................. None
Annual Fund Operating Expenses(2): (as a % of average net
assets)
Investment management and administration fees............. 0.98%
12b-1 distribution and service fees....................... None
Other expenses (after reimbursements)..................... 0.52%
----
Total Fund Operating Expenses..................... 1.50%
====
</TABLE>
(1)This table is intended to assist investors in understanding the various costs
and expenses associated with investing in the Fund.
(2)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 1.50% of the average daily net assets of the Fund's Advisor
Class shares. AIM has voluntarily agreed to continue this limitation through
May 31, 2000. Without reimbursements, "Other Expenses' and "Total Fund
Operating Expenses" would have been 0.60% and 1.58%, respectively, for
Advisor Class shares of the Infrastructure Fund. "Other expenses" include
custody, transfer agency, legal, audit and other operating expenses. See
"Management" herein and the Statement of Additional Information for more
information. Investors purchasing Advisor Class shares through financial
planners, trust companies, bank trust departments or registered investment
advisors, or under a "wrap fee' program, will be subject to additional fees
charged by such entities or by the sponsors of such programs. Where any
account advised by one of the companies composing or affiliated with AMVESCAP
PLC invests in Advisor Class shares of the Fund, such account shall not be
subject to duplicative advisory fees.
The Board of Trustees of the Trust believes that the aggregate per share
expenses of the Infrastructure Fund and its corresponding Portfolio will be
approximately equal to the expenses the Fund would incur if its assets were
invested directly in the type of securities being held by its Portfolio.
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
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class Shares................................. $15 $48 $82 $180
</TABLE>
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S AND THE PORTFOLIO'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 OR THE PORTFOLIO'S
PROJECTED OR ACTUAL PERFORMANCE.
4
<PAGE> 225
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FINANCIAL HIGHLIGHTS
The tables below provide condensed financial information concerning income and
capital changes for Advisor Class shares of the Fund. This information is
supplemented by the financial statements and accompanying notes appearing in the
Statement of Additional Information. The financial statements and notes, for the
fiscal year ended October 31, 1997, have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report thereon also is included in the
Statement of Additional Information. The unaudited financial statements and
notes for the semi-annual period ended April 30, 1998, are also included in the
Statement of Additional Information.
AIM GLOBAL INFRASTRUCTURE FUND
(FORMERLY GT GLOBAL INFRASTRUCTURE FUND)
<TABLE>
<CAPTION>
ADVISOR CLASS+
-------------------------------------------------------
SIX MONTHS
ENDED JUNE 1,
APRIL 30, YEAR ENDED OCTOBER 31, 1995 TO
1998 ---------------------- OCTOBER 31,
(UNAUDITED)(c) 1997(c) 1996(c) 1995
-------------- --------- --------- -----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period............... $ 15.23 $ 14.52 $ 12.14 $ 12.00
------- ------- ------- -------
Income from investment operations:
Net investment income (loss)....................... 0.08* 0.05 0.04 0.02*
Net realized and unrealized gain (loss) on
investments...................................... 1.51 1.38 2.34 0.12
------- ------- ------- -------
Net increase (decrease) from investment
operations....................................... 1.59 1.43 2.38 0.14
------- ------- ------- -------
Distributions:
From net realized gain on investments.............. (0.11) (0.72) -- --
Total distributions......................... (0.11) (0.72) -- --
Net assets value, end of period...................... $ 16.71 $ 15.23 $ 14.52 $ 12.14
======= ======= ======= =======
Total investment return..................... 10.53%(b) 10.10% 19.60% 1.17%(b)
======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in 000's)............... $ 9,347 $ 2,539 $ 344 $ 216
Ratio of net investment income (loss) to average net
assets:
With expense reductions and reimbursement by the
Sub-advisor...................................... 1.01%(b) 0.41% 0.31% 0.18%(a)
Without expense reductions and reimbursement by the
Sub-advisor...................................... 0.82%(a) 0.33% 0.20% (0.08)%(a)
Ratio of operating expenses to average net assets:
With expense reductions and reimbursement by the
Sub-advisor...................................... 1.49%(a) 1.50% 1.64% 1.86%(a)
Without expense reductions and reimbursement by the
Sub-advisor...................................... 1.68%(a) 1.58% 1.75% 2.12%(a)
Portfolio turnover rate++............................ 95%(a) 41% 41% 45%(a)
Average commission rate per share paid on portfolio
transactions++..................................... $0.0148 $0.0046 $0.0109 N/A
</TABLE>
- ---------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon average shares
outstanding during the period.
* Before reimbursement by the Sub-advisor, the net investment income per
share would have been reduced by $0.01 and $0.02 for the six months ended
April 30, 1997 and for the year ended October 31, 1995, respectively.
** Before reimbursement by the Sub-advisor, the net investment income per
share would have been reduced by $0.01.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Fund as a whole without distinguishing among the class of
shares issued. The Fund invests only in the Infrastructure Portfolio and
does not engage in securities transactions. Accordingly, the portfolio
turnover and average commission rates presented are for the Infrastructure
Portfolio.
N/A Not Applicable.
5
<PAGE> 226
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PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
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 capital
growth. It seeks its objective by investing all of its investable assets in the
Portfolio, which, in turn, invests primarily in equity securities of companies
throughout the world that design, develop or provide products and services
significant to a country's infrastructure. The Portfolio's investment objective
is identical to that of the Fund. There can be no assurance that the Fund or
Portfolio will achieve its investment objective.
INVESTMENT POLICIES. At least 65% of the Portfolio's total assets normally
will be invested in common and preferred stocks and warrants to acquire such
securities issued by infrastructure companies. An "infrastructure" company is an
entity in which (i) at least 50% of either the revenues or earnings was derived
from infrastructure activities, or (ii) at least 50% of the assets was devoted
to such activities, based on the company's most recent fiscal year. The
remainder of the Portfolio's assets may be invested in debt securities issued by
infrastructure companies and/or equity and debt securities of companies outside
of the infrastructure industries, which, in the opinion of the Sub-advisor,
stand to benefit from developments in the infrastructure industries.
Examples of infrastructure companies include those engaged in designing,
developing or providing the following products and services: electricity
production; oil, gas, and coal exploration, development, production and
distribution; water supply, including water treatment facilities; nuclear power
and other alternative energy sources; transportation, including the construction
or operation of transportation systems; steel, concrete, or similar types of
products; communications equipment and services (including equipment and
services for both data and voice transmission); mobile communications and
cellular radio/paging; emerging technologies combining telephone, television
and/or computer systems; and other products and services, which, in the
Sub-advisor's judgment, constitute services significant to the development of a
country's infrastructure.
The Sub-advisor believes that a country's infrastructure is one key to the
long-term success of that country's economy. The Sub-advisor believes that
adequate energy, transportation, water, and communications systems are essential
elements for long-term economic growth. The Sub-advisor believes that many
developing nations, especially in Asia and Latin America, plan to make
significant expenditures to the development of their infrastructure in the
coming years, which is expected to facilitate increased levels of services and
manufactured goods.
In the developed countries of North America, Europe, Japan and the Pacific
Rim, the Sub-advisor expects that the replacement and upgrade of transportation
and communications systems should stimulate growth in the infrastructure
industries of those countries. In addition, in the Sub-advisor's view,
deregulation of telecommunications and electric and gas utilities in many
countries is promoting significant changes in these industries.
The Sub-advisor believes that strong economic growth in developing countries
and infrastructure replacement, upgrade, and deregulation in more developed
countries provide an environment for favorable investment opportunities in
infrastructure companies worldwide. In addition, the long-term growth rates of
certain foreign countries' economies may be substantially higher than the long-
term growth rate of the U.S. economy. An integral aspect of certain foreign
countries' economies may be the development or improvement of their
infrastructure.
6
<PAGE> 227
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:
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. The Portfolio expects that,
from time to time, a significant portion of its assets may be invested in the
securities of domestic issuers. The industry represented in the Portfolio,
however, is a global industry with significant, growing markets outside of the
United States. A sizeable proportion of the companies which comprise the
infrastructure industries are headquartered outside of the United States.
For these reasons, the Sub-advisor believes that a portfolio composed only of
securities of U.S. issuers does not provide the greatest potential for return
from an investment by the Portfolio. The Sub-advisor uses its financial
expertise in markets located throughout the world and the substantial global
resources of AMVESCAP PLC in attempting to identify those countries and
companies then providing the greatest potential for long-term capital
appreciation. In this fashion, the Sub-advisor seeks to enable shareholders to
capitalize on the substantial investment opportunities and the potential for
long-term growth of capital presented by the global infrastructure industry
represented in the Portfolio.
The Sub-advisor allocates the Portfolio's assets among securities of countries
and in currency denominations where opportunities for meeting the Portfolio's
investment objective are expected to be the most attractive. The Portfolio may
invest substantially in securities denominated in one or more currencies. Under
normal conditions, the Portfolio invests in the securities of issuers located in
at least three countries, including the United States; investments in securities
of issuers in any one country, other than the United States, will represent no
more than 50% of the Portfolio's total assets.
In analyzing specific companies for possible investment, the Sub-advisor
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets.
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 Portfolio may invest up to
100% of its total assets in cash (U.S. dollars, foreign currencies or
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 the Portfolio's investments may be
made in the United States and denominated in U.S. dollars. To the extent the
Portfolio adopts a temporary defensive posture, it will not be invested so as to
achieve directly its investment objective. In addition, pending investment of
proceeds from new sales of Fund shares or to meet its ordinary daily cash needs,
the Portfolio 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 full description of money market instruments, see "Money
Market Instruments" in the "Investment Objective and Policies" section of the
Statement of Additional Information.
PRIVATIZATIONS. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-advisor believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Portfolio in privatizations in appropriate
circumstances. In certain foreign countries, the ability of foreign entities
such as the Portfolio to participate in privatizations may be limited by local
law, or the terms on which the Portfolio may be permitted to participate may be
less advantageous than those for local investors. There can be no assurance that
foreign governments will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Portfolio may invest up to 10%
of its total assets in other investment companies, some of which may be
investment vehicles or companies that are advised by the Sub-advisor or its
affiliates ("Affiliated Funds"). As a shareholder in an investment company, the
Portfolio would bear its ratable share of that investment company's expenses,
including its advisory and administration fees. At the same time, the Portfolio
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 Portfolio
invests in an Affiliated Fund.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Portfolio
may borrow from banks or may borrow through reverse repurchase agreements and
"roll" transactions in connection with meeting requests for the redemptions of
the Fund's shares. The Portfolio also may borrow up to 5% of its total assets
for temporary or emergency purposes other than to meet redemptions of the Fund's
shares. The Portfolio may borrow up to 33 1/3% of its total assets. However, no
additional investments will be made if the Portfolio's borrowings exceed 5% of
its total assets. Any borrowing by the Portfolio may cause greater fluctuation
in the value of its shares than would be the case if the Portfolio did not
borrow.
A reverse repurchase agreement is a borrowing transaction in which the
Portfolio 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. A "roll"
borrowing transaction involves the Portfolio's sale of securities together with
its commitment (for which the Portfolio may receive a fee) to purchase similar,
but not identical, securities at a future date.
7
<PAGE> 228
SECURITIES LENDING. The Portfolio may lend its portfolio securities to
broker/dealers or to other institutional investors. Securities lending allows
the Portfolio to retain ownership of the securities loaned and, at the same
time, enhances the Fund's total return. The Portfolio 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 Portfolio'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 Portfolio'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 should the borrower
fail financially.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES. The Portfolio may purchase debt
securities on a "when-issued" basis and may purchase or sell such securities on
a "forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. The price, which is generally expressed in yield
terms, is fixed at the time 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 Portfolio will
purchase or sell when-issued securities or enter into forward commitments only
with the intention of actually receiving or delivering the securities, as the
case may be. No income accrues on securities that have been purchased pursuant
to a forward commitment or on a when-issued basis prior to delivery to the
Portfolio. If the Portfolio disposes of the right to acquire a when-issued
security prior to its acquisition or disposes of its right to deliver or receive
against a forward commitment, it may incur a gain or loss. At the time the
Portfolio enters into a transaction on a when-issued or forward commitment
basis, the Portfolio will segregate cash or liquid securities equal to the value
of the when-issued or forward commitment securities with its custodian and will
mark to market daily such assets. There is a risk that the securities may not be
delivered and that the Portfolio may incur a loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. The Portfolio may use
forward currency contracts, futures contracts, options on securities, options on
indices, options on currencies and options on futures contracts to attempt to
hedge against the overall level of investment and currency risk normally
associated with 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 Portfolio may enter into such
instruments up to the full value of its portfolio assets. See "Risk
Factors -- Options, Futures and Forward 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 Portfolio may enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purchase or sale of a foreign currency against the
U.S. dollar or may involve two foreign currencies. The Portfolio may enter into
forward currency contracts either with respect to specific transactions or with
respect to its portfolio positions. The Portfolio 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.
In addition, the Portfolio may purchase and sell put and call options on
equity and debt securities to hedge against the risk of fluctuations in the
prices of securities held by the Portfolio or that the Sub-advisor intends to
include in the Portfolio's holdings. The Portfolio also may purchase and sell
put and call options on stock indexes to hedge against overall fluctuations in
the securities markets generally or in a specific market sector.
Further, the Portfolio may sell stock index futures contracts and may purchase
put options or write call options on such futures contracts to protect against a
general stock market decline or a decline in a specific market sector that could
affect adversely the Portfolio's holdings. The Portfolio also may purchase stock
index futures contracts and purchase call options or write put options on such
contracts to hedge against a general stock market or market sector advance and
thereby attempt to lessen the cost of future securities acquisitions. The
Portfolio may use interest rate futures contracts and options thereon to hedge
the debt portion of its portfolio against changes in the general level of
interest rates.
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 Fund's shares represented at a meeting at which more than 50% of the
outstanding shares are represented, or (ii) more than 50% of the outstanding
shares. In addition, the Fund has adopted certain investment limitations 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. The Fund's policies regarding
concentration and lending, and the percentage of the Fund's assets that may be
committed to borrowing, are fundamental policies and may not be changed without
shareholder approval. The investment policies of the Fund are identical to the
investment policies of the Portfolio.
The approval of the Fund and of other investors in the Portfolio, if any, is
not required to change the investment objective, policies or limitations of the
Portfolio, unless otherwise specified. Written notice shall be provided to
shareholders of the Fund thirty days prior to any changes in the Portfolio's
investment objective.
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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 or Portfolio's investment policies or
restrictions.
The Portfolio 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 Program" section of the Statement of Additional Information.
OTHER INFORMATION REGARDING THE PORTFOLIO. As previously described, the Fund,
unlike mutual funds that directly acquire and manage their own portfolios of
securities, seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, which is a separate investment company.
Because the Fund will invest only in the Portfolio, the Fund's shareholders will
acquire only an indirect interest in the investments of the Portfolio.
The Fund may redeem its investment in the Portfolio at any time, if the Board
of Trustees of the Trust determines that it is in the best interests of the Fund
and its shareholders to do so. A change in the Portfolio's investment objective,
policies or limitations that is not approved by the Board or the shareholders of
the Fund could require the Fund to redeem its interest in the Portfolio. Any
such redemption could result in a distribution in kind of portfolio securities
(as opposed to a cash distribution) by the Portfolio. Should such a distribution
occur, the Fund could incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of investments for the Fund and could
adversely affect its liquidity. Upon redemption, the Board would consider what
action might be taken, including the investment of all the investable assets of
the Fund in another pooled investment entity having substantially the same
investment objective as the Fund or the retention by the Fund of its own
investment advisor to manage its assets in accordance with its investment
objective, policies and limitations discussed herein.
In addition to selling an interest therein to the Fund, the Portfolio may sell
interests therein to other non-affiliated investment companies and/or other
institutional investors. All institutional investors in the Portfolio will pay a
proportionate share of the Portfolio's expenses and will invest in the Portfolio
on the same terms and conditions. However, if another investment company invests
any or all of its assets in the Portfolio, it would not be required to sell its
shares at the same public offering price as the Fund and may charge different
sales commissions. Therefore, investors in the Fund may experience different
returns than investors in another investment company that invests exclusively in
the Portfolio. As of the date of this Prospectus, the Fund is the only
institutional investor in the Portfolio.
The Fund may be materially affected by the actions of other large investors,
if any, in the Portfolio. For example, as with all open-end investment
companies, if a large investor were to redeem its interest in the Portfolio, (1)
the Portfolio's remaining investors could experience higher pro rata operating
expenses, thereby producing lower returns and (2) the Portfolio's security
holdings may become less diverse, resulting in increased risk. Institutional
investors in the Portfolio that have a greater pro rata ownership interest in
the Portfolio than the Fund could have effective voting control over the
operation of the Portfolio.
- --------------------------------------------------------------------------------
RISK FACTORS
GENERAL. There is no assurance that the Fund or the Portfolio will achieve its
investment objective. The Fund's net asset values will fluctuate reflecting
fluctuations in the market value of the Portfolio's securities positions. 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 Portfolio will
fluctuate in response to general market and economic developments, as well as
developments affecting the particular issuers of such securities. In addition,
the value of debt securities held by the Portfolio generally will fluctuate with
changes in the perceived creditworthiness of the issuers of such securities and
interest rates.
Because the Portfolio focuses its investments on the infrastructure
industries, an investment in it may be more volatile than that of other
investment companies that do not concentrate their investments in such a manner.
Moreover, the value of the shares of the Fund will be especially susceptible to
factors affecting the infrastructure industries. Accordingly, the Fund should be
considered a complete investment program.
INFRASTRUCTURE INDUSTRIES. Infrastructure industries may be subject to greater
political, environmental and other governmental regulation than many other
industries. The nature of such regulation continues to evolve in both the United
States and foreign countries, and changes in governmental policy and the need
for regulatory approvals may have a material effect on the products and services
offered by companies in the infrastructure industries. Electric, gas, water and
most telecommunications companies in the United States, for example, are subject
to both federal and state regulation affecting permitted rates of return and the
kinds of services that may be offered. Governmental regulation may also hamper
the development of new technologies.
In addition, many infrastructure companies have historically been subject to
the risks attendant to increases in fuel and other operating costs, high
interest costs on borrowed funds, costs associated with compliance with
environmental and other safety regulations and changes in the regulatory
climate. Further, competition is intense for many infrastructure companies. As a
result, many of these companies may be adversely affected in the future and such
companies may be subject to increased share price volatility. In addition, many
companies have diversified into oil and gas exploration and development, and
therefore returns may be more sensitive to en-
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<PAGE> 230
ergy prices. Other infrastructure companies, such as water supply companies, are
in a highly fragmented industry due to local ownership. Generally these
companies are mature and are experiencing little or no growth. Changes in
prevailing interest rates may also affect the Infrastructure Fund's share values
because prices of equity and debt securities of infrastructure companies often
tend to increase when interest rates decline and decrease when interest rates
rise.
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 Portfolio's interest and dividends from foreign issuers may be
subject to non-U.S. withholding taxes, thereby reducing the Portfolio's net
investment income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Portfolio, political or social instability, or diplomatic
developments which could affect the Portfolio's investments in those countries.
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, resource self-sufficiency
and balance of payments positions.
The Portfolio may invest in issuers domiciled in "emerging markets." Investing
in emerging market countries involves risks in addition to those risks involved
in foreign investing. Many emerging market countries have experienced high rates
of inflation for many years. In addition, emerging markets generally are
dependent heavily upon international trade and, accordingly, have been and
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. The securities markets of
emerging market countries are substantially smaller, less developed, less liquid
and more volatile than the securities markets of the developed countries. In
addition, issuers in emerging markets typically are subject to a greater degree
of change in earnings and business prospects than issuers in developed
countries.
The Portfolio will also be affected favorably or unfavorably by exchange
control regulations or changes in the exchange rates between foreign 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 Portfolio and gains and losses realized by the Portfolio.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, and Spain are members of the European Economic and
Monetary Union (the "EMU"). The EMU intends to establish a common European
currency for participating countries which will be known as the "euro." It is
anticipated that each participating country will supplement its existing
currency with the euro on January 1, 1999, and will replace its existing
currency with the euro on July 1, 2002. Any other European country that is a
member of the European Union and satisfies the criteria for participation in the
EMU may elect to participate in the EMU and may supplement its existing currency
with the euro after January 1, 1999.
The expected introduction of the euro presents unique risks and uncertainties,
including whether the payment and operational systems of banks and other
financial institutions will be ready by January 1, 1999; how outstanding
financial contracts will be treated after January 1, 1999; the establishment of
exchange rates for existing currencies and the euro; and the creation of
suitable clearing and settlement systems for the euro. These and other factors
could cause market disruptions before or after the introduction of the euro and
could adversely affect the value of securities held by the Fund.
LOWER QUALITY DEBT SECURITIES. The Portfolio may invest up to 20%, of its
total assets in below investment grade debt securities, that is, rated below BBB
by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or
Baa by Moody's Investors Service, Inc. ("Moody's") or, if unrated, deemed to be
of equivalent quality in the judgment of the Sub-advisor. Such investments
involve a high degree of risk. However, the Portfolio will not invest in debt
securities that are in default as to payment of principal and interest.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by S&P and debt rated Ba, B,
Caa, Ca or C by Moody's is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. 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 lower quality debt securities are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's
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<PAGE> 231
current financial condition may be better or worse than a rating indicates. See
"Description of Debt Ratings" in the Statement of Additional Information for a
full discussion of Moody's and S&P's ratings.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Portfolio. If an issuer exercises these provisions in a
declining interest rate market, the Portfolio may have to replace the security
with a lower yielding security, resulting in a decreased return for investors.
In addition, the Portfolio 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
Portfolio anticipates that such securities could be sold only to a limited
number of dealers or institutional investors. The lack of a liquid secondary
market also may have an adverse impact on market prices of such instruments and
may make it more difficult for the Portfolio to obtain accurate market
quotations for purposes of valuing its investments. The Portfolio 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 Portfolio 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 Portfolio may also incur additional expenses to the
extent it is required to seek recovery upon a default in the payment of
principal or interest on portfolio holdings, and the Portfolio may have limited
legal recourse in the event of a default.
ILLIQUID SECURITIES. The Portfolio may invest up to 15% of its net assets in
securities for which no readily available market exists, so-called "illiquid
securities." The Sub-advisor believes that carefully selected investments in
joint ventures, cooperatives, partnerships and state enterprises which are
illiquid (collectively, "Special Situations") could enable the Portfolio to
achieve capital appreciation substantially exceeding the appreciation the
Portfolio would realize if it did not make such investments. However, in order
to attempt to limit investment risk, the Portfolio will invest no more than 5%
of its total assets in Special Situations.
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.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Although the Portfolio is
authorized to enter into options, futures and forward currency transactions, the
Portfolio 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 or in the
appropriate market sector and movements in interest rates and currency markets;
(2) imperfect correlation, or even no correlation, between movements in the
price of options, forward contracts, futures contracts or options thereon and
movements in the price of the currency or security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are different from
those needed to select the securities in which the Portfolio 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 Portfolio 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 Portfolio to sell a security at a disadvantageous time, due to the need for
the Portfolio to maintain "cover" or to set aside securities in connection with
hedging transactions.
INVESTING IN SMALLER COMPANIES. While the Portfolio's holdings normally will
include securities of established suppliers of traditional products and
services, the Portfolio may invest in smaller companies which can benefit from
the development of new products and services. These smaller companies may
present greater opportunities for capital appreciation, but may also involve
greater risks than large, established issuers. Such smaller companies may have
limited product lines, markets or financial resources, and their securities may
trade less frequently and in more limited volume than the securities of larger,
more established companies. As a result, the prices of the securities of such
smaller companies may fluctuate to a greater degree than the prices of the
securities of other issuers.
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MANAGEMENT
The Trust's Board of Trustees and the Board of Trustees of the Portfolio have
overall responsibility for the operation of the Fund and the Portfolio,
respectively. The Boards have approved all significant agreements between the
Trust and the Portfolio on the one side and persons or companies furnishing
services to the Fund and the Portfolio 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 and the Portfolio are delegated to the officers of the Trust and the
Portfolio, subject always to the investment objective and policies of the Fund
and the Portfolio and to the general supervision of the Boards. See "Trustees
and Executive Officers" in the Statement of Additional Information for
information on the Trust's and the Portfolio's Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-advisor as the investment managers to the Fund and the Portfolio include,
but are not limited to, determining the composition of the investment portfolio
of the Portfolio and placing orders to buy, sell or hold particular securities.
In addition, AIM and the Sub-advisor provide the following administration
services to the Portfolio and the Fund: furnishing corporate officers and
clerical staff; providing office space, services and equipment; and supervising
all matters relating to the Portfolio's and the Fund's operation.
For administration services, the Fund pays AIM administration fees computed
daily and payable monthly at the annualized rate of 0.25% of the Fund's average
daily net assets. AIM has appointed the Sub-advisor as the Fund's
sub-administrator. In addition, the Fund bears its pro rata portion of the
investment management and administration fees paid by its corresponding
Portfolio to AIM and the Sub-advisor. The Portfolio pays AIM a fee, based on the
Portfolio's average daily net assets at the annualized rate of 0.725% on the
first $500 million, 0.70% on the next $500 million, 0.675% on the next $500
million and 0.65% on all amounts thereafter. Out of its aggregate fees payable
by the Fund and Portfolio, AIM pays the Sub-advisor sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from the
Fund and Portfolio. The investment management and administration fees paid by
the Fund and the Portfolio 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 1.50% of the average daily net assets of the Fund's Advisor Class
shares.
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 Portfolio pursuant to a master investment management
and administration 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 Portfolio 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 Portfolio, the Sub-advisor employs a
team approach, taking advantage of its investment resources around the world.
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The investment professional primarily responsible for the portfolio management
of the Portfolio is as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
----------- -------------------- -------------------
<S> <C> <C>
Brian T. Nelson Portfolio Manager Portfolio Manager for the Sub-advisor since
San Francisco since 1997 September 1997. Senior Equity Research Analyst for
the Sub-advisor from October 1994 to September
1997. Employed by Chancellor Capital Management,
Inc., a predecessor of the Sub-advisor, from 1994
to October 1996. Equity Research Analyst and
Co-Portfolio Manager for Franklin Resources, Inc.
(San Mateo, CA) from 1988 to 1994.
</TABLE>
---------------------
In placing orders for the Portfolio's securities 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 Funds 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 (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of the Advisor Class
shares of the Fund. Certain Trustees and officers of the Trust are affiliated
with AIM Distributors.
The Distribution Agreement provides AIM Distributors with the exclusive right
to distribute Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST AND THE PORTFOLIO
ORGANIZATION OF THE TRUST. The Trust was organized as a Delaware business
trust on May 7, 1998. On September 8, 1998, the Company 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 or portfolios of the Trust. From time to time, the Company 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 of 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 Company 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.
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a subtrust of
Global Investment Portfolio, a Delaware business trust. Under Delaware law, the
Fund and other entities investing in the Portfolio enjoy the same limitations of
liability extended to shareholders of private, for-profit corporations. There is
a remote possibility, however, that under certain circumstances an investor in
the Portfolio may be held liable for the Portfolio's obligations. However, the
Agreement and Declaration of Trust of the Global Investment Portfolio disclaims
shareholder liability for acts or obligations of the Portfolio and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Portfolio or a trustee. The Agreement and
Declara-
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<PAGE> 234
tion of Trust also provides for indemnification from the Portfolio property for
all losses and expenses of any shareholder held personally liable for the
Portfolio's obligations. Thus the risk of an investor incurring financial loss
on account of such liability is limited to circumstances in which the Portfolio
itself would be unable to meet its obligations and where the other party was
held not to be bound by the disclaimer.
Whenever the Fund is requested to vote on any proposal of the Portfolio, the
Fund will hold a meeting of the Fund's shareholders and will cast its vote as
instructed by its shareholders. Shares for which no voting instructions are
received will be voted in the same proportion as the shares for which voting
instructions are received.
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, to the
Fund and to the Portfolio.
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THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
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HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
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For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
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TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
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<PAGE> 237
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
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<PAGE> 238
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SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
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EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
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<PAGE> 239
Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
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HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
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REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
A-6
<PAGE> 241
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.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
A-7
<PAGE> 242
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
A-8
<PAGE> 243
TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
A-9
<PAGE> 244
AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 245
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> 246
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> 247
[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.
GIF-PRO-2
<PAGE> 248
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS OF
AIM GLOBAL RESOURCES FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM GLOBAL RESOURCE 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 capital
growth by investing all of its investable assets in the AIM Global Resources
Portfolio (the "Portfolio"), which, in turn, invests primarily in equity
securities of companies throughout the world that own, explore or develop
natural resources and other basic commodities or supply goods and services to
such companies. The Portfolio's investment objective is identical to that of the
Fund. The investment experience of the Fund will correspond directly with the
investment experience of the Portfolios.
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 by reference. The Statement of Additional
Information is available without charge upon written request to the Trust at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or by calling (800)
347-4246. The SEC maintains a Web site at http://www.sec.gov that contains the
Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund. Additional information about the Fund may
also be obtained from http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 249
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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 and the
Portfolio......................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INVESTOR'S GUIDE TO THE AIM FAMILY OF
FUNDS--Registered Trademark--........ A-1
Introduction to The AIM Family of
Funds............................. A-1
How to Purchase Shares............... A-1
Terms and Conditions of Purchase of
the AIM Funds..................... A-2
Special Plans........................ A-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND AND THE PORTFOLIO
The Fund is a diversified series of the Trust. The Portfolio is a diversified
series of the Portfolio.
INVESTMENT OBJECTIVE. The Fund seeks long-term capital growth.
PRINCIPAL INVESTMENTS. The Fund invests all of its investable assets in the
Portfolio, which, in turn, invests primarily in equity securities of companies
throughout the world that own, explore or develop natural resources and other
basic commodities or supply goods and services to such companies.
INVESTMENT MANAGERS. The Portfolio is managed by A I M Advisors, Inc. ("AIM")
and is sub-advised and sub-administered by INVESCO (NY), Inc. (the
"Sub-advisor"). AIM and the Sub-advisor and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM and the
Sub-advisor are both indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC and its subsidiaries are an independent investment management group
that has a significant presence in the institutional and retail segment of the
investment management industry in North America and Europe, and a growing
presence in Asia. AIM was organized in 1976 and, together with its subsidiaries,
currently advises approximately 90 investment company portfolios.
PURCHASING SHARES. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment adviser has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of a least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the funds in The AIM Family of Funds that are sub-advised
by the Sub-advisor ("AIM Funds") on May 29, 1998; (e) any of the companies
composing or affiliated with AMVESCAP PLC; and (f) AIM Global Trends Fund.
Pursuant to a separate prospectus, the Fund also offers Class A and Class B
shares, which represent interests in the Fund. The Class A and Class B shares
have different distribution arrangements.
Initial investments in Advisor Class shares must be at least $500 and
additional investments must be at least $50. The distributor of the Advisor
Class shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds").
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain funds in The AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at the Fund's net asset value on any business day. See
"How to Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be rein-
2
<PAGE> 250
vested at net asset value without payment of a sales charge in the Fund's shares
or may be invested in shares of the other funds in The AIM Family of Funds. See
"Dividends, Distributions and Tax Matters."
RISK FACTORS. There is no assurance that the Fund or the Portfolio will
achieve its investment objective. The Fund's net asset value will fluctuate,
reflecting fluctuations in the market value of the Portfolio's portfolio
holdings. The Portfolio's policy of concentrating its investments in companies
in the natural resources industries may cause the Fund's net asset value to
fluctuate more than if it invested in a greater number of industries.
The Portfolio may invest 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 Portfolio 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 Portfolio 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> 251
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following table(1):
<TABLE>
<S> <C>
Shareholder Transaction Costs:
Maximum sales charge on purchases of shares (as a % of
offering price)........................................ None
Sales charges on reinvested distributions to
shareholders........................................... None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)........ None
Redemption charges........................................ None
Exchange fees............................................. None
Annual Fund Operating Expenses(2): (as a % of average net
assets)
Investment management and administration fees............. 0.98%
12b-1 distribution and service fees....................... None
Other expenses (after reimbursements)..................... 0.52%
----
Total Fund Operating Expenses..................... 1.50%
====
</TABLE>
(1) This table is intended to assist investors in understanding the various
costs and expenses associated with investing in the Fund.
(2) 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 1.50% of the average daily net assets of
the Fund's Advisor Class shares. AIM has voluntarily agreed to continue
this limitation through May 31, 2000. Without reimbursements, "Other
Expenses" and "Total Fund Operating Expenses" would have been 0.65% and
1.63%, respectively, for Advisor Class Shares of the Fund. "Other expenses"
include custody, transfer agency, legal, audit and other operating
expenses. See "Management" herein and the Statement of Additional
Information for more information. Investors purchasing Advisor Class shares
through financial planners, trust companies, bank trust departments or
registered investment advisers, or under a "wrap fee" program, will be
subject to additional fees charged by such entities or by the sponsors of
such programs. Where any account advised by one of the companies composing
or affiliated with AMVESCAP PLC invests in Advisor Class shares of the
Fund, such account shall not be subject to duplicative advisory fees.
The Board of Trustees of the Trust believes that the aggregate per share
expenses of the Fund and its Portfolio will be approximately equal to the
expenses the Fund would incur if its assets were invested directly in the
type of securities being held by its Portfolio.
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
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class Shares.............................. $15 $48 $82 $180
</TABLE>
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S AND THE PORTFOLIO'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 OR THE PORTFOLIO'S
PROJECTED OR ACTUAL PERFORMANCE.
4
<PAGE> 252
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FINANCIAL HIGHLIGHTS
The tables below provide condensed financial information concerning income and
capital changes for one Advisor Class share of the Fund. This information is
supplemented by the financial statements and accompanying notes appearing in the
Statement of Additional Information. The financial statements and notes, for the
fiscal year ended October 31, 1997, have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report thereon also is included in the
Statement of Additional Information. The unaudited financial statements and
notes, for the semi-annual period ended April 30, 1998, are also included in the
Statement of Additional Information.
AIM GLOBAL RESOURCES FUND
(FORMERLY GT GLOBAL NATURAL RESOURCES FUND)
<TABLE>
<CAPTION>
ADVISOR CLASS+
-------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED OCTOBER 31, JUNE 1, 1995
APRIL 30, 1998 ------------------ TO
(UNAUDITED)(c) 1997(c) 1996(c) OCTOBER 31, 1995
-------------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................ $ 20.80 $ 17.47 $ 11.47 $ 11.45
------- ------- ------- -------
Income from investment operations:
Net investment income (loss).............................. (0.06)* (0.14) (0.17) 0.11*
Net realized and unrealized gain (loss) on investments.... (4.36) 4.08 6.28 (0.09)
------- ------- ------- -------
Net increase (decrease) from investment operations.......... (4.42) 3.94 6.11 0.02
------- ------- ------- -------
Distributions:
From net investment income................................ -- -- (0.10) --
From net realized gain on investments..................... (0.68) (0.61) (0.01) --
------- ------- ------- -------
Total distributions................................. (0.68) (0.61) (0.11) --
======= ======= ======= =======
Net asset value, end of period.............................. $ 15.70 $ 20.80 $ 17.47 $ 11.47
======= ======= ======= =======
Total investment return..................................... (21.76)%(b) 23.23% 53.76% 0.17%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $ 7,337 $14,886 $ 5,502 $ 95
Ratio of net investment income (loss) to average net assets:
With expense reductions and reimbursement from the
Sub-advisor............................................. (0.64)%(a) (0.91)% (1.05)% 0.91%(a)
Without expense reductions and reimbursement from the
Sub-advisor............................................. (0.82)%(a) (1.01)% (1.15)% (0.19)%(a)
Ratio of operating expenses to average net assets:
With expense reductions and reimbursement from the
Sub-advisor............................................. 1.49%(a) 1.53% 1.70% 1.87%(a)
Without expense reductions and reimbursement from the
Sub-advisor............................................. 1.67%(a) 1.63% 1.80% 2.97%(a)
Portfolio turnover rate++................................... 197%(a) 321% 94% 87%(a)
Average commission rate per share paid on portfolio
transactions ++........................................... $0.0245 $0.0112 $0.0243 N/A
</TABLE>
- ---------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon average shares
outstanding during the period.
* Before reimbursement by the Sub-advisor, the net investment income per
share would have been reduced by $0.01 for the six months ended April 30,
1998 and $0.12 for the period ended Oct. 31, 1995.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued. The Fund invests only in the AIM Global Resources Portfolio and
does not engage in securities transactions. Accordingly, the portfolio
turnover and average commission rates presented are for the AIM Global
Resources Portfolio.
N/A Not Applicable.
---------------------
<TABLE>
<CAPTION>
AVERAGE
MONTHLY
AVERAGE NUMBER OF AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT 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................. $ -- $331,332 7,240,441 $ 0.046
October 31, 1997................................ $4,670,000 $999,474 7,868,612 $0.1270
</TABLE>
Average amount of debt outstanding during the period is computed on a daily
basis.
5
<PAGE> 253
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Fund. Such practices will
have the effect of increasing the Fund's total return. The performance of the
Fund will vary from time to time and past results are not necessarily
representative of future results. The Fund's performance is a function of its
portfolio management in selecting the type and quality of portfolio securities
and is affected by operating expenses of the Fund as well as by general market
conditions.
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
INVESTMENT OBJECTIVE. The Fund's investment objective is long-term capital
growth. It seeks its objective by investing all of its investable assets in the
Portfolio, which, in turn, invests primarily in equity securities of companies
throughout the world that own, explore or develop natural resources and other
basic commodities or supply goods and services to such companies. The
Portfolio's investment objective is identical to that of the Fund. There can be
no assurance that the Fund or Portfolio will achieve its investment objectives.
INVESTMENT POLICIES. At least 65% of the Portfolio's total assets will
normally be invested in common stock and preferred stock, and warrants to
acquire such securities, issued by natural resource companies. A "natural
resource" company is an entity in which (i) at least 50% of either the revenues
or earnings was derived from natural resource activities, or (ii) at least 50%
of the assets was devoted to such activities, based upon the company's most
recent fiscal year. The remainder of the Portfolio's assets may be invested in
debt securities issued by natural resource companies and/or equity and debt
securities of companies outside of the natural resource industries, which, in
the opinion of the Sub-advisor, stand to benefit from developments in the
natural resource industries.
Examples of natural resource companies include those which own, explore or
develop: energy sources (such as oil, gas and coal); ferrous and non-ferrous
metals (such as iron, aluminum, copper, nickel, zinc and lead), strategic metals
(such as uranium and titanium) and precious metals (such as gold, silver and
platinum); chemicals; forest products (such as timber, coated and uncoated tree
sheet, pulp and newsprint); other basic commodities (such as foodstuffs);
refined products (such as chemicals and steel) and service companies that sell
to these producers and refiners; and other products and services, which, in the
Sub-advisor's opinion are significant to the ownership and development of
natural resources and other basic commodities.
The Sub-advisor believes that the liberalization of formerly socialist
economies will bring about dramatic changes in both the supply and demand for
natural resources. In addition, rapid industrialization in developing countries
of Asia and Latin America is generating new demands for industrial materials
that are affecting world commodities markets. The Sub-advisor believes these
changes are likely to create investment opportunities that benefit from new
sources of supply and/or from changes in commodities prices.
The Sub-advisor also believes that investments in natural resource industries
offer an opportunity to protect wealth against the capital-eroding effects of
inflation. During periods of accelerating inflation or currency uncertainty,
worldwide investment demand for natural resources, particularly precious metals,
tends to increase, and during periods of disinflation or currency stability, it
tends to decrease. The Sub-advisor believes that rising commodity prices and
increasing worldwide industrial production may favorably affect share prices of
natural resource companies, and investments in such companies can offer
excellent opportunities to offset the effects of inflation.
6
<PAGE> 254
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:
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. The Portfolio expects that,
from time to time, a significant portion of its assets may be invested in the
securities of domestic issuers. The industry represented in the Portfolio,
however, is a global industry with significant, growing markets outside of the
United States. A sizeable proportion of the companies which comprise the natural
resources industries are headquartered outside of the United States.
For these reasons, the Sub-advisor believes that a portfolio composed only of
securities of U.S. issuers does not provide the greatest potential for return
from an investment by the Portfolio. The Sub-advisor uses its financial
expertise in markets located throughout the world and the substantial global
resources of AMVESCAP PLC in attempting to identify those countries and
companies then providing the greatest potential for long-term capital
appreciation. In this fashion, the Sub-advisor seeks to enable shareholders to
capitalize on the substantial investment opportunities and the potential for
long-term growth of capital presented by the global natural resources industries
represented in the Portfolio.
The Sub-advisor allocates the Portfolio's assets among securities of countries
and in currency denominations where opportunities for meeting the Portfolio's
investment objective are expected to be the most attractive. The Portfolio may
invest substantially in securities denominated in one or more currencies. Under
normal conditions, the Portfolio invests in the securities of issuers located in
at least three countries, including the United States; investments in securities
of issuers in any one country, other than the United States, will represent no
more than 50% of the Portfolio's total assets.
In analyzing specific companies for possible investment, the Sub-advisor
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets.
In assessing companies for the Resources Portfolio, the Sub-advisor will also
evaluate, among other factors, their capabilities for expanded exploration and
production, superior exploration programs and production techniques and
facilities, current inventories, expected production and demand levels and the
potential to accumulate new resources.
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 Portfolio may invest up to
100% of its total assets in cash (U.S. dollars, foreign currencies or
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 the Portfolio's investments may be
made in the United States and denominated in U.S. dollars. To the extent the
Portfolio adopts a temporary defensive posture, it will not be invested so as to
achieve directly its investment objective. In addition, pending investment of
proceeds from new sales of Fund shares or to meet its ordinary daily cash needs,
the Portfolio 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 full description of money market instruments, see "Money
Market Instruments" in the "Investment Objectives and Policies" section of the
Statement of Additional Information.
PRIVATIZATIONS. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-advisor believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Portfolio in privatizations in appropriate
circumstances. In certain foreign countries, the ability of foreign entities
such as the Portfolio to participate in privatizations may be limited by local
law, or the terms on which the Portfolio may be permitted to participate may be
less advantageous than those for local investors. There can be no assurance that
foreign governments will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Portfolio may invest up to 10%
of its total assets in other investment companies, some of which may be
investment vehicles or companies that are advised by the Sub-advisor or its
affiliates ("Affiliated Funds"). As a shareholder in an investment company, the
Portfolio would bear its ratable share of that investment company's expenses,
including its advisory and administration fees. At the same time, the Portfolio
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 Portfolio
invests in an Affiliated Fund.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Portfolio
may borrow from banks or may borrow through reverse repurchase agreements and
"roll" transactions in connection with meeting requests for the redemptions of
the Funds' shares. The Portfolio also may borrow up to 5% of its total assets
for temporary or emergency purposes other than to meet redemptions of the Funds'
shares. The Portfolio may borrow up to 33 1/3% of its total assets. However, no
additional investments will be made if the Portfolio's borrowings exceed 5% of
its total assets. Any borrowing by the Portfolio may cause greater fluctuation
in the value of its shares than would be the case if the Portfolio did not
borrow.
A reverse repurchase agreement is a borrowing transaction in which the
Portfolio 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
7
<PAGE> 255
which includes an interest component. A "roll" borrowing transaction involves
the Portfolio's sale of securities together with its commitment (for which the
Portfolio may receive a fee) to purchase similar, but not identical, securities
at a future date.
SECURITIES LENDING. The Portfolio may lend its portfolio securities to
broker/dealers or to other institutional investors. Securities lending allows
the Portfolios to retain ownership of the securities loaned and, at the same
time, enhances the Fund's total return. The Portfolio 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 Portfolio'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 Portfolio'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 should the borrower
fail financially.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES. The Portfolio may purchase debt
securities on a "when-issued" basis and may purchase or sell such securities on
a "forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. The price, which is generally expressed in yield
terms, is fixed at the time 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 Portfolio will
purchase or sell when-issued securities or enter into forward commitments only
with the intention of actually receiving or delivering the securities, as the
case may be. No income accrues on securities that have been purchased pursuant
to a forward commitment or on a when-issued basis prior to delivery to the
Portfolio. If the Portfolio disposes of the right to acquire a when-issued
security prior to its acquisition or disposes of its right to deliver or receive
against a forward commitment, it may incur a gain or loss. At the time the
Portfolio enters into a transaction on a when-issued or forward commitment
basis, the Portfolio will segregate cash or liquid securities equal to the value
of the when-issued or forward commitment securities with its custodian and will
mark to market daily such assets. There is a risk that the securities may not be
delivered and that the Portfolio may incur a loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. The Portfolio may use
forward currency contracts, futures contracts, options on securities, options on
indices, options on currencies and options on futures contracts to attempt to
hedge against the overall level of investment and currency risk normally
associated with 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 Portfolio may enter into such
instruments up to the full value of its portfolio assets. See "Risk
Factors -- Options, Futures and Forward 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 Portfolio may enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purchase or sale of a foreign currency against the
U.S. dollar or may involve two foreign currencies. The Portfolio may enter into
forward currency contracts either with respect to specific transactions or with
respect to its portfolio positions. The Portfolio 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.
In addition, the Portfolio may purchase and sell put and call options on
equity and debt securities to hedge against the risk of fluctuations in the
prices of securities held by the Portfolio or that the Sub-advisor intends to
include in the Portfolio's holdings. The Portfolio also may purchase and sell
put and call options on stock indexes to hedge against overall fluctuations in
the securities markets generally or in a specific market sector.
Further, the Portfolio may sell stock index futures contracts and may purchase
put options or write call options on such futures contracts to protect against a
general stock market decline or a decline in a specific market sector that could
affect adversely the Portfolio's holdings. The Portfolio also may purchase stock
index futures contracts and purchase call options or write put options on such
contracts to hedge against a general stock market or market sector advance and
thereby attempt to lessen the cost of future securities acquisitions. The
Portfolio may use interest rate futures contracts and options thereon to hedge
the debt portion of its portfolio against changes in the general level of
interest rates.
OTHER INFORMATION. The investment objective of the Fund may not be changed
without the approval of a majority of that Fund's outstanding voting securities.
A "majority of the Fund's outstanding voting securities" means the lesser of (i)
67% of the Fund's shares represented at a meeting at which more than 50% of the
outstanding shares are represented, or (ii) more than 50% of the outstanding
shares. In addition, the Fund has adopted certain investment limitations 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. The Fund's policies regarding
concentration and lending, and the percentage of the Fund's assets that may be
committed to borrowing, are fundamental policies and may not be changed without
shareholder approval.
The approval of the Fund and of other investors in the Portfolio, if any, is
not required to change the investment objective, policies or limitations of the
Portfolio, unless otherwise specified. Written notice shall be provided to
shareholders of the Fund thirty days prior to any changes in the Portfolio's
investment objective.
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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 or Portfolio's investment policies or
restrictions.
The Portfolio 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.
OTHER INFORMATION REGARDING THE PORTFOLIO. As previously described, the Fund,
unlike mutual funds that directly acquire and manage their own portfolios of
securities, seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, which is a separate investment company.
Because the Fund will invest only in the Portfolio, the Fund's shareholders will
acquire only an indirect interest in the investments of the Portfolio.
The Fund may redeem its investment in the Portfolio at any time, if the Board
of Trustees of the Trust determines that it is in the best interests of the Fund
and its shareholders to do so. A change in the Portfolio's investment objective,
policies or limitations that is not approved by the Board or the shareholders of
the Fund could require the Fund to redeem its interest in the Portfolio. Any
such redemption could result in a distribution in kind of portfolio securities
(as opposed to a cash distribution) by the Portfolio. Should such a distribution
occur, the Fund could incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of investments for the Fund and could
adversely affect its liquidity. Upon redemption, the Board would consider what
action might be taken, including the investment of all the investable assets of
the Fund in another pooled investment entity having substantially the same
investment objective as the Fund or the retention by the Fund of its own
investment adviser to manage its assets in accordance with its investment
objective, policies and limitations discussed herein.
In addition to selling an interest therein to the Fund, the Portfolio may sell
interests therein to other non-affiliated investment companies and/or other
institutional investors. All institutional investors in the Portfolio will pay a
proportionate share of the Portfolio's expenses and will invest in the Portfolio
on the same terms and conditions. However, if another investment company invests
any or all of its assets in the Portfolio, it would not be required to sell its
shares at the same public offering price as the Fund and may charge different
sales commissions. Therefore, investors in the Fund may experience different
returns than investors in another investment company that invests exclusively in
the Portfolio. As of the date of this Prospectus, the Fund is the only
institutional investor in the Portfolio.
The Fund may be materially affected by the actions of other large investors,
if any, in the Portfolio. For example, as with all open-end investment
companies, if a large investor were to redeem its interest in the Portfolio, (1)
the Portfolio's remaining investors could experience higher pro rata operating
expenses, thereby producing lower returns and (2) the Portfolio's security
holdings may become less diverse, resulting in increased risk. Institutional
investors in the Portfolio that have a greater pro rata ownership interest in
the Portfolio than the Fund could have effective voting control over the
operation of the Portfolio.
- --------------------------------------------------------------------------------
RISK FACTORS
GENERAL. There is no assurance that the Fund or the Portfolio will achieve its
investment objective. The Fund's net asset values will fluctuate reflecting
fluctuations in the market value of the Portfolio's securities. 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 Portfolio will
fluctuate in response to general market and economic developments, as well as
developments affecting the particular issuers of such securities. In addition,
the value of debt securities held by the Portfolio generally will fluctuate with
changes in the perceived creditworthiness of the issuers of such securities and
interest rates.
Because the Portfolio focuses its investments on the natural resources
industries, an investment in it may be more volatile than that of other
investment companies that do not concentrate their investments in such a manner.
Moreover, the value of the shares of the Fund will be especially susceptible to
factors affecting the natural resources industries in which it focuses.
Accordingly, the Fund should not be considered a complete investment program.
NATURAL RESOURCES INDUSTRIES. Natural resource industries may be subject to
greater political, environmental and other governmental regulation than many
other industries. The nature of such regulation continues to evolve in both the
United States and foreign countries, and changes in governmental policies and
the need for regulatory approvals may have a material effect on the products and
services offered by companies in the natural resource industries. For example,
the exploration, development and distribution of coal, oil and gas in the United
States are subject to significant federal and state regulation, which may affect
rates of return on such investments and the kinds of services that may be
offered. Governmental regulation may also hamper the development of new
technologies.
In addition, many natural resource companies historically have been subject to
significant costs associated with compliance with environmental and other safety
regulations. Further, competition is intense for many natural resource
companies. As a result, many
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of these companies may be adversely affected in the future and the value of the
securities issued by such companies may be subject to increased share price
volatility. Such companies may also be subject to irregular fluctuations in
earnings due to changes in the availability of money, the level of interest
rates, and other factors.
The value of securities of natural resource companies will fluctuate in
response to market conditions for the particular natural resources with which
the issuers are involved. The price of natural resources will fluctuate due to
changes in worldwide levels of inventory, and changes, perceived or actual, in
production and consumption. With respect to precious metals, such price
fluctuations may be substantial over short periods of time. In addition, the
value of natural resources may fluctuate directly with respect to various stages
of the inflationary cycle and perceived inflationary trends and are subject to
numerous factors, including national and international politics.
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 Portfolio's interest and dividends from foreign issuers may be
subject to non-U.S. withholding taxes, thereby reducing the Portfolio's net
investment income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Portfolio, political or social instability, or diplomatic
developments which could affect the Portfolio's investments in those countries.
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, resource self-sufficiency
and balance of payments positions.
The Portfolio may invest in issuers domiciled in "emerging markets." Investing
in emerging market countries involves risks in addition to those risks involved
in foreign investing. Many emerging market countries have experienced high rates
of inflation for many years. In addition, emerging markets generally are
dependent heavily upon international trade and, accordingly, have been and
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. The securities markets of
emerging market countries are substantially smaller, less developed, less liquid
and more volatile than the securities markets of the developed countries. In
addition, issuers in emerging markets typically are subject to a greater degree
of change in earnings and business prospects than issuers in developed
countries.
The Portfolio will also be affected favorably or unfavorably by exchange
control regulations or changes in the exchange rates between foreign 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 Portfolio and gains and losses realized by the Portfolio.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, and Spain are members of the European Economic and
Monetary Union (the "EMU"). The EMU intends to establish a common European
currency for participating countries which will be known as the "euro." It is
anticipated that each participating country will supplement its existing
currency with the euro on January 1, 1999, and will replace its existing
currency with the euro on July 1, 2002. Any other European country that is a
member of the European Union and satisfies the criteria for participation in the
EMU may elect to participate in the EMU and may supplement its existing currency
with the euro after January 1, 1999.
The expected introduction of the euro presents unique risks and uncertainties,
including whether the payment and operational systems of banks and other
financial institutions will be ready by January 1, 1999; how outstanding
financial contracts will be treated after January 1, 1999; the establishment of
exchange rates for existing currencies and the euro; and the creation of
suitable clearing and settlement systems for the euro. These and other factors
could cause market disruptions before or after the introduction of the euro and
could adversely affect the value of securities held by the Fund.
LOWER QUALITY DEBT SECURITIES. The Portfolio may invest up to 20% of its total
assets in below investment grade debt securities, that is, rated below BBB by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or Baa
by Moody's Investors Service, Inc. ("Moody's") or, if unrated, deemed to be of
equivalent quality in the judgment of the Sub-adviser. Such investments involve
a high degree of risk. However, the Portfolio will not invest in debt securities
that are in default as to payment of principal and interest.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by S&P and debt rated Ba, B,
Caa, Ca or C by Moody's is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. 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 eco-
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nomic conditions. These lower quality debt securities are the equivalent of high
yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates. See "Description of Debt Ratings" in the Statement of Additional
Information for a full discussion of Moody's and S&P's ratings.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Portfolio. If an issuer exercises these provisions in a
declining interest rate market, the Portfolio may have to replace the security
with a lower yielding security, resulting in a decreased return for investors.
In addition, the Portfolio 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
Portfolio anticipates that such securities could be sold only to a limited
number of dealers or institutional investors. The lack of a liquid secondary
market also may have an adverse impact on market prices of such instruments and
may make it more difficult for the Portfolio to obtain accurate market
quotations for purposes of valuing its investments. The Portfolio 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 Portfolio 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 Portfolio may also incur additional expenses to the
extent it is required to seek recovery upon a default in the payment of
principal or interest on portfolio holdings, and the Portfolio may have limited
legal recourse in the event of a default.
ILLIQUID SECURITIES. The Portfolio may invest up to 15% of its net assets in
securities for which no readily available market exists, so-called "illiquid
securities." The Sub-advisor believes that carefully selected investments in
joint ventures, cooperatives, partnerships and state enterprises which are
illiquid (collectively, "Special Situations") could enable the Portfolio to
achieve capital appreciation substantially exceeding the appreciation the
Portfolio would realize if they did not make such investments. However, in order
to attempt to limit investment risk, the Portfolio will invest no more than 5%
of its total assets in Special Situations.
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.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Although the Portfolio is
authorized to enter into options, futures and forward currency transactions, the
Portfolio 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 or in the
appropriate market sector and movements in interest rates and currency markets;
(2) imperfect correlation, or even no correlation, between movements in the
price of options, forward contracts, futures contracts or options thereon and
movements in the price of the currency or security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are different from
those needed to select the securities in which the Portfolio 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 Portfolio 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 Portfolio to sell a security at a disadvantageous time, due to the need for
the Portfolio to maintain "cover" or to set aside securities in connection with
hedging transactions.
INVESTING IN SMALLER COMPANIES. While the Portfolio's holdings normally will
include securities of established suppliers of traditional products and
services, the Portfolio may invest in smaller companies which can benefit from
the development of new products and services. These smaller companies may
present greater opportunities for capital appreciation, but may also involve
greater risks than large, established issuers. Such smaller companies may have
limited product lines, markets or financial resources, and their securities may
trade less frequently and in more limited volume than the securities of larger,
more established companies. As a result,
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the prices of the securities of such smaller companies may fluctuate to a
greater degree than the prices of the securities of other issuers.
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MANAGEMENT
The Trust's Board of Trustees and the Board of Trustees of the Portfolio have
overall responsibility for the operation of the Fund and the Portfolio,
respectively. The Boards have approved all significant agreements between the
Trust and the Portfolio on the one side and persons or companies furnishing
services to the Fund and the Portfolio on the other, including the investment
management and administrative services 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 and the Portfolio are delegated to the officers of the
Trust and the Portfolio, subject always to the investment objective and policies
of the Fund and the Portfolio and to the general supervision of the Boards. See
"Trustees and Executive Officers" in the Statement of Additional Information for
information on the Trust's and the Portfolio's Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-advisor as the investment managers to the Fund and the Portfolio include,
but are not limited to, determining the composition of the investment portfolio
of the Portfolio and placing orders to buy, sell or hold particular securities.
In addition, AIM and the Sub-advisor provide the following administration
services to the Portfolio and the Fund: furnishing corporate officers and
clerical staff; providing office space, services and equipment; and supervising
all matters relating to the Portfolio's and the Fund's operation.
For administration services, the Fund pays AIM administration fees computed
daily and payable monthly at the annualized rate of 0.25% of the Fund's average
daily net assets. AIM has appointed the Sub-advisor as the Fund's
sub-administrator. In addition, the Fund bears its pro rata portion of the
investment management and administration fees paid by its corresponding
Portfolio to AIM and the Sub-advisor. The Portfolio pays AIM a fee, based on the
Portfolio's average daily net assets at the annualized rate of 0.725% on the
first $500 million, 0.70% on the next $500 million, 0.675% on the next $500
million and 0.65% on all amounts thereafter. Out of its aggregate fees payable
by the Fund and the Portfolio, AIM pays the Sub-advisor sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from the
Fund and the Portfolio. The investment management and administration fees paid
by the Fund and the Portfolio 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 1.50% of the average daily net assets of the Fund's Advisor Class
shares.
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 Portfolio 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 Portfolio 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, including investment offices in Atlanta,
Boston, Dallas, Denver, Louisville, Miami, Portland (Oregon), Frankfurt, Hong
Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing the Portfolio,
the Sub-advisor employs a team approach, taking advantage of its investment
resources around the world.
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The investment professional primarily responsible for the portfolio management
of the Portfolio is as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- ----------- -------------------- -------------------
<S> <C> <C>
Derek H. Webb San Portfolio Manager Head of the Theme Funds for the Sub-advisor since 1997.
Francisco since Portfolio Portfolio Manager for the Sub-advisor since 1994. Analyst
inception in 1994 for the Sub-advisor from 1992 to 1994.
</TABLE>
In placing orders for the Portfolio's securities 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 Funds 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 (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of the Advisor Class
shares of the Fund. Certain Trustees and officers of the Trust are affiliated
with AIM Distributors.
The Distribution Agreement provides AIM Distributors with the exclusive right
to distribute Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
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ORGANIZATION OF THE TRUST AND THE PORTFOLIO
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 of 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 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.
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a subtrust of
Global Investment Portfolio, a Delaware business trust. Under Delaware law, the
Fund and other entities investing in the Portfolio enjoy the same limitations of
liability extended to shareholders of private, for-profit corporations. There is
a remote possibility, however, that under certain circumstances an investor in
the Portfolio may be held liable for the Portfolio's obligations. However, the
Agreement and Declaration of Trust of Global Investment Portfolio disclaims
shareholder liability for acts or obligations of the Portfolio and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Portfolio or a trustee. The Agreement and
Declaration of Trust also provides for indemnification from the Portfolio
property for all losses and expenses of any shareholder held personally liable
for the Portfolio's obligations. Thus the risk of an investor incurring
financial loss on account of such liability is limited to circumstances in which
the Portfolio itself would be unable to meet its obligations and where the other
party was held not to be bound by the disclaimer.
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Whenever the Fund is requested to vote on any proposal of the Portfolio, the
Fund will hold a meeting of the Fund's shareholders and will cast its vote as
instructed by its shareholders. Shares for which no voting instructions are
received will be voted in the same proportion as the shares for which voting
instructions are received.
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, to the
Fund and to the Portfolio.
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THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
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HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
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For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
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TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
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and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
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SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
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EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
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<PAGE> 266
Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
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HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
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REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
A-6
<PAGE> 268
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.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
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- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
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TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
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AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 272
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> 273
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> 274
[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.
GRS-PRO-2
<PAGE> 275
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS OF
AIM GLOBAL TELECOMMUNICATIONS FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM GLOBAL TELECOMMUNICATIONS 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 throughout the
world engaged in the development, manufacture or sale of telecommunications
services or equipment.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
September 8, 1998, has been filed with the Securities and Exchange Commission
(the "SEC") and is incorporated herein by reference. The Statement of Additional
Information is available without charge upon written request to the Trust at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or by calling (800)
347-4246. The SEC maintains a Web site at http://www.sec.gov that contains the
Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund. Additional information about the fund may
also be obtained from http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 276
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SUMMARY................................ 2
THE FUND............................... 4
Table of Fees and Expenses........... 4
Financial Highlights................. 5
Performance.......................... 6
Investment Program................... 6
Risk Factors......................... 9
Management........................... 11
Organization of the Trust............ 12
INVESTOR'S GUIDE TO THE AIM FAMILY OF
FUNDS--Registered Trademark--........ A-1
Introduction to The AIM Family of
Funds............................. A-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
How to Purchase Shares............... A-1
Terms and Conditions of Purchase of
the AIM Funds..................... A-2
Special Plans........................ A-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
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THE FUND
The Fund is a diversified series of the Trust.
INVESTMENT OBJECTIVE. The Fund seeks long-term growth of capital.
PRINCIPAL INVESTMENTS. The Fund invests primarily in equity securities of
companies throughout the world engaged in the development, manufacture or sale
of telecommunications services or equipment.
INVESTMENT MANAGERS. The Portfolio is managed by A I M Advisors, Inc. ("AIM")
and is sub-advised and sub-administered by INVESCO (NY), Inc. (the
"Sub-advisor"). AIM and the Sub-advisor and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM and the
Sub-advisor are both indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC and its subsidiaries are an independent investment management group
that has a significant presence in the institutional and retail segment of the
investment management industry in North America and Europe, and a growing
presence in Asia. AIM was organized in 1976 and, together with its subsidiaries,
currently advises approximately 90 investment company portfolios.
PURCHASING SHARES. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of at least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-adviser or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the funds in The AIM Family of Funds that are sub-advised
by the Sub-advisor ("AIM Funds") on May 29, 1998; (e) any of the companies
composing or affiliated with AMVESCAP PLC; and (f) AIM Global Trends Fund.
Pursuant to a separate prospectus, the Fund also offers Class A and Class B
shares, which represent interests in the Fund. The Class A and Class B shares
have different distribution arrangements.
Initial investments in Advisor Class shares must be at least $500 and
additional investments must be at least $50. The distributor of the Advisor
Class shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds").
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain Funds in The AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at the Fund's net asset value on any business day. See
"How to Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be reinvested at net asset value without
payment of a sales charge in the Fund's shares or may be invested in shares of
the other funds in The AIM Family of Funds. See "Dividends, Distributions and
Tax Matters."
2
<PAGE> 277
RISK FACTORS. There is no assurance that the Fund will achieve its investment
objective. The Fund's net asset value will fluctuate, reflecting fluctuations in
the market value of its portfolio holdings. The Fund's policy of concentrating
its investments in companies in its particular industries may cause the Fund's
net asset value to fluctuate more than if it invested in a greater number of
industries.
The Fund may invest 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 5% 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> 278
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following table(1):
<TABLE>
<S> <C>
Shareholder Transaction Costs:
Maximum sales charge on purchases of shares (as a % of
offering price)........................................ None
Sales charges on reinvested distributions to
shareholders........................................... None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)........ None
Redemption charges........................................ None
Exchange fees............................................. None
Annual Fund Operating Expenses(2): (as a % of average net
assets)
Investment management and administration fees............. 0.94%
12b-1 distribution and service fees....................... None
Other expenses (after reimbursements)..................... 0.40%
----
Total Fund Operating Expenses..................... 1.34%
====
</TABLE>
(1)This table is intended to assist investors in understanding the various costs
and expenses associated with investing in the Fund.
(2)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 1.50% of the average daily net assets of the Fund's Advisor
Class shares. AIM has voluntarily agreed to continue this limitation through
May 31, 2000. "Other expenses" include custody, transfer agency, legal, audit
and other operating expenses. See "Management" herein and the Statement of
Additional Information for more information. Investors purchasing Advisor
Class shares through financial planners, trust companies, bank trust
departments or registered investment advisers, or under a "wrap fee" program,
will be subject to additional fees charged by such entities or by the
sponsors of such programs. Where any account advised by one of the companies
composing or affiliated with AMVESCAP PLC invests in Advisor Class shares of
a Fund, such account shall not be subject to duplicative advisory fees.
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
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class Shares................................. $14 $43 $74 $162
</TABLE>
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> 279
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FINANCIAL HIGHLIGHTS
The tables below provide condensed financial information concerning income and
capital changes for Advisor Class shares of the Fund. This information is
supplemented by the financial statements and accompanying notes appearing in the
Statement of Additional Information. The financial statements and notes, for the
fiscal year ended October 31, 1997, have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report thereon also is included in the
Statement of Additional Information. The unaudited financial statements and
notes for the semi-annual period ending April 30, 1998, are also included in the
Statement of Additional Information.
AIM GLOBAL TELECOMMUNICATIONS FUND
(FORMERLY GT GLOBAL TELECOMMUNICATIONS FUND)
<TABLE>
<CAPTION>
ADVISOR CLASS**
------------------------------------------------------
SIX MONTHS
ENDED JUNE 1,
APRIL 30, YEAR ENDED OCTOBER 31, 1995 TO
1998 ----------------------- OCT. 31,
(UNAUDITED)(c) 1997(c) 1996(c) 1995
-------------- --------- --------- --------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period............ $ 18.28 $ 16.81 $ 16.46 $15.24
------- ------- ------- ------
Income from investment operations:
Net investment income (loss).................... (0.04) (0.09) (0.05) --
Net realized and unrealized gain (loss) on
investments.................................. 3.36 2.97 1.22 1.22
------- ------- ------- ------
Net increase (decrease) from investment
operations................................... 3.32 2.88 1.17 1.22
------- ------- ------- ------
Distributions:
From net investment income...................... -- -- -- --
From net realized gain on investments........... (1.20) (1.41) (0.82) --
------- ------- ------- ------
Total distributions..................... (1.20) (1.41) (0.82) --
------- ------- ------- ------
Net asset value, end of period.................... $ 20.40 $ 18.28 $ 16.81 $16.46
======= ======= ======= ======
Total investment return(d).............. 19.56% 18.33% 7.49% 7.94%(a)
======= ======= ======= ======
Ratios and supplemental data:
Net assets, end of period (in 000's)............ $ 8,351 $ 4,783 $ 945 $ 681
Ratio of net investment income to average net
assets:
With expense reductions......................... (0.58)%(b) (0.51)% (0.34)% 0.01%(b)
Without expense reductions...................... (0.59)%(b) (0.56)% (0.39)% 0.07%(b)
Ratio of expenses to average net assets:
With expense reductions......................... 1.37%(b) 1.29% 1.24% 1.27%(b)
Without expense reductions...................... 1.38%(b) 1.34% 1.29% 1.33%(b)
Portfolio turnover rate++......................... 56%(b) 35% 37% 62%
Average commission rate per share paid on
portfolio transactions++........................ $0.0045 $0.0085 $0.0165 N/A
</TABLE>
- ---------------
++ Portfolio turnover and average commission rates are calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
** Commencing June 1, 1995, the Fund began offering Advisor class shares.
(a) Not annualized.
(b) Annualized.
(c) These per share operating performance data were calculated based upon
average shares outstanding during the period.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
---------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
AVERAGE MONTHLY NUMBER OF AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT REGISTRANT'S SHARES OF DEBT
OUTSTANDING AT OUTSTANDING OUTSTANDING PER SHARE
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
---------- -------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Six months ended April 30, 1998......... $ -- $ 776,210 30,210,054 $ 0.026
October 31, 1997........................ -- $8,225,969 113,614,232 $0.0724
</TABLE>
Average monthly amount of debt outstanding during the period is computed on a
daily basis.
5
<PAGE> 280
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PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
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. It seeks its objective by investing primarily in equity securities of
companies throughout the world engaged in the development, manufacture or sale
of telecommunications services or equipment. There can be no assurance that the
Fund will achieve its investment objective.
INVESTMENT POLICIES. At least 65% of the Fund's total assets normally will be
invested in common and preferred stocks and warrants to acquire such securities
issued by telecommunications companies. A "telecommunications" company is an
entity in which (i) at least 50% of either its revenues or earnings was derived
from telecommunications activities, or (ii) at least 50% of its assets was
devoted to telecommunications activities, based on the company's most recent
fiscal year. The remainder of the assets of the Fund may be invested in debt
securities issued by telecommunications companies and/or equity and debt
securities of companies outside of the telecommunications industry which, in the
opinion of the Sub-advisor, stand to benefit from developments in the
telecommunications industries.
Global Telecommunications Industries Investment. Telecommunications companies
cover a variety of sectors, ranging from companies concentrating on established
technologies to those primarily engaged in emerging or developing technologies.
The characteristics of companies focusing on the same technology will vary among
countries depending upon the extent to which the technology is established in
the particular country. The Sub-advisor will allocate the Fund's investments
among these sectors depending upon its assessment of their relative long-term
growth potential.
Examples of telecommunications companies include those engaged in designing,
developing or providing the following products and services: communications
equipment and services (including equipment and services for both data and voice
transmission); electronic components and equipment; broadcasting (including
television and radio, satellite, microwave and cable television and
narrowcasting); computer equipment, mobile communications and cellular
radio/paging; electronic mail; local and wide area networking and linkage of
word and data processing systems; publishing and information systems; videotext
and teletext; and emerging technologies combining telephone, television and/or
computer systems.
The Sub-advisor believes that there are opportunities for continued growth in
demand for components, products, media and systems to collect, store, retrieve,
transmit, process, distribute, record, reproduce and use information. The
pervasive societal impact of communications and information technologies has
been accelerated by the lower costs and higher efficiencies that result from the
blending of computers with telecommunications systems. Accordingly, companies
engaged in the production of methods for using electronic and, potentially,
video technology to communicate information are expected to be important in the
Fund's portfolio. Older technologies, such as photography and print also may be
represented, however.
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:
6
<PAGE> 281
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. The Fund expects that, from
time to time, a significant portion of its assets may be invested in the
securities of domestic issuers. The industry represented in the Fund, however,
is a global industry with significant, growing markets outside of the United
States. A sizeable proportion of the companies which comprise the
telecommunications industry are headquartered outside of the United States.
For these reasons, the Sub-advisor believes that a portfolio composed only of
securities of U.S. issuers does not provide the greatest potential for return
from an investment by the Fund. The Sub-advisor uses its financial expertise in
markets located throughout the world and the substantial global resources of
AMVESCAP PLC in attempting to identify those countries and companies then
providing the greatest potential for long-term capital appreciation. In this
fashion, the Sub-advisor seeks to enable shareholders to capitalize on the
substantial investment opportunities and the potential for long-term growth of
capital presented by the global industry represented in the Fund.
The Sub-advisor allocates the Fund's assets among securities of countries and
in currency denominations where opportunities for meeting the Fund's investment
objective are expected to be the most attractive. The Fund may invest
substantially in securities denominated in one or more currencies. Under normal
conditions, the Fund invests in the securities of issuers located in at least
three countries, including the United States; investments in securities of
issuers in any one country, other than the United States, will represent no more
than 40% of the Fund's total assets.
In analyzing specific companies for possible investment, the Sub-advisor
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets.
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 may invest up to 100%
of its total assets in cash (U.S. dollars, foreign currencies or 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 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 achieve directly
its investment objective. In addition, pending investment of proceeds from new
sales of Fund shares or to meet its 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 full
description of money market instruments, see "Money Market Instruments" in the
"Investment Objectives and Policies" section of the Statement of Additional
Information.
PRIVATIZATIONS. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-advisor believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Fund in privatizations in appropriate
circumstances. In certain foreign countries, 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 for local investors. There can be no assurance that
foreign governments will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Fund may invest up to 10% of
its total assets in other investment companies, some of which may be investment
vehicles or companies that are advised by the Sub-advisor or its affiliates
("Affiliated Funds"). 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.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Fund may
borrow from banks or may borrow through reverse repurchase agreements and "roll"
transactions in connection with meeting requests for the redemptions of the
Fund's shares. The Fund also may borrow up to 5% of its total assets for
temporary or emergency purposes other than to meet redemptions of the Fund's
shares. The Fund may borrow up to 33 1/3% of its total assets. However, no
additional investments will be made if the Fund's borrowings exceed 5% of its
total assets. Any borrowing by the Fund may cause greater fluctuation in the
value of its shares than would be the case if the Fund 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 which includes an interest component. A "roll"
borrowing transaction involves the Fund's sale of securities together with its
commitment (for which the Fund may receive a fee) to purchase similar, but not
identical, securities at a future date.
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. govern-
7
<PAGE> 282
ment 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 risks in lending portfolio
securities, as with other extensions of secured credit, consist of possible
delays in receiving additional collateral or in recovery of the securities and
possible loss of rights in the collateral should the borrower fail financially.
WHEN-ISSUED OR 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 or enter into forward commitments only with the
intention of actually receiving or delivering the securities, as the case may
be. No income accrues on securities that have been purchased pursuant to a
forward commitment or on a when-issued basis prior to delivery to the 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 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 and currency 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 Forward 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.
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 indexes 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
affect adversely the Fund's holdings. 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 portfolio 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 Fund's shares represented at a meeting at which more than 50% of the
outstanding shares are represented, or (ii) more than 50% of the outstanding
shares. In addition, the Fund has adopted certain investment limitations 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. The Fund's policies regarding
concentration and lending, and the percentage of the Fund's 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.
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RISK FACTORS
GENERAL. There is no assurance that the Fund will achieve its investment
objective. The Fund's net asset value will fluctuate reflecting fluctuations in
the market value of the Fund's positions. 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 changes in the perceived creditworthiness
of the issuers of such securities and interest rates.
Because the Fund focuses its investments on particular industries, an
investment in the Fund may be more volatile than that of other investment
companies that do not concentrate their investments in such a manner. Moreover,
the value of the shares of the Fund will be especially susceptible to factors
affecting the industries in which it focuses. Accordingly, the Fund should not
be considered a complete investment program.
TELECOMMUNICATIONS INDUSTRIES. Telecommunications industries may be subject to
greater governmental regulation than many other industries and changes in
governmental policy and the need for regulatory approvals may have a material
effect on the products and services offered by companies in the
telecommunications industries. Telephone operating companies in the United
States, for example, are subject to both federal and state regulation affecting
permitted rates of return and the kinds of services that may be offered. Certain
types of companies in the telecommunications industries are engaged in fierce
competition for market share that could result in increased share price
volatility.
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 interest and dividends from foreign issuers may be subject
to non-U.S. withholding taxes, thereby reducing the Fund's net investment
income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments which could affect the Fund's investments in those countries.
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, resource self-sufficiency
and balance of payments positions.
The Fund may invest in issuers domiciled in "emerging markets." Investing in
emerging market countries involves risks in addition to those risks involved in
foreign investing. Many emerging market countries have experienced high rates of
inflation for many years. In addition, emerging markets generally are dependent
heavily upon international trade and, accordingly, have been and 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. The securities markets of emerging
market countries are substantially smaller, less developed, less liquid and more
volatile than the securities markets of the developed countries. In addition,
issuers in emerging markets typically are subject to a greater degree of change
in earnings and business prospects than issuers in developed countries.
The Fund will also be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rates between foreign 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.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, and Spain are members of the European Economic and
Monetary Union (the "EMU"). The EMU intends to establish a common European
currency for participating countries which will be known as the "euro." It is
anticipated that each participating country will supplement its existing
currency with the euro on January 1, 1999, and will replace its existing
currency with the euro on July 1, 2002. Any other European country that is a
member of the European Union and satisfies the criteria for participation in the
EMU, may elect to participate in the EMU and may supplement its existing
currency with the euro after January 1, 1999.
The expected introduction of the euro presents unique risks and uncertainties,
including whether the payment and operational systems of banks and other
financial institutions will be ready by January 1, 1999; how outstanding
financial contracts will be treated after January 1, 1999; the establishment of
exchange rates for existing currencies and the euro; and the creation of
suitable clearing and settlement systems for the euro. These and other factors
could cause market disruptions before or after the introduction of the euro and
could adversely affect the value of securities held by the Fund.
LOWER QUALITY DEBT SECURITIES. The Fund may invest up to 5% of its total
assets in below investment grade debt securities, that
9
<PAGE> 284
is, rated below BBB by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ("S&P"), or Baa by Moody's Investors Service, Inc. ("Moody's")
or, if unrated, deemed to be of equivalent quality in the judgment of the
Sub-adviser. Such investments involve a high degree of risk. However, the Fund
will not invest in debt securities that are in default as to payment of
principal and interest.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by S&P and debt rated Ba, B,
Caa, Ca or C by Moody's is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. 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 lower quality debt securities are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates. See "Description of Debt Ratings" in the Statement of Additional
Information for a full discussion of Moody's and S&P's ratings.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Fund. If an issuer exercises these provisions in a declining
interest rate market, the Fund may have to replace the security with a lower
yielding security, resulting in a decreased return for investors. 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 the Fund's
portfolio investments. 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 portfolio holdings, and the Fund may have limited legal recourse in
the event of a default.
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." The Sub-advisor believes that carefully selected investments in
joint ventures, cooperatives, partnerships and state enterprises which are
illiquid (collectively, "Special Situations") could enable the Fund to achieve
capital appreciation substantially exceeding the appreciation the Fund would
realize if it did not make such investments. However, in order to attempt to
limit investment risk, the Fund will invest no more than 5% of its total assets
in Special Situations.
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.
OPTIONS, FUTURES AND FORWARD 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 or in the appropriate
market sector and movements in interest rates and currency markets; (2)
imperfect correlation, or even no correlation, between movements in the price of
options, forward contracts, futures contracts or options thereon and movements
in the price of the currency or security hedged or used for cover; (3) the fact
that skills and techniques needed to trade options, futures contracts and
options thereon or to use forward currency contracts are different from those
needed to select the securities in which the Fund invests; (4) lack of assurance
that a liquid secondary market will exist for
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<PAGE> 285
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.
INVESTING IN SMALLER COMPANIES. While the Fund's portfolio normally will
include securities of established suppliers of traditional products and
services, the Fund may invest in smaller companies which can benefit from the
development of new products and services. These smaller companies may present
greater opportunities for capital appreciation, but may also involve greater
risks than large, established issuers. Such smaller companies may have limited
product lines, markets or financial resources, and their securities may trade
less frequently and in more limited volume than the securities of larger, more
established companies. As a result, the prices of the securities of such smaller
companies may fluctuate to a greater degree than the prices of the securities of
other issuers.
- --------------------------------------------------------------------------------
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 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 Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-advisor as the Fund's investment managers include, but are not limited to,
determining the composition of the investment portfolio of the Fund and placing
orders to buy, sell or hold particular securities. In addition, AIM and the
Sub-adviser provide the following administration services to the Fund:
furnishing corporate officers and clerical staff; providing office space,
services and equipment; and supervising all matters relating to the Fund's
operation.
For investment management and administration services provided to the Fund,
the Fund pays AIM a fee computed daily and paid monthly based on the Fund's
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 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 1.50% of the average daily net assets of the Fund's
Advisor Class shares.
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.
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> 286
The investment professional primarily responsible for the portfolio management
of the Fund is as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
----------- -------------------- -------------------
<S> <C> <C>
Michael Mahoney Portfolio Manager Portfolio Manager for the Sub-advisor since 1993.
San Francisco since 1993 Investment Analyst for the Sub-advisor from 1991
to 1993.
</TABLE>
In placing orders for the Fund's securities 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 Funds 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 (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of the Advisor Class
shares of the Fund. Certain Trustees and officers of the Trust are affiliated
with AIM Distributors.
The Distribution Agreement provides AIM Distributors with the exclusive right
to distribute Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
- --------------------------------------------------------------------------------
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 Company. From
time to time, the Company has established and may continue to 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 of 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 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.
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THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
A-1
<PAGE> 288
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
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and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
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SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
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EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
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Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
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HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
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REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
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as certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client
Services Department of AFS.
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DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
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DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
A-8
<PAGE> 295
TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
A-9
<PAGE> 296
AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 297
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> 298
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> 299
[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.
GTL-PRO-2
<PAGE> 300
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS OF
AIM LATIN AMERICAN GROWTH FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM LATIN AMERICAN GROWTH 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 seeks capital
appreciation by investing primarily in equity and debt securities of a broad
range of Latin American issuers.
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 Latin
America. 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> 301
- --------------------------------------------------------------------------------
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........................... 11
Organization of the Trust............ 13
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-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND
The Fund is a non-diversified series of the Trust.
INVESTMENT OBJECTIVE. The Fund seeks capital appreciation.
PRINCIPAL INVESTMENT. The Fund normally invests at least 65% of its total
assets in equity and debt securities issued by Latin American companies and
governments.
INVESTMENT MANAGERS. The Fund is managed by A I M Advisors, Inc. ("AIM") and
is sub-advised and sub-administered by INVESCO (NY), Inc. (the "Sub-advisor").
AIM and the Sub-advisor and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-advisor are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
AIM was organized in 1976 and, together with its subsidiaries, currently advises
approximately 90 investment company portfolios.
PURCHASING SHARES. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of a least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the funds in The AIM Family of Funds on May 29, 1998; and
(e) any of the companies affiliated with AMVESCAP PLC. Pursuant to a separate
prospectus, the Fund also offers Class A and Class B shares, which represent
interests in the Fund. The Class A and Class B shares have different
distribution arrangements.
Initial investments in Advisor Class shares must be at least $500 and
additional investments must be at least $50. The distributor of the Advisor
Class shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds").
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain funds in The AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at net asset value on any business day. See "How to
Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on an annual basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be reinvested at net asset value without
payment of a sales charge in the Fund's shares or may be invested in shares of
the other funds in The AIM Family of Funds. See "Dividends, Distributions and
Tax Matters."
2
<PAGE> 302
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 the 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. There is no limitation
on the percentage of the Fund's total assets that may be invested 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> 303
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following table(1):
<TABLE>
<S> <C>
Shareholder Transaction Costs:
Maximum sales charge on purchases of shares (as a % of
offering price)........................................ None
Sales charges on reinvested distributions to
shareholders........................................... None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)........ None
Redemption charges........................................ None
Exchange fees:
-- On first four exchanges each year...................... None
-- On each additional exchange............................ $7.50
Annual Fund Operating Expenses(2): (as a % of average net
assets)
Investment management and administration fees............. 0.98%
12b-1 distribution and service fees....................... None
Other expenses (after reimbursements)..................... 0.52%
-----
Total Fund Operating Expenses..................... 1.50%
=====
</TABLE>
(1)This table is intended to assist investors in understanding the various costs
and expenses associated with investing in the Fund.
(2)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 1.50% of the average daily net assets of the Fund's Advisor
Class shares. AIM has voluntarily agreed to continue this limitation through
May 31, 2000. Without reimbursements, "Other expenses" and "Total Fund
Operating Expenses" would have been 0.58% and 1.56%, respectively, for
Advisor Class shares of the Fund. "Other expenses" include custody, transfer
agent, legal, audit and other operating expenses. See "Management" herein and
the Statement of Additional Information for more information. Investors
purchasing Advisor Class shares through financial planners, trust companies,
bank trust departments or registered investment advisors, or under a "wrap
fee" program, will be subject to additional fees charged by such entities or
by the sponsors of such programs. Where any account advised by one of the
companies affiliated with AMVESCAP PLC invests in Advisor Class shares of the
Fund, such account shall not be subject to duplicative advisory fees.
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
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class Shares................................. $15 $48 $82 $180
</TABLE>
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S ACTUAL 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> 304
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables below provide condensed financial information concerning income and
capital changes for Advisor Class shares of the Fund. This information is
supplemented by the financial statements and accompanying notes appearing in the
Statement of Additional Information. The financial statements and notes, for the
fiscal 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 also is included in the Statement of Additional
Information.
AIM LATIN AMERICAN GROWTH FUND
(FORMERLY GT GLOBAL LATIN AMERICA GROWTH FUND)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCT. 31, JUNE 1, 1995
APRIL 30, ---------------------- TO
1998(a) 1997(a) 1996(a) OCT. 31, 1995
----------- --------- --------- -------------
<S> <C> <C> <C> <C>
ADVISOR CLASS*
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:
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......................... 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 reimbursements.... 1.40%(c) 1.02% 0.96% 1.36%(c)
Without expense reductions and
reimbursements............................. 1.21%(c) 0.92% 0.89% 1.35%(c)
Ratio of operating expenses to average net
assets:
With expense reductions....................... 1.49%(c) 1.46% 1.53% 1.61%(c)
Without expense reductions.................... 1.68%(c) 1.56% 1.60% 1.62%(c)
Ratio of interest expense to average net
assets+....................................... 0.16%(c) N/A N/A N/A
Portfolio turnover rate+........................ 27%(c) 130% 101% 125%(c)
Average commission rate per share paid on
portfolio transactions+....................... $0.0016 $0.0007 $0.0005 N/A
</TABLE>
- ---------------
+ Portfolio turnover, average commission 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.
* Commencing June 1, 1995, the Fund began offering Advisor Class shares.
** Before reimbursement, the net investment income per share would have been
reduced by $0.02.
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Not annualized.
(c) Annualized.
N/A Not Applicable.
<TABLE>
<CAPTION>
AVERAGE AMOUNT
OF DEBT AVERAGE MONTHLY AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING NUMBER OF REGISTRANT'S OF DEBT PER
OUTSTANDING AT DURING THE SHARES OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD PERIOD DURING THE PERIOD THE PERIOD
---------- -------------- -------------- ---------------------- --------------
<S> <C> <C> <C> <C>
Six months ended April 30, 1998...... $ -- $3,165,121 13,623,707 $ 0.232
October 31, 1997..................... $3,238,000 $1,519,383 16,973,475 $0.0895
</TABLE>
Average amount of debt outstanding during the period is computed on a daily
basis.
5
<PAGE> 305
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of the Fund. Such practices will
have the effect of increasing the Fund's total return. The performance of the
Fund will vary from time to time and past results are not necessarily
representative of future results. The Fund's performance is a function of its
portfolio management in selecting the type and quality of portfolio securities
and is affected by operating expenses of the Fund as well as by general market
conditions.
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
INVESTMENT OBJECTIVE. The Fund's investment objective is capital appreciation.
The Fund normally invests at least 65% of its total assets in the securities of
a broad range of Latin American issuers. The Fund may invest in common stock,
preferred stock, rights, warrants and securities convertible into common stock,
and other substantially similar forms of equity securities with comparable risk
characteristics, as well as bonds, notes, debentures or other forms of
indebtedness that may be developed in the future. Normally, the Fund will invest
a majority of its assets in equity securities. The Fund may also invest up to
35% of its total assets in a combination of equity and debt securities of U.S.
issuers. There can be no assurance that the Fund will meet its investment
objective.
INVESTMENT POLICIES. For purposes of this Prospectus, unless otherwise
indicated, the Fund defines Latin America to include the following countries:
Argentina, the Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia,
Costa Rica, Dominican Republic, Ecuador, El Salvador, French Guiana, Guatemala,
Guyana, Haiti, Honduras, Jamaica, Mexico, the Netherlands Antilles, Nicaragua,
Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay and Venezuela.
Under current market conditions, the Fund expects to invest primarily in
securities issued by companies and governments in Mexico, Chile, Brazil and
Argentina. The Fund may invest more than 25% of its total assets in any of these
four countries but does not expect to invest more than 60% of its total assets
in any one country.
The Fund defines securities of Latin American issuers to include: (a)
securities of companies organized under the laws of, or having a principal
office located in, a Latin American country; (b) securities of companies that
derive 50% or more of their total revenues from business in Latin America,
provided that, in the Sub-advisor's view, the value of such issuers' securities
reflect Latin American developments to a greater extent than developments
elsewhere; (c) securities issued or guaranteed by the government of a country in
Latin America, its agencies or instrumentalities, or municipalities, or the
central bank of such country; (d) U.S. dollar-denominated securities or
securities denominated in a Latin American currency issued by companies to
finance operations in Latin America; and (e) securities of Latin American
issuers, as defined herein, in the form of depositary shares. For purposes of
the foregoing definition, the Fund's purchases of securities issued by companies
outside of Latin America to finance their Latin American operations will be
limited to securities, the performance of which is materially related to such
company's Latin American activities.
In allocating investments among the various Latin American countries, the
Sub-advisor looks principally at the stage of industrialization, potential for
productivity gains through economic deregulation, the impact of financial
liberalization and monetary conditions and the political outlook in each
country. In allocating assets between equity and debt securities, the
Sub-advisor will consider, among other factors: the level and anticipated
direction of interest rates; expected rates of economic growth and corporate
profits growth; changes in Latin American government policy including regulation
governing industry, trade, financial markets, and foreign and domestic
investment; substance and likely development of government finances; and the
condition of the balance of payments and changes in the terms of trade. In
evaluating investments in securities of U.S. issuers, the Sub-advisor will
consider, among other factors, the issuer's Latin American business activities
and the impact that development in Latin America may have on the issuer's
operations and financial condition.
6
<PAGE> 306
Certain sectors of the economies of certain Latin American countries are
closed 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 in certain Latin American countries, the
Fund may be able to invest in such countries solely or primarily through
governmentally approved investment vehicles or companies. In addition, the
portion of the Fund's assets invested directly in Chile may be less than the
portion invested in other Latin American countries because, at present, capital
directly invested in Chile normally cannot be repatriated for at least one year.
As a result, the Fund currently intends to limit most of its Chilean investments
to indirect investments through American Depositary Receipts ("ADRs") and
established Chilean investment companies, the shares of which are not subject to
repatriation restrictions.
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. Under normal circumstances, the Fund may
invest up to 50% of its total assets in debt securities. There is no limitation
on the percentage of its 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." Most debt securities in which the Fund will invest are not rated;
if rated, it is expected that such ratings would be below investment grade.
However, the Fund will not invest in debt securities that are in default in
payment as to principal or interest. See "Risk Factors -- Risks Associated with
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
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, 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 capital
appreciation.
TEMPORARY DEFENSIVE STRATEGIES. The Fund may invest up to 100% of its assets
in cash (U.S. dollars, foreign currencies, multinational units such as euros)
and/or high quality debt securities or money market instruments to generate
income to defray its expenses, for temporary defensive purposes and pending
investment in accordance with its investment objective and policies.
In addition, the Fund may be primarily invested in U.S. securities for
temporary defensive purposes or pending investment of the proceeds of sales of
new Fund shares. The Fund may assume a temporary defensive position when, due to
political, market or other factors broadly affecting Latin American markets, the
Sub-advisor determines that opportunities for capital appreciation in those
markets would be significantly limited over an extended period or that investing
in those markets presents undue risk of loss. For a full description of money
market instruments, 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 "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
7
<PAGE> 307
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 Latin American countries have been
engaged in programs of selling part or all of their stakes in government owned
or controlled enterprises ("privatizations"). The Sub-advisor believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Fund in privatizations in appropriate
circumstances. In certain Latin American countries, 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 Latin American governments and 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 each 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 Latin American 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.
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.
8
<PAGE> 308
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 Latin America, 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.
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 fewer number of issuers than if it
were classified under the 1940 Act as a "diversified" fund. To the extent that
the Fund invests in a smaller number of issuers, the value 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 securities of Latin American issuers involves risks relating to
potential political and economic instability of certain Latin American 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 any such country.
The securities markets of Latin American countries are substantially smaller,
less developed, less liquid and more volatile than the major securities markets
in the United States. Disclosure and regulatory standards are in many respects
less stringent than U.S. standards. Furthermore, there is a lower level of
monitoring and regulation of the markets and the activities of investors in such
markets, and enforcement of existing regulations has been extremely limited.
The limited size of many Latin American securities markets and limited trading
volume in issuers compared to 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.
Further, there is a risk that an emergency situation may arise in one or more
Latin American markets as a result of which prices for 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.
The economies of individual Latin American countries may differ favorably or
unfavorably from the U.S. economy in such respects as the rate of growth of
gross domestic product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. 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. Furthermore, certain
Latin American countries may impose withholding taxes on dividends payable to
the Fund at a higher rate than those imposed by other foreign countries. This
may reduce the Fund's investment income available for distribution to
shareholders.
9
<PAGE> 309
Companies in Latin America are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. There is substantially less publicly available
information about Latin American companies and the governments of Latin American
countries than there is about U.S. companies and the U.S. Government.
Certain Latin American countries are 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.
The Fund may invest in debt securities, including Brady Bonds, issued as part of
debt restructurings and such debt is to be considered speculative. There is a
history of defaults with respect to commercial bank loans by public and private
entities issuing Brady Bonds.
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 50% of its total assets in debt securities of any
rating. 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 Latin American 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 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 Latin American 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 Latin American markets in the event of
default by the governments under commercial bank loan agreements.
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ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in
securities for which no readily available market exists, so-called "Illiquid
Securities." The Fund may invest in joint ventures, cooperatives, partnerships
and state enterprises and other similar vehicles which are illiquid
(collectively, "Special Situations"). The Sub-advisor believes that carefully
selected investments in Special Situations could enable the Fund to achieve
capital appreciation substantially exceeding the appreciation the Fund would
realize if it did not make such investments. However, in order to limit
investment risk, the Fund will invest no more than 5% of its total assets in
Special Situations.
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 Latin American 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.
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 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 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 the Fund's expenses (exclusive of brokerage commissions,
taxes, interest and extraordinary expenses) to the annual rate of 1.50% of the
average daily net assets of the Fund's Advisor Class shares.
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AIM also serves as the Fund's pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, G.T. Global
Variable Investment Series and G.T. Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment manager to the Fund pursuant to a master investment management and
administration agreement (the "Advisory Agreement"). AIM was organized in 1976
and, together with its subsidiaries, manages or advises approximately 90
investment company portfolios encompassing a broad range of investment
objectives. The Sub-advisor, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-advisor to the Fund pursuant to an investment sub-advisory and
sub-administration agreement. Prior to May 29, 1998, the Sub-advisor was known
as Chancellor LGT Asset Management, Inc. On May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of the Sub-advisor,
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included the Sub-advisor and
certain other affiliates. As a result of this transaction, the Sub-advisor is
now an indirect wholly-owned subsidiary of AMVESCAP PLC. Prior to the sale, the
Sub-advisor and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
AIM and the Sub-advisor and their worldwide asset management affiliates
provide investment management and/or administrative services to institutional,
corporate and individual clients around the world. AIM and the Sub-advisor are
both indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and
New York offices, AIM and the Sub-advisor draw upon the expertise, personnel,
data and systems of other offices in Atlanta, Boston, Dallas, Denver,
Louisville, Miami, Portland (Oregon), 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 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.
David Manuel Portfolio Manager Portfolio Manager for the Sub-advisor and
London since 1997 INVESCO GT Asset Management PLC (London), an
affiliate of the Sub-advisor, since November
1997. Investment Analyst and Portfolio Manager
for Abbey Life Investment Services Ltd.
(Bournemouth) from 1987 to 1997, and Head of
Latin American Equities from 1994 to 1997.
</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 (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of the Advisor Class
shares of the Fund. Certain Trustees and officers of the Trust are affiliated
with AIM Distributors.
The Distribution Agreement provides AIM Distributors with the exclusive right
to distribute Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
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- --------------------------------------------------------------------------------
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 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.
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THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
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<PAGE> 314
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
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and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
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SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
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EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
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Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
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HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
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REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
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as certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client
Services Department of AFS.
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DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
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DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
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TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
A-9
<PAGE> 322
AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 323
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> 324
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> 325
[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.
LAG-PRO-2
<PAGE> 326
[APPLICATION
INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
ADVISOR CLASS OF
AIM STRATEGIC INCOME FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM STRATEGIC INCOME 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 high
current income and secondarily seeks capital appreciation. The Fund allocates
its assets among debt securities of issuers in: (1) the United States; (2)
developed foreign countries; and (3) emerging markets.
The Fund is designed for long-term investors and not as a trading vehicle, does
not represent a complete investment program and is not suitable for all
investors. An investment in the Fund involves risk factors that should be
reviewed carefully by potential investors. The Fund is authorized to borrow
money for investment purposes, which would increase the volatility of its
performance and involves additional risks. See "Investment Objectives and
Policies" and "Risk Factors."
This Prospectus sets forth concisely information about the Fund that prospective
investors should know before investing. It should be read and retained for
future reference. A Statement of Additional Information, dated September 8,
1998, has been filed with the Securities and Exchange Commission (the "SEC") and
is incorporated herein by reference. The Statement of Additional Information is
available without charge upon written request to the Trust at 11 Greenway Plaza,
Suite 100, Houston, Texas 77046-1173, or by calling (800) 347-4246. The SEC
maintains a Web site at http://www.sec.gov that contains the Statement of
Additional Information, material incorporated by reference, and other
information regarding the Fund. Additional information about the Fund may also
be obtained from http://www.aimfunds.com.
THE STRATEGIC INCOME FUND INVESTS UP TO 50% OF ITS TOTAL ASSETS 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. PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED
WITH AN INVESTMENT IN THE FUND. SEE "INVESTMENT PROGRAM" AND "RISK FACTORS."
EFFECTIVE NOVEMBER 9, 1998, UP TO 65% OF THE FUND'S TOTAL ASSETS MAY BE INVESTED
IN NON-INVESTMENT GRADE DEBT SECURITIES. THIS CHANGE MAY INCREASE THE FUND'S
EXPOSURE TO THE RISKS ASSOCIATED WITH INVESTING IN SUCH SECURITIES. SEE
"INVESTMENT PROGRAM -- INVESTMENT POLICIES" AND "RISK FACTORS."
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> 327
- --------------------------------------------------------------------------------
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......................... 11
Management........................... 16
Organization of the Trust............ 17
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-4
Exchange Privilege................... A-4
How to Redeem Shares................. A-5
Determination of Net Asset Value..... A-7
Dividends, Distributions and Tax
Matters........................... A-8
General Information.................. A-10
Appendix A........................... A-11
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND
The Fund is a non-diversified series of the Trust.
INVESTMENT OBJECTIVES. The Fund primarily seeks high current income and
secondarily seeks capital appreciation.
PRINCIPAL INVESTMENTS. The Fund allocates its assets primarily among debt
securities of issuers in: (1) the United States; (2) developed foreign
countries; and (3) emerging markets, and selects particular securities in each
sector based on their relative investment merit.
INVESTMENT MANAGERS. The Fund is managed by A I M Advisors, Inc. ("AIM") and
is sub-advised and sub-administered by INVESCO (NY), Inc. (the "Sub-advisor").
AIM and the Sub-advisor and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-advisor are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
AIM was organized in 1976 and, together with its subsidiaries, currently advises
approximately 90 investment company portfolios.
PURCHASING SHARES. Advisor Class shares are offered through this Prospectus to
(a) trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 1,000 employees; (b)
any account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment advisor has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least 0.50%
on the assets in the account; (c) any account with assets of a least $10,000 if
(i) such account is established under a "wrap fee" program, and (ii) the account
holder pays the sponsor of such program an annual fee of at least 0.50% on the
assets in the account; (d) accounts advised by the Sub-advisor or one of the
companies formerly affiliated with the Asset Management Division of
Liechtenstein Global Trust AG, provided such accounts were invested in Advisor
Class shares of any of the funds in The AIM Family of Funds on May 29, 1998; and
(e) any of the companies composing or affiliated with AMVESCAP PLC. Pursuant to
a separate prospectus, the Fund also offers Class A and Class B shares, which
represent interests in the Fund. The Class A and Class B shares have different
distribution arrangements.
Initial investments in Advisor Class shares must be at least $500 and
additional investments must be at least $50. The distributor of the Advisor
Class shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares."
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds").
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
certain Funds in the AIM Family of Funds in the manner and subject to the
policies and charges set forth herein. See "Exchange Privilege."
REDEEMING SHARES. Advisor Class shareholders of the Fund may redeem all or a
portion of their shares at net asset value on any business day. See "How to
Redeem Shares."
DISTRIBUTIONS. The Fund currently declares and pays dividends from net
investment income, if any, on a monthly basis. The Fund generally makes
distributions of realized capital gains, if any, on an annual basis. Dividends
and distributions of the Fund may be
2
<PAGE> 328
reinvested at net asset value without payment of a sales charge in the Fund's
shares or may be invested in shares of the other funds in The AIM Family of
Funds. See "Dividends, Distributions and Tax Matters."
RISK FACTORS. There is no assurance that the Fund will achieve its investment
objectives. The Fund's net asset value will fluctuate, reflecting fluctuations
in the market value of its portfolio holdings. The value of debt securities held
by the Fund generally fluctuates inversely with interest rate movements.
The Fund will invest 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 invest in securities of issuers in emerging markets. Such investments entail
greater risks than investing in securities of 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 Fund may invest up to 50% of its total assets in debt securities rated
below investment grade or, if not rated, determined by the Sub-advisor to be of
comparable quality. Investments of this type are subject to greater risk of loss
of principal and interest. See "Investment Program" and "Risk Factors."
Effective November 9, 1998, up to 65% of the Fund's total assets may be invested
in non-investment grade debt securities. The Fund may also invest up to 35% of
its total assets in equity securities which involve additional risks. See "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> 329
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Advisor Class shares of the Fund are reflected in the following table(1):
<TABLE>
<S> <C>
Shareholder Transaction Costs:
Maximum sales charge on purchases of shares (as a % of None
offering price)........................................
Sales charges on reinvested distributions to None
shareholders...........................................
Maximum deferred sales charge (as a % of net asset value None
at time of purchase or sale, whichever is less)........
Redemption charges........................................ None
Exchange fees............................................. None
Annual Fund Operating Expenses(2): (as a % of average net
assets)
Investment management and administration fees............. 0.73%
12b-1 distribution and service fees....................... None
Other expenses............................................ 0.36%
----
Total Fund Operating Expenses..................... 1.09%
====
</TABLE>
(1) This table is intended to assist investors in understanding the various
costs and expenses associated with investing in the Fund.
(2) Expenses are based on the Fund's fiscal year ended October 31, 1997. "Other
expenses" include custody, transfer agent, legal, audit and other operating
expenses. See "Management" herein and the Statement of Additional
Information for more information. Investors purchasing Advisor Class shares
through financial planners, trust companies, bank trust departments or
registered investment advisors, or under a "wrap fee' program, will be
subject to additional fees charged by such entities or by the sponsors of
such programs. Where any account advised by one of the companies composing
or affiliated with AMVESCAP PLC invests in Advisor Class shares of the
Fund, such account shall not be subject to duplicative advisory fees.
Effective November 1, 1997, AIM has voluntarily agreed to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the annual rate of 1.40% of the average daily
net assets of the Fund's Advisor Class shares through May 31, 2000.
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
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class Shares................................. $11 $35 $60 $133
</TABLE>
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> 330
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The table below provides condensed financial information concerning income and
capital changes for one Advisor Class share of the Fund. For the period March
29, 1988 (commencement of operations) to October 22, 1992, the Strategic Income
Fund was named G.T. Global Bond Fund and operated under different investment
objectives, policies and limitations. 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 ending April 30, 1998, have
been audited by PricewaterhouseCoopers LLP, independent accountants, whose
report thereon also is included in the Statement of Additional Information.
AIM STRATEGIC INCOME FUND
(FORMERLY GT GLOBAL STRATEGIC INCOME FUND)
<TABLE>
<CAPTION>
ADVISOR CLASS**
-----------------------------------------------
SIX MONTHS YEAR ENDED JUNE 1,
ENDED OCTOBER 31, 1995 TO
APRIL 30, ----------------- OCTOBER 31,
1998(c) 1997 1996(c) 1995(c)
---------- ------ ------- -----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................ $12.02 $11.77 $10.33 $10.32
------ ------ ------ ------
Income from investment operations:
Net investment income..................................... 0.55* 0.79 0.93 0.41
Net realized and unrealized gain (loss) on investments.... 0.18 0.34 1.44 (0.04)
------ ------ ------ ------
Net increase (decrease) from investment operations...... 0.73 1.13 2.37 0.37
------ ------ ------ ------
Distributions:
From net investment income................................ (0.44) (0.82) (0.86) (0.34)
From net realized gain on investments..................... -- -- -- --
In excess of net investment income........................ -- (0.06) (0.07) --
Return of capital......................................... -- -- -- (0.02)
From sources other than net investment income............. -- -- -- --
------ ------ ------ ------
Total distributions..................................... (0.44) (0.88) (0.93) (0.36)
------ ------ ------ ------
Net asset value, end of period.............................. $12.31 $12.02 $11.77 $10.33
====== ====== ====== ======
Total investment return..................................... 6.09%(a) 9.86% 23.39% 3.72%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $ 777 $ 533 $ 479 $ 443
Ratio of net investment income to average net assets........ 8.13%(b) 6.53% 8.44% 9.99%(b)
Ratio of operating expenses to average net assets:
With expense reductions................................... 1.11%(b) 1.00% 1.03% 1.07%(b)
Without expense reductions................................ 1.11%(b) 1.09% 1.05% 1.10%(b)
Ratio of interest expenses to average net assets ++......... 0.01%(b) N/A N/A N/A
Portfolio turnover rate ++.................................. 244%(b) 149% 177% 238%(b)
</TABLE>
- ---------------
<TABLE>
<C> <S>
++ Portfolio turnover and ratio of interest expenses to average
net assets are calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares
issued.
* Net investment income per share reflects an interest payment
received from the conversion of Vnesheconombank loan
agreements. Without such a payment, net investment income
would have been $0.44 per share for Advisor Class.
** Commencing June 1, 1995, the Fund began offering Advisor
Class shares.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon
average shares outstanding during the period.
N/A Not Applicable.
</TABLE>
<TABLE>
<CAPTION>
AVERAGE MONTHLY
AVERAGE NUMBER OF AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT OUTSTANDING OUTSTANDING SHARE
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
- ---------- -------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Six months ended April 30, 1998................... $1,000,000 $ 161,644 33,389,895 $ 0.005
October 31, 1997.................................. -- $3,575,910 39,263,038 $0.0911
</TABLE>
Average amount of debt outstanding during the period is computed on a daily
basis.
5
<PAGE> 331
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return.
The Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
Yield is computed in accordance with standardized formulas described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, yield
information may not provide a basis for comparison with investments which pay a
fixed rate of interest for a stated period of time. Yield reflects investment
income net of expenses over the relevant period attributable to a Fund share,
expressed as an annualized percentage of the net asset value per share for
Advisor Class shares.
Yield is a function of the type and quality of the Fund's investments, the
maturity of the securities held in the Fund's portfolio and the operating
expense ratio of the Fund. A shareholder's investment in the Fund is not insured
or guaranteed. These factors should be carefully considered by the investor
before making an investment in the Fund.
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 any Fund. Such practices will
have the effect of increasing the Fund's yield and total return. The performance
of the Fund will vary from time to time and past results are not necessarily
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 primarily seeks high current income and
secondarily seeks capital appreciation. There can be no assurance that the Fund
will achieve its investment objectives.
INVESTMENT POLICIES. The Fund invests in debt securities of issuers in: (1)
the United States; (2) developed foreign countries; and (3) emerging markets.
The Fund selects debt securities from those issued by governments, their
agencies and instrumentalities; central banks; and commercial banks and other
corporate entities. Debt securities in which the Fund may invest include bonds,
notes, debentures, and other similar instruments including mortgage-backed and
asset-backed securities of foreign issuers as well as domestic issuers. The Fund
normally invests at least 50% of its net assets in U.S. and foreign debt and
other fixed income securities that, at the time of purchase, are rated at least
investment grade by Moody's or S&P or, if not rated, determined by the
Sub-advisor to be of comparable quality. No more than 50% of the Fund's total
assets may be invested in securities rated below investment grade. Such
securities involve a high degree of risk and are predominantly speculative. They
are the equivalent of high yield, high risk bonds, commonly known as "junk
bonds." The Fund may also invest in securities that are in default as to payment
of principal and/or interest.
Beginning November 9, 1998, the following changes to non-fundamental
investment policies of the Fund will become effective: (1) the non-fundamental
investment policy of the Fund relating to investment grade debt securities will
be removed and replaced in its entirety with the following: "Under normal market
conditions, the Fund will invest at least 35% of its total assets in U.S. and
foreign debt and other fixed income securities that, at the time of purchase,
are either rated at least investment grade by Moody's or S&P or, if not rated,
are determined by the Sub-advisor to be of comparable quality"; (2) the
non-fundamental investment policy of the Fund relating to non-investment grade
debt securities will be removed and replaced in its entirety with the following:
"Up to 65% of the Fund's total assets may be invested in debt securities that,
at the time of purchase are either rated below investment grade by Moody's or
S&P, or, if not rated, are determined by the Sub-Advisor to be of comparable
quality"; and (3) a new non-fundamental investment policy of the Fund relating
to investments in equity securities will be added to read in its entirety as
follows: "The Fund may invest up to 35% of its total assets in equity securities
(including convertible securities)." The Sub-advisor anticipates investing in
equity securities when market conditions appear to present opportunities
favorable for capital appreciation due to such factors as improved corporate
earnings or favorable interest rates.
6
<PAGE> 332
The Fund's investments in emerging market securities may consist substantially
of Brady Bonds (see "General Policies -- Brady Bonds," below) and other
sovereign debt securities issued by emerging market governments that are traded
in the markets of developed countries or groups of developed countries. The
Sub-advisor may invest in debt securities of emerging market issuers that it
determines to be suitable investments for the Fund without regard to ratings.
Currently, the substantial majority of emerging market debt securities are
considered to have a credit quality below investment grade. The Fund also may
invest in below-investment grade debt securities of corporate issuers in the
United States and in developed foreign countries, subject to the overall 50%
limitation.
- --------------------------------------------------------------------------------
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:
ASSET ALLOCATION. The Fund invests in debt obligations allocated among diverse
markets and denominated in various currencies, including U.S. dollars, or in
multinational currency units such as Euros. The Fund is designed for investors
who wish to accept the risks entailed in such investments, which are different
from those associated with a portfolio consisting entirely of securities of U.S.
issuers denominated in U.S. dollars. The Fund may purchase securities that are
issued by the government or a company or financial institution of one country
but denominated in the currency of another country (or a multinational currency
unit).
The Sub-advisor allocates the assets of the Fund in securities of issuers in
countries and in currency denominations where the combination of fixed income
market returns, the price appreciation potential of fixed income securities and
currency exchange rate movements will present opportunities primarily for high
current income and secondarily for capital appreciation. In so doing, the Sub-
advisor intends to take full advantage of the different yield, risk and return
characteristics that investment in the fixed income markets of different
countries can provide for U.S. investors. Fundamental economic strength, credit
quality and currency and interest rate trends are the principal determinants of
the emphasis given to various country, geographic and industry sectors within
the Fund. Securities held by the Fund may be invested in without limitation as
to maturity.
The Sub-advisor selects securities of particular issuers on the basis of its
views as to the best values then currently available in the marketplace. Such
values are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the local and world
economies, movements in the general level and term of interest rates, currency
values, political developments and variations in the supply of funds available
for investment in the world bond market relative to the demands placed upon it.
The Sub-advisor generally evaluates currencies on the basis of fundamental
economic criteria (e.g., relative inflation, interest rate levels and trends,
growth rate forecasts, balance of payments status and economic policies) as well
as technical and political data. The Sub-advisor may seek to protect the Fund
against such negative currency movements through the use of sophisticated
investment techniques. See "Options, Futures and Forward Currency Transactions"
and "Swaps, Caps, Floors and Collars."
According to the Sub-advisor, as of the date of this Prospectus, more than 50%
of the value of all outstanding government debt obligations throughout the world
is represented by obligations denominated in currencies other than the U.S.
dollar. Moreover, from time to time, the debt securities of issuers located
outside the United States have substantially outperformed the debt obligations
of U.S. issuers. Accordingly, the Sub-advisor believes that the Fund's policy of
investing in debt securities throughout the world may enable the achievement of
results superior to those produced by mutual funds with similar objectives to
those of the Fund that invest solely in debt securities of U.S. issuers.
The Fund is designed for investors who wish to accept the risks entailed in
such investments, which are different from those associated with a portfolio
consisting entirely of securities of U.S. issuers denominated in U.S. dollars.
TEMPORARY DEFENSIVE STRATEGIES. 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. Pursuant to such a defensive
strategy, the Fund temporarily may hold cash (U.S. dollars, foreign currencies
or multinational currency units, such as the euros) and/or invest up to 100% of
its assets in high quality debt securities or 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 employs a temporary defensive strategy, it
will not be invested so as to achieve directly its investment objectives. In
addition, pending investment of proceeds from new sales of Fund shares or to
meet ordinary daily cash needs, the Fund may hold cash (U.S. dollars, foreign
currencies or multinational currency units) and may invest in high quality
foreign or domestic money market instruments. For a full description of money
market instruments, see "Selection of Debt Investments" in the "Investment
Objectives and Policies" section of the Statement of Additional Information.
EMERGING MARKET SECURITIES. The Fund considers "emerging markets" to 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. The Fund will consider investment in the
following emerging markets:
Algeria
Argentina
Bolivia
Botswana
Brazil
Bulgaria
Chile
China
Colombia
7
<PAGE> 333
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
Swaziland
Taiwan
Thailand
Turkey
Ukraine
Uruguay
Venezuela
Zambia
Zimbabwe
The Fund 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, overly burdensome repatriation
requirements and similar restrictions, the lack of organized and liquid
securities markets, unacceptable political risks or for other reasons.
As used in this Prospectus and the Statement of Additional Information, 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 revenue from
either goods produced, sales made or services performed in emerging markets; or
(iii) organized under the laws of, or with a principal office in, an emerging
market.
BRADY BONDS. 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
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.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Fund may invest in
mortgage-backed and asset-backed securities of U.S. and foreign issuers,
including privately issued mortgage-backed and asset-backed securities.
Mortgage-backed securities represent direct or indirect interests in pools of
underlying mortgage loans that are secured by real property. Investors typically
receive payments out of the interest on and principal of the underlying
mortgages. Asset-backed securities are similar to mortgage-backed securities,
except that the underlying assets are other financial assets or financial
receivables, such as motor vehicle installment sales contracts, home equity
loans, leases of various types of real and personal property, and receivables
from credit cards. Any mortgage-backed and asset-backed securities purchased by
the Fund will be subject to the same rating requirements that apply to its other
investments.
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 government. 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 ("Loan Agreement"), 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 As-
8
<PAGE> 334
signments from Lenders, the Fund will acquire direct rights against the borrower
on the Loan. However, since 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.
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 of the securities. 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 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.
The Fund may also sell securities on a "when, as and if issued" basis for
hedging purposes. Under such a transaction, the Fund is required to deliver at a
future date a security it does not presently hold, but which it has a right to
receive if the security is issued. Issuance of the security may not occur, in
which case the Fund would have no obligation to the other party, and would not
receive payment for the sale. Selling securities on a "when, as and if issued"
basis may reduce risk of loss to the extent that such a sale wholly or partially
offsets unfavorable price movements on the investments being hedged. However,
such sales also limit the amount the Fund can receive if the "when, as and if
issued" security is in fact issued.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Fund is
authorized to borrow money from banks in an amount up to 33 1/3% of its total
assets (including the amount borrowed), less all liabilities and indebtedness
other than the borrowings and may use the proceeds of such borrowings for
investment purposes. The Fund will borrow for investment purposes only when the
Sub-advisor believes that such borrowings will benefit the Fund after taking
into account considerations such as the costs of the borrowing and the likely
investment returns on the securities purchased with the borrowed monies.
Borrowing for investment purposes is known as leveraging, which is a
speculative practice. Such borrowing by the Fund creates the opportunity for
increased net income and appreciation but, at the same time, involves special
risk considerations. For example, leveraging might exaggerate changes in the net
asset value of Fund shares and in the yield realized by the Fund. Although the
principal amount of such borrowings will be fixed, the Fund's assets may change
in value during the time the borrowing is outstanding. By leveraging the Fund,
changes in net asset values, higher or lower, may be greater in degree than if
leverage was not employed. To the extent the income derived from the assets
obtained with borrowed funds exceeds the interest and other expenses that the
Fund will have to pay, the Fund's net income will be greater than if borrowing
was not used. Conversely, if the income from the assets obtained with borrowed
funds is not sufficient to cover the cost of borrowing, the net income of the
Fund will be less than if borrowing were not used, and therefore the amount
available for distribution to shareholders as dividends will be reduced. The
Fund expects that some of its borrowings may be made on a secured basis.
In addition to the foregoing borrowings, the Fund may borrow money for
temporary or emergency purposes or payments in an amount not exceeding 5% of the
value of its total assets (not including the amount borrowed) provided that the
total amount borrowed by the Fund for any purpose does not exceed 33 1/3% of its
total assets.
The Fund may also enter into reverse repurchase agreements with a bank or
recognized securities dealer, although the Fund currently has no intention of
doing so with respect to more than 5% of its total assets. Under a reverse
repurchase agreement, the Fund would sell securities and agree to repurchase
them at a particular price at a future date. At the time the Fund enters into a
reverse repurchase agreement, it will establish and maintain a segregated
account with an approved custodian containing cash or liquid securities having a
value not less than the repurchase price, including accrued interest. Reverse
repurchase agreements involve the risk that the market value of the securities
retained in lieu of sale by the Fund may decline below the price of the
securities the Fund has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce the Fund's obligation to
repurchase the securities, and the Fund's use of the proceeds of the reverse
repurchase agreement may effectively be restricted pending such decision.
The Fund also may enter into "dollar rolls," in which the Fund sells fixed
income securities for delivery in the current month and simultaneously contracts
to repurchase substantially similar (same type, coupon and maturity) securities
on a specified future date. During the roll period, the Fund would forego
principal and interest paid on such securities. The Fund would be compensated by
the difference between the current sales price and the forward price for the
future purchase, as well as by the interest earned on the cash proceeds of the
initial sale. See "Investment Objectives and Policies" in the Statement of
Additional Information.
Reverse repurchase agreements and dollar rolls will be treated as borrowings
and will be deducted from the Fund's assets for purposes of calculating
compliance with the Fund's borrowing limitation. See "Investment Limitations" in
the Statement of Additional Information.
9
<PAGE> 335
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. At all times a loan is outstanding, the Fund
requires the borrower to 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.
ZERO COUPON SECURITIES. The Fund may invest in certain zero coupon securities
that are "stripped" U.S. Treasury notes and bonds. It 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. However, 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
must 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.
SYNTHETIC SECURITY POSITIONS. The Fund may utilize combinations of futures on
bonds and forward currency contracts to create investment positions that have
substantially the same characteristics as bonds of the same type as those on
which the futures contracts are written. Investment positions of this type are
generally referred to as "synthetic securities."
For example, in order to establish a synthetic security position for the Fund
that is comparable to owning a Japanese government bond, the Sub-advisor might
purchase futures contracts on Japanese government bonds in the desired principal
amount and purchase forward currency contracts for Japanese Yen in an amount
equal to the then current purchase price for such bonds in the Japanese cash
market, with each contract having approximately the same delivery date.
The Sub-advisor might roll over the futures and forward currency contract
positions before taking delivery in order to continue the Fund's investment
position, or the Sub-advisor might close out those positions, thus effectively
selling the synthetic security. Further, the amount of each contract might be
adjusted in response to market conditions and the forward currency contract
might be changed in amount or eliminated in order to hedge against currency
fluctuations.
The Sub-advisor would create synthetic security positions for the Fund when it
believes that it can obtain a better yield or achieve cost savings in comparison
to purchasing actual bonds or when comparable bonds are not readily available in
the market. Synthetic security positions are subject to the risk that changes in
the value of purchased futures contracts may differ from changes in the value of
the bonds that might otherwise have been purchased in the cash market. Also,
while the Sub-advisor believes that the cost of creating synthetic security
positions generally will be materially lower than the cost of acquiring
comparable bonds in the cash market, the Fund will incur transaction costs in
connection with each purchase of a futures or forward currency contract. The use
of futures contracts and forward currency contracts to create synthetic security
positions also is subject to substantially the same risks as those that exist
when these instruments are used in connection with hedging strategies. See
"Options, Futures and Forward Currency Transactions" below and "Options, Futures
and Currency Strategies" in the Statement of Additional Information.
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 and currency risk normally
associated with the Fund's investment. The Fund also may enter into interest
rate, currency and index swaps and purchase or sell related caps, floors and
collars and other similar instruments. See "Swaps, Caps, Floors and Collars"
below. 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 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 the
Fund's 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.
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In addition, 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 index futures contracts and may purchase put
options or write call options on such futures contracts to protect against a
general market or 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. The Fund may use interest rate futures contracts and
options thereon to hedge its portfolio against changes in the general level of
interest rates.
SWAPS, CAPS, FLOORS AND COLLARS. The Fund may enter into interest rate,
currency and index swaps, and 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 or floors
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 the 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.
INDEXED COMMERCIAL PAPER. The Fund may invest without limitation in commercial
paper which 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
may also 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 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 which
also may not be changed without shareholder approval. A complete description of
these limitations is included in the Statement of Additional Information. The
Fund's other investment policies described herein and in the Statement of
Additional Information may be changed by the Trust Board of Trustees without
shareholder approval.
The Fund is authorized to make short sales of securities, although it has no
current intention of doing so. See "Investment Objectives and Policies -- Short
Sales" in the Statement of Additional Information.
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.
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RISK FACTORS
GENERAL. There is no assurance that the Fund will achieve its investment
objectives. The Fund's net asset value will fluctuate, reflecting fluctuations
in the market value of its portfolio positions and its net currency exposure.
The value of fixed income securities held by the Fund generally fluctuates
inversely with interest rate movements. Longer term bonds held by the Fund are
subject to greater interest rate risk. 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.
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.
NON-DIVERSIFIED CLASSIFICATION. The Fund is classified under the Investment
Company Act of 1940 (the "1940 Act") as a "non-diversified" fund. As a result,
the Fund will be able to invest in a fewer number of issuers than if it were
classified under the 1940 Act as a "diversified" fund. To the extent that the
Fund invests in a smaller number of issuers, the value of the Fund's shares may
fluctuate more widely and the Fund may be subject to greater investment and
credit risk with respect to its portfolios.
FOREIGN INVESTING. Investing in foreign securities entails certain risks. 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 those applicable to U.S. 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 interest and dividends from foreign
issuers may be subject to non-U.S. withholding taxes, thereby reducing their net
investment income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments which could affect the investments of the Fund in those countries.
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, resource self-sufficiency
and balance of payments positions.
CURRENCY RISK. Since the Fund normally invests substantially in securities
denominated in currencies other than the U.S. dollar, and because they may hold
foreign currencies, they 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. The exchange rates between the U.S. dollar and other currencies
are determined by supply and demand in the currency exchange markets, the
international balance of payments, governmental intervention, speculation and
other economic and political conditions. 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 U.S.
dollars.
In addition, many of the currencies in emerging market countries have
experienced steady devaluations relative to the U.S. dollar and major
devaluations have historically occurred in certain countries.
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.
INVESTING IN EMERGING MARKETS. Because of the special risks associated with
investing in emerging markets, 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 foreign markets around the world.
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 in any
emerging market, the Fund could lose its entire investment in that market.
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Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain emerging market
countries.
Economies in 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. These economies also have been and may continue
to be affected adversely by economic conditions in the countries in which they
trade.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. 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 securities 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 the Fund to forego attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result 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 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 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 appropriate circumstances warrant, it will promptly apply
to the SEC for a determination that 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 SEC action, the portfolio
securities of the Fund in the affected markets will be valued at fair value as
determined in good faith by or under the direction of the Trust's Board of
Trustees.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The yield characteristics of
mortgage-backed and asset-backed securities differ from those of traditional
bonds. Among the major differences are that interest and principal payments are
made more frequently (usually monthly) and that principal may be prepaid at any
time because the underlying mortgage loans or other assets generally may be
prepaid at any time. Generally, prepayments on fixed-rate mortgage loans will
increase during a period of falling interest rates and decrease during a period
of rising interest rates. Mortgage-backed and asset-backed securities may also
decrease in value as a result of increasing market interest rates and, because
of prepayments, may benefit less than other bonds from declining interest rates.
Reinvestments of prepayments may occur at lower interest rates than the original
investment, thus adversely affecting the yield of the Fund. Actual prepayment
experience may cause the yield of a mortgage-backed security to differ from what
was assumed when the Fund purchased the security. The market for privately
issued mortgage-backed and asset-backed securities is smaller and less liquid
than the market for U.S. government mortgage-backed securities.
Foreign mortgage-backed securities markets are substantially smaller than U.S.
markets, but have been established in several countries, including Germany,
Denmark, Sweden, Canada and Australia, and may be developed elsewhere. Foreign
mortgage-backed securities generally are structured similar to domestic
mortgage-backed securities, and they normally present substantially similar
investment risks as well as the other risks normally associated with foreign
securities.
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 the
Fund's 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 the Fund's 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
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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
the willingness of countries to service their 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 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.
Investors should also be aware that certain sovereign debt instruments in
which the 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 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.
LOWER QUALITY DEBT SECURITIES. Under normal market conditions the Fund may
invest up to 65% 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. 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 quality 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 higher quality securities with regard to a deterioration of general
economic conditions. These securities are the equivalent of high yield, high
risk bonds, commonly known as "junk bonds." As noted above, the Fund may invest
in debt securities rated below C, which are in default as to principal and/or
interest.
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 quality in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates. See "Appendix A" for a discussion of Moody's and S&P's ratings.
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The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Fund. If an issuer exercises these provisions in a declining
interest rate market, the Fund may have to replace the security with a lower
yielding security, resulting in a decreased return for investors. In addition,
the Fund may have difficulty disposing of lower quality securities because there
may be a thin trading market for such securities. 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 the securities in the portfolios of the Fund. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may also
decrease the values and liquidity of lower quality securities, especially in a
thinly traded market. The Fund also may acquire lower quality debt securities
during an initial underwriting or may acquire lower quality debt securities
which are sold without registration under applicable securities laws. Such
securities involve special considerations and risks.
Factors having an adverse effect on the market value of lower rated securities
or their equivalents purchased by the Fund will adversely impact net asset value
of the Fund. See "Risk Factors" in the Statement of Additional Information. In
addition to the foregoing, such factors may 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 also may 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.
As of October 31, 1997, the Fund had 89.27% of its total net assets in debt
securities that received a rating from Moody's and 4.00% of its total net assets
in debt securities that were not so rated. In addition, the Fund had 6.73% of
its total net assets in cash and net receivables. The Fund had the following
percentages of its total net assets invested in rated securities: Aaa -- 41.23%,
Aa -- 12.68%, A -- 1.31%, Baa -- 3.75%, Ba -- 24.30%, B -- 6.00%, Caa -- 0.00%,
Ca -- 0.00%, C -- 0.00%. Included under the unrated category are securities held
by the Fund which, while unrated, have been determined by the Sub-advisor to be
of comparable quality to securities in the following rating categories:
Ba -- 1.03%; and B -- 2.97%. It should be noted that the allocation of the
investments of the Fund by rating on any given date will vary and should not be
considered representative of the future portfolio composition of the Fund.
OPTIONS, FUTURES AND FORWARD 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. In addition, issuers in
emerging markets typically are subject to a greater degree of change in earnings
and business prospects than issuers in developed countries. 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 or in the
appropriate market sector and movements in interest rates and currency markets;
(2) imperfect correlation, or even no correlation, between movements in the
price of options, forward contracts, futures contracts or options thereon and
movements in the price of the currency or security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are different from
those needed to select the securities in which 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 or Portfolio to
maintain "cover" or to set aside securities in connection with hedging
transactions.
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.
15
<PAGE> 341
- --------------------------------------------------------------------------------
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 and persons or companies furnishing services to the Fund
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 "Trustees and
Executive Officers" in the Statement of Additional Information for information
on the Trustees of the Trust.
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 investment portfolio of
the Fund and placing orders to buy, sell or hold particular securities. In
addition, AIM and the Sub-advisor provide the following administration services
to the Fund: furnishing corporate officers and clerical staff; providing office
space, services and equipment; and supervising all matters relating to the
Fund's operation.
The Fund pays AIM investment management and administration fees computed daily
and payable monthly, based on the average daily net assets, for such services at
the annualized rate of .725% on the first $500 million, .70% on the next $1
billion, .675% on the next $1 billion, and .65% 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 any other agents. Effective
November 1, 1997, AIM has undertaken to limit the expenses of the Advisor Class
shares of the Fund (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the maximum annual rate of 1.40% of the average daily
net assets of the Fund's Advisor Class shares.
AIM also serves as the Fund's pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, G.T. Global
Variable Investment Series and G.T. Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment manager to the Fund pursuant to a master investment management and
administration agreement (the "Advisory Agreement"). AIM was organized in 1976
and, together with its subsidiaries, manages or advises approximately 90
investment company portfolios encompassing a broad range of investment
objectives. The Sub-advisor, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-advisor to the Fund pursuant to an investment sub-advisory and
sub-administration agreement. Prior to May 29, 1998, the Sub-advisor was known
as Chancellor LGT Asset Management, Inc. On May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of the Sub-advisor,
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included the Sub-advisor and
certain other affiliates. As a result of this transaction, the Sub-advisor is
now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to the sale, the
Sub-advisor and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
AIM and the Sub-advisor and their worldwide asset management affiliates
provide investment management and/or administrative services to institutional,
corporate and individual clients around the world. AIM and the Sub-advisor are
both indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and
New York offices, AIM and the Sub-advisor draw upon the expertise, personnel,
data and systems of other offices, including investment 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.
16
<PAGE> 342
The investment professional primarily responsible for the portfolio management
of the Fund is as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
----------- -------------------- -------------------
<S> <C> <C>
Cheng-Hock Lau Portfolio Manager Chief Investment Officer for Global Fixed Income
New York since 1996 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.
("Chancellor Capital"), 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.
David B. Hughes Portfolio Manager Head of Global Fixed Income, North America, and
New York since 1998 Portfolio Manager for the Sub-Advisor since
January 1998. Senior Portfolio Manager for
Global/International Fixed Income for the
Sub-Advisor from July 1995 to December 1997.
Employed by Chancellor Capital from July 1995 to
October 1996. Assistant Vice President of
Fiduciary Trust Company International from 1994 to
1995. Assistant Treasurer at the Bankers Trust
Company from 1991 to 1994.
Craig Munro Portfolio Manager Portfolio Manager for the Sub-advisor since August
New York since 1998 1997. Vice President and Senior Analyst in the
Emerging Markets Group of the Global Fixed Income
Division of Merrill Lynch Asset Management from
1993 to August 1997.
Kevin J. Rogers Portfolio Manager Portfolio Manager for the Sub-advisor since July
New York since 1998 1997. High Yield Bond Analyst at Fidelity
Management & Research Company (Boston) from 1988
to 1997.
</TABLE>
In placing orders for the Fund's securities 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 for the Fund 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 (the
"Distribution Agreement"), with AIM Distributors, a registered broker-dealer and
a wholly owned subsidiary of AIM, to act as the distributor of the Advisor Class
shares of the Fund. Certain Trustees and officers of the Trust are affiliated
with AIM Distributors.
The Distribution Agreement provides AIM Distributors with the exclusive right
to distribute Advisor Class shares of the Fund directly and through institutions
with whom AIM Distributors has entered into selected dealer agreements.
- --------------------------------------------------------------------------------
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.
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 of 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.
17
<PAGE> 343
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 also
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.
18
<PAGE> 344
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Register Mark--
FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of approximately 50 mutual funds, several of
which offer Advisor Class shares. Only Advisor Class shares are offered through
this Prospectus. Advisor Class shares are available from the following funds
(collectively, the "Advisor Class Funds"):
<TABLE>
<S> <C>
AIM BASIC VALUE FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM DEVELOPING MARKETS FUND AIM GLOBAL RESOURCES FUND
AIM DOLLAR FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM EMERGING MARKETS FUND AIM GLOBAL TRENDS FUND
AIM EMERGING MARKETS DEBT FUND AIM INTERNATIONAL GROWTH FUND
AIM EUROPE GROWTH FUND AIM JAPAN GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AIM LATIN AMERICAN GROWTH FUND
AND SERVICES FUND AIM MID CAP EQUITY FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM NEW PACIFIC GROWTH FUND
AIM GLOBAL GOVERNMENT INCOME FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL GROWTH & INCOME FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL HEALTH CARE FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. ADVISOR
CLASS SHARES OF A FUND MAY BE EXCHANGED ONLY FOR ADVISOR CLASS SHARES OF ANOTHER
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND
OTHER THAN THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
HOW TO OPEN AN ACCOUNT. Advisor Class shares are available through Financial
Advisers (as defined herein) who have entered into agreements with A I M
Distributors, Inc. ("AIM Distributors"). In order to purchase Advisor Class
shares of any Advisor Class Fund, the Financial Adviser, on behalf of the
investor, must submit a fully completed new Account Application form directly to
A I M Fund Services, Inc. ("AFS" or the "Transfer Agent"). The Transfer Agent
will not accept new Account Application forms submitted directly by investors.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
non-resident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will be subject to backup withholding. See the Account
Application for applicable IRS penalties. The minimum initial investment for
Advisor Class shares is $500.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
A-1
<PAGE> 345
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Advisor Class shares of any Advisor Class Funds not named on the cover of this
Prospectus, as well as Class A, Class B and Class C shares of other funds
distributed by AIM Distributors ("AIM Funds"), are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his Financial Adviser should call AFS' Client Services
Department at (800) 959-4246 prior to sending a wire to receive a reference
number for the wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
Shareholder Name, Shareholder Account Number (70
OBI: character limit)
</TABLE>
It is recommended that investors in wrap fee accounts and advisory accounts
place orders through their Financial Advisers.
HOW TO PURCHASE ADDITIONAL SHARES. Additional Advisor Class shares may be
purchased directly through AIM Distributors or through any Financial Adviser who
has entered into an agreement with AIM Distributors. The minimum investment for
additional purchases of Advisor Class shares is $50.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional Advisor Class shares by
electronic funds transfer, please contact the Client Services Department of AFS
for details.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
In addition to the Advisor Class Funds, the AIM Funds consist of the following
funds: AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR
LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND,
AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION
FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM
WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM
LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND), with the Advisor Class
Funds, the "Multiple Class Funds." For information on purchasing any of the AIM
Funds and to receive a prospectus, please call (800) 347-4246. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value."
Advisor Class shares are offered through this Prospectus to (a) trustees or
other fiduciaries purchasing shares for employee benefit plans that are
sponsored by organizations that have at least 1,000 employees; (b) any account
with assets of at least $10,000 if (i) a financial planner, trust company, bank
trust department or registered investment adviser has investment discretion over
the account and (ii) the account holder pays such person as compensation for its
advice and other services an annual fee of at least .50% of the assets in the
account; (c) any account with assets of at least $10,000 if (i) the account is
established under a "wrap fee" program and (ii) the account holder pays the
sponsor of such program an annual fee of at least .50% of the assets in the
account; (d) accounts advised by INVESCO (NY), Inc. or one of the companies
formerly affiliated with Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares on May 29, 1998; (e) any of the companies
affiliated with AMVESCAP PLC; and (f) AIM GLOBAL TRENDS FUND (certain Advisor
Class Funds only).
Financial planners, trust companies, bank trust departments and registered
investment advisers referenced in clause (b) above, and sponsors of "wrap fee'
programs referenced in clause (c) above are collectively referred to as
"Financial Advisers." Financial Advisers and other fiduciaries may be required
to provide information satisfactory to AIM Distributors concerning their
eligibility to purchase Advisor Class shares. Investors in wrap fee programs and
advisory accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors. Investors may
be charged a fee by their agents or brokers for effecting transactions in
Advisor Class shares.
AIM Distributors may, from time to time, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives
A-2
<PAGE> 346
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
TIMING OF PURCHASE ORDERS. Orders for the purchase of Advisor Class shares
received prior to the close of regular trading on the New York Stock Exchange
("NYSE"), which is generally 4:00 p.m. Eastern Time (and which is hereinafter
referred to as "NYSE Close"), on any business day of an AIM Fund will be
confirmed at the price next determined. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of the AIM Fund.
Certain financial institutions (or their designees) may be authorized to accept
purchase orders on behalf of the AIM Funds. Orders received by authorized
institutions (or their designees) before NYSE Close will be deemed to have been
received by an AIM Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. It is the responsibility of the dealer/financial
institution to ensure that all orders are transmitted on a timely basis to the
Transfer Agent. Any loss resulting from the dealer/financial institution's
failure to submit an order within the prescribed time frame will be borne by
that dealer/financial institution. Please see "How to Purchase Shares -- Initial
and Subsequent Purchases by Wire" for information on obtaining a reference
number for wire orders, which will facilitate the handling of such orders and
ensure prompt credit to an investor's account. A "business day" of an AIM Fund
is any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
days on which New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO AIM DOLLAR FUND. Because AIM DOLLAR FUND uses
the amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of that fund will remain constant at $1.00 per share.
However, there is no assurance that AIM DOLLAR FUND can maintain a $1.00 net
asset value per share. AIM DOLLAR FUND generally will not issue share
certificates but will record investor holdings in noncertificate form and
regularly advise the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
A-3
<PAGE> 347
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each Advisor Class Fund provides the special plans
described below for the convenience of its Advisor Class shareholders. Once
established, there is no obligation to continue to invest through a plan, and a
shareholder may terminate a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Advisor Class shareholders may elect to
have all dividends and distributions declared by an Advisor Class Fund paid in
cash or invested at net asset value either in Advisor Class shares of the same
Advisor Class Fund or invested in shares of another Advisor Class Fund. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" for a
description of payment dates for these options. In order to qualify to have
dividends and distributions of one Advisor Class Fund invested in shares of
another Advisor Class Fund, the following conditions must be satisfied: (a) the
shareholder must have an account balance in the dividend paying fund of at least
$5,000; (b) the account must be held in the name of the shareholder (i.e., the
account may not be held in nominee name); and (c) the shareholder must have
requested and completed an authorization relating to the reinvestment of
dividends into another Advisor Class Fund. An authorization may be given on the
account application or on an authorization form available from AIM Distributors.
An Advisor Class Fund will waive the $5,000 minimum account value requirement if
the shareholder has an account in the fund selected to receive the dividends and
distributions with a value of at least $500.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of Advisor Class Funds. The
Program automatically rebalances holdings of Advisor Class Funds to the
established allocation on a periodic basis. Under the Program, a shareholder may
predesignate, on a percentage basis, how the total value of his or her holdings
in a minimum of two, and a maximum of ten, Advisor Class Funds ("Personal
Portfolio") is to be rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more Advisor Class Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other Advisor Class Funds in the
shareholder's Personal Portfolio. See "Exchange Privilege." If shares of the
Advisor Class Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of Advisor Class
Fund(s) that have appreciated most during the period being exchanged for shares
of Advisor Class Fund(s) that have appreciated least. SUCH EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions." Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Advisor Class Fund would be 2%
or less. In predesignating percentages, shareholders must use whole percentages
and totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an Advisor Class Fund's
shares. The AIM Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Advisor
Class Funds or what allocation percentages are assigned to the Program, unless
canceled or changed in writing and received by the Transfer Agent in good order
at least five business days prior to the rebalancing date. Certain
dealers/financial institutions may charge a fee for establishing accounts
relating to the Program. Investors should contact their dealers/financial
institutions or AIM Distributors for more information.
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EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Advisor Class shareholders of the Advisor
Class Funds may participate in an exchange privilege as described below. AIM
Distributors acts as distributor for the Advisor Class Funds which represent a
range of different investment objectives and policies.
Advisor Class shares of any Advisor Class Fund may be exchanged only for
Advisor Class shares of any other Advisor Class Fund.
Investors in wrap fee programs and advisory accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of an
Advisor Class Fund being considered. Other investors should contact AIM
Distributors for the appropriate prospectus.
An exchange is permitted only in the following circumstances: (a) the dollar
amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the Advisor Class Fund acquired through such
exchange; (b) the shares of the Advisor
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Class Fund acquired through exchange must be qualified for sale in the state in
which the shareholder resides; (c) the exchange must be made between accounts
having identical registrations and addresses; (d) the full amount of the
purchase price for the shares being exchanged must have already been received by
the fund; (e) the account from which shares have been exchanged must be coded as
having a certified taxpayer identification number on file or, in the
alternative, an appropriate IRS Form W-8 (certificate of foreign status) or Form
W-9 (certifying exempt status) must have been received by the fund; (f) newly
acquired shares (through either an initial or subsequent investment) are held in
an account for at least ten business days, and all other shares are held in an
account for at least one day, prior to the exchange; and (g) certificates
representing shares must be returned before shares can be exchanged. There is no
fee for exchanges among the Advisor Class Funds.
THE CURRENT PROSPECTUS OF EACH OF THE ADVISOR CLASS FUNDS AND CURRENT
INFORMATION CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE
THROUGH AIM DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE
AGREEMENT WITH AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD
REVIEW THE PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH
EXCHANGE. EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE
INCOME TAX PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any Advisor Class Fund to be exchanged are redeemed at their net
asset value as determined at NYSE Close on the day that an exchange request in
proper form (described below) is received. Exchange requests received after NYSE
Close will result in the redemption of shares at their net asset value at NYSE
Close on the next business day. Normally, Advisor Class shares of an Advisor
Class Fund to be acquired by exchange are purchased at their net asset value
determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that an Advisor Class Fund would be materially disadvantaged by an
immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into an Advisor Class Fund that declares daily dividends ("Dividends,
Distributions and Tax Matters -- Dividends and Distributions," below), and the
release of the exchange proceeds is delayed for the foregoing five-day period,
such shareholder will not begin to accrue dividends until the sixth business day
after the exchange. Advisor Class shares purchased by check may not be exchanged
until it is determined that the check has cleared, which may take up to ten
business days from the date that the check is received. See "Terms and
Conditions of Purchase of the AIM Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their Advisor Class shares by mail
should send a written request to AFS. The request should contain the account
registration and account number, the dollar amount or number of Advisor Class
shares to be exchanged, and the names of the Advisor Class Funds from which and
into which the exchange is to be made. The request should comply with all of the
requirements for redemption by mail. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. A shareholder may give exchange information to his Financial
Adviser. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the Advisor Class Funds. AIM Distributors reserves the right to impose
conditions on dealers or investment advisors who make telephone exchanges of
shares of the Advisor Class Funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a Financial Adviser, shareholder or dealer who has
satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
Financial Adviser, shareholder or dealer is unable to reach AFS by telephone, he
may also request exchanges by telegraph or use overnight courier services to
expedite exchanges by mail, which will be effective on the business day received
by the Transfer Agent as long as such request is received prior to NYSE Close.
The Transfer Agent and AIM Distributors will not be liable for any loss, expense
or cost arising out of any telephone exchange request that they reasonably
believe to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
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HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution who has entered into an agreement with
AIM Distributors. In addition to the obligation of the fund(s) named on the
cover page to redeem shares, AIM Distributors also repurchases shares. No
redemption fee is imposed when Advisor Class shares are redeemed or repurchased;
however, dealers/financial institutions may charge service fees for handling
repurchase transactions.
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REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnership, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
TIMING AND PRICING OF REDEMPTION ORDERS. Advisor Class shares of the Advisor
Class Funds are redeemed at their net asset value next computed after a request
for redemption in proper form (including signature guarantees and other required
documentation for written redemptions) is received by the Transfer Agent or
certain financial institutions (or their designees) who are authorized to accept
redemption orders on behalf of the AIM Funds, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. Orders for the redemption of Advisor Class shares received on any
business day of an AIM Fund will be confirmed at the price determined as of the
close of that day. Orders received after NYSE Close will be confirmed at the
price determined on the next business day of an AIM Fund. It is the
responsibility of the dealer/financial institution to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer/financial
institution's failure to submit a request for redemption within the prescribed
time frame will be borne by that dealer/financial institution. Telephone
redemption requests must be made by NYSE Close on any business day of an AIM
Fund and will be confirmed at the price determined as of the close of that day.
No AIM Fund will accept requests which specify a particular date for redemption
or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner, (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions, and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such
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as certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client
Services Department of AFS.
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DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each Advisor Class Fund is
determined as of 4:00 p.m. Eastern Time on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an Advisor Class
Fund's share will be determined as of the close of the NYSE on such day. For
purposes of defining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE. The
net asset value per share is calculated by subtracting a class' liabilities from
its assets and dividing the result by the total number of class shares
outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the AIM DOLLAR FUND, are valued at amortized cost as
reflecting fair value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
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DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as set forth below:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM BASIC VALUE FUND............... declared and paid annually annually annually
AIM DEVELOPING MARKETS FUND........ declared and paid annually annually annually
AIM DOLLAR FUND.................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND.......... declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND..... declared and paid monthly annually annually
AIM EUROPE GROWTH FUND............. declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND.................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES
FUND............................. declared and paid annually annually annually
AIM GLOBAL GOVERNMENT INCOME
FUND............................. declared and paid monthly annually annually
AIM GLOBAL GROWTH & INCOME FUND.... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND........ declared and paid annually annually annually
AIM GLOBAL INFRASTRUCTURE FUND..... declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND.......... declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS
FUND............................. declared and paid annually annually annually
AIM GLOBAL TRENDS FUND............. declared and paid annually annually annually
AIM INTERNATIONAL GROWTH FUND...... declared and paid annually annually annually
AIM JAPAN GROWTH FUND.............. declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND..... declared and paid annually annually annually
AIM MID CAP EQUITY FUND............ declared and paid annually annually annually
AIM NEW PACIFIC GROWTH FUND........ declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND.......... declared and paid monthly annually annually
AIM WORLDWIDE GROWTH FUND.......... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods. Each Advisor Class Fund
may make additional distributions, if necessary, to avoid a non-deductible 4%
federal excise tax on certain undistributed income and capital gain (the "Excise
Tax").
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Advisor Class shares of an Advisor
Class Fund are reinvested in additional Advisor Class shares of that fund,
absent an election by a shareholder to receive cash or to have such dividends
and distributions reinvested in Advisor Class shares of another Advisor Class
Fund, to the extent permitted. For funds that do not declare a dividend daily,
such dividends and distributions will be reinvested at the net asset value per
share determined on the ex-dividend date. For funds that declare a dividend
daily, such dividends and distributions will be reinvested at the net asset
value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or only the
dividend portion thereof, in cash, or to invest such dividends and distributions
in Advisor Class shares of another Advisor Class Fund. Investors who have not
previously selected such a reinvestment option on the account application form
may contact the Transfer Agent at any time to obtain a form to authorize such
reinvestments in another Advisor Class Fund.
Dividends on Advisor Class shares of an Advisor Class Fund are expected to be
higher than dividends on shares of other classes of that fund because of the
service and distribution fees paid by those other classes of shares. Dividends
on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
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TAX MATTERS
Each AIM Fund has qualified and intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Code. As long as a
fund qualifies for this tax treatment, it is not subject to federal income tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including determining taxable income, distribution
requirements and other requirements of Subchapter M), is treated as a separate
corporation. Therefore, no fund may offset its gains against another fund's
losses, and each fund must individually comply with all of the provisions of the
Code that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, and any applicable state and local income taxes, on the
dividends and distributions received by them from a fund whether in the form of
cash or additional fund shares. With respect to tax-exempt shareholders,
dividends and distributions from the AIM Funds are not subject to federal income
taxation to the extent permitted under the applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other distributions) may qualify for the
federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM Developing
Markets Fund, AIM Dollar Fund, AIM Emerging Markets Fund, AIM Europe Growth
Fund, AIM Global Government Income Fund, AIM Global High Income Fund, AIM Global
Trends Fund, AIM International Growth Fund, AIM Japan Growth Fund, AIM Latin
American Growth Fund, AIM New Pacific Growth Fund and AIM Strategic Income Fund
will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions declared in October,
November or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to them during January of the
following calendar year.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE SHAREHOLDERS OF A FUND MUST FURNISH THE FUND WITH
THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTIES OF PERJURY THAT
THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT SUBJECT TO BACKUP
WITHHOLDING FOR ANY REASON.
Under the Code, nonresident alien individuals, foreign partnerships and
foreign corporations may be subject to federal income tax withholding at a 30%
rate on ordinary income dividends. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE
OR LOCAL TAX LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES
DISCUSSED HEREIN. ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
AIM BASIC VALUE FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS DEBT FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM MID CAP
EQUITY FUND, AIM SMALL CAP GROWTH FUND AND AIM STRATEGIC INCOME FUND -- SPECIAL
TAX INFORMATION. Certain states exempt from income taxes dividends paid by
mutual funds attributable to interest on U.S. Treasury and certain other U.S.
government obligations. Investors should consult with their own tax advisors
concerning the availability of such exemption.
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AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL
SERVICES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL
TELECOMMUNICATIONS FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM LATIN AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND AND AIM WORLDWIDE
GROWTH FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is
eligible to do so, each of these funds may elect to pass through to its
shareholders credits for foreign taxes paid. If a fund makes such an election, a
shareholder who receives a distribution (1) will be required to include in gross
income his proportionate share of foreign taxes allocable to the distribution
and (2) may claim a credit or deduction for such share for his taxable year in
which the distribution is received, subject to the general limitations imposed
on the allowance of foreign tax credits and deductions. Shareholders should also
note that certain gains or losses attributable to fluctuations in exchange rates
or foreign currency forward contracts may increase or decrease the amount of
income of the fund available for distribution to shareholders and should note
that if, for any fund, such losses exceed other income during a taxable year,
the fund would not be able to pay ordinary income dividends for that year.
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GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the Advisor Class Funds. Chase Bank of Texas,
N.A., P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for
retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each Advisor Class Fund's transfer agent and
dividend payment agent.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
A-10
<PAGE> 354
APPENDIX A
- --------------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS
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 bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A -- 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 both 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.
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.
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,"
A-11
<PAGE> 355
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.
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 "A1" 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."
A-12
<PAGE> 356
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> 357
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> 358
[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 02107
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.
SINC-PRO-2
<PAGE> 359
STATEMENT OF
ADDITIONAL INFORMATION
ADVISOR CLASS 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, TX 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, TX 77210-4739
OR BY CALLING (800) 347-4246
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 8, 1998
RELATING TO THE AIM DEVELOPING MARKETS FUND: ADVISOR CLASS PROSPECTUS,
THE AIM EMERGING MARKETS FUND: ADVISOR CLASS PROSPECTUS AND THE AIM LATIN
AMERICAN GROWTH FUND: ADVISOR CLASS PROSPECTUS EACH DATED SEPTEMBER 8, 1998
<PAGE> 360
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<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
Contracts.............................................. 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
</TABLE>
2
<PAGE> 361
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
MANAGEMENT.................................................. 31
Trustees and Executive Officers........................... 31
Investment Management and Administration Services......... 33
Distribution Services..................................... 33
Expenses of the Funds..................................... 33
NET ASSET VALUE DETERMINATION............................... 34
HOW TO PURCHASE AND REDEEM SHARES........................... 34
PROGRAMS AND SERVICES FOR SHAREHOLDERS...................... 35
DIVIDEND ORDER.............................................. 35
TAXES....................................................... 35
General................................................... 35
Foreign Taxes............................................. 36
Passive Foreign Investment Companies...................... 36
Non-U.S. Shareholders..................................... 36
Options, Futures and Foreign Currency Transactions........ 37
MISCELLANEOUS INFORMATION................................... 37
Custodian................................................. 38
Transfer Agency and Accounting Agency Services............ 38
Independent Accountants................................... 38
Shareholder Liability..................................... 38
Name...................................................... 38
Control Persons and Principal Holders of Securities....... 39
INVESTMENT RESULTS.......................................... 40
Total Return Quotations................................... 40
Other Information Regarding Standard Total and Cumulative
Total Returns for Developing Markets Fund.............. 41
Performance Information................................... 42
APPENDIX.................................................... 44
Description of Bond Ratings............................... 44
Description of Commercial Paper Ratings................... 45
Absence of Rating......................................... 45
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 362
INTRODUCTION
This Statement of Additional Information relates to the Advisor Class 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 Advisor Class
shares of the Fund.
The term "majority of the outstanding shares" of the Trust, a particular Fund
or 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> 363
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.
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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 Depositary 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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generally bear all the costs of such facilities. The depository usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into U.S. dollars, the disposition of non-cash distributions, and
the performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass-through voting
rights to ADR holders in respect of the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
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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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 Markets 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 CONTRACTS
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
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marketable in the United States, will not be considered illiquid. Where
registration is required, a Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the 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.
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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
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.
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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 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
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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.
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 markets 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 markets 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.
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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 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 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 take steps 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
24
<PAGE> 383
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 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
25
<PAGE> 384
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities;
(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 Company'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 Funds 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 outstanding shares of the Fund.
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;
26
<PAGE> 385
(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
27
<PAGE> 386
(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 a majority of the outstanding shares of the Fund.
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> 387
(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 that 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.
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<PAGE> 388
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 and 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
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<PAGE> 389
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>
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NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION WITH REGISTRANT
--------------------- ------------------------------ ------------------------------------
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<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.
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C. DEREK ANDERSON (57) Trustee Mr. Anderson is President, Plantagenet
220 Sansome Street Capital 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) and Director, "R"
Homes, Inc. and various other
companies. Mr. Anderson is also a
trustee of each of the other investment
companies registered under the 1940 Act
that is sub-advised or sub-administered
by the Sub-advisor.
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FRANK S. BAYLEY (59) Trustee Mr. Bayley is a partner of the law firm
Two Embarcadero Center of Baker & McKenzie, and serves as a
Suite 2400 Director and Chairman of C.D. Stimson
San Francisco, CA 94111 Company (a private investment company).
Mr. Bayley is also a trustee of each of
the other investment companies
registered under the 1940 Act that is
sub-advised or sub-administered by the
Sub-advisor.
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ARTHUR C. PATTERSON (54) Trustee Mr. Patterson is Managing Partner of
428 University Avenue Accel Partners (a venture capital
Palo Alto, CA 94301 firm). He also serves as a director of
Viasoft and PageMart, Inc. (both public
software companies), as well as several
other privately held software and
communications companies. Mr. Patterson
is also a trustee of each of the other
investment companies registered under
the 1940 Act that is sub-advised or
sub-administered by the Sub-advisor.
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RUTH H. QUIGLEY (63) Trustee Miss Quigley is a private investor.
1055 California Street From 1984 to 1986, she was President of
San Francisco, CA 94108 Quigley Friedlander & Co., Inc. (a
financial advisory services firm). Miss
Quigley is also a trustee of each of
the other investment companies
registered under the 1940 Act that is
sub-advised or sub-administered by the
Sub-advisor.
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* A Trustee who is an "interested person" of the Trust and A I M Advisors, Inc., as defined in the
1940 Act.
</TABLE>
31
<PAGE> 390
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION WITH REGISTRANT
--------------------- ------------------------------ ------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
+JOHN J. ARTHUR (53) Vice President Director, Senior Vice President and
Treasurer, A I M Advisors, Inc.; Vice
President and Treasurer, A I M
Management Group Inc., A I M Capital
Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and
Fund Management Company.
- ----------------------------------------------------------------------------------------------------
KENNETH W. CHANCEY (52) Vice President and 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 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
GT Global Insurance Agency, Inc. since
August 1997; Secretary and Chief Legal
and Compliance Officer, GT Global, Inc.
from August 1997 to April 1998;
Executive Vice President of the Asset
Management Division of Liechtenstein
Global Trust since October 1996 to May
1998; Senior Vice President, General
Counsel and Secretary of LGT Asset
Management, Inc., INVESCO (NY), Inc.,
GT Global, GT Global Investor Services,
Inc. and G.T. Insurance from May 1994
to October 1996; Senior Vice President,
General Counsel and Secretary of
Strong/Corneliuson Management, Inc. and
Secretary of each of the Strong Funds
from October 1991 through May 1994.
- ----------------------------------------------------------------------------------------------------
+CAROL F. RELIHAN (43) Vice President Director, Senior Vice President,
General Counsel and Secretary, A I M
Advisors, Inc.; Vice President, General
Counsel and Secretary, A I M Management
Group Inc.; Director, Vice President
and General Counsel, Fund Management
Company; Vice President and General
Counsel, A I M Fund Services, Inc.; and
Vice President, A I M Capital
Management, Inc. and A I M
Distributors, Inc.
- ----------------------------------------------------------------------------------------------------
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.
32
<PAGE> 391
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).
For the fiscal years ended October 31, 1997, December 31, 1996 and December
31, 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.
DISTRIBUTION SERVICES
Each Fund's Advisor Class shares are offered continuously through the Funds'
principal underwriter and distributor, AIM Distributors, on a "best efforts"
basis pursuant to a distribution contract between the Trust and AIM Distributors
without a sales charge or a contingent deferred sales charge.
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
33
<PAGE> 392
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) on 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.
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."
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."
34
<PAGE> 393
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."
PROGRAMS AND SERVICES FOR SHAREHOLDERS
The Funds provide certain services for shareholders and certain investment or
redemption programs. See "Exchange Privilege" and "How to Redeem Shares" in the
Prospectus. All inquiries concerning these programs should be made directly to
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, toll free
at (800) 959-4246.
DIVIDEND ORDER
Dividends may be paid to someone other than the registered owner, or sent to
an address other than the address of record. (Please note that signature
guarantees are required to effect this option.) An investor also may direct that
his or her dividends be invested in one of the other AIM Funds and there is no
sales charge for these investments; initial investment minimums apply. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" in the
Prospectus. To effect this option, please contact your authorized dealer. For
more information concerning AIM Funds other than the Fund, please obtain a
current prospectus by contacting your authorized dealer, by writing to A I M
Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, or by calling
toll free (800) 959-4246.
TAXES
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
35
<PAGE> 394
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 "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.
36
<PAGE> 395
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
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.
37
<PAGE> 396
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 Company 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.
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.
38
<PAGE> 397
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 Fund -- Class B Olde Discount 55.67% -0-
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 Fund -- Advisor G.T. Capital Holdings, Inc. 401(k) 57.04% -0-
Class FBO
Account 041-66-4510
Attn: Human Resources
50 California Street, 27th Floor
San Francisco, California 94111-4624
G.T. Capital Holdings, Inc. 401(k) 13.34% -0-
FBO
Account 556-33-9792
Attn: Human Resources
50 California Street, 27th Floor
San Francisco, California 94111-4624
G.T. Capital Holdings, Inc. 401(k) 8.19% -0-
FBO
Account 561-49-0015
50 California Street, 27th Floor
San Francisco, California 94111-4624
Attn: Human Resources
Emerging Markets Fund -- Advisor Wells Fargo Bank NA TTEE FBO 28.45% -0-
Class
LGT Asset Management AC 5000201000
Serp Prft Shr Pln ###-##-####
P O Box 9800 MAC 9137-027
Calabasas, CA 91372-0800
Emerging Markets Fund -- Class A MLPF& S for the Sole Benefit of Its 5.72% -0-
Customers, Security #97OEL
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C>
* The Trust has no knowledge as to whether all or any portion of the shares owned are also owned
beneficially.
</TABLE>
39
<PAGE> 398
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
- ---- ------------------------- -------- ------------
<S> <C> <C> <C>
Latin American Fund -- Advisor Class G.T. Capital Holdings, Inc. 401(k) 8.48% -0-
FBO
Account 102505451
50 California Street, 27th Floor
San Francisco, California 94111-4624
Attn: Human Resources
G.T. Capital Holdings, Inc. 401(k) 5.35% -0-
FBO
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 Growth Fund -- Class MLPF& S for the Sole Benefit of Its 7.99% -0-
A
Customers, Security #977S6
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 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 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 Markets Fund'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
MARKETS FUND
PERIOD (CLASS A)
------ ------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. (9.59)%
Jan. 11, 1994 (commencement of operations) through Oct. 31,
1997...................................................... (2.47)%
</TABLE>
Advisor Class 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.
40
<PAGE> 399
The standard total returns for the Advisor Class shares of Emerging Markets
Fund, stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
EMERGING MARKETS
PERIOD FUND (ADVISOR CLASS)
------ --------------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. (14.05)%
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... (7.37)%
Oct. 31, 1992 through Oct. 31, 1997......................... n/a
</TABLE>
The standard total returns for the Advisor Class shares of Latin American
Fund, stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
LATIN AMERICAN
PERIOD FUND (ADVISOR CLASS)
------ --------------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. 8.91%
Oct. 31, 1992 through Oct. 31, 1997......................... n/a
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 9.29%
Aug. 13, 1991 (commencement of operations) through Oct. 31,
1997...................................................... 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 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 (not taking sales charges into account) for the
Advisor Class shares of Emerging Markets Fund, stated as aggregate total returns
for the periods shown, were:
<TABLE>
<CAPTION>
EMERGING MARKETS
PERIOD FUND (ADVISOR CLASS)
------ --------------------
<S> <C>
April 1, 1993 (commencement of operations) through Oct 31,
1997...................................................... n/a
May 18, 1992 (commencement of operations) through Oct. 31,
1997...................................................... n/a
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... (16.88)%
</TABLE>
The cumulative total return (not taking sales charges into account) for the
Advisor Class shares of Latin American Fund, stated as aggregate total returns
for the periods shown, were:
<TABLE>
<CAPTION>
LATIN AMERICAN
PERIOD FUND (ADVISOR CLASS)
------ --------------------
<S> <C>
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 23.94%
Aug. 13, 1991 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
OTHER INFORMATION REGARDING STANDARD TOTAL AND CUMULATIVE TOTAL RETURNS FOR
DEVELOPING MARKETS FUND
The standard total and cumulative 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.
41
<PAGE> 400
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)
Moody's Investors Service (publications)
Morgan Stanley Capital International All Country
(AC) World Index
Morgan Stanley Capital International World
Indices
Morningstar, Inc. (data and mutual fund rankings
and comparisons)
NASDAQ
Organization for Economic Cooperation and
Development (publications)
Salomon Brothers Global Telecommunications
Index
Salomon Brothers World Government Bond
Index-Non-U.S.
Salomon Brothers World Government Bond
Index
Standard & Poor's (publications)
Standard & Poor's 500 Composite Stock Price
Index
Stangar
Wilshire Associates
World Bank (publications and reports)
The World Bank Publication of Trends in
Developing Countries
Worldscope
42
<PAGE> 401
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.
43
<PAGE> 402
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.
44
<PAGE> 403
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 "A1" 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.
45
<PAGE> 404
FINANCIAL STATEMENTS
FS
<PAGE> 405
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> 406
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> 407
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> 408
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> 409
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> 410
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> 411
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> 412
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> 413
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> 414
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> 415
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> 416
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> 417
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> 418
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> 419
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> 420
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> 421
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> 422
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> 423
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> 424
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> 425
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> 426
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> 427
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> 428
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> 429
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> 430
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> 431
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> 432
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> 433
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> 434
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> 435
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> 436
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> 437
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> 438
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> 439
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> 440
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> 441
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> 442
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> 443
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> 444
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> 445
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> 446
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
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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> 448
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> 449
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> 450
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> 451
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
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<PAGE> 452
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> 453
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> 454
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> 455
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> 456
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> 457
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> 458
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> 459
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> 460
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> 461
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> 462
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> 463
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> 464
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> 465
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> 466
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> 467
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> 468
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> 469
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> 470
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> 471
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> 472
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> 473
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> 474
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> 475
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> 476
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> 477
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> 478
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> 479
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> 480
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> 481
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> 482
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> 483
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> 484
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> 485
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> 486
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> 487
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> 488
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> 489
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> 490
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> 491
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> 492
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> 493
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
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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> 495
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> 496
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> 497
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> 498
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> 499
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> 500
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> 501
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> 502
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> 503
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> 504
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> 505
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> 506
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> 507
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> 508
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> 509
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> 510
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> 511
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> 512
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> 513
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> 514
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> 515
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> 516
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> 517
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> 518
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
FS-114
<PAGE> 519
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> 520
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> 521
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> 522
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> 523
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> 524
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> 525
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> 526
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> 527
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> 528
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.
FS-124
<PAGE> 529
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> 530
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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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> 532
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:
FS-128
<PAGE> 533
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> 534
STATEMENT OF
ADDITIONAL INFORMATION
ADVISOR CLASS SHARES OF
AIM GLOBAL THEME FUNDS:
AIM GLOBAL FINANCIAL SERVICES FUND
AIM GLOBAL INFRASTRUCTURE FUND
AIM GLOBAL RESOURCES FUND
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
AIM GLOBAL HEALTH CARE FUND
AIM GLOBAL TELECOMMUNICATIONS 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 GLOBAL FINANCIAL SERVICES FUND PROSPECTUS, THE AIM GLOBAL INFRASTRUCTURE
FUND PROSPECTUS, THE AIM GLOBAL RESOURCES FUND PROSPECTUS, THE AIM GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND PROSPECTUS, THE AIM GLOBAL HEALTH CARE FUND
PROSPECTUS AND THE AIM GLOBAL TELECOMMUNICATIONS FUND PROSPECTUS EACH DATED
SEPTEMBER 8, 1998
<PAGE> 535
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<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
Money Market Instruments.................................. 7
Commercial Bank Obligations............................... 7
Repurchase Agreements..................................... 7
Borrowing, Reverse Repurchase Agreements and "Roll"
Transactions........................................... 8
Short Sales............................................... 8
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................... 9
Special Risks of Options, Futures and Currency
Strategies............................................. 9
Writing Call Options...................................... 10
Writing Put Options....................................... 10
Purchasing Put Options.................................... 11
Purchasing Call Options................................... 11
Index Options............................................. 12
Interest Rate, Currency and Stock Index Futures
Contracts.............................................. 13
Options on Futures Contracts.............................. 15
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies.......................... 15
Forward Contracts......................................... 16
Foreign Currency Strategies -- Special Considerations..... 16
Cover..................................................... 17
RISK FACTORS................................................ 17
Illiquid Securities....................................... 17
Foreign Securities........................................ 18
INVESTMENT LIMITATIONS...................................... 22
Feeder Funds.............................................. 22
Health Care Fund.......................................... 23
Telecommunications Fund................................... 24
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 26
Portfolio Trading and Turnover............................ 27
MANAGEMENT.................................................. 28
Trustees and Executive Officers........................... 28
Investment Management and Administration Services Relating
to the Federal Funds and the Portfolios................ 30
Investment Management and Administration Services Relating
to the Health Care Fund and Telecommunications Fund.... 30
Distribution Services Relating to Each Fund............... 32
Expenses of the Funds and the Portfolios.................. 32
NET ASSET VALUE DETERMINATION............................... 32
</TABLE>
2
<PAGE> 536
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
HOW TO PURCHASE AND REDEEM SHARES........................... 33
PROGRAMS AND SERVICES FOR SHAREHOLDERS...................... 33
DIVIDEND ORDER.............................................. 33
TAXES....................................................... 33
Taxation of the Funds..................................... 33
Taxation of the Theme Portfolios.......................... 34
Taxation of the Funds' Shareholders....................... 36
MISCELLANEOUS INFORMATION................................... 36
Custodian................................................. 36
Transfer Agency and Accounting Agency Services............ 37
Independent Accountants................................... 37
Shareholder Liability..................................... 37
Names..................................................... 37
Special Servicing Agreement............................... 37
Control Persons and Principal Holders of Security......... 38
INVESTMENT RESULTS.......................................... 39
Total Return Quotations................................... 39
Performance Information................................... 42
General Information About the Theme Funds and Theme
Portfolios............................................. 43
Health Care Fund.......................................... 44
Information About the Global Health Care Industries....... 44
Telecommunications Fund................................... 45
Deregulation in the United States......................... 45
Consumer Products and Services Fund....................... 45
Infrastructure Fund....................................... 46
Financial Services Fund................................... 46
Resources Fund............................................ 46
APPENDIX.................................................... 47
Description of Bond Ratings............................... 47
Description of Commercial Paper Ratings................... 48
Absence of Rating......................................... 48
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 537
INTRODUCTION
This Statement of Additional Information relates to the Advisor Class shares
of AIM Global Financial Services Fund ("Financial Services Fund"), AIM Global
Infrastructure Fund ("Infrastructure Fund"), AIM Global Resources Fund
("Resources Fund"), AIM Global Consumer Products and Services Fund ("Consumer
Products and Services Fund"), AIM Global Health Care Fund ("Health Care Fund")
and AIM Global Telecommunications Fund ("Telecommunications Fund") (each, a
"Fund" or "Theme Fund," and collectively, the "Funds" or "Theme Funds"). Each
Fund is a diversified series of AIM Investment Funds (the "Trust"), a registered
open-end management investment company organized as a Delaware business trust.
The Financial Services Fund, Infrastructure Fund, Resources Fund and Consumer
Products and Services Fund (each a "Feeder Fund," and, collectively the "Feeder
Funds,") invest all of their investable assets in the Global Financial Services
Portfolio, Global Infrastructure Portfolio, Global Resources Portfolio and
Global Consumer Products and Services Portfolio (each, a "Portfolio," and,
collectively, the "Portfolios"), respectively.
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 of and sub-administrator for the Health Care Fund,
Telecommunications Fund and the Portfolios (each a "Theme Portfolio," and
collectively the "Theme Portfolios"). AIM and the Sub-advisor also serve as the
administrator and sub-administrator, respectively, for each Feeder Fund.
The Trust is a series mutual fund. The rules and regulations of the Securities
and Exchange Commission (the "SEC") require all mutual funds to furnish
prospective investors certain information concerning the activities of the fund
being considered for investment. This information for Financial Services Fund is
included in a Prospectus dated September 8, 1998, for Infrastructure Fund is
included in a separate Prospectus dated September 8, 1998, for Resources Fund is
included in a separate Prospectus dated September 8, 1998, for Consumer Products
and Services Fund is included in a separate Prospectus dated September 8, 1998,
for Health Care Fund is included in a separate Prospectus dated September 8,
1998, and for Telecommunications 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 Emerging
Markets Debt Fund (formerly, 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 G.T. Investment Funds, Inc. (renamed AIM Investment Funds, Inc.).
This Statement of Additional Information relates solely to the Advisor Class
shares of the Funds.
The term "majority of the outstanding shares" of the Trust, of a particular
Fund or of a particular class of a Fund or of a particular Portfolio 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.
4
<PAGE> 538
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.
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
The investment objective of each Feeder Fund is long-term capital growth. The
investment objective of the Health Care Fund and Telecommunications Fund is
long-term capital appreciation and long-term growth of capital, respectively.
Each Feeder Fund seeks to achieve its investment objective by investing all of
its investable assets in a Portfolio, each of which is a subtrust (a "series")
of Global Investment Portfolio (an open-end management investment company), with
an investment objective that is identical to that of its corresponding Feeder
Fund. Whenever the phrase "all of a Fund's investable assets" is used herein and
in the Prospectus, it means that the only investment securities held by a Feeder
Fund will be its interest in its corresponding Portfolio. A Feeder Fund may
withdraw its investment in its corresponding Portfolio at any time, if the Board
of Trustees of the Trust determines that it is in the best interests of the Fund
and its shareholders to do so. Upon any such withdrawal, a Feeder Fund's assets
would be invested in accordance with the investment policies of its
corresponding Portfolio described below and in the Prospectus.
SELECTION OF EQUITY INVESTMENTS
With respect to the Resources Portfolio, the Sub-advisor has identified four
areas that it expects will create investment opportunities: (i) improving
supply/demand fundamentals, which may result in higher commodity prices; (ii)
privatization of state-owned natural resource businesses; (iii) management which
can improve production efficiencies without correspondingly increasing commodity
prices; and (iv) service companies with emerging technologies that can enhance
productivity or reduce production costs. Of course, there is no certainty that
these factors will produce the anticipated results.
With respect to the Telecommunications Fund, the Sub-advisor has identified
four areas that it expects will create investment opportunities: (i)
deregulation of companies in the industry, which will allow competition to
promote greater efficiencies; (ii) privatization of state-owned
telecommunications businesses; (iii) development of infrastructure in
underdeveloped countries and upgrading of services in other countries; and (iv)
emerging technologies that will enhance productivity and reduce costs in the
telecommunications industry. Of course, there is no certainty that these factors
will produce the anticipated results.
There may be times when, in the opinion of the Sub-advisor, prevailing market,
economic or political conditions warrant reducing the proportion of the Theme
Portfolios' assets invested in equity securities and increasing the proportion
held in cash (U.S. dollars, foreign currencies or multinational currency units)
or invested in debt securities or high quality money market instruments issued
by corporations or the U.S., or a foreign government. A portion of each Theme
Portfolio's assets normally will be held in cash (U.S. dollars, foreign
currencies or multinational currency units) or invested in foreign or domestic
high quality money market instruments pending investment of proceeds from new
sales of fund shares to provide for ongoing expenses and to satisfy redemptions.
For each Theme Portfolio's investment purposes, an issuer is typically
considered as located in a particular country if it (a) is organized under the
laws of or has its principal office in a particular country, or (b) normally
derives 50% or more of its total revenues from business in that country,
provided that, in the Sub-advisor's view, the value of such issuer's securities
will tend to reflect such country's development to a greater extent than
developments elsewhere. However, these are not absolute requirements, and
certain companies incorporated in a particular country and considered by the
Sub-advisor to be located in that country may have substantial foreign
operations or subsidiaries and/or export sales exceeding in size the assets or
sales in that country.
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In certain countries, governmental restrictions and other limitations on
investment may affect a Theme Portfolio's ability to invest in such countries.
In addition, in some instances only special classes of securities may be
purchased by foreigners and the market prices, liquidity and rights with respect
to those securities may vary from shares owned by nationals. The Sub-advisor is
not aware at this time of the existence of any investment or exchange control
regulations which might substantially impair the operations of the Theme
Portfolios as described in the Prospectus and this Statement of Additional
Information. Restrictions may in the future, however, make it undesirable to
invest in certain countries. None of the Theme Portfolios has a present
intention of making any significant investment in any country or stock market in
which the Sub-advisor considers the political or economic situation to threaten
a Theme Portfolio with substantial or total loss of its investment in such
country or market.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
Each Theme Portfolio 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 Investment Company Act
of 1940, as amended (the "1940 Act"). These limitations currently provide that,
in general, a Theme Portfolio may purchase shares of an investment company
unless (a) such a purchase would cause a Theme Portfolio to own in the aggregate
more than 3% of the total outstanding voting stock of the investment company or
(b) such a purchase would cause the Theme Portfolio to have more than 5% of its
assets invested in the investment company or more than 10% of its assets
invested in an aggregate of all such investment companies. The foregoing
restrictions do not apply to the investment of the Financial Services Fund,
Infrastructure Fund, Resources Fund and Consumer Products and Services Fund in
their corresponding Portfolios. Investment in closed-end investment companies
may involve the payment of substantial premiums above the value of such
companies' portfolio securities. Each Theme Portfolio does not intend to invest
in such investment companies unless, in the judgment of the Sub-advisor, the
potential benefits of such investments justify the payment of any applicable
premiums. The return on such securities will be reduced by operating expenses of
such companies, including payments to the investment managers of those
investment companies. 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 a Theme Portfolio invested in Affiliated Funds.
DEPOSITARY RECEIPTS
A Theme Portfolio may hold 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 foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. ADRs and ADSs are typically issued
by an American bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. EDRs, which are sometimes referred
to as Continental Depositary Receipts ("CDRs"), are issued in Europe typically
by foreign banks and trust companies and evidence ownership of either foreign or
domestic securities. 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 U.S. securities markets and EDRs in bearer form are
designed for use in European securities markets. For purposes of each Theme
Portfolio's investment policies, a Theme Portfolio'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
generally bear all the costs of such facilities. The depository usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into U.S. dollars, the disposition of non-cash distributions, and
the performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass-through voting
rights to ADR holders in respect of the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other
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information to the ADR holders at the request of the issuer of the deposited
securities. The Theme Portfolios may invest in both sponsored and unsponsored
ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by a Theme Portfolio in connection with
other securities or separately and provide the Theme Portfolio with the right to
purchase at a later date other securities of the issuer. Warrants are securities
permitting, but not obligating, their holder to subscribe for other securities
or commodities. Warrants do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle their holder to
purchase, and they do not represent any rights in the assets of the issuer. As a
result, warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to its expiration date.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each Theme Portfolio may make
secured loans of its securities holdings amounting to not more than 30% of its
total assets. Securities loans are made to broker/dealers or institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral at least equal at all times to the value of the securities
lent plus any accrued interest, "marked to market" on a daily basis. The Theme
Portfolios may pay reasonable administrative and custodial fees in connection
with the loans of their securities. While the securities loan is outstanding, a
Theme Portfolio will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the
investment of the collateral or a fee from the borrower. A Theme Portfolio will
have a right to call each loan and obtain the securities within the stated
settlement period. A Theme Portfolio will not have the right to vote equity
securities while they are being lent, but it may call in a loan in anticipation
of any important vote. Loans will only be made to firms deemed by the
Sub-advisor to be of good standing and will not be made unless, in the judgment
of the Sub-advisor, the consideration to be earned from such loans would justify
the risk.
MONEY MARKET INSTRUMENTS
Money market instruments in which the Theme Portfolios may invest include U.S.
government securities, high-grade commercial paper, bank certificates of
deposit, bankers' acceptances and repurchase agreements related to any of the
foregoing. "High-grade commercial paper" refers to commercial paper rated A-1 by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc., or P-1 by
Moody's Investors Services, Inc. or, if not rated, determined by the Sub-advisor
to be of comparable quality.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each Theme Portfolio's investment policies with respect to
bank obligations, obligations of foreign branches of U.S. banks and of foreign
banks are obligations of the issuing bank and may be general obligations of the
parent bank. Such obligations may, however, be limited by the terms of a
specific obligation and by government regulation. As with investments in
non-U.S. securities in general, investments in the obligations of foreign
branches of U.S. banks and of foreign banks may subject each Theme Portfolio to
investment risks that are different in some respects from those of investments
in obligations of U.S. issuers. Although each Theme Portfolio will typically
acquire obligations issued and supported by the credit of U.S. or foreign banks
having total assets at the time of purchase of $1 billion or more, this $1
billion figure is not an investment policy or restriction of each Theme
Portfolio. For the purposes of calculation with respect to the $1 billion
figure, the assets of a bank will be deemed to include the assets of its U.S.
and non-U.S. branches.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction in which a Theme Portfolio 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 the Theme
Portfolio if the other party to the repurchase agreement becomes bankrupt, the
Theme Portfolios intend to enter into repurchase agreements only with banks and
dealers believed by the Sub-advisor to present minimal credit risks in
accordance with guidelines established by the Trust's or the Portfolios' Board
of Trustees, as applicable. The Sub-advisor will review and monitor the
creditworthiness of such institutions under the applicable Board's general
supervision.
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Each Theme Portfolio will invest only in repurchase agreements collateralized
at all times in an amount at least equal to the repurchase price plus accrued
interest. To the extent that the proceeds from any sale of such collateral upon
a default in the obligation to repurchase were less than the repurchase price, a
Theme Portfolio 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 Theme Portfolio's ability to sell the collateral and a Theme
Portfolio could suffer a loss. However, with respect to financial institutions
whose bankruptcy or liquidation proceedings are subject to the U.S. Bankruptcy
Code, each Theme Portfolio intends to comply with provisions under such Code
that would allow the immediate resale of such collateral. Each Theme Portfolio
will not enter into a repurchase agreement with a maturity of more than seven
days if, as a result, more than 15% of the value of its net assets (except for
Health Care Fund, more than 10% of the value of its total assets) would be
invested in such repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
Each Theme Portfolio's borrowings will not exceed 33 1/3% of its total assets,
i.e., the Theme Portfolio's total assets at all times will equal at least 300%
of the amount of outstanding borrowings. If market fluctuations in the value of
a Theme Portfolio's securities holdings or other factors cause the ratio of a
Theme Portfolio's total assets to outstanding borrowings to fall below 300%,
within three days (excluding Sundays and holidays) of such event that Theme
Portfolio may be required to sell portfolio securities to restore the 300% asset
coverage, even though from an investment standpoint such sales might be
disadvantageous. Each Theme Portfolio may also borrow up to 5% of its total
assets for temporary or emergency purposes other than to meet redemptions. Any
borrowing by a Theme Portfolio may cause greater fluctuation in the value of its
shares than would be the case if that Theme Portfolio did not borrow.
Each Theme Portfolio's fundamental investment limitations permit the Theme
Portfolio to borrow money for leveraging purposes. However, each Theme Portfolio
(except the Health Care Fund) is currently prohibited, pursuant to a non-
fundamental investment policy, from borrowing money in order to purchase
securities. Nevertheless, this policy may be changed in the future by the
Trust's or the Portfolios' Board of Trustees, as applicable. If a Theme
Portfolio employs leverage in the future, it would be subject to certain
additional risks. Use of leverage creates an opportunity for greater growth of
capital but would exaggerate any increases or decreases in the net asset value
of the Financial Services Fund, Infrastructure Fund, Resources Fund, Consumer
Products and Services Fund or a Theme Portfolio. When the income and gains on
securities purchased with the proceeds of borrowings exceed the costs of such
borrowings, a Theme Portfolio's earnings or a Fund's net asset value will
increase faster than otherwise would be the case; conversely, if such income and
gains fail to exceed such costs, a Theme Portfolio's earnings or a Fund's net
asset value would decline faster than would otherwise be the case.
Each Theme Portfolio may enter into reverse repurchase agreements. A reverse
repurchase agreement is a borrowing transaction in which the Portfolio 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. Each Theme Portfolio
may also engage in "roll" borrowing transactions, which involve the sale of
Government National Mortgage Association certificates or other securities
together with a commitment (for which the Theme Portfolio may receive a fee) to
purchase similar, but not identical, securities at a future date. Each Theme
Portfolio will segregate with a custodian liquid assets in an amount sufficient
to cover its obligations under "roll" transactions and reverse repurchase
agreements with broker/dealers. No segregation is required for reverse
repurchase agreements with banks.
SHORT SALES
Each Theme Portfolio may make short sales of securities. A short sale is a
transaction in which a Theme Portfolio sells a security in anticipation that the
market price of that security will decline. A Theme Portfolio may make short
sales (i) as a form of hedging to offset potential declines in long positions in
securities it owns, or anticipates acquiring, or in similar securities, and (ii)
in order to maintain flexibility in its securities holdings.
When a Theme Portfolio makes a short sale of a security it does not own, it
must borrow the security sold short and deliver it to the broker/dealer or other
intermediary through which it made the short sale. The Theme Portfolio may have
to pay a fee to borrow particular securities and will often be obligated to pay
over any payments received on such borrowed securities.
A Theme Portfolio's obligation to replace the borrowed security when the
borrowing is called or expires will be secured by collateral deposited with the
intermediary. The Theme Portfolio will also be required to deposit collateral
with its custodian to the extent, if any, necessary so that the value of both
collateral deposits in the aggregate is at all times equal
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to at least 100% of the current market value of the security sold short.
Depending on arrangements made with the intermediary from which it borrowed the
security regarding payment of any amounts received by that Theme Portfolio on
such security, a Theme Portfolio may not receive any payments (including
interest) on its collateral deposited with such intermediary.
If the price of the security sold short increases between the time of the
short sale and the time a Theme Portfolio replaces the borrowed security, that
Theme Portfolio will incur a loss; conversely, if the price declines, the Theme
Portfolio will realize a gain. Any gain will be decreased, and any loss
increased, by the transaction costs associated with the transaction. Although a
Theme Portfolio's gain is limited by the price at which it sold the security
short, its potential loss theoretically is unlimited.
No Theme Portfolio 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 Theme Portfolio's aggregate short sales of the
securities of any one issuer exceed the lesser of 2% of the Theme Portfolio's
net assets or 2% of the securities of any class of the issuer. Moreover, a Theme
Portfolio may engage in short sales only with respect to securities listed on a
national securities exchange. A Theme Portfolio 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 Theme Portfolio owns the security it has sold short or has
the immediate and unconditional right to acquire at no additional cost the
identical security.
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
Theme Portfolio entered into a short hedge because the Sub-advisor
projected a decline in the price of a security in the Theme Portfolio's
portfolio, and the price of that security increased instead, the gain from
that increase might be wholly or partially offset by a decline in the price
of the hedging instrument. Moreover, if the price of the hedging instrument
declined by more than the increase in the price of the security, the Theme
Portfolio could suffer a loss. In either such case, the Theme Portfolio
would have been in a better position had it not hedged at all.
(4) As described below, a Theme Portfolio might be required to
maintain assets as "cover," maintain segregated accounts or make margin
payments when it takes positions in instruments involving obligations to
third parties (i.e., instruments other than purchased options). If the
Theme Portfolio were unable to close out its positions in such instruments,
it might be required to continue to maintain such assets or accounts or
make such payments until the position expired or matured. The requirements
might impair the Theme Portfolio's ability to sell a portfolio security or
make an investment at a time when it would otherwise be favorable to do so,
or require that the Theme Portfolio sell a portfolio security at a
disadvantageous time. The Theme Portfolio's ability to close out a position
in an instrument prior to expiration or maturity depends on the existence
of a liquid secondary market or, in the absence of such a market, the
ability and willingness of the other party to the transaction ("contra
party") to enter into a transaction closing out the position. Therefore,
there is no assurance that any position can be closed out at a time and
price that is favorable to the Theme Portfolio.
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WRITING CALL OPTIONS
Each Theme Portfolio may write (sell) call options on securities, indices and
currencies. Call options generally will be written on securities and currencies
that, in the opinion of the Sub-advisor are not expected to make any major price
moves in the near future but that, over the long term, are deemed to be
attractive investments for the Theme Portfolios.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he or she may be
assigned an exercise notice, requiring him or her to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by purchasing an option
identical to that previously sold.
Portfolio securities or currencies on which call options may be written will
be purchased solely on the basis of investment considerations consistent with
each Theme Portfolio's investment objective. When writing a call option, a Theme
Portfolio, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security or currency above the exercise price,
and retains the risk of loss should the price of the security or currency
decline. Unlike one who owns securities or currencies not subject to an option,
a Theme Portfolio has no control over when it may be required to sell the
underlying securities or currencies, since most options may be exercised at any
time prior to the option's expiration. If a call option that a Theme Portfolio
has written expires, the Theme Portfolio 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 Theme Portfolio will realize a gain or loss from the
sale of the underlying security or currency, which will be increased or offset
by the premium received. Each Theme Portfolio does not consider a security or
currency covered by a call option to be "pledged" as that term is used in that
Theme Portfolio's policy that limits the pledging or mortgaging of its 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 Theme Portfolio will be
obligated to sell the security or currency at less than its market value.
The premium that a Theme Portfolio receives for writing a call option is
deemed to constitute the market value of an option. The premium the Theme
Portfolio will receive from writing a call option will reflect, among other
things, the current market price of the underlying investment, the relationship
of the exercise price to such market price, the historical price volatility of
the underlying investment, and the length of the option period. In determining
whether a particular call option should be written, the Sub-advisor will
consider the reasonableness of the anticipated premium and the likelihood that a
liquid secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit a Theme Portfolio to
write another call option on the underlying security or currency with either a
different exercise price or expiration date, or both.
Each Theme Portfolio will pay transaction costs in connection with the writing
of options and in entering into closing purchase contracts. Transaction costs
relating to options activity are normally higher than those applicable to
purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, a Theme Portfolio may purchase an
underlying security or currency for delivery in accordance with the exercise of
an option, rather than delivering such security or currency from its portfolio.
In such cases, additional costs will be incurred.
A Theme Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more, respectively, than
the premium received from writing the option. Because increases in the market
price of a call option generally will reflect increases in the market price of
the underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by a Theme Portfolio.
WRITING PUT OPTIONS
Each Theme Portfolio may write put options on securities, indices and
currencies. A put option gives the purchaser of the option the right to sell,
and the writer (seller) the obligation to buy, the underlying security or
currency at the
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exercise price at any time until (American style) or on (European style) the
expiration date. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call options.
A Theme Portfolio generally would write put options in circumstances where the
Sub-advisor wishes to purchase the underlying security or currency for a Theme
Portfolio's holdings at a price lower than the current market price of the
security or currency. In such event, a Theme Portfolio would write a put option
at an exercise price that, reduced by the premium received on the option,
reflects the lower price it is willing to pay. Since the Theme Portfolio would
also receive interest on debt securities or currencies maintained to cover the
exercise price of the option, this technique could be used to enhance current
return during periods of market uncertainty. The risk in such a transaction
would be that the market price of the underlying security or currency would
decline below the exercise price less the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and a Theme Portfolio will be
obligated to purchase the security or currency at greater than its market value.
PURCHASING PUT OPTIONS
Each Theme Portfolio may purchase put options on securities, indices and
currencies. As the holder of a put option, a Theme Portfolio would have the
right to sell the underlying security or currency at the exercise price at any
time until (American style) or on (European style) the expiration date. A Theme
Portfolio may enter into closing sale transactions with respect to such options,
exercise such option or permit such option to expire.
Each Theme Portfolio may purchase a put option on an underlying security or
currency ("protective put") owned by the Theme Portfolio in order to protect
against an anticipated decline in the value of the security or currency. Such
hedge protection is provided only during the life of the put option when the
Theme Portfolio, as the holder of the put option, is able to sell the underlying
security or currency at the put exercise price regardless of any decline in the
underlying security's market price or currency's exchange value. The premium
paid for the put option and any transaction costs would reduce any profit
otherwise available for distribution when the security or currency is eventually
sold.
A Theme Portfolio may also purchase put options at a time when it does not own
the underlying security or currency. By purchasing put options on a security or
currency it does not own, that Theme Portfolio seeks to benefit from a decline
in the market price of the underlying security or currency. If the put option is
not sold when it has remaining value, and if the market price of the underlying
security or currency remains equal to or greater than the exercise price during
the life of the put option, the Theme Portfolio will lose its entire investment
in the put option. In order for the purchase of a put option to be profitable,
the market price of the underlying security or currency must decline
sufficiently below the exercise price to cover the premium and transaction
costs, unless the put option is sold in a closing sale transaction.
PURCHASING CALL OPTIONS
Each Theme Portfolio may purchase call options on securities, indices and
currencies. As the holder of a call option, the Theme Portfolio would have the
right to purchase the underlying security or currency at the exercise price at
any time until (American style) or on (European style) the expiration date. A
Theme Portfolio may enter into closing sale transactions with respect to such
options, exercise such options or permit such options to expire.
Call options may be purchased by a Theme Portfolio for the purpose of
acquiring the underlying security or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable a Theme Portfolio to
acquire the security or currency at the exercise price of the call option plus
the premium paid. At times, the net cost of acquiring the security or currency
in this manner may be less than the cost of acquiring the security or currency
directly. This technique may also be useful to a Theme Portfolio in purchasing a
large block of securities that would be more difficult to acquire by direct
market purchases. So long as it holds such a call option, rather than the
underlying security or currency itself, the Theme Portfolio is partially
protected from any unexpected decline in the market price of the underlying
security or currency and, in such event, could allow the call option to expire,
incurring a loss only to the extent of the premium paid for the option.
A Theme Portfolio may also purchase call options on underlying securities or
currencies it owns to avoid realizing losses that would result in a reduction of
its current return. For example, where a Theme Portfolio has written a call
option on an underlying security or currency having a current market value below
the price at which it purchased the security or currency, an increase in the
market price could result in the exercise of the call option written by the
Theme Portfolio and the realization of a loss on the underlying security or
currency. Accordingly, the Theme Portfolio could purchase a call option on the
same underlying security or currency, which could be exercised to fulfill the
Theme
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Portfolio's delivery obligations under its written call (if it is exercised).
This strategy could allow the Theme Portfolio to avoid selling the portfolio
security or currency at a time when it has an unrealized loss; however, the
Theme Portfolio would have to pay a premium to purchase the call option plus
transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of each
Theme Portfolio's total assets at the time of each purchase.
A Theme Portfolio may attempt to accomplish objectives similar to those
involved in using Forward Contracts by purchasing put or call options on
currencies. A put option gives the Theme Portfolio as purchaser the right (but
not the obligation) to sell a specified amount of currency at the exercise price
at any time until (American style) or on (European style) the expiration date of
the option. A call option gives the Theme Portfolio as purchaser the right (but
not the obligation) to purchase a specified amount of currency at the exercise
price at any time until (American style) or on (European style) the expiration
date of the option. A Theme Portfolio might purchase a currency put option, for
example, to protect itself against a decline in the dollar value of a currency
in which it holds or anticipates holding securities. If the currency's value
should decline against the dollar, the loss in currency value should be offset,
in whole or in part, by an increase in the value of the put. If the value of the
currency instead should rise against the dollar, any gain to a Theme Portfolio
would be reduced by the premium it had paid for the put option. A currency call
option might be purchased, for example, in anticipation of, or to protect
against, a rise in the value against the dollar of a currency in which a Theme
Portfolio anticipates purchasing securities.
Options may be either listed on an exchange or traded in over-the-counter
("OTC") markets. Listed options are third-party contracts (i.e., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation) and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. A Theme Portfolio will not purchase an OTC option unless it believes that
daily valuations for such options are readily obtainable. OTC options differ
from exchange-traded options in that OTC options are transacted with dealers
directly and not through a clearing corporation (which guarantees performance).
Consequently, there is a risk of non-performance by the dealer. Since no
exchange is involved, OTC options are valued on the basis of an average of the
last bid prices obtained from dealers, unless a quotation from only one dealer
is available, in which case only that dealer's price will be used. In the case
of OTC options, there can be no assurance that a liquid secondary market will
exist for any particular option at any specific time.
The staff of the SEC considers purchased OTC options to be illiquid
securities. A Theme Portfolio may also sell OTC options and, in connection
therewith, segregate assets or cover its obligations with respect to OTC options
written by the Theme Portfolio. The assets used as cover for OTC options written
by a Theme Portfolio will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Theme Portfolio may repurchase any OTC
option it writes at a maximum price to be calculated by a formula set forth in
the option agreement. The cover for an OTC option written subject to this
procedure would be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
A Theme Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. A Theme
Portfolio 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 a Theme Portfolio will enter into OTC options only with contra
parties that are expected to be capable of entering into closing transactions
with the Theme Portfolio, there is no assurance that the Theme Portfolio will in
fact be able to close out an OTC option position at a favorable price prior to
expiration. In the event of insolvency of the contra party, the Theme Portfolio
might be unable to close out an OTC option position at any time prior to its
expiration.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or
futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. When a Theme Portfolio
writes a call on an index, it receives a premium and agrees that, prior to the
expiration date, the purchaser of the call, upon exercise of the call, will
receive from the Theme Portfolio an amount of cash if the closing level of the
index upon which the call is based is greater than the exercise price of the
call. The amount of cash is equal to the difference between the closing price of
the index and the exercise price of the call times a specified multiple (the
"multiplier"), which determines the total dollar value for each point of such
difference. When a Theme Portfolio buys a call on an index, it pays a premium
and has the same rights as to such call as are indicated above. When a Theme
Portfolio
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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 Theme Portfolio's
exercise of the put, to deliver to the Theme Portfolio an amount of cash if the
closing level of the index upon which the put is based is less than the exercise
price of the put, which amount of cash is determined by the multiplier, as
described above for calls. When a Theme Portfolio writes a put on an index, it
receives a premium and the purchaser has the right, prior to the expiration
date, to require the Theme Portfolio to deliver to it an amount of cash equal to
the difference between the closing level of the index and the exercise price
times the multiplier, if the closing level is less than the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Theme Portfolio
writes a call on an index it cannot provide in advance for its potential
settlement obligations by acquiring and holding the underlying securities. A
Theme Portfolio can offset some of the risk of writing a call index option
position by holding a diversified portfolio of securities similar to those on
which the underlying index is based. However, a Theme Portfolio cannot, as a
practical matter, acquire and hold a portfolio containing exactly the same
securities as underlie the index and, as a result, bears a risk that the value
of the securities held will vary from the value of the index.
Even if a Theme Portfolio could assemble a securities portfolio that exactly
reproduced the composition of the underlying index, it still would not be fully
covered from a risk standpoint because of the "timing risk" inherent in writing
index options. When an index option is exercised, the amount of cash that the
holder is entitled to receive is determined by the difference between the
exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, the Theme Portfolio, as the call
writer, will not know that it has been assigned until the next business day at
the earliest. The time lag between exercise and notice of assignment poses no
risk for the writer of a covered call on a specific underlying security, such as
common stock, because there the writer's obligation is to deliver the underlying
security, not to pay its value as of a fixed time in the past. So long as the
writer already owns the underlying security, it can satisfy its settlement
obligations by simply delivering it, and the risk that its value may have
declined since the exercise date is borne by the exercising holder. In contrast,
even if the writer of an index call holds securities that exactly match the
composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those securities against payment of the
exercise price. Instead, it will be required to pay cash in an amount based on
the closing index value on the exercise date; and by the time it learns that it
has been assigned, the index may have declined, with a corresponding decline in
the value of its securities portfolio. This "timing risk" is an inherent
limitation on the ability of index call writers to cover their risk exposure by
holding securities positions.
If a Theme Portfolio purchases an index option and exercises it before the
closing index value for that day is available, it runs the risk that the level
of the underlying index may subsequently change. If such a change causes the
exercised option to fall out-of-the-money, the Theme Portfolio will be required
to pay the difference between the closing index value and the exercise price of
the option (times the applicable multiplier) to the assigned writer.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each Theme Portfolio 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 price levels in order
to establish more definitely the effective return on securities or currencies
held or intended to be acquired by the Theme Portfolio. A Theme Portfolio's
hedging may include sales of Futures as an offset against the effect of expected
increases in interest rates, and decreases in currency exchange rates and stock
prices, and purchases of Futures as an offset against the effect of expected
declines in interest rates, and increases in currency exchange rates or stock
prices.
Each Theme Portfolio only will enter into Futures Contracts that are traded on
futures exchanges and are standardized as to maturity date and underlying
financial instrument. Futures exchanges and trading thereon in the United States
are regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"). Futures are exchanged in London at the London International
Financial Futures Exchange.
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce a Theme Portfolio's exposure to interest rate, currency
exchange rate and stock market fluctuations, that Theme Portfolio may be able to
hedge its exposure more effectively and at a lower cost through using Futures
Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (security
or currency) for a specified price at a designated date, time and place. A stock
index Futures Contract provides for the delivery, at a designated date, time and
place, of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of trading on the contract
and the price at which the Futures Contract is originally struck; no physical
delivery of stocks comprising the index is made. Brokerage
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fees are incurred when a Futures Contract is bought or sold, and margin deposits
must be maintained at all times the Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment
for financial instruments or currencies, Futures Contracts usually are closed
out before the delivery date. Closing out an open Futures Contract sale or
purchase is effected by entering into an offsetting Futures Contract purchase or
sale, respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Theme Portfolio realizes a gain;
if it is more, the Theme Portfolio realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, the Theme
Portfolio realizes a gain; if it is less, the Theme Portfolio realizes a loss.
The transaction costs must also be included in these calculations. There can be
no assurance, however, that a Theme Portfolio will be able to enter into an
offsetting transaction with respect to a particular Futures Contract at a
particular time. If a Theme Portfolio is not able to enter into an offsetting
transaction, that Theme Portfolio 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 Theme
Portfolio.
Each Theme Portfolio's Futures transactions will be entered into for hedging
purposes only; that is, Futures Contracts will be sold to protect against a
decline in the price of securities or currencies that a Theme Portfolio owns, or
Futures Contracts will be purchased to protect a Theme Portfolio against an
increase in the price of securities or currencies it has committed to purchase
or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by a Theme Portfolio in order to initiate Futures trading and maintain
the Theme Portfolio's open positions in Futures Contracts. A margin deposit made
when the Futures Contract is entered into ("initial margin") is intended to
ensure the Theme Portfolio's performance under the Futures Contract. The margin
required for a particular Futures Contract is set by the exchange on which the
Futures Contract is traded and may be significantly modified from time to time
by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin" to and from the futures
commission merchant through which the Theme Portfolio entered in 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 Theme Portfolio's
portfolio being hedged. The degree of imperfection of correlation depends upon
circumstances such as variations in speculative market demand for Futures and
for securities or currencies, including technical influences in Futures trading;
and differences between the financial instruments being hedged and the
instruments underlying the standard Futures Contracts available for trading. A
decision of whether, when and how to hedge involves skill and judgment, and even
a well-conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in
Futures Contract and options on Futures 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
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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 Theme Portfolio were unable to liquidate a Futures or option on Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Theme Portfolio would
continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Theme Portfolio would continue to
be required to make daily variation margin payments and might be required to
maintain the position being hedged by the Future or option or to maintain cash
or securities in a segregated account.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the Futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account,
which represents the amount by which the market price of the Futures Contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the Futures Contract. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the securities, currencies
or index upon which the Futures Contract is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If a Theme Portfolio writes an option on a Futures Contract, it will be
required to deposit initial and variation margin pursuant to requirements
similar to those applicable to Futures Contracts. Premiums received from the
writing of an option on a Futures Contract are included in the initial margin
deposit.
A Theme Portfolio may seek to close out an option position by selling an
option covering the same Futures Contract and having the same exercise price and
expiration date. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Theme Portfolio enters into Futures Contracts, options on
Futures Contracts, and options on foreign currencies traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums required to establish those
positions (excluding the amount by which options are "in-the-money") will not
exceed 5% of the liquidation value of the Theme Portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Theme
Portfolio 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 and the Portfolios' Board of Trustees, as applicable, without a
shareholder vote. This limitation does not limit the percentage of a Theme
Portfolio's assets at risk to 5%.
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FORWARD CONTRACTS
A Forward Contract is an obligation, usually arranged with a commercial bank
or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. A Theme
Portfolio either may accept or make delivery of the currency at the maturity of
the Forward Contract. A Theme Portfolio may also, if its contra party agrees,
prior to maturity, enter into a closing transaction involving the purchase or
sale of an offsetting contract.
A Theme Portfolio engages in forward currency transactions in anticipation of,
or to protect itself against, fluctuations in exchange rates. A Theme Portfolio
might sell a particular foreign currency forward, for example, when it holds
bonds denominated in a foreign currency but anticipates, and seeks to be
protected against, a decline in the currency against the U.S. dollar. Similarly,
a Theme Portfolio might sell the U.S. dollar forward when it holds bonds
denominated in U.S. dollars but anticipates, and seeks to be protected against,
a decline in the U.S. dollar relative to other currencies. Further, a Theme
Portfolio might purchase a currency forward to "lock in" the price of securities
denominated in that currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
Forward Contract generally has no deposit requirement, and no commissions are
charged at any stage for trades. Each Theme Portfolio will enter into such
Forward Contracts with major U.S. or foreign banks and securities or currency
dealers in accordance with guidelines approved by the Trust's or the Portfolios'
Board of Trustees, as applicable.
A Theme Portfolio may enter into Forward Contracts either with respect to
specific transactions or with respect to overall investments of that Theme
Portfolio. The precise matching of the Forward Contract amounts and the value of
specific securities generally will not be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the Forward Contract
is entered into and the date it matures. Accordingly, it may be necessary for
that Theme Portfolio to purchase additional foreign currency on the spot (i.e.,
cash) market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Theme Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency the Theme Portfolio is obligated to
deliver. The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be predicted accurately, causing a Theme Portfolio to sustain
losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Theme Portfolio to
sell a currency, that Theme Portfolio either may sell a security and use the
sale proceeds to make delivery of the currency or retain the security and offset
its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Theme Portfolio will obtain, on the same maturity
date, the same amount of the currency that it is obligated to deliver.
Similarly, a Theme Portfolio may close out a Forward Contract requiring it to
purchase a specified currency by entering into a second contract, if its contra
party agrees, entitling it to sell the same amount of the same currency on the
maturity date of the first contract. A Theme Portfolio would realize a gain or
loss as a result of entering into such an offsetting Forward Contract under
either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
the offsetting contract.
The cost to a Theme Portfolio of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because Forward Contracts are usually
entered into on a principal basis, no fees or commissions are involved. The use
of Forward Contracts does not eliminate fluctuations in the prices of the
underlying securities a Theme Portfolio owns or intends to acquire, but it does
establish a rate of exchange in advance. In addition, while Forward Contract
sales limit the risk of loss due to a decline in the value of the hedged
currencies, they also limit any potential gain that might result should the
value of the currencies increase.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
A Theme Portfolio may use options on foreign currencies, Futures on foreign
currencies, options on Futures on foreign currencies and Forward Contracts, to
hedge against movements in the values of the foreign currencies in which the
Theme Portfolio's securities are denominated. Such currency hedges can protect
against price movements in a security that the Theme Portfolio owns or intends
to acquire that are attributable to changes in the value of the currency in
which it is denominated. Such hedges do not, however, protect against price
movements in the securities that are attributable to other causes.
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A Theme Portfolio might seek to hedge against changes in the value of a
particular currency when no Futures Contract, Forward Contract or option
involving that currency is available or one of such contracts is more expensive
than certain other contracts. In such cases, the Theme Portfolio may hedge
against price movements in that currency by entering into a contract on another
currency or basket of currencies, the values of which the Sub-advisor believes
will have a positive correlation to the value of the currency being hedged. The
risk that movements in the price of the contract will not correlate perfectly
with movements in the price of the currency being hedged is magnified when this
strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward
Contracts and options on foreign currencies depends on the value of the
underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of Futures Contracts, Forward
Contracts or options, a Theme Portfolio could be disadvantaged by dealing in the
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving
foreign currencies might be required to take place within the country issuing
the underlying currency. Thus, a Theme Portfolio might be required to accept or
make delivery of the underlying foreign currency in accordance with any U.S. or
foreign regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other
than options purchased by a Theme Portfolio) expose the Theme Portfolio to an
obligation to another party. A Theme Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies, or other options, Forward Contracts or Future Contracts,
or (2) cash, receivables and short-term debt securities with a value sufficient
at all times to cover its potential obligations not covered as provided in (1)
above. Each Theme Portfolio will comply with SEC guidelines regarding cover for
these instruments and, if the guidelines so require, set aside cash or liquid
securities.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Forward Contract, Futures Contract or option is
open, unless they are replaced with other appropriate assets. If a large portion
of a Theme Portfolio's assets is used for cover or otherwise set aside, it could
affect portfolio management or the Theme Portfolio's ability to meet redemption
requests or other current obligations.
RISK FACTORS
ILLIQUID SECURITIES
Each Theme Portfolio may invest up to 15% of its net assets in illiquid
securities. Securities may be considered illiquid if a Theme Portfolio cannot
reasonably expect within seven days to sell the security for approximately the
amount at which that Theme Portfolio values such securities. See "Investment
Limitations." The sale of illiquid securities, if they can be sold at all,
generally will require more time and result in higher brokerage charges or
dealer discounts and other selling expenses than will the sale of liquid
securities such as securities eligible for trading on U.S. securities exchanges
or in OTC markets. Moreover, restricted securities, which may be illiquid for
purposes of this limitation, often sell, if at all, at a price lower than
similar securities that are 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 Theme Portfolio may be obligated to pay all or part
of the registration expenses and a considerable period may elapse between the
time of the decision to sell and the time the Theme Portfolio may be permitted
to sell a security under an effective registration
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statement. If, during such a period, adverse market conditions were to develop,
the Theme Portfolio might obtain a less favorable price than prevailed when it
decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended ("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 Theme Portfolio, however, could affect adversely the marketability of such
portfolio securities and the Theme Portfolio might be unable to dispose of such
securities promptly or at favorable prices.
With respect to liquidity determinations generally, the Trust's or the
Portfolios' Board of Trustees, as applicable, has the ultimate responsibility
for determining whether specific securities, including restricted securities
pursuant to Rule 144A under the 1933 Act, are liquid or illiquid. Each Board has
delegated the function of making day-to-day determinations of liquidity to the
Sub-advisor, in accordance with procedures approved by that Board. The
Sub-advisor takes into account a number of factors in reaching liquidity
decisions, including, but not limited to, (i) the frequency of trading in the
security; (ii) the number of dealers that make quotes for the security; (iii)
the number of dealers that have undertaken to make a market in the security;
(iv) the number of other potential purchasers; and (v) the nature of the
security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited and the mechanics of transfer). The Sub-
advisor monitors the liquidity of securities held by each Theme Portfolio and
periodically reports such determinations to the Trust's or the Portfolios' Board
of Trustees, as applicable. If the liquidity percentage restriction of a Theme
Portfolio is satisfied at the time of investment, a later increase in the
percentage of illiquid securities held by the Theme Portfolio resulting from a
change in market value or assets will not constitute a violation of that
restriction. If as a result of a change in market value or assets, the
percentage of illiquid securities held by the Theme Portfolio increases above
the applicable limit, the Sub-advisor will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on the Theme Portfolio.
FOREIGN SECURITIES
Political, Social and Economic Risks. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment convertibility of currencies into U.S. dollars and on repatriation of
capital invested. In the event of such expropriation, nationalization or other
confiscation by any country, a Theme Portfolio could lose its entire investment
in any such country.
Religious, Political and Ethnic Instability. Certain countries in which a
Theme Portfolio may invest may have groups that advocate radical religious or
revolutionary philosophies or support ethnic independence. Any disturbance on
the part of such individuals could carry the potential for widespread
destruction or confiscation of property owned by individuals and entities
foreign to such country and could cause the loss of a Theme Portfolio's
investment in those countries. Instability may also result from, among other
things; (i) authoritarian governments or military involvement in political and
economic decision-making, including changes in government through
extra-constitutional means; (ii) popular unrest associated with demands for
improved political, economic and social conditions; and (iii) hostile relations
with neighboring or other countries. Such political, social and economic
instability could disrupt the principal financial markets in which a Theme
Portfolio invests and adversely affect the value of a Theme Portfolio's 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 a Theme Portfolio. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the cost and expenses of a
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Theme Portfolio. For example, certain countries require prior governmental
approval before investments by foreign persons may be made, or may limit the
amount of investment by foreign persons in a particular company or limit the
investment by foreign persons to only a specific class of securities of a
company that may have less advantageous terms than securities of the company
available for purchase by nationals. Moreover, the national policies of certain
countries may restrict investment opportunities in issuers or industries deemed
sensitive to national interests. In addition, some countries require
governmental approval for the repatriation of investment income, capital or the
proceeds of securities sales by foreign investors. In addition, if there is a
deterioration in a country's balance of payments of for other reasons, a country
may impose restrictions on foreign capital remittances abroad. A Theme Portfolio
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
Non-Uniform Corporate Disclosure Standards and Governmental
Regulation. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the foreign securities held by a Theme
Portfolio will not be registered with the SEC or regulators of any foreign
country, nor will the issuers thereof be subject to the SEC's reporting
requirements. Thus, there will be less available information concerning most
foreign issuers of securities held by a Theme Portfolio than is available
concerning U.S. issuers. In instances where the financial statements of an
issuer are not deemed to reflect accurately the financial situation of the
issuer, the Sub-advisor will take appropriate steps to evaluate the proposed
investment, which may include on-site inspection of the issuer, interviews with
its management and consultations with accountants, bankers and other
specialists. There is substantially less publicly available information about
foreign companies than there are reports and ratings published about U.S.
companies 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 in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
restrictions on market manipulation, insider trading rules, shareholder proxy
requirements and timely disclosure of information.
Currency Fluctuations. Because each Theme Portfolio, under normal
circumstances, 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 a Theme Portfolio's investment performance. A decline in the
value of any particular currency against the U.S. dollar will cause a decline in
the U.S. dollar value of that Theme Portfolio's holdings of securities and cash
denominated in such currency and, therefore, will cause an overall decline in
the appropriate 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 Theme Portfolio receives its income falls relative to the U.S. dollar
between receipt of the income and the making of Theme Portfolio distributions,
the Theme Portfolio may be required to liquidate securities in order to make
distributions if the Theme Portfolio has insufficient cash in U.S. dollars to
meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the relative
movement of interest rates and the pace of business activity in the other
countries and the United States, and other economic and financial conditions
affecting the world economy.
Although each Theme Portfolio values its assets daily in terms of U.S.
dollars, the Portfolios do not intend to convert their holdings of foreign
currencies into U.S. dollars on a daily basis. Each Portfolio will do so, from
time to time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference ("spread") between the prices at which
they buy and sell various currencies. Thus, a dealer may offer to sell a foreign
currency to a Portfolio at one rate, while offering a lesser rate of exchange
should a Portfolio desire to sell the currency to the dealer.
Adverse Market Characteristics. Securities of many foreign issuers may be less
liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions usually are subject to fixed
commissions, which generally are higher than negotiated commissions on U.S.
transactions. In addition, foreign securities transactions may be subject to
difficulties associated with the settlement of such transactions. Delays in
settlement could result in temporary periods when assets of a Theme Portfolio
are uninvested and no return is earned thereon. The inability of a Theme
Portfolio to make intended security purchases due to settlement problems could
cause that Theme Portfolio to miss attractive investment opportunities.
Inability to dispose of a portfolio security due to settlement problems either
could result in losses to that Theme Portfolio due to subsequent declines in
value of the
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<PAGE> 553
portfolio security or, if that Theme Portfolio has entered into a contract to
sell the security, could result in possible liability to the purchaser. The
Sub-advisor will consider such difficulties when determining the allocation of a
Theme Portfolio's assets, although the Sub-advisor does not believe that such
difficulties will have a material adverse effect on a Theme Portfolio's
portfolio trading activities.
Each Theme Portfolio may use foreign custodians, which may involve risks in
addition to those related to its use of U.S. custodians. Such risks include
uncertainties relating to determining and monitoring the foreign custodian's
financial strength, reputation and standing; maintaining appropriate safeguards
concerning that Theme Portfolio's investments; and possible difficulties in
obtaining and enforcing judgments against such custodians.
Withholding Taxes. Each Theme Portfolio's net investment income from foreign
issuers may be subject to withholding taxes by the foreign issuer's country,
thereby reducing that income or delaying the receipt of income when those taxes
may be recaptured. See "Taxes."
Concentration. To the extent a Theme Portfolio invests a significant portion
of its assets in securities of issuers located in a particular country or region
of the world, such Portfolio may be subject to greater risks and may experience
greater volatility than a fund that is more broadly diversified geographically.
Special Considerations Affecting Western European Countries. The countries
that are members of the European Economic Community ("Common Market") (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
Netherlands, Portugal, Spain, Sweden and the United Kingdom) eliminated certain
import tariffs and quotas and other trade barriers with respect to one another
over the past several years. The Sub-advisor believes that this deregulation
should improve the prospects for economic growth in many Western European
countries. Among other things, the deregulation could enable companies domiciled
in one country to avail themselves of lower labor costs existing in other
countries. In addition, this deregulation could benefit companies domiciled in
one country by opening additional markets for their goods and services in other
countries. Since, however, it is not clear what the exact form or effect of
these Common Market reforms will be on business in Western Europe, it is
impossible to predict the long-term impact of the implementation of these
programs on the securities owned by a Theme Portfolio.
Special Considerations Affecting Russia and Eastern European
Countries. Investing in Russia and Eastern European countries involves a high
degree of risk and special considerations not typically associated with
investing in the United States securities markets, and should be considered
highly speculative. Such risks include: (1) delays in settling portfolio
transactions and risk of loss arising out of the system of share registration
and custody; (2) the risk that it may be impossible or more difficult than in
other countries to obtain and/or enforce a judgement; (3) pervasiveness of
corruption and crime in the economic system; (4) currency exchange rate
volatility and the lack of available currency hedging instruments; (5) higher
rates of inflation (including the risk of social unrest associated with periods
of hyper-inflation) and high unemployment; (6) controls on foreign investment
and local practices disfavoring foreign investors and limitations on
repatriation of invested capital, profits and dividends, and on a fund's ability
to exchange local currencies for U.S. dollars; (7) political instability and
social unrest and violence; (8) the risk that the governments of Russia and
Eastern European countries may decide not to continue to support the economic
reform programs implemented recently and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed when such countries had a communist form of government; (9)
the financial condition of companies in these countries, including large amounts
of inter-company debt which may create a payments crisis on a national scale;
(10) dependency on exports and the corresponding importance of international
trade; (11) the risk that the tax system in these countries will not be reformed
to prevent inconsistent, retroactive and/or exorbitant taxation; and (12) the
underdeveloped nature of the securities markets.
Special Considerations Affecting Japan. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
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Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
Special Considerations Affecting Pacific Region Countries. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also exist between South Korea and North Korea. In
addition, the Theme Portfolios may invest in Hong Kong, which reverted to
Chinese Administration on July 1, 1997. Investments in Hong Kong may be subject
to expropriation, national, nationalization or confiscation, in which case a
Theme Portfolio could lose its entire investment in Hong Kong. In addition, the
reversion of Hong Kong also presents a risk that the Hong Kong dollar will be
devalued and a risk of possible loss of investor confidence in Hong Kong's
currency, stock market and assets.
Special Considerations Affecting Latin American Countries. Most Latin American
countries have experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have very negative effects on the economies
and securities markets of certain Latin American countries. Certain Latin
American countries are also among the largest debtors to commercial banks and
foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are
maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the currency which, in turn, can have a disruptive and negative
effect on foreign investors. For example, in late 1994, the value of the Mexican
peso lost more than one-third of its value relative to the U.S. dollar.
Special Considerations Affecting Emerging Markets. Investing in the securities
of companies in emerging markets may entail special risks relating to potential
political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, a Theme Portfolio could lose its entire
investment in any such country.
Emerging securities markets are substantially smaller, less developed, less
liquid and more volatile than the major securities markets. The limited size of
emerging securities markets and limited trading volume 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 markets
there may be share registration and delivery delays or failures.
Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economics and securities
markets of certain emerging market countries.
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INVESTMENT LIMITATIONS
FEEDER FUNDS
The Financial Services Fund, Infrastructure Fund, Resources Fund and Consumer
Products and Services Fund each has the following fundamental investment policy
to enable it to invest in the Financial Services Portfolio, Infrastructure
Portfolio, Resources Portfolio and Consumer Products and Services Portfolio,
respectively:
Notwithstanding any other investment policy of the Fund, the Fund may invest
all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
All other fundamental investment policies, and the non-fundamental investment
policies, of each Feeder Fund and its corresponding Portfolio are identical.
Therefore, although the following discusses the investment policies of each
Portfolio and its Board of Trustees, it applies equally to each Feeder Fund and
its Board of Trustees.
Each Portfolio has adopted the following investment limitations as fundamental
policies that (unless otherwise noted) may not be changed without approval by
the affirmative vote of a majority of the outstanding shares of the Portfolio.
Whenever a Feeder Fund is requested to vote on a change in the investment
limitations of its corresponding Portfolio, the Fund will hold a meeting of its
shareholders and will cast its votes as instructed by its shareholders.
No Portfolio may:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Portfolio may exercise rights under agreements relating
to such securities, including the right to enforce security interests and
to hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Portfolio may
purchase, sell or enter into financial options and futures, forward and
spot currency contracts, swap transactions and other financial contracts or
derivative instruments;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Portfolio might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Portfolio's total
assets (including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the
Portfolio may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than
5% of the Portfolio's total assets would be invested in securities of that
issuer or the Portfolio would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Portfolio's
total assets may be invested without regard to this limitation, and except
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities or to securities
issued by other investment companies.
The following investment policies of each Portfolio are not fundamental
policies and may be changed by vote of the Portfolios' Board of Trustees without
shareholder approval.
No Portfolio may:
(1) Invest in securities of an issuer if the investment would cause
the Portfolio to own more than 10% of any class of securities of any one
issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a
readily available market;
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(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of
those positions (excluding the amount by which options are "in-the-money")
exceeds 5% of the liquidation value of the Portfolio's portfolio, after
taking into account unrealized profits and unrealized losses on any
contracts the Portfolio has entered into;
(5) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the Portfolio's
total assets, the Portfolio will not make any additional investments;
(6) Invest more than 10% of its total assets in shares of other
investment companies and may not invest more than 5% of its total assets in
any one investment company or acquire more than 3% of the outstanding
voting securities of any one investment company;
(7) Purchase securities on margin, provided that each Portfolio may
obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Portfolio
may make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments; or
(8) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Investors should refer to the Prospectus for further information with respect
to the investment objective of each Feeder Fund, which may not be changed
without the approval of the Fund's shareholders, and its corresponding
Portfolio's investment objective, which may be changed without the approval of
the Portfolio's shareholders, and other investment policies, techniques and
limitations, which may or may not be changed without shareholder approval.
HEALTH CARE FUND
The Health Care Fund has adopted the following investment limitations as
fundamental policies, which (unless otherwise noted) may not be changed without
approval by a majority of the outstanding shares of the Fund.
The Health Care Fund may not:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Health Care Fund may exercise rights under agreements
relating to such securities, including the right to enforce security
interests and to hold real estate acquired by reason of such enforcement
until that real estate can be liquidated in an orderly manner;
(2) Engage in the business of underwriting securities of other
issuers, except to the extent that the Health Care Fund might be considered
an underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(3) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(4) Purchase or sell physical commodities, but the Health Care Fund
may purchase, sell or enter into financial options and futures, forward and
spot currency contracts, swap transactions and other financial contracts or
derivative instruments;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Health Care Fund's
total assets (including the amount borrowed but reduced by any liabilities
not constituting borrowings) at the time of the borrowing, except that the
Health Care Fund may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than
5% of the Health Care Fund's total assets would be invested in securities
of that issuer or the Health Care Fund would own or hold more than 10% of
the outstanding voting securities of that issuer, except that up to 25% of
the Health Care Fund's total assets may be invested without regard to this
limitation, and except that this limitation does not apply to securities
issued or
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guaranteed by the U.S. government, its agencies or instrumentalities or to
securities issued by other investment companies.
Notwithstanding any other investment policy of the Health Care Fund, the
Health Care Fund may invest all of its investable assets (cash, securities and
receivables related to securities) in an open-end management investment company
having substantially the same investment objective, policies and limitations as
the Fund.
The following investment policies of the Health Care Fund are not fundamental
policies and may be changed by vote of the Trust's Board of Trustees without
shareholder approval. The Health Care Fund will not:
(1) Purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits
maturing in more than seven days, or purchase OTC options or hold assets
set aside to cover OTC options written by the Health Care Fund, if
immediately after and as a result, the value of such securities would
exceed, in the aggregate, 15% of the Health Care Fund's net assets;
(2) Purchase securities on margin, provided that the Health Care Fund
may obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Health
Care Fund may make margin deposits in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments; or
(3) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities; or
(4) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the Health Care
Fund's total assets, it will not make any additional investments.
Investors should refer to the Health Care Fund's Prospectus for further
information with respect to the Health Care Fund's investment objective, which
may not be changed without the approval of its shareholders, and other
investment policies, techniques and limitations, which may be changed without
shareholder approval.
TELECOMMUNICATIONS FUND
The Telecommunications Fund has adopted the following investment limitations
as fundamental policies, which (unless otherwise noted) may not be changed
without approval by the affirmative vote of a majority of the outstanding shares
of the Fund.
The Telecommunications Fund may not:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Telecommunications Fund may exercise rights under
agreements relating to such securities, including the right to enforce
security interests and to hold real estate acquired by reason of such
enforcement until that real estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Telecommunications
Fund may purchase, sell or enter into financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Telecommunications Fund might be
considered an underwriter under the federal securities laws in connection
with its disposition of portfolio securities;
(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Telecommunications
Fund's total assets (including the amount borrowed but reduced by any
liabilities not constituting borrowings) at the time of the borrowing,
except that the Telecommunications Fund may borrow up to an additional 5%
of its total assets (not including the amount borrowed) for temporary or
emergency purposes; or
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(6) Purchase securities of any one issuer if, as a result, more than
5% of the Telecommunications Fund's total assets would be invested in
securities of that issuer or the Telecommunications Fund would own or hold
more than 10% of the outstanding voting securities of that issuer, except
that up to 25% of the Telecommunications Fund's total assets may be
invested without regard to this limitation, and except that this limitation
does not apply to securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities or to securities issued by other
investment companies.
Notwithstanding any other investment policy of the Telecommunications Fund,
the Telecommunications Fund may invest all of its investable assets (cash,
securities and receivables related to securities) in an open-end management
investment company having substantially the same investment objective, policies
and limitations as the Fund.
The following investment policies of the Telecommunications Fund are not
fundamental policies and may be changed by vote of the Trust's Board of Trustees
without shareholder approval.
The Telecommunications Fund may not:
(1) Invest in securities of an issuer if the investment would cause
the Telecommunications Fund to own more than 10% of any class of securities
of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a
readily available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of
those positions (excluding the amount by which options are "in-the-money")
exceeds 5% of the liquidation value of the Fund's portfolio, after taking
into account unrealized profits and unrealized losses on any contracts the
Fund has entered into;
(5) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the
Telecommunications Fund's total assets, it will not make any additional
investments;
(6) Purchase securities on margin, provided that the
Telecommunications Fund may obtain short-term credits as may be necessary
for the clearance of purchases and sales of securities, and further
provided that the Telecommunications Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Investors should refer to the Telecommunications Fund's Prospectus for further
information with respect to the Telecommunications Fund's investment objective,
which may not be changed without the approval of its shareholders, and other
investment policies, techniques and limitations, which may be changed without
shareholder approval.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Fund's or Portfolio's investment policies or
restrictions. A Fund or Portfolio may exchange securities, exercise conversion
or subscription rights, warrants or other rights to purchase common stock or
other equity securities and may hold, except to the extent limited by the 1940
Act, any such securities so acquired without regard to the Fund's or Portfolio's
investment policies and restrictions. The original cost of the securities so
acquired will be included in any subsequent determination of a Fund's or
Portfolio's compliance with the investment percentage limitations referred to
above and in the Prospectus.
25
<PAGE> 559
EXECUTION OF PORTFOLIO TRANSACTIONS
Subject to policies established by the Trust's and the Portfolios' Board of
Trustees, the Sub-advisor is responsible for the execution of each Theme
Portfolio's securities transactions and the selection of broker/dealers who
execute such transactions on behalf of each Theme Portfolio. In executing
transactions, the Sub-advisor seeks the best net results for each Theme
Portfolio, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Although the Sub-
advisor generally seeks reasonably competitive commission rates and spreads,
payment of the lowest commission or spread is not necessarily consistent with
the best net results. While each Theme Portfolio may engage in soft dollar
arrangements for research services, as described below, it has no obligation to
deal with any broker/dealer or group of broker/dealers in the execution of
portfolio transactions.
Consistent with the interests of each Theme Portfolio, the Sub-advisor may
select broker/dealers to execute that Theme Portfolio's portfolio transaction on
the basis of the research and brokerage services they provide to the Sub-advisor
for its use in managing that Theme Portfolio and its other advisory accounts.
Such services may include furnishing analyses, reports and information
concerning issuers, industries, securities, geographic regions, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Research and brokerage services received from such
broker are in addition to, and not in lieu of, the services required to be
performed by the Sub-advisor under the applicable investment management and
administration contract. A commission paid to such broker may be higher than
that which another qualified broker would have charged for effecting the same
transaction, provided that the Sub-advisor determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Sub-advisor to that Theme Portfolio and its other
clients and that the total commissions paid by that Theme Portfolio will be
reasonable in relation to the benefits it received over the long term. Research
services may also be received from dealers who execute portfolio transactions in
OTC markets.
The Sub-advisor may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by a Theme Portfolio toward payment of its expenses, such
as custodian fees.
Investment decisions for a Theme Portfolio and for other investment accounts
managed by the Sub-advisor are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts, including a Theme Portfolio. In such
cases, simultaneous transactions may occur. Purchases or sales are then
allocated as to price or amount in a manner deemed fair and equitable to all
accounts involved. While in some cases this practice could have a detrimental
effect upon the price or value of the security as far as a Theme Portfolio is
concerned, in other cases the Sub-advisor believes that coordination and the
ability to participate in volume transactions will be beneficial to that Theme
Portfolio.
Under a policy adopted by the Trust's and the Portfolios' 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 the Theme Funds and the other
portfolios for which AIM or the Sub-advisor serves as investment manager or
administrator in selecting broker/dealers for the execution of portfolio
transactions. This policy does not imply a commitment to execute portfolio
transactions through all broker/dealers that sell shares of the Theme Funds and
such other portfolios.
Each Theme Portfolio contemplates purchasing most foreign equity securities in
OTC markets or stock exchanges located in the countries in which the respective
principal offices of the issuers of the various securities are located, if that
is the best available market. The fixed commissions paid in connection with most
such foreign stock transactions generally are higher than negotiated commissions
on U.S. transactions. There generally is less government supervision and
regulation of foreign stock exchanges and brokers than in the United States.
Foreign security settlements may in some instances be subject to delays and
related administrative uncertainties.
Foreign equity securities may be held by a Theme Portfolio in the form of
ADRs, ADSs, EDRs, CDRs or securities convertible into foreign equity securities.
ADRs, ADSs, EDRs and CDRs may be listed on stock exchanges, or traded in the OTC
markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the United States, will be subject to negotiated commission
rates. The foreign and domestic debt securities and money market instruments in
which a Theme Portfolio may invest are generally traded in the OTC markets.
A Theme Portfolio does not have any obligation to deal with any broker/dealer
or group of broker/dealers in the execution of securities transactions. Each
Theme Portfolio contemplates that, consistent with the policy of obtaining the
best net results, brokerage transactions may be conducted through certain
companies that are affiliated with AIM or the Sub-advisor. The Trust's or the
Portfolios' Board of Trustees, as applicable, has adopted procedures in
conformity with
26
<PAGE> 560
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 Portfolios 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 Portfolio, provided the conditions of an exemptive order
received by the Portfolios from the SEC are met. In addition, a Portfolio may
purchase or sell a security from or to another AIM Fund provided the Portfolios
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 October 31, 1997, 1996 and 1995, the Health Care
Fund paid aggregate brokerage commissions of $1,150,118, $1,619,500 and
$545,743, respectively. For the fiscal years ended October 31, 1997, 1996 and
1995, the Telecommunications Fund paid aggregate brokerage commissions of
$2,254,069, $2,848,733 and $2,253,982, respectively. For the fiscal years ended
October 31, 1997, 1996 and 1995, the Financial Services Portfolio paid aggregate
brokerage commissions of $250,893, $77,822 and $38,814, respectively. For the
fiscal years ended October 31, 1997, 1996 and 1995, the Infrastructure Portfolio
paid aggregate brokerage commissions of $131,543, $124,164 and $122,399,
respectively. For the fiscal years ended October 31, 1997, 1996 and 1995, the
Resources Portfolio paid aggregate brokerage commissions of $1,281,212, $496,370
and $98,462, respectively. For the fiscal years ended October 31, 1997 and 1996
and for the fiscal period December 30, 1994 (commencement of operations) to
October 31, 1995, the Consumer Products and Services Portfolio paid aggregate
brokerage commissions of $1,454,348, $356,459 and $17,605, respectively. For the
fiscal years ended October 31, 1997 and 1996, the Health Care Fund paid to GT
Bank in Liechtenstein AG, which was an "affiliated" broker, aggregate brokerage
commissions of $23,081 and $32,898, respectively, for transactions involving
purchases and sales of portfolio securities which represented 2.01% and 2.03%,
respectively, of the total brokerage commissions paid by the Health Care Fund
and 1.61% and 1.71%, respectively, of the aggregate dollar amount of
transactions involving payment of commissions by the Health Care Fund. For
fiscal year ended October 31, 1997, the Telecommunications Fund paid to GT Bank
in Liechtenstein, AG, which was an "affiliated" broker, aggregate brokerage
commissions of $22,584 for transactions involving purchases and sales of
portfolio securities which represented 1.00% of the total brokerage commissions
paid by the Fund and 0.67% of the aggregate dollar amount of transactions
involving payment of commissions by the Fund.
PORTFOLIO TRADING AND TURNOVER
Although each Theme Portfolio does not intend generally to trade for
short-term profits, the securities held by that Theme 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 each Theme Portfolio's average month-end portfolio value,
excluding short-term investments. The portfolio turnover rate will not be a
limiting factor when management deems portfolio changes appropriate. Higher
portfolio turnover involves correspondingly greater brokerage commissions and
other transaction costs that the Theme Portfolio will bear directly, and may
result in the realization of net capital gains that are taxable when distributed
to each Fund's shareholders. For the fiscal years ended October 31, 1996 and
1997, the Telecommunications Fund's portfolio turnover rates were 37% and 35%,
respectively. For the fiscal years ended October 31, 1996 and 1997, the Health
Care Fund's portfolio turnover rates were 157% and 149%, respectively. For the
fiscal years ended October 31, 1996 and 1997, the portfolio turnover rates for
the Financial Services Portfolio, Infrastructure Portfolio and Resources
Portfolio were 103% and 91%, 41% and 41%, and 94% and 321%, respectively. For
the fiscal years ended October 31, 1996 and 1997, the portfolio turnover rates
for the Consumer Products and Services Portfolio were 169% and 392%,
respectively.
27
<PAGE> 561
MANAGEMENT
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers and the Portfolios' Trustees and
Executive Officers are listed below. Unless otherwise indicated, the address of
each Executive Officer is 11 Greenway, Suite 100, Houston, Texas 77046.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (51) Trustee, Chairman of the Director, President and Chief Executive Officer,
Board and President A I M Management Group Inc.; Director and
President, A I M Advisors, Inc.; Director and
Senior Vice President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company; and
Director, AMVESCAP PLC.
- ---------------------------------------------------------------------------------------------------------
C. DEREK ANDERSON (57) Trustee President, Plantagenet Capital Management, LLC (an
220 Sansome Street investment partnership); Chief Executive Officer,
Suite 400 Plantagenet Holdings, Ltd. (an investment banking
San Francisco, CA 94104 firm); Director, Anderson Capital Management, Inc.
since 1988; Director, PremiumWear, Inc. (formerly
Munsingwear, Inc.) (a casual apparel company);
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; Director and
Two Embarcadero Center Chairman, C.D. Stimson Company (a private
Suite 2400 investment company); and Trustee, each of the other
San Francisco, CA 94111 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 venture capital
428 University Avenue firm); Director, Viasoft and PageMart, Inc. (both
Palo Alto, CA 94301 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.
- ---------------------------------------------------------------------------------------------------------
RUTH H. QUIGLEY (63) Trustee Private investor; President, Quigley Friedlander &
1055 California Street Co., Inc. (a financial advisory services firm) from
San Francisco, CA 94108 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 Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc.
and Fund Management Company.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* A Trustee who is an "interested person" of the Trust and A I M Advisors, Inc., as defined in the 1940
Act.
+ Mr. Arthur and Ms. Relihan are married to each other.
</TABLE>
28
<PAGE> 562
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
KENNETH W. CHANCEY (53) Vice President and Senior Vice President -- Mutual Fund Accounting,
50 California Street Principal Accounting the Sub-advisor since 1997; Vice
San Francisco, CA 94111 Officer 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 Chief Legal and Compliance Officer -- North
50 California Street Secretary America, the Sub-advisor since October 1997;
San Francisco, CA 94111 Secretary and Chief Legal and Compliance Officer,
INVESCO (NY) Asset Management, Inc., INVESCO (NY),
Inc., GT Global Investor Services, Inc. and GT
Insurance Agency, Inc. since August 1997; Secretary
and Chief Legal and Compliance Officer, GT Global,
Inc. 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.
- ---------------------------------------------------------------------------------------------------------
+ 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 Vice President and Fund Controller, A I M Advisors,
Assistant Treasurer Inc.; and Assistant Vice President and Assistant
Treasurer, Fund Management Company.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
+ Mr. Arthur and Ms. Relihan are married to each other.
The Board of Trustees has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and its
funds and recommending firms to serve as independent auditors of the Trust. All
of the Trust's Trustees also serve as directors or trustees of some or all of
the other investment companies managed, administered or advised by AIM. All of
the Trust's Executive Officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM. Each Trustee
who is not a director, officer or employee of the Sub-advisor or any 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,
29
<PAGE> 563
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 Directors. 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 Directors
contained no exercised 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
each Fund or of all the Trust's series in the aggregate.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE FEEDER FUNDS
AND THE PORTFOLIOS
AIM serves as each Portfolio's investment manager and administrator under an
investment management and administration contract between each Portfolio and AIM
("Portfolio Management Contract"). The Sub-advisor serves as each Portfolio's
sub-advisor and sub-administrator under a sub-advisory and sub-administration
agreement between AIM and the Sub-advisor ("Portfolio Management Sub-Contract,"
and together with the Portfolio Management Contract, the "Portfolio Management
Contracts"). AIM serves as administrator to each Feeder Fund under an
administration contract between the Trust and AIM ("Administration Contract").
The Sub-advisor serves as sub-administrator to each Feeder Fund under a
sub-administration contract between AIM and the Sub-advisor ("Administration
Sub-Contract," and together with the Administration Contract, the
"Administration Contracts"). The Administration Contracts will not be deemed
advisory contracts, as defined under the 1940 Act. As investment managers and
administrators, AIM and the Sub-advisor make all investment decisions for each
Portfolio and, as administrators, administer each Portfolio's and each Feeder
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 each Portfolio
and each Feeder Fund and provide suitable office space, necessary small office
equipment and utilities.
The Portfolio Management Contracts may be renewed with respect to a Portfolio
for additional one-year terms, provided that any such renewal has been
specifically approved at least annually by (i) the Portfolios' Board of Trustees
or the vote of a majority of the Portfolio's outstanding voting securities (as
defined in the 1940 Act) and (ii) a majority of Trustees who are not parties to
the Portfolio 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 Portfolio Management Contracts provide
that with respect to each Portfolio, and the Administration Contracts provide
that with respect to each Feeder Fund, either the Trust, each Portfolio or the
Sub-advisor may terminate the Contracts without penalty upon sixty days' written
notice to the other party. The Portfolio Management Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE HEALTH CARE
FUND AND TELECOMMUNICATIONS FUND
AIM serves as the investment manager and administrator to the Health Care Fund
and Telecommunications Fund under an investment management and administration
contract ("Management Contract") between the Trust and AIM. The Sub-advisor
serves as the sub-advisor and sub-administrator to the Health Care Fund and
Telecommunications 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
Health Care Fund and Telecommunications Fund and administer the Health Care
Fund's and the Telecommunications 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 Health Care Fund and
Telecommunications Fund, and provide suitable office space, necessary small
office equipment and utilities.
The Management Contracts may be renewed for additional one-year terms with
respect to the Health Care Fund and Telecommunications Fund, 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 the Health Care Fund
and Telecommunications 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 the Health
Care Fund and Telecommunications Fund either the Trust or each of AIM or the
Sub-advisor may terminate the Contracts without penalty upon sixty days' written
notice to the other party. The Management Contracts terminate automatically in
the event of their assignment (as defined in the 1940 Act).
30
<PAGE> 564
The following table discloses the amount of investment management and
administration fees paid by the Theme Portfolios to the Sub-advisor during the
periods shown:
HEALTH CARE FUND
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, AMOUNT PAID
----------- -----------
<S> <C>
1997...................................................... $ 5,820,067
1996...................................................... 5,495,494
1995...................................................... 4,453,857
</TABLE>
TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, AMOUNT PAID
----------- -----------
<S> <C>
1997...................................................... $17,999,111
1996...................................................... 23,119,601
1995...................................................... 23,861,460
</TABLE>
FINANCIAL SERVICES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, AMOUNT PAID
----------- -----------
<S> <C>
1997...................................................... $ 346,965
1996...................................................... 99,991
1995...................................................... 51,353
</TABLE>
INFRASTRUCTURE PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, AMOUNT PAID
----------- -----------
<S> <C>
1997...................................................... $ 772,727
1996...................................................... 635,456
1995...................................................... 601,421
</TABLE>
RESOURCES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, AMOUNT PAID
----------- -----------
<S> <C>
1997...................................................... $ 979,215
1996...................................................... 425,745
1995...................................................... 213,856
</TABLE>
CONSUMER PRODUCTS AND SERVICES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, AMOUNT PAID
----------- -----------
<S> <C>
1997...................................................... $ 1,207,854
1996...................................................... 422,640
1995 (since Fund inception on Dec. 30, 1994).............. 16,284
</TABLE>
For the fiscal years ended October 31, 1995 and 1996, the Sub-advisor
reimbursed the Financial Services Portfolio, Infrastructure Portfolio and
Resources Portfolio for their respective investment management and
administration fees in the amounts of $51,353 and $103,267; $0 and $0; and
$213,856 and $0, respectively. Each of these Portfolios had no reimbursement for
the fiscal year ended October 31, 1997. For the fiscal years ended October 31,
1995, 1996 and 1997, the Financial Services Fund, Infrastructure Fund and
Resources Fund paid administration fees of $18,756, $34,865 and $119,765;
$208,892, $218,735 and $266,025; and $74,485, $147,614 and $338,578,
respectively. However, the Sub-advisor reimbursed those Funds for such fees in
the amounts of $18,756, $34,865 and $0; $177,376, $0 and $0; and $74,485, $0 and
$0, respectively. For the fiscal period December 30, 1994 (commencement of
operations) to October 31, 1995, and for the fiscal years ended October 31, 1996
and 1997, the Sub-advisor reimbursed the Consumer Products and
31
<PAGE> 565
Services Portfolio for investment management and administration fees in the
amount of $16,284, $0 and $0, respectively. For the same periods, the Consumer
Products and Services Fund paid $5,933, $147,623 and $416,297, respectively, in
administration fees; however, the Sub-advisor reimbursed the Fund in the amounts
of $5,933, $0 and $0, respectively.
DISTRIBUTION SERVICES RELATING TO EACH FUND
Each Fund's Advisor Class shares are offered continuously through each Fund's
principal underwriter and distributor, AIM Distributors, on a "best efforts"
basis pursuant to a distribution contract between the Trust and AIM Distributors
without a front-end sales charge or a contingent deferred sales charge.
EXPENSES OF THE FUNDS AND OF THE PORTFOLIOS
Each Fund and each Portfolio pays all expenses not assumed by AIM, the
Sub-advisor, AIM Distributors and other agents. These expenses include, in
addition to the advisory, administration, distribution, transfer agency, pricing
and accounting agency and brokerage fees described above, legal and audit
expenses, custodian fees, trustees' fees, organizational fees, fidelity bond and
other insurance premiums, taxes, extraordinary expenses and expenses of reports
and prospectuses sent to existing investors. The allocation of general Company
expenses and expenses shared among the Funds and other funds organized as series
of the Company 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 service
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 the Funds or the
Portfolios 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) on each business day of the Fund. In the event the NYSE
closes early (i.e., before 4:00 p.m. Eastern time) on a particular day, the net
asset value of 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 each Theme
Portfolio'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
Theme Portfolio's net asset value per share is made in accordance with generally
accepted accounting principles.
Each equity security held by a Theme Portfolio 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
32
<PAGE> 566
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 of the Fund and the Portfolio.
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."
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."
PROGRAMS AND SERVICES FOR SHAREHOLDERS
The Funds provide certain services for shareholders and certain investment or
redemption programs. See "Exchange Privilege" and "How to Redeem Shares" in the
Prospectus. All inquiries concerning these programs should be made directly to
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, toll free
at (800) 959-4246.
DIVIDEND ORDER
Dividends may be paid to someone other than the registered owner, or sent to
an address other than the address of record. (Please note that signature
guarantees are required to effect this option.) An investor also may direct that
his or her dividends be invested in one of the other AIM Funds and there is no
sales charge for these investments; initial investment minimums apply. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" in the
Prospectus. To effect this option, please contact your authorized dealer. For
more information concerning AIM Funds other than the 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.
33
<PAGE> 567
TAXES
TAXATION OF THE FUNDS
Each Fund is treated as a separate corporation for federal income tax
purposes. To continue to qualify for treatment as a regulated investment company
("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. With respect to each Fund, 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. Each Feeder Fund, as an investor in its
corresponding Portfolio, is deemed to own a proportionate share of the
Portfolio's assets, and to earn a proportionate share of the Portfolio's income,
for purposes of determining whether the Fund satisfies the requirements
described above to qualify as a RIC.
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.
See the next section for a discussion of the tax consequences to each Feeder
Fund of hedging transactions engaged in, and investments in passive foreign
investment companies ("PFICs") and other foreign securities, by its
corresponding Portfolio and to the Health Care Fund and Telecommunications Fund
of those transactions and investments.
TAXATION OF THE THEME PORTFOLIOS
The Portfolios and their Relationship to the Feeder Funds. Each Portfolio is
treated as a separate partnership for federal income tax purposes and is not a
"publicly traded partnership." As a result, each Portfolio is not subject to
federal income tax; instead, each Feeder Fund, as an investor in its
corresponding Portfolio, is required to take into account in determining its
federal income tax liability its share of the Portfolio's income, gains, losses,
deductions and credits, without regard to whether it has received any cash
distributions from the Portfolio. Each Portfolio also is not subject to Delaware
income or franchise tax.
Because, as noted above, each Feeder Fund is deemed to own a proportionate
share of its corresponding Portfolio's assets, and to earn a proportionate share
of its corresponding Portfolio's income, for purposes of determining whether the
Fund satisfies the requirements to qualify as a RIC, each Portfolio intends to
conduct its operations so that its corresponding Fund will be able to continue
to satisfy all those requirements.
Distributions to each Feeder Fund from its corresponding Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
the Fund's recognition of any gain or loss for federal income tax purposes,
except that (1) gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, and
(3) loss will be recognized if a liquidation distribution consists solely of
cash and/or unrealized receivables. Each Feeder Fund's basis for its interest in
its corresponding Portfolio generally will equal the amount of cash and the
basis of any property the Fund invests in the Portfolio, increased by the Fund's
share of the Portfolio's net income and gains and decreased by (a) the amount of
cash and the basis of any property the Portfolio distributes to the Fund and (b)
the Fund's share of the Portfolio's losses.
Foreign Taxes. Dividends and interest received by a Theme Portfolio, 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 (taking into account, in the case of a Feeder Fund, its
proportionate share of its corresponding Portfolio's 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 (taking into account, in
the case of a Feeder Fund, its proportionate share of any foreign taxes paid by
its corresponding Portfolio) (a "Fund's foreign taxes"). Pursuant to the
election, a 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,
34
<PAGE> 568
his share of the Fund's foreign taxes, (2) treat his share of those taxes and of
any dividend paid by the Fund that represents its income from foreign and U.S.
possessions sources (taking into account, in the case of a Feeder Fund, its
proportionate share of its corresponding Portfolio's Income from those 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 (taking into
account, in the case of a Feeder Fund, its proportionate share of its
corresponding Portfolio's income) from sources within 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 of 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 Theme Portfolio may invest in the
stock of 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 the Theme Portfolio is a U.S. shareholder (effective
with respect to each Fund for their 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 part (or, in
the case of a Feeder Fund, its proportionate share of a part) of any "excess
distribution" received by it (or, in the case of a Feeder Fund, by its
corresponding Portfolio) on the stock of a PFIC or of any gain on the Fund's
(or, in the case of a Feeder Fund, its corresponding Portfolio's) disposition of
that stock (collectively "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 Theme Portfolio 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 Theme Portfolio (or, in the case of a Portfolio, its
corresponding Feeder Fund) would be required to include in income each year its
pro rata share (taking into account, in the case of a Feeder Fund, its
proportionate share of its corresponding Portfolio's pro rata share) of the
QEF's annual 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 Theme Portfolio (or, in the case of a
Portfolio, its corresponding Feeder Fund) to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not received thereby from the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
A holder of stock in any PFIC may elect to include in ordinary income for each
taxable year beginning after 1997, the excess, if any, of the fair market value
of the stock over the adjusted basis therein as of the end of that year.
Pursuant to the election, a deduction (as an ordinary, not capital, loss) also
will be allowed for the excess, if any, of the holder's 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 for prior taxable years. The 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.
Options, Futures and Foreign Currency Transactions. The Theme Portfolios' use
of hedging transactions, such as selling (writing) and purchasing options and
Futures Contracts 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 Theme Portfolio realizes in
connection therewith. Gains from disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from the
options, Futures and Forward Contracts derived by a Theme Portfolio with respect
to its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement for that Theme Portfolio (or,
in the case of a Portfolio, its corresponding Feeder Fund).
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 Theme Portfolio 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
35
<PAGE> 569
loss. That 60% portion will qualify for the reduced maximum tax rates on
non-corporate 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. Each Theme Portfolio attempts to monitor section 988 transactions
to minimize any adverse tax impact.
If a Theme Portfolio 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 Theme Portfolio 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 principal contract or Futures or Forward Contract entered into by a
Theme Portfolio 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.
TAXATION OF THE FUNDS' SHAREHOLDERS
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.
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.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Funds, their shareholders and the Portfolios.
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 a Fund.
Additional Information AIM was organized in 1976, and along with its
subsidiaries, manages or advises approximately 90 investment company portfolios
encompassing a broad range of investment objectives. AIM is a direct, wholly
owned subsidiary of A I M Management Group Inc. ("AIM Management"), a holding
company that has been engaged in the financial services business since 1976. AIM
is the sole shareholder of the Funds' principal underwriter, AIM Distributors.
AIM Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11
Devonshire Square, London, EC2M 4YR, England. AMVESCAP PLC and its subsidiaries
are 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.
36
<PAGE> 570
MISCELLANEOUS INFORMATION
AIM was organized in 1976, and along with its subsidiaries, manages or advises
approximately 90 investment company portfolios encompassing a broad range of
investment objectives. AIM is a direct, wholly owned subsidiary of A I M
Management Group Inc. ("AIM Management"), a holding company that has been
engaged in the financial services business since 1976. AIM is the sole
shareholder of the Funds' principal underwriter, AIM Distributors. AIM
Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire
Square, London, EC2M 4YR, England. AMVESCAP PLC and its subsidiaries are
independent investment management groups that have a significant presence in the
institutional and retail segment of the investment management industry in North
America and Europe, and a growing presence in Asia.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Funds' and Theme
Portfolios' assets. State Street is authorized to establish and has established
separate accounts in foreign currencies and to cause securities of the Theme
Portfolios 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. See "Additional Information -- Special Servicing Agreement."
The Sub-advisor also serves as each Fund's pricing and accounting agent. For the
fiscal years ended October 31, 1995, 1996 and 1997 the accounting services fees
for the Health Care Fund, Telecommunications Fund, Financial Services Fund,
Infrastructure Fund, Resources Fund and Consumer Products and Services Fund were
$30,660, $141,582 and $153,780; $170,297, $621,480 and $493,322; $616, $3,493
and $12,292 ; $5,836, $21,910 and $27,303; $1,931, $14,761 and $34,698; and
$318, $14,778 and $43,330, respectively.
INDEPENDENT ACCOUNTANTS
The Trust's and Theme Portfolios' independent accountants are
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP conducts annual audits of
the Portfolios' and the Funds' financial statements, assists in the preparation
of each Portfolio's and each Fund's federal and state income tax returns and
consults with the Trust and Global Investment Portfolio 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.
37
<PAGE> 571
NAMES
Prior to May 29, 1998, AIM Global Consumer Products and Services Fund operated
under the name of GT Global Consumer Products and Services Fund; AIM Global
Financial Services Fund operated under the name of GT Global Financial Services
Fund; AIM Global Health Care Fund operated under the name of GT Global Health
Care Fund; AIM Global Infrastructure Fund operated under the name of GT Global
Infrastructure Fund; AIM Global Resources Fund operated under the name of GT
Global Natural Resources Fund; and AIM Global Telecommunications Fund operated
under the name of GT Global Telecommunications Fund.
SPECIAL SERVICING AGREEMENT
Subject to receipt of an exemptive order from the SEC, the Funds will be
parties to a Special Servicing Agreement ("Agreement") among the Trust on behalf
of the Funds, AIM Series Trust on behalf of its sole series, AIM Global Trends
Fund ("Global Trends Fund"), AIM, the Sub-advisor, and AFS. The Agreement will
provide that, if the Board of Trustees determines that a Fund's share of the
aggregate expenses of Global Trends Fund is less than the estimated savings to
the Fund from the operation of Global Trends Fund, the Fund will bear those
expenses in proportion to the average daily value of its shares owned by Global
Trends Fund, provided that no Fund will bear such expenses in excess of the
estimated savings to it. Those savings are expected to result primarily from the
elimination of numerous separate shareholder accounts which are or would have
been invested directly in the Funds and the resulting reduction in shareholder
servicing costs. Although such cost savings are not certain, the estimated
savings to the Funds generated by the operation of Global Trends Fund are
expected to be sufficient to offset most, if not all, of the expenses incurred
by that Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITY
To the best knowledge of the Trust, the names and 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>
Consumer Products and Services GT New Dimension Fund 91.69% -0-
Fund -- Advisor Class Theme Fund Omnibus Account
2121 N. California Blvd. Ste. 395
Walnut Creek, CA 94596-7305
Consumer Products and Services -- MLPF&S for the Sole Benefit of its 5.06% -0-
Class A Customers, Security #97DD9
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Consumer Products and Services MLPF&S for the Sole Benefit of its 8.12% -0-
Fund -- Class B Customers, Security #97F31
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Financial Services Fund -- GT New Dimension Fund 96.31% -0-
Advisor Class Theme Fund Omnibus Account
2121 N. California Blvd. Ste. 395
Walnut Creek, CA 94596-7305
Financial Services Fund -- Class A MLPF&S for the Sole Benefit of its 11.45% -0-
Customers, Security #97D41
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.
38
<PAGE> 572
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
---- ------------------------- -------- ------------
<S> <C> <C> <C>
Financial Services Fund -- Class B MLPF&S for the Sole Benefit of its 19.47% -0-
Customers, Security #97D30
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Health Care Fund -- Advisor Class GT New Dimension Fund 88.44% -0-
Theme Fund Omnibus Account
2121 N. California Blvd. Ste. 395
Walnut Creek, CA 94596-7305
Health Care Fund -- Class A MLPF&S for the Sole Benefit of its 13.75% -0-
Customers, Security #975M3
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Health Care Fund -- Class B MLPF&S for the Sole Benefit of its 12.94% -0-
Customers, Security #97BA1
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Infrastructure Fund -- Advisor Class GT New Dimension Fund 96.84% -0-
Theme Fund Omnibus Account
2121 N. California Blvd. Ste. 395
Walnut Creek, CA 94596-7305
Infrastructure Fund -- Class B MLPF&S for the Sole Benefit of its 7.69% -0-
Customers, Security #97HX6
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Resources Fund -- Advisor Class GT New Dimension Fund 86.71% -0-
Theme Fund Omnibus Account
2121 N. California Blvd. Ste. 395
Walnut Creek, CA 94596-7305
Telecommunications Fund -- GT New Dimension Fund 83.64% -0-
Advisor Class Theme Fund Omnibus Account
2121 N. California Blvd. Ste. 395
Walnut Creek, CA 94596-7305
Telecommunications Fund -- Class A MLPF&S for the Sole Benefit of its 10.20% -0-
Customers, Security #979F7
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Telecommunications Fund -- Class B MLPF&S for the Sole Benefit of its 11.12% -0-
Customers, Security #97BA2
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.
39
<PAGE> 573
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return, as described in the
Prospectus, is as follows:
(n)
P(1+T) =ERV
<TABLE>
<S> <C> <C> <C>
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable maximum
sales load is deducted at the beginning of the 1, 5, or 10
year periods.)
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the 1, 5, or 10 year periods (or fractional
portion of such period).
</TABLE>
The standardized returns for the Advisor Class shares of the Health Care Fund,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE
FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. 29.00%
Oct. 31, 1992 through Oct. 31, 1997......................... n/a
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 29.35%
Aug. 7, 1989 (commencement of operation) through Oct. 31,
1997...................................................... n/a
</TABLE>
The standardized returns for the Advisor Class shares of the
Telecommunications Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
TELECOMMUNI-
CATIONS FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. 18.33%
Oct. 31, 1992 through Oct. 31, 1997......................... n/a
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 13.56%
Jan. 27, 1992 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The standardized returns for the Advisor Class shares of the Financial
Services Fund, stated as average annualized total returns for the periods shown,
were:
<TABLE>
<CAPTION>
FINANCIAL
SERVICES FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. 30.52%
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 24.52%
May 31, 1994 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The standardized returns for the Advisor Class shares of the Infrastructure
Fund, stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
INFRASTRUCTURE
FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. 10.10%
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 12.41%
May 31, 1994 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
40
<PAGE> 574
The standardized returns for the Advisor Class shares of the Resources Fund,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
RESOURCES
FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. 23.23%
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 30.14%
May 31, 1994 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The standardized returns for the Advisor Class shares of the Consumer Products
and Services Fund, stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
CONSUMER PRODUCTS
AND
SERVICES FUND
PERIOD (ADVISOR CLASS)
------ -----------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. 11.15%
June 1, 1995 (commencement of operations) to Oct. 31,
1997...................................................... 34.67%
Dec. 30, 1994 (commencement of operations) to Oct. 31,
1997...................................................... 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>
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 aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Health Care Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE
FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 87.25%
Aug. 7, 1989 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
41
<PAGE> 575
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Telecommunications Fund, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
TELECOMMUNI-
CATIONS FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 35.96%
Jan. 27, 1992 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Financial Services Fund, stated as aggregate
total returns for the period shown, were:
<TABLE>
<CAPTION>
FINANCIAL
SERVICES FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 68.30%
May 31, 1994 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Infrastructure Fund, stated as aggregate
total returns for the period shown, were:
<TABLE>
<CAPTION>
INFRASTRUCTURE
FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 32.67%
May 31, 1994 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Resources Fund, stated as aggregate total
returns for the period shown, were:
<TABLE>
<CAPTION>
RESOURCES
FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 88.99%
May 31, 1994 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Consumer Products and Services Fund, stated
as aggregate total returns for the period shown, were:
<TABLE>
<CAPTION>
CONSUMER PRODUCTS
AND
SERVICES FUND
PERIOD (ADVISOR CLASS)
------ ------------------
<S> <C>
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 105.30%
Dec. 30, 1994 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
Each Fund's investment results will vary from time to time depending upon
market conditions, the composition of each Fund's portfolio and operating
expenses of each Fund, so that current or past yield or total return should not
be considered representative of what an investment in each Fund may earn in any
future period. These factors and possible differences in the methods used in
calculating investment results should be considered when comparing each Fund's
investment results with those published for other investment companies and other
investment vehicles. Each Fund's results also should be considered relative to
the risks associated with such Fund's investment objective and policies.
42
<PAGE> 576
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)
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
43
<PAGE> 577
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.
GENERAL INFORMATION ABOUT THE THEME FUNDS AND THEME PORTFOLIOS
Each Theme Portfolio may invest worldwide across industries within the
Portfolio area of concentration without national or regional restrictions. The
ability of each Theme Portfolio to invest worldwide may allow the portfolio
managers to select industries in different economic cycles and varying stages of
development, though there is no assurance that the managers will be successful
in this selection.
Each Theme Portfolio's area of concentration reflects the underlying theme of
the Portfolio. AIM Distributors believes that there are certain social,
political and economic trends that may benefit one or more industries within a
Theme Portfolio's area of concentration. Of course, there is no assurance that
any of the Funds will benefit as a result.
HEALTH CARE FUND
From time to time the Fund and AIM Distributors will quote information
including data regarding:
- Trading volume, number of listed companies and the largest companies of the
global health care industry
- Expenditures by various countries, regions and age groups on health care
- Population of countries, regions and age groups
- Natality and mortality rates in various regions, countries and age groups
- Life expectancy rates in various regions, countries and age groups
- New health care products and products seeking approval
- Health maintenance organizations (HMOs) and their enrollment growth
- Studies from, but not limited to, the American Medical Association showing
the effectiveness of using drugs to cure illness
- Medical technology and devices in use or in development
- Regulatory environment of health care industries
- Consolidation in the health care industries
44
<PAGE> 578
The information quoted has not been independently verified by a Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Research firms such as Mehta and Isaly which publishes Pharmaceutical
Portfolio Recommendations
- OECD and its publications such as the OECD Health Data, as supplemented
annually
- Morgan Stanley Capital International stock market industry indices such as
Health & Personal Care
- The World Bank and its publications such as The World Development Report, as
supplemented annually
- IFC and publications such as the Emerging Stock Markets Factbook
INFORMATION ABOUT THE GLOBAL HEALTH CARE INDUSTRIES
The Fund and the Sub-advisor believe that certain market and demographic
factors merit an investor's consideration when making a health care investment.
Worldwide standards of living and life expectancy have increased at a
substantial rate. The Sub-advisor expects this growth, which works to the
general benefit of the global health care industry, to continue at a roughly
comparable rate in the future, although no assurances can be given in this
regard. Moreover, according to the Sub-advisor, the health care industry
historically has proven to be a relatively non-cyclical industry that continues
to provide goods and services to the public in periods of economic weakness as
well as economic strength.
The Sub-advisor believes that the anticipated increase in the world's elderly
population could increase demand for health care products and services. For
example, according to data compiled by the Sub-advisor, in Japan the number of
people age 65 and older is expected to grow over 100% by the year 2025; in
Germany, France and the U.S., the same age group should grow 40%. Similarly, the
U.S. Census Bureau predicts the number of Americans 85 and older to double in
the next 30 years. From time to time, the Fund and AIM Distributors will quote
information including, but not limited to, international data regarding
populations, birth rates, mortality rates, life expectancy, health care
expenditures, and gross domestic product vs. life expectancy. The information
quoted has not been independently verified by the Fund or AIM Distributors and
will be based on data that is believed to be reliable and accurate.
TELECOMMUNICATIONS FUND
From time to time the Fund and AIM Distributors will quote information
including data regarding:
- Increased usage of new technologies such as, but not limited to, cellular
and wireless communications in emerging and established countries around the
world
- Supply and demand of telephone equipment and services
- Regulatory environment of telecommunications industries
- Revenue, price and usage of telecommunications products and services
- Privatization and/or deregulation of telecommunications companies
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Salomon Brothers World Equity Telecommunications Index, which includes stock
market data about the telecommunications industry in established and
developing markets
- OECD and other publications from its subsidiaries such as the International
Telecommunications Union
- Morgan Stanley Capital International stock market industry indices such as
Telecommunications, Broadcasting & Publishing and Data Processing &
Reproduction
- International Technology Consultants, a Washington D.C. based firm which
publishes reports such as Eastern European & Soviet Telecom Report and Latin
American Telecom Report
- Telegeography and other publications
DEREGULATION IN THE UNITED STATES
The United States has been the bellwether for deregulation of the telephone
industry. The divestiture of the Bell System from American Telephone and
Telegraph has produced competing companies in the United States. Such U.S.
market-driven
45
<PAGE> 579
competition has, for example, led to lower costs for consumers which in turn led
to greater consumer usage and to higher industrywide revenues. The Sub-advisor
expects this scenario to continue to benefit such companies in the U.S. and
similarly to be realized by the established telecommunications companies in
established economies, although no assurances can be made in this regard.
CONSUMER PRODUCTS AND SERVICES FUND
From time to time the Fund and AIM Distributors will quote information
including data regarding:
- Trading volume, number of listed companies and the largest companies located
around the world in the consumer products and services industries
- Expenditures, demand and consumption by various countries, regions, income
classes and age groups of consumer products and services
- Population of countries, regions and age groups
- Life expectancy rates in various regions, countries and age groups
- New consumer products and services in the development or manufacturing
stages
- Income of various regions, countries and age groups
- Sales and sales growth of consumer products and services companies in their
own country and abroad
- Sales, supply and demand of consumer products and services
- Parent Companies and the products and services they distribute
- Regulatory environment of consumer products industries
The information quoted will not be independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
- Consumer and trade groups
- Fortune magazine and other periodicals
- The World Bank and its publications
- The International Monetary Fund (IMF) and its publications
- IFC and its publications
- OECD and its publications
INFRASTRUCTURE FUND
From time to time the Fund and AIM Distributors may quote information
including:
- Supply and demand of telephone equipment and services, electricity, water,
transportation, construction materials and other infrastructure related
products and services
- Regulatory environment of infrastructure industries
- Quantity and costs of current and projected infrastructure projects
- Privatization of industries and companies
- New technologies, products and services used in infrastructure industries
- Infrastructure Finance magazine and other periodicals
FINANCIAL SERVICES FUND
From time to time the Fund and AIM Distributors may quote information
including:
- Supply and demand of financial services
- Regulatory environment of financial service industries
46
<PAGE> 580
- Credit ratings of U.S. and non-U.S. banks
- New technologies, products and services used in the financial services
industries
- Consolidation in the financial services industries
RESOURCES FUND
From time to time the Fund and AIM Distributors may quote information
including:
- Supply, demand and prices of natural resources
- Regulatory environment of natural resources
- Supply, demand and prices of products manufactured from natural resources
- New technologies, products and services used in the natural resources
industries
47
<PAGE> 581
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 bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risk appear
somewhat larger than the Aaa securities. A -- 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 well-assured. Often the
protection of interest and principal payments may be very moderate, and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class. B -- 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.
48
<PAGE> 582
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.
49
<PAGE> 583
FINANCIAL STATEMENTS
FS
<PAGE> 584
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
(FORMERLY GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (59.0%)
Linens 'N Things, Inc.-/- ................................. US 86,500 $ 5,211,625 2.7
RETAILERS-APPAREL
Fred Meyer, Inc.-/- ....................................... US 111,800 5,017,025 2.6
RETAILERS-FOOD
Lamar Advertising Co.-/- .................................. US 143,100 4,936,950 2.5
BROADCASTING & PUBLISHING
New York Times Co. "A" .................................... US 67,000 4,752,813 2.4
BROADCASTING & PUBLISHING
Brylane, Inc.-/- .......................................... US 77,000 4,523,750 2.3
RETAILERS-APPAREL
Tandy Corp. ............................................... US 90,500 4,502,375 2.3
RETAILERS-OTHER
Safeway, Inc.-/- .......................................... US 115,800 4,429,350 2.3
RETAILERS-FOOD
Telecom Italia Mobile S.p.A. .............................. ITLY 733,500 4,203,738 2.1
WIRELESS COMMUNICATIONS
Airborne Freight Corp. .................................... US 101,200 4,010,050 2.0
TRANSPORTATION - AIRLINES
Outdoor Systems, Inc.-/- .................................. US 126,000 4,000,500 2.0
BROADCASTING & PUBLISHING
Loblaw Cos., Ltd. ......................................... CAN 189,300 3,978,782 2.0
RETAILERS-FOOD
Pier 1 Imports, Inc. ...................................... US 150,400 3,966,800 2.0
RETAILERS-OTHER
CKE Restaurants, Inc. ..................................... US 112,000 3,878,000 2.0
RESTAURANTS
Sears Canada, Inc. ........................................ CAN 203,500 3,807,530 1.9
RETAILERS-OTHER
Dayton Hudson Corp. ....................................... US 42,000 3,667,125 1.9
RETAILERS-APPAREL
Pacific Sunwear of California-/- .......................... US 80,000 3,530,000 1.8
RETAILERS-APPAREL
Family Dollar Stores, Inc. ................................ US 103,000 3,502,000 1.8
RETAILERS-APPAREL
The Neiman Marcus Group, Inc.-/- .......................... US 88,600 3,250,513 1.7
RETAILERS-APPAREL
Ames Department Stores, Inc.-/- ........................... US 132,600 3,248,700 1.7
RETAILERS-OTHER
Cinar Films, Inc. "B"-/- {\/} ............................. CAN 152,000 2,926,000 1.5
BROADCASTING & PUBLISHING
Duane Reade, Inc.-/- ...................................... US 115,700 2,747,875 1.4
RETAILERS-OTHER
Dress Barn, Inc.-/- ....................................... US 90,700 2,641,638 1.3
RETAILERS-APPAREL
Fred's, Inc. .............................................. US 105,500 2,637,500 1.3
RETAILERS-OTHER
Clear Channel Communications, Inc.-/- ..................... US 25,200 2,375,100 1.2
BROADCASTING & PUBLISHING
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-1
<PAGE> 585
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
(FORMERLY GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
Goody's Family Clothing, Inc.-/- .......................... US 45,000 $ 2,227,500 1.1
RETAILERS-APPAREL
Sonic Automotive, Inc.-/- ................................. US 125,300 2,192,750 1.1
RETAILERS-OTHER
Costco Companies, Inc.-/- ................................. US 39,000 2,179,125 1.1
RETAILERS-FOOD
Canadian Tire Corp. "A" ................................... CAN 78,200 1,963,615 1.0
RETAILERS-OTHER
Cavanaughs Hospitality Corp.-/- ........................... US 120,200 1,885,638 1.0
LEISURE & TOURISM
Chancellor Media Corp.-/- ................................. US 39,000 1,850,063 0.9
BROADCASTING & PUBLISHING
Southwest Airlines Co. .................................... US 61,000 1,673,688 0.9
TRANSPORTATION - AIRLINES
Musicland Stores Corp.-/- ................................. US 127,800 1,565,550 0.8
RETAILERS-OTHER
Dollar Tree Stores, Inc.-/- ............................... US 27,900 1,513,575 0.8
RETAILERS-OTHER
Imax Corp.-/- ............................................. CAN 50,000 1,355,179 0.7
BROADCASTING & PUBLISHING
99 Cents Only Stores-/- ................................... US 35,200 1,342,000 0.7
RETAILERS-OTHER
Torstar Corp. "B" ......................................... CAN 39,220 1,330,468 0.7
BROADCASTING & PUBLISHING
General Cable PLC-/- ...................................... UK 420,000 1,278,261 0.7
BROADCASTING & PUBLISHING
Rite Aid Corp. ............................................ US 29,100 934,838 0.5
RETAILERS-OTHER
Southam, Inc. ............................................. CAN 28,000 509,198 0.3
BROADCASTING & PUBLISHING
------------
115,547,187
------------
Consumer Non-Durables (25.5%)
Heineken N.V. ............................................. NETH 22,500 5,220,583 2.7
BEVERAGES - ALCOHOLIC
Saputo Group, Inc. ........................................ CAN 197,800 5,208,904 2.7
FOOD
Nestle S.A. - Registered .................................. SWTZ 2,670 5,180,145 2.6
FOOD
The Dial Corp. ............................................ US 191,400 4,665,375 2.4
HOUSEHOLD PRODUCTS
Clorox Co. ................................................ US 50,000 4,193,750 2.1
HOUSEHOLD PRODUCTS
Procter & Gamble Co. ...................................... US 49,500 4,068,281 2.1
HOUSEHOLD PRODUCTS
Ladbroke Group PLC-/- ..................................... UK 705,000 3,875,732 2.0
RECREATION
Coca-Cola Co. ............................................. US 51,000 3,869,625 2.0
BEVERAGES - NON-ALCOHOLIC
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-2
<PAGE> 586
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
(FORMERLY GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (Continued)
International Home Foods, Inc.-/- ......................... US 123,100 $ 3,693,000 1.9
FOOD
Suiza Foods Corp.-/- ...................................... US 54,520 3,230,310 1.7
FOOD
Mail-Well, Inc.-/- ........................................ US 51,300 2,481,638 1.3
OTHER CONSUMER GOODS
Diageo PLC ................................................ UK 174,500 2,077,659 1.1
BEVERAGES - ALCOHOLIC
HON INDUSTRIES, Inc. ...................................... US 54,000 1,728,000 0.9
OTHER CONSUMER GOODS
------------
49,493,002
------------
Finance (7.7%)
Merita Ltd. "A" ........................................... FIN 738,300 4,953,121 2.5
BANKS-REGIONAL
Fannie Mae ................................................ US 70,000 4,191,250 2.1
OTHER FINANCIAL
Axa - UAP ................................................. FR 18,850 2,214,326 1.1
INSURANCE - MULTI-LINE
H. F. Ahmanson & Co. ...................................... US 25,000 1,906,250 1.0
BANKS-REGIONAL
Green Tree Financial Corp. ................................ US 46,500 1,894,875 1.0
CONSUMER FINANCE
------------
15,159,822
------------
Capital Goods (2.3%)
Alcatel Alsthom Compagnie Generale d'Electricite .......... FR 23,900 4,434,027 2.3
------------
TELECOM EQUIPMENT
Consumer Durables (1.5%)
Budget Group, Inc. "A"-/- ................................. US 48,800 1,634,800 0.8
AUTOMOBILES
Dollar Thrifty Automotive Group, Inc.-/- .................. US 77,000 1,453,375 0.7
AUTOMOBILES
------------
3,088,175
------------
Technology (0.2%)
Aspec Technology, Inc.-/- ................................. US 30,000 416,250 0.2
COMPUTERS & PERIPHERALS
------------ -----
TOTAL EQUITY INVESTMENTS (cost $154,216,164) ................ 188,138,463 96.2
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-3
<PAGE> 587
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
(FORMERLY GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<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 $6,460,000 U.S. Treasury Bills, 6.125%
due 8/31/98 (market value of collateral is $6,540,750,
including accrued interest). (cost $6,409,000) ........... $ 6,409,000 3.3
------------ -----
TOTAL INVESTMENTS (cost $160,625,164) * .................... 194,547,463 99.5
Other Assets and Liabilities ................................ 975,779 0.5
------------ -----
NET ASSETS .................................................. $195,523,242 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
* For Federal income tax purposes, cost is $160,852,352 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 34,939,576
Unrealized depreciation: (1,244,465)
-------------
Net unrealized appreciation: $ 33,695,111
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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>
Canada (CAN/CAD) ..................... 10.8 10.8
Finland (FIN/FIM) .................... 2.5 2.5
France (FR/FRF) ...................... 3.4 3.4
Italy (ITLY/ITL) ..................... 2.1 2.1
Netherlands (NETH/NLG) ............... 2.7 2.7
Switzerland (SWTZ/CHF) ............... 2.6 2.6
United Kingdom (UK/GBP) .............. 3.8 3.8
United States (US/USD) ............... 68.3 3.8 72.1
------ --- -----
Total ............................... 96.2 3.8 100.0
------ --- -----
------ --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $195,523,242.
The accompanying notes are an integral part of the financial statements.
FS-4
<PAGE> 588
AIM GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
(FORMERLY GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Banks-Regional (46.7%)
H. F. Ahmanson & Co. ...................................... US 30,000 $ 2,287,500 2.0
NationsBank Corp. ......................................... US 30,000 2,272,500 2.0
City National Corp. ....................................... US 52,550 1,954,203 1.7
Mellon Bank Corp. ......................................... US 26,800 1,929,600 1.7
Royal Bank of Canada ...................................... CAN 30,000 1,791,984 1.6
Lloyds TSB Group PLC ...................................... UK 115,086 1,723,403 1.5
Merita Ltd. "A" ........................................... FIN 247,000 1,657,078 1.4
ABSA Group Ltd. ........................................... SAFR 188,867 1,635,414 1.4
GreenPoint Financial Corp. ................................ US 41,200 1,635,125 1.4
First National Bank Holdings Ltd. ......................... SAFR 115,800 1,512,677 1.3
National Australia Bank Ltd. .............................. AUSL 106,500 1,511,425 1.3
Bank of Nova Scotia ....................................... CAN 54,600 1,498,951 1.3
Canadian Western Bank ..................................... CAN 84,000 1,492,341 1.3
Bank of Ireland ........................................... IRE 70,800 1,435,068 1.2
BankBoston Corp. .......................................... US 13,000 1,403,188 1.2
Allied Irish Bank PLC{V} .................................. IRE 98,797 1,365,480 1.2
Nordbanken Holding AB ..................................... SWDN 182,800 1,346,724 1.2
Anglo-Irish Bank Corp., PLC: .............................. IRE -- -- 1.1
Common{V} ............................................... -- 322,082 853,679 --
Common .................................................. -- 184,026 490,461 --
Crestar Financial Corp. ................................... US 21,800 1,303,913 1.1
Bank Hapoalim Ltd. ........................................ ISRL 483,000 1,297,249 1.1
Banc One Corp. ............................................ US 21,700 1,276,231 1.1
Commonwealth Bancorp, Inc. ................................ US 54,000 1,275,750 1.1
Bayerische Vereinsbank .................................... GER 16,070 1,222,717 1.1
First Union Corp. (N.C.) .................................. US 20,200 1,219,575 1.1
Sovereign Bancorp, Inc. ................................... US 63,840 1,204,980 1.0
Norwest Corp. ............................................. US 30,000 1,190,625 1.0
Christiania Bank Og Kreditkasse ........................... NOR 257,900 1,186,439 1.0
ForeningsSparbanken AB .................................... SWDN 37,500 1,172,935 1.0
Vermont Financial Services Corp. .......................... US 40,000 1,170,000 1.0
Westpac Banking Corp., Ltd. ............................... AUSL 167,000 1,119,784 1.0
Bank Leumi Le - Israel .................................... ISRL 605,700 1,107,468 1.0
St. George Bank Ltd. ...................................... AUSL 186,620 1,106,769 1.0
Jyske Bank ................................................ DEN 9,000 1,045,930 0.9
Demirbank T.A.S.: ......................................... TRKY -- -- 0.9
Common .................................................. -- 37,896,000 834,547 --
New-/- .................................................. -- 11,368,800 202,567 --
Halifax PLC ............................................... UK 76,800 1,025,498 0.9
Cullen/Frost Bankers, Inc. ................................ US 17,500 1,023,750 0.9
Akbank T.A.S. ............................................. TRKY 9,821,967 835,703 0.7
Banco Commercial S.A.: .................................... URGY -- -- 0.7
Reg S GDR{c} {\/} ....................................... -- 15,200 425,600 --
144A GDR(::){\/}{.} ..................................... -- 14,000 392,000 --
BG Bank AS ................................................ DEN 9,500 555,491 0.5
The Daishi Bank Ltd. ...................................... JPN 140,000 439,120 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-5
<PAGE> 589
AIM GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
(FORMERLY GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Banks-Regional (Continued)
Asahi Bank Ltd. ........................................... JPN 83,000 $ 319,930 0.3
Mandamus AB Share Units-/- ................................ SWDN 75,000 67,856 0.1
------------
53,819,228
------------
Banks-Money Center (14.4%)
BankAmerica Corp. ......................................... US 44,400 3,774,000 3.3
HSBC Holdings PLC ......................................... HK 99,441 2,837,320 2.5
ING Groep N.V. ............................................ NETH 29,500 1,917,880 1.7
Credit Lyonnais CDI-/- .................................... FR 18,900 1,871,131 1.6
Citicorp .................................................. US 9,450 1,422,225 1.2
Chase Manhattan Corp. ..................................... US 9,750 1,350,984 1.2
ABN AMRO Holdings N.V. .................................... NETH 54,864 1,336,556 1.2
Credit Suisse Group ....................................... SWTZ 5,610 1,234,282 1.1
Fuji Bank Ltd. ............................................ JPN 67,000 377,258 0.3
Sumitomo Bank ............................................. JPN 38,000 359,005 0.3
------------
16,480,641
------------
Consumer Finance (11.1%)
The Money Store, Inc. ..................................... US 143,000 4,701,121 4.1
Green Tree Financial Corp. ................................ US 70,000 2,852,500 2.5
Beneficial Corp ........................................... US 15,800 2,059,925 1.8
Doral Financial Corp. ..................................... US 51,200 1,798,400 1.6
Aeon Credit Service ....................................... HK 3,894,000 809,417 0.7
Acom Co., Ltd. ............................................ JPN 9,000 475,474 0.4
------------
12,696,837
------------
Insurance - Multi-Line (9.2%)
Travelers Group, Inc. ..................................... US 37,000 2,263,938 2.0
Axa - UAP ................................................. FR 14,770 1,735,045 1.5
SunAmerica, Inc. .......................................... US 32,800 1,637,950 1.4
Allstate Corp. ............................................ US 15,000 1,443,750 1.3
American International Group, Inc. ........................ US 9,200 1,210,375 1.0
Allianz AG ................................................ GER 3,788 1,165,538 1.0
Fremont General Corp. ..................................... US 20,000 1,115,000 1.0
------------
10,571,596
------------
Other Financial (7.2%)
Newcourt Credit Group, Inc. ............................... CAN 63,200 3,103,196 2.7
Providian Financial Corp. ................................. US 42,000 2,527,875 2.2
Investors Financial Services Corp. ........................ US 25,500 1,373,813 1.2
Heller Financial, Inc.-/- ................................. US 33,500 904,500 0.8
Shohkoh Fund .............................................. JPN 1,200 381,831 0.3
------------
8,291,215
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-6
<PAGE> 590
AIM GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
(FORMERLY GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Investment Management (3.0%)
Alliance Capital Management L.P. .......................... US 68,800 $ 1,827,500 1.6
Franklin Resources, Inc. .................................. US 29,500 1,578,250 1.4
------------
3,405,750
------------
Securities Broker (2.5%)
Morgan Stanley, Dean Witter & Co. ......................... US 22,200 1,751,025 1.5
Hambrecht & Quist Group-/- ................................ US 36,000 1,203,750 1.0
Peregrine Investment Holdings Ltd.(::) .................... HK 532,000 -- --
------------
2,954,775
------------
Insurance-Life (1.4%)
AEGON N.V. ................................................ NETH 12,080 1,567,122 1.4
------------
Insurance - Property-Casualty (1.2%)
Mercury General Corp. ..................................... US 22,000 1,424,500 1.2
------------ -----
TOTAL EQUITY INVESTMENTS (cost $86,172,363) ................. 111,211,664 96.7
------------ -----
<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 $4,995,000 U.S. Treasury Bills, 6.125%
due 8/31/98 (market value of collateral is $5,057,438,
including accrued interest). (cost $4,955,000) ........... 4,955,000 4.3
------------ -----
TOTAL INVESTMENTS (cost $91,127,363) * ..................... 116,166,664 101.0
Other Assets and Liabilities ................................ (1,111,733) (1.0)
------------ -----
NET ASSETS .................................................. $115,054,931 100.0
------------ -----
------------ -----
</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).
{V} Security is denominated in GBP.
{.} 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.
{\/} U.S. currency denominated.
* For Federal income tax purposes, cost is $91,609,705 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,101,790
Unrealized depreciation: (1,544,831)
-------------
Net unrealized appreciation: $ 24,556,959
-------------
-------------
</TABLE>
Abbreviation:
GDR--Global Depositary Receipt
The accompanying notes are an integral part of the financial statements.
FS-7
<PAGE> 591
AIM GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
(FORMERLY GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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>
Australia (AUSL/AUD) ................. 3.3 3.3
Canada (CAN/CAD) ..................... 6.9 6.9
Denmark (DEN/DKK) .................... 1.4 1.4
Finland (FIN/FIM) .................... 1.4 1.4
France (FR/FRF) ...................... 3.1 3.1
Germany (GER/DEM) .................... 2.1 2.1
Hong Kong (HK/HKD) ................... 3.2 3.2
Ireland (IRE/IEP) .................... 3.5 3.5
Israel (ISRL/ILS) .................... 2.1 2.1
Japan (JPN/JPY) ...................... 2.0 2.0
Netherlands (NETH/NLG) ............... 4.3 4.3
Norway (NOR/NOK) ..................... 1.0 1.0
South Africa (SAFR/ZAR) .............. 2.7 2.7
Sweden (SWDN/SEK) .................... 2.3 2.3
Switzerland (SWTZ/CHF) ............... 1.1 1.1
Turkey (TRKY/TRL) .................... 1.6 1.6
United Kingdom (UK/GBP) .............. 2.4 2.4
United States (US/USD) ............... 51.6 3.3 54.9
Uruguay (URGY/UYP) ................... 0.7 0.7
------ ----- -----
Total ............................... 96.7 3.3 100.0
------ ----- -----
------ ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $115,054,931.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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>
Australian Dollars...................... 2,018,779 1.48137 5/26/98 $ 73,876
Australian Dollars...................... 390,731 1.49191 5/26/98 11,437
Canadian Dollars........................ 3,956,610 1.41430 6/24/98 38,299
Canadian Dollars........................ 700,285 1.40700 6/24/98 10,447
Canadian Dollars........................ 420,171 1.41500 6/24/98 3,857
Canadian Dollars........................ 119,048 1.41500 6/24/98 1,093
Japanese Yen............................ 642,431 122.80000 5/12/98 49,752
Japanese Yen............................ 113,370 129.93000 5/12/98 2,077
-------------- --------------
Total Contracts to Sell (Receivable
amount $8,552,263)................... 8,361,425 190,838
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 7.27%.
Total Open Forward Foreign Currency
Contracts............................ $ 190,838
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-8
<PAGE> 592
AIM GLOBAL HEALTH CARE FUND
(FORMERLY GT GLOBAL HEALTH CARE FUND)
PORTFOLIO OF INVESTMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Medical Technology & Supplies (51.5%)
Guidant Corp. ............................................. US 591,000 $ 39,523,117 7.1
Visx, Inc.{::} -/- ........................................ US 866,200 38,221,075 6.8
ATL Ultrasound, Inc.{::} -/- .............................. US 745,500 36,063,563 6.4
Physio-Control International Corp.{::} -/- ................ US 1,183,800 27,227,400 4.9
Waters Corp.-/- ........................................... US 381,100 20,388,850 3.6
Dexter Corp. .............................................. US 484,000 19,995,250 3.6
Mentor Corp. .............................................. US 621,900 16,907,906 3.0
ESC Medical Systems Ltd.-/- {\/} .......................... ISRL 393,100 12,775,750 2.3
Sunrise Medical, Inc.-/- .................................. US 710,000 10,516,875 1.9
Endosonics Corp.{::} -/- .................................. US 1,509,400 9,811,100 1.8
Cardiac Pathways Corp.-/- ................................. US 929,300 8,828,350 1.6
Baxter International, Inc. ................................ US 126,500 7,012,844 1.3
Kensey Nash Corp.-/- ...................................... US 334,600 6,441,050 1.1
Arterial Vascular Engineering, Inc.-/- .................... US 153,000 5,412,375 1.0
AVECOR Cardiovascular, Inc.{::} -/- ....................... US 580,000 4,060,000 0.7
Becton, Dickinson & Co. ................................... US 56,000 3,899,000 0.7
CONMED Corp.-/- ........................................... US 109,700 2,509,388 0.4
Thoratec Laboratories Corp.-/- ............................ US 299,900 2,436,688 0.4
Micro Therapeutics, Inc.-/- ............................... US 200,000 2,137,500 0.4
CardioGenesis Corp.-/- .................................... US 310,000 1,976,250 0.3
INAMED Corp.-/- ........................................... US 275,000 1,925,000 0.3
Angeion Corp.-/- .......................................... US 670,000 1,842,500 0.3
SonoSight, Inc.-/- ........................................ US 188,500 1,543,344 0.3
Osteotech, Inc.-/- ........................................ US 58,000 1,279,625 0.2
Medtronic, Inc. ........................................... US 22,000 1,157,750 0.2
Instrumentarium Group "A" ................................. FIN 16,000 970,481 0.2
PolyMedica Corp.-/- ....................................... US 74,600 727,350 0.1
Boston Scientific Corp.-/- ................................ US 9,800 708,663 0.1
Innerdyne, Inc.-/- ........................................ US 193,000 579,000 0.1
Conceptus, Inc.-/- ........................................ US 137,000 445,250 0.1
Abaxis, Inc.-/- ........................................... US 160,000 410,000 0.1
Laserscope-/- ............................................. US 150,000 393,750 0.1
Cardiovascular Dynamics, Inc.-/- .......................... US 65,000 390,000 0.1
Photoelectron Corp.-/- .................................... US 22,800 152,475 --
Lifecore Biomedical, Inc.-/- .............................. US 3,000 58,875 --
------------
288,728,394
------------
Pharmaceuticals (20.0%)
Warner-Lambert Co. ........................................ US 135,000 25,540,313 4.6
Pfizer, Inc. .............................................. US 155,000 17,640,938 3.2
TheraTech, Inc.{::} -/- ................................... US 1,935,000 15,721,875 2.8
Zeneca Group PLC - ADR{\/} ................................ UK 324,300 14,228,663 2.5
Bergen Brunswig Corp. "A" ................................. US 100,000 4,537,500 0.8
NABI, Inc.-/- ............................................. US 820,000 3,228,750 0.6
Schering-Plough Corp. ..................................... US 39,700 3,180,963 0.6
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-9
<PAGE> 593
AIM GLOBAL HEALTH CARE FUND
(FORMERLY GT GLOBAL HEALTH CARE FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Pharmaceuticals (Continued)
Roberts Pharmaceutical Corp.-/- ........................... US 178,000 $ 3,026,000 0.5
Bristol Myers Squibb Co. .................................. US 28,000 2,964,500 0.5
American Home Products Corp. .............................. US 28,000 2,607,500 0.5
Abbott Laboratories ....................................... US 28,000 2,047,500 0.4
Catalytica, Inc.-/- ....................................... US 138,866 2,013,557 0.4
Johnson & Johnson ......................................... US 28,000 1,998,500 0.4
SmithKline Beecham PLC - ADR{\/} .......................... UK 29,000 1,727,313 0.3
Glaxo Wellcome PLC - ADR{\/} .............................. UK 29,000 1,640,313 0.3
Merck & Co., Inc. ......................................... US 13,500 1,626,750 0.3
Altana AG ................................................. GER 15,000 1,150,502 0.2
Gedeon Richter-/- ......................................... HGRY 9,350 1,001,849 0.2
Warner Chilcott Laboratories - ADR-/- {\/} ................ IRE 83,800 963,700 0.2
Spiros Development Corporation II, Inc. - Units-/-+X+ ..... US 57,000 947,625 0.2
Novartis AG ............................................... SWTZ 561 927,582 0.2
Elan Corp., PLC - ADR-/- {\/} ............................. IRE 7,000 434,875 0.1
R.P. Scherer Corp.-/- ..................................... US 5,700 416,100 0.1
Alpharma, Inc. "A" ........................................ US 16,700 379,925 0.1
Life Medical Sciences, Inc.-/- ............................ US 200,000 275,000 --
Astra AB - ADR{\/} ........................................ SWDN 12,000 246,750 --
Watson Pharmaceuticals, Inc.-/- ........................... US 5,700 245,100 --
Schein Pharmaceutical, Inc.-/- ............................ US 10,000 245,000 --
Medco Research, Inc. ...................................... US 5,700 116,138 --
Unimed Pharmaceuticals, Inc.-/- ........................... US 9,200 67,275 --
------------
111,148,356
------------
Biotechnology (12.4%)
Agouron Pharmaceuticals, Inc.-/- .......................... US 706,100 24,007,400 4.3
Guilford Pharmaceuticals, Inc.-/- ......................... US 667,000 13,256,625 2.4
COR Therapeutics, Inc.-/- ................................. US 550,000 10,381,250 1.9
Amgen, Inc.-/- ............................................ US 139,800 8,335,575 1.5
Protein Design Labs, Inc.-/- .............................. US 260,000 8,320,000 1.5
Genelabs Technologies, Inc.-/- ............................ US 1,090,000 3,951,250 0.7
PathoGenesis Corp.-/- ..................................... US 16,400 649,850 0.1
Enzon, Inc. Preferred-/- .................................. US 16,000 217,920 --
Human Genome Sciences, Inc.-/- ............................ US 1,000 36,375 --
------------
69,156,245
------------
Health Care Services (5.5%)
Vencor, Inc.-/- ........................................... US 513,000 13,915,125 2.5
Tenet Healthcare Corp.-/- ................................. US 129,500 4,848,156 0.9
Allegiance Corp. .......................................... US 103,000 4,699,375 0.8
Nationwide Health Properties, Inc. ........................ US 68,000 1,598,000 0.3
SteriGenics International, Inc.-/- ........................ US 61,900 1,431,438 0.3
Hanger Orthopedic Group, Inc.-/- .......................... US 59,000 1,102,563 0.2
Grupo Casa Autrey, S.A. de C.V. - ADR{\/} ................. MEX 79,100 1,048,075 0.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-10
<PAGE> 594
AIM GLOBAL HEALTH CARE FUND
(FORMERLY GT GLOBAL HEALTH CARE FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Health Care Services (Continued)
Parkway Holdings Ltd. ..................................... SING 300,000 $ 648,751 0.1
Health Management Associates, Inc. "A"-/- ................. US 14,000 441,000 0.1
Quorum Health Group, Inc.-/- .............................. US 12,500 401,563 0.1
Quintiles Transnational Corp.-/- .......................... US 5,000 247,500 --
McKesson Corp. ............................................ US 2,500 176,719 --
United Healthcare Corp. ................................... US 2,500 175,625 --
HEALTHSOUTH Corp.-/- ...................................... US 5,500 166,031 --
Wellpoint Health Networks - New-/- ........................ US 1,000 72,125 --
------------
30,972,046
------------
Paper/Packaging (2.2%)
Kimberly-Clark Corp. ...................................... US 240,618 12,211,364 2.2
------------
Computers & Peripherals (0.4%)
Hewlett-Packard Co. ....................................... US 27,000 2,033,438 0.4
------------
Consumer Services (0.1%)
Service Corporation International ......................... US 11,000 453,750 0.1
------------
Personal Care/Cosmetics (0.0%)
Gillette Co. .............................................. US 2,000 230,875 --
------------ -----
TOTAL EQUITY INVESTMENTS (cost $453,759,253) ................ 514,934,468 92.1
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Rhone-Poulenc Warrants, expire 11/5/01 .................... FR 190,736 920,357 0.2
PHARMACEUTICALS
ALZA Corp. Warrants, expire 12/31/99 ...................... US 100,000 109,375 --
PHARMACEUTICALS
------------ -----
TOTAL WARRANTS (cost $32,137) ............................... 1,029,732 0.2
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-11
<PAGE> 595
AIM GLOBAL HEALTH CARE FUND
(FORMERLY GT GLOBAL HEALTH CARE FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<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 $29,380,000 U.S. Treasury Bonds, 7.25%
due 5/15/16 (market value of collateral is $34,111,844,
including accrued interest). (cost $33,422,000) .......... $ 33,422,000 6.0
------------ -----
TOTAL INVESTMENTS (cost $487,213,390) * .................... 549,386,200 98.3
Other Assets and Liabilities ................................ 9,348,090 1.7
------------ -----
NET ASSETS .................................................. $558,734,290 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{::} See Note 6 of Notes to Financial Statements.
+X+ Each unit consists of one callable common share of Spiros
Development Corporation II, Inc. and one warrant to purchase .25
shares of Dura Pharmaceuticals, Inc.
* For Federal income tax purposes, cost is $489,315,001 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 90,649,808
Unrealized depreciation: (30,578,609)
-------------
Net unrealized appreciation: $ 60,071,199
-------------
-------------
</TABLE>
Abbreviation:
ADR--American 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 WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Finland (FIN/FIM) .................... 0.2 0.2
France (FR/FRF) ...................... 0.2 0.2
Germany (GER/DEM) .................... 0.2 0.2
Hungary (HGRY/HUF) ................... 0.2 0.2
Ireland (IRE/IEP) .................... 0.3 0.3
Israel (ISRL/ILS) .................... 2.3 2.3
Mexico (MEX/MXN) ..................... 0.2 0.2
Singapore (SING/SGD) ................. 0.1 0.1
Switzerland (SWTZ/CHF) ............... 0.2 0.2
United Kingdom (UK/GBP) .............. 3.1 3.1
United States (US/USD) ............... 85.3 7.7 93.0
------ ----- ----- -----
Total ............................... 92.1 0.2 7.7 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $558,734,290.
The accompanying notes are an integral part of the financial statements.
FS-12
<PAGE> 596
AIM GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
(FORMERLY GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Energy (36.6%)
Enron Corp. ................................................ US 62,701 $ 3,084,102 3.4
GAS PRODUCTION & DISTRIBUTION
AES Corp.-/- ............................................... US 55,264 3,049,882 3.4
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. ..................... BRZL 5,500,000 2,212,505 2.5
ELECTRICAL & GAS UTILITIES
EVN Energie-Versorgung Niederoesterreich AG ................ ASTRI 13,200 1,949,941 2.2
ELECTRICAL & GAS UTILITIES
Endesa S.A. - ADR{\/} ...................................... SPN 80,000 1,940,000 2.2
ELECTRICAL & GAS UTILITIES
Houston Industries, Inc. ................................... US 59,000 1,714,688 1.9
ELECTRICAL & GAS UTILITIES
Viag AG .................................................... GER 3,000 1,520,067 1.7
ELECTRICAL & GAS UTILITIES
Dominion Resources, Inc. ................................... US 38,000 1,503,375 1.7
ELECTRICAL & GAS UTILITIES
Interstate Energy Corp. .................................... US 46,740 1,475,231 1.6
ELECTRICAL & GAS UTILITIES
Pinnacle West Capital Corp. ................................ US 32,000 1,416,000 1.6
ELECTRICAL & GAS UTILITIES
Light - Participacoes S.A. ................................. BRZL 5,410,000 1,324,705 1.5
ELECTRICAL & GAS UTILITIES
VEBA AG .................................................... GER 20,000 1,322,185 1.5
ELECTRICAL & GAS UTILITIES
MCN Energy Group, Inc. ..................................... US 35,000 1,321,250 1.5
ELECTRICAL & GAS UTILITIES
National Grid Group PLC .................................... UK 200,000 1,290,970 1.4
ELECTRICAL & GAS UTILITIES
RWE AG ..................................................... GER 25,000 1,272,297 1.4
ELECTRICAL & GAS UTILITIES
Edison S.p.A. .............................................. ITLY 150,000 1,248,235 1.4
ELECTRICAL & GAS UTILITIES
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} ..... BRZL 24,900 1,207,650 1.3
ELECTRICAL & GAS UTILITIES
BSES Ltd. - 144A GDR{.} {\/} ............................... IND 70,000 1,149,750 1.3
ELECTRICAL & GAS UTILITIES
EVI, Inc.-/- ............................................... US 20,000 1,065,000 1.2
ENERGY EQUIPMENT & SERVICES
MetroGas S.A. - ADR{\/} .................................... ARG 96,051 954,507 1.1
ELECTRICAL & GAS UTILITIES
Hub Power Co. .............................................. PAK 700,000 713,507 0.8
ELECTRICAL & GAS UTILITIES
-----------
32,735,847
-----------
Services (29.6%)
Compagnie Generale des Eaux ................................ FR 13,982 2,600,978 2.9
CONSUMER SERVICES
Mannesmann AG .............................................. GER 3,000 2,381,271 2.7
WIRELESS COMMUNICATIONS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-13
<PAGE> 597
AIM GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
(FORMERLY GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Services (Continued)
Telecom Italia SpA - Di Risp-/- ............................ ITLY 400,000 $ 2,109,674 2.3
TELEPHONE NETWORKS
Canadian National Railway Co. .............................. CAN 30,900 2,011,083 2.2
TRANSPORTATION - ROAD & RAIL
Magyar Tavkozlesi Rt. - ADR-/- {\/} ........................ HGRY 66,800 1,970,600 2.2
TELEPHONE NETWORKS
Paging Network, Inc.-/- .................................... US 125,000 1,757,813 2.0
WIRELESS COMMUNICATIONS
Portugal Telecom S.A. - ADR{\/} ............................ PORT 28,000 1,505,000 1.7
TELEPHONE NETWORKS
SPT Telecom-/- ............................................. CZCH 10,000 1,454,783 1.6
TELEPHONE NETWORKS
Tranz Rail Holdings Ltd. - ADR{\/} ......................... NZ 132,000 1,386,000 1.5
TRANSPORTATION - ROAD & RAIL
Alaska Air Group, Inc.-/- .................................. US 24,000 1,347,000 1.5
TRANSPORTATION - AIRLINES
America West Holdings Corp. "B"-/- ......................... US 42,000 1,270,500 1.4
TRANSPORTATION - AIRLINES
Airborne Freight Corp. ..................................... US 32,000 1,268,000 1.4
TRANSPORTATION - AIRLINES
Comair Holdings, Inc. ...................................... US 46,000 1,256,375 1.4
TRANSPORTATION - AIRLINES
Swift Transportation Co., Inc.-/- .......................... US 50,000 1,143,750 1.3
TRANSPORTATION - ROAD & RAIL
Navistar International Corp.-/- ............................ US 30,000 896,250 1.0
TRANSPORTATION - ROAD & RAIL
Brisa-Auto Estradas de Portugal S.A. ....................... PORT 16,000 709,274 0.8
TRANSPORTATION - ROAD & RAIL
Telecom Corporation of New Zealand - Installment
Receipts-/- ............................................... NZ 258,200 693,578 0.8
TELEPHONE NETWORKS
Aeroporti di Roma SpA ...................................... ITLY 48,000 674,255 0.7
TRANSPORTATION - AIRLINES
China Telecom (Hong Kong) Ltd.-/- .......................... HK 80,000 151,830 0.2
WIRELESS COMMUNICATIONS
Illinois Central Corp. ..................................... US 611 24,287 --
TRANSPORTATION - ROAD & RAIL
Hellenic Telecommunications Organization S.A. .............. GREC 100 2,864 --
TELEPHONE NETWORKS
-----------
26,615,165
-----------
Materials/Basic Industry (12.9%)
Masco Corp. ................................................ US 40,000 2,320,000 2.6
BUILDING MATERIALS & COMPONENTS
Lafarge S.A. ............................................... FR 20,000 1,890,183 2.1
CEMENT
Giant Cement Holding, Inc.-/- .............................. US 64,800 1,830,600 2.0
CEMENT
IPSCO, Inc. ................................................ CAN 56,265 1,706,014 1.9
METALS - STEEL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-14
<PAGE> 598
AIM GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
(FORMERLY GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Suez Cement Co. - Reg S GDR{c} {\/} ........................ EGPT 60,000 $ 1,224,000 1.4
CEMENT
La Cementos Nacional, C.A. - 144A GDR{.} {\/} .............. ECDR 7,445 1,191,200 1.3
CEMENT
Martin Marietta Materials, Inc. ............................ US 25,000 1,173,438 1.3
BUILDING MATERIALS & COMPONENTS
Apasco, S.A. de C.V. ....................................... MEX 35,500 241,417 0.3
CEMENT
-----------
11,576,852
-----------
Technology (6.2%)
Cisco Systems, Inc.-/- ..................................... US 21,500 1,574,875 1.8
NETWORKING
Ascend Communications, Inc.-/- ............................. US 30,000 1,306,875 1.5
NETWORKING
Ciena Corp.-/- ............................................. US 20,000 1,115,000 1.2
TELECOM TECHNOLOGY
EMCORE Corp.-/- ............................................ US 58,000 833,750 0.9
SEMICONDUCTORS
Tadiran Telecommunications Ltd.{\/} ........................ ISRL 45,200 740,150 0.8
TELECOM TECHNOLOGY
-----------
5,570,650
-----------
Capital Goods (3.3%)
Doncasters PLC - ADR-/- {\/} ............................... UK 49,600 1,525,200 1.7
AEROSPACE/DEFENSE
Gulfstream Aerospace Corp.-/- .............................. US 35,000 1,467,813 1.6
AEROSPACE/DEFENSE
-----------
2,993,013
-----------
Consumer Durables (2.9%)
Kaufman and Broad Home Corp. ............................... US 53,000 1,540,313 1.7
HOUSING
D.R. Horton, Inc. .......................................... US 60,000 1,110,000 1.2
HOUSING
-----------
2,650,313
----------- -----
TOTAL EQUITY INVESTMENTS (cost $65,337,987) .................. 82,141,840 91.5
----------- -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-15
<PAGE> 599
AIM GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
(FORMERLY GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<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 $7,745,000 U.S. Treasury Bills, 6.125%
due 8/31/98 (market value of collateral is $7,841,813,
including accrued interest). (cost $7,688,000) ............ $ 7,688,000 8.5
----------- -----
TOTAL INVESTMENTS (cost $73,025,987) * ...................... 89,829,840 100.0
Other Assets and Liabilities ................................. (18,680) --
----------- -----
NET ASSETS ................................................... $89,811,160 100.0
----------- -----
----------- -----
</TABLE>
- --------------
{\/} U.S. currency denominated.
-/- Non-income producing security.
{.} 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 $73,025,987 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 18,343,020
Unrealized depreciation: (1,539,167)
-------------
Net unrealized appreciation: $ 16,803,853
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
The accompanying notes are an integral part of the financial statements.
FS-16
<PAGE> 600
AIM GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
(FORMERLY GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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) .................................................... 1.1 1.1
Austria (ASTRI/ATS) .................................................... 2.2 2.2
Brazil (BRZL/BRL) ...................................................... 5.3 5.3
Canada (CAN/CAD) ....................................................... 4.1 4.1
Czech Republic (CZCH/CSK) .............................................. 1.6 1.6
Ecuador (ECDR/ECS) ..................................................... 1.3 1.3
Egypt (EGPT) ........................................................... 1.4 1.4
France (FR/FRF) ........................................................ 5.0 5.0
Germany (GER/DEM) ...................................................... 7.3 7.3
Hong Kong (HK/HKD) ..................................................... 0.2 0.2
Hungary (HGRY/HUF) ..................................................... 2.2 2.2
India (IND/INR) ........................................................ 1.3 1.3
Israel (ISRL/ILS) ...................................................... 0.8 0.8
Italy (ITLY/ITL) ....................................................... 4.4 4.4
Mexico (MEX/MXN) ....................................................... 0.3 0.3
New Zealand (NZ/NZD) ................................................... 2.3 2.3
Pakistan (PAK/PKR) ..................................................... 0.8 0.8
Portugal (PORT/PTE) .................................................... 2.5 2.5
Spain (SPN/ESP) ........................................................ 2.2 2.2
United Kingdom (UK/GBP) ................................................ 3.1 3.1
United States (US/USD) ................................................. 42.1 8.5 50.6
----------- ----- ---------
Total ................................................................. 91.5 8.5 100.0
----------- ----- ---------
----------- ----- ---------
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $89,811,160.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
APRIL 30, 1998
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------ ---------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 3,571,432 1.79365 5/26/98 $(3,289)
French Francs........................... 1,996,672 5.99940 5/6/98 3,528
French Francs........................... 332,779 6.03550 5/6/98 (1,406)
Italian Lira............................ 2,573,415 1768.80000 7/21/98 (1,050)
------------ --------------
Total Contracts to Sell (Receivable
amount $8,472,081)................... 8,474,298 (2,217)
------------ --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 9.44%.
Total Open Forward Foreign Currency
Contracts............................ $(2,217)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-17
<PAGE> 601
AIM GLOBAL RESOURCES FUND - CONSOLIDATED
(FORMERLY GT GLOBAL NATURAL RESOURCES FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy Equipment & Services (19.5%)
Enerflex Systems Ltd. ..................................... CAN 83,600 $ 2,514,374 2.5
R&B Falcon Corp.-/- ....................................... US 76,900 2,465,606 2.4
J. Ray McDermott S.A.-/- .................................. US 51,400 2,280,875 2.2
Cooper Cameron Corp.-/- ................................... US 29,700 1,973,194 1.9
EVI, Inc.-/- .............................................. US 35,400 1,885,050 1.9
Key Energy Group, Inc.-/- ................................. US 80,050 1,495,934 1.5
Fred Olsen Energy ASA-/- .................................. NOR 74,500 1,328,948 1.3
Core Laboratories N.V.-/- {\/} ............................ NETH 42,500 1,205,938 1.2
Smith International, Inc.-/- .............................. US 18,500 1,086,875 1.1
Bonus Resource Services Corp.-/- .......................... CAN 282,284 977,342 1.0
Transocean Offshore, Inc. ................................. US 15,750 880,031 0.9
Mitcham Industries, Inc.-/- ............................... US 54,500 636,969 0.6
Bayard Drilling Technologies, Inc.-/- ..................... US 33,900 504,263 0.5
Patterson Energy, Inc.-/- ................................. US 33,800 473,200 0.5
------------
19,708,599
------------
Oil (17.3%)
Orogen Minerals Ltd. - 144A ADR{.} {\/} ................... AUSL 111,200 2,396,149 2.4
Total Compagnie Francaise des Petroles S.A. - ADR{\/} ..... FR 38,700 2,273,625 2.2
Suncor Energy, Inc. ....................................... CAN 62,300 2,148,276 2.1
Petro-Canada .............................................. CAN 115,300 1,943,576 1.9
Ultramar Diamond Shamrock Corp. ........................... US 58,000 1,874,125 1.8
Triton Energy Ltd.-/- ..................................... US 43,900 1,761,488 1.7
ERG SpA-/- ................................................ ITLY 373,000 1,610,639 1.6
Ente Nazionale Idrocarburi (ENI) S.p.A. - ADR{\/} ......... ITLY 20,300 1,342,338 1.3
Canadian Fracmaster Ltd. .................................. CAN 188,500 1,219,574 1.2
British Petroleum Co., PLC - ADR{\/} ...................... UK 12,000 1,134,000 1.1
------------
17,703,790
------------
Chemicals (14.4%)
NOVA Corp. ................................................ CAN 219,900 2,476,317 2.4
Ciba Specialty Chemicals AG ............................... SWTZ 19,360 2,342,716 2.3
Potash Corporation of Saskatchewan, Inc.{\/} .............. CAN 25,570 2,283,721 2.2
Henkel KGaA Non-voting Preferred .......................... GER 24,590 1,918,952 1.9
Cabot Corp. ............................................... US 45,500 1,635,156 1.6
Crompton & Knowles Corp. .................................. US 35,900 1,074,756 1.1
E.I. du Pont de Nemours and Co. ........................... US 13,900 1,012,094 1.0
Solutia, Inc. ............................................. US 35,400 1,004,475 1.0
Akzo Nobel N.V. ........................................... NETH 4,690 954,441 0.9
------------
14,702,628
------------
Forest Products (13.7%)
St Laurent Paperboard, Inc.-/- ............................ CAN 190,000 2,584,808 2.5
Stone Container Corp.-/- .................................. US 113,600 1,860,200 1.8
MacMillan Bloedel Ltd. .................................... CAN 112,442 1,600,472 1.6
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-18
<PAGE> 602
AIM GLOBAL RESOURCES FUND - CONSOLIDATED
(FORMERLY GT GLOBAL NATURAL RESOURCES FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Forest Products (Continued)
Doman Industries Ltd. "B"-/- .............................. CAN 246,830 $ 1,234,409 1.2
Noranda, Inc. ............................................. CAN 52,356 1,080,298 1.1
Bowater, Inc. ............................................. US 18,900 1,057,219 1.0
Tembec, Inc. "A"-/- ....................................... CAN 148,900 989,403 1.0
Donohue, Inc. ............................................. CAN 41,151 935,446 0.9
Champion International Corp. .............................. US 17,200 925,575 0.9
Noranda Forest, Inc. ...................................... CAN 136,459 916,281 0.9
Alliance Forest Products, Inc.-/- ......................... CAN 36,400 767,616 0.8
------------
13,951,727
------------
Misc. Materials & Commodities (11.8%)
American Disposal Services, Inc.-/- ....................... US 64,500 2,586,047 2.5
USG Corp. ................................................. US 44,000 2,260,500 2.2
Encore Wire Corp.-/- ...................................... US 56,950 2,206,813 2.2
Valero Energy Corp. ....................................... US 65,000 2,104,375 2.1
Medusa Corp. .............................................. US 32,241 1,982,822 2.0
EdperBrascan Corp. "A" .................................... CAN 37,369 763,219 0.8
------------
11,903,776
------------
Construction (5.3%)
Stolt Comex Seaway S.A.-/- ................................ US 79,000 2,567,500 2.5
Coflexip - ADR{\/} ........................................ FR 27,300 1,945,125 1.9
Global Industries Ltd.-/- ................................. US 40,850 926,784 0.9
------------
5,439,409
------------
Metals - Non-Ferrous (5.0%)
Alumax, Inc. .............................................. US 54,100 2,671,183 2.6
Freeport-McMoRan Copper & Gold, Inc. "B" .................. US 58,000 1,091,125 1.1
Sutton Resources Ltd.-/- .................................. CAN 69,113 536,584 0.5
Western Copper Holdings Ltd.-/- ........................... CAN 89,280 465,228 0.5
Cominco Ltd. .............................................. CAN 18,181 298,206 0.3
------------
5,062,326
------------
Gas Production & Distribution (5.0%)
Comstock Resources, Inc.-/- ............................... US 132,400 1,704,650 1.7
Santa Fe Energy Resources, Inc.-/- ........................ US 163,700 1,688,156 1.7
Poco Petroleums Ltd.-/- ................................... CAN 72,069 821,658 0.8
Berkley Petroleum Corp.-/- ................................ CAN 84,600 810,674 0.8
------------
5,025,138
------------
Metals - Steel (2.3%)
IPSCO, Inc. ............................................... CAN 78,700 2,386,266 2.3
------------ -----
TOTAL EQUITY INVESTMENTS (cost $89,332,125) ................. 95,883,659 94.3
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-19
<PAGE> 603
AIM GLOBAL RESOURCES FUND - CONSOLIDATED
(FORMERLY GT GLOBAL NATURAL RESOURCES FUND - CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<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 $5,130,000 U.S. Treasury Bills, 6.125%
due 8/31/98 (market value of collateral is $5,194,125,
including accrued interest). (cost $5,088,000) ........... $ 5,088,000 5.0
------------ -----
TOTAL INVESTMENTS (cost $94,420,125) * ..................... 100,971,659 99.3
Other Assets and Liabilities ................................ 668,445 0.7
------------ -----
NET ASSETS .................................................. $101,640,104 100.0
------------ -----
------------ -----
</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.
* For Federal income tax purposes, cost is $95,007,118 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 8,390,497
Unrealized depreciation: (2,425,956)
-------------
Net unrealized appreciation: $ 5,964,541
-------------
-------------
</TABLE>
Abbreviation:
ADR--American 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>
Australia (AUSL/AUD) ................. 2.4 2.4
Canada (CAN/CAD) ..................... 29.3 29.3
France (FR/FRF) ...................... 4.1 4.1
Germany (GER/DEM) .................... 1.9 1.9
Italy (ITLY/ITL) ..................... 2.9 2.9
Netherlands (NETH/NLG) ............... 2.1 2.1
Norway (NOR/NOK) ..................... 1.3 1.3
Switzerland (SWTZ/CHF) ............... 2.3 2.3
United Kingdom (UK/GBP) .............. 1.1 1.1
United States (US/USD) ............... 46.9 5.7 52.6
------ --- -----
Total ............................... 94.3 5.7 100.0
------ --- -----
------ --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $101,640,104.
The accompanying notes are an integral part of the financial statements.
FS-20
<PAGE> 604
AIM GLOBAL TELECOMMUNICATIONS FUND
(FORMERLY GT GLOBAL TELECOMMUNICATIONS FUND)
PORTFOLIO OF INVESTMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Wireless Communications (24.5%)
Mannesmann AG ........................................... GER 110,900 $ 88,027,648 4.8
Nextel Communications, Inc. "A"-/- ...................... US 1,695,700 48,645,394 2.7
Millicom International Cellular S.A.-/- {\/} ............ LUX 1,217,000 47,615,125 2.6
Grupo Iusacell S.A. "L" - ADR-/- {\/} ................... MEX 1,663,700 32,234,188 1.8
Paging Network, Inc.-/- ................................. US 2,165,000 30,445,313 1.7
WinStar Communications, Inc.-/- ......................... US 667,700 25,956,838 1.4
Vodafone Group PLC ...................................... UK 1,882,000 20,613,880 1.1
Orange PLC-/- ........................................... UK 2,660,800 19,099,472 1.1
Bell Canada International, Inc.: ........................ CAN -- -- 1.1
Common-/- ............................................. -- 717,300 16,054,837 --
Common - ADR-/- {\/} .................................. -- 132,500 2,981,250 --
Smartone Telecommunications ............................. HK 6,729,000 17,679,317 1.0
Clearnet Communications, Inc. "A"-/- .................... CAN 1,138,100 15,761,614 0.9
Western Wireless Corp. "A"-/- ........................... US 750,300 14,630,850 0.8
Advanced Info. Service - Foreign ........................ THAI 1,993,150 13,941,723 0.8
Vimpel-Communications - ADR-/- {\/} ..................... RUS 250,000 13,500,000 0.7
Champion Technology Holding Ltd.{::} .................... HK 207,801,804 12,072,921 0.7
Powertel, Inc.-/- ....................................... US 365,000 8,349,375 0.5
China Telecom (Hong Kong) Ltd.-/- ....................... HK 4,360,000 8,274,740 0.5
Microcell Telecommunications, Inc. "B"-/- {\/} .......... CAN 596,400 4,696,650 0.3
--------------
440,581,135
--------------
Telecom Equipment (18.8%)
Nokia AB "A" ............................................ FIN 1,348,320 90,456,347 5.0
ECI Telecommunications Ltd.{\/} ......................... ISRL 2,309,500 70,439,750 3.9
P-COM, Inc.-/- .......................................... US 1,790,000 35,240,625 1.9
Tekelec-/- .............................................. US 648,900 32,607,225 1.8
Alcatel Alsthom Compagnie Generale d'Electricite ........ FR 133,000 24,674,709 1.4
Corning, Inc. ........................................... US 600,000 24,000,000 1.3
ANTEC Corp.-/- .......................................... US 1,162,300 22,955,425 1.3
Tellabs, Inc.-/- ........................................ US 240,000 17,010,000 0.9
Tadiran Ltd. - ADR{\/} .................................. ISRL 246,100 9,444,088 0.5
Pairgain Technologies, Inc.-/- .......................... US 428,800 7,906,000 0.4
Netas Telekomunik-/- .................................... TRKY 17,820,000 6,635,676 0.4
Kantone Holding Ltd. .................................... HK 6,256,868 306,967 --
--------------
341,676,812
--------------
Telephone Networks (16.6%)
Telecom Italia S.p.A.: .................................. ITLY -- -- 3.2
Di Risp-/- ............................................ -- 9,326,517 49,189,779 --
Common ................................................ -- 1,263,333 9,521,194 --
SPT Telecom-/- .......................................... CZCH 391,340 56,931,492 3.1
WorldCom, Inc.-/- ....................................... US 1,065,000 45,562,031 2.5
NTL, Inc.-/- {\/} ....................................... UK 700,000 27,300,000 1.5
Carso Global Telecom "A1" ............................... MEX 6,089,982 23,367,700 1.3
Magyar Tavkozlesi Rt. - ADR-/- {\/} ..................... HGRY 625,450 18,450,775 1.0
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-21
<PAGE> 605
AIM GLOBAL TELECOMMUNICATIONS FUND
(FORMERLY GT GLOBAL TELECOMMUNICATIONS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Telephone Networks (Continued)
Telstra Corp. Ltd. - Installment Receipts ............... AUSL 7,282,000 $ 17,066,076 0.9
Telecommunicacoes Brasileiras S.A. (Telebras) ........... BRZL 139,700,000 13,866,157 0.8
BCE, Inc. ............................................... CAN 226,025 9,627,840 0.5
Telecom Corporation of New Zealand Ltd. - Installment
Receipts-/- ............................................ NZ 3,495,700 9,390,159 0.5
Telefonica del Peru S.A. - ADR{\/} ...................... PERU 318,400 7,044,600 0.4
Russian Telecommunications Development Corp.: ........... RUS -- -- 0.3
Non-Voting(.) -/- {\/} (::) ........................... -- 453,000 3,397,500 --
Voting(.) -/- {\/} (::) ............................... -- 331,000 2,482,500 --
PLD Telekon, Inc.-/- {\/} ............................... RUS 510,000 4,143,750 0.2
Emerging Communications, Inc.-/- ........................ US 468,100 2,984,138 0.2
Atlantic Tele-Network, Inc.-/- .......................... US 200,040 2,450,490 0.1
Ionica Group PLC-/- ..................................... UK 1,456,400 2,094,481 0.1
--------------
304,870,662
--------------
Telephone - Regional/Local (9.5%)
ICG Communications, Inc.-/- ............................. US 1,254,600 43,911,000 2.4
GTE Corp. ............................................... US 675,000 39,445,313 2.2
Intermedia Communications of Florida, Inc.-/- ........... US 454,800 33,193,294 1.8
Teleport Communications Group, Inc. "A"-/- .............. US 400,000 21,550,000 1.2
SBC Communications ...................................... US 488,000 20,221,500 1.1
ING Barings Russian Regional Telecommunications Basket
Bridge Certificates-/- {=} {\/} ........................ RUS 1,749 14,161,443 0.8
--------------
172,482,550
--------------
Telephone - Long Distance (6.8%)
Tel-Save Holdings, Inc.-/- .............................. US 2,000,000 45,625,000 2.5
Rostelecom - ADR-/- {\/} ................................ RUS 1,780,735 38,174,507 2.1
MCI Communications Corp. ................................ US 400,000 20,125,000 1.1
LCI International, Inc.-/- .............................. US 500,000 19,875,000 1.1
--------------
123,799,507
--------------
Cable Television (4.7%)
Cable & Wireless Communications - ADR-/- {\/} ........... UK 1,470,413 53,118,670 2.9
Comcast Corp. "A" ....................................... US 604,300 21,641,494 1.2
United International Holdings, Inc. "A"-/- .............. US 373,000 6,341,000 0.3
Comcast UK Cable Partners Ltd. "A"-/- {\/} .............. UK 415,000 5,317,188 0.3
--------------
86,418,352
--------------
Networking (3.5%)
Cisco Systems, Inc.-/- .................................. US 450,000 32,962,500 1.8
Ascend Communications, Inc.-/- .......................... US 700,000 30,493,750 1.7
--------------
63,456,250
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-22
<PAGE> 606
AIM GLOBAL TELECOMMUNICATIONS FUND
(FORMERLY GT GLOBAL TELECOMMUNICATIONS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Telecom Technology (2.9%)
Uniphase Corp.-/- ....................................... US 758,300 $ 41,137,775 2.3
Three-Five Systems, Inc.{::} -/- ........................ US 599,000 11,755,375 0.6
--------------
52,893,150
--------------
Broadcasting & Publishing (2.6%)
Univision Communications, Inc.-/- ....................... US 463,900 17,773,169 1.0
EchoStar Communications Corp. "A"-/- .................... US 609,200 16,029,575 0.9
Seat SpA-/- ............................................. ITLY 16,820,000 8,351,581 0.5
Sistem Televisyen Malaysia Bhd. ......................... MAL 7,436,000 2,793,524 0.2
--------------
44,947,849
--------------
Aerospace/Defense (1.9%)
Orbital Sciences Corp.-/- ............................... US 785,500 34,954,750 1.9
--------------
Consumer Services (1.7%)
Compagnie Generale des Eaux ............................. FR 168,500 31,344,925 1.7
--------------
Semiconductors (1.3%)
VLSI Technology, Inc.-/- ................................ US 572,600 11,809,875 0.7
DSP Communications, Inc.-/- ............................. US 624,000 10,413,000 0.6
--------------
22,222,875
--------------
Multi-Industry (1.1%)
Grupo Carso, S.A. de C.V. "A1" .......................... MEX 2,000,000 12,609,209 0.7
Hutchison Whampoa ....................................... HK 1,302,000 8,051,875 0.4
--------------
20,661,084
-------------- -----
TOTAL EQUITY INVESTMENTS (cost $1,173,173,527) ............ 1,740,309,901 95.9
-------------- -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
American Satellite Network Warrants, expire 1/1/99 (cost
$0)(.) (::) ............................................ US 65,825 -- --
-------------- -----
WIRELESS COMMUNICATIONS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-23
<PAGE> 607
AIM GLOBAL TELECOMMUNICATIONS FUND
(FORMERLY GT GLOBAL TELECOMMUNICATIONS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENTS (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 $61,530,000 U.S. Treasury Bonds, 7.25%
due 5/15/16 (market value of collateral is $71,439,899,
including accrued interest) ........................... $ 70,000,000 3.8
Dated April 30, 1998, with State Street Bank & Trust Co.,
due May 1, 1998, for an effective yield of 5.44%,
collateralized by $950,000 U.S. Treasury Bonds, 8.125%
due 8/15/19 (market value of collateral is $1,192,591,
including accrued interest) ........................... 1,165,000 0.1
-------------- -----
TOTAL REPURCHASE AGREEMENTS (cost $71,165,000) ............ 71,165,000 3.9
-------------- -----
TOTAL INVESTMENTS (cost $1,244,338,527) * ................ 1,811,474,901 99.8
Other Assets and Liabilities .............................. 4,309,365 0.2
-------------- -----
NET ASSETS ................................................ $1,815,784,266 100.0
-------------- -----
-------------- -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{=} Issued by ING Barings, the value of which is linked to the
underlying value of a basket of shares issued by Russian regional
telephone companies.
{::} See Note 6 of Notes to Financial Statements.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (See Note 1 of Notes to Financial Statements).
(.) Restricted Securities: At April 30, 1998 the Fund owned the
following restricted securities constituting .3% 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>
VALUE
PER
SHARE
(NOTE
DESCRIPTION ACQUISITION DATE SHARES COST 1)
----------------------------------------------- ----------------- ------ ----------- ------
<S> <C> <C> <C> <C>
American Satellite Network Warrants, Expire
1/1/99........................................ 12/31/93 65,825 $ -- $--
Russian Telecommunications Development Corp.:
Non-voting................................... 12/22/93 453,000 4,530,000 7.50
Voting....................................... 12/22/93 331,000 3,310,000 7.50
</TABLE>
* For Federal income tax purposes, cost is $1,244,874,015 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 612,812,855
Unrealized depreciation: (46,211,969)
-------------
Net unrealized appreciation: $ 566,600,886
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
FS-24
<PAGE> 608
AIM GLOBAL TELECOMMUNICATIONS FUND
(FORMERLY GT GLOBAL TELECOMMUNICATIONS FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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>
Australia (AUSL/AUD) ................. 0.9 0.9
Brazil (BRZL/BRL) .................... 0.8 0.8
Canada (CAN/CAD) ..................... 2.8 2.8
Czech Republic (CZCH/CSK) ............ 3.1 3.1
Finland (FIN/FIM) .................... 5.0 5.0
France (FR/FRF) ...................... 3.1 3.1
Germany (GER/DEM) .................... 4.8 4.8
Hong Kong (HK/HKD) ................... 2.6 2.6
Hungary (HGRY/HUF) ................... 1.0 1.0
Israel (ISRL/ILS) .................... 4.4 4.4
Italy (ITLY/ITL) ..................... 3.7 3.7
Luxembourg (LUX/LUF) ................. 2.6 2.6
Malaysia (MAL/MYR) ................... 0.2 0.2
Mexico (MEX/MXN) ..................... 3.8 3.8
New Zealand (NZ/NZD) ................. 0.5 0.5
Peru (PERU/PES) ...................... 0.4 0.4
Russia (RUS/SUR) ..................... 4.1 4.1
Thailand (THAI/THB) .................. 0.8 0.8
Turkey (TRKY/TRL) .................... 0.4 0.4
United Kingdom (UK/GBP) .............. 7.0 7.0
United States (US/USD) ............... 43.9 4.1 48.0
------ ----- -----
Total ............................... 95.9 4.1 100.0
------ ----- -----
------ ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $1,815,784,266.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
APRIL 30, 1998
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 12,834,836 1.8461 5/26/98 $ 376,139
Italian Liras........................... 10,859,243 1763.55 7/21/98 (27,888)
-------------- --------------
Total Contracts to Buy (Payable amount
$23,345,828)......................... 23,694,079 348,251
-------------- --------------
THE VALUE OF CONTRACTS TO BUY AS A
PERCENTAGE OF NET ASSETS IS 1.30%.
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
British Pounds.......................... 41,362,104 0.59400 7/20/98 725,396
Deutsche Marks.......................... 18,520,501 1.81400 5/26/98 (224,635)
Deutsche Marks.......................... 15,066,981 1.81500 5/26/98 (190,948)
Deutsche Marks.......................... 12,729,534 7.79365 5/26/98 (11,724)
Finnish Markka.......................... 24,746,112 5.46000 7/21/98 (203,988)
Italian Liras........................... 40,071,738 1784.71000 7/21/98 (373,412)
Italian Liras........................... 8,116,153 1774.85000 7/21/98 (30,963)
-------------- --------------
Total Contracts to Sell (Receivable
amount $160,302,849)................. 160,613,123 (310,274)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 8.85%.
Total Open Forward Foreign Currency
Contracts, Net....................... $ 37,977
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-25
<PAGE> 609
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
STATEMENT OF ASSETS
AND LIABILITIES
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM GLOBAL{/\}
-----------------------------------------------------------------------------
CONSUMER
PRODUCTS AND FINANCIAL INFRASTRUCTURE RESOURCES
SERVICES FUND- SERVICES FUND- HEALTH FUND- FUND-
CONSOLIDATED CONSOLIDATED CARE CONSOLIDATED CONSOLIDATED
(NOTE 1) (NOTE 1) FUND (NOTE 1) (NOTE 1)
-------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities: (Note 1)
At identified cost............... $160,625,164 $91,127,363 $487,213,390 $73,025,987 $ 94,420,125
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
At value......................... $194,547,463 $116,166,664 $549,386,200 $89,829,840 $100,971,659
U.S. currency...................... 957 148 625 944 923
Foreign currencies (cost
$3,262,600, $6,666, $116,
$4,084,175, $574,226, and
$38,012,099, respectively)........ 3,264,957 6,699 120 4,084,175 574,161
Dividends and dividend withholding
tax reclaims receivable........... 213,234 293,292 233,561 103,025 44,335
Interest receivable................ 968 749 5,050 1,162 769
Receivable for forward foreign
currency contracts -- closed, net
(Note 1).......................... -- -- -- 92,468 --
Receivable for Fund shares sold.... 215,386 1,042,626 5,213,987 140,038 1,292,050
Receivable for open forward foreign
currency contracts, net (Note
1)................................ -- 190,838 -- -- --
Receivable for securities sold..... 805,431 1,328,983 11,760,191 99,627 1,964,959
Receivable from Chancellor LGT
Asset Management, Inc. (Note 2)... -- 13,505 -- 62,569 74,218
Unamortized organizational costs
(Note 1).......................... 17,156 13,685 -- 11,172 11,117
-------------- -------------- ------------ -------------- ------------
Total assets..................... 199,065,552 119,057,189 566,599,734 94,425,020 104,934,191
-------------- -------------- ------------ -------------- ------------
Liabilities:
Payable for custodian fees......... 4,311 5,076 8,079 6,473 9,760
Payable for Directors' and
Trustees' fees and expenses (Note
2)................................ 7,748 1,867 1,704 2,516 652
Payable for fund accounting fees
(Note 2).......................... 4,281 2,494 11,428 1,971 2,068
Payable for Fund shares
repurchased....................... 450,326 136,340 1,204,094 222,025 394,335
Payable for investment management
and administration fees (Note
2)................................ 158,974 104,848 435,270 110,495 126,214
Payable for open forward foreign
currency contracts (Note 1)....... -- -- -- 2,217 --
Payable for printing and postage
expenses.......................... 20,439 17,511 56,469 44,305 37,005
Payable for professional fees...... 17,379 13,698 27,249 18,478 18,472
Payable for registration and filing
fees.............................. 5,980 3,204 8,448 9,720 7,417
Payable for securities purchased... 2,666,126 3,630,414 5,701,866 4,084,175 2,586,961
Payable for service and
distribution expenses (Note 2).... 118,493 69,098 270,724 54,114 60,200
Payable for transfer agent fees
(Note 2).......................... 55,395 9,673 133,832 50,128 42,561
Other accrued expenses............. 32,758 7,935 6,281 7,143 8,342
-------------- -------------- ------------ -------------- ------------
Total liabilities................ 3,542,210 4,002,158 7,865,444 4,613,760 3,293,987
Minority interest (Notes 1 & 2).... 100 100 -- 100 100
-------------- -------------- ------------ -------------- ------------
Net assets........................... $195,523,242 $115,054,931 $558,734,290 $89,811,160 $101,640,104
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
<CAPTION>
TELECOM-
MUNICATIONS
FUND
---------------
<S> <C>
Assets:
Investments in securities: (Note 1)
At identified cost............... $ 1,244,338,527
---------------
---------------
At value......................... $ 1,811,474,901
U.S. currency...................... 481,143
Foreign currencies (cost
$3,262,600, $6,666, $116,
$4,084,175, $574,226, and
$38,012,099, respectively)........ 37,989,074
Dividends and dividend withholding
tax reclaims receivable........... 1,461,730
Interest receivable................ 10,754
Receivable for forward foreign
currency contracts -- closed, net
(Note 1).......................... 169,870
Receivable for Fund shares sold.... 3,519,217
Receivable for open forward foreign
currency contracts, net (Note
1)................................ 37,977
Receivable for securities sold..... 38,128,097
Receivable from Chancellor LGT
Asset Management, Inc. (Note 2)... --
Unamortized organizational costs
(Note 1).......................... --
---------------
Total assets..................... 1,893,272,763
---------------
Liabilities:
Payable for custodian fees......... 196,883
Payable for Directors' and
Trustees' fees and expenses (Note
2)................................ 3,634
Payable for fund accounting fees
(Note 2).......................... 39,086
Payable for Fund shares
repurchased....................... 6,626,277
Payable for investment management
and administration fees (Note
2)................................ 1,400,357
Payable for open forward foreign
currency contracts (Note 1)....... --
Payable for printing and postage
expenses.......................... 126,767
Payable for professional fees...... 39,759
Payable for registration and filing
fees.............................. 24,933
Payable for securities purchased... 67,011,318
Payable for service and
distribution expenses (Note 2).... 1,091,628
Payable for transfer agent fees
(Note 2).......................... 894,937
Other accrued expenses............. 32,918
---------------
Total liabilities................ 77,488,497
Minority interest (Notes 1 & 2).... --
---------------
Net assets........................... $ 1,815,784,266
---------------
---------------
</TABLE>
- ----------------
{/\} See Notes 1 and 7 of Notes to Financial Statements.
The accompanying notes are an integral part of the financial statements.
FS-26
<PAGE> 610
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
STATEMENT OF ASSETS
AND LIABILITIES (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM GLOBAL{/\}
-----------------------------------------------------------------------------
CONSUMER
PRODUCTS AND FINANCIAL INFRASTRUCTURE RESOURCES
SERVICES FUND- SERVICES FUND- HEALTH FUND- FUND-
CONSOLIDATED CONSOLIDATED CARE CONSOLIDATED CONSOLIDATED
Class A: (NOTE 1) (NOTE 1) FUND (NOTE 1) (NOTE 1)
-------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Net assets......................... $ 70,546,554 $38,146,311 $427,300,000 $33,286,992 $ 42,092,882
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Shares outstanding................. 2,824,537 1,891,058 19,783,338 2,026,023 2,704,501
Net asset value and redemption
price per share................... $ 24.98 $ 20.17 $ 21.60 $ 16.43 $ 15.56
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Maximum offering price per share
(100/95.25 of Class A net asset
value) *.......................... $ 26.23 $ 21.18 $ 22.68 $ 17.25 $ 16.34
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Class B:+
Net assets......................... $106,835,715 $64,747,167 $121,735,496 $47,177,150 $ 52,210,289
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Shares outstanding................. 4,357,974 3,268,753 5,848,019 2,929,766 3,411,115
Net asset value and offering price
per share......................... $ 24.51 $ 19.81 $ 20.82 $ 16.10 $ 15.31
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Advisor Class:
Net assets......................... $ 18,140,973 $12,161,453 $ 9,698,794 $ 9,347,018 $ 7,336,933
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Shares outstanding................. 713,803 595,404 440,494 559,425 467,314
Net asset value, offering price per
share, and redemption price per
share............................. $ 25.41 $ 20.43 $ 22.02 $ 16.71 $ 15.70
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Net assets consist of:
Paid in capital (Note 4)........... $151,024,282 $88,920,854 $487,685,110 $62,623,203 $103,332,054
Undistributed/Accumulated net
investment income (loss).......... (1,114,025) 8,925 (3,241,309) 126,439 (795,676)
Accumulated net realized gain
(loss) on investments and foreign
currency transactions............. 11,687,365 889,661 12,117,688 10,339,065 (7,454,066)
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................ 3,321 196,190 (9) (81,400) 6,258
Net unrealized appreciation of
investments....................... 33,922,299 25,039,301 62,172,810 16,803,853 6,551,534
-------------- -------------- ------------ -------------- ------------
Total -- representing net assets
applicable to capital shares
outstanding......................... $195,523,242 $115,054,931 $558,734,290 $89,811,160 $101,640,104
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
<CAPTION>
TELECOM-
MUNICATIONS
Class A: FUND
---------------
<S> <C>
Net assets......................... $ 969,856,693
---------------
---------------
Shares outstanding................. 48,380,775
Net asset value and redemption
price per share................... $ 20.05
---------------
---------------
Maximum offering price per share
(100/95.25 of Class A net asset
value) *.......................... $ 21.05
---------------
---------------
Class B:+
Net assets......................... $ 837,576,106
---------------
---------------
Shares outstanding................. 43,066,637
Net asset value and offering price
per share......................... $ 19.45
---------------
---------------
Advisor Class:
Net assets......................... $ 8,351,467
---------------
---------------
Shares outstanding................. 409,477
Net asset value, offering price per
share, and redemption price per
share............................. $ 20.40
---------------
---------------
Net assets consist of:
Paid in capital (Note 4)........... $ 1,192,624,877
Undistributed/Accumulated net
investment income (loss).......... (11,031,674)
Accumulated net realized gain
(loss) on investments and foreign
currency transactions............. 67,631,904
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................ (577,215)
Net unrealized appreciation of
investments....................... 567,136,374
---------------
Total -- representing net assets
applicable to capital shares
outstanding......................... $ 1,815,784,266
---------------
---------------
<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.
{/\} See Notes 1 and 7 of Notes to Financial Statements.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-27
<PAGE> 611
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
STATEMENT OF OPERATIONS
Six months ended April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM GLOBAL{/\}
-------------------------------------------------------------------------
CONSUMER
PRODUCTS
AND FINANCIAL
SERVICES SERVICES HEALTH INFRASTRUCTURE RESOURCES TELECOM-
FUND- FUND- CARE FUND- FUND- MUNICATIONS
CONSOLIDATED CONSOLIDATED FUND CONSOLIDATED CONSOLIDATED FUND
----------- ----------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income (net of foreign withholding tax
of $58,439, $89,413, $2,069, $67,669, $37,565,
and $182,685, respectively)..................... $ 631,492 $ 930,225 $ 738,020 $ 903,398 $ 335,385 $3,963,693
Interest income.................................. 173,161 113,943 1,275,652 227,045 142,904 2,012,264
Securities lending income........................ 17,942 34,910 55,507 18,515 11,469 609,824
----------- ----------- --------- ----------- ----------- ----------
Total investment income........................ 822,595 1,079,078 2,069,179 1,148,958 489,758 6,585,781
----------- ----------- --------- ----------- ----------- ----------
Expenses:
Investment management and administration fees
(Note 2)........................................ 873,213 470,304 2,709,564 447,907 566,986 7,889,067
Amortization of organization costs (Note 1)...... 5,108 6,259 -- 5,108 5,108 --
Custodian Fees................................... 19,189 14,299 7,625 19,729 19,910 318,017
Directors' and Trustees' fees and expenses (Note
2).............................................. 11,510 8,964 6,074 6,878 7,240 11,100
Fund accounting fees (Note 2).................... 22,980 12,779 73,483 12,109 15,269 221,052
Printing and postage expenses.................... 20,996 8,869 100,150 16,470 16,652 332,859
Professional fees................................ 52,434 54,449 62,182 43,983 41,087 155,725
Registration and filing fees..................... 36,924 44,693 36,200 43,598 50,331 52,671
Service and distribution expenses: (Note 2)
Class A........................................ 166,991 82,697 1,060,797 86,552 120,076 2,209,459
Class B........................................ 493,846 273,191 631,046 252,743 303,610 3,905,123
Transfer agent fees (Note 2)..................... 244,554 112,625 650,700 171,226 217,743 2,523,864
Other expenses................................... 7,413 5,886 11,305 3,195 28,231 43,951
----------- ----------- --------- ----------- ----------- ----------
Total expenses before reductions............... 1,955,158 1,095,015 5,349,126 1,109,498 1,392,243 17,662,888
----------- ----------- --------- ----------- ----------- ----------
Expenses reimbursed by Chancellor LGT Asset
Management, Inc. (Note 2)................... -- (13,505) -- (82,569) (74,218) --
Expense reductions (Notes 5)................. (18,538) (11,357) (38,638) (4,410) (32,591) (39,899)
----------- ----------- --------- ----------- ----------- ----------
Total net expenses............................. 1,936,620 1,070,153 5,310,488 1,022,519 1,285,434 17,622,989
----------- ----------- --------- ----------- ----------- ----------
Net investment income (loss)....................... (1,114,025) 8,925 (3,241,309) 126,439 (795,676) (11,037,208)
----------- ----------- --------- ----------- ----------- ----------
Net realized and unrealized gain (loss) on
investments and foreign currencies: (Note 1)
Net realized gain (loss) on investments.......... 12,037,902 1,624,816 14,637,996 10,174,908 (6,823,307) 59,731,742
Net realized gain (loss) on foreign currency
transactions.................................... (59,417) (171,425) (374,206) 200,616 (45,557) 8,663,014
----------- ----------- --------- ----------- ----------- ----------
Net realized gain (loss) during the period..... 11,978,485 1,453,391 14,263,790 10,375,524 (6,868,864) 68,394,756
----------- ----------- --------- ----------- ----------- ----------
Net change in unrealized appreciation
(depreciation) on translation of assets and
liabilities in foreign currencies............... (1,738) 130,285 257,003 (36,699) 115,162 2,170,571
Net change in unrealized appreciation
(depreciation) of investments................... 25,373,856 17,197,803 (1,277,554) (1,970,941) (27,822,535) 241,184,397
----------- ----------- --------- ----------- ----------- ----------
Net unrealized appreciation (depreciation)
during the period............................. 25,372,118 17,328,088 (1,020,551) (2,007,640) (27,707,373) 243,354,968
----------- ----------- --------- ----------- ----------- ----------
Net realized and unrealized gain (loss) on
investments and foreign currencies................ 37,350,603 18,781,479 13,243,239 8,367,884 (34,576,237) 311,749,724
----------- ----------- --------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations................................... 3$6,236,578 1$8,790,404 $10,001,930 $8,494,323 ($35,371,913) $300,712,516
----------- ----------- --------- ----------- ----------- ----------
----------- ----------- --------- ----------- ----------- ----------
<FN>
- ----------------
{/\} See Notes 1 and 7 of Notes to Financial Statements.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-28
<PAGE> 612
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM GLOBAL{/\}
-----------------------------------------------------------------------------
CONSUMER PRODUCTS
AND SERVICES FINANCIAL SERVICES HEALTH CARE
FUND-CONSOLIDATED FUND-CONSOLIDATED FUND
------------------------ ------------------------ -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
APRIL 30, YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, YEAR ENDED
1998 OCTOBER 31, 1998 OCTOBER 31, 1998 OCTOBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss).......... ($1,114,025) $(1,662,851) $ 8,925 $ (31,012) $(3,241,309) $ (6,665,748)
Net realized gain (loss) on
investments and foreign currency
transactions......................... 11,978,485 16,167,449 1,453,391 2,628,562 14,263,790 153,599,307
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... (1,738) 5,172 130,285 58,275 257,003 (569,426)
Net change in unrealized appreciation
(depreciation) of investments........ 25,373,856 (714,518) 17,197,803 6,449,986 (1,277,554) 1,308,779
----------- ----------- ----------- ----------- ----------- ------------
Net increase (decrease) in net
assets resulting from operations... 36,236,578 13,795,252 18,790,404 9,105,811 10,001,930 147,672,912
----------- ----------- ----------- ----------- ----------- ------------
Class A:
Distributions to shareholders: (Note 1)
From net realized gain on
investments.......................... (5,574,484) (3,424,902) (1,110,662) (580,522) (111,031,908) (34,613,411)
Class B:
Distributions to shareholders: (Note 1)
From net realized gain on
investments.......................... (8,128,583) (4,055,905) (1,697,929) (823,692) (34,132,136) (8,701,491)
Advisor Class:
Distributions to shareholders: (Note 1)
From net realized gain on
investments.......................... (962,619) (308,573) (225,074) (5,018) (1,791,803) (57,488)
----------- ----------- ----------- ----------- ----------- ------------
Total distributions................. (14,665,686) (7,789,380) (3,033,665) (1,409,232) (146,955,847) (43,372,390)
----------- ----------- ----------- ----------- ----------- ------------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested........................... 67,898,330 136,239,369 78,300,144 130,520,030 466,202,619 1,007,452,632
Decrease from capital shares
repurchased.......................... (56,608,293) (151,833,735) (59,963,586) (74,514,633) (396,856,529) (1,062,045,275)
----------- ----------- ----------- ----------- ----------- ------------
Net increase (decrease) from capital
share transactions................. 11,290,037 (15,594,366) 18,336,558 56,005,397 69,346,090 (54,592,643)
----------- ----------- ----------- ----------- ----------- ------------
Total increase (decrease) in net
assets................................. 32,860,929 (9,588,494) 34,093,297 63,701,976 (67,607,827) 49,707,879
Net assets:
Beginning of period................... 162,662,313 172,250,807 80,961,634 17,259,658 626,342,117 576,634,238
----------- ----------- ----------- ----------- ----------- ------------
End of period *....................... 1$95,523,242 $162,662,313 1$15,054,931 $80,961,634 $558,734,290 $626,342,117
----------- ----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ----------- ------------
* Includes undistributed/accumulated
net investment income (loss)......... ($1,114,025) $ -- $ 8,925 $ -- $(3,241,309) $ --
----------- ----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-29
<PAGE> 613
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
STATEMENTS OF CHANGES IN NET ASSETS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM GLOBAL{/\}
-----------------------------------------------------------------------------
INFRASTRUCTURE RESOURCES TELECOMMUNICATIONS
FUND-CONSOLIDATED FUND-CONSOLIDATED FUND
----------------------- ------------------------ --------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED ENDED
APRIL 30, OCTOBER APRIL 30, YEAR ENDED APRIL 30, YEAR ENDED
1998 31, 1998 OCTOBER 31, 1998 OCTOBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997
----------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss).......... $ 126,439 $ (405,469) $ (795,676) $(2,255,658) $(11,037,208) $(23,856,621)
Net realized gain (loss) on
investments and foreign currency
transactions......................... 10,375,524 778,612 (6,868,864) 7,540,578 68,394,756 120,426,746
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... (36,699) (116,926) 115,162 (125,779) 2,170,571 (7,132,389)
Net change in unrealized appreciation
(depreciation) of investments........ (1,970,941) 8,647,635 (27,822,535) 18,607,939 241,184,397 217,773,979
----------- ---------- ----------- ----------- ------------ ------------
Net increase (decrease) in net
assets resulting from operations... 8,494,323 8,903,852 (35,371,913) 23,767,080 300,712,516 307,211,715
----------- ---------- ----------- ----------- ------------ ------------
Class A:
Distributions to shareholders: (Note 1)
From net realized gain on
investments.......................... (275,162) (1,943,050) (2,006,260) (1,915,988) (59,979,475) (95,676,425)
Class B:
Distributions to shareholders: (Note 1)
From net realized gain on
investments.......................... (454,424) (2,733,339) (2,974,905) (2,369,395) (54,057,207) (83,596,023)
Advisor Class:
Distributions to shareholders: (Note 1)
From net realized gain on
investments.......................... (39,877) (17,129) (210,222) (134,145) (238,558) (176,806)
----------- ---------- ----------- ----------- ------------ ------------
Total distributions................. (769,463) (4,693,518) (5,191,387) (4,419,528) (114,275,240) (179,449,254)
----------- ---------- ----------- ----------- ------------ ------------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested........................... 13,758,704 44,324,471 133,328,246 377,334,346 991,606,632 1,783,734,946
Decrease from capital shares
repurchased.......................... (29,691,463) (42,934,337) (162,798,415) (336,987,548) (1,083,378,701) (2,403,405,013)
----------- ---------- ----------- ----------- ------------ ------------
Net increase (decrease) from capital
share transactions................. (15,932,759) 1,390,134 (29,470,169) 40,346,798 (91,772,069) (619,670,067)
----------- ---------- ----------- ----------- ------------ ------------
Total increase (decrease) in net
assets................................. (8,207,899) 5,600,468 (70,033,469) 59,694,350 94,665,207 (491,907,606)
Net assets:
Beginning of period................... 98,019,059 92,418,591 171,673,573 111,979,223 1,721,119,059 2,213,026,665
----------- ---------- ----------- ----------- ------------ ------------
End of period *....................... 8$9,811,160 $98,019,059 $101,640,104 $171,673,573 $1,815,784,266 $1,721,119,059
----------- ---------- ----------- ----------- ------------ ------------
----------- ---------- ----------- ----------- ------------ ------------
* Includes undistributed/accumulated
net investment income (loss)......... $ 126,439 $ -- $ (795,676) $ -- $(11,031,674) $ 5,534
----------- ---------- ----------- ----------- ------------ ------------
----------- ---------- ----------- ----------- ------------ ------------
</TABLE>
- ----------------
{/\} See Notes 1 and 7 of Notes to Financial Statements.
FS-30
<PAGE> 614
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
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>
CONSUMER PRODUCTS AND SERVICES FUND
---------------------------------------------------------
CLASS A
---------------------------------------------------------
SIX MONTHS DECEMBER 30, 1994
ENDED YEAR ENDED (COMMENCEMENT OF
APRIL 30, OCTOBER 31, OPERATIONS) TO
1998 ---------------------- OCTOBER 31,
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 (d)
------------- ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 22.19 $ 20.98 $ 14.59 $ 11.43
------------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.12) (0.15) (0.22) 0.02*
Net realized and unrealized gain on
investments.......................... 4.80 2.27 7.13 3.14
------------- ---------- ---------- ----------
Net increase from investment
operations......................... 4.68 2.12 6.91 3.16
------------- ---------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (1.89) (0.91) (0.52) --
------------- ---------- ---------- ----------
Total distributions................. (1.89) (0.91) (0.52) --
------------- ---------- ---------- ----------
Net asset value, end of period.......... $ 24.98 $ 22.19 $ 20.98 $ 14.59
------------- ---------- ---------- ----------
------------- ---------- ---------- ----------
Total investment return (c)............. 22.48%(b) 10.55% 48.82% 27.65 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 70,547 $ 62,637 $ 76,900 $ 4,082
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.00)%(a) (0.72)% (1.14)% 0.20 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (1.02)%(a) (0.87)% (1.24)% (11.11)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.92%(a) 1.84% 2.24% 2.32 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 1.94%(a) 1.99% 2.34% 13.63 % (a)
Portfolio turnover rate++............... 169%(a) 392% 169% 240 % (a)
Average commission rate per share paid
on portfolio transactions++............ $ 0.0423 $ 0.0319 $ 0.0545 N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., net
investment income per share would have been reduced by $1.12, $1.04
and $0.61 for Class A, Class B and Advisor Class, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-31
<PAGE> 615
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
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>
CONSUMER PRODUCTS AND SERVICES FUND
---------------------------------------------------------
CLASS B
---------------------------------------------------------
SIX MONTHS DECEMBER 30, 1994
ENDED YEAR ENDED (COMMENCEMENT OF
APRIL 30, OCTOBER 31, OPERATIONS)
1998 ---------------------- OCTOBER 31,
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 (d)
------------- ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 21.86 $ 20.79 $ 14.53 $ 11.43
------------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.17) (0.24) (0.31) (0.04) *
Net realized and unrealized gain on
investments.......................... 4.71 2.22 7.09 3.14
------------- ---------- ---------- ----------
Net increase from investment
operations......................... 4.54 1.98 6.78 3.10
------------- ---------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (1.89) (0.91) (0.52) --
------------- ---------- ---------- ----------
Total distributions................. (1.89) (0.91) (0.52) --
------------- ---------- ---------- ----------
Net asset value, end of period.......... $ 24.51 $ 21.86 $ 20.79 $ 14.53
------------- ---------- ---------- ----------
------------- ---------- ---------- ----------
Total investment return (c)............. 22.21%(b) 9.95% 48.11% 27.12 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 106,836 $ 93,978 $ 87,904 $ 2,959
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.50)%(a) (1.22)% (1.64)% (0.30)% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (1.52)%(a) (1.37)% (1.74)% (11.61)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.42%(a) 2.34% 2.74% 2.82 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.44%(a) 2.49% 2.84% 14.13 % (a)
Portfolio turnover rate++............... 169%(a) 392% 169% 240 % (a)
Average commission rate per share paid
on portfolio transactions++............ $ 0.0423 $ 0.0319 $ 0.0545 N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., net
investment income per share would have been reduced by $1.12, $1.04
and $0.61 for Class A, Class B and Advisor Class, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-32
<PAGE> 616
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
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>
CONSUMER PRODUCTS AND SERVICES FUND
---------------------------------------------------------
ADVISOR CLASS+
---------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 1, 1995
APRIL 30, OCTOBER 31, TO
1998 ---------------------- OCTOBER 31,
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 (d)
------------- ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 22.50 $ 21.15 $ 14.64 $ 11.84
------------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.06) (0.04) (0.13) 0.04*
Net realized and unrealized gain on
investments.......................... 4.86 2.30 7.16 2.76
------------- ---------- ---------- ----------
Net increase from investment
operations......................... 4.80 2.26 7.03 2.80
------------- ---------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (1.89) (0.91) (0.52) --
------------- ---------- ---------- ----------
Total distributions................. (1.89) (0.91) (0.52) --
------------- ---------- ---------- ----------
Net asset value, end of period.......... $ 25.41 $ 22.50 $ 21.15 $ 14.64
------------- ---------- ---------- ----------
------------- ---------- ---------- ----------
Total investment return (c)............. 22.77%(b) 11.15% 49.50% 23.65 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 18,141 $ 6,047 $ 7,446 $ 164
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.50)%(a) (0.22)% (0.64)% 0.70 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.52)%(a) (0.37)% (0.74)% (10.61)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.42%(a) 1.34% 1.74% 1.82 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 1.44%(a) 1.49% 1.84% 13.13 % (a)
Portfolio turnover rate++............... 169%(a) 392% 169% 240 % (a)
Average commission rate per share paid
on portfolio transactions++............ $ 0.0423 $ 0.0319 $ 0.0545 N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., net
investment income per share would have been reduced by $1.12, $1.04
and $0.61 for Class A, Class B and Advisor Class, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-33
<PAGE> 617
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
FINANCIAL SERVICES FUND
----------------------------------------------------------------------
CLASS A
----------------------------------------------------------------------
SIX MONTHS
ENDED MAY 31, 1994
APRIL 30, YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
1998 ----------------------------------- OPERATIONS) TO
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 (d) OCTOBER 31, 1994
------------- ---------- ---------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.22 $ 14.20 $ 11.92 $ 11.62 $ 11.43
------------- ---------- ---------- ----------- --------
Income from investment operations:
Net investment income (loss).......... 0.02 0.04 0.05* 0.17* * 0.02* * *
Net realized and unrealized gain on
investments.......................... 3.54 3.97 2.36 0.13 0.17
------------- ---------- ---------- ----------- --------
Net increase from investment
operations......................... 3.56 4.01 2.41 0.30 0.19
------------- ---------- ---------- ----------- --------
Distributions to shareholders:
From net investment income............ -- -- (0.12) -- --
From net realized gain on
investments.......................... (0.61) (0.99) (0.01) -- --
------------- ---------- ---------- ----------- --------
Total distributions................. (0.61) (0.99) (0.13) -- --
------------- ---------- ---------- ----------- --------
Net asset value, end of period.......... $ 20.17 $ 17.22 $ 14.20 $ 11.92 $ 11.62
------------- ---------- ---------- ----------- --------
------------- ---------- ---------- ----------- --------
Total investment return (c)............. 21.29%(b) 29.91% 20.21% 2.58% 1.66 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 38,146 $ 29,639 $ 7,302 $ 5,687 $ 3,175
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.25%(a) 0.23% 0.41% 1.46% 0.66 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 0.20%(a) 0.16% (0.66)% (5.34)% (7.26)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.98%(a) 2.29% 2.32% 2.34% 2.40 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.03%(a) 2.36% 3.39% 9.14% 10.32 % (a)
Portfolio turnover rate++............... 106%(a) 91% 103% 170% 53 % (a)
Average commission rate per share paid
on portfolio transactions++............ $ 0.0015 $ 0.0014 $ 0.0080 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 $0.13 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.59, $0.59
and $0.30 for Class A, Class B and Advisor Class, respectively.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.23 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-34
<PAGE> 618
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
FINANCIAL SERVICES FUND
---------------------------------------------------------------------
CLASS B
---------------------------------------------------------------------
SIX MONTHS
ENDED MAY 31, 1994
APRIL 30, YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
1998 ----------------------------------- OPERATIONS) TO
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 (d) OCTOBER 31, 1994
------------- ---------- ---------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 16.97 $ 14.06 $ 11.83 $ 11.60 $ 11.43
------------- ---------- ---------- ----------- -----------------
Income from investment operations:
Net investment income (loss).......... (0.02) (0.04) (0.01) * 0.11* * 0.00* * *
Net realized and unrealized gain on
investments.......................... 3.47 3.94 2.34 0.12 0.17
------------- ---------- ---------- ----------- -----------------
Net increase from investment
operations......................... 3.45 3.90 2.33 0.23 0.17
------------- ---------- ---------- ----------- -----------------
Distributions to shareholders:
From net investment income............ -- -- (0.09) -- --
From net realized gain on
investments.......................... (0.61) (0.99) (0.01) -- --
------------- ---------- ---------- ----------- -----------------
Total distributions................. (0.61) (0.99) (0.10) -- --
------------- ---------- ---------- ----------- -----------------
Net asset value, end of period.......... $ 19.81 $ 16.97 $ 14.06 $ 11.83 $ 11.60
------------- ---------- ---------- ----------- -----------------
------------- ---------- ---------- ----------- -----------------
Total investment return (c)............. 21.02%(b) 29.13% 19.81% 1.98% 1.49% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 64,747 $ 47,585 $ 9,886 $ 4,548 $ 2,235
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.25)%(a) (0.27)% (0.09)% 0.96% 0.16% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.30)%(a) (0.34)% (1.16)% (5.84)% (7.76)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.48%(a) 2.79% 2.82% 2.84% 2.90% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.53%(a) 2.86% 3.89% 9.64% 10.82% (a)
Portfolio turnover rate++............... 106%(a) 91% 103% 170% 53% (a)
Average commission rate per share paid
on portfolio transactions++............ $ 0.0015 $ 0.0014 $ 0.0080 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 $0.13 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.59, $0.59
and $0.30 for Class A, Class B and Advisor Class, respectively.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.23 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-35
<PAGE> 619
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
FINANCIAL SERVICES FUND
---------------------------------------------------------
ADVISOR CLASS+
---------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, JUNE 1, 1995
APRIL 30, TO
1998 ---------------------- OCTOBER 31,
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 (d)
------------- ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.40 $ 14.26 $ 11.95 $ 11.09
------------- ---------- ---------- --------
Income from investment operations:
Net investment income (loss).......... 0.07 0.12 0.12* 0.09* *
Net realized and unrealized gain on
investments.......................... 3.57 4.01 2.36 0.77
------------- ---------- ---------- --------
Net increase from investment
operations......................... 3.64 4.13 2.48 0.86
------------- ---------- ---------- --------
Distributions to shareholders:
From net investment income............ -- -- (0.16) --
From net realized gain on
investments.......................... (0.61) (0.99) (0.01) --
------------- ---------- ---------- --------
Total distributions................. (0.61) (0.99) (0.17) --
------------- ---------- ---------- --------
Net asset value, end of period.......... $ 20.43 $ 17.40 $ 14.26 $ 11.95
------------- ---------- ---------- --------
------------- ---------- ---------- --------
Total investment return (c)............. 21.55%(b) 30.52% 20.87% 7.75 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 12,161 $ 3,738 $ 72 $ 31
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.75%(a) 0.73% 0.91% 1.96 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 0.70%(a) 0.66% (0.16)% (4.84)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.48%(a) 1.79% 1.82% 1.84 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 1.53%(a) 1.86% 2.89% 8.64 % (a)
Portfolio turnover rate++............... 106%(a) 91% 103% 170 %
Average commission rate per share paid
on portfolio transactions++............ $ 0.0015 $ 0.0014 $ 0.0080 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 $0.13 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.59, $0.59
and $0.30 for Class A, Class B and Advisor Class, respectively.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.23 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-36
<PAGE> 620
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
HEALTH CARE FUND
-------------------------------------------------------------------------
CLASS A+
-------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1998 ----------------------------------------------------------
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 1994 (d) 1993 (d)
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 27.98 $ 23.60 $ 21.84 $ 19.60 $ 17.86 $ 17.44
------------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment loss................... (0.11) (0.25) (0.17) (0.15) (0.22) (0.15)
Net realized and unrealized gain on
investments.......................... 0.44 6.48 4.79 3.73 2.02 0.57
------------- ---------- ---------- ---------- ---------- ----------
Net increase from investment
operations......................... 0.33 6.23 4.62 3.58 1.80 0.42
------------- ---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (6.71) (1.85) (2.86) (1.34) -- --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.06) --
------------- ---------- ---------- ---------- ---------- ----------
Total distributions................. (6.71) (1.85) (2.86) (1.34) (0.06) --
------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 21.60 $ 27.98 $ 23.60 $ 21.84 $ 19.60 $ 17.86
------------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 2.15%(b) 28.36% 23.14% 19.79% 10.11% 2.4%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 427,300 $ 472,083 $ 467,861 $ 426,380 $ 438,940 $ 461,113
Ratio of net investment loss to average
net assets:
With expense reductions (Notes 1 &
5)................................... (1.06)%(a) (1.00)% (0.71)% (0.72)% (1.23)% (0.9)%
Without expense reductions............ (1.07)%(a) (1.03)% (0.75)% (0.78)% N/A N/A
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.80%(a) 1.77% 1.80% 1.85% 1.98% 2.0%
Without expense reductions............ 1.81%(a) 1.80% 1.84% 1.91% N/A N/A
Portfolio turnover rate++++............. 156%(a) 149% 157% 99% 64% 61%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0561 $ 0.0490 $ 0.0548 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.
+ 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 and average commission rates 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-37
<PAGE> 621
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
HEALTH CARE FUND
--------------------------------------------------------------------------------
CLASS B++
--------------------------------------------------------------------------------
SIX MONTHS
ENDED APRIL 1, 1993
APRIL 30, YEAR ENDED OCTOBER 31, TO
1998 ---------------------------------------------- OCTOBER 31,
(UNAUDITED) 1997 (d) 1996 (d) 1995 1994 (d) 1993 (d)
------------ ---------- ---------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 27.27 $ 23.15 $ 21.56 $ 19.46 $ 17.80 $ 15.59
------------ ---------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment loss................... (0.16) (0.37) (0.27) (0.25) (0.32) (0.14)
Net realized and unrealized gain on
investments.......................... 0.42 6.34 4.72 3.69 2.02 2.35
------------ ---------- ---------- ---------- ---------- --------
Net increase from investment
operations......................... 0.26 5.97 4.45 3.44 1.70 2.21
------------ ---------- ---------- ---------- ---------- --------
Distributions to shareholders:
From net realized gain on
investments.......................... (6.71) (1.85) (2.86) (1.34) -- --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.04) --
------------ ---------- ---------- ---------- ---------- --------
Total distributions................. (6.71) (1.85) (2.86) (1.34) (0.04) --
------------ ---------- ---------- ---------- ---------- --------
Net asset value, end of period.......... $ 20.82 $ 27.27 $ 23.15 $ 21.56 $ 19.46 $ 17.80
------------ ---------- ---------- ---------- ---------- --------
------------ ---------- ---------- ---------- ---------- --------
Total investment return (c)............. 1.89 %(b) 27.75% 22.59% 19.17% 9.55% 14.2 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 121,735 $ 147,440 $ 107,622 $ 70,740 $ 39,100 $ 8,604
Ratio of net investment loss to average
net assets:
With expense reductions (Notes 1 &
5)................................... (1.56)%(a) (1.50)% (1.21)% (1.22)% (1.73)% (1.4)% (a)
Without expense reductions............ (1.57)%(a) (1.53)% (1.25)% (1.28)% N/A N/A
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.30 %(a) 2.27% 2.30% 2.35% 2.48% 2.50 % (a)
Without expense reductions............ 2.31 %(a) 2.30% 2.34% 2.41% N/A N/A
Portfolio turnover rate++++............. 156 %(a) 149% 157% 99% 64% 61 %
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0561 $ 0.0490 $ 0.0548 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.
+ 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 and average commission rates 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-38
<PAGE> 622
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
FINANCIAL HIGHLIGHTS (cont'd)
- -------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
HEALTH CARE FUND
-------------------------------------------------------
ADVISOR CLASS+++
-------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31, JUNE 1, 1995
1998 ---------------------- TO
(UNAUDITED) (d) 1997 (d) 1996 (d) OCTOBER 31, 1995
------------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 28.34 $ 23.77 $ 21.88 $ 18.66
------------- ---------- ---------- --------
Income from investment operations:
Net investment loss................... (0.05) (0.12) (0.05) (0.02)
Net realized and unrealized gain on
investments.......................... 0.44 6.54 4.80 3.24
------------- ---------- ---------- --------
Net increase from investment
operations......................... 0.39 6.42 4.75 3.22
------------- ---------- ---------- --------
Distributions to shareholders:
From net realized gain on
investments.......................... (6.71) (1.85) (2.86) --
In excess of net realized gain on
investments.......................... -- -- -- --
------------- ---------- ---------- --------
Total distributions................. (6.71) (1.85) (2.86) --
------------- ---------- ---------- --------
Net asset value, end of period.......... $ 22.02 $ 28.34 $ 23.77 $ 21.88
------------- ---------- ---------- --------
------------- ---------- ---------- --------
Total investment return (c)............. 2.37%(b) 29.00% 23.82% 17.10 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 9,699 $ 6,819 $ 1,152 $ 539
Ratio of net investment loss to average
net assets:
With expense reductions (Notes 1 &
5)................................... (0.56)%(a) (0.50)% (0.21)% (0.22)% (a)
Without expense reductions............ (0.57)%(a) (0.53)% (0.25)% (0.28)% (a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.30%(a) 1.27% 1.30% 1.35 % (a)
Without expense reductions............ 1.31%(a) 1.30% 1.34% 1.41 % (a)
Portfolio turnover rate++++............. 156%(a) 149% 157% 99 % (a)
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0561 $ 0.0490 $ 0.0548 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.
+ 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 and average commission rates 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-39
<PAGE> 623
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
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>
INFRASTRUCTURE FUND
--------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------
SIX MONTHS
ENDED MAY 31, 1994
APRIL 30, YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
1998 ---------------------------------- OPERATIONS) TO
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 OCTOBER 31, 1994
------------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 15.01 $ 14.42 $ 12.11 $ 12.47 $ 11.43
------------- ---------- ---------- ---------- -----------------
Income from investment operations:
Net investment income (loss).......... 0.03* (0.01) (0.03) (0.03) ** 0.01* * *
Net realized and unrealized gain
(loss) on investments................ 1.50 1.32 2.34 (0.33) 1.03
------------- ---------- ---------- ---------- -----------------
Net increase (decrease) from
investment operations.............. 1.53 1.31 2.31 (0.36) 1.04
------------- ---------- ---------- ---------- -----------------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.11) (0.72) -- -- --
------------- ---------- ---------- ---------- -----------------
Total distributions................. (0.11) (0.72) -- -- --
------------- ---------- ---------- ---------- -----------------
Net asset value, end of period.......... $ 16.43 $ 15.01 $ 14.42 $ 12.11 $ 12.47
------------- ---------- ---------- ---------- -----------------
------------- ---------- ---------- ---------- -----------------
Total investment return (c)............. 10.29%(b) 9.38% 19.08% (2.89)% 9.10% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 33,287 $ 38,281 $ 38,397 $ 36,241 $ 23,615
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.51%(a) (0.09)% (0.19)% (0.32)% 0.41% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 0.32%(a) (0.17)% (0.30)% (0.58)% (0.47)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.99%(a) 2.00% 2.14% 2.36% 2.40% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.18%(a) 2.08% 2.25% 2.62% 3.28% (a)
Portfolio turnover rate++............... 95%(a) 41% 41% 45% 18%
Average commission rate per share paid
on portfolio transactions.............. $ 0.0148 $ 0.0046 $ 0.0109 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 $0.01 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.03 for Class
A shares, $0.03 for Class B shares, and $0.02 for Advisor Class
shares.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02 for Class
A and Class B from May 31, 1994 to October 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-40
<PAGE> 624
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
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>
INFRASTRUCTURE FUND
--------------------------------------------------------------------
CLASS B
--------------------------------------------------------------------
SIX MONTHS
ENDED MAY 31, 1994
APRIL 30, YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
1998 ---------------------------------- OPERATIONS) TO
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 OCTOBER 31, 1994
------------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.75 $ 14.24 $ 12.03 $ 12.45 $ 11.43
------------- ---------- ---------- ---------- -----------------
Income from investment operations:
Net investment income (loss).......... --* (0.09) (0.09) (0.09) ** (0.01) * * *
Net realized and unrealized gain
(loss) on investments................ 1.46 1.32 2.30 (0.33) 1.03
------------- ---------- ---------- ---------- -----------------
Net increase (decrease) from
investment operations.............. 1.46 1.23 2.21 (0.42) 1.02
------------- ---------- ---------- ---------- -----------------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.11) (0.72) -- -- --
------------- ---------- ---------- ---------- -----------------
Total distributions................. (0.11) (0.72) -- -- --
------------- ---------- ---------- ---------- -----------------
Net asset value, end of period.......... $ 16.10 $ 14.75 $ 14.24 $ 12.03 $ 12.45
------------- ---------- ---------- ---------- -----------------
------------- ---------- ---------- ---------- -----------------
Total investment return (c)............. 9.99%(b) 8.83% 18.37% (3.37)% 8.92% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 47,177 $ 57,199 $ 53,678 $ 50,181 $ 30,954
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.01%(a) (0.59)% (0.69)% (0.82)% (0.09)% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.18)%(a) (0.67)% (0.80)% (1.08)% (0.97)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.49%(a) 2.50% 2.64% 2.86% 2.90% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.68%(a) 2.58% 2.75% 3.12% 3.78% (a)
Portfolio turnover rate++............... 95%(a) 41% 41% 45% 18%
Average commission rate per share paid
on portfolio transactions.............. $ 0.0148 $ 0.0046 $ 0.0109 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 $0.01 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.03 for Class
A shares, $0.03 for Class B shares, and $0.02 for Advisor Class
shares.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02 for Class
A and Class B from May 31, 1994 to October 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-41
<PAGE> 625
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
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>
INFRASTRUCTURE FUND
-------------------------------------------------------
ADVISOR CLASS+
-------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, JUNE 1, 1995
1998 ---------------------- TO
(UNAUDITED) (d) 1997 (d) 1996 (d) OCTOBER 31, 1995
------------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 15.23 $ 14.52 $ 12.14 $ 12.00
------------- ---------- ---------- --------
Income from investment operations:
Net investment income (loss).......... 0.08* 0.05 0.04 0.02* *
Net realized and unrealized gain
(loss) on investments................ 1.51 1.38 2.34 0.12
------------- ---------- ---------- --------
Net increase (decrease) from
investment operations.............. 1.59 1.43 2.38 0.14
------------- ---------- ---------- --------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.11) (0.72) -- --
------------- ---------- ---------- --------
Total distributions................. (0.11) (0.72) -- --
------------- ---------- ---------- --------
Net asset value, end of period.......... $ 16.71 $ 15.23 $ 14.52 $ 12.14
------------- ---------- ---------- --------
------------- ---------- ---------- --------
Total investment return (c)............. 10.53%(b) 10.10% 19.60% 1.17 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 9,347 $ 2,539 $ 344 $ 216
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.01%(a) 0.41% 0.31% 0.18 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 0.82%(a) 0.33% 0.20% (0.08)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.49%(a) 1.50% 1.64% 1.86 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 1.68%(a) 1.58% 1.75% 2.12 % (a)
Portfolio turnover rate++............... 95%(a) 41% 41% 45 %
Average commission rate per share paid
on portfolio transactions.............. $ 0.0148 $ 0.0046 $ 0.0109 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 $0.01 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.03 for Class
A shares, $0.03 for Class B shares, and $0.02 for Advisor Class
shares.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02 for Class
A and Class B from May 31, 1994 to October 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-42
<PAGE> 626
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
RESOURCES FUND
--------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------
SIX MONTHS
ENDED MAY 31, 1994
APRIL 30, YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
1998 ---------------------------------- OPERATIONS) TO
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 OCTOBER 31, 1994
------------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 20.65 $ 17.43 $ 11.44 $ 12.41 $ 11.43
------------- ---------- ---------- ---------- -----------------
Income from investment operations:
Net investment income (loss).......... (0.10) * (0.25) (0.24) 0.04* * 0.06* * *
Net realized and unrealized gain
(loss) on investments................ (4.31) 4.08 6.28 (0.98) 0.92
------------- ---------- ---------- ---------- -----------------
Net increase (decrease) from
investment operations.............. (4.41) 3.83 6.04 (0.94) 0.98
------------- ---------- ---------- ---------- -----------------
Distributions to shareholders:
From net investment income............ -- -- (0.04) (0.03) --
From net realized gain on
investments.......................... (0.68) (0.61) (0.01) -- --
------------- ---------- ---------- ---------- -----------------
Total distributions................. (0.68) (0.61) (0.05) (0.03) --
------------- ---------- ---------- ---------- -----------------
Net asset value, end of period.......... $ 15.56 $ 20.65 $ 17.43 $ 11.44 $ 12.41
------------- ---------- ---------- ---------- -----------------
------------- ---------- ---------- ---------- -----------------
Total investment return (c)............. (21.88)%(b) 22.64% 53.04% (7.58)% 8.57% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 42,093 $ 69,975 $ 48,729 $ 12,598 $ 14,797
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.14)%(a) (1.41)% (1.55)% 0.41% 2.63% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (1.32)%(a) (1.51)% (1.65)% (0.69)% 0.65% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.99%(a) 2.03% 2.20% 2.37% 2.40% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.17%(a) 2.13% 2.30% 3.47% 4.38% (a)
Portfolio turnover rate++............... 197%(a) 321% 94% 87% 137%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0245 $ 0.0112 $ 0.0243 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 $0.01 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income (loss) per share would have been reduced (increased)
by $0.14, $0.13, and $0.12 for Class A, Class B, and Advisor Class,
respectively.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.04 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-43
<PAGE> 627
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
RESOURCES FUND
--------------------------------------------------------------------
CLASS B
--------------------------------------------------------------------
SIX MONTHS
ENDED MAY 31, 1994
APRIL 30, YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
1998 ---------------------------------- OPERATIONS) TO
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 OCTOBER 31, 1994
------------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 20.37 $ 17.29 $ 11.36 $ 12.38 $ 11.43
------------- ---------- ---------- ---------- -----------------
Income from investment operations:
Net investment income (loss).......... (0.14) * (0.33) (0.31) (0.02) ** 0.03* * *
Net realized and unrealized gain
(loss) on investments................ (4.24) 4.02 6.25 (0.98) 0.92
------------- ---------- ---------- ---------- -----------------
Net increase (decrease) from
investment operations.............. (4.38) 3.69 5.94 (1.00) 0.95
------------- ---------- ---------- ---------- -----------------
Distributions to shareholders:
From net investment income............ -- -- -- (0.02) --
From net realized gain on
investments.......................... (0.68) (0.61) (0.01) -- --
------------- ---------- ---------- ---------- -----------------
Total distributions................. (0.68) (0.61) (0.01) (0.02) --
------------- ---------- ---------- ---------- -----------------
Net asset value, end of period.......... $ 15.31 $ 20.37 $ 17.29 $ 11.36 $ 12.38
------------- ---------- ---------- ---------- -----------------
------------- ---------- ---------- ---------- -----------------
Total investment return (c)............. (22.03)%(b) 21.99% 52.39% (8.05)% 8.31% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 52,210 $ 86,812 $ 57,749 $ 13,978 $ 13,404
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.64)%(a) (1.91)% (2.05)% (0.09)% 2.13% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (1.82)%(a) (2.01)% (2.15)% (1.19)% 0.15% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.49%(a) 2.53% 2.70% 2.87% 2.90% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.67%(a) 2.63% 2.80% 3.97% 4.88% (a)
Portfolio turnover rate++............... 197%(a) 321% 94% 87% 137%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0245 $ 0.0112 $ 0.0243 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 $0.01 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income (loss) per share would have been reduced (increased)
by $0.14, $0.13, and $0.12 for Class A, Class B, and Advisor Class,
respectively.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.04 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-44
<PAGE> 628
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
RESOURCES FUND
-------------------------------------------------------
ADVISOR CLASS+
-------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, JUNE 1, 1995
1998 ---------------------- TO
(UNAUDITED) (d) 1997 (d) 1996 (d) OCTOBER 31, 1995
------------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 20.80 $ 17.47 $ 11.47 $ 11.45
------------- ---------- ---------- --------
Income from investment operations:
Net investment income (loss).......... (0.06) * (0.14) (0.17) 0.11* *
Net realized and unrealized gain
(loss) on investments................ (4.36) 4.08 6.28 (0.09)
------------- ---------- ---------- --------
Net increase (decrease) from
investment operations.............. (4.42) 3.94 6.11 0.02
------------- ---------- ---------- --------
Distributions to shareholders:
From net investment income............ -- -- (0.10) --
From net realized gain on
investments.......................... (0.68) (0.61) (0.01) --
------------- ---------- ---------- --------
Total distributions................. (0.68) (0.61) (0.11) --
------------- ---------- ---------- --------
Net asset value, end of period.......... $ 15.70 $ 20.80 $ 17.47 $ 11.47
------------- ---------- ---------- --------
------------- ---------- ---------- --------
Total investment return (c)............. (21.76)%(b) 23.23% 53.76% 0.17 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 7,337 $ 14,886 $ 5,502 $ 95
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.64)%(a) (0.91)% (1.05)% 0.91 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.82)%(a) (1.01)% (1.15)% (0.19)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.49%(a) 1.53% 1.70% 1.87 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 1.67%(a) 1.63% 1.80% 2.97 % (a)
Portfolio turnover rate++............... 197%(a) 321% 94% 87 %
Average commission rate per share paid
on portfolio transactions++............ $ 0.0245 $ 0.0112 $ 0.0243 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 $0.01 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income (loss) per share would have been reduced (increased)
by $0.14, $0.13, and $0.12 for Class A, Class B, and Advisor Class,
respectively.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.04 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-45
<PAGE> 629
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
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>
TELECOMMUNICATIONS FUND
-------------------------------------------------------------------------
CLASS A+
-------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1998 ----------------------------------------------------------
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 1994 (d) 1993
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 18.04 $ 16.69 $ 16.42 $ 17.80 $ 16.92 $ 11.16
------------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.09) (0.17) (0.13) (0.09) (0.01) 0.08
Net realized and unrealized gain
(loss) on investments................ 3.30 2.93 1.22 (0.43) 1.17 5.83
------------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 3.21 2.76 1.09 (0.52) 1.16 5.91
------------- ---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- -- (0.01) (0.15)
From net realized gain on
investments.......................... (1.20) (1.41) (0.82) (0.86) (0.27) --
------------- ---------- ---------- ---------- ---------- ----------
Total distributions................. (1.20) (1.41) (0.82) (0.86) (0.28) (0.15)
------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 20.05 $ 18.04 $ 16.69 $ 16.42 $ 17.80 $ 16.92
------------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 19.19%(b) 17.70% 7.00% (2.88)% 7.02% 53.60%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 969,857 $ 910,801 $1,204,428 $1,353,722 $1,644,402 $1,223,340
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 1 &
5)................................... (1.08)%(a) (1.01)% (0.84)% (0.49)% (0.02)% 0.80%
Without expense reductions............ (1.09)%(a) (1.06)% (0.89)% (0.55)% N/A N/A
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.87%(a) 1.79% 1.74% 1.77% 1.80% 2.0%
Without expense reductions............ 1.88%(a) 1.84% 1.79% 1.83% N/A N/A
Portfolio turnover rate++++............. 56%(a) 35% 37% 62% 57% 41%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0045 $ 0.0085 $ 0.0165 N/A N/A N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
+ All capital shares issued and outstanding 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 and average commission rates 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-46
<PAGE> 630
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
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>
TELECOMMUNICATIONS FUND
-----------------------------------------------------------------------------
CLASS B++
-----------------------------------------------------------------------------
SIX MONTHS
ENDED APRIL 1, 1993
APRIL 30, YEAR ENDED OCTOBER 31, TO
1998 ---------------------------------------------- OCTOBER 31,
(UNAUDITED) (d) 1997 (d) 1996 (d) 1995 1994 (d) 1993
------------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.58 $ 16.37 $ 16.20 $ 17.66 $ 16.87 $ 12.68
------------- ---------- ---------- ---------- ---------- --------------
Income from investment operations:
Net investment income (loss).......... (0.13) (0.25) (0.23) (0.17) (0.10) 0.01
Net realized and unrealized gain
(loss) on investments................ 3.20 2.87 1.22 (0.43) 1.17 4.18
------------- ---------- ---------- ---------- ---------- --------------
Net increase (decrease) from
investment operations.............. 3.07 2.62 0.99 (0.60) 1.07 4.19
------------- ---------- ---------- ---------- ---------- --------------
Distributions to shareholders:
From net investment income............ -- -- -- -- (0.01) --
From net realized gain on
investments.......................... (1.20) (1.41) (0.82) (0.86) (0.27) --
------------- ---------- ---------- ---------- ---------- --------------
Total distributions................. (1.20) (1.41) (0.82) (0.86) (0.28) --
------------- ---------- ---------- ---------- ---------- --------------
Net asset value, end of period.......... $ 19.45 $ 17.58 $ 16.37 $ 16.20 $ 17.66 $ 16.87
------------- ---------- ---------- ---------- ---------- --------------
------------- ---------- ---------- ---------- ---------- --------------
Total investment return (c)............. 18.88%(b) 17.15% 6.46% (3.37)% 6.50% 33.0 %(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 837,576 $ 805,535 $1,007,654 $1,111,520 $1,184,081 $ 455,335
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 1 &
5)................................... (1.58)%(a) (1.51)% (1.34)% (0.99)% (0.52)% 0.3 %(a)
Without expense reductions............ (1.59)%(a) (1.56)% (1.39)% (1.05)% N/A N/A
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.37%(a) 2.29% 2.24% 2.27% 2.30% 2.50 %(a)
Without expense reductions............ 2.38%(a) 2.34% 2.29% 2.33% N/A N/A
Portfolio turnover rate++++............. 56%(a) 35% 37% 62% 57% 41 %
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0045 $ 0.0085 $ 0.0165 N/A N/A N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
+ All capital shares issued and outstanding 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 and average commission rates 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-47
<PAGE> 631
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
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>
TELECOMMUNICATIONS FUND
-------------------------------------------------------
ADVISOR CLASS+++
-------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, JUNE 1, 1995
1998 ---------------------- TO
(UNAUDITED) (d) 1997 (d) 1996 (d) OCTOBER 31, 1995
------------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 18.28 $ 16.81 $ 16.46 $ 15.24
------------- ---------- ---------- --------
Income from investment operations:
Net investment income (loss).......... (0.04) (0.09) (0.05) --
Net realized and unrealized gain
(loss) on investments................ 3.36 2.97 1.22 1.22
------------- ---------- ---------- --------
Net increase (decrease) from
investment operations.............. 3.32 2.88 1.17 1.22
------------- ---------- ---------- --------
Distributions to shareholders:
From net investment income............ -- -- -- --
From net realized gain on
investments.......................... (1.20) (1.41) (0.82) --
------------- ---------- ---------- --------
Total distributions................. (1.20) (1.41) (0.82) --
------------- ---------- ---------- --------
Net asset value, end of period.......... $ 20.40 $ 18.28 $ 16.81 $ 16.46
------------- ---------- ---------- --------
------------- ---------- ---------- --------
Total investment return (c)............. 19.56%(b) 18.33% 7.49% 7.94 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 8,351 $ 4,783 $ 945 $ 681
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 1 &
5)................................... (0.58)%(a) (0.51)% (0.34)% 0.01 % (a)
Without expense reductions............ (0.59)%(a) (0.56)% (0.39)% 0.07 % (a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.37%(a) 1.29% 1.24% 1.27 % (a)
Without expense reductions............ 1.38%(a) 1.34% 1.29% 1.33 % (a)
Portfolio turnover rate++++............. 56%(a) 35% 37% 62 %
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0045 $ 0.0085 $ 0.0165 N/A
</TABLE>
- - ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
+ All capital shares issued and outstanding 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 and average commission rates 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-48
<PAGE> 632
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
NOTES TO
FINANCIAL STATEMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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 7 -- Subsequent Events" for a discussion of certain changes which took
place after April 30, 1998.
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 7)
GT Global Consumer Products and Services Fund, GT Global Financial Services
Fund, GT Global Health Care Fund, GT Global Infrastructure Fund, GT Global
Natural Resources Fund and GT Global Telecommunications Fund ("Funds") are
separate series of G.T. Investment Funds, Inc. ("Company"). Effective June 1,
1998, the Company was renamed AIM Investment Funds, Inc. and these six separate
series were renamed as follows: AIM Global Consumer Products and Services Fund,
AIM Global Financial Services Fund, AIM Global Health Care Fund, AIM Global
Infrastructure Fund, AIM Global Resources Fund and AIM Global Telecommunications
Fund, respectively. Collectively, these Funds are now known as the "AIM Global
Theme Funds." 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.
The GT Global Consumer Products and Services Fund, GT Global Financial Services
Fund, GT Global Infrastructure Fund, and GT Global Natural Resources Fund each
invests substantially all of its investable assets in Global Consumer Products
and Services Portfolio, Global Financial Services Portfolio, Global
Infrastructure Portfolio, and Global Natural Resources Portfolio ("Portfolios"),
respectively. Each Portfolio is organized as a subtrust of a New York common law
trust ("Trust") and is registered under the 1940 Act as an open-end management
investment company.
The Portfolios have investment objectives, policies, and limitations
substantially identical to those of their corresponding Funds. Therefore, the
financial statements of the aformentioned Funds and their respective Portfolios
have been presented on a consolidated basis, and represent all activities of
both the respective Funds and Portfolios. Through April 30, 1998, all of the
shares of beneficial interest of each Portfolio were owned by either its
respective Fund or Chancellor LGT Asset Management, Inc. (the "Manager"), which
has a nominal ($100) investment in each Portfolio.
The Funds 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 each 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 Funds calculate the net asset value of and complete 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 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 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 or the Trust's Board of Trustees.
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 or
the Trusts's Board of Trustees.
FS-49
<PAGE> 633
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of each Fund and Portfolio 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 Funds or
Portfolios (the phrase "Fund or Portfolio" hereinafter includes the GT Global
Health Care Fund, The GT Global Telecommunications Fund, and the four
Portfolios) 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.
A Fund or Portfolio 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 or Portfolio'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 a Fund or Portfolio, it is
the Fund's or Portfolio'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 or Portfolio 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 or Portfolio as an unrealized gain or loss.
When the Forward Contract is closed, the Fund or Portfolio 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 or Portfolio's "Statement of Assets
and Liabilities". A Fund or Portfolio 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. A Fund or Portfolio 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 a Fund or Portfolio writes a call or put option, an amount equal to the
premium received is included in the Fund's or Portfolio'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 or Portfolio 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 or Portfolio can write options only on a covered basis,
which, for a call, requires that the Fund or Portfolio hold the underlying
security and, for a put, requires the Fund or Portfolio 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 or Portfolio 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 or Portfolio for the purchase of a call or put
option is included in the Fund's or Portfolio'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 or Portfolio has
purchased expires on the stipulated expiration date, the Fund or Portfolio
realizes a loss in the amount of the cost of the option. If the Fund or
Portfolio enters into a closing sale transaction, the Fund or Portfolio 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 or Portfolio
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 or Portfolio
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 or Portfolio 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 or Portfolio 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 or Portfolio may not be able to enter into a closing
transaction because of an illiquid secondary market.
FS-50
<PAGE> 634
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
(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 a
Fund or Portfolio 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 or Portfolio
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 or Portfolio as unrealized gains
or losses. When the contract is closed, the Fund or Portfolio 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 or Portfolio is that the change in value of the underlying
securities may not correlate to the change in value of the contracts. A Fund or
Portfolio 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. A Fund or Portfolio 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
or Portfolio to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At April 30, 1998, stocks with an aggregate value listed below were on loan to
brokers. The loans were secured by cash collateral received by the Funds or
Portfolios:
<TABLE>
<CAPTION>
APRIL 30, 1998 PERIOD ENDED
-------------------------------- APRIL 30, 1998
AGGREGATE VALUE CASH --------------
ON LOAN COLLATERAL FEES RECEIVED
--------------- -------------- --------------
<S> <C> <C> <C>
Global Consumer Products and Services
Portfolio.............................. $ 13,868,204 $ 14,143,909 $ 17,942
Global Financial Services Portfolio..... 5,524,535 5,830,915 34,910
GT Global Health Care Fund.............. 42,191,546 43,020,709 55,507
Global Infrastructure Portfolio......... 2,588,399 2,614,825 18,515
Global Natural Resources Portfolio...... 4,703,950 4,758,300 11,469
GT Global Telecommunications Fund....... 252,579,366 258,744,228 609,824
</TABLE>
For international securities, cash collateral is received by a Fund or Portfolio
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 a Fund or Portfolio 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 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.
(I) TAXES
It is the intended policy of the Funds and Portfolios 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 Funds 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, unrealized appreciation of securities held, or exise tax
on income and capital gains.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by each 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 Funds or Portfolios and timing
differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the GT Global Consumer Products and Services Fund, GT
Global Financial Services Fund, GT Global Infrastructure Fund, and GT Global
Natural Resources Fund in connection with their organizations, their initial
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $51,500, $63,100,
$51,500, and $51,500, respectively. 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 or Portfolio's investment in emerging
market countries may involve greater risks than investments in more developed
markets and the price of such investments may be volatile. These risks of
investing in foreign and
FS-51
<PAGE> 635
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
emerging markets may include foreign currency exchange rate fluctuations,
perceived credit risk, adverse political and economic developments and possible
adverse foreign government intervention.
In addition, each Fund or Portfolio may focus its investments in certain related
consumer products and services, financial services, health care, infrastructure,
natural resources, or telecommunications industries, subjecting the Fund or
Portfolio to greater risk than a fund that is more diversified.
(M) INDEXED SECURITIES
A Fund or Portfolio 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
A Fund or Portfolio 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
or Portfolio's Portfolio of Investments.
(O) LINE OF CREDIT
Each of the Funds, 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 GT
Funds to borrow an aggregate maximum amount of $250,000,000. Each of these funds
is limited to borrowing up to 33 1/3% of the value of each Fund's total assets.
On April 30, 1998, there were no outstanding loans.
For the period ended April 30, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for GT Global Consumer Products Fund, GT Global Financial Services Fund, GT
Global Health Care Fund, GT Global Natural Resources Fund and GT Global
Telecommunications Fund was $1,170,000, $1,290,000, $746,750, $2,468,082, and
$7,805,222 respectively, with a weighted average interest rate of 6.31%, 6.19%,
6.45%, 6.29%, and 6.22%, respectively. Interest expense for the GT Global
Consumer Products Fund, GT Global Financial Services Fund, GT Global Health Care
Fund, GT Global Natural Resources Fund and GT Global Telecommunications Fund for
the period ended April 30, 1998 was $7,383, $2,214, $536, $21,125 and $24,291,
respectively, and is included in "Other Expenses" on the Statement of
Operations.
2. RELATED PARTIES (SEE ALSO NOTE 7)
For the period ended April 30, 1998, Chancellor LGT Asset Management, Inc. was
the Funds' and Portfolios' investment manager and administrator. GT Global
Consumer Products and Services Fund, GT Global Financial Services Fund, GT
Global Infrastructure Fund, and GT Global Natural Resources Fund each pays the
Manager administration fees at the annualized rate of 0.25% of such Fund's
average daily net assets. Each of the Portfolios pays investment management and
administration fees to the Manager at the annualized rate of 0.725% on the first
$500 million of average daily net assets of the Portfolio; 0.70% on the next
$500 million; 0.675% on the next $500 million; and 0.65% on amounts thereafter.
GT Global Health Care Fund and GT Global Telecommunications Fund each 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 Funds' distributor. The Funds offer 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 Funds' 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 the
following sales charges: $10,253 for the GT Global Consumer Products and
Services Fund, $7,958 for the GT Global Financial Services Fund, $13,964 for the
GT Global Health Care Fund, $3,173 for the GT Global Infrastructure Fund,
$12,051 for the GT Global Natural Resources Fund, and $38,922 for the GT Global
Telecommunications Fund. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge ("CDSC") upon redemption, in
accordance with the Funds' current prospectus. GT Global collected CDSCs for the
period ended April 30, 1998, as follows: $207 for the GT Global Health Care
Fund, $1,704 for the GT Global Natural Resources Fund, and $28,868 for the GT
Global Telecommunications Fund. 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 Funds' current
prospectus. For the period ended April 30, 1998, GT Global collected CDSCs in
the amount of: $219,642 for the GT Global Consumer Products and Services Fund,
$114,176 for the GT Global Financial Services Fund, $297,817 for the GT Global
Health Care Fund, $227,499 for the GT Global Infrastructure Fund, $205,833 for
the GT Global Natural Resources Fund, and $1,825,382 for the GT Global
Telecommunications Fund. 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
FS-52
<PAGE> 636
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
respect to the Funds' Class A shares ("Class A Plan") and Class B shares ("Class
B Plan"), a Fund reimbursed GT Global for a portion of its shareholder servicing
and distributions expenses. Under that Class A Plan, a 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, a 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 each Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary expense)
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 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 Funds. 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
Funds 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 Funds and Portfolios.
The monthly fee for these services to the Manager is a percentage, not to exceed
0.03% annually, of a Fund or Portfolio'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 each Fund's average daily
net assets.
The Company pays each Director who is not an employee, officer or director of
the Manager, or any other affiliated company $5,000 per year plus $300 for each
meeting of the board or any committee thereof attended by the Director. Each
Portfolio pays each of its Trustees who is not an employee, officer, or director
of the Manager, GT Global or GT Services $500 per year plus $150 for each
meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities, other
than short-term investments, by each Fund or Portfolio for the period ended
April 30, 1998:
PURCHASES AND SALES OF SECURITIES
<TABLE>
<CAPTION>
PURCHASES
------------------------------
PORTFOLIO U.S. GOVERNMENT OTHER ISSUES
- -------------------------------------------------------------------------------- --------------- ------------
<S> <C> <C>
Global Consumer Products and Services Portfolio................................. $ 4,199,510 $155,523,280
Global Financial Services Portfolio............................................. -- 63,728,759
GT Global Health Care Fund...................................................... -- 399,958,793
Global Infrastructure Portfolio................................................. -- 39,969,524
Global Natural Resources Portfolio.............................................. -- 110,713,591
GT Global Telecommunications Fund............................................... -- 448,227,983
</TABLE>
<TABLE>
<CAPTION>
SALES
------------------------------
PORTFOLIO U.S. GOVERNMENT OTHER ISSUES
- -------------------------------------------------------------------------------- --------------- ------------
<S> <C> <C>
Global Consumer Products and Services Portfolio................................. $ -- $141,592,098
Global Financial Services Portfolio............................................. -- 48,272,178
GT Global Health Care Fund...................................................... -- 444,982,304
Global Infrastructure Portfolio................................................. -- 60,993,159
Global Natural Resources Portfolio.............................................. -- 151,337,444
GT Global Telecommunications Fund............................................... -- 610,121,125
</TABLE>
FS-53
<PAGE> 637
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
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, 400,000,000 were classified as
shares of the GT Global Telecommunications 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 Developing 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; 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; 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
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 1,112,259 $ 25,614,280 3,438,964 $ 69,880,587
Shares issued in connection with reinvestment of
distributions................................... 232,566 5,000,187 143,274 2,884,089
----------- ------------- ----------- ---------------
1,344,825 30,614,467 3,582,238 72,764,676
Shares repurchased................................ (1,343,578) (30,694,267) (4,424,828) (88,957,730)
----------- ------------- ----------- ---------------
Net increase (decrease)........................... 1,247 $ (79,800) (842,590) $ (16,193,054)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
CLASS B
- --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold....................................... 723,496 $ 16,399,597 2,703,434 $ 53,329,784
Shares issued in connection with reinvestment of
distributions................................... 327,557 6,925,053 168,859 3,364,713
----------- ------------- ----------- ---------------
1,051,053 23,324,650 2,872,293 56,694,497
Shares repurchased................................ (991,653) (22,264,517) (2,802,820) (55,171,454)
----------- ------------- ----------- ---------------
Net increase...................................... 59,400 $ 1,060,133 69,473 $ 1,523,043
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
ADVISOR CLASS
- --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold....................................... 566,015 $ 12,996,998 287,832 $ 6,471,623
Shares issued in connection with reinvestment of
distributions................................... 44,078 962,215 15,186 308,573
----------- ------------- ----------- ---------------
610,093 13,959,213 303,018 6,780,196
Shares repurchased................................ (165,014) (3,649,509) (386,341) (7,704,551)
----------- ------------- ----------- ---------------
Net increase (decrease)........................... 445,079 $ 10,309,704 (83,323) $ (924,355)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
</TABLE>
FS-54
<PAGE> 638
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
GT GLOBAL FINANCIAL SERVICES FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 2,072,253 $ 37,752,666 3,783,353 $ 60,418,186
Shares issued in connection with reinvestment of
distributions................................... 54,738 960,105 35,121 488,531
----------- ------------- ----------- ---------------
2,126,991 38,712,771 3,818,474 60,906,717
Shares repurchased................................ (1,956,651) (35,515,655) (2,611,893) (41,931,634)
----------- ------------- ----------- ---------------
Net increase...................................... 170,340 $ 3,197,116 1,206,581 $ 18,975,083
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
CLASS B
- --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold....................................... 1,623,641 $ 28,918,053 4,102,099 $ 64,968,183
Shares issued in connection with reinvestment of
distributions................................... 76,614 1,322,358 44,922 618,563
----------- ------------- ----------- ---------------
1,700,255 30,240,411 4,147,021 65,586,746
Shares repurchased................................ (1,235,482) (21,955,270) (2,045,933) (32,384,709)
----------- ------------- ----------- ---------------
Net increase...................................... 464,773 $ 8,285,141 2,101,088 $ 33,202,037
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
ADVISOR CLASS
- --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold....................................... 511,558 $ 9,122,009 220,956 $ 4,021,549
Shares issued in connection with reinvestment of
distributions................................... 12,688 224,953 359 5,018
----------- ------------- ----------- ---------------
524,246 9,346,962 221,315 4,026,567
Shares repurchased................................ (143,620) (2,492,661) (11,568) (198,290)
----------- ------------- ----------- ---------------
Net increase...................................... 380,626 $ 6,854,301 209,747 $ 3,828,277
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
</TABLE>
GT GLOBAL HEALTH CARE FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 12,159,063 $ 262,335,545 31,631,342 $ 772,292,073
Shares issued in connection with reinvestment of
distributions................................... 4,211,990 87,483,074 1,208,813 27,043,227
----------- ------------- ----------- ---------------
16,371,053 349,818,619 32,840,155 799,335,300
Shares repurchased................................ (13,457,648) (291,455,802) (35,792,763) (876,621,319)
----------- ------------- ----------- ---------------
Net increase (decrease)........................... 2,913,405 $ 58,362,817 (2,952,608) $ (77,286,019)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
CLASS B
- --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold....................................... 2,458,046 $ 52,390,051 6,206,431 $ 152,327,079
Shares issued in connection with reinvestment of
distributions................................... 1,393,867 27,960,984 321,688 7,045,104
----------- ------------- ----------- ---------------
3,851,913 80,351,035 6,528,119 159,372,183
Shares repurchased................................ (3,410,161) (73,670,320) (5,770,947) (142,017,878)
----------- ------------- ----------- ---------------
Net increase...................................... 441,752 $ 6,680,715 757,172 $ 17,354,305
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
ADVISOR CLASS
- --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold....................................... 1,545,283 $ 34,253,905 1,865,809 $ 48,687,774
Shares issued in connection with reinvestment of
distributions................................... 84,156 1,779,060 2,543 57,375
----------- ------------- ----------- ---------------
1,629,439 36,032,965 1,868,352 48,745,149
Shares repurchased................................ (1,429,554) (31,730,407) (1,676,189) (43,406,078)
----------- ------------- ----------- ---------------
Net increase...................................... 199,885 $ 4,302,558 192,163 $ 5,339,071
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
</TABLE>
FS-55
<PAGE> 639
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
GT GLOBAL INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 104,931 $ 1,616,314 1,282,535 $ 19,272,428
Shares issued in connection with reinvestment of
distributions................................... 16,842 254,490 123,795 1,776,449
----------- ------------- ----------- ---------------
121,773 1,870,804 1,406,330 21,048,877
Shares repurchased................................ (646,612) (9,883,646) (1,518,962) (23,157,570)
----------- ------------- ----------- ---------------
Net decrease...................................... (524,839) $ (8,012,842) (112,632) $ (2,108,693)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
CLASS B
- --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold....................................... 349,600 $ 5,216,141 1,233,796 $ 18,394,879
Shares issued in connection with reinvestment of
distributions................................... 24,609 365,217 164,966 2,337,575
----------- ------------- ----------- ---------------
374,209 5,581,358 1,398,762 20,732,454
Shares repurchased................................ (1,323,411) (19,560,006) (1,288,192) (19,574,097)
----------- ------------- ----------- ---------------
Net increase (decrease)........................... (949,202) $ (13,978,648) 110,570 $ 1,158,357
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
ADVISOR CLASS
- --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold....................................... 406,514 $ 6,266,773 154,643 $ 2,526,548
Shares issued in connection with reinvestment of
distributions................................... 2,592 39,769 1,147 16,592
----------- ------------- ----------- ---------------
409,106 6,306,542 155,790 2,543,140
Shares repurchased................................ (16,383) (247,811) (12,773) (202,670)
----------- ------------- ----------- ---------------
Net increase...................................... 392,723 $ 6,058,731 143,017 $ 2,340,470
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
</TABLE>
GT GLOBAL NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 5,934,812 $ 94,206,870 14,008,426 $ 250,536,207
Shares issued in connection with reinvestment of
distributions................................... 107,234 1,988,098 97,424 1,671,792
----------- ------------- ----------- ---------------
6,042,046 96,194,968 14,105,850 252,207,999
Shares repurchased................................ (6,725,769) (107,268,558) (13,512,928) (239,425,288)
----------- ------------- ----------- ---------------
Net increase (decrease)........................... (683,723) $ (11,073,590) 592,922 $ 12,782,711
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
CLASS B
- --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold....................................... 1,115,632 $ 18,339,082 5,227,207 $ 91,103,073
Shares issued in connection with reinvestment of
distributions................................... 132,618 2,421,604 120,229 2,044,194
----------- ------------- ----------- ---------------
1,248,250 20,760,686 5,347,436 93,147,267
Shares repurchased................................ (2,099,147) (33,861,073) (4,425,914) (75,084,090)
----------- ------------- ----------- ---------------
Net increase (decrease)........................... (850,897) $ (13,100,387) 921,522 $ 18,063,177
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
ADVISOR CLASS
- --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold....................................... 964,441 $ 16,163,437 1,573,656 $ 31,848,691
Shares issued in connection with reinvestment of
distributions................................... 11,197 209,155 7,576 130,389
----------- ------------- ----------- ---------------
975,638 16,372,592 1,581,232 31,979,080
Shares repurchased................................ (1,223,931) (21,668,784) (1,180,622) (22,478,170)
----------- ------------- ----------- ---------------
Net increase (decrease)........................... (248,293) $ (5,296,192) 400,610 $ 9,500,910
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
</TABLE>
FS-56
<PAGE> 640
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
GT GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 42,237,756 $ 761,922,475 86,491,272 $ 1,449,735,933
Shares issued in connection with reinvestment of
distributions................................... 3,004,037 49,839,444 4,872,560 77,134,577
----------- ------------- ----------- ---------------
45,241,793 811,761,919 91,363,832 1,526,870,510
Shares repurchased................................ (47,343,286) (854,782,831) (113,032,156) (1,893,258,359)
----------- ------------- ----------- ---------------
Net decrease...................................... (2,101,493) $ (43,020,912) (21,668,324) $ (366,387,849)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
CLASS B
- --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold....................................... 5,605,682 $ 97,608,327 9,249,969 $ 152,245,081
Shares issued in connection with reinvestment of
distributions................................... 2,786,130 44,943,239 4,413,826 68,371,781
----------- ------------- ----------- ---------------
8,391,812 142,551,566 13,663,795 220,616,862
Shares repurchased................................ (11,156,504) (193,567,924) (29,383,147) (477,593,385)
----------- ------------- ----------- ---------------
Net decrease...................................... (2,764,692) $ (51,016,358) (15,719,352) $ (256,976,523)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
ADVISOR CLASS
- --------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold....................................... 2,089,008 $ 37,055,709 2,029,510 $ 36,070,768
Shares issued in connection with reinvestment of
distributions................................... 14,099 237,438 11,071 176,806
----------- ------------- ----------- ---------------
2,103,107 37,293,147 2,040,581 36,247,574
Shares repurchased................................ (1,955,252) (35,027,946) (1,835,151) (32,553,269)
----------- ------------- ----------- ---------------
Net increase...................................... 147,855 $ 2,265,201 205,430 $ 3,694,305
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of a Fund's or Portfolio's expenses. For the period ended April 30,
1998, the Funds' or Portfolios' expenses were reduced by the following amounts
under these arrangements:
<TABLE>
<CAPTION>
EXPENSE
REDUCTION
------------
<S> <C>
Global Consumer Products and Services
Portfolio.............................. $ 18,538
Global Financial Services Portfolio..... 11,357
GT Global Health Care Fund.............. 38,638
Global Infrastructure Portfolio......... 4,410
Global Natural Resources Portfolio...... 32,591
GT Global Telecommunications Fund....... 39,899
</TABLE>
FS-57
<PAGE> 641
AIM GLOBAL THEME FUNDS
(FORMERLY GT GLOBAL THEME FUNDS)
6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities by a Fund
or Portfolio are defined in the Investment Company Act of 1940 as an affiliated
company. Investments in affiliated companies by GT Global Health Care Fund and
GT Global Telecommunications Fund at April 30, 1998 amounted to $131,105,013 and
$23,828,296, respectively, at value.
Transactions with affiliated companies are as follows:
GT GLOBAL CONSUMER PRODUCTS PORTFOLIO:
<TABLE>
<CAPTION>
NET REALIZED DIVIDEND
PURCHASES COST SALES PROCEEDS GAIN (LOSS) INCOME
-------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
O & Y Properties, Inc. Sp Wts..................... $ 1,996,065 $ 2,376,836 $ 380,771 $ --
</TABLE>
GT GLOBAL HEALTH CARE FUND:
<TABLE>
<CAPTION>
NET REALIZED DIVIDEND
PURCHASES COST SALES PROCEEDS GAIN (LOSS) INCOME
-------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
ATL Ultrasound, Inc............................... $ 606,750 $ 1,099,963 $ 371,288 $ --
AVECOR Cardiovascular, Inc........................ 250,716 749,318 (458,188) --
Endosonics Corp................................... -- 337,211 (127,186) --
Physio Control Holding Corp....................... 3,336,633 1,489,734 551,699 --
TheraTech, Inc.................................... -- 1,941,548 (1,140,909) --
Visx, Inc......................................... 1,134,100 9,215,798 2,010,019 --
</TABLE>
GT GLOBAL TELECOMMUNICATIONS FUND:
<TABLE>
<CAPTION>
NET REALIZED DIVIDEND
PURCHASES COST SALES PROCEEDS GAIN (LOSS) INCOME
-------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
Champion Technology Holding Ltd................... $ 3,431,305 $ -- $ -- $ 55,129
Echostar Communications Corp. "A"................. -- -- -- --
Millicom International Cellular S.A............... 5,887,008 -- -- --
Orbital Sciences Corp............................. -- 33,829,243 16,094,363 --
Three-Five Systems, Inc........................... -- -- -- --
</TABLE>
7. 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 Funds and INVESCO (NY), Inc. became the
sub-adviser and sub-administrator of the Funds. In addition, A I M Distributors,
Inc. replaced GT Global, Inc. as the Funds' principal underwriter, and the Funds
became subject to compensation-type Rule 12b-1 plans of distribution, which
replaced the Funds' 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.
F58
<PAGE> 642
GT GLOBAL THEME FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statements of assets and liabilities of GT
Global Consumer Products & Services Fund - Consolidated, GT Global Financial
Services Fund - Consolidated, GT Global Health Care Fund, GT Global
Infrastructure Fund - Consolidated, GT Global Natural Resources Fund -
Consolidated, and GT Global Telecommunications Fund, six series of G.T.
Investment Funds, Inc., including the portfolios of investments, as of October
31, 1997, the related statements of operations for the year then ended, and the
related statements of changes in net assets and financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and 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 positions of
the aforementioned series of G.T. Investments Funds, Inc. as of October 31,
1997, the results of their operations, changes in their net assets and their
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
FS-59
<PAGE> 643
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (56.3%)
CVS Corp. ................................................. US 97,900 $ 6,002,494 3.7
RETAILERS-OTHER
Airborne Freight Corp. .................................... US 80,600 5,108,025 3.1
TRANSPORTATION - AIRLINES
Brylane, Inc.-/- .......................................... US 115,000 4,995,313 3.1
RETAILERS-APPAREL
New York Times Co. "A" .................................... US 90,000 4,927,500 3.0
BROADCASTING & PUBLISHING
Jones Apparel Group, Inc.-/- .............................. US 89,200 4,538,050 2.8
RETAILERS-APPAREL
Pacific Sunwear of California-/- .......................... US 150,000 4,143,750 2.5
RETAILERS-APPAREL
Loblaw Cos., Ltd. ......................................... CAN 251,800 3,663,000 2.2
RETAILERS-FOOD
Nordstrom, Inc. ........................................... US 56,000 3,430,000 2.1
RETAILERS-APPAREL
Yogen Fruz World-Wide, Inc.-/- ............................ CAN 583,900 3,314,789 2.0
RETAILERS-FOOD
Central Newspapers, Inc. "A" .............................. US 50,000 3,284,375 2.0
BROADCASTING & PUBLISHING
Cinar Films, Inc. "B"{\/} ................................. CAN 76,000 2,954,500 1.8
LEISURE & TOURISM
Chapters, Inc.: ........................................... CAN -- -- 1.8
RETAILERS-OTHER
Common-/- ............................................... -- 83,500 1,747,978 --
Special Warrants(::) -/- ................................ -- 66,200 1,204,960 --
Sears Canada, Inc. ........................................ CAN 170,500 2,825,131 1.7
RETAILERS-OTHER
Gap, Inc. ................................................. US 50,000 2,659,375 1.6
RETAILERS-APPAREL
Outdoor Systems, Inc.-/- .................................. US 84,000 2,583,000 1.6
BUSINESS & PUBLIC SERVICES
Universal Outdoor Holdings, Inc.-/- ....................... US 60,000 2,535,000 1.6
BUSINESS & PUBLIC SERVICES
Avis Rent A Car, Inc. ..................................... US 90,000 2,469,375 1.5
TRANSPORTATION - ROAD & RAIL
Consolidated Stores Corp.-/- .............................. US 61,300 2,444,338 1.5
RETAILERS-OTHER
Family Dollar Stores, Inc. ................................ US 103,000 2,420,500 1.5
RETAILERS-APPAREL
Bed Bath & Beyond-/- ...................................... US 76,000 2,413,000 1.5
RETAILERS-OTHER
Stage Stores, Inc.-/- ..................................... US 65,000 2,372,500 1.5
RETAILERS-APPAREL
Transat A.T., Inc.-/- ..................................... CAN 270,200 2,320,054 1.4
TRANSPORTATION - AIRLINES
Dress Barn, Inc.-/- ....................................... US 90,700 2,301,513 1.4
RETAILERS-APPAREL
Abercrombie & Fitch Co.-/- ................................ US 80,000 2,080,000 1.3
RETAILERS-APPAREL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-60
<PAGE> 644
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
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)
Ames Department Stores, Inc.-/- ........................... US 132,600 $ 2,063,588 1.3
RETAILERS-OTHER
Valassis Communications, Inc.-/- .......................... US 60,000 1,770,000 1.1
BROADCASTING & PUBLISHING
Air Canada ................................................ CAN 150,000 1,495,529 0.9
TRANSPORTATION - AIRLINES
The Bombay Co., Inc. ...................................... US 244,100 1,479,856 0.9
RETAILERS-OTHER
Budget Group, Inc. "A"-/- ................................. US 41,800 1,463,000 0.9
TRANSPORTATION - ROAD & RAIL
Tuesday Morning Corp.-/- .................................. US 50,050 1,213,713 0.7
RETAILERS-APPAREL
Ryanair Holdings PLC - ADR-/- {\/} ........................ IRE 42,500 1,062,500 0.7
TRANSPORTATION - AIRLINES
Star Choice Communications, Inc.-/- ....................... CAN 293,500 916,406 0.6
BROADCASTING & PUBLISHING
Hospitality Worldwide Services-/- ......................... US 66,000 767,250 0.5
LEISURE & TOURISM
Dayton Hudson Corp. ....................................... US 10,000 628,125 0.4
RETAILERS-APPAREL
N2K, Inc.-/- .............................................. US 8,300 218,394 0.1
LEISURE & TOURISM
Hudson's Bay Co. .......................................... CAN 300 6,866 --
RETAILERS-APPAREL
------------
91,823,747
------------
Consumer Non-Durables (14.8%)
Morningstar Group, Inc.-/- ................................ US 151,200 6,463,796 4.0
FOOD
Tabacalera S.A. "A" ....................................... SPN 74,000 5,332,967 3.3
TOBACCO
Interstate Bakeries Corp. ................................. US 70,600 4,509,575 2.8
FOOD
Foodmaker, Inc.-/- ........................................ US 208,400 3,425,575 2.1
FOOD
General Cigar Holdings, Inc.-/- ........................... US 62,800 1,817,275 1.1
TOBACCO
Saputo Group, Inc.-/- ..................................... CAN 114,400 1,753,506 1.1
FOOD
American Italian Pasta Co. "A"-/- ......................... US 30,000 630,000 0.4
FOOD
------------
23,932,694
------------
Finance (6.5%)
BankAmerica Corp. ......................................... US 71,000 5,076,500 3.1
BANKS-MONEY CENTER
Merita Ltd. "A" ........................................... FIN 738,300 3,608,281 2.2
BANKS-MONEY CENTER
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-61
<PAGE> 645
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
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)
O&Y Properties Corp. Special Warrants(::) -/- {::} ........ CAN 342,400 $ 1,943,798 1.2
REAL ESTATE
------------
10,628,579
------------
Technology (2.6%)
CHS Electronics, Inc.-/- .................................. US 164,500 4,019,969 2.5
COMPUTERS & PERIPHERALS
Concord Communications, Inc.-/- ........................... US 7,100 126,025 0.1
SOFTWARE
------------
4,145,994
------------
Capital Goods (1.3%)
HON INDUSTRIES, Inc. ...................................... US 40,000 2,065,000 1.3
OFFICE EQUIPMENT
------------ -----
TOTAL EQUITY INVESTMENTS (cost $124,047,571) ................ 132,596,014 81.5
------------ -----
<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 $4,435,000 U.S. Treasury Bond, 8.875%
due 8/15/17 (market value of collateral is $5,818,438,
including accrued interest).
(cost $5,697,881) ....................................... 5,697,881 3.5
------------ -----
TOTAL INVESTMENTS (cost $129,745,452) * .................... 138,293,895 85.0
Other Assets and Liabilities ................................ 24,368,418 15.0
------------ -----
NET ASSETS .................................................. $162,662,313 100.0
------------ -----
------------ -----
</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 was an affiliate at October 31, 1997 (see Note 6 of Notes
to Financial Statements).
* For Federal income tax purposes, cost is $129,972,640 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 11,067,741
Unrealized depreciation: (2,746,486)
-------------
Net unrealized appreciation: $ 8,321,255
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depository Receipt
The accompanying notes are an integral part of the financial statements.
FS-62
<PAGE> 646
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
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>
Canada (CAN/CAD) ..................... 14.7 14.7
Finland (FIN/FIM) .................... 2.2 2.2
Ireland (IRE/IEP) .................... 0.7 0.7
Spain (SPN/ESP) ...................... 3.3 3.3
United States (US/USD) ............... 60.6 18.5 79.1
------ ----- -----
Total ............................... 81.5 18.5 100.0
------ ----- -----
------ ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $162,662,313.
The accompanying notes are an integral part of the financial statements.
FS-63
<PAGE> 647
GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Banks - Regional (50.6%)
Sparbanken Sverige AB "A" .................................. SWDN 68,000 $ 1,543,927 1.9
City National Corp. ........................................ US 50,550 1,525,978 1.9
Lloyds TSB Group PLC ....................................... UK 113,600 1,419,524 1.8
Royal Bank of Canada ....................................... CAN 26,000 1,390,221 1.7
NationsBank Corp. .......................................... US 20,000 1,197,500 1.5
Mellon Bank Corp. .......................................... US 21,800 1,124,063 1.4
Bank of Montreal ........................................... CAN 25,800 1,114,058 1.4
Demirbank T.A.S. ........................................... TRKY 37,896,000 1,084,691 1.3
National Bank of Canada .................................... CAN 75,600 1,080,996 1.3
Hamilton Bancorp, Inc.-/- .................................. US 35,000 1,067,500 1.3
Crestar Financial Corp. .................................... US 20,800 984,100 1.2
GreenPoint Financial Corp. ................................. US 15,100 972,063 1.2
Norbanken AB ............................................... SWDN 30,400 954,136 1.2
Christiania Bank Og Kreditkasse ............................ NOR 232,900 933,534 1.2
Bayerische Vereinsbank ..................................... GER 16,070 931,864 1.2
Bank Leumi Le - Israel ..................................... ISRL 605,700 930,012 1.1
Jyske Bank ................................................. DEN 9,000 927,029 1.1
Bank Hapoalim Ltd. ......................................... ISRL 383,000 906,460 1.1
Bank of Ireland ............................................ IRE 70,800 895,906 1.1
First Union Corp. (N.C.) ................................... US 18,200 892,938 1.1
H. F. Ahmanson & Co. ....................................... US 15,000 885,000 1.1
Halifax PLC-/- ............................................. UK 76,800 869,507 1.1
Nedcor Ltd. ................................................ SAFR 41,123 863,498 1.1
Zagrebacka Banka - 144A GDR{.} {\/} ........................ CRT 27,000 860,625 1.1
Sovereign Bancorp, Inc. .................................... US 48,200 855,550 1.1
First American Corp. ....................................... US 18,000 855,000 1.1
Allied Irish Bank PLC{V} ................................... IRE 97,644 826,256 1.0
ABSA Group Ltd. ............................................ SAFR 138,867 822,809 1.0
Anglo-Irish Bank Corp., PLC: ............................... IRE -- -- 1.0
Common{V} ................................................ -- 315,036 515,196 --
Common ................................................... -- 180,000 297,565 --
Compagnie Financiere de Paribas S.A. ....................... FR 11,100 806,457 1.0
First National Bank Holdings Ltd. .......................... SAFR 105,800 799,549 1.0
Yapi ve Kredi Bankasi A.S. ................................. TRKY 26,000,000 793,807 1.0
Commercial International Bank - GDR{\/} .................... EGPT 36,265 788,764 1.0
National Australia Bank Ltd. ............................... AUSL 56,500 772,531 1.0
Ergo Bank S.A. ............................................. GREC 12,960 772,510 1.0
Westpac Banking Corp., Ltd. ................................ AUSL 132,000 768,337 0.9
Australia & New Zealand Banking Group Ltd. ................. AUSL 110,000 767,100 0.9
Banco Totta & Acores S.A. "B" .............................. PORT 39,300 760,068 0.9
Wielkopolski Bank Kredytowy S.A. ........................... POL 138,000 753,448 0.9
Cullen/Frost Bankers, Inc. ................................. US 14,500 732,250 0.9
Akbank T.A.S. .............................................. TRKY 9,821,967 669,363 0.8
Banco Commercial S.A. - 144A GDR{.} {\/} ................... URGY 22,000 638,000 0.8
BG Bank AS ................................................. DEN 9,500 610,308 0.8
Banco Bradesco S.A. Preferred .............................. BRZL 79,500,000 591,346 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-64
<PAGE> 648
GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
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>
Banks - Regional (Continued)
Security Bank Corp.-/- ..................................... PHIL 688,900 $ 363,095 0.4
-----------
40,914,439
-----------
Banks - Money Center (18.4%)
BankAmerica Corp. .......................................... US 43,400 3,103,091 3.8
Citicorp ................................................... US 15,050 1,882,191 2.3
Chase Manhattan Corp. ...................................... US 14,750 1,701,781 2.1
Merita Ltd. "A" ............................................ FIN 297,000 1,451,523 1.8
HSBC Holdings PLC .......................................... HK 55,800 1,263,260 1.6
Barclays PLC ............................................... UK 39,375 986,026 1.2
Schweizerischer Bankverein (Swiss Bank Corp.)-/- ........... SWTZ 3,330 895,532 1.1
Unidanmark AS "A" .......................................... DEN 13,200 891,009 1.1
ABN AMRO Holdings N.V. ..................................... NETH 42,864 863,463 1.1
Bank of Tokyo - Mitsubishi ................................. JPN 41,750 544,867 0.7
Sumitomo Bank .............................................. JPN 37,000 393,682 0.5
Industrial Bank of Japan ................................... JPN 26,000 257,190 0.3
Fuji Bank Ltd. ............................................. JPN 29,000 250,707 0.3
Sanwa Bank ................................................. JPN 24,000 241,397 0.3
Dai-Ichi Kangyo Bank Ltd. .................................. JPN 15,000 127,182 0.2
-----------
14,852,901
-----------
Insurance - Multi-Line (10.9%)
Conseco, Inc. .............................................. US 51,600 2,251,050 2.8
Fremont General Corp. ...................................... US 30,000 1,398,750 1.7
Allstate Corp. ............................................. US 15,000 1,244,063 1.5
SunAmerica, Inc. ........................................... US 29,800 1,070,938 1.3
Axa Group .................................................. FR 14,770 1,011,872 1.2
Royal & Sun Alliance Insurance Group PLC ................... UK 98,700 946,110 1.2
American International Group, Inc. ......................... US 9,200 938,975 1.2
-----------
8,861,758
-----------
Consumer Finance (5.8%)
The Money Store, Inc. ...................................... US 39,500 1,120,813 1.4
Green Tree Financial Corp. ................................. US 24,600 1,036,275 1.3
Doral Financial Corp. ...................................... US 45,200 1,000,050 1.2
Aeon Credit Service ........................................ HK 2,964,000 747,710 0.9
Acom Co., Ltd. ............................................. JPN 9,000 493,766 0.6
Bankard, Inc.-/- ........................................... PHIL 5,307,000 362,872 0.4
-----------
4,761,486
-----------
Other Financial (4.1%)
Newcourt Credit Group, Inc. ................................ CAN 25,200 871,771 1.1
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} ................................................... PAN 20,000 795,000 1.0
Investors Financial Services Corp. ......................... US 16,500 726,000 0.9
MoneyGram Payment Systems, Inc.-/- ......................... US 42,000 580,125 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-65
<PAGE> 649
GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
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>
Other Financial (Continued)
Shohkoh Fund ............................................... JPN 1,200 $ 349,127 0.4
-----------
3,322,023
-----------
Securities Broker (2.8%)
Hambrecht & Quist Group-/- ................................. US 30,000 945,000 1.2
Morgan Stanley, Dean Witter, Discover and Co. .............. US 13,200 652,575 0.8
Peregrine Investment Holdings Ltd. ......................... HK 532,000 523,053 0.6
Nomura Securities Co., Ltd. ................................ JPN 10,000 116,376 0.1
Daiwa Securities Co., Ltd. ................................. JPN 14,000 84,722 0.1
-----------
2,321,726
-----------
Investment Management (2.4%)
Alliance Capital Management L.P. ........................... US 32,400 1,111,725 1.4
Franklin Resources, Inc. ................................... US 8,750 786,406 1.0
-----------
1,898,131
----------- -----
TOTAL EQUITY INVESTMENTS (cost $69,090,966) .................. 76,932,464 95.0
----------- -----
<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 $2,110,000 U.S. Treasury Bond, 8.875% due
8/15/17 (market value of collateral is $2,768,185,
including accrued interest). (cost $2,708,419) ........... 2,708,419 3.4
----------- -----
TOTAL INVESTMENTS (cost $71,799,385) * ...................... 79,640,883 98.4
Other Assets and Liabilities ................................. 1,320,751 1.6
----------- -----
NET ASSETS ................................................... $80,961,634 100.0
----------- -----
----------- -----
</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.
{V} Security is denominated in GBP.
* For Federal income tax purposes, cost is $72,281,726 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 10,637,773
Unrealized depreciation: (3,278,616)
-------------
Net unrealized appreciation: $ 7,359,157
-------------
-------------
</TABLE>
Abbreviation:
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
FS-66
<PAGE> 650
GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
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>
Australia (AUSL/AUD) ................. 2.8 2.8
Brazil (BRZL/BRL) .................... 0.7 0.7
Canada (CAN/CAD) ..................... 5.5 5.5
Croatia (CRT/HRK) .................... 1.1 1.1
Denmark (DEN/DKK) .................... 3.0 3.0
Egypt (EGPT/EGP) ..................... 1.0 1.0
Finland (FIN/FIM) .................... 1.8 1.8
France (FR/FRF) ...................... 2.2 2.2
Germany (GER/DEM) .................... 1.2 1.2
Greece (GREC/GRD) .................... 1.0 1.0
Hong Kong (HK/HKD) ................... 3.1 3.1
Ireland (IRE/IEP) .................... 3.1 3.1
Israel (ISRL/ILS) .................... 2.2 2.2
Japan (JPN/JPY) ...................... 3.5 3.5
Netherlands (NETH/NLG) ............... 1.1 1.1
Norway (NOR/NOK) ..................... 1.2 1.2
Panama (PAN/PND) ..................... 1.0 1.0
Philippines (PHIL/PHP) ............... 0.8 0.8
Poland (POL/PLZ) ..................... 0.9 0.9
Portugal (PORT/PTE) .................. 0.9 0.9
South Africa (SAFR/ZAR) .............. 3.1 3.1
Sweden (SWDN/SEK) .................... 3.1 3.1
Switzerland (SWTZ/CHF) ............... 1.1 1.1
Turkey (TRKY/TRL) .................... 3.1 3.1
United Kingdom (UK/GBP) .............. 5.3 5.3
United States (US/USD) ............... 40.4 5.0 45.4
Uruguay (URGY/UYP) ................... 0.8 0.8
------ --- ----------
Total ............................... 95.0 5.0 100.0
------ --- ----------
------ --- ----------
</TABLE>
- --------------
(d) Percentages indicated are based on net assets of $80,961,634.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACT OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE CONTRACT DELIVERY UNREALIZED
CONTRACT TO SELL: (U.S. DOLLARS) PRICE DATE APPRECIATION
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Japanese Yen............................ 1,182,045 114.50000 11/12/97 $ 59,877
-------------- --------------
Total Contracts to Sell (Receivable
amount $1,241,922)................... 1,182,045 59,877
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 1.46%.
Total Open Forward Foreign Currency
Contracts............................ $ 59,877
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-67
<PAGE> 651
GT GLOBAL HEALTH CARE FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Medical Technology & Supplies (37.8%)
ATL Ultrasound, Inc.{::} -/- .............................. US 755,500 $ 32,486,500 5.2
Visx, Inc.{::} -/- ........................................ US 1,147,700 26,253,638 4.2
Endosonics Corp.{::} -/- .................................. US 1,546,000 17,779,000 2.8
Physio-Control International Corp.{::} -/- ................ US 1,050,500 16,742,344 2.7
Sunrise Medical, Inc.{::} -/- ............................. US 1,011,700 15,618,119 2.5
Waters Corp.-/- ........................................... US 345,000 15,158,438 2.4
Dexter Corp. .............................................. US 339,000 13,305,750 2.1
TECNOL Medical Products, Inc.-/- .......................... US 572,900 12,317,350 2.0
Circon Corp.{::} -/- ...................................... US 686,486 10,812,155 1.7
Cardiac Pathways Corp.{::} -/- ............................ US 1,002,400 9,522,800 1.5
Lifecore Biomedical, Inc.-/- .............................. US 361,900 7,509,425 1.2
AVECOR Cardiovascular, Inc.{::} -/- ....................... US 658,700 6,751,675 1.1
Mentor Corp. .............................................. US 175,800 6,405,713 1.0
CONMED Corp.-/- ........................................... US 308,400 6,322,200 1.0
Angeion Corp.-/- .......................................... US 1,325,000 5,217,188 0.8
Kensey Nash Corp.-/- ...................................... US 322,600 4,919,650 0.8
Photoelectron Corp.-/- .................................... US 338,300 3,721,300 0.6
Cardiovascular Dynamics, Inc.{::} -/- ..................... US 515,675 3,480,806 0.6
Innerdyne, Inc.-/- ........................................ US 824,600 2,886,100 0.5
CardioGenesis Corp.-/- .................................... US 307,000 2,763,000 0.4
Laser Industries Ltd.-/- .................................. US 130,500 2,593,688 0.4
INAMED Corp.{::} -/- ...................................... US 628,900 2,515,600 0.4
Heartstream, Inc.-/- ...................................... US 206,800 2,145,550 0.3
Laserscope-/- ............................................. US 330,800 1,943,450 0.3
ThermoTrex Corp.-/- ....................................... US 73,000 1,679,000 0.3
Micro Therapeutics, Inc.-/- ............................... US 290,000 1,558,750 0.2
Abaxis, Inc.-/- ........................................... US 462,400 1,445,000 0.2
Lumisys, Inc.-/- .......................................... US 211,400 1,294,825 0.2
Interpore International-/- ................................ US 92,900 870,938 0.1
Sulzer Medica AG - Registered-/- .......................... SWTZ 3,130 849,571 0.1
ESC Medical Systems Ltd.-/- {\/} .......................... ISRL 19,200 753,600 0.1
Thoratec Laboratories Corp.-/- ............................ US 60,000 412,500 0.1
ATS Medical, Inc.-/- ...................................... US 31,250 195,313 --
Conceptus, Inc.-/- ........................................ US 18,000 130,500 --
------------
238,361,436
------------
Biotechnology (26.6%)
Protein Design Labs, Inc.{::} -/- ......................... US 1,017,600 50,752,795 8.1
Amgen, Inc.-/- ............................................ US 539,000 26,545,750 4.2
Guilford Pharmaceuticals, Inc.-/- ......................... US 896,600 21,854,625 3.5
Cell Therapeutics, Inc.{::} -/- ........................... US 1,141,000 18,256,000 2.9
Regeneron Pharmaceuticals, Inc.{::} -/- ................... US 1,414,900 14,768,019 2.4
Human Genome Sciences, Inc.-/- ............................ US 260,900 10,696,900 1.7
Genelabs Technologies, Inc.-/- ............................ US 1,642,800 6,365,850 1.0
Interferon Sciences, Inc.-/- .............................. US 552,500 5,110,625 0.8
NABI, Inc.-/- ............................................. US 592,500 2,814,375 0.5
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-68
<PAGE> 652
GT GLOBAL HEALTH CARE 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>
Biotechnology (Continued)
PathoGenesis Corp.-/- ..................................... US 61,400 $ 2,210,400 0.4
Agouron Pharmaceuticals, Inc.-/- .......................... US 46,400 2,117,000 0.3
CytoTherapeutics, Inc.-/- ................................. US 396,900 2,083,725 0.3
Pharmacyclics, Inc.-/- .................................... US 75,000 1,912,500 0.3
Coulter Pharmaceutical, Inc.-/- ........................... US 73,700 1,059,438 0.2
Enzon, Inc. Preferred-/- (.) .............................. US 16,000 222,460 --
Targeted Genetics Corp.-/- ................................ US 40,000 160,000 --
------------
166,930,462
------------
Pharmaceuticals (17.7%)
TheraTech, Inc.{::} -/- ................................... US 2,150,000 22,575,000 3.6
American Home Products Corp. .............................. US 145,600 10,792,600 1.7
Perrigo Co.-/- ............................................ US 648,600 9,972,225 1.6
Spiros Development Corp.(::) (.) -/- ...................... US 100,000 9,161,246 1.5
Rhone-Poulenc "A" ......................................... FR 190,736 8,319,910 1.3
Depotech Corp.-/- ......................................... US 549,300 7,621,538 1.2
Magainin Pharmaceuticals, Inc.-/- ......................... US 895,100 7,608,350 1.2
Bergen Brunswig Corp. "A" ................................. US 150,000 6,009,375 1.0
Catalytica, Inc.-/- ....................................... US 437,866 5,473,325 0.9
SEQUUS Pharmaceuticals, Inc.-/- ........................... US 597,800 5,380,200 0.9
IVAX Corp.-/- ............................................. US 700,000 5,293,750 0.8
Altana AG ................................................. GER 50,000 3,632,937 0.6
Life Medical Sciences, Inc.{::} -/- ....................... US 768,600 3,074,400 0.5
Warner Chilcott Laboratories - ADR{\/} .................... IRE 117,000 1,652,625 0.3
Unimed Pharmaceuticals, Inc.-/- ........................... US 147,200 1,048,800 0.2
Intercardia, Inc.-/- ...................................... US 41,200 999,100 0.2
Alpharma, Inc. "A" ........................................ US 21,700 478,756 0.1
Aradigm Corp.-/- .......................................... US 28,000 322,000 0.1
------------
109,416,137
------------
Health Care Services (5.2%)
Vencor, Inc.-/- ........................................... US 801,400 21,637,800 3.5
Allegiance Corp. .......................................... US 120,000 3,330,000 0.5
Grupo Casa Autrey, S.A. de C.V. - ADR{\/} ................. MEX 135,100 2,313,588 0.4
Parkway Holdings Ltd. ..................................... SING 900,000 2,277,177 0.4
SteriGenics International, Inc.-/- ........................ US 61,900 1,392,750 0.2
Cohr, Inc.-/- ............................................. US 129,100 1,355,550 0.2
------------
32,306,865
------------ -----
TOTAL EQUITY INVESTMENTS (cost $484,175,220) ................ 547,014,900 87.3
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-69
<PAGE> 653
GT GLOBAL HEALTH CARE 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>
Rhone-Poulenc Warrants, expire 11/5/01 .................... FR 190,736 $ 603,731 0.1
PHARMACEUTICALS
ALZA Corp. Warrants, expire 12/31/99 ...................... US 100,000 18,750 --
PHARMACEUTICALS
------------ -----
TOTAL WARRANTS (cost $32,137) ............................... 622,481 0.1
------------ -----
<CAPTION>
NO. OF
RIGHTS RIGHTS
- ------------------------------------------------------------- -----------
<S> <C> <C> <C> <C>
Alpharma, Inc. Rights, expire 11/25/97 (cost $0) .......... US 3,616 20,340 --
------------ -----
PHARMACEUTICALS
<CAPTION>
REPURCHASE AGREEMENT
- -------------------------------------------------------------
<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 $56,460,000 U.S. Treasury Bond, 8.875%
due 8/15/17 (market value of collateral is $74,071,916,
including accrued interest).
(cost $72,617,234) ...................................... 72,617,234 11.6
------------ -----
TOTAL INVESTMENTS (cost $556,824,591) * .................... 620,274,955 99.0
Other Assets and Liabilities ................................ 6,067,162 1.0
------------ -----
NET ASSETS .................................................. $626,342,117 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{::} Security was an affiliate at October 31, 1997 (see Note 6 of Notes
to Financial Statements).
{\/} U.S. currency denominated.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (see Note 1 of Notes to Financial Statements).
(.) Restricted securities: At October 31, 1997 the Fund owned the
following restricted securities constituting less than 1.5% 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>
VALUE
PER
SHARE
(NOTE
DESCRIPTION ACQUISITION DATE SHARES COST 1)
----------------------------------------------- ----------------- ------ ----------- ------
<S> <C> <C> <C> <C>
Enzon, Inc. Preferred.......................... 3/22/90 16,000 $ 400,000 $13.90
Spiros Development Corp........................ 1/3/96 100,000 3,000,000 91.61
</TABLE>
* For Federal income tax purposes, cost is $558,926,202 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 88,802,844
Unrealized depreciation: (27,454,091)
-------------
Net unrealized appreciation: $ 61,348,753
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depository Receipt
The accompanying notes are an integral part of the financial statements.
FS-70
<PAGE> 654
GT GLOBAL HEALTH CARE 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, SHORT-TERM
RIGHTS & &
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS OTHER TOTAL
- -------------------------------------- ------ ------------- ----- -----
<S> <C> <C> <C> <C>
France (FR/FRF) ...................... 1.3 0.1 1.4
Germany (GER/DEM) .................... 0.6 0.6
Ireland (IRE/IEP) .................... 0.3 0.3
Israel (ISRL/ILS) .................... 0.1 0.1
Mexico (MEX/MXN) ..................... 0.4 0.4
Singapore (SING/SGD) ................. 0.4 0.4
Switzerland (SWTZ/CHF) ............... 0.1 0.1
United States (US/USD) ............... 84.1 12.6 96.7
------ --- ----- -----
Total ............................... 87.3 0.1 12.6 100.0
------ --- ----- -----
------ --- ----- -----
</TABLE>
- --------------
(d) Percentages indicated are based on net assets of $626,342,117.
The accompanying notes are an integral part of the financial statements.
FS-71
<PAGE> 655
GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Energy (31.2%)
Hub Power Co.-/- ........................................... PAK 2,400,000 $ 3,206,835 3.3
ELECTRICAL & GAS UTILITIES
Enron Global Power & Pipelines L.L.C. ...................... US 90,000 3,099,375 3.2
ELECTRICAL & GAS UTILITIES
Endesa S.A. - ADR{\/} ...................................... SPN 160,000 2,980,000 3.0
ELECTRICAL & GAS UTILITIES
Shaw Group, Inc.-/- ........................................ US 140,300 2,928,763 3.0
ENERGY EQUIPMENT & SERVICES
IES Industries, Inc. ....................................... US 81,000 2,612,250 2.7
ELECTRICAL & GAS UTILITIES
Light - Participacoes S.A. ................................. BRZL 9,910,000 2,535,033 2.6
ELECTRICAL & GAS UTILITIES
Edison S.p.A. .............................................. ITLY 450,000 2,370,058 2.4
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. ..................... BRZL 7,000,000 2,324,020 2.4
ELECTRICAL & GAS UTILITIES
EVN Energie-Versorgung Niederoesterreich AG ................ ASTRI 16,800 1,948,628 2.0
ELECTRICAL & GAS UTILITIES
Giant Industries, Inc. ..................................... US 102,600 1,840,388 1.9
OIL
AES Corp.-/- ............................................... US 45,264 1,793,586 1.8
ELECTRICAL & GAS UTILITIES
BSES Ltd. - 144A GDR{.} {\/} ............................... IND 70,000 1,085,000 1.1
ELECTRICAL & GAS UTILITIES
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} ..... BRZL 24,900 996,000 1.0
ELECTRICAL & GAS UTILITIES
MetroGas S.A. - ADR{\/} .................................... ARG 111,051 805,120 0.8
ELECTRICAL & GAS UTILITIES
-----------
30,525,056
-----------
Services (23.1%)
Canadian National Railway Co. .............................. CAN 60,900 3,284,415 3.3
TRANSPORTATION - ROAD & RAIL
Aeroporti di Roma SpA-/- ................................... ITLY 286,600 2,606,270 2.7
TRANSPORTATION - AIRLINES
Hellenic Telecommunications Organization S.A. .............. GREC 118,250 2,469,600 2.5
TELEPHONE NETWORKS
Telecom Italia SpA - Di Risp-/- ............................ ITLY 600,000 2,415,946 2.5
TELEPHONE NETWORKS
SPT Telecom-/- ............................................. CZCH 19,000 2,187,547 2.2
TELEPHONE NETWORKS
Tranz Rail Holdings Ltd. - ADR{\/} ......................... NZ 132,000 1,782,000 1.8
TRANSPORTATION - ROAD & RAIL
Portugal Telecom S.A. - ADR{\/} ............................ PORT 43,000 1,773,750 1.8
TELEPHONE NETWORKS
Paging Network, Inc.-/- .................................... US 125,000 1,546,875 1.6
WIRELESS COMMUNICATIONS
Centennial Cellular Corp. "A"-/- ........................... US 50,000 1,000,000 1.0
WIRELESS COMMUNICATIONS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-72
<PAGE> 656
GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
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)
DDI Corp. .................................................. JPN 295 $ 985,786 1.0
WIRELESS COMMUNICATIONS
Telefonica del Peru S.A. - ADR{\/} ......................... PERU 40,900 807,775 0.8
TELEPHONE NETWORKS
Compania Anonima Nacional Telefonos de Venezuela (CANTV) -
ADR{\/} ................................................... VENZ 16,000 700,000 0.7
TELEPHONE NETWORKS
Pakistan Telecommunications Co., Ltd.: ..................... PAK -- -- 0.6
TELEPHONE NETWORKS
GDR{\/} .................................................. -- 4,892 396,252 --
"A" ...................................................... -- 280,000 235,741 --
Philippine Long Distance Telephone Co. - ADR{\/} ........... PHIL 20,000 485,000 0.5
TELEPHONE NETWORKS
China Telecom (Hong Kong) Ltd.-/- .......................... HK 80,000 127,814 0.1
WIRELESS COMMUNICATIONS
-----------
22,804,771
-----------
Materials/Basic Industry (20.8%)
Giant Cement Holding, Inc.-/- .............................. US 179,800 4,360,150 4.4
CEMENT
La Cementos Nacional, C.A. - 144A GDR{.} {\/} .............. ECDR 15,060 3,162,600 3.2
CEMENT
Northwest Pipe Co.-/- ...................................... US 127,500 3,091,875 3.2
METALS - STEEL
IPSCO, Inc. ................................................ CAN 67,600 2,926,199 3.0
METALS - STEEL
Hylsamex, S.A. de C.V. - 144A ADR{.} {\/} .................. MEX 75,000 2,896,875 3.0
METALS - STEEL
NS Group, Inc.-/- .......................................... US 98,100 2,624,175 2.7
METALS - STEEL
Suez Cement Co. - Reg S GDR{c} {\/} ........................ EGPT 60,000 1,245,000 1.3
CEMENT
-----------
20,306,874
-----------
Capital Goods (9.3%)
Doncasters PLC - ADR-/- {\/} ............................... UK 139,600 3,760,474 3.8
AEROSPACE/DEFENSE
Caterpillar, Inc. .......................................... US 60,000 3,075,000 3.1
MACHINERY & ENGINEERING
KCI Konecranes International ............................... FIN 42,660 1,664,636 1.7
MACHINERY & ENGINEERING
United Engineers Ltd. ...................................... MAL 270,000 640,733 0.7
CONSTRUCTION
-----------
9,140,843
-----------
Technology (7.8%)
Tadiran Telecommunications Ltd.{\/} ........................ ISRL 130,000 2,941,250 3.0
TELECOM TECHNOLOGY
Emcore Corp.-/- ............................................ US 123,000 2,367,750 2.4
SEMICONDUCTORS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-73
<PAGE> 657
GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
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>
Technology (Continued)
Cisco Systems, Inc.-/- ..................................... US 21,000 $ 1,722,656 1.8
NETWORKING
Asia Pacific Wire & Cable Corporation Ltd.-/- {\/} ......... SING 59,400 549,450 0.6
TELECOM TECHNOLOGY
-----------
7,581,106
-----------
Multi-Industry/Miscellaneous (4.7%)
Mannesmann AG .............................................. GER 7,500 3,166,135 3.2
MULTI-INDUSTRY
E.R.G. Ltd. ................................................ AUSL 1,689,040 1,436,723 1.5
MULTI-INDUSTRY
-----------
4,602,858
----------- -----
TOTAL EQUITY INVESTMENTS (cost $76,186,714) .................. 94,961,508 96.9
----------- -----
<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 $1,680,000 U.S. Treasury Bond, 8.875% due
8/15/17 (market value of collateral is $2,204,053,
including accrued interest). (cost $2,156,334) ........... 2,156,334 2.2
----------- -----
TOTAL INVESTMENTS (cost $78,343,048) * ...................... 97,117,842 99.1
Other Assets and Liabilities ................................. 901,217 0.9
----------- -----
NET ASSETS ................................................... $98,019,059 100.0
----------- -----
----------- -----
</TABLE>
- --------------
{\/} U.S. currency denominated.
-/- Non-income producing security.
{.} 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 $78,343,048 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 23,477,043
Unrealized depreciation: (4,702,249)
-------------
Net unrealized appreciation: $ 18,774,794
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
FS-74
<PAGE> 658
GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
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) .................. 0.8 0.8
Australia (AUSL/AUD) ................. 1.5 1.5
Austria (ASTRI/ATS) .................. 2.0 2.0
Brazil (BRZL/BRL) .................... 6.0 6.0
Canada (CAN/CAD) ..................... 6.3 6.3
Czech Republic (CZCH/CSK) ............ 2.2 2.2
Ecuador (ECDR/ECS) ................... 3.2 3.2
Egypt (EGPT/EGP) ..................... 1.3 1.3
Finland (FIN/FIM) .................... 1.7 1.7
Germany (GER/DEM) .................... 3.2 3.2
Greece (GREC/GRD) .................... 2.5 2.5
Hong Kong (HK/HKD) ................... 0.1 0.1
India (IND/INR) ...................... 1.1 1.1
Israel (ISRL/ILS) .................... 3.0 3.0
Italy (ITLY/ITL) ..................... 7.6 7.6
Japan (JPN/JPY) ...................... 1.0 1.0
Malaysia (MAL/MYR) ................... 0.7 0.7
Mexico (MEX/MXN) ..................... 3.0 3.0
New Zealand (NZ/NZD) ................. 1.8 1.8
Pakistan (PAK/PKR) ................... 3.9 3.9
Peru (PERU/PES) ...................... 0.8 0.8
Philippines (PHIL/PHP) ............... 0.5 0.5
Portugal (PORT/PTE) .................. 1.8 1.8
Singapore (SING/SGD) ................. 0.6 0.6
Spain (SPN/ESP) ...................... 3.0 3.0
United Kingdom (UK/GBP) .............. 3.8 3.8
United States & Other (US/USD) ....... 32.8 3.1 35.9
Venezuela (VENZ/VEB) ................. 0.7 0.7
------ --- -----
Total ............................... 96.9 3.1 100.0
------ --- -----
------ --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $98,019,059.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 1,509,823 1.80100 11/28/97 $ (66,180)
Japanese Yen............................ 404,821 114.50000 11/12/97 20,506
Japanese Yen............................ 368,245 120.70000 01/07/98 (4,948)
Japanese Yen............................ 84,327 118.82300 02/04/98 (168)
-------------- --------------
Total Contracts to Sell (Receivable
amount $2,316,426)................... 2,367,216 (50,790)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 2.42%.
Total Open Forward Foreign Currency
Contracts............................ $ (50,790)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-75
<PAGE> 659
GT GLOBAL NATURAL RESOURCES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy Equipment & Services (53.2%)
Schlumberger Ltd. ......................................... US 60,800 $ 5,320,000 3.1
Cliffs Drilling Co.-/- .................................... US 73,100 5,313,456 3.1
EVI, Inc.-/- .............................................. US 81,000 5,199,188 3.0
Varco International, Inc.-/- .............................. US 85,000 5,179,688 3.0
Cooper Cameron Corp.-/- ................................... US 71,500 5,165,875 3.0
Precision Drilling Corp.-/- ............................... CAN 162,300 4,980,581 2.9
Nabors Industries, Inc.-/- ................................ US 120,200 4,943,225 2.9
Patterson Energy, Inc.-/- ................................. US 86,800 4,860,800 2.8
UTI Energy Corp.-/- ....................................... US 107,700 4,806,113 2.8
Key Energy Group, Inc.-/- ................................. US 147,600 4,630,950 2.7
Pool Energy Services Co.-/- ............................... US 133,600 4,534,050 2.6
Diamond Offshore Drilling, Inc. ........................... US 72,000 4,482,000 2.6
Helmerich & Payne, Inc. ................................... US 51,300 4,139,269 2.4
BJ Services Co.-/- ........................................ US 43,600 3,695,100 2.1
Santa Fe International Corp.-/- ........................... US 71,700 3,526,744 2.1
Falcon Drilling Co., Inc.-/- .............................. US 96,900 3,524,738 2.0
Smith International, Inc.-/- .............................. US 41,900 3,194,875 1.9
Bonus Resource Services Corp.-/- .......................... CAN 482,284 2,361,453 1.4
Veritas DGC, Inc.-/- ...................................... US 56,400 2,308,875 1.3
Noble Drilling Corp.-/- ................................... US 64,300 2,286,669 1.3
Fred Olsen Energy ASA-/- .................................. NOR 74,500 2,053,003 1.2
Computalog Ltd.-/- ........................................ CAN 58,800 1,189,185 0.7
Rowan Cos., Inc.-/- ....................................... US 30,000 1,166,250 0.7
Enerflex Systems Ltd. ..................................... CAN 38,000 1,078,626 0.6
Hanover Compressor Co.-/- ................................. US 42,100 910,413 0.5
Dril-Quip, Inc.-/- ........................................ US 22,700 814,363 0.5
------------
91,665,489
------------
Metals - Steel (13.5%)
IPSCO, Inc. ............................................... CAN 111,700 4,835,155 2.8
Tubos de Acero de Mexico S.A. - ADR{\/} -/- ............... MEX 227,800 4,598,713 2.7
Prudential Steel Ltd. ..................................... CAN 102,200 4,278,882 2.5
NS Group, Inc.-/- ......................................... US 130,300 3,485,525 2.0
Oregon Steel Mills, Inc. .................................. US 146,800 3,091,975 1.8
Maverick Tube Corp.-/- .................................... US 81,600 2,876,400 1.7
------------
23,166,650
------------
Construction (10.8%)
National-Oilwell, Inc.-/- ................................. US 71,501 5,474,292 3.2
Global Industries Ltd.-/- ................................. US 248,800 5,007,100 2.9
Cal Dive International, Inc.-/- ........................... US 80,000 2,500,000 1.5
Halter Marine Group, Inc.-/- .............................. US 43,600 2,280,825 1.3
Coflexip - ADR{\/} ........................................ FR 34,300 1,886,500 1.1
Bouygues Offshore S.A. - ADR{\/} .......................... FR 31,900 773,575 0.4
TransCoastal Marine Services, Inc.-/- ..................... US 19,200 477,600 0.3
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-76
<PAGE> 660
GT GLOBAL NATURAL RESOURCES FUND - CONSOLIDATED
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>
Construction (Continued)
UNIFAB International, Inc.-/- ............................. US 4,200 $ 134,400 0.1
------------
18,534,292
------------
Oil (10.0%)
Giant Industries, Inc. .................................... US 201,100 3,607,231 2.1
Orogen Minerals Ltd. - 144A ADR{.} {\/} ................... AUSL 111,200 3,030,200 1.8
Canadian Fracmaster Ltd.-/- ............................... CAN 261,500 2,597,928 1.5
Ranger Oil Ltd. ........................................... CAN 280,900 2,431,862 1.4
Black Sea Energy Ltd.-/- .................................. CAN 1,139,600 2,345,189 1.4
ERG SpA-/- ................................................ ITLY 373,000 1,535,837 0.9
Petroleo Brasileiro S.A. (Petrobras) Preferred ............ BRZL 7,900,000 1,469,067 0.9
------------
17,017,314
------------
Chemicals (2.5%)
Ciba Specialty Chemicals AG-/- ............................ SWTZ 43,360 4,258,571 2.5
------------
Paper/Packaging (2.4%)
Fort James Corp. .......................................... US 66,962 2,657,554 1.5
Jefferson Smurfit Corp.-/- ................................ US 100,400 1,506,000 0.9
------------
4,163,554
------------
Gas Production & Distribution (2.4%)
Comstock Resources, Inc.-/- ............................... US 232,400 3,892,700 2.3
Berkley Petroleum Corp.-/- ................................ CAN 20,400 233,792 0.1
------------
4,126,492
------------
Industrial Components (2.2%)
Encore Wire Corp.-/- ...................................... US 132,950 3,755,838 2.2
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-77
<PAGE> 661
GT GLOBAL NATURAL RESOURCES FUND - CONSOLIDATED
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 Services (2.0%)
American Disposal Services, Inc.-/- ....................... US 95,500 $ 3,366,375 2.0
------------
Forest Products (0.7%)
The TimberWest Timber Trust Special Warrants(.) (::) ...... CAN 422,700 1,124,840 0.7
------------ -----
TOTAL EQUITY INVESTMENTS (cost $136,805,346) ................ 171,179,415 99.7
------------ -----
TOTAL INVESTMENTS (cost $136,805,346) * .................... 171,179,415 99.7
Other Assets and Liabilities ................................ 494,158 0.3
------------ -----
NET ASSETS .................................................. $171,673,573 100.0
------------ -----
------------ -----
</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.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (see Note 1 of Notes to Financial Statements).
(.) Restricted securities: At October 31, 1997 the Fund owned the
following restricted security constituting 0.7% of net assets which
may not be publicly sold without registration under the Securities
Act of 1933 (Note 1). Additional information on the security is as
follows:
<TABLE>
<CAPTION>
VALUE
PER
SHARE
(NOTE
DESCRIPTION ACQUISITION DATE SHARES COST 1)
----------------------------------------------- ----------------- ------ ----------- ------
<S> <C> <C> <C> <C>
The TimberWest Timber Trust Special Warrants... 8/7/97 422,700 $ 1,142,844 $2.66
</TABLE>
* For Federal income tax purposes, cost is $137,392,339 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 37,982,563
Unrealized depreciation: (4,195,487)
-------------
Net unrealized appreciation: $ 33,787,076
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depository Receipt
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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>
Australia (AUSL/AUD) ................. 1.8 1.8
Brazil (BRZL/BRL) .................... 0.9 0.9
Canada (CAN/CAD) ..................... 16.0 16.0
France (FR/FRF) ...................... 1.5 1.5
Italy (ITLY/ITL) ..................... 0.9 0.9
Mexico (MEX/MXN) ..................... 2.7 2.7
Norway (NOR/NOK) ..................... 1.2 1.2
Switzerland (SWTZ/CHF) ............... 2.5 2.5
United States (US/USD) ............... 72.2 0.3 72.5
------ ----- -----
Total ............................... 99.7 0.3 100.0
------ ----- -----
------ ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $171,673,573.
The accompanying notes are an integral part of the financial statements.
FS-78
<PAGE> 662
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Telecom Equipment (28.0%)
Nokia AB "A" ............................................ FIN 1,059,160 $ 92,479,819 5.4
ECI Telecommunications Ltd.{\/} ......................... ISRL 2,609,500 72,087,438 4.2
Newbridge Networks Corp.-/- ............................. CAN 1,332,300 71,049,067 4.1
Telefonaktiebolaget LM Ericsson: ........................ SWDN -- -- 3.1
"B" Free-/- ........................................... -- 871,200 38,397,307 --
ADR{\/} ............................................... -- 350,480 15,508,740 --
DSC Communications Corp.-/- ............................. US 1,220,100 29,739,938 1.7
Corning, Inc. ........................................... US 600,000 27,075,000 1.6
P-COM, Inc.-/- .......................................... US 1,200,000 24,150,000 1.4
ANTEC Corp.-/- .......................................... US 1,162,300 18,306,225 1.1
Tekelec-/- .............................................. US 428,900 17,960,188 1.0
Tellabs, Inc.-/- ........................................ US 240,000 12,960,000 0.8
Pairgain Technologies, Inc.-/- .......................... US 428,800 12,113,600 0.7
Tadiran Ltd. - ADR{\/} .................................. ISRL 246,100 9,290,275 0.5
Geotek Communications, Inc.-/- .......................... US 2,471,100 8,957,738 0.5
Champion Technology Holding Ltd. ........................ HK 67,154,902 8,166,314 0.5
Teledata Communications Ltd.-/- {\/} .................... ISRL 198,000 6,138,000 0.4
Allen Telecom, Inc.-/- .................................. US 300,000 5,662,500 0.3
Netas Telekomunik-/- .................................... TRKY 17,820,000 5,343,474 0.3
Ascend Communications, Inc.-/- .......................... US 160,000 4,330,000 0.3
Himachal Futuristic Communications Ltd. - 144A GDR{.} -/-
{\/} (.) (::) .......................................... IND 1,248,000 2,184,000 0.1
Sapura Telecommunications Bhd. .......................... MAL 1,155,000 680,024 --
Kantone Holding Ltd.-/- ................................. HK 6,256,868 639,447 --
--------------
483,219,094
--------------
Telephone Networks (22.4%)
Telecom Italia S.p.A.: .................................. ITLY -- -- 3.8
Di Risp-/- ............................................ -- 13,989,767 56,330,863 --
Common ................................................ -- 1,263,334 7,901,199 --
Telecomunicacoes Brasileiras S.A. (Telebras) -
ADR{\/} ................................................ BRZL 632,500 64,198,750 3.7
WorldCom, Inc. .......................................... US 1,644,290 55,289,251 3.2
SPT Telecom-/- .......................................... CZCH 391,340 45,056,567 2.6
Cable & Wireless Communications - ADR-/- {\/} ........... UK 1,670,250 30,377,672 1.8
Hellenic Telecommunications Organization S.A. ........... GREC 1,286,000 26,857,552 1.6
NTL, Inc.-/- {\/} ....................................... UK 855,833 23,214,470 1.4
Carso Global Telecom "A1" ............................... MEX 7,036,683 23,090,433 1.3
France Telecom S.A.: .................................... FR -- -- 0.9
ADR-/- {\/} ........................................... -- 320,000 12,120,000 --
Common-/- ............................................. -- 85,500 3,237,187 --
Ionica Group PLC-/- ..................................... UK 1,456,400 7,523,838 0.4
Atlantic Tele-Network, Inc.-/- .......................... US 500,100 6,313,763 0.4
Telefonica del Peru S.A. - ADR{\/} ...................... PERU 318,400 6,288,400 0.4
Russian Telecommunications Development Corp.: ........... RUS -- -- 0.3
Non-Voting(.) -/- {\/} (::) ........................... -- 453,000 3,397,500 --
Voting(.) -/- {\/} (::) ............................... -- 331,000 2,482,500 --
Compania Anonima Nacional Telefonos de Venezuela (CANTV)
- ADR{\/} .............................................. VENZ 96,000 4,200,000 0.2
PLD Telekon, Inc.-/- {\/} (.) ........................... RUS 510,000 4,016,250 0.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-79
<PAGE> 663
GT GLOBAL TELECOMMUNICATIONS 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>
Telephone Networks (Continued)
TelecomAsia Corp. - Foreign-/- .......................... THAI 6,622,652 $ 2,965,367 0.2
--------------
384,861,562
--------------
Wireless Communications (17.3%)
Nextel Communications, Inc. "A"-/- ...................... US 2,745,700 72,074,625 4.2
Millicom International Cellular S.A.{::} -/- {\/} ....... LUX 1,057,000 44,394,000 2.6
DDI Corp. ............................................... JPN 9,320 31,144,140 1.8
Grupo Iusacell S.A. "L" - ADR-/- {\/} ................... MEX 1,672,100 30,097,800 1.8
Paging Network, Inc.-/- ................................. US 2,165,000 26,791,875 1.6
Clearnet Communications, Inc. "A"-/- .................... CAN 1,138,100 17,848,432 1.0
WinStar Communications, Inc.-/- ......................... US 667,700 15,273,638 0.9
Western Wireless Corp. "A"-/- ........................... US 750,300 13,411,613 0.8
Telecom Italia Mobile S.p.A. - Di Risp .................. ITLY 5,425,700 11,086,917 0.6
Advanced Info. Service - Foreign ........................ THAI 1,993,150 10,709,463 0.6
Vimpel-Communications - ADR-/- {\/} ..................... RUS 250,000 8,187,500 0.5
Powertel, Inc.-/- ....................................... US 365,000 6,638,438 0.4
Microcell Telecommunications, Inc. "B"-/- {\/} .......... CAN 596,400 5,330,325 0.3
China Telecom (Hong Kong) Ltd.-/- ....................... HK 1,452,000 2,319,819 0.1
SK Telecom Co., Ltd. - ADR{\/} .......................... KOR 289,900 1,594,450 0.1
--------------
296,903,035
--------------
Telephone - Long Distance (5.7%)
Tel-Save Holdings, Inc.-/- .............................. US 2,000,000 43,000,000 2.5
Call-Net Enterprises, Inc.: ............................. CAN -- -- 2.2
"B"-/- ................................................ -- 1,036,700 20,966,470 --
"A"-/- ................................................ -- 519,400 10,688,760 --
"B" - 144A{.} -/- ..................................... -- 379,400 7,673,077 --
Bell Canada International, Inc.: ........................ CAN -- -- 0.8
Common-/- ............................................. -- 717,300 12,165,392 --
Common-/- {\/} ........................................ -- 132,500 2,235,938 --
RSL Communications Ltd. "A"-/- .......................... US 136,000 3,196,000 0.2
--------------
99,925,637
--------------
Telephone - Regional/Local (5.6%)
ICG Communications, Inc.-/- ............................. US 1,504,600 34,605,800 2.0
Intermedia Communications of Florida, Inc.-/- ........... US 613,900 27,855,713 1.6
Teleport Communications Group, Inc. "A"-/- .............. US 364,000 17,608,500 1.0
ING Barings Russian Regional Telecommunications Basket
Bridge Certificates-/- {\/} {=} ........................ RUS 1,749 14,383,024 0.8
Brooks Fiber Properties, Inc.-/- ........................ US 41,400 2,302,875 0.1
NEXTLINK Communications, Inc. "A"-/- .................... US 78,000 1,764,750 0.1
--------------
98,520,662
--------------
Multi-Industry (4.7%)
Mannesmann AG ........................................... GER 140,900 59,481,125 3.5
Grupo Carso, S.A. de C.V. "A1" .......................... MEX 3,300,000 20,985,629 1.2
--------------
80,466,754
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-80
<PAGE> 664
GT GLOBAL TELECOMMUNICATIONS 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>
Aerospace/Defense (2.6%)
Orbital Sciences Corp.{::} -/- .......................... US 1,838,500 $ 44,813,438 2.6
--------------
Telecom Technology (2.5%)
Uniphase Corp.-/- ....................................... US 449,900 30,199,538 1.8
Three-Five Systems, Inc.{::} -/- ........................ US 599,000 12,429,250 0.7
--------------
42,628,788
--------------
Cable Television (1.6%)
Comcast Corp. "A" ....................................... US 604,300 16,618,250 1.0
Comcast UK Cable Partners Ltd. "A"-/- ................... UK 415,000 4,707,656 0.3
United International Holdings, Inc. "A"-/- .............. US 373,000 4,615,875 0.3
--------------
25,941,781
--------------
Broadcasting & Publishing (1.4%)
EchoStar Communications Corp. "A"{::} ................... US 609,200 11,574,800 0.7
Sistem Televisyen Malaysia Bhd. ......................... MAL 7,436,000 7,549,919 0.4
Seat SpA-/- ............................................. ITLY 16,820,000 4,413,481 0.3
--------------
23,538,200
--------------
Semiconductors (0.8%)
DSP Communications, Inc.-/- ............................. US 624,000 11,544,000 0.7
General Semiconductor, Inc.-/- .......................... US 175,000 1,990,625 0.1
--------------
13,534,625
--------------
Retailers - Other (0.3%)
Asia Food & Properties Ltd.-/- {\/} ..................... SING 14,192,000 4,328,560 0.3
Gran Cadena de Almacenes Colombianos S.A. ............... COL 66,560 82,032 --
--------------
4,410,592
--------------
Networking (0.2%)
3Com Corp.-/- ........................................... US 80,100 3,319,144 0.2
-------------- -----
TOTAL EQUITY INVESTMENTS (cost $1,274,850,186) ............ 1,602,083,312 93.1
-------------- -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Structured Note (2.2%)
Russia (2.2%)
Credit Suisse Financial Products Russian Equity Linked
Note, 3.3% due 4/29/98 (This is an equity linked note.
The value of this note is linked to the underlying
value of Rostelecom.)-/- (.) ......................... USD 38,000,000 37,012,000 2.2
-------------- -----
TOTAL FIXED INCOME INVESTMENTS (cost $38,000,000) ......... 37,012,000 2.2
-------------- -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-81
<PAGE> 665
GT GLOBAL TELECOMMUNICATIONS 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>
Asia Food & Properties Ltd. Warrants, expire
7/12/02{\/} ............................................ SING 1,064,400 $ 191,592 --
FOOD
American Satellite Network Warrants, expire 1/1/99(::)
(.) .................................................... US 65,825 -- --
WIRELESS COMMUNICATIONS
-------------- -----
TOTAL WARRANTS (cost $484,741) ............................ 191,592 --
-------------- -----
<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 $35,290,000 U.S. Treasury Bond,
8.875% due 8/15/17 (market value of collateral is
$46,298,227, including accrued interest).
(cost $45,388,021) .................................... 45,388,021 2.6
-------------- -----
TOTAL INVESTMENTS (cost $1,358,722,948) * ................ 1,684,674,925 97.9
Other Assets and Liabilities .............................. 36,444,134 2.1
-------------- -----
NET ASSETS ................................................ $1,721,119,059 100.0
-------------- -----
-------------- -----
</TABLE>
- --------------
-/- Non-income producing security.
{::} Security was an affiliate at October 31, 1997 (see Note 6 of Notes
to Financial Statements).
{\/} 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.
{=} Issued by ING Barings, the value of which is linked to the
underlying value of a basket of shares issued by Russian regional
telephone companies.
(.) Restricted securities: At October 31, 1997 the Fund owned the
following restricted securities constituting 2.8% 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>
VALUE
PER
SHARE
(NOTE
DESCRIPTION ACQUISITION DATE SHARES COST 1)
----------------------------------------------- ----------------- ------ ----------- ------
<S> <C> <C> <C> <C>
American Satellite Network Warrants, expire
1/1/99........................................ 12/31/93 65,825 $ -- $--
Credit Suisse Financial Products Russian Equity
Linked Note, 3.3% due 4/29/98................. 4/29/97 38,000,000 38,000,000 0.97
Himachal Futuristic Communications Ltd. - 144A
GDR........................................... 8/1/95 1,248,000 9,604,650 1.75
PLD Telekon, Inc............................... 8/30/96 510,000 3,498,750 7.88
Russian Telecommunications Development Corp.:
Non-voting................................... 12/22/93 453,000 4,530,000 7.50
Voting....................................... 12/22/93 331,000 3,310,000 7.50
</TABLE>
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (See Note 1 of Notes to Financial Statements).
* For Federal income tax purposes, cost is $1,359,258,436 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 519,851,820
Unrealized depreciation: (194,435,331)
-------------
Net unrealized appreciation: $ 325,416,489
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
FS-82
<PAGE> 666
GT GLOBAL TELECOMMUNICATIONS 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>
Brazil (BRZL/BRL) .................... 3.7 3.7
Canada (CAN/CAD) ..................... 8.4 8.4
Czech Republic (CZCH/CSK) ............ 2.6 2.6
Finland (FIN/FIM) .................... 5.4 5.4
France (FR/FRF) ...................... 0.9 0.9
Germany (GER/DEM) .................... 3.5 3.5
Greece (GREC/GRD) .................... 1.6 1.6
Hong Kong (HK/HKD) ................... 0.6 0.6
India (IND/INR) ...................... 0.1 0.1
Israel (ISRL/ILS) .................... 5.1 5.1
Italy (ITLY/ITL) ..................... 4.7 4.7
Japan (JPN/JPY) ...................... 1.8 1.8
Korea (KOR/KRW) ...................... 0.1 0.1
Luxembourg (LUX/LUF) ................. 2.6 2.6
Malaysia (MAL/MYR) ................... 0.4 0.4
Mexico (MEX/MXN) ..................... 4.3 4.3
Peru (PERU/PES) ...................... 0.4 0.4
Russia (RUS/SUR) ..................... 1.8 2.2 4.0
Singapore (SING/SGD) ................. 0.3 0.3
Sweden (SWDN/SEK) .................... 3.1 3.1
Thailand (THAI/THB) .................. 0.8 0.8
Turkey (TRKY/TRL) .................... 0.3 0.3
United Kingdom (UK/GBP) .............. 3.9 3.9
United States (US/USD) ............... 36.5 4.7 41.2
Venezuela (VENZ/VEB) ................. 0.2 0.2
------ ----- ----- -----
Total ............................... 93.1 2.2 4.7 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
(d) Percentages indicated are based on net assets of $1,721,119,059.
The accompanying notes are an integral part of the financial statements.
FS-83
<PAGE> 667
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Japanese Yen............................ 13,280,549 118.50000 11/12/97 $ (201,730)
Japanese Yen............................ 673,732 118.60000 11/12/97 (9,657)
-------------- --------------
Total Contracts to Buy (Payable amount
$14,165,668)......................... 13,954,281 (211,387)
-------------- --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 0.81%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
British Pounds.......................... 41,535,139 0.60190 1/20/98 (1,170,888)
Deutsche Marks.......................... 15,664,388 1.80000 11/21/97 (664,388)
Deutsche Marks.......................... 7,948,226 1.72400 11/21/97 (1,591)
Finnish Markka.......................... 38,825,761 5.28300 1/21/98 (968,483)
Italian Liras........................... 50,091,184 1730.40000 1/21/98 (969,594)
Japanese Yen............................ 23,255,611 113.59900 11/12/97 1,371,807
Japanese Yen............................ 17,298,836 114.50000 11/12/97 876,273
Swedish Kronor.......................... 51,700,408 7.61030 1/21/98 (979,674)
-------------- --------------
Total Contracts to Sell (Receivable
amount $243,813,015)................. 246,319,553 (2,506,538)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 14.31%.
Total Open Forward Foreign Currency
Contracts, Net....................... $(2,717,925)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-84
<PAGE> 668
GT GLOBAL THEME FUNDS
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
<CAPTION>
GT GLOBAL
-----------------------------------------------------------------------------
CONSUMER NATURAL
PRODUCTS AND FINANCIAL INFRASTRUCTURE RESOURCES
SERVICES FUND- SERVICES FUND- HEALTH FUND- FUND-
CONSOLIDATED CONSOLIDATED CARE CONSOLIDATED CONSOLIDATED
(NOTE 1) (NOTE 1) FUND (NOTE 1) (NOTE 1)
-------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities: (Note 1)
At identified cost............... $124,047,571 $69,090,966 $484,207,357 $76,186,714 $136,805,346
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
At value......................... $132,596,014 $76,932,464 $547,657,721 $94,961,508 $171,179,415
Repurchase Agreement, at value
and cost (Note 1)............... 5,697,881 2,708,419 72,617,234 2,156,334 --
U.S. currency...................... 303 -- 390 128 705
Foreign currencies (cost $249,434,
$290,416, $32,405,
$252,788, $2,016,446, and
$938,200, respectively)........... 247,103 290,889 32,773 257,815 2,016,446
Dividends and dividend withholding
tax reclaims receivable........... 29,063 50,112 10,585 25,624 15,438
Interest receivable................ -- -- -- -- --
Receivable for forward foreign
currency contracts -- closed, net
(Note 1).......................... -- -- -- 5,096 --
Receivable for Fund shares sold.... 585,508 1,011,553 13,993,515 141,205 5,010,514
Receivable for open forward foreign
currency contracts (Note 1)....... -- 59,877 -- -- --
Receivable for securities sold..... 25,634,646 1,515,031 6,745,139 1,309,852 6,715,639
Unamortized organizational costs
(Note 1).......................... 22,264 19,944 -- 16,280 16,225
Miscellaneous receivable........... 91,501 4,131 36,371 -- 33,585
-------------- -------------- ------------ -------------- ------------
Total assets..................... 164,904,283 82,592,420 641,093,728 98,873,842 184,987,967
-------------- -------------- ------------ -------------- ------------
Liabilities:
Payable for custodian fees......... 769 10,403 7,317 1,332 8,200
Payable for Directors' and
Trustees' fees and expenses
(Note 2).......................... 4,859 4,446 9,136 7,921 5,237
Payable for forward foreign
currency contracts -- closed, net
(Note 1).......................... -- -- -- -- --
Payable for fund accounting fees
(Note 2).......................... 4,352 1,845 14,194 2,367 3,914
Payable for Fund shares
repurchased....................... 261,522 142,435 882,049 496,631 4,099,045
Payable for investment management
and administration fees (Note
2)................................ 139,166 180,741 536,273 89,949 147,355
Payable for loan outstanding (Note
1)................................ -- -- -- -- 4,670,000
Payable for open forward foreign
currency contracts, net (Note
1)................................ -- -- -- 50,790 --
Payable for printing and postage
expenses.......................... 33,464 23,148 73,457 51,926 45,104
Payable for professional fees...... 23,989 25,345 39,780 30,852 35,756
Payable for registration and filing
fees.............................. 4,130 2,371 15,839 2,078 12,139
Payable for securities purchased... 1,563,285 1,154,504 12,706,263 -- 4,125,569
Payable for service and
distribution expenses (Note 2).... 114,540 57,009 346,611 74,426 113,980
Payable for transfer agent fees
(Note 2).......................... 55,435 20,911 111,824 38,302 39,544
Other accrued expenses............. 36,359 7,528 8,868 8,109 8,451
-------------- -------------- ------------ -------------- ------------
Total liabilities................ 2,241,870 1,630,686 14,751,611 854,683 13,314,294
Minority interest (Notes 1 & 2).... 100 100 -- 100 100
-------------- -------------- ------------ -------------- ------------
Net assets........................... $162,662,313 $80,961,634 $626,342,117 $98,019,059 $171,673,573
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
<CAPTION>
TELECOM-
MUNICATIONS
FUND
---------------
<S> <C>
Assets:
Investments in securities: (Note 1)
At identified cost............... $ 1,313,334,927
---------------
---------------
At value......................... $ 1,639,286,904
Repurchase Agreement, at value
and cost (Note 1)............... 45,388,021
U.S. currency...................... 1,822,076
Foreign currencies (cost $249,434,
$290,416, $32,405,
$252,788, $2,016,446, and
$938,200, respectively)........... 944,514
Dividends and dividend withholding
tax reclaims receivable........... 403,424
Interest receivable................ 639,026
Receivable for forward foreign
currency contracts -- closed, net
(Note 1).......................... --
Receivable for Fund shares sold.... 15,407,247
Receivable for open forward foreign
currency contracts (Note 1)....... --
Receivable for securities sold..... 28,894,370
Unamortized organizational costs
(Note 1).......................... --
Miscellaneous receivable........... 76,388
---------------
Total assets..................... 1,732,861,970
---------------
Liabilities:
Payable for custodian fees......... 84,942
Payable for Directors' and
Trustees' fees and expenses
(Note 2).......................... 19,588
Payable for forward foreign
currency contracts -- closed, net
(Note 1).......................... 518,821
Payable for fund accounting fees
(Note 2).......................... 42,359
Payable for Fund shares
repurchased....................... 3,902,530
Payable for investment management
and administration fees (Note
2)................................ 1,545,877
Payable for loan outstanding (Note
1)................................ --
Payable for open forward foreign
currency contracts, net (Note
1)................................ 2,717,925
Payable for printing and postage
expenses.......................... 143,320
Payable for professional fees...... 42,564
Payable for registration and filing
fees.............................. 21,199
Payable for securities purchased... 824,693
Payable for service and
distribution expenses (Note 2).... 1,246,800
Payable for transfer agent fees
(Note 2).......................... 578,391
Other accrued expenses............. 53,902
---------------
Total liabilities................ 11,742,911
Minority interest (Notes 1 & 2).... --
---------------
Net assets........................... $ 1,721,119,059
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-85
<PAGE> 669
GT GLOBAL THEME FUNDS
STATEMENT OF ASSETS
AND LIABILITIES (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-----------------------------------------------------------------------------
CONSUMER NATURAL
PRODUCTS AND FINANCIAL INFRASTRUCTURE RESOURCES
SERVICES FUND- SERVICES FUND- HEALTH FUND- FUND-
CONSOLIDATED CONSOLIDATED CARE CONSOLIDATED CONSOLIDATED
(NOTE 1) (NOTE 1) FUND (NOTE 1) (NOTE 1)
-------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Class A:
Net assets......................... $ 62,637,424 $29,639,233 $472,082,753 $38,281,107 $ 69,975,533
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Shares outstanding................. 2,823,290 1,720,718 16,869,933 2,550,862 3,388,224
Net asset value and redemption
price per share................... $ 22.19 $ 17.22 $ 27.98 $ 15.01 $ 20.65
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Maximum offering price per share
(100/95.25 of Class A net asset
value) *.......................... $ 23.30 $ 18.08 $ 29.38 $ 15.76 $ 21.68
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Class B:+
Net assets......................... $ 93,978,324 $47,584,875 $147,440,444 $57,199,440 $ 86,812,455
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Shares outstanding................. 4,298,574 2,803,980 5,406,267 3,878,968 4,262,012
Net asset value and offering price
per share......................... $ 21.86 $ 16.97 $ 27.27 $ 14.75 $ 20.37
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Advisor Class:
Net assets......................... $ 6,046,565 $ 3,737,526 $ 6,818,920 $ 2,538,512 $ 14,885,585
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Shares outstanding................. 268,724 214,778 240,609 166,702 715,607
Net asset value, offering price per
share, and redemption price per
share............................. $ 22.50 $ 17.40 $ 28.34 $ 15.23 $ 20.80
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
Net assets consist of:
Paid in capital (Note 4)........... $139,734,245 $70,584,296 $418,339,020 $78,555,962 $132,802,223
Undistributed net investment
income............................ -- -- -- -- --
Accumulated net realized gain on
investments and foreign currency
transactions...................... 14,374,566 2,469,935 144,809,745 733,004 4,606,185
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................ 5,059 65,905 (257,012) (44,701) (108,904)
Net unrealized appreciation of
investments....................... 8,548,443 7,841,498 63,450,364 18,774,794 34,374,069
-------------- -------------- ------------ -------------- ------------
Total -- representing net assets
applicable to capital shares
outstanding......................... $162,662,313 $80,961,634 $626,342,117 $98,019,059 $171,673,573
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
<CAPTION>
TELECOM-
MUNICATIONS
FUND
---------------
<S> <C>
Class A:
Net assets......................... $ 910,801,431
---------------
---------------
Shares outstanding................. 50,482,268
Net asset value and redemption
price per share................... $ 18.04
---------------
---------------
Maximum offering price per share
(100/95.25 of Class A net asset
value) *.......................... $ 18.94
---------------
---------------
Class B:+
Net assets......................... $ 805,535,052
---------------
---------------
Shares outstanding................. 45,831,329
Net asset value and offering price
per share......................... $ 17.58
---------------
---------------
Advisor Class:
Net assets......................... $ 4,782,576
---------------
---------------
Shares outstanding................. 261,622
Net asset value, offering price per
share, and redemption price per
share............................. $ 18.28
---------------
---------------
Net assets consist of:
Paid in capital (Note 4)........... $ 1,284,396,946
Undistributed net investment
income............................ 5,534
Accumulated net realized gain on
investments and foreign currency
transactions...................... 113,512,388
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................ (2,747,786)
Net unrealized appreciation of
investments....................... 325,951,977
---------------
Total -- representing net assets
applicable to capital shares
outstanding......................... $ 1,721,119,059
---------------
---------------
<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-86
<PAGE> 670
GT GLOBAL THEME FUNDS
STATEMENT OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-----------------------------------------------------------------------------
CONSUMER NATURAL
PRODUCTS AND FINANCIAL HEALTH INFRASTRUCTURE RESOURCES
SERVICES FUND- SERVICES FUND- CARE FUND- FUND-
CONSOLIDATED CONSOLIDATED FUND CONSOLIDATED CONSOLIDATED
-------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividend income (net of foreign
withholding tax of $116,237,
$77,681, $47,010, $134,900,
$37,547, and $1,130,922,
respectively)...................... $ 1,313,121 $ 984,532 $ 1,039,797 $1,596,063 $ 449,578
Interest income..................... 547,671 222,469 3,553,024 438,660 389,867
Other income........................ -- -- 10,693 -- --
-------------- -------------- ------------ -------------- ------------
Total investment income........... 1,860,792 1,207,001 4,603,514 2,034,723 839,445
-------------- -------------- ------------ -------------- ------------
Expenses:
Investment management and
administration fees (Note 2)....... 1,624,151 466,730 5,820,067 1,038,752 1,317,793
Amortization of organization costs
(Note 1)........................... 10,300 12,622 -- 10,300 10,300
Custodian fees (Note 1)............. 37,548 43,877 41,984 32,117 46,437
Directors' and Trustees' fees and
expenses (Note 2).................. 10,068 15,695 13,505 16,060 16,464
Fund accounting fees (Note 2)....... 43,330 12,292 153,780 27,303 34,698
Professional fees................... 62,925 77,090 73,277 74,770 86,956
Printing and postage expenses....... 53,290 27,560 239,520 49,065 54,239
Registration and filing fees........ 75,895 50,741 80,092 54,967 80,810
Service and distribution expenses:
(Note 2)
Class A........................... 351,953 97,454 2,327,631 218,486 291,788
Class B........................... 941,035 280,650 1,316,284 621,768 733,200
Transfer agent fees (Note 2)........ 547,348 177,473 1,346,860 364,416 478,946
Other expenses...................... 10,567 7,531 34,305 17,058 81,546
-------------- -------------- ------------ -------------- ------------
Total expenses before
reductions....................... 3,768,410 1,269,715 11,447,305 2,525,062 3,233,177
-------------- -------------- ------------ -------------- ------------
Expense reductions (Notes 1 &
5)............................... (244,767) (31,702) (178,043) (84,870) (138,074)
-------------- -------------- ------------ -------------- ------------
Total net expenses.................. 3,523,643 1,238,013 11,269,262 2,440,192 3,095,103
-------------- -------------- ------------ -------------- ------------
Net investment loss................... (1,662,851) (31,012) (6,665,748) (405,469) (2,255,658)
-------------- -------------- ------------ -------------- ------------
Net realized and unrealized gain on
investments and foreign currencies:
(Note 1)
Net realized gain on investments.... 16,725,116 2,648,364 153,144,761 380,153 7,635,020
Net realized gain (loss) on foreign
currency transactions.............. (557,667) (19,802) 454,546 398,459 (94,442)
-------------- -------------- ------------ -------------- ------------
Net realized gain during the
year............................. 16,167,449 2,628,562 153,599,307 778,612 7,540,578
-------------- -------------- ------------ -------------- ------------
Net change in unrealized
appreciation (depreciation) on
translation of assets and
liabilities in foreign
currencies......................... 5,172 58,275 (569,426) (116,926) (125,779)
Net change in unrealized
appreciation (depreciation) of
investments........................ (714,518) 6,449,986 1,308,779 8,647,635 18,607,939
-------------- -------------- ------------ -------------- ------------
Net unrealized appreciation
(depreciation) during the period
................................. (709,346) 6,508,261 739,353 8,530,709 18,482,160
-------------- -------------- ------------ -------------- ------------
Net realized and unrealized gain on
investments and foreign currencies... 15,458,103 9,136,823 154,338,660 9,309,321 26,022,738
-------------- -------------- ------------ -------------- ------------
Net increase in net assets resulting
from operations...................... $13,795,252 $9,105,811 $147,672,912 $8,903,852 $23,767,080
-------------- -------------- ------------ -------------- ------------
-------------- -------------- ------------ -------------- ------------
<CAPTION>
TELECOM-
MUNICATIONS
FUND
-------------
<S> <C>
Investment income:
Dividend income (net of foreign
withholding tax of $116,237,
$77,681, $47,010, $134,900,
$37,547, and $1,130,922,
respectively)...................... $ 12,312,099
Interest income..................... 2,451,921
Other income........................ 100,726
-------------
Total investment income........... 14,864,746
-------------
Expenses:
Investment management and
administration fees (Note 2)....... 17,999,111
Amortization of organization costs
(Note 1)........................... --
Custodian fees (Note 1)............. 744,400
Directors' and Trustees' fees and
expenses (Note 2).................. 27,375
Fund accounting fees (Note 2)....... 493,322
Professional fees................... 89,205
Printing and postage expenses....... 421,575
Registration and filing fees........ 110,230
Service and distribution expenses:
(Note 2)
Class A........................... 5,105,842
Class B........................... 8,933,516
Transfer agent fees (Note 2)........ 5,229,276
Other expenses...................... 619,413
-------------
Total expenses before
reductions....................... 39,773,265
-------------
Expense reductions (Notes 1 &
5)............................... (1,051,898)
-------------
Total net expenses.................. 38,721,367
-------------
Net investment loss................... (23,856,621)
-------------
Net realized and unrealized gain on
investments and foreign currencies:
(Note 1)
Net realized gain on investments.... 101,709,075
Net realized gain (loss) on foreign
currency transactions.............. 18,717,671
-------------
Net realized gain during the
year............................. 120,426,746
-------------
Net change in unrealized
appreciation (depreciation) on
translation of assets and
liabilities in foreign
currencies......................... (7,132,389)
Net change in unrealized
appreciation (depreciation) of
investments........................ 217,773,979
-------------
Net unrealized appreciation
(depreciation) during the period
................................. 210,641,590
-------------
Net realized and unrealized gain on
investments and foreign currencies... 331,068,336
-------------
Net increase in net assets resulting
from operations...................... $ 307,211,715
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-87
<PAGE> 671
GT GLOBAL THEME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-----------------------------------------------------------------------------
CONSUMER PRODUCTS AND FINANCIAL SERVICES
SERVICES FUND-CONSOLIDATED HEALTH CARE
FUND-CONSOLIDATED ----------------------- FUND
------------------------ YEAR ENDED --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income
(loss)..................... $(1,662,851) $ (806,945) $ (31,012) $ 18,823 $ (6,665,748) $ (4,508,835)
Net realized gain on
investments and foreign
currency transactions...... 16,167,449 8,472,742 2,628,562 1,764,380 153,599,307 176,889,538
Net change in unrealized
appreciation (depreciation)
on translation of assets
and liabilities in foreign
currencies................. 5,172 (7,034) 58,275 (6,352) (569,426) (547,070)
Net change in unrealized
appreciation (depreciation)
of investments............. (714,518) 8,880,649 6,449,986 615,083 1,308,779 (53,392,951)
----------- ----------- ----------- ---------- ------------ ------------
Net increase in net assets
resulting from
operations............... 13,795,252 16,539,412 9,105,811 2,391,934 147,672,912 118,440,682
----------- ----------- ----------- ---------- ------------ ------------
Class A:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (56,390) -- --
From net realized gain on
investments................ (3,424,902) (217,050) (580,522) (8,739) (34,613,411) (54,405,334)
Class B:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (37,999) -- --
From net realized gain on
investments................ (4,055,905) (180,431) (823,692) (7,991) (8,701,491) (9,956,648)
Advisor Class:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (377) -- --
From net realized gain on
investments................ (308,573) (5,969) (5,018) (43) (57,488) (69,184)
----------- ----------- ----------- ---------- ------------ ------------
Total distributions....... (7,789,380) (403,450) (1,409,232) (111,539) (43,372,390) (64,431,166)
----------- ----------- ----------- ---------- ------------ ------------
Capital share transactions:
(Note 4)
Increase from capital shares
sold and reinvested........ 136,239,369 241,650,741 130,520,030 19,900,814 1,007,452,632 2,138,295,778
Decrease from capital shares
repurchased................ (151,833,735) (92,740,871) (74,514,633) (15,187,336) (1,062,045,275) (2,113,330,083)
----------- ----------- ----------- ---------- ------------ ------------
Net increase (decrease)
from capital share
transactions............. (15,594,366) 148,909,870 56,005,397 4,713,478 (54,592,643) 24,965,695
----------- ----------- ----------- ---------- ------------ ------------
Total increase (decrease) in
net assets................... (9,588,494) 165,045,832 63,701,976 6,993,873 49,707,879 78,975,211
Net assets:
Beginning of year........... 172,250,807 7,204,975 17,259,658 10,265,785 576,634,238 497,659,027
----------- ----------- ----------- ---------- ------------ ------------
End of year *............... $162,662,313 $172,250,807 $80,961,634 $17,259,658 $626,342,117 $576,634,238
----------- ----------- ----------- ---------- ------------ ------------
----------- ----------- ----------- ---------- ------------ ------------
* Includes accumulated net
investment income/(loss)... $ -- $ -- $ -- $ -- $ -- $ --
----------- ----------- ----------- ---------- ------------ ------------
----------- ----------- ----------- ---------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-88
<PAGE> 672
GT GLOBAL THEME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (cont'd)
<TABLE>
<CAPTION>
GT GLOBAL
----------------------------------------------------------------------------
INFRASTRUCTURE
FUND-CONSOLIDATED NATURAL RESOURCES TELECOMMUNICATIONS
---------------------- FUND-CONSOLIDATED FUND
YEAR ENDED YEAR ENDED ------------------------ --------------------------
OCTOBER OCTOBER YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
31, 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996 1997 1996
---------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income
(loss)..................... $ (405,469) $ (421,987) $(2,255,658) $(1,055,526) $(23,856,621) $(26,498,477)
Net realized gain on
investments and foreign
currency transactions...... 778,612 5,308,138 7,540,578 7,316,705 120,426,746 230,489,793
Net change in unrealized
appreciation (depreciation)
on translation of assets
and liabilities in foreign
currencies................. (116,926) (86,155) (125,779) 65,378 (7,132,389) (21,852,465)
Net change in unrealized
appreciation (depreciation)
of investments............. 8,647,635 9,582,726 18,607,939 14,910,009 217,773,979 (5,766,662)
---------- ---------- ----------- ----------- ------------ ------------
Net increase in net assets
resulting from
operations............... 8,903,852 14,382,722 23,767,080 21,236,566 307,211,715 176,372,189
---------- ---------- ----------- ----------- ------------ ------------
Class A:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (46,497) -- --
From net realized gain on
investments................ (1,943,050) -- (1,915,988) (9,643) (95,676,425) (64,901,484)
Class B:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- -- -- --
From net realized gain on
investments................ (2,733,339) -- (2,369,395) (10,136) (83,596,023) (54,643,650)
Advisor Class:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (853) -- --
From net realized gain on
investments................ (17,129) -- (134,145) (69) (176,806) (33,321)
---------- ---------- ----------- ----------- ------------ ------------
Total distributions....... (4,693,518) -- (4,419,528) (67,198) (179,449,254) (119,578,455)
---------- ---------- ----------- ----------- ------------ ------------
Capital share transactions:
(Note 4)
Increase from capital shares
sold and reinvested........ 44,324,471 42,853,853 377,334,346 219,606,793 1,783,734,946 3,156,330,159
Decrease from capital shares
repurchased................ (42,934,337) (51,456,466) (336,987,548) (155,468,156) (2,403,405,013) (3,466,020,319)
---------- ---------- ----------- ----------- ------------ ------------
Net increase (decrease)
from capital share
transactions............. 1,390,134 (8,602,613) 40,346,798 64,138,637 (619,670,067) (309,690,160)
---------- ---------- ----------- ----------- ------------ ------------
Total increase (decrease) in
net assets................... 5,600,468 5,780,109 59,694,350 85,308,005 (491,907,606) (252,896,426)
Net assets:
Beginning of year........... 92,418,591 86,638,482 111,979,223 26,671,218 2,213,026,665 2,465,923,091
---------- ---------- ----------- ----------- ------------ ------------
End of year *............... $98,019,059 $92,418,591 $171,673,573 $111,979,223 $1,721,119,059 $2,213,026,665
---------- ---------- ----------- ----------- ------------ ------------
---------- ---------- ----------- ----------- ------------ ------------
* Includes accumulated net
investment income/(loss)... $ -- $ -- $ -- $ -- $ 5,534 $ 5,534
---------- ---------- ----------- ----------- ------------ ------------
---------- ---------- ----------- ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-89
<PAGE> 673
GT GLOBAL THEME FUNDS
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
<TABLE>
<S> <C> <C> <C>
statements.
<CAPTION>
<S> <C> <C> <C>
<CAPTION>
CONSUMER PRODUCTS AND SERVICES FUND
------------------------------------------
CLASS A
------------------------------------------
DECEMBER 30, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
OPERATIONS) TO
---------------------- OCTOBER 31,
1997 (d) 1996 (d) 1995 (d)
---------- ---------- ------------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 20.98 $ 14.59 $ 11.43
---------- ---------- --------
Income from investment operations:
Net investment income (loss).......... (0.15) (0.22) 0.02*
Net realized and unrealized gain on
investments.......................... 2.27 7.13 3.14
---------- ---------- --------
Net increase from investment
operations......................... 2.12 6.91 3.16
---------- ---------- --------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.91) (0.52) --
---------- ---------- --------
Total distributions................. (0.91) (0.52) --
---------- ---------- --------
Net asset value, end of period.......... $ 22.19 $ 20.98 $ 14.59
---------- ---------- --------
---------- ---------- --------
Total investment return (c)............. 10.55% 48.82% 27.65 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 62,637 $ 76,900 $ 4,082
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.72)% (1.14)% 0.20 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.87)% (1.24)% (11.11)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.84% 2.24% 2.32 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 1.99% 2.34% 13.63 % (a)
Portfolio turnover rate++............... 392% 169% 240 % (a)
Average commission rate per share paid
on portfolio transactions++............ $ 0.0319 $ 0.0545 N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., net
investment income per share would have been reduced by $1.12, $1.04
and $0.61 for Class A, Class B and Advisor Class, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-90
<PAGE> 674
GT GLOBAL THEME FUNDS
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>
CONSUMER PRODUCTS AND SERVICES FUND
---------------------------------------------------------------------------------
CLASS B
------------------------------------------ ADVISOR CLASS+
-------------------------------------
DECEMBER 30, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF YEAR ENDED OCTOBER 31, JUNE 1, 1995
OPERATIONS) TO TO
---------------------- OCTOBER 31, ---------------------- OCTOBER 31,
1997 (d) 1996 (d) 1995 (d) 1997 (d) 1996 (d) 1995 (d)
---------- ---------- ------------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 20.79 $ 14.53 $ 11.43 $ 21.15 $ 14.64 $ 11.84
---------- ---------- -------- ---------- ---------- -------------
Income from investment operations:
Net investment income (loss).......... (0.24) (0.31) (0.04) * (0.04) (0.13) 0.04*
Net realized and unrealized gain on
investments.......................... 2.22 7.09 3.14 2.30 7.16 2.76
---------- ---------- -------- ---------- ---------- -------------
Net increase from investment
operations......................... 1.98 6.78 3.10 2.26 7.03 2.80
---------- ---------- -------- ---------- ---------- -------------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.91) (0.52) -- (0.91) (0.52) --
---------- ---------- -------- ---------- ---------- -------------
Total distributions................. (0.91) (0.52) -- (0.91) (0.52) --
---------- ---------- -------- ---------- ---------- -------------
Net asset value, end of period.......... $ 21.86 $ 20.79 $ 14.53 $ 22.50 $ 21.15 $ 14.64
---------- ---------- -------- ---------- ---------- -------------
---------- ---------- -------- ---------- ---------- -------------
Total investment return (c)............. 9.95% 48.11% 27.12 % (b) 11.15% 49.50% 23.65%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 93,978 $ 87,904 $ 2,959 $ 6,047 $ 7,446 $ 164
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.22)% (1.64)% (0.30)% (a) (0.22)% (0.64)% 0.70%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (1.37)% (1.74)% (11.61)% (a) (0.37)% (0.74)% (10.61)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.34% 2.74% 2.82 % (a) 1.34% 1.74% 1.82%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.49% 2.84% 14.13 % (a) 1.49% 1.84% 13.13%(a)
Portfolio turnover rate++............... 392% 169% 240 % (a) 392% 169% 240%(a)
Average commission rate per share paid
on portfolio transactions++............ $ 0.0319 $ 0.0545 N/A $ 0.0319 $ 0.0545 N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., net
investment income per share would have been reduced by $1.12, $1.04
and $0.61 for Class A, Class B and Advisor Class, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-91
<PAGE> 675
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
<TABLE>
<S> <C> <C> <C> <C>
derived from information provided in the financial statements.
<CAPTION>
<S> <C> <C> <C> <C>
<CAPTION>
FINANCIAL SERVICES FUND
-------------------------------------------------------
CLASS A
-------------------------------------------------------
MAY 31, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
----------------------------------- OPERATIONS) TO
1997 (d) 1996 (d) 1995 (d) OCTOBER 31, 1994
---------- ---------- ----------- ------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.20 $ 11.92 $ 11.62 $ 11.43
---------- ---------- ----------- --------
Income from investment operations:
Net investment income (loss).......... 0.04 0.05* 0.17* * 0.02* * *
Net realized and unrealized gain on
investments.......................... 3.97 2.36 0.13 0.17
---------- ---------- ----------- --------
Net increase from investment
operations......................... 4.01 2.41 0.30 0.19
---------- ---------- ----------- --------
Distributions to shareholders:
From net investment income............ -- (0.12) -- --
From net realized gain on
investments.......................... (0.99) (0.01) -- --
---------- ---------- ----------- --------
Total distributions................. (0.99) (0.13) -- --
---------- ---------- ----------- --------
Net asset value, end of period.......... $ 17.22 $ 14.20 $ 11.92 $ 11.62
---------- ---------- ----------- --------
---------- ---------- ----------- --------
Total investment return (c)............. 29.91% 20.21% 2.58% 1.66 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 29,639 $ 7,302 $ 5,687 $ 3,175
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.23% 0.41% 1.46% 0.66 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 0.16% (0.66)% (5.34)% (7.26)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.29% 2.32% 2.34% 2.40 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.36% 3.39% 9.14% 10.32 % (a)
Portfolio turnover rate++............... 91% 103% 170% 53 % (a)
Average commission rate per share paid
on portfolio transactions++............ $ 0.0014 $ 0.0080 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 $0.13 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.59, $0.59
and $0.30 for Class A, Class B and Advisor Class, respectively.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.23 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-92
<PAGE> 676
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
FINANCIAL SERVICES FUND
-------------------------------------------------------------------------------
ADVISOR CLASS+
CLASS B ----------------------
-------------------------------------------------------
MAY 31, 1994 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
----------------------------------- OPERATIONS) TO ----------------------
1997 (d) 1996 (d) 1995 (d) OCTOBER 31, 1994 1997 (d) 1996 (d)
---------- ---------- ----------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.06 $ 11.83 $ 11.60 $ 11.43 $ 14.26 $ 11.95
---------- ---------- ----------- -------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.04) (0.01) * 0.11* * 0.00 * * 0.12 0.12*
Net realized and unrealized gain on
investments.......................... 3.94 2.34 0.12 0.17 4.01 2.36
---------- ---------- ----------- -------- ---------- ----------
Net increase from investment
operations......................... 3.90 2.33 0.23 0.17 4.13 2.48
---------- ---------- ----------- -------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- (0.09) -- -- -- (0.16)
From net realized gain on
investments.......................... (0.99) (0.01) -- -- (0.99) (0.01)
---------- ---------- ----------- -------- ---------- ----------
Total distributions................. (0.99) (0.10) -- -- (0.99) (0.17)
---------- ---------- ----------- -------- ---------- ----------
Net asset value, end of period.......... $ 16.97 $ 14.06 $ 11.83 $ 11.60 $ 17.40 $ 14.26
---------- ---------- ----------- -------- ---------- ----------
---------- ---------- ----------- -------- ---------- ----------
Total investment return (c)............. 29.13% 19.81% 1.98% 1.49 % (b) 30.52% 20.87%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 47,585 $ 9,886 $ 4,548 $ 2,235 $ 3,738 $ 72
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.27)% (0.09)% 0.96% 0.16 % (a) 0.73% 0.91%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.34)% (1.16)% (5.84)% (7.76)% (a) 0.66%(a) (0.16)%
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.79% 2.82% 2.84% 2.90 % (a) 1.79% 1.82%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.86% 3.89% 9.64% 10.82 % (a) 1.86% 2.89%
Portfolio turnover rate++............... 91% 103% 170% 53 % (a) 91% 103%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0014 $ 0.0080 N/A N/A $ 0.0014 $ 0.0080
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995 (d)
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.09
-------------
Income from investment operations:
Net investment income (loss).......... 0.09* *
Net realized and unrealized gain on
investments.......................... 0.77
-------------
Net increase from investment
operations......................... 0.86
-------------
Distributions to shareholders:
From net investment income............ --
From net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 11.95
-------------
-------------
Total investment return (c)............. 7.75%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 31
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.96%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (4.84)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.84%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 8.64%(a)
Portfolio turnover rate++............... 170%
Average commission rate per share paid
on portfolio transactions++............ 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 $0.13 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.59, $0.59
and $0.30 for Class A, Class B and Advisor Class, respectively.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.23 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-93
<PAGE> 677
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
HEALTH CARE FUND
----------------------------------------------------------
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (d) 1996 (d) 1995 1994 (d) 1993 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 23.60 $ 21.84 $ 19.60 $ 17.86 $ 17.44
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment loss................... (0.25) (0.17) (0.15) (0.22) (0.15)
Net realized and unrealized gain on
investments.......................... 6.48 4.79 3.73 2.02 0.57
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 6.23 4.62 3.58 1.80 0.42
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (1.85) (2.86) (1.34) -- --
In excess of net realized gain on
investments.......................... -- -- -- (0.06) --
---------- ---------- ---------- ---------- ----------
Total distributions................. (1.85) (2.86) (1.34) (0.06) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 27.98 $ 23.60 $ 21.84 $ 19.60 $ 17.86
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 28.36% 23.14% 19.79% 10.11% 2.4%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 472,083 $ 467,861 $ 426,380 $ 438,940 $ 461,113
Ratio of net investment loss to average
net assets:
With expense reductions (Notes 1 &
5)................................... (1.00)% (0.71)% (0.72)% (1.23)% (0.9)%
Without expense reductions............ (1.03)% (0.75)% (0.78)% N/A N/A
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.77% 1.80% 1.85% 1.98% 2.0%
Without expense reductions............ 1.80% 1.84% 1.91% N/A N/A
Portfolio turnover rate++++............. 149% 157% 99% 64% 61%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0490 $ 0.0548 N/A N/A N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ 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 and average commission rates 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-94
<PAGE> 678
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
HEALTH CARE FUND
-------------------------------------------------------------------------------------
ADVISOR CLASS+++
CLASS B++ ----------------------
-------------------------------------------------------------
APRIL 1, 1993 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, TO
---------------------------------------------- OCTOBER 31, ----------------------
1997 (d) 1996 (d) 1995 1994 (d) 1993 (d) 1997 (d) 1996 (d)
---------- ---------- ---------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 23.15 $ 21.56 $ 19.46 $ 17.80 $ 15.59 $ 23.77 $ 21.88
---------- ---------- ---------- ---------- ------------- ---------- ----------
Income from investment operations:
Net investment loss................... (0.37) (0.27) (0.25) (0.32) (0.14) (0.12) (0.05)
Net realized and unrealized gain on
investments.......................... 6.34 4.72 3.69 2.02 2.35 6.54 4.80
---------- ---------- ---------- ---------- ------------- ---------- ----------
Net increase (decrease) from
investment operations.............. 5.97 4.45 3.44 1.70 2.21 6.42 4.75
---------- ---------- ---------- ---------- ------------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (1.85) (2.86) (1.34) -- -- (1.85) (2.86)
In excess of net realized gain on
investments.......................... -- -- -- (0.04) -- -- --
---------- ---------- ---------- ---------- ------------- ---------- ----------
Total distributions................. (1.85) (2.86) (1.34) (0.04) -- (1.85) (2.86)
---------- ---------- ---------- ---------- ------------- ---------- ----------
Net asset value, end of period.......... $ 27.27 $ 23.15 $ 21.56 $ 19.46 $ 17.80 $ 28.34 $ 23.77
---------- ---------- ---------- ---------- ------------- ---------- ----------
---------- ---------- ---------- ---------- ------------- ---------- ----------
Total investment return (c)............. 27.75% 22.59% 19.17% 9.55% 14.2%(b) 29.00% 23.82%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 147,440 $ 107,622 $ 70,740 $ 39,100 $ 8,604 $ 6,819 $ 1,152
Ratio of net investment loss to average
net assets:
With expense reductions (Notes 1 &
5)................................... (1.50)% (1.21)% (1.22)% (1.73)% (1.4)%(a) (0.50)% (0.21)%
Without expense reductions............ (1.53)% (1.25)% (1.28)% N/A N/A (0.53)% (0.25)%
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.27% 2.30% 2.35% 2.48% 2.50%(a) 1.27% 1.30%
Without expense reductions............ 2.30% 2.34% 2.41% N/A N/A 1.30% 1.34%
Portfolio turnover rate++++............. 149% 157% 99% 64% 61% 149% 157%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0490 $ 0.0548 N/A N/A N/A $ 0.0490 $ 0.0548
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 18.66
-------------
Income from investment operations:
Net investment loss................... (0.02)
Net realized and unrealized gain on
investments.......................... 3.24
-------------
Net increase (decrease) from
investment operations.............. 3.22
-------------
Distributions to shareholders:
From net realized gain on
investments.......................... --
In excess of net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 21.88
-------------
-------------
Total investment return (c)............. 17.10%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 539
Ratio of net investment loss to average
net assets:
With expense reductions (Notes 1 &
5)................................... (0.22)%(a)
Without expense reductions............ (0.28)%(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.35%(a)
Without expense reductions............ 1.41%(a)
Portfolio turnover rate++++............. 99%
Average commission rate per share paid
on portfolio transactions++++.......... N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ 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 and average commission rates 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-95
<PAGE> 679
GT GLOBAL THEME FUNDS
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
<TABLE>
<S> <C> <C> <C> <C>
statements.
<CAPTION>
<S> <C> <C> <C> <C>
<CAPTION>
INFRASTRUCTURE FUND
-----------------------------------------------------
CLASS A
-----------------------------------------------------
MAY 31, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS) TO
1997 (d) 1996 (d) 1995 OCTOBER 31, 1994
---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.42 $ 12.11 $ 12.47 $ 11.43
---------- ---------- ---------- -----------------
Income from investment operations:
Net investment income (loss).......... (0.01) (0.03) (0.03) * 0.01* *
Net realized and unrealized gain
(loss) on investments................ 1.32 2.34 (0.33) 1.03
---------- ---------- ---------- -----------------
Net increase (decrease) from
investment operations.............. 1.31 2.31 (0.36) 1.04
---------- ---------- ---------- -----------------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.72) -- -- --
---------- ---------- ---------- -----------------
Total distributions................. (0.72) -- -- --
---------- ---------- ---------- -----------------
Net asset value, end of period.......... $ 15.01 $ 14.42 $ 12.11 $ 12.47
---------- ---------- ---------- -----------------
---------- ---------- ---------- -----------------
Total investment return (c)............. 9.38% 19.08% (2.89)% 9.10% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 38,281 $ 38,397 $ 36,241 $ 23,615
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.09)% (0.19)% (0.32)% 0.41% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.17)% (0.30)% (0.58)% (0.47)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.00% 2.14% 2.36% 2.40% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.08% 2.25% 2.62% 3.28% (a)
Portfolio turnover rate++............... 41% 41% 45% 18%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0046 $ 0.0109 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 for Class
A shares, $0.03 for Class B shares, and $0.02 for Advisor Class
shares.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02 for Class
A and Class B from May 31, 1994 to October 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-96
<PAGE> 680
GT GLOBAL THEME FUNDS
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>
INFRASTRUCTURE FUND
-----------------------------------------------------------------------------
ADVISOR CLASS+
CLASS B ----------------------
-----------------------------------------------------
MAY 31, 1994 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS) TO ----------------------
1997 (d) 1996 (d) 1995 OCTOBER 31, 1994 1997 (d) 1996 (d)
---------- ---------- ---------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.24 $ 12.03 $ 12.45 $ 11.43 $ 14.52 $ 12.14
---------- ---------- ---------- ----------------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.09) (0.09) (0.09) * (0.01) * * 0.05 0.04
Net realized and unrealized gain
(loss) on investments................ 1.32 2.30 (0.33) 1.03 1.38 2.34
---------- ---------- ---------- ----------------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.23 2.21 (0.42) 1.02 1.43 2.38
---------- ---------- ---------- ----------------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.72) -- -- -- (0.72) --
---------- ---------- ---------- ----------------- ---------- ----------
Total distributions................. (0.72) -- -- -- (0.72) --
---------- ---------- ---------- ----------------- ---------- ----------
Net asset value, end of period.......... $ 14.75 $ 14.24 $ 12.03 $ 12.45 $ 15.23 $ 14.52
---------- ---------- ---------- ----------------- ---------- ----------
---------- ---------- ---------- ----------------- ---------- ----------
Total investment return (c)............. 8.83% 18.37% (3.37)% 8.92% (b) 10.10% 19.60%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 57,199 $ 53,678 $ 50,181 $ 30,954 $ 2,539 $ 344
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.59)% (0.69)% (0.82)% (0.09)% (a) 0.41% 0.31%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.67)% (0.80)% (1.08)% (0.97)% (a) 0.33% 0.20%
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.50% 2.64% 2.86% 2.90% (a) 1.50% 1.64%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.58% 2.75% 3.12% 3.78% (a) 1.58% 1.75%
Portfolio turnover rate++............... 41% 41% 45% 18% 41% 41%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0046 $ 0.0109 N/A N/A $ 0.0046 $ 0.0109
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.00
-------------
Income from investment operations:
Net investment income (loss).......... 0.02*
Net realized and unrealized gain
(loss) on investments................ 0.12
-------------
Net increase (decrease) from
investment operations.............. 0.14
-------------
Distributions to shareholders:
From net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 12.14
-------------
-------------
Total investment return (c)............. 1.17%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 216
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.18%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.08)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.86%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.12%(a)
Portfolio turnover rate++............... 45%
Average commission rate per share paid
on portfolio transactions++............ 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 for Class
A shares, $0.03 for Class B shares, and $0.02 for Advisor Class
shares.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02 for Class
A and Class B from May 31, 1994 to October 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-97
<PAGE> 681
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
<TABLE>
<S> <C> <C> <C> <C>
statements.
<CAPTION>
<S> <C> <C> <C> <C>
<CAPTION>
NATURAL RESOURCES FUND
-----------------------------------------------------
CLASS A
-----------------------------------------------------
MAY 31, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS) TO
1997 (d) 1996 (d) 1995 OCTOBER 31, 1994
---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.43 $ 11.44 $ 12.41 $ 11.43
---------- ---------- ---------- -----------------
Income from investment operations:
Net investment income (loss).......... (0.25) (0.24) 0.04* 0.06* *
Net realized and unrealized gain
(loss) on investments................ 4.08 6.28 (0.98) 0.92
---------- ---------- ---------- -----------------
Net increase (decrease) from
investment operations.............. 3.83 6.04 (0.94) 0.98
---------- ---------- ---------- -----------------
Distributions to shareholders:
From net investment income............ -- (0.04) (0.03) --
From net realized gain on
investments.......................... (0.61) (0.01) -- --
---------- ---------- ---------- -----------------
Total distributions................. (0.61) (0.05) (0.03) --
---------- ---------- ---------- -----------------
Net asset value, end of period.......... $ 20.65 $ 17.43 $ 11.44 $ 12.41
---------- ---------- ---------- -----------------
---------- ---------- ---------- -----------------
Total investment return (c)............. 22.64% 53.04% (7.58)% 8.57% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 69,975 $ 48,729 $ 12,598 $ 14,797
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.41)% (1.55)% 0.41% 2.63% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (1.51)% (1.65)% (0.69)% 0.65% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.03% 2.20% 2.37% 2.40% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.13% 2.30% 3.47% 4.38% (a)
Portfolio turnover rate++............... 321% 94% 87% 137%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0112 $ 0.0243 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 (loss) per share would have been reduced (increased)
by $0.14, $0.13, and $0.12 for Class A, Class B, and Advisor Class,
respectively.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.04 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-98
<PAGE> 682
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
NATURAL RESOURCES FUND
-----------------------------------------------------------------------------
ADVISOR CLASS+
CLASS B ----------------------
-----------------------------------------------------
MAY 31, 1994 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS) TO ----------------------
1997 (d) 1996 (d) 1995 OCTOBER 31, 1994 1997 (d) 1996 (d)
---------- ---------- ---------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.29 $ 11.36 $ 12.38 $ 11.43 $ 17.47 $ 11.47
---------- ---------- ---------- ----------------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.33) (0.31) (0.02) * 0.03* * (0.14) (0.17)
Net realized and unrealized gain
(loss) on investments................ 4.02 6.25 (0.98) 0.92 4.08 6.28
---------- ---------- ---------- ----------------- ---------- ----------
Net increase (decrease) from
investment operations.............. 3.69 5.94 (1.00) 0.95 3.94 6.11
---------- ---------- ---------- ----------------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- (0.02) -- -- (0.10)
From net realized gain on
investments.......................... (0.61) (0.01) -- -- (0.61) (0.01)
---------- ---------- ---------- ----------------- ---------- ----------
Total distributions................. (0.61) (0.01) (0.02) -- (0.61) (0.11)
---------- ---------- ---------- ----------------- ---------- ----------
Net asset value, end of period.......... $ 20.37 $ 17.29 $ 11.36 $ 12.38 $ 20.80 $ 17.47
---------- ---------- ---------- ----------------- ---------- ----------
---------- ---------- ---------- ----------------- ---------- ----------
Total investment return (c)............. 21.99% 52.39% (8.05)% 8.31% (b) 23.23% 53.76%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 86,812 $ 57,749 $ 13,978 $ 13,404 $ 14,886 $ 5,502
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.91)% (2.05)% (0.09)% 2.13% (a) (0.91)% (1.05)%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (2.01)% (2.15)% (1.19)% 0.15% (a) (1.01)% (1.15)%
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.53% 2.70% 2.87% 2.90% (a) 1.53% 1.70%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.63% 2.80% 3.97% 4.88% (a) 1.63% 1.80%
Portfolio turnover rate++............... 321% 94% 87% 137% 321% 94%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0112 $ 0.0243 N/A N/A $ 0.0112 $ 0.0243
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.45
-------------
Income from investment operations:
Net investment income (loss).......... 0.11*
Net realized and unrealized gain
(loss) on investments................ (0.09)
-------------
Net increase (decrease) from
investment operations.............. 0.02
-------------
Distributions to shareholders:
From net investment income............ --
From net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 11.47
-------------
-------------
Total investment return (c)............. 0.17%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 95
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.91%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.19)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.87%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.97%(a)
Portfolio turnover rate++............... 87%
Average commission rate per share paid
on portfolio transactions++............ 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 (loss) per share would have been reduced (increased)
by $0.14, $0.13, and $0.12 for Class A, Class B, and Advisor Class,
respectively.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.04 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio 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-99
<PAGE> 683
GT GLOBAL THEME FUNDS
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
<TABLE>
<S> <C> <C> <C> <C> <C>
statements.
<CAPTION>
<S> <C> <C> <C> <C> <C>
<CAPTION>
TELECOMMUNICATIONS FUND
----------------------------------------------------------
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (d) 1996 (d) 1995 1994 (d) 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 16.69 $ 16.42 $ 17.80 $ 16.92 $ 11.16
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.17) (0.13) (0.09) (0.01) 0.08
Net realized and unrealized gain
(loss) on investments................ 2.93 1.22 (0.43) 1.17 5.83
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.76 1.09 (0.52) 1.16 5.91
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- (0.01) (0.15)
From net realized gain on
investments.......................... (1.41) (0.82) (0.86) (0.27) --
---------- ---------- ---------- ---------- ----------
Total distributions................. (1.41) (0.82) (0.86) (0.28) (0.15)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 18.04 $ 16.69 $ 16.42 $ 17.80 $ 16.92
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 17.70% 7.00% (2.88)% 7.02% 53.60%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 910,801 $1,204,428 $1,353,722 $1,644,402 $1,223,340
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 1 &
5)................................... (1.01)% (0.84)% (0.49)% (0.02)% 0.80%
Without expense reductions............ (1.06)% (0.89)% (0.55)% N/A N/A
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.79% 1.74% 1.77% 1.80% 2.0%
Without expense reductions............ 1.84% 1.79% 1.83% N/A N/A
Portfolio turnover rate++++............. 35% 37% 62% 57% 41%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0085 $ 0.0165 N/A N/A N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not Annualized.
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
+ All capital shares issued and outstanding 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 and average commission rates 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-100
<PAGE> 684
GT GLOBAL THEME FUNDS
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>
TELECOMMUNICATIONS FUND
-----------------------------------------------------------------------------------
CLASS B++ ADVISOR CLASS+++
----------------------------------------------------------- ----------------------
APRIL 1,
1993 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, TO
---------------------------------------------- OCTOBER 31, ----------------------
1997 (d) 1996 (d) 1995 1994 (d) 1993 1997 (d) 1996 (d)
---------- ---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 16.37 $ 16.20 $ 17.66 $ 16.87 $ 12.68 $ 16.81 $ 16.46
---------- ---------- ---------- ---------- ----------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.25) (0.23) (0.17) (0.10) 0.01 (0.09) (0.05)
Net realized and unrealized gain
(loss) on investments................ 2.87 1.22 (0.43) 1.17 4.18 2.97 1.22
---------- ---------- ---------- ---------- ----------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.62 0.99 (0.60) 1.07 4.19 2.88 1.17
---------- ---------- ---------- ---------- ----------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- (0.01) -- -- --
From net realized gain on
investments.......................... (1.41) (0.82) (0.86) (0.27) -- (1.41) (0.82)
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total distributions................. (1.41) (0.82) (0.86) (0.28) -- (1.41) (0.82)
---------- ---------- ---------- ---------- ----------- ---------- ----------
Net asset value, end of period.......... $ 17.58 $ 16.37 $ 16.20 $ 17.66 $ 16.87 $ 18.28 $ 16.81
---------- ---------- ---------- ---------- ----------- ---------- ----------
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total investment return (c)............. 17.15% 6.46% (3.37)% 6.50% 33.0%(b) 18.33% 7.49%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 805,535 $1,007,654 $1,111,520 $1,184,081 $ 455,335 $ 4,783 $ 945
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 1 &
5)................................... (1.51)% (1.34)% (0.99)% (0.52)% 0.3%(a) (0.51)% (0.34)%
Without expense reductions............ (1.56)% (1.39)% (1.05)% N/A N/A (0.56)% (0.39)%
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.29% 2.24% 2.27% 2.30% 2.5%(a) 1.29% 1.24%
Without expense reductions............ 2.34% 2.29% 2.33% N/A N/A 1.34% 1.29%
Portfolio turnover rate++++............. 35% 37% 62% 57% 41% 35% 37%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0085 $ 0.0165 N/A N/A N/A $ 0.0085 $ 0.0165
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 15.24
-------------
Income from investment operations:
Net investment income (loss).......... --
Net realized and unrealized gain
(loss) on investments................ 1.22
-------------
Net increase (decrease) from
investment operations.............. 1.22
-------------
Distributions to shareholders:
From net investment income............ --
From net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 16.46
-------------
-------------
Total investment return (c)............. 7.94%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 681
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 1 &
5)................................... 0.01%(a)
Without expense reductions............ 0.07%(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.27%(a)
Without expense reductions............ 1.33%(a)
Portfolio turnover rate++++............. 62%
Average commission rate per share paid
on portfolio transactions++++.......... N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not Annualized.
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
+ All capital shares issued and outstanding 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 and average commission rates 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-101
<PAGE> 685
GT GLOBAL THEME FUNDS
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Consumer Products and Services Fund, GT Global Financial Services
Fund, GT Global Health Care Fund, GT Global Infrastructure Fund, GT Global
Natural Resources Fund and GT Global Telecommunications Fund ("Funds") are
separate series of G.T. Investment Funds, Inc. ("Company"). Collectively, these
Funds are known as the "GT Global Theme Funds". 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.
The GT Global Consumer Products and Services Fund, GT Global Financial Services
Fund, GT Global Infrastructure Fund, and GT Global Natural Resources Fund each
invests substantially all of its investable assets in Global Consumer Products
and Services Portfolio, Global Financial Services Portfolio, Global
Infrastructure Portfolio, and Global Natural Resources Portfolio ("Portfolios"),
respectively. Each Portfolio is organized as a subtrust of a New York common law
trust ("Trust") and is registered under the 1940 Act as an open-end management
investment company.
The Portfolios have investment objectives, policies, and limitations
substantially identical to those of their corresponding Funds. Therefore, the
financial statements of the aforementioned Funds and their respective Portfolios
have been presented on a consolidated basis, and represent all activities of
both the respective Funds and Portfolios. Through October 31, 1997, all of the
shares of beneficial interest of each Portfolio were owned by either its
respective Fund or Chancellor LGT Asset Management, Inc. (the "Manager"), which
has a nominal ($100) investment in each Portfolio.
The Funds 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 each 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 and Portfolios in the preparation
of the financial statements.
(A) PORTFOLIO VALUATION
The Funds calculate the net asset value of and complete 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 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 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 or the Trusts' Board of Trustees.
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 or
the Trusts' Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of each Fund and Portfolio 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 Funds or
Portfolios (the phrase "Fund or Portfolio" hereinafter includes the GT Global
Health Care Fund, the GT Global Telecommunications Fund, and the four
Portfolios) 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.
FS-102
<PAGE> 686
GT GLOBAL THEME FUNDS
A Fund or Portfolio 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 or Portfolio'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 a Fund or Portfolio, it is
the Fund's or Portfolio'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 or Portfolio 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 or Portfolio as an unrealized gain or loss.
When the Forward Contract is closed, the Fund or Portfolio 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 or Portfolio's "Statement of Assets
and Liabilities". A Fund or Portfolio 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. A Fund or Portfolio 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 a Fund or Portfolio writes a call or put option, an amount equal to the
premium received is included in the Fund's or Portfolio'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 or Portfolio 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 or Portfolio can write options only on a covered basis,
which, for a call, requires that the Fund or Portfolio hold the underlying
security and, for a put, requires the Fund or Portfolio 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 or Portfolio 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 or Portfolio for the purchase of a call or put
option is included in the Fund's or Portfolio'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 or Portfolio has
purchased expires on the stipulated expiration date, the Fund or Portfolio
realizes a loss in the amount of the cost of the option. If the Fund or
Portfolio enters into a closing sale transaction, the Fund or Portfolio 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 or Portfolio
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 or Portfolio
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 or Portfolio 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 or Portfolio 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 or Portfolio 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 a
Fund or Portfolio 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 or Portfolio
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 or Portfolio as unrealized gains
or losses. When the contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference
FS-103
<PAGE> 687
GT GLOBAL THEME FUNDS
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 or Portfolio is that the
change in value of the underlying securities may not correlate to the change in
value of the contracts. A Fund or Portfolio 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. A Fund or Portfolio 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
or Portfolio to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value listed below were on loan to
brokers. The loans were secured by cash collateral received by the Funds or
Portfolios:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31,
-------------------------------- 1997
AGGREGATE VALUE CASH --------------
ON LOAN COLLATERAL FEES RECEIVED
--------------- -------------- --------------
<S> <C> <C> <C>
Global Consumer Products and Services
Portfolio.............................. $ 4,385,800 $ 4,476,600 $121,197
Global Financial Services Portfolio..... 1,715,052 1,813,650 18,080
GT Global Health Care Fund.............. 33,287,031 33,773,900 96,689
Global Infrastructure Portfolio......... 3,149,538 3,301,300 84,150
Global Natural Resources Portfolio...... 12,448,138 12,910,000 66,945
GT Global Telecommunications Fund....... 132,935,037 137,795,261 888,654
</TABLE>
For international securities, cash collateral is received by a Fund or Portfolio
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 a Fund or Portfolio 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 the loan.
Fees received from securities loaned were used to reduce the Funds' or
Portfolios' custodian and other administrative expenses.
(I) TAXES
It is the intended policy of the Funds and Portfolios 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 Funds 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, unrealized appreciation of securities held, or excise tax
on income and capital gains.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by each 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 Funds or Portfolios and timing
differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the GT Global Consumer Products and Services Fund, GT
Global Financial Services Fund, GT Global Infrastructure Fund, and GT Global
Natural Resources Fund in connection with their organizations, their initial
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $51,500, $63,100,
$51,500, and $51,500, respectively. 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 or Portfolio's investments in
emerging market countries may involve greater risks than investments in more
developed markets and the price 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.
In addition, each Fund or Portfolio may focus its investments in certain related
consumer products and services, financial services, health care, infrastructure,
natural resources, or telecommunications industries, subjecting the Fund or
Portfolio to greater risk than a fund that is more diversified.
(M) INDEXED SECURITIES
A Fund or Portfolio 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.
FS-104
<PAGE> 688
GT GLOBAL THEME FUNDS
(N) RESTRICTED SECURITIES
A Fund or Portfolio 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
or Portfolio's Portfolio of Investments.
(O) LINE OF CREDIT
Each of the Funds, 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 GT
Funds to borrow an aggregate maximum amount of $200,000,000. Each Fund is
limited to borrowing up to 33 1/3% of the value of each Fund's total assets. On
October 31, 1997, GT Global Natural Resources Fund had $4,670,000 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 GT Global Consumer Products Fund, GT Global Health Care Fund, GT Global
Natural Resources Fund and GT Global Telecommunications Fund was $2,217,765,
$4,916,667, $4,008,879 and $26,570,611, respectively, with a weighted average
interest rate of 6.14%, 6.61%, 6.32% and 6.32%, respectively. Interest expense
for the GT Global Consumer Products Fund, GT Global Health Care Fund, GT Global
Natural Resources Fund and GT Global Telecommunications Fund for the year ended
October 31, 1997 was $6,616, $21,656, $64,318 and $527,303, respectively.
Interest expense is included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Funds' and Portfolios' investment
manager and administrator. GT Global Consumer Products and Services Fund, GT
Global Financial Services Fund, GT Global Infrastructure Fund, and GT Global
Natural Resources Fund each pays the Manager administration fees at the
annualized rate of 0.25% of such Fund's average daily net assets. Each of the
Portfolios pays investment management and administration fees to the Manager at
the annualized rate of 0.725% on the first $500 million of average daily net
assets of the Portfolio; 0.70% on the next $500 million; 0.675% on the next $500
million; and 0.65% on amounts thereafter. GT Global Health Care Fund and GT
Global Telecommunications Fund each 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 Funds'
distributor. The Funds offer 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 Funds' 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 the
following sales charges: $85,990 for the GT Global Consumer Products and
Services Fund, $22,263 for the GT Global Financial Services Fund, $54,971 for
the GT Global Health Care Fund, $24,983 for the GT Global Infrastructure Fund,
$63,915 for the GT Global Natural Resources Fund, and $131,495 for the GT Global
Telecommunications Fund. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge ("CDSC") upon redemption, in
accordance with the Funds' current prospectus. GT Global collected CDSCs for the
year ended October 31, 1997, as follows: $5,032 for the GT Global Consumer
Products and Services Fund, $0 for the GT Global Financial Services Fund,
$15,375 for the GT Global Health Care Fund, $115 for the GT Global
Infrastructure Fund, $12,885 for the GT Global Natural Resources Fund, and
$11,930 for the GT Global Telecommunications Fund. 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 Funds' current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of: $503,378 for the GT Global Consumer Products and Services Fund,
$81,031 for the GT Global Financial Services Fund, $530,383 for the GT Global
Health Care Fund, $261,504 for the GT Global Infrastructure Fund, $404,993 for
the GT Global Natural Resources Fund, and $7,104,939 for the GT Global
Telecommunications Fund. 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 Funds' Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which a Fund
reimburses GT Global for a portion of its shareholder servicing and
distributions expenses. Under the Class A Plan, a 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 Class B Plan, a Fund may pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net assets
FS-105
<PAGE> 689
GT GLOBAL THEME FUNDS
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 each Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expense) 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 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 Funds. 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
Funds 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 Funds and Portfolios.
The monthly fee for these services to the Manager is a percentage, not to exceed
0.03% annually, of a Fund or Portfolio'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 each Fund's average daily
net assets.
The Company pays each Director who is not an employee, officer or director of
the Manager, or any other affiliated company $5,000 per year plus $300 for each
meeting of the board or any committee thereof attended by the Director. Each
Portfolio pays each of its Trustees who is not an employee, officer, or director
of the Manager, GT Global or GT Services $500 per year plus $150 for each
meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities, other
than short-term investments, by each Fund or Portfolio for the year ended
October 31, 1997:
PURCHASES AND SALES OF SECURITIES
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES
- ---------------------------------------------------------------------------------------------------- -----------------
<S> <C>
Global Consumer Products and Services Portfolio..................................................... $ 612,647,861
Global Financial Services Portfolio................................................................. 92,386,002
GT Global Health Care Fund.......................................................................... 787,196,366
Global Infrastructure Portfolio..................................................................... 39,949,012
Global Natural Resources Portfolio.................................................................. 443,019,604
GT Global Telecommunications Fund................................................................... 645,313,904
<CAPTION>
PORTFOLIO SALES
- ---------------------------------------------------------------------------------------------------- -------------------
<S> <C>
Global Consumer Products and Services Portfolio..................................................... $ 664,389,208
Global Financial Services Portfolio................................................................. 40,245,074
GT Global Health Care Fund.......................................................................... 891,939,099
Global Infrastructure Portfolio..................................................................... 39,409,094
Global Natural Resources Portfolio.................................................................. 403,198,520
GT Global Telecommunications Fund................................................................... 1,492,219,852
</TABLE>
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, 400,000,000 were
classified as shares of the GT Global Telecommunications 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; 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; 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-106
<PAGE> 690
GT GLOBAL THEME FUNDS
CAPITAL SHARE TRANSACTIONS
GT GLOBAL CONSUMER PRODUCTS & SERVICES FUND
<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............................. 3,438,964 $ 69,880,587 6,142,401 $ 118,779,939
Shares issued in connection with
reinvestment of distributions......... 143,274 2,884,089 13,656 202,166
----------- ------------- ----------- -------------
3,582,238 72,764,676 6,156,057 118,982,105
Shares repurchased...................... (4,424,828) (88,957,730) (2,769,898) (54,486,898)
----------- ------------- ----------- -------------
Net increase (decrease)................. (842,590) $ (16,193,054) 3,386,159 $ 64,495,207
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,703,434 $ 53,329,784 5,689,956 $ 110,105,123
Shares issued in connection with
reinvestment of distributions......... 168,859 3,364,713 10,957 161,052
----------- ------------- ----------- -------------
2,872,293 56,694,497 5,700,913 110,266,175
Shares repurchased...................... (2,802,820) (55,171,454) (1,675,446) (32,960,366)
----------- ------------- ----------- -------------
Net increase............................ 69,473 $ 1,523,043 4,025,467 $ 77,305,809
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- - ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 287,832 $ 6,471,623 589,226 $ 12,396,492
Shares issued in connection with
reinvestment of distributions......... 15,186 308,573 402 5,969
----------- ------------- ----------- -------------
303,018 6,780,196 589,628 12,402,461
Shares repurchased...................... (386,341) (7,704,551) (248,775) (5,293,607)
----------- ------------- ----------- -------------
Net increase (decrease)................. (83,323) $ (924,355) 340,853 $ 7,108,854
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
GT GLOBAL FINANCIAL SERVICES FUND
<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............................. 3,783,353 $ 60,418,186 900,372 $ 11,973,497
Shares issued in connection with
reinvestment of distributions......... 35,121 488,531 3,997 50,562
----------- ------------- ----------- -------------
3,818,474 60,906,717 904,369 12,024,059
Shares repurchased...................... (2,611,893) (41,931,634) (867,261) (11,494,650)
----------- ------------- ----------- -------------
Net increase............................ 1,206,581 $ 18,975,083 37,108 $ 529,409
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 4,102,099 $ 64,968,183 596,980 $ 7,792,181
Shares issued in connection with
reinvestment of distributions......... 44,922 618,563 2,898 36,456
----------- ------------- ----------- -------------
4,147,021 65,586,746 599,878 7,828,637
Shares repurchased...................... (2,045,933) (32,384,709) (281,339) (3,677,982)
----------- ------------- ----------- -------------
Net increase............................ 2,101,088 $ 33,202,037 318,539 $ 4,150,655
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 220,956 $ 4,021,549 3,500 $ 47,698
Shares issued in connection with
reinvestment of distributions......... 359 5,018 35 420
----------- ------------- ----------- -------------
221,315 4,026,567 3,535 48,118
Shares repurchased...................... (11,568) (198,290) (1,103) (14,704)
----------- ------------- ----------- -------------
Net increase............................ 209,747 $ 3,828,277 2,432 $ 33,414
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
FS-107
<PAGE> 691
GT GLOBAL THEME FUNDS
GT GLOBAL HEALTH CARE FUND
<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............................. 31,631,342 $ 772,292,073 84,410,204 $1,903,687,570
Shares issued in connection with
reinvestment of distributions......... 1,208,813 27,043,227 2,009,491 41,475,881
----------- ------------- ----------- -------------
32,840,155 799,335,300 86,419,695 1,945,163,451
Shares repurchased...................... (35,792,763) (876,621,319) (86,124,175) (1,957,478,015)
----------- ------------- ----------- -------------
Net increase (decrease)................. (2,952,608) $ (77,286,019) 295,520 $ (12,314,564)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 6,206,431 $ 152,327,079 6,741,207 $ 157,453,975
Shares issued in connection with
reinvestment of distributions......... 321,688 7,045,104 411,416 8,363,880
----------- ------------- ----------- -------------
6,528,119 159,372,183 7,152,623 165,817,855
Shares repurchased...................... (5,770,947) (142,017,878) (5,784,194) (129,761,569)
----------- ------------- ----------- -------------
Net increase............................ 757,172 $ 17,354,305 1,368,429 $ 36,056,286
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 1,865,809 $ 48,687,774 1,142,479 $ 27,246,793
Shares issued in connection with
reinvestment of distributions......... 2,543 57,375 3,280 67,679
----------- ------------- ----------- -------------
1,868,352 48,745,149 1,145,759 27,314,472
Shares repurchased...................... (1,676,189) (43,406,078) (1,121,971) (26,090,499)
----------- ------------- ----------- -------------
Net increase............................ 192,163 $ 5,339,071 23,788 $ 1,223,973
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
GT GLOBAL INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
Shares sold............................. 1,282,535 $ 19,272,428 2,175,475 $ 30,275,819
<S> <C> <C> <C> <C>
Shares issued in connection with
reinvestment of distributions......... 123,795 1,776,449 -- --
----------- ------------- ----------- -------------
1,406,330 21,048,877 2,175,475 30,275,819
Shares repurchased...................... (1,518,962) (23,157,570) (2,503,715) (33,964,432)
----------- ------------- ----------- -------------
Net decrease............................ (112,632) $ (2,108,693) (328,240) $ (3,688,613)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- - ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 1,233,796 $ 18,394,879 903,064 $ 12,423,925
Shares issued in connection with
reinvestment of distributions......... 164,966 2,337,575 -- --
----------- ------------- ----------- -------------
1,398,762 20,732,454 903,064 12,423,925
Shares repurchased...................... (1,288,192) (19,574,097) (1,306,101) (17,421,173)
----------- ------------- ----------- -------------
Net increase (decrease)................. 110,570 $ 1,158,357 (403,037) $ (4,997,248)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 154,643 $ 2,526,548 11,122 $ 154,109
Shares issued in connection with
reinvestment of distributions......... 1,147 16,592 -- --
----------- ------------- ----------- -------------
155,790 2,543,140 11,122 154,109
Shares repurchased...................... (12,773) (202,670) (5,256) (70,861)
----------- ------------- ----------- -------------
Net increase............................ 143,017 $ 2,340,470 5,866 $ 83,248
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
FS-108
<PAGE> 692
GT GLOBAL THEME FUNDS
GT GLOBAL NATURAL RESOURCES FUND
<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............................. 14,008,426 $ 250,536,207 9,220,103 $ 142,385,816
Shares issued in connection with
reinvestment of distributions......... 97,424 1,671,792 3,977 47,892
----------- ------------- ----------- -------------
14,105,850 252,207,999 9,224,080 142,433,708
Shares repurchased...................... (13,512,928) (239,425,288) (7,529,884) (116,812,100)
----------- ------------- ----------- -------------
Net increase............................ 592,922 $ 12,782,711 1,694,196 $ 25,621,608
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 5,227,207 $ 91,103,073 4,288,540 $ 66,460,658
Shares issued in connection with
reinvestment of distributions......... 120,229 2,044,194 709 8,495
----------- ------------- ----------- -------------
5,347,436 93,147,267 4,289,249 66,469,153
Shares repurchased...................... (4,425,914) (75,084,090) (2,178,862) (33,276,553)
----------- ------------- ----------- -------------
Net increase............................ 921,522 $ 18,063,177 2,110,387 $ 33,192,600
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 1,573,656 $ 31,848,691 663,037 $ 10,703,010
Shares issued in connection with
reinvestment of distributions......... 7,576 130,389 77 922
----------- ------------- ----------- -------------
1,581,232 31,979,080 663,114 10,703,932
Shares repurchased...................... (1,180,622) (22,478,170) (356,384) (5,379,503)
----------- ------------- ----------- -------------
Net increase............................ 400,610 $ 9,500,910 306,730 $ 5,324,429
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
GT GLOBAL TELECOMMUNICATIONS FUND
<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............................. 86,491,272 $ 1,449,735,933 161,134,594 $ 2,777,197,821
Shares issued in connection with
reinvestment of distributions......... 4,872,560 77,134,577 3,376,395 52,886,360
------------ --------------- ------------ ---------------
91,363,832 1,526,870,510 164,510,989 2,830,084,181
Shares repurchased...................... (113,032,156) (1,893,258,359) (174,818,005) (3,017,740,549)
------------ --------------- ------------ ---------------
Net decrease............................ (21,668,324) $ (366,387,849) (10,307,016) $ (187,656,368)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 9,249,969 $ 152,245,081 15,365,874 $ 260,167,785
Shares issued in connection with
reinvestment of distributions......... 4,413,826 68,371,781 2,882,770 44,452,585
------------ --------------- ------------ ---------------
13,663,795 220,616,862 18,248,644 304,620,370
Shares repurchased...................... (29,383,147) (477,593,385) (25,319,583) (426,829,324)
------------ --------------- ------------ ---------------
Net decrease............................ (15,719,352) $ (256,976,523) (7,070,939) $ (122,208,954)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,029,510 $ 36,070,768 1,229,487 $ 21,592,338
Shares issued in connection with
reinvestment of distributions......... 11,071 176,806 2,119 33,270
------------ --------------- ------------ ---------------
2,040,581 36,247,574 1,231,606 21,625,608
Shares repurchased...................... (1,835,151) (32,553,269) (1,216,785) (21,450,446)
------------ --------------- ------------ ---------------
Net increase............................ 205,430 $ 3,694,305 14,821 $ 175,162
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of a Fund's or Portfolio's expenses. For the year ended October 31, 1997, the
Funds' or Portfolios' expenses were reduced by the following amounts under these
arrangements:
<TABLE>
<CAPTION>
EXPENSE
REDUCTION
---------
<S> <C>
Global Consumer Products and Services Portfolio.......................................................................... $ 123,570
Global Financial Services Portfolio...................................................................................... 13,622
GT Global Health Care Fund............................................................................................... 81,354
Global Infrastructure Portfolio.......................................................................................... 720
Global Natural Resources Portfolio....................................................................................... 71,129
GT Global Telecommunications Fund........................................................................................ 163,244
</TABLE>
FS-109
<PAGE> 693
GT GLOBAL THEME FUNDS
6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities by a Fund
or Portfolio are defined in the Investment Company Act of 1940 as an affiliated
company. Investments in affiliated companies by Global Consumer Products
Portfolio, GT Global Health Care Fund, and GT Global Telecommunications Fund at
October 31, 1997 amounted to $1,943,798, $251,388,855, and $113,211,488,
respectively, at value.
Transactions during the period with companies that are or were affiliates are as
follows:
GLOBAL CONSUMER PRODUCTS PORTFOLIO
<TABLE>
<CAPTION>
SALES NET REALIZED DIVIDEND
PURCHASES COST PROCEEDS GAIN (LOSS) INCOME
--------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
O & Y Properties Inc. Sp Wts...................... $ 1,996,065 $ -- $ -- $ --
</TABLE>
GT GLOBAL HEALTH CARE FUND
<TABLE>
<CAPTION>
PURCHASES SALES NET REALIZED DIVIDEND
COST PROCEEDS GAIN (LOSS) INCOME
--------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
ATL Ultrasound, Inc............................... $ 22,092,644 $ 7,075,476 $ 1,636,015 $ --
AVECOR Cardiovascular, Inc........................ 1,034,472 -- -- --
Cardiac Pathways Corp............................. 8,400,212 -- -- --
Cardiovascular Dynamics Inc....................... 3,500,454 -- -- --
Catalytica, Inc................................... 10,691,833 16,327,767 8,539,392 --
Cell Therapeutics Inc............................. 12,018,948 -- -- --
Circon Corp....................................... -- 2,739,253 568,655 --
Depotech Corp..................................... 12,202,500 5,683,922 896,972 --
Endosonics Corp................................... 20,775,778 4,411,500 (979,619) --
INAMED Corp....................................... 3,033,798 90,000 (108,753) --
Interferon........................................ 5,870,743 3,085,840 839,277
Kensey Nash Corp.................................. 5,159,335 1,561,197 1,266,168 --
Life Medical Sciences, Inc........................ 2,096,223 442,500 (352,500) --
Micro Therapeutics, Inc........................... 1,800,000 66,248 6,248 --
Photoelectron Corp................................ 2,822,805 -- -- --
Physio-Control International Corp................. 16,172,912 1,542,063 65,018 --
Protein Design Labs, Inc.......................... 12,029,386 22,123,118 40,261 --
Regeneron Pharmaceuticals, Inc.................... 15,114,745 2,161,577 277,371 --
Sunrise Medical, Inc.............................. 3,237,927 -- -- --
TheraTech, Inc.................................... 7,797,057 -- -- --
Visx, Inc......................................... 12,660,684 8,329,268 (295,181) --
</TABLE>
GT GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
SALES NET REALIZED DIVIDEND
PURCHASES COST PROCEEDS GAIN (LOSS) INCOME
--------------- --------------- ---------------- ------------
<S> <C> <C> <C> <C>
ANTEC Corp........................................ $ -- $ 8,346,027 $ (10,335,549) $ --
Atlantic Tele-Network, Inc........................ -- 1,368,992 (86,633) --
DSP Communications, Inc........................... 22,490,263 10,010,074 (10,387,819) --
Echostar Communications Corp. "A"................. -- -- -- --
Gandalf Technologies, Inc......................... -- 4,316,779 (27,050,916) --
Grupo Mexicano de Video - 144A ADR................ -- -- -- --
Himachal Futuristic Communications Ltd. - 144A
GDR............................................. -- 1,643,750 (7,656,250) --
Intermedia Communications of Florida, Inc......... 508,750 -- -- --
International Engineering PLC - Foreign........... -- 3,181,312 (15,784,033) 305,427
Millicom International Cellular S.A............... -- -- -- --
Orbital Sciences Corp............................. 430,000 6,351,505 1,003,380 --
PT Kabelindo Murni - Foreign...................... -- 1,394,687 (5,501,277) --
Spectrian Corp.................................... -- 10,450,207 (9,831,404) --
Tekelec........................................... 292,878 43,271,004 31,126,430 --
Tele 2000 S.A..................................... -- 10,524,931 (2,848,177) --
Three-Five Systems, Inc........................... -- 1,862,340 (1,738,353) --
</TABLE>
FS-110
<PAGE> 694
GT GLOBAL THEME FUNDS
FEDERAL TAX INFORMATION (UNAUDITED): Listed below is the amount of income
received by the Funds from sources within foreign countries and possessions of
the United States and the amount of taxes paid by the Funds to such countries
for the fiscal year ended October 31, 1997:
<TABLE>
<CAPTION>
FOREIGN FOREIGN
------------------------- -----------------------
FUND SOURCE INCOME PER SHARE TAXES PAID PER SHARE
- ---------------------------------------- ------------- --------- ------------ ---------
<S> <C> <C> <C> <C>
GT Global Consumer Products and Services
Fund.................................. -- -- -- --
GT Global Financial Services Fund....... $699,745 $0.1412 $ 77,681 $0.0157
GT Global Health Care Fund.............. -- -- -- --
GT Global Infrastructure Fund........... -- -- -- --
GT Global Natural Resources Fund........ -- -- -- --
GT Global Telecommunications Fund....... -- -- -- --
</TABLE>
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as capital gain dividends for the fiscal year ended October
31, 1997:
<TABLE>
<CAPTION>
CAPITAL GAIN
FUND DIVIDEND
- ---------------------------------------- ------------
<S> <C>
GT Global Consumer Products and Services
Fund.................................. $ 330,657
GT Global Financial Services Fund....... 740,650
GT Global Health Care Fund.............. --
GT Global Infrastructure Fund........... 3,083,268
GT Global Natural Resources Fund........ 2,673,826
GT Global Telecommunications Fund....... 166,632,944
</TABLE>
Pursuant to Section 854 of the Internal Revenue Code, the Funds designate the
following percentage amounts of ordinary income dividends paid (including
short-term capital gain distributions, if any) by the Funds as income qualifying
for the dividends received deduction for corporations for the fiscal year ended
October 31, 1997:
<TABLE>
<CAPTION>
FUND
- ----------------------------------------
<S> <C>
GT Global Consumer Products and Services
Fund.................................. 2.57%
GT Global Financial Services Fund....... 13.12%
GT Global Health Care Fund.............. --
GT Global Infrastructure Fund........... --
GT Global Natural Resources Fund........ 2.48%
GT Global Telecommunications Fund....... --
</TABLE>
FS-111
<PAGE> 695
STATEMENT OF
ADDITIONAL INFORMATION
ADVISOR CLASS SHARES OF
AIM GLOBAL GOVERNMENT INCOME FUND
AIM STRATEGIC INCOME FUND
AIM EMERGING MARKETS DEBT FUND
AIM GLOBAL GROWTH & INCOME FUND
(SERIES PORTFOLIOS OF
AIM INVESTMENT FUNDS)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TX 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 TX 77210-4739
OR BY CALLING (800) 347-4246.
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 8, 1998
RELATING TO THE AIM GLOBAL GOVERNMENT INCOME FUND PROSPECTUS, THE AIM STRATEGIC
INCOME FUND PROSPECTUS, THE AIM EMERGING MARKETS DEBT FUND PROSPECTUS AND THE
AIM GLOBAL GROWTH & INCOME FUND PROSPECTUS EACH DATED SEPTEMBER 8, 1998
<PAGE> 696
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE FUNDS......................... 4
The Trust and Its Shares.................................. 4
INVESTMENT OBJECTIVES AND POLICIES.......................... 5
Investment Objectives..................................... 5
Investment in Emerging Markets............................ 5
Selection of Debt Investments............................. 5
Selection of Equity Investments........................... 6
Investments in Other Investment Companies................. 6
Depositary Receipts....................................... 6
Samurai and Yankee Bonds.................................. 7
Warrants or Rights........................................ 7
Lending of Portfolio Securities........................... 7
Commercial Bank Obligations............................... 7
Repurchase Agreements..................................... 8
Borrowing, Reverse Repurchase Agreements and "Roll"
Transactions........................................... 8
Short Sales............................................... 9
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................... 9
Special Risks of Options, Futures and Currency
Strategies............................................. 9
Writing Call Options...................................... 10
Writing Put Options....................................... 11
Purchasing Put Options.................................... 12
Purchasing Call Options................................... 12
Index Options............................................. 13
Interest Rate, Currency and Stock Index Futures
Contracts.............................................. 14
Options on Futures Contracts.............................. 16
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies.......................... 16
Forward Contracts......................................... 17
Foreign Currency Strategies -- Special Considerations..... 17
Cover..................................................... 18
Interest Rate and Currency Swaps.......................... 18
RISK FACTORS................................................ 19
Illiquid Securities....................................... 19
Foreign Securities........................................ 20
INVESTMENT LIMITATIONS...................................... 23
Government Income Fund.................................... 23
Strategic Income Fund..................................... 24
Emerging Markets Debt Fund and the Portfolio.............. 25
Growth and Income Fund.................................... 26
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 28
Portfolio Trading and Turnover............................ 29
MANAGEMENT.................................................. 30
Trustees and Executive Officers........................... 30
Investment Management and Administration Services......... 32
Distribution Services..................................... 33
Expenses of the Funds and the Portfolio................... 33
NET ASSET VALUE DETERMINATION............................... 34
</TABLE>
2
<PAGE> 697
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HOW TO PURCHASE AND REDEEM SHARES........................... 34
Programs and Services for Shareholders.................... 35
Dividend Order............................................ 35
TAXES....................................................... 35
Taxation of the Funds..................................... 35
Taxation of the Portfolio -- General...................... 35
Taxation of Certain Investment Activities................. 36
Taxation of the Funds' Shareholders....................... 38
MISCELLANEOUS INFORMATION................................... 38
Custodian................................................. 38
Transfer Agency and Accounting Agency Services............ 39
Independent Accountants................................... 39
Shareholders Liability.................................... 39
Names..................................................... 39
Control Persons and Principal Holders of Securities....... 40
INVESTMENT RESULTS.......................................... 41
Total Return Quotations................................... 41
Non-Standardized Returns.................................. 42
Yield Quotations.......................................... 43
Performance Information................................... 43
APPENDIX.................................................... 45
Description of Bond Ratings............................... 45
Description of Commercial Paper Ratings................... 46
Absence of Rating......................................... 46
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 698
INTRODUCTION
This Statement of Additional Information relates to the Advisor Class shares
of AIM Global Government Income Fund ("Government Income Fund"), AIM Strategic
Income Fund ("Strategic Income Fund"), AIM Emerging Markets Debt Fund formerly
known as AIM Global High Income Fund ("Emerging Markets Debt Fund"), and AIM
Global Growth & Income Fund ("Growth & Income Fund") (each, a "Fund," and
collectively, the "Funds"). Each Fund is a non-diversified series of AIM
Investment Funds (the "Company"), a registered open-end management investment
company organized as a Delaware business trust. The Emerging Markets Debt Fund
invests all its investable assets in AIM Emerging Markets Debt Portfolio
("Portfolio").
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 Government Income Fund, the
Strategic Income Fund, the Growth & Income Fund and the Emerging Markets Debt
Portfolio (formerly known as the Global High Income Portfolio) (the
"Portfolio"). AIM and the Sub-advisor also serve as the administrator and
sub-administrator, respectively, of the Emerging Markets Debt Fund.
The Trust is a series mutual fund. The rules and regulations of the Securities
and Exchange Commission (the "SEC") require all mutual funds to furnish
prospective investors certain information concerning the activities of the fund
being considered for investment. This information for Government Income Fund is
included in a Prospectus dated September 8, 1998, for Strategic Income Fund is
included in a separate Prospectus dated September 8, 1998, for Emerging Markets
Debt Fund is included in a separate Prospectus dated September 8, 1998, and for
Growth & Income 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 Health Care Fund, AIM
Global Telecommunications Fund, AIM Global Government Income Fund, AIM Emerging
Markets Debt 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 G.T. Investment Funds, Inc.
This Statement of Additional Information relates solely to the Advisor Class
shares of the Funds.
The term "majority of the outstanding shares" of the Trust, a particular Fund,
or 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, and 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.
4
<PAGE> 699
Fund shares are fully paid, non-assessable and fully transferable when issued
and have no preemptive rights and have such conversion and exchange rights as
set forth in the Prospectus and this Statement of Additional Information.
Fractional shares have proportionately the same rights, including voting rights,
as are provided for a full share.
Shareholders of the 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
The Government Income Fund primarily seeks high current income and secondarily
seeks capital appreciation and protection of principal through active management
of the maturity structure and currency exposure of its portfolio. The Strategic
Income Fund and the Emerging Markets Debt Fund primarily seek high current
income and secondarily seek capital appreciation. The Emerging Markets Debt Fund
seeks to achieve its investment objectives by investing all of its investable
assets in the Portfolio, which is a non-diversified open-end management
investment company with investment objectives identical to those of the Fund.
Whenever the phrase "all of the Emerging Markets Debt Fund's investable assets"
is used herein and in the Prospectus, it means that the only investment
securities held by the Emerging Markets Debt Fund will be its interest in the
Portfolio. The Emerging Markets Debt Fund may withdraw its investment in the
Portfolio at any time, if the Board of Trustees of the Trust determines that it
is in the best interests of the Fund and its shareholders to do so. Upon any
such withdrawal, the Emerging Markets Debt Fund's assets would be invested in
accordance with the investment policies of the Portfolio described below and in
the Prospectus. The investment objective of the Growth & Income Fund is
long-term capital appreciation together with current income. The Growth & Income
Fund seeks its objective by investing in a global portfolio of both equity
securities and debt obligations allocated among diverse international markets.
INVESTMENT IN EMERGING MARKETS
The Portfolio seeks its objectives by investing, under normal circumstances,
at least 65% of its total assets in debt securities of issuers in emerging
markets. The Strategic Income Fund may invest up to 50% of its assets in debt
securities of issuers in emerging markets. The Strategic Income Fund and the
Portfolio do not consider the following countries to be emerging markets:
Australia, Austria, Belgium, Canada, Denmark, France, Germany, Ireland, Italy,
Japan, the Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, United
Kingdom, and United States.
In addition to the factors set forth in the Prospectus, the Sub-advisor will
also consider, when determining what countries constitute emerging markets,
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.
SELECTION OF DEBT INVESTMENTS
In determining the appropriate distribution of investments among various
countries and geographic regions for the Government Income Fund, the Strategic
Income Fund, the Growth & Income Fund, and the Portfolio, the Sub-advisor
ordinarily considers the following factors: prospects for relative economic
growth among the different countries in which the Government Income Fund, the
Strategic Income Fund, the Growth & Income Fund, and the Portfolio 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.
The Government Income Fund, the Strategic Income Fund and the Portfolio 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: (a) obligations issued or guaranteed by the
U.S. or foreign governments, 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), subject to the restriction that the Government Income
Fund, the Strategic Income Fund and the Portfolio may not invest more than 25%
of their respective total assets in bank securities; (e) repurchase agreements
with respect to the foregoing; and (f) other substantially similar short-term
debt securities with comparable characteristics. Money market instruments in
which the Growth & Income Fund may invest
5
<PAGE> 700
include U.S. government securities, high-grade commercial paper, bank
certificates of deposit, bankers' acceptances and repurchase agreements related
to any of the foregoing. "High-grade commercial paper" refers to commercial
paper rated A-1 by Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. ("S&P"), or P-1 by Moody's Investors Service, Inc. ("Moody's") or, if not
rated, determined by the Sub-advisor to be of comparable quality.
SELECTION OF EQUITY INVESTMENTS
With respect to Growth & Income Fund, 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
With respect to certain countries, investments by the Government Income Fund,
the Strategic Income Fund, the Growth & Income Fund and the Portfolio presently
may be made only by acquiring shares of other investment companies (including
investment vehicles or companies advised by the Sub-advisor or its affiliates
("Affiliated Funds")) with local governmental approval to invest in those
countries. At such time as direct investment in these countries is allowed, the
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund and
the Portfolio anticipate investing directly in these markets. The Government
Income Fund, the Strategic Income Fund, the Growth & Income Fund and the
Portfolio may also invest in the securities of closed-end investment companies
within the limits of the Investment Company Act of 1940, as amended ("1940
Act"). These limitations currently provide that, in part, a Fund or the
Portfolio may purchase shares of another investment company unless (a) such a
purchase would cause the Government Income Fund, the Strategic Income Fund, the
Growth & Income Fund or the Portfolio to own in the aggregate more than 3% of
the total outstanding voting securities of the investment company or (b) such a
purchase would cause the Government Income Fund, the Strategic Income Fund, the
Growth & Income Fund or the Portfolio to have more than 5% of its total assets
invested in the investment company or more than 10% of its aggregate assets
invested in an aggregate of all such investment companies. The foregoing
limitations do not apply to the investment by the Emerging Markets Debt Fund in
the Portfolio. Investment in investment companies may involve the payment of
substantial premiums above the value of such companies' portfolio securities.
The Government Income Fund, the Strategic Income Fund, the Growth & Income Fund
and the Portfolio 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 a Fund invested in Affiliated
Funds.
DEPOSITARY RECEIPTS
The Growth & Income 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 Depositary 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 the
Fund's investment policies, the 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
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
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<PAGE> 701
holders in respect of the deposited securities. Sponsored ADR facilities are
created in generally the same manner as unsponsored facilities, except that the
issuer of the deposited securities enters into a deposit agreement with the
depository. The deposit agreement sets out the rights and responsibilities of
the issuer, the depository and the ADR holders. With sponsored facilities, the
issuer of the deposited securities generally will bear some of the costs
relating to the facility (such as dividend payment fees of the depository),
although ADR holders continue to bear certain other costs (such as deposit and
withdrawal fees). Under the terms of most sponsored arrangements, depositories
agree to distribute notices of shareholder meetings and voting instructions, and
to provide shareholder communications and other information to the ADR holders
at the request of the issuer of the deposited securities. The Fund may invest in
both sponsored and unsponsored ADRs.
SAMURAI AND YANKEE BONDS
The Government Income Fund, the Strategic Income Fund and the Portfolio 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"). It is the policy of the Government Income
Fund, the Strategic Income Fund and the Portfolio to invest in Samurai or Yankee
bond issues only after taking into account considerations of quality and
liquidity, as well as yield.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Government Income Fund, the
Strategic Income Fund, the Growth & Income Fund or the Portfolio in connection
with other securities or separately and provide a Fund or the Portfolio with the
right to purchase at a later date other securities of the issuer. Warrants are
securities permitting, but not obligating, their holder to subscribe for other
securities or commodities. Warrants do not carry with them the right to
dividends or voting rights with respect to the securities that they entitle
their holder to purchase, and they do not represent any rights in the assets of
the issuer. As a result, warrants may be considered more speculative than
certain other types of investments. In addition, the value of a warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to its expiration date.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Government Income Fund,
the Strategic Income Fund, the Growth & Income Fund or the Portfolio may make
secured loans of portfolio securities amounting to not more than 30% of its
total assets. Securities loans are made to broker/dealers or institutional
investors pursuant to agreements requiring that the loans 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
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund, and
the Portfolio may pay reasonable administrative and custodial fees in connection
with loans of its securities. While the securities loan is outstanding, the
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund and
the Portfolio will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the
investment of the collateral or a fee from the borrower. The Government Income
Fund, the Strategic Income Fund, the Growth & Income Fund and the Portfolio each
will have a right to call each loan and obtain the securities within the stated
settlement period. The Government Income Fund, the Strategic Income Fund, the
Growth & Income Fund and the Portfolio will not have the right to vote equity
securities while they are lent, but each 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 the Strategic Income Fund's, the Growth & Income Fund's
and the Portfolio's investment policies with respect to bank obligations,
obligations of foreign branches of U.S. banks and of foreign banks are
obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations, 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 the Strategic Income Fund, the
Growth & Income Fund and the Portfolio to investment risks that are different in
some respects from those of investments in obligations of domestic issuers.
Although the Strategic Income Fund, the Growth & Income Fund and the Portfolio
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
the Strategic Income
7
<PAGE> 702
Fund, the Growth & Income Funds or the Portfolio. For the purposes of
calculation with respect to the $1 billion figure, the assets of a bank will be
deemed to include the assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction in which the Government Income Fund,
the Strategic Income Fund, the Growth & Income Fund, or the Portfolio buys 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 the
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund or
Portfolio if the other party to the repurchase agreement becomes bankrupt, the
Government Income Fund, the Strategic Income Fund, Growth & Income Fund and the
Portfolio intend to enter into repurchase agreements only with banks and
broker/dealers believed by the Sub-advisor to present minimal credit risks in
accordance with guidelines approved by the Board of Trustees. The Sub-advisor
reviews and monitors the creditworthiness of such institutions under the Board's
general supervision.
The Government Income Fund, the Strategic Income Fund, Growth & Income Fund
and the Portfolio will invest only in repurchase agreements collateralized at
all times in an amount at least equal to the repurchase price plus accrued
interest. There is no limitation on the amount of the Growth & Income Fund's
assets that may be subject to repurchase agreements at any time. 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, the Government
Income Fund, the Strategic Income Fund, Growth & Income Fund or the Portfolio
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 the
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund's or
the Portfolio's ability to sell the collateral and the Government Income Fund,
the Strategic Income Fund, Growth & Income Fund or the Portfolio could suffer a
loss. However, with respect to financial institutions whose bankruptcy or
liquidation proceedings are subject to the U.S. Bankruptcy Code, the Government
Income Fund, the Strategic Income Fund Growth & Income Fund and the Portfolio
intend to comply with provisions under such Code that would allow the immediate
resale of such collateral. The Government Income Fund and the Growth & Income
Fund will not enter into a repurchase agreement with a maturity of more than
seven days if, as a result, more than 10% of the value of each Fund's total
assets would be invested in such repurchase agreements and other illiquid
investments and securities for which no readily available market exists.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Government Income Fund's, the Strategic Income Fund's, the Growth & Income
Fund's and the Portfolio's borrowings will not exceed 30% of the Fund's or the
Portfolio's respective total assets, i.e., the Government Income Fund's, the
Strategic Income Fund's, the Growth & Income Fund's and the Portfolio's
respective total assets at all times will equal at least 300% of the amount of
its outstanding borrowings. If market fluctuations in the value of the
Government Income Fund's, the Strategic Income Fund's, the Growth & Income
Fund's or the Portfolio's total assets to outstanding borrowings to fall below
300%, within three days (excluding Sundays and holidays) of such event the
respective Fund or the Portfolio may be required to sell portfolio securities to
restore the 300% asset coverage, even though from an investment standpoint such
sales might be disadvantageous. The Government Income Fund, the Strategic Income
Fund, the Growth & Income Fund and the Portfolio each may borrow up to 5% of its
respective total assets for temporary or emergency purposes other than to meet
redemptions. Any borrowing by the Government Income Fund, the Strategic Income
Fund, the Growth & Income Fund or the Portfolio may cause greater fluctuation in
the value of its shares than would be the case if the Fund or the Portfolio did
not borrow.
The Government Income Fund's, the Strategic Income Fund's, the Growth & Income
Fund's and the Portfolio's fundamental investment limitations permit them to
borrow money for leveraging purposes. The Government Income Fund and the Growth
& Income Fund, however, currently are prohibited, pursuant to a non-fundamental
investment policy, from borrowing money in order to purchase securities.
Nevertheless, this policy may be changed in the future by a vote of a majority
of the Trust's Board of Trustees. The Strategic Income Fund and the Portfolio
may borrow for leveraging purposes. If the Strategic Income Fund or the
Portfolio employs leverage, 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 Strategic Income Fund's or the
Portfolio's net asset value. When the income and gains on securities purchased
with the proceeds of borrowings exceed the costs of such borrowings, the
Government Income Fund's, the Strategic Income Fund's, the Growth & Income
Fund's or the Portfolio'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 or the Portfolio's earnings or net asset value would
decline faster than would otherwise be the case.
8
<PAGE> 703
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund and the Portfolio may enter into reverse repurchase agreements. A reverse
repurchase agreement is a borrowing transaction in which a Fund or the Portfolio
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. The
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund and
the Portfolio also may engage in "roll" borrowing transactions which involve a
Fund's or the Portfolio's sale of Government National Mortgage Association
certificates or other securities together with a commitment (for which a Fund or
the Portfolio may receive a fee) to purchase similar, but not identical,
securities at a future date. The Government Income Fund, the Strategic Income
Fund, the Growth & Income Fund and the Portfolio will segregate with a custodian
liquid assets in an amount sufficient to cover its obligations under "roll"
transactions and reverse repurchase agreements with broker/dealers. No
segregation is required for reverse repurchase agreements with banks.
SHORT SALES
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund and the Portfolio may make short sales of securities, although they have no
current intention of doing so. A short sale is a transaction in which a Fund or
the Portfolio sells a security in anticipation that the market price of that
security will decline. The Government Income Fund, the Strategic Income Fund,
the Growth & Income Fund and the Portfolio may make short sales as a form of
hedging to offset potential declines in long positions in securities it owns, or
anticipates acquiring, and in order to maintain portfolio flexibility. The
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund and
the Portfolio only may make short sales "against the box." In this type of short
sale, at the time of the sale, the Fund or the Portfolio owns the security it
has sold short or has the immediate and unconditional right to acquire the
identical security at no additional cost.
In a short sale, the seller does not immediately deliver the securities sold
and does not receive the proceeds from the sale. To make delivery to the
purchaser, the executing broker borrows the securities being sold short on
behalf of the seller. The seller is said to have a short position in the
securities sold until it delivers the securities sold, at which time it receives
the proceeds of the sale. To secure its obligation to deliver securities sold
short, the Government Income Fund, the Strategic Income Fund, the Growth &
Income Fund or the Portfolio will deposit in a separate account with its
custodian an equal amount of the securities sold short or securities convertible
into or exchangeable for such securities at no cost. The Government Income Fund,
the Strategic Income Fund, the Growth & Income Fund or the Portfolio could close
out a short position by purchasing and delivering an equal amount of the
securities sold short, rather than by delivering securities already held by the
Fund or the Portfolio, because the Fund or the Portfolio might want to continue
to receive interest and dividend payments on securities in its portfolio that
are convertible into the securities sold short.
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund and the Portfolio 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
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund or
the Portfolio or a security convertible into or exchangeable for such security.
In such case, any future losses in the Government Income Fund's, the Strategic
Income Fund's, the Growth & Income Fund's or the Portfolio'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 or the Portfolio owns, either directly or indirectly, and, in the case
where a Fund or the Portfolio 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 a Fund or the Portfolio will endeavor to offset these costs with
income from the investment of the cash proceeds of short sales.
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
9
<PAGE> 704
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 the
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund
or the Portfolio entered into a short hedge because the Sub-advisor
projected a decline in the price of a security in the Fund's or the
Portfolio's portfolio, and the price of that security increased instead,
the gain from that increase might by 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 Government Income Fund, the Strategic Income Fund, the
Growth & Income Fund or the Portfolio could suffer a loss. In either such
case, the Government Income Fund, the Strategic Income Fund, the Growth &
Income Fund or the Portfolio would have been in a better position had it
not hedged at all.
(4) As described below, the Government Income Fund, the Strategic
Income Fund, the Growth & Income Fund or the Portfolio might be required to
maintain assets as "cover," maintain segregated accounts or make margin
payments when it takes positions in instruments involving obligations to
third parties (i.e., instruments other than purchased options). If a Fund
or the Portfolio were unable to close out its positions in such
instruments, it might be required to continue to maintain such assets or
accounts or make such payments until the position expired or matured. The
requirements might impair the Fund's ability or the Portfolio's ability to
sell a portfolio security or make an investment at a time when it would
otherwise be favorable to do so, or require that the Fund or the Portfolio
sell a portfolio security at a disadvantageous time. The Fund's or the
Portfolio's ability to close out a position in an instrument prior to
expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("contra party") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund or the Portfolio.
WRITING CALL OPTIONS
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund and the Portfolio may write (sell) call options on securities, indices and
currencies. Call options generally will be written on securities and currencies
that, in the opinion of the Sub-advisor are not expected to make any major price
moves in the near future but that, over the long term, are deemed to be
attractive investments for the Government Income Fund, the Strategic Income
Fund, the Growth & Income Fund and the Portfolio.
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 a
Fund's or the Portfolio's investment objectives. When writing a call option, the
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund or
the Portfolio, in return for the premium, gives up the opportunity for profit
from a price increase in the underlying security or currency above the exercise
price, and retains the risk of loss should the price of the security or currency
decline. Unlike one who owns securities or currencies not subject to an option,
a Fund or the Portfolio has no control over when it may be required to sell the
underlying securities or currencies, since most options may be exercised at any
time prior to the option's expiration. If a call option that a Fund or the
Portfolio has written expires, the Fund or the Portfolio 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
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<PAGE> 705
or currency during the option period. If the call option is exercised, the Fund
or the Portfolio will realize a gain or loss from the sale of the underlying
security or currency, which will be increased or offset by the premium received.
The Government Income Fund, the Strategic Income Fund, the Growth & Income Fund
and the Portfolio do not consider a security or currency covered by a call
option to be "pledged" as that term is used in the Government Income Fund's, the
Strategic Income Fund's, the Growth & Income Fund's and the Portfolio's
fundamental investment 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 or the Portfolio will
be obligated to sell the security or currency at less than its market value.
The premium that the Government Income Fund, the Strategic Income Fund, the
Growth & Income Fund or the Portfolio receives for writing a call option is
deemed to constitute the market value of an option. The premium a Fund or the
Portfolio will receive from writing a call option will reflect, among other
things, the current market price of the underlying investment, the relationship
of the exercise price to such market price, the historical price volatility of
the underlying investment, and the length of the option period. In determining
whether a particular call option should be written, the Sub-advisor will
consider the reasonableness of the anticipated premium and the likelihood that a
liquid secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Government Income
Fund, the Strategic Income Fund, the Growth & Income Fund or the Portfolio to
write another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund and the Portfolio will pay transaction costs in connection with the writing
of options and in entering into closing purchase contracts. Transaction costs
relating to options activity normally are higher than those applicable to
purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or currencies at the time the options
are written. From time to time, a Fund or the Portfolio may purchase an
underlying security or currency for delivery in accordance with the exercise of
an option, rather than delivering such security or currency from its portfolio.
In such cases, additional costs will be incurred.
A Fund or the Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more, respectively, than
the premium received from writing the option. Because increases in the market
price of a call option generally will reflect increases in the market price of
the underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by a Fund or the Portfolio.
WRITING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund and the Portfolio may write put options on securities, indices and
currencies. A put option gives the purchaser of the option the right to sell,
and the writer (seller) the obligation to buy, the underlying security or
currency at the exercise price at anytime until (American Style) or on (European
Style) the expiration date. The operation of put options in other respects,
including their related risks and rewards, is substantially identical to that of
call options.
A Fund or the Portfolio generally would write put options in circumstances
where the Sub-advisor wishes to purchase the underlying security or currency for
the Fund's or the Portfolio's portfolio at a price lower than the current market
price of the security or currency. In such event, the Fund or the Portfolio
would write a put option at an exercise price that, reduced by the premium
received on the option, reflects the lower price it is willing to pay. Since the
Fund or the Portfolio also would 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 a Fund or the Portfolio
will be obligated to purchase the security or currency at greater than its
market value.
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<PAGE> 706
PURCHASING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund and the Portfolio may purchase put options on securities, indices and
currencies. As the holder of a put option, the Government Income Fund, the
Strategic Income Fund, the Growth & Income Fund or the Portfolio would have the
right to sell the underlying security or currency at the exercise price at any
time until (American Style), or on (European Style) the expiration date. The
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund or
the Portfolio may enter into closing sale transactions with respect to such
options, exercise them or permit them to expire.
A Fund or the Portfolio may purchase a put option on an underlying security or
currency ("protective put") owned by the Fund or the Portfolio as a hedging
technique in order to protect against an anticipated decline in the value of the
security or currency. Such hedge protection is provided only during the life of
the put option when the Fund or the Portfolio, as the holder of the put option,
is able to sell the underlying security or currency at the put exercise price
regardless of any decline in the underlying security's market price or
currency's exchange value. The premium paid for the put option and any
transaction costs would reduce any profit otherwise available for distribution
when the security or currency eventually is sold.
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund and the Portfolio also may purchase put options at a time when that Fund or
the Portfolio does not own the underlying security or currency. By purchasing
put options on a security or currency it does not own, a Fund or the Portfolio
seeks to benefit from a decline in the market price of the underlying security
or currency. If the put option is not sold when it has remaining value, and if
the market price of the underlying security or currency remains equal to or
greater than the exercise price during the life of the put option, the Fund or
the Portfolio will lose its entire investment in the put option. In order for
the purchase of a put option to be profitable, the market price of the
underlying security or currency must decline sufficiently below the exercise
price to cover the premium and transaction costs, unless the put option is sold
in a closing sale transaction.
PURCHASING CALL OPTIONS
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund or the Portfolio may purchase call options on securities, indices and
currencies. As the holder of a call option, a Fund or the Portfolio would have
the right to purchase the underlying security or currency at the exercise price
at any time until (American Style) or on (European Style) the expiration date. A
Fund or the Portfolio may enter into closing sale transactions with respect to
such options, exercise them or permit them to expire.
Call options may be purchased by a Fund or the Portfolio for the purpose of
acquiring the underlying security or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable the Fund or the
Portfolio to acquire the security or currency at the exercise price of the call
option plus the premium paid. At times, the net cost of acquiring the security
or currency in this manner may be less than the cost of acquiring the security
or currency directly. This technique also may be useful to a Fund or the
Portfolio in purchasing a large block of securities that would be more difficult
to acquire by direct market purchases. So long as it holds such a call option,
rather than the underlying security or currency itself, a Fund or the Portfolio
is partially protected from any unexpected decline in the market price of the
underlying security or currency and, in such event, could allow the call option
to expire, incurring a loss only to the extent of the premium paid for the
option.
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund and the Portfolio also may purchase call options on underlying securities
or currencies it owns to avoid realizing losses that would result in a reduction
of a Fund's or the Portfolio's current return. For example, where a Fund or the
Portfolio has written a call option on an underlying security or currency having
a current market value below the price at which it purchased the security or
currency, an increase in the market price could result in the exercise of the
call option written by the Fund or the Portfolio and the realization of a loss
on the underlying security or currency. Accordingly, the Fund or the Portfolio
could purchase a call option on the same underlying security or currency, which
could be exercised to fulfill the Fund's or the Portfolio's delivery obligations
under its written call (if it is exercised). This strategy could allow the Fund
or the Portfolio to avoid selling the portfolio security or currency at a time
when it has an unrealized loss; however, the Fund or the Portfolio would have to
pay a premium to purchase the call option plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of the
Government Income Fund, the Strategic Income Fund, the Growth & Income's Fund's
or the Portfolio's total assets at the time of purchase.
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund or the Portfolio may attempt to accomplish objectives similar to those
involved in using Forward Contracts by purchasing put or call options on
currencies. A put option gives a Fund or the Portfolio as purchaser the right
(but not the obligation) to sell a specified amount of
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currency at the exercise price at any time until (American Style) or on
(European Style) the expiration of the option. A call option gives a Fund or the
Portfolio as purchaser the right (but not the obligation) to purchase a
specified amount of currency at the exercise price at any time until (American
Style) or on (European Style) the expiration of the option. A Fund or the
Portfolio might purchase a currency put option, for example, to protect itself
against a decline in the dollar value of a currency in which it holds or
anticipates holding securities. If the currency's value should decline against
the dollar, the loss in currency value should be offset, in whole or in part, by
an increase in the value of the put. If the value of the currency instead should
rise against the dollar, any gain to the Fund or the Portfolio would be reduced
by the premium it had paid for the put option. A currency call option might be
purchased, for example, in anticipation of, or to protect against, a rise in the
value against the dollar of a currency in which the Fund or the Portfolio
anticipates purchasing securities.
Options may be either listed on an exchange or traded in over-the-counter
("OTC") markets. Listed options are third-party contracts (i.e., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. The Funds and the Portfolio will not purchase an OTC option unless the
Fund or the Portfolio 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 the 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 or the Portfolio may also sell OTC options and, in connection
therewith, segregate assets or cover its obligations with respect to OTC options
written by the Fund or the Portfolio. The assets used as cover for OTC options
written by a Fund or the Portfolio will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Fund or the Portfolio
may repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC option written
subject to this procedure would be considered illiquid only to the extent that
the maximum repurchase price under the formula exceeds the intrinsic value of
the option.
A Fund's or the Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. Each Fund
and the Portfolio 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 and the Portfolio will enter into OTC options
only with contra parties that are expected to be capable of entering into
closing transactions with the Fund or the Portfolio, there is no assurance that
the Fund or the Portfolio will in fact be able to close out an OTC option
position at a favorable price prior to expiration. In the extent of insolvency
of the contra party, the Fund or the Portfolio might be unable to close out an
OTC option position at any time prior to its expiration.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or
futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. When a Fund or the
Portfolio writes a call on an index, it receives a premium and agrees that,
prior to the expiration date, the purchaser of the call, upon exercise of the
call, will receive from the Fund or the Portfolio an amount of cash if the
closing level of the index upon which the call is based is greater than the
exercise price of the call. The amount of cash is equal to the difference
between the closing price of the index and the exercise price of the call times
a specified multiple (the "multiplier"), which determines the total dollar value
for each point of such difference. When a Fund or the Portfolio buys a call on
an index, it pays a premium and has the same rights as to such call as are
indicated above. When a Fund or the Portfolio buys a put on an index, it pays a
premium and has the right, prior to the expiration date, to require the seller
of the put, upon the Fund's or the Portfolio's exercise of the put, to deliver
to the Fund or the Portfolio an amount of cash if the closing level of the index
upon which the put is based is less than the exercise price of the put, which
amount of cash is determined by the multiplier, as described above for calls.
When a Fund or the Portfolio writes a put on an index, it receives a premium and
the purchaser has the right, prior to the expiration date, to require the Fund
or the Portfolio to deliver to it an amount of cash equal to the difference
between the closing level of the index and the exercise price times the
multiplier, if the closing level is less than the exercise price.
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<PAGE> 708
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund or the
Portfolio 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 or the Portfolio can offset some of the risk of writing a
call index option position by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, a Fund or the
Portfolio cannot, as a practical matter, acquire and hold a portfolio containing
exactly the same securities as underlie the index and, as a result, bears a risk
that the value of the securities held will vary from the value of the index.
Even if a Fund or the Portfolio could assemble a securities portfolio that
exactly reproduced the composition of the underlying index, it still would not
be fully covered from a risk standpoint because of the "timing risk" inherent in
writing index options. When an index option is exercised, the amount of cash
that the holder is entitled to receive is determined by the difference between
the exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, the Fund or the Portfolio, as the
call writer, will not know that it has been assigned until the next business day
at the earliest. The time lag between exercise and notice of assignment poses no
risk for the writer of a covered call on a specific underlying security, such as
common stock, because there the writer's obligation is to deliver the underlying
security, not to pay its value as of a fixed time in the past. So long as the
writer already owns the underlying security, it can satisfy its settlement
obligations by simply delivering it, and the risk that its value may have
declined since the exercise date is borne by the exercising holder. In contrast,
even if the writer of an index call holds securities that exactly match the
composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those securities against payment of the
exercise price. Instead, it will be required to pay cash in an amount based on
the closing index value on the exercise date; and by the time it learns that it
has been assigned, the index may have declined, with a corresponding decline in
the value of its securities portfolio. This "timing risk" is an inherent
limitation on the ability of index call writers to cover their risk exposure by
holding securities positions.
If a Fund or the Portfolio purchases an index option and exercises it before
the closing index value for that day is available, it runs the risk that the
level of the underlying index may subsequently change. If such a change causes
the exercised option to fall out-of-the-money, the Fund or the Portfolio will be
required to pay the difference between the closing index value and the exercise
price of the option (times the applicable multiplier) to the assigned writer.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund or the Portfolio may enter into interest rate or currency futures
contracts, including futures contracts on indices of debt securities, ("Futures"
or "Futures Contracts"), as a hedge against changes in prevailing levels of
interest rates or currency exchange rates in order to establish more definitely
the effective return on securities or currencies held or intended to be acquired
by the Fund or the Portfolio. The Government Income Fund's, the Strategic Income
Fund's, the Growth & Income Fund's or the Portfolio's hedging may include sales
of Futures as an offset against the effect of expected increases in interest
rates or decreases in currency exchange rates, and purchases of Futures as an
offset against the effect of expected declines in interest rates or increases in
currency exchange rates. The Growth & Income Fund may also enter into stock
index Futures Contracts as a hedge against changes in stock prices.
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund and the Portfolio only will enter into Futures Contracts that are traded on
futures exchanges and are standardized as to maturity date and underlying
financial instrument. Futures exchanges and trading thereon in the United States
are regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"). Futures are exchanged in London at the London International
Financial Futures Exchange.
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce a Fund's or the Portfolio's exposure to interest rate and
currency exchange rate fluctuations, a Fund or the Portfolio may be able to
hedge 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 (debt
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 usually are closed
out before the delivery date. Closing out an open Futures Contract sale or
purchase is
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<PAGE> 709
effected by entering into an offsetting Futures Contract purchase or sale,
respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Government Income Fund, the
Strategic Income Fund, the Growth & Income Fund or the Portfolio realizes a
gain; if it is more, the Government Income Fund, the Strategic Income Fund, the
Growth & Income Fund or the Portfolio realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, the Government
Income Fund, the Strategic Income Fund, the Growth & Income Fund or the
Portfolio realizes a gain; if it is less, the Government Income Fund, the
Strategic Income Fund, the Growth & Income Fund or the Portfolio realizes a
loss. The transaction costs also must be included in these calculations. There
can be no assurance, however, that a Fund or the Portfolio will be able to enter
into an offsetting transaction with respect to a particular Futures Contract at
a particular time. If a Fund or the Portfolio is not able to enter into an
offsetting transaction, the Fund or the Portfolio 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 Government
Income Fund, the Strategic Income Fund, the Growth & Income Fund or the
Portfolio.
The Government Income Fund's, the Strategic Income Fund's, the Growth & Income
Fund's and the Portfolio's Futures transactions will be entered into for hedging
purposes only; that is, Futures Contracts will be sold to protect against a
decline in the price of securities or currencies that the Fund or the Portfolio
owns, or Futures Contracts will be purchased to protect the Fund or the
Portfolio against an increase in the price of securities or currencies it has
committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by the Government Income Fund, the Strategic Income Fund, the Growth &
Income Fund or the Portfolio in order to initiate Futures trading and to
maintain the Fund's or the Portfolio'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 or the Portfolio's performance under the Futures
Contract. The margin required for a particular Futures Contract is set by the
exchange on which the Futures Contract is traded, and may be 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 the Fund or the Portfolio entered into the
Futures Contract will be made on a daily basis as the price of the underlying
security, currency or index fluctuates making the Futures Contract more or less
valuable, a process known as marking-to-market.
Risks of Using Futures Contracts. The prices of Futures Contracts are volatile
and are influenced, among other things, by actual and anticipated changes in
interest and currency rates, 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 or the
Portfolio's portfolio being hedged. The degree of imperfection of correlation
depends upon circumstances such as: variations in speculative market demand for
Futures and for securities or currencies, including technical influences in
Futures trading; and differences between the financial instruments being hedged
and the instruments underlying the standard Futures Contracts available for
trading. A decision of whether, when, and how to hedge involves skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in
Futures Contract and option 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
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<PAGE> 710
does not limit potential losses, because the limit may prevent the liquidation
of unfavorable positions. Futures Contract and option prices occasionally have
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 or the Portfolio were unable to liquidate a Futures or option on
Futures position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund or the
Portfolio would continue to be subject to market risk with respect to the
position. In addition, except in the case of purchased options, the Fund or the
Portfolio would continue to be required to make daily variation margin payments
and might be required to maintain the position being hedged by the Future or
option or to maintain cash or securities in a segregated account.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the Futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account,
which represents the amount by which the market price of the Futures Contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the Futures Contract. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the securities, currencies
or index upon which the Futures Contract is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If a Fund or the Portfolio writes an option on a Futures Contract, it will be
required to deposit initial and variation margin pursuant to requirements
similar to those applicable to Futures Contracts. Premiums received from the
writing of an option on a Futures Contract are included in the initial margin
deposit.
A Fund or the Portfolio may seek to close out an option position by selling an
option covering the same Futures Contract and having the same exercise price and
expiration date. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund or the Portfolio enters into Futures Contracts,
options on Futures Contracts and options on foreign currencies traded on a
CFTC-regulated exchange, in each case other than for bona fide hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the liquidation value of a Fund's or the
Portfolio's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund or the Portfolio 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 or the Portfolio's Board of Trustees,
as applicable, without a shareholder vote. This limitation does not limit the
percentage of a Fund's or the Portfolio's assets at risk to 5%.
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<PAGE> 711
FORWARD CONTRACTS
A Forward Contract is an obligation, generally 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. The
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund and
the Portfolio either may accept or make delivery of the currency at the maturity
of the Forward Contract. A Fund or the Portfolio may also, if its contra party
agrees, prior to maturity, enter into a closing transaction involving the
purchase or sale of an offsetting contract.
A Fund or the Portfolio engages in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund or the Portfolio might sell a particular foreign currency forward, for
example, when it holds bonds denominated in a foreign currency but anticipates,
and seeks to be protected against, a decline in the currency against the U.S.
dollar. Similarly, a Fund or the Portfolio might sell the U.S. dollar forward
when it holds bonds denominated in U.S. dollars but anticipates, and seeks to be
protected against, a decline in the U.S. dollar relative to other currencies.
Further, the Funds or the Portfolio might purchase a currency forward to "lock
in" the price of securities denominated in that currency that it anticipates
purchasing.
Forward Contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
Forward Contract generally has no deposit requirement, and no commissions are
charged at any stage for trades. The Government Income Fund, the Strategic
Income Fund, the Growth & Income Fund or the Portfolio will enter into such
Forward Contracts with major U.S. or foreign banks and securities or currency
dealers in accordance with guidelines approved by the Trust's or the Portfolio's
Board of Trustees, as applicable.
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund or the Portfolio may enter into Forward Contracts either with respect to
specific transactions or with respect to the overall investment of the Fund or
the Portfolio. The precise matching of the Forward Contract amounts and the
value of specific securities generally will not be possible because the future
value of such securities in foreign currencies will change as a consequence of
market movements in the value of those securities between the date the Forward
Contract is entered into and the date it matures. Accordingly, it may be
necessary for the Fund or the Portfolio to purchase additional foreign currency
on the spot (i.e., cash) market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign currency the
Fund or the Portfolio is obligated to deliver and if a decision is made to sell
the security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency the Fund or
the Portfolio is obligated to deliver. The projection of short-term currency
market movements is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be predicted accurately,
causing the Fund or the Portfolio to sustain losses on these contracts and
transaction costs.
At or before the maturity of a Forward Contract requiring the Fund or the
Portfolio to sell a currency, the Fund or the Portfolio 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 or the
Portfolio will obtain, on the same maturity date, the same amount of the
currency that it is obligated to deliver. Similarly, the Fund or the Portfolio
may close out a Forward Contract requiring it to purchase a specified currency
by entering into a second contract, if its contra party agrees, entitling it to
sell the same amount of the same currency on the maturity date of the first
contract. The Fund or the Portfolio would realize a gain or loss as a result of
entering into such an offsetting Forward Contract under either circumstance to
the extent the exchange rate or rates between the currencies involved moved
between the execution dates of the first contract and the offsetting contract.
The cost to a Fund or the Portfolio of engaging in Forward Contracts varies
with factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts 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 the Fund or the Portfolio owns or intends to acquire, but
it does establish a rate of exchange in advance. In addition, while Forward
Contracts 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
A Fund or the Portfolio may use options on foreign currencies, Futures on
foreign currencies, options on Futures on foreign currencies and Forward
Contracts to hedge against movements in the values of the foreign currencies in
which the Fund's or the Portfolio's securities are denominated. Such currency
hedges can protect against price movements in a security that a Fund or the
Portfolio owns or intends to acquire that are attributable to changes in the
value of the
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<PAGE> 712
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 or the Portfolio might seek to hedge against changes in the value of a
particular currency when no Futures Contract, Forward Contract or option
involving that currency is available or one of such contracts is more expensive
than certain other contracts. In such cases, the Fund or the Portfolio may hedge
against price movements in that currency by entering into a contract on another
currency or basket of currencies, the values of which the Sub-advisor believes
will have a positive correlation to the value of the currency being hedged. The
risk that movements in the price of the contract will not correlate perfectly
with movements in the price of the currency being hedged is magnified when this
strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward
Contracts and options on foreign currencies depends on the value of the
underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of Futures Contracts, Forward
Contracts or options, a Fund or the Portfolio could be disadvantaged by dealing
in the odd lot market (generally consisting of transactions of less than $1
million) for the underlying foreign currencies at prices that are less favorable
than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving
foreign currencies might be required to take place within the country issuing
the underlying currency. Thus, a Fund or the Portfolio might be required to
accept or make delivery of the underlying foreign currency in accordance with
any U.S. or foreign regulations regarding the maintenance of foreign banking
arrangements by U.S. residents and might be required to pay any fees, taxes and
charges associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other
than options purchased by a Fund or the Portfolio) expose the Fund or the
Portfolio to an obligation to another party. A Fund or the Portfolio will not
enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, currencies, or other options, Forward
Contracts or Futures Contracts, or (2) cash, receivables and short-term debt
securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Fund and the Portfolio
will comply with SEC guidelines regarding cover for these instruments and, if
the guidelines so require, set aside cash or liquid securities.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Forward Contract, Futures Contract or option is
open, unless they are replaced with other appropriate assets. If a large portion
of a Fund's or the Portfolio's assets are used for cover or segregated accounts,
it could affect portfolio management or the Fund's or the Portfolio's ability to
meet redemption requests or other current obligations.
INTEREST RATE AND CURRENCY SWAPS
The Strategic Income Fund and the Portfolio usually will enter into interest
rate swaps on a net basis, that is, the two payment streams are netted out in a
cash settlement on the payment date or dates specified in the instrument, with
the Strategic Income Fund or the Portfolio receiving or paying, as the case may
be, only the net amount of the two payments. The net amount of the excess, if
any, of each of the Strategic Income Fund's and the Portfolio's obligations over
its entitlements with respect to each swap will be accrued on a daily basis and
an amount of cash or liquid securities having an aggregate net asset value at
least equal to the accrued excess will be maintained in an account by a
custodian that satisfies the requirements of the 1940 Act. The Strategic Income
Fund and the Portfolio will also establish and maintain such segregated accounts
with respect to its total obligations under any swaps that are not entered into
on a net basis and with respect to any caps or floors that are written by that
Fund or the Portfolio. The Sub-advisor, the Strategic Income Fund and the
Portfolio believe that swaps, caps and floors do not constitute senior
securities under the 1940 Act and, accordingly, will not treat them as being
subject to the Fund's and the Portfolio's borrowing restrictions. The Strategic
Income Fund and the Portfolio will not enter into any swap, cap, floor, collar
or other derivative transaction unless, at the time of entering into the
transaction, the unsecured long-term debt rating of the counterparty combined
with any credit
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<PAGE> 713
enhancements is rated at least A by Moody's or S&P, or has an equivalent rating
from a nationally recognized statistical rating organization or is determined to
be of equivalent credit quality by the Sub-advisor. If a counterparty defaults,
the Strategic Income Fund or the Portfolio may have contractual remedies
pursuant to the agreements related to the transactions. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps, floors and collars are more recent innovations for which standardized
documentation has not yet been fully developed and, for that reason, they are
less liquid than swaps.
RISK FACTORS
ILLIQUID SECURITIES
The Government Income Fund, the Strategic Income Fund, the Growth & Income
Fund and the Portfolio each may invest up to 15% of net assets in illiquid
securities. Securities may be considered illiquid if a Fund or the Portfolio
cannot reasonably expect within seven days to receive approximately the amount
at which the Fund or the Portfolio 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 will 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, each Fund and the Portfolio may be obligated to pay
all or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time a Fund or the Portfolio
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, a Fund or
the Portfolio might obtain a less favorable price than prevailed when it decided
to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended ("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 or the Portfolio, however, could affect adversely the marketability of
such portfolio securities and a Fund or the Portfolio might be unable to dispose
of such securities promptly or at favorable prices.
With respect to liquidity determinations generally, the Trust's or the
Portfolio's Board of Trustees has the ultimate responsibility for determining
whether specific securities, including restricted securities eligible for resale
to qualified institutional buyers 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 that make quotes for the security; (iii)
the number of dealers that have undertaken to make a market in the security;
(iv) the number of other potential purchasers; and (v) the nature of the
security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited and the mechanics of transfer). The
Sub-advisor will monitor the liquidity of securities held by each Fund and the
Portfolio and report periodically on such decisions to the Trust's or the
Portfolio's Board of Trustees. Moreover, as noted in the Prospectus, certain
securities, such as those subject to registration restrictions of more than
seven days, will generally be treated as
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<PAGE> 714
illiquid. If the liquidity percentage restriction of a Fund or the Portfolio is
satisfied at the time of investment, a later increase in the percentage of
illiquid securities held by a Fund or the Portfolio resulting from a change in
market value or assets will not constitute a violation of that restriction. If
as a result of a change in market value or assets, the percentage of illiquid
securities held by the Fund or Portfolio increases above the applicable limit,
the Sub-advisor will take appropriate steps to bring the aggregate amount of
illiquid assets back within the prescribed limitations as soon as reasonably
practicable, taking into account the effect of any disposition on the Fund or
the Portfolio.
FOREIGN SECURITIES
Political, Social and Economic Risks. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, either a Fund or the Portfolio could lose its
entire investment in any such country.
Religious, Political and Ethnic Instability. Certain countries in which a Fund
or the Portfolio may invest may have groups that advocate radical religious or
revolutionary philosophies or support ethnic independence. Any disturbance on
the part of such individuals could carry the potential for widespread
destruction or confiscation of property owned by individuals and entities
foreign to such country and could cause the loss of a Fund's or the Portfolio's
investment in those countries. Instability may also result from, among other
things: (i) authoritarian governments or military involvement in political and
economic decision-making, including changes in government through
extra-constitutional means; (ii) popular unrest associated with demands for
improved political, economic and social conditions; and (iii) hostile relations
with neighboring or other countries. Such political, social and economic
instability could disrupt the principal financial markets in which a Fund or the
Portfolio invests and adversely affect the value of the Fund's or the
Portfolio's 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 Government Income Fund,
the Strategic Income Fund, the Growth & Income Fund or the Portfolio. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the cost and expenses of a Fund or the Portfolio.
For example, certain countries require prior governmental approval before
investments by foreign persons may be made, or may limit the amount of
investment by foreign persons in a particular company, or limit the investment
by foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals. Moreover, the national policies of certain countries may
restrict investment opportunities in issuers or industries deemed sensitive to
national interests. In addition, some countries require governmental approval
for the repatriation of investment income, capital or the proceeds of securities
sales by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
restrictions on foreign capital remittances abroad. The Government Income Fund,
the Strategic Income Fund, the Growth & Income Fund or the Portfolio could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
Non-Uniform Corporate Disclosure Standards and Governmental
Regulation. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the foreign securities held by the
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund or
the Portfolio will not be registered with the SEC or regulators of any foreign
country, nor will the issuers thereof be subject to the SEC's reporting
requirements. Thus, there will be less available information concerning most
foreign issuers of securities held by the Government Income Fund, the Strategic
Income Fund, the Growth & Income Fund and the Portfolio than is available
concerning U.S. issuers. In instances where the financial statements of an
issuer are not deemed to reflect accurately the financial situation of the
issuer, the Sub-advisor will take appropriate steps to evaluate the proposed
investment, which may include on-site inspection of the issuer, interviews with
its management and consultations with accountants, bankers and other
specialists. There is substantially less publicly available information about
foreign companies than there are reports and ratings published about U.S.
companies 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 in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
restrictions on market manipulation, insider trading rules, shareholder proxy
requirements and timely disclosure of information.
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<PAGE> 715
Currency Fluctuations. Because the Funds and the Portfolio, under normal
circumstances, will invest substantial portions of their 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 and the Portfolio's investment performance. A
decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of each Fund's and the Portfolio's
holdings of securities and cash denominated in such currency and, therefore,
will cause an overall decline in their respective net asset values and any net
investment income and capital gains derived from such securities to be
distributed in U.S. dollars to shareholders of the Funds. Moreover, if the value
of the foreign currencies in which a Fund or the Portfolio receives its income
declines relative to the U.S. dollar between the receipt of the income and the
making of Fund distributions, the Fund or the Portfolio may be required to
liquidate securities in order to make distributions if the Fund or the Portfolio
has insufficient cash in U.S. dollars to meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the relative
movement of interest rates and the pace of business activity in the other
countries, and the United States, and other economic and financial conditions
affecting the world economy.
Although the Funds and the Portfolio value their assets daily in terms of U.S.
dollars, they do not intend to convert holdings of foreign currencies into U.S.
dollars on a daily basis. The Funds and the Portfolio will do so from time to
time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference ("spread") between the prices at which
they 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 the Fund desire to sell that currency to the dealer.
Adverse Market Characteristics. Securities of many foreign issuers may be less
liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the U.S., 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 a Fund or the Portfolio are
uninvested and no return is earned thereon. The inability of a Fund or the
Portfolio to make intended security purchases due to settlement problems could
cause it to miss attractive opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to a Fund or
the Portfolio due to subsequent declines in value of the portfolio security or,
if the Fund or the Portfolio has entered into a contract to sell the security,
could result in possible liability to the purchaser. The Sub-advisor will
consider such difficulties when determining the allocation of each Fund's or the
Portfolio's assets, although the Sub-advisor does not believe that such
difficulties will have a material adverse effect on the Funds' or the
Portfolio's portfolio trading activities.
The Funds and the Portfolio 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 the Funds' and the Portfolio's investments and
(iii) possible difficulties in obtaining and enforcing judgments against such
custodians.
Withholding Taxes. Each Fund's and the Portfolio's net investment income from
foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing the Fund's and the Portfolio's income or delaying the
receipt of income where those taxes may be recaptured. See "Taxes" herein.
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, such Portfolio may be subject to greater risks and may experience greater
volatility than a fund that is more broadly diversified geographically.
Special Considerations Affecting Western European Countries. The countries
that are members of the European Economic Community ("Common Market")
(Australia, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom)
eliminated certain import tariffs and quotas and other trade barriers with
respect to one another over the past several years. The Sub-advisor believes
that this deregulation should improve the prospects for economic growth in many
Western European countries. Among other things, the deregulation could enable
companies domiciled in one country to avail themselves of lower labor costs
existing in other countries. In addition, this deregulation could benefit
companies domiciled in one country by opening additional markets for their goods
and services in other countries. Since, however, it is not clear what the exact
form or effect of these Common Market reforms will be on business in Western
Europe, it is impossible to predict the long-term impact of the implementation
of these programs on the securities owned by a Fund.
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<PAGE> 716
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 United States securities markets, and should be considered
highly speculative. Such risks include: (1) delays in settling portfolio
transactions and risk of loss arising out of the system of share registration
and custody; (2) the risk that it may be impossible or more difficult than in
other countries to obtain and/or enforce a judgement; (3) pervasiveness of
corruption and crime in the economic system; (4) currency exchange rate
volatility and the lack of available currency hedging instruments; (5) higher
rates of inflation (including the risk of social unrest associated with periods
of hyper-inflation) and high unemployment; (6) controls on foreign investment
and local practices disfavoring foreign investors and limitations on
repatriation of invested capital, profits and dividends, and on a fund's ability
to exchange local currencies for U.S. dollars; (7) political instability and
social unrest and violence; (8) the risk that the governments of Russia and
Eastern European countries may decide not to continue to support the economic
reform programs implemented recently and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed when such countries had a communist form of government; (9)
the financial condition of companies in these countries, including large amounts
of inter-company debt which may create a payments crisis on a national scale;
(10) dependency on exports and the corresponding importance of international
trade; (11) the risk that the tax system in these countries will not be reformed
to prevent inconsistent, retroactive and/or exorbitant taxation; and (12) the
underdeveloped nature of the securities markets.
Special Considerations Affecting Japan. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
Special Considerations Affecting Pacific Region Countries. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also exist between South Korea and North Korea. In
addition, the Funds may invest in Hong Kong, which reverted to Chinese
Administration on July 1, 1997. Investments in Hong Kong may be subject to
expropriation, national, nationalization or confiscation, in which case a Fund
could lose its entire investment in Hong Kong. In addition, the reversion of
Hong Kong also presents a risk that the Hong Kong dollar will be devalued and a
risk of possible loss of investor confidence in Hong Kong's currency, stock
market and assets.
Special Considerations Affecting Latin American Countries. Most Latin American
countries have experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have very negative effects on the economies
and securities markets of certain Latin American countries. Certain Latin
American countries are also among the largest debtors to commercial banks and
foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by
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<PAGE> 717
foreign entities, investments may only be made in certain Latin American
countries solely or primarily through governmentally approved investment
vehicles or companies.
Certain Latin American countries may have managed currencies that are
maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the currency which, in turn, can have a disruptive and negative
effect on foreign investors. For example, in late 1994, the value of the Mexican
peso lost more than one-third of its value relative to the U.S. dollar.
Special Considerations Affecting Emerging Markets. The Strategic Income Fund,
the Growth & Income Fund and the Portfolio may invest in debt securities in
emerging markets. Investing in securities in emerging countries may entail
greater risks than investing in debt securities in developed countries.
Similarly, for Growth & Income Fund, investing in the equity securities of
companies in emerging markets entails additional risks. These risks affecting
debt and equity investments in emerging markets 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 the Funds' and the Portfolio'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.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities markets
there may be share registration and delivery delays or failures.
Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain emerging market countries.
INVESTMENT LIMITATIONS
Each Fund and the Portfolio has adopted the following investment limitations
as fundamental policies which may not be changed without approval by the holders
of a majority of the outstanding shares of the Fund or Portfolio, as applicable.
Whenever the Emerging Markets Debt Fund is requested to vote on a change in the
investment limitations of the Portfolio, the Fund will hold a meeting of its
shareholders and will cast its votes as instructed by its shareholders.
GOVERNMENT INCOME FUND
The Government Income Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or
more of the 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-based securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the 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
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<PAGE> 718
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
Notwithstanding any other investment policy of the Fund, the Fund may invest
all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff positions 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 investment policies of the Government Income Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Trustees without shareholder approval. The Fund may not:
(1) Borrow money to purchase securities or borrow money except for
temporary or emergency purposes. While borrowings exceed 5% of the Fund's
total assets, the Fund will not make any additional investments;
(2) Invest in securities of an issuer if the investment would cause
the Fund to own more than 10% of any class of securities of any one issuer;
(3) 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;
(4) Enter into a futures contract, if, as a result thereof, more than
5% of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to margin on such futures
contracts;
(5) Purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits
maturing in more than seven days, or purchase OTC options or hold assets
set aside to cover OTC options written by the Fund, if immediately after
and as a result, the value of such securities would exceed, in the
aggregate, 15% of the Fund's net assets; or
(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.
STRATEGIC INCOME FUND
The Strategic Income Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or
more of the 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-based securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting
24
<PAGE> 719
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 the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
Notwithstanding any other investment policy of the Fund, the Fund may invest
all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff positions 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 investment policies of the Strategic Income Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Trustees without shareholder approval. The Fund may not:
(1) Invest more than 15% of its total assets in illiquid securities;
(2) Borrow money to purchase securities and will not invest in
securities of an issuer if the investment would cause the Fund to own more
than 10% of any class of securities of any one issuer (provided, however,
that the Fund may invest all of its investable assets in an open-end
management investment company with substantially the same investment
objectives, policies, and limitations as the Fund.);
(3) Invest more than 10% of its total assets in shares of other
investment companies and 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 (provided, however, that the Fund
may invest all of its investable assets in an open-end management
investment company with substantially the same investment objectives,
policies, and limitations as the Fund);
(4) 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;
(5) Enter into a futures contract, if, as a result thereof, more than
5% of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to margin on such futures
contracts; or
(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.
EMERGING MARKETS DEBT FUND AND THE PORTFOLIO
The Emerging Markets Debt Fund and the Portfolio each may not:
(1) Purchase any security if, as a result of that purchase, 25% or
more of the 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-based securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(3) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(4) Engage in the business of underwriting securities of other
issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
25
<PAGE> 720
(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; or
(6) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes.
For purposes of the Fund's and the Portfolio's concentration policy contained
in limitation (1) above, they intend to comply with the SEC staff positions 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 investment policies of the Emerging Markets Debt Fund and the
Portfolio are not fundamental policies and may be changed by vote of the Trust's
or the Portfolio's Board of Trustees without shareholder approval. The Fund and
the Portfolio each may not:
(1) Invest in securities of an issuer if the investment would cause
the Fund or the Portfolio to own more than 10% of any class of securities
of any one issuer (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(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 the Fund's or the Portfolio's
portfolio, after taking into account unrealized profits and unrealized
losses on any contracts the Fund or the Portfolio has entered into;
(4) Invest more than 10% of its total assets in shares of other
investment companies and 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 (provided, however, that the Fund
may invest all of its investable assets in an open-end management
investment company with substantially the same investment objectives as the
Fund);
(5) 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; or
(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.
GROWTH & INCOME FUND
Growth & Income Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or
more of the 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-based securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
26
<PAGE> 721
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(4) 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 3/4% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial operations and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments.
Notwithstanding any other investment policy of the Fund, the Fund may invest
all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
For purposes of the 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 the Growth & Income Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Trustees without shareholder approval. The Fund may not:
(1) Invest in securities of an issuer if the investment would cause
the Fund to own more than 10% of any class of securities of any one issuer;
(2) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(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 the 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 (other
than to meet redemptions). While borrowings exceed 5% of the Fund's total
assets, the Fund will not make any additional investments;
(5) 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;
(6) Purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits
maturing in more than seven days, or purchase OTC options or hold assets
set aside to cover OTC options written by the Fund, if immediately after
and as a result, the value of such securities would exceed, in the
aggregate, 15% of the Fund's net assets; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Investors should refer to each Fund's Prospectus for further information about
each Fund's respective investment objectives, which may not be changed without
the approval of the Fund's shareholders and its corresponding Portfolio's
investment objective, which may be changed without the approval of the
Portfolio's shareholders, and other investment policies and techniques, which
may be changed without shareholder approval.
27
<PAGE> 722
EXECUTION OF PORTFOLIO TRANSACTIONS
Subject to policies established by the Trust's and the Portfolio's Board of
Trustees, the Sub-advisor is responsible for the execution of the Government
Income Fund's, the Strategic Income Fund's, the Growth & Income Fund's and the
Portfolio's portfolio transactions and the selection of broker/dealers that
execute such transactions on behalf of these Funds and the Portfolio. In
executing transactions, the Sub-advisor seeks the best net results for the
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund and
the Portfolio, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Although the
Sub-advisor generally seeks reasonably competitive commission rates and spreads,
payment of the lowest commission or spread is not necessarily consistent with
the best net results. While the Funds and the Portfolio may engage in soft
dollar arrangements for research services, as described below, neither the Funds
nor the Portfolio has any 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 the Funds and the Portfolio, the Sub-advisor
may select brokers to execute the Funds' and the Portfolio's portfolio
transactions on the basis of the research and brokerage services they provide to
the Sub-advisor for its use in managing the Funds and the Portfolio and its
other advisory accounts. Such services may include furnishing analyses, reports
and information concerning issuers, industries, securities, geographic regions,
economic factors and trends, portfolio strategy, and performance of accounts;
and effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement). Research and brokerage services
received from such brokers are in addition to, and not in lieu of, the services
required to be performed by the Sub-advisor under investment management and
administration contracts. A commission paid to such 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 the Funds and the Portfolio and its
other clients and that the total commissions paid by the Funds and the Portfolio
will be reasonable in relation to the benefits received by the Funds and the
Portfolio 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 the Funds or the Portfolio toward payment of the Funds'
or the Portfolio's expenses, such as transfer agent and custodian fees.
Investment decisions for each Fund and the Portfolio and for other investment
accounts managed by the Sub-advisor are made independently of each other in
light of differing conditions. However, the same investment decision
occasionally may be made for two or more of such accounts, including one or both
Funds and the Portfolio. In such cases, simultaneous transactions may occur.
Purchases or sales are then allocated as to price or amount in a manner deemed
fair and equitable to all accounts involved. While in some cases this practice
could have a detrimental effect upon the price or value of the security as far
as the Funds and the Portfolio are concerned, in other cases the Sub-advisor
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Funds and the Portfolio.
Under a policy adopted by the Trust's and the Portfolio'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 the Funds 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 and the Portfolio 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 United States 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.
28
<PAGE> 723
Foreign equity securities may be held by a Fund and the Portfolio in the form
of American Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs"),
Continental Depositary Receipts ("CDRs") or European Depositary Receipts
("EDRs") or securities convertible into foreign equity securities. ADRs, ADSs,
CDRs and EDRs 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 the
Funds and the Portfolio may invest generally are traded in the OTC markets.
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.
The Funds and the Portfolio contemplate that, consistent with the policy of
obtaining the best net results, brokerage transactions may be conducted through
certain companies that are affiliates of AIM and 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. For the fiscal years ended October
31, 1997, 1996 and 1995, the Portfolio paid aggregate brokerage commissions of
$0, $86,600 and $0, respectively. For the fiscal years ended October 31, 1997,
1996 and 1995, the Government Income Fund paid aggregate brokerage commissions
of $4,987, $24,663 and $0, respectively. For the fiscal years ended October 31,
1997, 1996 and 1995, the Strategic Income Fund paid aggregate brokerage
commissions of $6,177, $85,404 and $0, respectively. For the fiscal years ended
October 31, 1997, 1996, and 1995, the Growth & Income Fund paid aggregate
brokerage commissions of $463,307, $257,953 and $318,958, respectively. For the
fiscal years ended October 31, 1996 and 1997, the Growth & Income Fund paid to
LGT Bank in Liechtenstein, AG, which was an "affiliated" broker, aggregate
brokerage commissions of $16,898 and $12,262, respectively, for transactions
involving purchases and sales of portfolio securities which represented 6.55%
and 2.65%, respectively, of the total brokerage commissions paid by the Fund and
5.69% and 2.94%, respectively, of the aggregate dollar amount of transactions
involving payment of commissions by the Fund.
PORTFOLIO TRADING AND TURNOVER
Each Fund and the Portfolio engages in portfolio trading when the Sub-advisor
concludes that the sale of a security owned by a Fund and the Portfolio 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 and the Portfolio's investment objectives, 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 the Funds and
the Portfolio generally do not intend to trade for short-term profits, the
securities in each Fund's and the Portfolio's portfolio will be sold whenever
the Sub-advisor believes it is appropriate to do so, without regard to the
length of time a particular security may have been held. Portfolio turnover is
calculated by dividing the lesser of sales or purchases of portfolio securities
by each Fund's or the Portfolio's average month-end portfolio value, excluding
short-term investments. Higher portfolio turnover involves correspondingly
greater brokerage commissions and other transaction costs that a Fund or the
Portfolio will bear directly, and could result in the realization of net capital
gains that would be taxable when distributed to shareholders. The portfolio
turnover rates for the Government Income Fund, Strategic Income Fund, Growth &
Income Fund and the Portfolio the last two fiscal years were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCT. 31, 1997 OCT. 31, 1996
------------- -------------
<S> <C> <C>
Government Income Fund...................................... 241% 268%
Strategic Income Fund....................................... 149% 177%
Emerging Markets Debt Portfolio............................. 214% 290%
Growth & Income Fund........................................ 50% 39%
</TABLE>
29
<PAGE> 724
MANAGEMENT
TRUSTEES AND EXECUTIVE OFFICERS
The Trust and the Portfolio'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
and President Executive Officer, A I M Management
Group Inc.; Director and President,
A I M Advisors, Inc.; Director and
Senior Vice President, A I M Capital
Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and
Fund Management Company; and Director,
AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------
C. DEREK ANDERSON (57) Trustee President, Plantagenet Capital
220 Sansome Street Management, LLC (an investment
Suite 400 partnership); Chief Executive 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
San Francisco, CA 94111 company); and Trustee, each of the
other investment companies registered
under the 1940 Act that is sub-advised
or sub-administered by the
Sub-advisor.
- ----------------------------------------------------------------------------------------------------
ARTHUR C. PATTERSON (54) Trustee Managing Partner, Accel Partners (a
428 University Avenue venture capital firm); Director,
Palo Alto, CA 94301 Viasoft and PageMart, Inc. (both
public software companies) and several
other privately held software and
communications companies; and Trustee,
each of the other investment companies
registered under the 1940 Act that is
sub-advised or sub-administered by the
Sub-advisor.
- ----------------------------------------------------------------------------------------------------
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.
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
+ Mr. Arthur and Ms. Relihan are married to each other.
30
<PAGE> 725
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION WITH REGISTRANT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
KENNETH W. CHANCEY (53) Vice President and Principal Senior Vice President -- Mutual Fund
50 California Street Accounting Officer Accounting, the Sub-advisor since
San Francisco, CA 94111 1997; Vice President -- Mutual Fund
Accounting, the Sub-advisor from 1992
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 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.
- ----------------------------------------------------------------------------------------------------
+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, composed of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and its
funds and recommending firms to serve as independent auditors of the Trust. All
of the Trust's Trustees also serve as directors or trustees of some or all of
the other investment companies managed, administered or advised by AIM. All of
the Trust's Executive Officers held similar offices with some or all of the
other investment companies managed, administered or advised by AIM. Each Trustee
who is not a trustee, officer or employee of the Sub-advisor or any affiliated
company is paid
31
<PAGE> 726
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 trustees, 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 trustees, 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-advised by the Sub-advisor for which
he or she serves as a 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 the Government Income Fund's, the Strategic Income Fund's and
the Growth & Income Fund's investment manager and administrator under an
investment management and administration contract between the Trust and AIM
("Trust Management Contract"). The Sub-advisor serves as the Portfolio's
sub-advisor and sub-administrator under a sub-advisory and sub-administration
Agreement between AIM and the Sub-advisor ("Portfolio Management Sub-Contract,"
and together with the Portfolio Management Contract, the "Portfolio Management
Contracts"). AIM serves as the Portfolio's investment manager and administrator
under an Investment Management and Administration Contract between the Portfolio
and AIM ("Portfolio Management Contract") (collectively, "Management
Contracts"). The Sub-advisor serves as sub-administrator to each Feeder Fund
under a sub-administration contract between AIM and the Sub-advisor
("Administration Sub-Contract," and together with the Administration Contract,
the "Administration Contracts"). AIM serves as the Emerging Markets Debt Fund's
administrator under an Administration Contract ("Administration Contract")
between the Trust and AIM. The Sub-advisor serves as the sub-advisor and
sub-administrator to the Government Income Fund, the Strategic Income Fund and
the Growth & Income 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"). The Administration
Contracts will not be deemed advisory contracts, as defined under the 1940 Act.
As investment managers and administrators, AIM and the Sub-advisor make all
investment decisions for the Government Income Fund, the Strategic Income Fund,
the Growth & Income Fund and the Portfolio and as administrators, AIM and the
Sub-advisor administer each Fund's and the Portfolio'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, the Funds, and the Portfolio
and provide suitable office space, necessary small office equipment and
utilities.
The Management Contracts may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Trust's or the Portfolio's Board of Trustees, as applicable, or by the vote of a
majority of the Fund's or the Portfolio'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 the Administration 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 the Government Income Fund, the Strategic
Income Fund, the Growth & Income Fund and the Portfolio, and the Administration
Contracts provide that with respect to the Emerging Markets Debt Fund, either
the Trust, the Portfolio or each of AIM or the Sub-advisor may terminate the
Contracts without penalty upon sixty days' written notice to the other party.
The Management Contracts and the Administration Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
In each of the last three fiscal years the Government Income Fund paid
investment management and administration fees to the Sub-advisor in the
following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------- -----------
<S> <C>
1997........................................................ $2,403,043
1996........................................................ 3,672,503
1995........................................................ 4,946,971
</TABLE>
32
<PAGE> 727
In each of the last three fiscal years the Strategic Income Fund paid
investment management and administration fees to the Sub-advisor in the
following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------- -----------
<S> <C>
1997........................................................ $3,474,804
1996........................................................ 3,807,689
1995........................................................ 4,293,053
</TABLE>
In each of the last three fiscal years the Growth & Income Fund paid
investment management and administration fees to the Sub-advisor in the
following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------- -----------
<S> <C>
1997........................................................ $6,900,695
1996........................................................ 6,282,438
1995........................................................ 6,301,399
</TABLE>
In each of the last three fiscal years the Emerging Markets Debt Portfolio
paid investment management and administration fees to the Sub-advisor in the
following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------- -----------
<S> <C>
1997........................................................ $2,971,167
1996........................................................ 3,014,924
1995........................................................ 2,411,786
</TABLE>
In each of the last three fiscal years the Emerging Markets Debt Fund paid
administration fees to the Sub-advisor in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------- -----------
<S> <C>
1997........................................................ $1,136,471
1996........................................................ 1,015,220
1995........................................................ 860,884
</TABLE>
DISTRIBUTION SERVICES
Each Fund's Advisor Class shares are offered continuously through each Fund's
principal underwriter and distributor, AIM Distributors, on a "best efforts"
basis pursuant to a distribution contract between the Trust and AIM Distributors
without a sales charge or a contingent deferred sales charge.
EXPENSES OF THE FUNDS AND THE PORTFOLIO
Each Fund and the Portfolio 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
agent 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 Company
expenses and expenses shared by 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 each Fund. 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 and the Portfolio'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 and the Portfolio generally are higher than the comparable expenses of
such other funds.
33
<PAGE> 728
NET ASSET VALUE DETERMINATION
The net asset value per share of each Fund and Portfolio is normally
determined daily as of the close of trading of the New York Stock Exchange
("NYSE") (generally 4:00 p.m. Eastern time) on each business day of the Fund and
Portfolio. 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 or Portfolio 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 or the Portfolio'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 a Fund's or the Portfolio's net
asset value per share is made in accordance with generally accepted accounting
principles.
Each equity security 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 or Portfolio'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 or Portfolio'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 of the Fund.
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."
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.
34
<PAGE> 729
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the NYSE is restricted, as determined by applicable rules and
regulations of the SEC, (b) the NYSE is closed for other than customary weekend
and holiday closings, (c) the SEC has by order permitted such suspension, or (d)
an emergency as determined by the SEC exists making disposition of portfolio
securities or the valuation of the net assets of a Fund not reasonably
practicable.
PROGRAMS AND SERVICES FOR SHAREHOLDERS
The Funds provide certain services for shareholders and certain investment or
redemption programs. See "Exchange Privilege" and "How to Redeem Shares" in the
Prospectus. All inquiries concerning these programs should be made directly to
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, toll free
at (800) 959-4246.
DIVIDEND ORDER
Dividends may be paid to someone other than the registered owner, or sent to
an address other than the address of record. (Please note that signature
guarantees are required to effect this option.) An investor also may direct that
his or her dividends be invested in one of the other A I M 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.
TAXES
TAXATION OF THE FUNDS
Each Fund is treated as a separate corporation for federal income tax
purposes. To continue to qualify for treatment as a regulated investment company
("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. With respect to each Fund, 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"); (2) at the close of each
quarter of the Fund's taxable year, at least 50% of the value of its total
assets must be 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 the Fund's total assets and that does not represent more than 10%
of the issuer's outstanding voting securities; and (3) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its total
assets may be invested in securities (other than U.S. government securities or
the securities of other RICs) of any one issuer. The Emerging Markets Debt Fund,
as an investor in the Portfolio, is deemed to own a proportionate share of the
Portfolio's assets, and to earn a proportionate share of the Portfolio's income,
for purposes of determining whether that Fund satisfies the requirements
described above to qualify as a RIC.
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.
See "Taxation of Certain Investment Activities" below for a discussion of the
tax consequences to the Emerging Markets Debt Fund of hedging transactions
engaged in, and investments in passive foreign investment companies ("PFICs")
and other foreign securities by, the Portfolio.
TAXATION OF THE PORTFOLIO -- GENERAL
The Portfolio is treated as a partnership for federal income tax purposes and
is not a "publicly traded partnership." As a result, the Portfolio is not
subject to federal income tax; instead, the Emerging Markets Debt Fund, as an
investor in the Portfolio, is required to take into account in determining its
federal income tax liability its share of the Portfolio's income, gains, losses,
deductions and credits, without regard to whether it has received any cash
distributions from the Portfolio. The Portfolio also is not subject to Delaware
income or franchise tax.
35
<PAGE> 730
Because, as noted above, the Emerging Markets Debt Fund is deemed to own a
proportionate share of the Portfolio's assets, and to earn a proportionate share
of the Portfolio's income, for purposes of determining whether that Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to conduct
its operations so that the Emerging Markets Debt Fund will be able to continue
to satisfy all those requirements.
Distributions to the Emerging Markets Debt Fund from the Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
that Fund's recognition of any gain or loss for federal income tax purposes,
except that (1) gain will be recognized to the extent any cash that is
distributed exceeds that Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
in liquidation of that Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, and
(3) loss will be recognized if a liquidation distribution consists solely of
cash and/or unrealized receivables. The Emerging Markets Debt Fund's basis for
its interest in the Portfolio generally will equal the amount of cash and the
basis of any property that Fund invests in the Portfolio, increased by that
Fund's share of the Portfolio's net income and gains and decreased by (a) the
amount of cash and the basis of any property the Portfolio distributes to that
Fund and (b) that Fund's share of the Portfolio's losses.
TAXATION OF CERTAIN INVESTMENT ACTIVITIES
For purposes of the following discussion, "Investor Funds" means the
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund and
the Portfolio.
Foreign Taxes. Interest and dividends received by an Investor 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 an Investor
Fund's total assets (taking into account, in the case of the Emerging Markets
Debt Fund, its proportionate share of the Portfolio's 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 (taking into account, in
the case of the Emerging Markets Debt Fund, its proportionate share of any
foreign taxes paid by the Portfolio) (a "Fund's foreign taxes"). Pursuant to the
election, an Investor 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 proportionate share of the Fund's foreign
taxes, (2) treat his share of those taxes and of any dividend paid by the Fund
that represents its income from foreign and U.S. possessions sources (taking
into account, in the case of the Emerging Markets Debt Fund, its proportionate
share of the Portfolio's income from those 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 Investor Fund will
report to its shareholders shortly after each taxable year their respective
shares of the Fund's foreign taxes and income (taking into account, in the case
of the Emerging Markets Debt Fund, its proportionate share of the Portfolio's
income) from sources within 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 Investor Fund may invest in the
stock of 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 the Investor Fund is a U.S. shareholder (effective
with respect to each Investor 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, an Investor Fund will be subject to federal income tax on a part
(or, in the case of the Emerging Markets Debt Fund, its proportionate share of a
part) of any "excess distribution" received by it (or, in the case of the
Emerging Markets Debt Fund, by the Portfolio) on the stock of a PFIC or of any
gain on the Fund's (or, in the case of the Emerging Markets Debt Fund, the
Portfolio's) disposition of that stock (collectively "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
36
<PAGE> 731
investment company taxable income and, accordingly, will not be taxable to it to
the extent it distributes that income to its shareholders.
If an Investor 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 Investor Fund (or, in the case of the Portfolio, the
Emerging Markets Debt Fund) would be required to include in income each year its
pro rata share (taking into account, in the case of the Emerging Markets Debt
Fund, its proportionate share of the Portfolio's 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 Investor Fund (or, in the case of the Portfolio, the
Emerging Markets Debt Fund) to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax -- even if those earnings and gain were not
received thereby 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 Investor 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 an Investor Fund's adjusted
basis therein as of the end of that year. Pursuant to the election, an Investor
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. An Investor 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.
Options, Futures and Foreign Currency Transactions. The Investors Funds' use
of hedging transactions, such as selling (writing) and purchasing options and
Futures Contracts 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 an Investor 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 an Investor Fund with respect
to its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement for that Investor Fund (or,
in the case of the Portfolio, the Emerging Markets Debt Fund).
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 an Investor 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. Each Investor Fund attempts to monitor section 988 transactions to
minimize any adverse tax impact.
If an Investor 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
principal contract or Futures or Forward Contract entered into by an Investor
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 Strategic Income Fund and the Portfolio each may acquire zero coupon or
other securities issued with original issue discount ("OID"). As a holder of
those securities, that Fund and the Portfolio (and, through it, the Emerging
Markets Debt Fund) each must include in its income the portion of the OID that
accrues on the securities during the taxable year, even if no corresponding
payment on them is received during the year. Similarly, the Strategic Income
Fund and the
37
<PAGE> 732
Portfolio each must include in its gross income securities it receives as
"interest" on payment-in-kind securities. Because each Fund annually must
distribute substantially all of its investment company taxable income, including
any OID and other non-cash income, to satisfy the Distribution Requirement and
avoid imposition of the Excise Tax, the Strategic Income Fund or the Emerging
Markets Debt Fund, or both, may be required in a particular year to distribute
as a dividend an amount that is greater than the total amount of cash it
actually receives (or, in the case of the Emerging Markets Debt Fund, its share
of the total amount of cash the Portfolio actually receives). Those
distributions will be made from the Fund's (or, in the case of the Emerging
Markets Debt Fund, its, or its share of the Portfolio's) cash assets or, if
necessary, from the proceeds of sales of portfolio securities. A Fund may
(directly or through the Portfolio) realize capital gains or losses from those
sales, which would increase or decrease its investment company taxable income
and/or net capital gain.
TAXATION OF THE FUNDS' SHAREHOLDERS
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.
A portion of the dividends from the Growth & Income Fund's investment company
taxable income (whether paid in cash or reinvested in additional shares) may be
eligible for the dividends-received deduction allowed to corporations. The
eligible portion may not exceed the aggregate dividends received by that Fund
from U.S. corporations. However, dividends received by a corporate shareholder
and deducted by it pursuant to the dividends-received deduction are subject
indirectly to the federal alternative minimum tax. The Funds other than the
Growth & Income Fund are not expected to pay dividends eligible for that
deduction.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Dividends paid by 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.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Funds, their shareholders and the Portfolio.
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 a Fund.
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 Funds' principal underwriter, AIM Distributors. AIM
Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire
Square, London, EC2M 4YR, England. AMVESCAP PLC and its subsidiaries are
independent investment management groups that have a significant presence in the
institutional and retail segment of the investment management industry in North
America and Europe, and a growing presence in Asia.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 02110, acts as custodian of each Fund's and the Portfolio's assets.
State Street is authorized to establish and has established separate accounts in
foreign currencies and to cause securities of the Funds and the Portfolio to be
held in separate accounts outside the United States in the custody of non-U.S.
banks.
38
<PAGE> 733
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 also serves as each Fund's pricing and
accounting agent. As of October 31, 1997, October 31, 1996 and October 31, 1995,
the Fund paid accounting services fees to the Sub-advisor of Government Income
Fund, Strategic Income Fund, Emerging Markets Debt Fund and Growth & Income Fund
of $85,149, $127,205, $40,218 and $183,323; $123,309, $131,517, $34,980 and
$162,035; and $116,607, $101,697, $22,563 and $40,735, respectively.
INDEPENDENT ACCOUNTANTS
The Funds' and the Portfolio's independent accountants are
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP conducts audits of each
Fund's and the Portfolio's financial statements, assists in the preparation of
the Funds' and the Portfolio's federal and state income tax returns and consults
with the Trust, the Funds and the Portfolio as to matters of accounting,
regulatory filings, and federal and state income taxation.
The audited financial statements of the Funds and the Portfolio 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.
NAMES
Prior to May 29, 1998, AIM Emerging Markets Debt Fund, formerly known as AIM
Global High Income Fund, operated under the name of GT Global High Income Fund;
AIM Strategic Income Fund operated under the name of GT Global Strategic Income
Fund; AIM Global Government Income Fund operated under the name of GT Global
Government Income Fund; and AIM Global Growth & Income Fund operated under the
name of GT Global Growth & Income Fund.
39
<PAGE> 734
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>
Government Income Fund -- Advisor NFSC FEBO #179-514144 10.09% -0-
Class FMT CO Cust IRA
FBO Thomas Stanley Lipscomb
Cook-Fort Worth Children's Med C
801 7th Ave
Fort Worth, TX 76104-2733
Government Income Fund -- Class A MLPF&S for the Sole Benefit of 9.16% -0-
Its
Customers, Security #
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd
Floor
Jacksonville, FL 32246-6484
Government Income Fund -- Class B MLPF&S for the Sole Benefit of 12.71% -0-
Its
Customers, Security #97AM9
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd
Floor
Jacksonville, FL 32246-6484
Strategic Income Fund -- Advisor FTC & CO 9.67% -0-
Class Attn: Datalynx #089
P.O. Box 173736
Denver, CO 80217-3736
Strategic Income Fund -- Class A MLPF&S for the Sole Benefit of 6.37% -0-
Its
Customers, Security #974TI
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd
Floor
Jacksonville, FL 32246-6484
Emerging Markets Debt Charles Schwab & Co. Inc. 19.58% -0-
Fund -- Advisor Class For the Excl Benef. of our Custs.
Reinvest Account
101 Montgomery St.
San Francisco, California
94104-4122
Attn: Mutual Funds
Wells Fargo Bank NA TTEE FBO 25.58% -0-
LGT Asset Management AC
5000201000
Serp Prft Shr Pln ###-##-####
P.O. Box 9800 MAC 9139-027
Calabasas, CA 91372-0800
Emerging Markets Debt MLPF&S for the Sole Benefit of 10.74% -0-
Fund -- Class B Its
Customers, Security #97AM8
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd
Floor
Jacksonville, FL 32246-6484
Growth & Income Fund -- Advisor Wells Fargo Bank NA TTEE FBO 28.32% -0-
Class LGT Asset Management AC
5000201000
Serp Prft Shr Pln ###-##-####
P O Box 9800 MAC 9137-027
Calabasas, CA 91372-0800
</TABLE>
- ---------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
40
<PAGE> 735
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return, as described in the
Prospectus, is as follows:
(n)
P(1+T) =ERV
<TABLE>
<S> <C> <C> <C>
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable maximum
sales load is deducted at the beginning of the 1, 5, or 10
year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the 1, 5, or 10 year periods (or fractional
portions of such period).
</TABLE>
The standardized returns for the Advisor Class shares of the Strategic Income
Fund, stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
STRATEGIC
INCOME
FUND
PERIOD (ADVISOR CLASS)
- ------ ---------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. 9.86%
October 31, 1992 through Oct. 31, 1997...................... n/a
May 31, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 14.91%
March 29, 1988 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The standardized returns for the Advisor Class shares of the Government Income
Fund, stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
GOVERNMENT
INCOME
FUND
PERIOD (ADVISOR CLASS)
- ------ ---------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. 5.15%
Oct. 31, 1992 through Oct. 31, 1997......................... n/a
May 31, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 5.51%
March 29, 1988 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The standardized returns for the Advisor Class shares of the Emerging Markets
Debt Fund, stated as average annualized total returns for the periods shown,
were:
<TABLE>
<CAPTION>
EMERGING
MARKETS
DEBT FUND
PERIOD (ADVISOR CLASS)
- ------ ---------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. 14.72%
May 31, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 24.17%
Oct. 22, 1992 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The standardized returns for the Advisor Class shares of the Growth & Income
Fund, stated as average annualized total returns, for the periods shown, were:
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND
PERIOD (ADVISOR CLASS)
- ------ ---------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................. 19.23%
Oct. 31, 1992 through Oct. 31, 1997......................... n/a
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 16.34%
Sept. 25, 1990 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
41
<PAGE> 736
NON-STANDARDIZED RETURNS
Standard total return quotes may be accompanied by total return figures
calculated by alternative methods. For example, average annual total return may
be calculated without assuming payment of the full sales load according to the
following formula:
(n)
P(1+U) =ERV
<TABLE>
<S> <C> <C> <C>
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only a
stated portion of, or none of, the applicable maximum sales
load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.
</TABLE>
Cumulative total return across a stated period may be calculated as follows:
(n)
P(1+V) =ERV
<TABLE>
<S> <C> <C> <C>
Where P = a hypothetical initial payment of $1,000.
V = cumulative total return assuming payment of all of, a stated
portion of, or none of, the applicable maximum sales load at
the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Strategic Income Fund, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
STRATEGIC
INCOME
FUND
PERIOD (ADVISOR CLASS)
- ------ ---------------
<S> <C>
May 31, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 39.92%
March 29, 1988 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Advisor Class shares of the Government Income Fund, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
GOVERNMENT
INCOME
FUND
PERIOD (ADVISOR CLASS)
- ------ ---------------
<S> <C>
May 31, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 13.83%
March 29, 1988 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Emerging Markets Debt Fund, stated as
aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
EMERGING
MARKETS
DEBT FUND
PERIOD (ADVISOR CLASS)
- ------ ---------------
<S> <C>
May 31, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 68.73%
Oct. 22, 1992 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Growth & Income Fund, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND
PERIOD (ADVISOR CLASS)
- ------ ---------------
<S> <C>
June 1, 1995 (commencement of operations) through Oct. 31,
1997...................................................... 44.16%
Sept. 25, 1990 (commencement of operations) through Oct. 31,
1997...................................................... n/a
</TABLE>
42
<PAGE> 737
YIELD QUOTATIONS
The standard formula for calculating yield for each Fund, as described in the
Prospectus, is as follows:
(6)
YIELD = 2[((a-b)/(c(LOGO)d)+1) -1]
<TABLE>
<S> <C> <C> <C>
Where a = dividends and interest earned during a stated 30-day period.
For purposes of this calculation, dividends are accrued
rather than recorded on the ex-dividend date. Interest
earned under this formula must generally be calculated based
on the yield to maturity of each obligation (or, if more
appropriate, based on yield to a call date).
b = expenses accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during the
period.
d = the maximum offering price per share on the last day of the
period.
</TABLE>
The Yields of the Class A shares of the Strategic Income Fund, Government
Income Fund and the Emerging Markets Debt Fund for the one-month period ended
October 31, 1996 were 6.58%, 6.23% and 7.29%, respectively. The current yields
of the Class B shares of Strategic Income Fund, Government Income Fund and
Emerging Markets Debt Fund for the one-month period ended October 31, 1996 were
6.23%, 5.87% and 7.00%, respectively. The Yields of the Advisor Class shares of
the Strategic Income Fund, Government Income Fund and Emerging Markets Debt Fund
for the one-month period ended October 31, 1996 were 7.27%, 6.74% and 8.04%,
respectively.
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
43
<PAGE> 738
Fitch (publications)
Ibbotson Associates International Bond Index
International Bank for Reconstruction and
Development (publications)
International Finance Corporation Emerging
Markets Database
International Financial Statistics
Lehman Bond Indices
Lipper Analytical Data Services, Inc. (data and
mutual fund rankings and comparisons)
Micropal, Inc. (data and mutual fund rankings
and comparisons)
Moody's Investors Service (publications)
Morgan Stanley Capital International All Country
(AC) World Index
Morgan Stanley Capital International World
Indices
Morningstar, Inc. (data and mutual fund rankings
and comparisons)
NASDAQ
Organization for Economic Cooperation and
Development (publications)
Salomon Brothers Global Telecommunications
Index
Salomon Brothers World Government Bond
Index-Non-U.S.
Salomon Brothers World Government Bond
Index
Standard & Poor's (publications)
Standard & Poor's 500 Composite Stock Price
Index
Stangar
Wilshire Associates
World Bank (publications and reports)
The World Bank Publication of Trends in
Developing Countries
Worldscope
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.
44
<PAGE> 739
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 bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A -- 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 both 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.
45
<PAGE> 740
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 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.
46
<PAGE> 741
FINANCIAL STATEMENTS
FS
<PAGE> 742
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
PORTFOLIO OF INVESTMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (32.7%)
Schweizerischer Bankverein (Swiss Bank Corp.) .......... SWTZ 74,750 $ 25,964,898 3.1
BANKS-MONEY CENTER
AEGON N.V. ............................................. NETH 187,875 24,372,772 2.9
INSURANCE-LIFE
Credit Suisse Group .................................... SWTZ 108,300 23,827,589 2.8
BANKS-MONEY CENTER
Royal & Sun Alliance Insurance Group PLC ............... UK 2,081,400 23,250,421 2.7
INSURANCE - MULTI-LINE
ABN AMRO Holding N.V. .................................. NETH 891,296 21,713,093 2.5
BANKS-MONEY CENTER
Union Bank of Switzerland - Bearer ..................... SWTZ 11,752 18,929,817 2.2
BANKS-MONEY CENTER
ING Groep N.V. ......................................... NETH 264,262 17,180,432 2.0
BANKS-MONEY CENTER
First Tennessee National Corp. ......................... US 490,800 16,901,925 2.0
BANKS-REGIONAL
Fortis Amev N.V. ....................................... NETH 244,011 14,281,095 1.7
OTHER FINANCIAL
American General Corp. ................................. US 170,000 11,326,250 1.3
INSURANCE-LIFE
Lloyds TSB Group PLC ................................... UK 688,428 10,309,152 1.2
BANKS-REGIONAL
National Westminster Bank PLC .......................... UK 471,800 9,443,890 1.1
BANKS-MONEY CENTER
General Accident PLC ................................... UK 400,000 9,404,682 1.1
INSURANCE - PROPERTY-CASUALTY
IKB Deutsche Industriebank AG .......................... GER 394,000 8,620,123 1.0
BANKS-REGIONAL
Generale de Banque S.A.: ............................... BEL -- -- 1.0
BANKS-MONEY CENTER
Common ............................................... -- 14,762 8,534,275 --
Strip VVPR-/- ........................................ -- 1,342 254 --
Kredietbank N.V. ....................................... BEL 12,980 7,328,524 0.9
BANKS-REGIONAL
Commercial Union PLC ................................... UK 361,550 6,765,459 0.8
INSURANCE - MULTI-LINE
Commonwealth Bank of Australia ......................... AUSL 526,000 6,304,056 0.7
BANKS-SUPER REGIONAL
M & G Group PLC ........................................ UK 155,000 4,762,751 0.6
INVESTMENT MANAGEMENT
General Property Trust ................................. AUSL 1,444,125 2,679,354 0.3
REAL ESTATE
Reinsurance Australia Corporation Ltd. ................. AUSL 846,250 2,357,887 0.3
INSURANCE - MULTI-LINE
Infrastructure Trust of Australia Group ................ AUSL 2,724,750 2,341,430 0.3
OTHER FINANCIAL
National Australia Bank Ltd. ........................... AUSL 120,725 1,713,303 0.2
BANKS-REGIONAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-1
<PAGE> 743
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Realty Development Corp. "A" ........................... HK 5,000 $ 11,168 --
REAL ESTATE
------------
278,324,600
------------
Consumer Non-Durables (15.3%)
Cadbury Schweppes PLC .................................. UK 1,381,800 20,149,324 2.4
BEVERAGES - NON-ALCOHOLIC
Diageo PLC ............................................. UK 1,684,559 20,056,957 2.4
BEVERAGES - ALCOHOLIC
Reckitt & Colman PLC ................................... UK 983,093 19,809,817 2.3
HOUSEHOLD PRODUCTS
Avon Products, Inc. .................................... US 182,000 14,958,125 1.8
PERSONAL CARE/COSMETICS
Pernod Ricard .......................................... FR 158,720 10,959,867 1.3
BEVERAGES - ALCOHOLIC
Philip Morris Cos., Inc. ............................... US 255,000 9,514,688 1.1
TOBACCO
Kellogg Co. ............................................ US 219,513 9,054,911 1.1
FOOD
Clorox Co. ............................................. US 105,960 8,887,395 1.0
HOUSEHOLD PRODUCTS
Anheuser-Busch Cos., Inc. .............................. US 188,371 8,629,746 1.0
BEVERAGES - ALCOHOLIC
Brown-Forman Corp. "B" ................................. US 93,600 5,300,100 0.6
BEVERAGES - ALCOHOLIC
Universal Corp. ........................................ US 62,075 2,323,933 0.3
TOBACCO
------------
129,644,863
------------
Energy (12.5%)
Royal Dutch Petroleum Co. .............................. NETH 371,840 20,528,897 2.4
OIL
Exxon Corp. ............................................ US 182,600 13,318,388 1.6
OIL
VEBA AG ................................................ GER 170,200 11,251,795 1.3
ELECTRICAL & GAS UTILITIES
Mobil Corp. ............................................ US 127,600 10,080,400 1.2
OIL
Electrabel S.A. ........................................ BEL 34,760 9,241,630 1.1
ELECTRICAL & GAS UTILITIES
Shell Transport & Trading Co., PLC ..................... UK 1,121,700 8,347,099 1.0
OIL
PG&E Corp. ............................................. US 220,000 7,122,500 0.8
ELECTRICAL & GAS UTILITIES
Reunies Electrobel & Tractebel S.A. .................... BEL 57,935 6,933,773 0.8
ELECTRICAL & GAS UTILITIES
Elf Aquitaine .......................................... FR 52,475 6,888,981 0.8
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-2
<PAGE> 744
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
RWE AG ................................................. GER 134,620 $ 6,851,062 0.8
ELECTRICAL & GAS UTILITIES
Groupe Bruxelles Lambert S.A. .......................... BEL 31,025 6,201,140 0.7
OIL
------------
106,765,665
------------
Services (9.6%)
Telecom Corporation of New Zealand Limited: ............ NZ -- -- 1.7
TELEPHONE NETWORKS
Common ............................................... -- 2,614,200 12,405,045 --
ADR{\/} .............................................. -- 38,000 1,455,875 --
McGraw-Hill, Inc. ...................................... US 162,000 12,544,875 1.5
BROADCASTING & PUBLISHING
EMI Group PLC .......................................... UK 887,600 9,017,007 1.1
LEISURE & TOURISM
Reuters Group PLC ...................................... UK 823,020 8,918,344 1.0
BROADCASTING & PUBLISHING
Elsevier N.V. .......................................... NETH 557,255 8,415,665 1.0
BROADCASTING & PUBLISHING
Woolworths Ltd. ........................................ AUSL 2,021,925 6,949,915 0.8
RETAILERS-OTHER
Royal PTT Nederland N.V. ............................... NETH 112,735 5,827,656 0.7
TELEPHONE NETWORKS
PMP Communications Ltd. ................................ AUSL 2,556,250 4,543,039 0.5
BROADCASTING & PUBLISHING
Qantas Airways Ltd. .................................... AUSL 2,781,250 4,236,785 0.5
TRANSPORTATION - AIRLINES
Dun & Bradstreet Corp. ................................. US 109,800 3,897,893 0.5
BROADCASTING & PUBLISHING
Telstra Corp. Ltd. - Installment Receipts .............. AUSL 1,262,200 2,958,089 0.3
TELEPHONE NETWORKS
------------
81,170,188
------------
Health Care (4.5%)
Bristol Myers Squibb Co. ............................... US 277,400 29,369,725 3.5
PHARMACEUTICALS
Bayer AG ............................................... GER 191,600 8,522,676 1.0
PHARMACEUTICALS
------------
37,892,401
------------
Materials/Basic Industry (2.8%)
BASF AG ................................................ GER 194,000 8,640,245 1.0
CHEMICALS
Akzo Nobel N.V. ........................................ NETH 41,450 8,435,309 1.0
CHEMICALS
Solvay S.A. "A" ........................................ BEL 58,770 4,426,864 0.5
CHEMICALS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-3
<PAGE> 745
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Aberfoyle Ltd. ......................................... AUSL 1,116,300 $ 2,180,132 0.3
METALS - NON-FERROUS
------------
23,682,550
------------
Capital Goods (0.9%)
Lockheed Martin Corp. .................................. US 69,545 7,745,574 0.9
------------
AEROSPACE/DEFENSE
Multi-Industry/Miscellaneous (0.4%)
ICI Australia Ltd. ..................................... AUSL 497,800 3,658,721 0.4
MULTI-INDUSTRY
------------ -----
TOTAL EQUITY INVESTMENTS (cost $376,302,771) ............. 668,884,562 78.7
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (19.4%)
Canada (1.1%)
Canadian Government, 8.75% due 12/1/05 ............... CAD 10,620,000 8,989,525 1.1
Denmark (0.6%)
Kingdom of Denmark, 7% due 11/15/07 .................. DKK 31,100,000 5,133,173 0.6
Germany (2.4%)
Deutschland Republic:
6.25% due 1/4/24 ................................... DEM 25,150,000 15,429,960 1.8
6.25% due 4/26/06 .................................. DEM 8,110,000 4,906,234 0.6
Italy (1.2%)
Italian Buoni Poliennali del Tesoro (BTPS), 6% due
2/15/00 ............................................. ITL 18,365,000,000 10,621,560 1.2
New Zealand (0.3%)
New Zealand Government, 8% due 4/15/04 ............... NZD 4,440,000 2,564,101 0.3
United Kingdom (2.5%)
United Kingdom Government Bond, 8% due 6/7/21 ........ GBP 9,800,000 21,017,559 2.5
United States (11.3%)
United States Treasury:
6.5% due 8/15/05 ................................... USD 52,130,000 54,437,159 6.4
6% due 2/15/26 ..................................... USD 33,430,000 33,356,220 3.9
5.625% due 2/28/01 ................................. USD 8,100,000 8,101,582 1.0
------------
Total Government & Government Agency Obligations
(cost $160,419,537) ..................................... 164,557,073
------------
Corporate Bonds (1.6%)
Germany (0.7%)
Commerzbank AG, Convertible Bond, 8.4% due
12/31/00+ ........................................... DEM 3,274,000 5,935,722 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-4
<PAGE> 746
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
United Kingdom (0.9%)
Daily Mail & General Trust, Convertible Bond, 5.75%
due 9/26/03 ......................................... GBP 3,405,000 $ 7,544,523 0.9
------------
Total Corporate Bonds (cost $8,756,515) .................. 13,480,245
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $169,176,052) ....... 178,037,318 21.0
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- - ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Societe Generale Banque put warrants due 11/15/99
Tractebel (cost $0) ................................... BEL 11,587 9,715 --
------------ -----
BANKS-MONEY CENTER
TOTAL INVESTMENTS (cost $545,478,823) * ................. 846,931,595 99.7
Other Assets and Liabilities ............................. 2,557,073 0.3
------------ -----
NET ASSETS ............................................... $849,488,668 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
+ The coupon rate shown on floating rate note represents the rate at
period end.
* For Federal income tax purposes, cost is $546,893,380 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 306,724,441
Unrealized depreciation: (6,686,226)
-------------
Net unrealized appreciation: $ 300,038,215
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
FS-5
<PAGE> 747
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & WARRANTS OTHER TOTAL
- - -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Australia (AUSL/AUD) ................. 4.6 4.6
Belgium (BEL/BEF) .................... 5.0 5.0
Canada (CAN/CAD) ..................... 1.1 1.1
Denmark (DEN/DKK) .................... 0.6 0.6
France (FR/FRF) ...................... 2.1 2.1
Germany (GER/DEM) .................... 5.1 3.1 8.2
Italy (ITLY/ITL) ..................... 1.2 1.2
Netherlands (NETH/NLG) ............... 14.2 14.2
New Zealand (NZ/NZD) ................. 1.7 0.3 2.0
Switzerland (SWTZ/CHF) ............... 8.1 8.1
United Kingdom (UK/GBP) .............. 17.7 3.4 21.1
United States (US/USD) ............... 20.2 11.3 0.3 31.8
------ ----- --- -----
Total ............................... 78.7 21.0 0.3 100.0
------ ----- --- -----
------ ----- --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $849,488,668.
The accompanying notes are an integral part of the financial statements.
FS-6
<PAGE> 748
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
STATEMENT OF ASSETS
AND LIABILITIES
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $545,478,823) (Note 1)........................... $846,931,595
U.S. currency................................................................. $ 109
Foreign currencies (cost $23,545,587)......................................... 23,550,489 23,550,598
-----------
Receivable for securities sold............................................................. 21,471,592
Interest receivable........................................................................ 2,781,260
Dividends and dividend withholding tax reclaims receivable................................. 2,210,071
Receivable for Fund shares sold............................................................ 2,063,804
------------
Total assets............................................................................. 899,008,920
------------
Liabilities:
Payable for loan outstanding (Note 1)...................................................... 31,902,000
Payable for securities purchased........................................................... 14,891,346
Payable for Fund shares repurchased........................................................ 1,223,889
Payable for investment management and administration fees (Note 2)......................... 684,243
Payable for service and distribution expenses (Note 2)..................................... 512,776
Payable for transfer agent fees (Note 2)................................................... 94,567
Payable for custodian fees................................................................. 77,850
Payable for printing and postage expenses.................................................. 66,438
Payable for professional fees.............................................................. 23,257
Payable for fund accounting fees (Note 2).................................................. 15,341
Payable for registration and filing fees................................................... 10,508
Payable for Directors' fees and expenses (Note 2).......................................... 2,022
Other accrued expenses..................................................................... 16,015
------------
Total liabilities........................................................................ 49,520,252
------------
Net assets................................................................................... $849,488,668
------------
------------
Class A:
Net asset value and redemption price per share ($324,300,291 DIVIDED BY 34,750,950 shares
outstanding)................................................................................ $ 9.33
------------
------------
Maximum offering price per share (100/95.25 of $9.33) *...................................... $ 9.80
------------
------------
Class B:+
Net asset value and offering price per share ($517,679,095 DIVIDED BY 55,515,498 shares
outstanding)................................................................................ $ 9.32
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($7,509,282 DIVIDED
BY 805,076 shares outstanding).............................................................. $ 9.33
------------
------------
Net assets consist of:
Paid in capital (Note 4)................................................................... $514,353,897
Distributions in excess of net investment income........................................... (4,773,683)
Accumulated net realized gain on investments and foreign currency transactions............. 38,431,162
Net unrealized appreciation on translation of assets and liabilities in foreign
currencies................................................................................ 24,520
Net unrealized appreciation of investments................................................. 301,452,772
------------
Total -- representing net assets applicable to capital shares outstanding.................... $849,488,668
------------
------------
<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-7
<PAGE> 749
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
STATEMENT OF OPERATIONS
Six months ended April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $607,655)............................... $ 6,272,680
Interest income............................................................................ 5,991,094
Securities lending income.................................................................. 371,976
------------
Total investment income.................................................................. 12,635,750
------------
Expenses:
Investment management and administration fees (Note 2)..................................... 3,831,231
Service and distribution expenses: (Note 2)
Class A..................................................................... $ 533,841
Class B..................................................................... 2,412,218 2,946,059
-----------
Transfer agent fees (Note 2)............................................................... 656,600
Custodian fees............................................................................. 253,400
Printing and postage expenses.............................................................. 109,505
Fund accounting fees (Note 2).............................................................. 101,780
Professional fees.......................................................................... 92,400
Registration and filing fees............................................................... 25,227
Directors' fees and expenses (Note 2)...................................................... 9,110
Other expenses (Note 1).................................................................... 126,324
------------
Total expenses before reductions......................................................... 8,151,636
------------
Expense reductions (Note 5)............................................................ (7,140)
------------
Total net expenses....................................................................... 8,144,496
------------
Net investment income........................................................................ 4,491,254
------------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized gain on investments.............................................. 42,712,911
Net realized loss on foreign currency transactions............................ (4,570,498)
-----------
Net realized gain during the period...................................................... 38,142,413
Net change in unrealized appreciation on translation of assets and liabilities
in foreign currencies........................................................ 2,429,401
Net change in unrealized appreciation of investments.......................... 81,947,814
-----------
Net unrealized appreciation during the period............................................ 84,377,215
------------
Net realized and unrealized gain on investments and foreign currencies....................... 122,519,628
------------
Net increase in net assets resulting from operations......................................... $127,010,882
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-8
<PAGE> 750
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
---------------- ----------------
<S> <C> <C>
Increase in net assets
Operations:
Net investment income................................................................... $ 4,491,254 $ 16,790,846
Net realized gain on investments and foreign currency transactions...................... 38,142,413 24,005,528
Net change in unrealized appreciation (depreciation) on translation of assets and
liabilities in foreign currencies...................................................... 2,429,401 (4,059,448)
Net change in unrealized appreciation of investments.................................... 81,947,814 84,674,909
---------------- ----------------
Net increase in net assets resulting from operations.................................. 127,010,882 121,411,835
---------------- ----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income.............................................................. (1,971,816) (7,733,156)
From net realized gain on investments................................................... (5,352,371) (757,327)
In excess of net investment income...................................................... (2,095,813) --
Class B:
Distributions to shareholders: (Note 1)
From net investment income.............................................................. (2,483,340) (9,266,887)
From net realized gain on investments................................................... (8,530,046) (907,529)
In excess of net investment income...................................................... (2,639,502) --
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income.............................................................. (36,098) (125,777)
From net realized gain on investments................................................... (62,701) (12,318)
In excess of net investment income...................................................... (38,368) --
---------------- ----------------
Total distributions................................................................... (23,210,055) (18,802,994)
---------------- ----------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested........................................ 299,960,697 426,976,337
Decrease from capital shares repurchased................................................ (306,750,679) (450,361,754)
---------------- ----------------
Net decrease from capital share transactions.......................................... (6,789,982) (23,385,417)
---------------- ----------------
Total increase in net assets.............................................................. 97,010,845 79,223,424
Net assets:
Beginning of period..................................................................... 752,477,823 673,254,399
---------------- ----------------
End of period........................................................................... $ 849,488,668* $ 752,477,823*
---------------- ----------------
---------------- ----------------
* Includes distributions in excess of net investment income of........................... $ (4,773,683) $ --
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-9
<PAGE> 751
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME 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
APRIL 30, YEAR ENDED OCTOBER 31,
1998 ----------------------------------------------------------
(UNAUDITED) (d) 1997 (d) 1996 1995 1994 1993 (d)
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29 $ 5.28
------------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.07 0.21 0.22 0.24 0.22 0.24*
Net realized and unrealized gain
(loss) on investments................ 1.32 1.12 0.82 0.13 (0.03) 1.05
------------- ---------- ---------- ---------- ---------- ----------
Net increase from investment
operations......................... 1.39 1.33 1.04 0.37 0.19 1.29
------------- ---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.07) (0.21) (0.24) (0.22) (0.21) (0.24)
From net realized gain on
investments.......................... (0.15) (0.02) (0.04) (0.01) (0.06) --
In excess of net investment income.... (0.05) -- -- -- -- --
From sources other than net investment
income............................... -- -- -- -- -- (0.04)
------------- ---------- ---------- ---------- ---------- ----------
Total distributions................. (0.27) (0.23) (0.28) (0.23) (0.27) (0.28)
------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 9.33 $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29
------------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 17.41%(b) 19.01% 16.80% 6.27% 3.14% 25.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 324,300 $ 292,528 $ 286,203 $ 284,069 $ 317,847 $ 251,428
Ratio of net investment income to
average net assets..................... 1.52%(a) 2.74% 3.17% 3.85% 3.30% 3.3%*
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.66%(a) 1.50% 1.59% 1.70% 1.67% 1.8%*
Without expense reductions............ 1.66%(a) 1.64% 1.66% 1.74% N/A N/A
Portfolio turnover rate++............... 63%(a) 50% 39% 83% 117% 24%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0131 $ 0.0151 $ 0.0139 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.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.005 for the year ended October 31, 1993.
Without such reimbursement, the expense ratio would have been 1.9% and
the ratio of net investment income to average net assets would have
been 3.2%.
+ 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
class of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-10
<PAGE> 752
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME 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
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1998 ----------------------------------------------------------
(UNAUDITED) (d) 1997 (d) 1996 1995 1994 1993 (d)
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29 $ 5.28
------------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.04 0.16 0.17 0.20 0.18 0.20
Net realized and unrealized gain
(loss) on investments................ 1.31 1.13 0.82 0.13 (0.03) 1.05
------------- ---------- ---------- ---------- ---------- ----------
Net increase from investment
operations......................... 1.35 1.29 0.99 0.33 0.15 1.25
------------- ---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.04) (0.17) (0.20) (0.18) (0.17) (0.20)
From net realized gain on
investments.......................... (0.15) (0.02) (0.03) (0.01) (0.06) --
In excess of net investment income.... (0.05) -- -- -- -- --
From sources other than net investment
income............................... -- -- -- -- -- (0.04)
------------- ---------- ---------- ---------- ---------- ----------
Total distributions................. (0.24) (0.19) (0.23) (0.19) (0.23) (0.24)
------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 9.32 $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29
------------- ---------- ---------- ---------- ---------- ----------
------------- ---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 16.97%(b) 18.28% 16.06% 5.57% 2.48% 24.3%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 517,679 $ 456,893 $ 383,966 $ 356,796 $ 359,242 $ 150,768
Ratio of net investment income to
average net assets..................... 0.87%(a) 2.09% 2.52% 3.20% 2.65% 2.6%
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.31%(a) 2.15% 2.24% 2.35% 2.32% 2.5%
Without expense reductions............ 2.31%(a) 2.29% 2.31% 2.39% N/A N/A
Portfolio turnover rate++............... 63%(a) 50% 39% 83% 117% 24%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0131 $ 0.0151 $ 0.0139 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.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.005 for the year ended October 31, 1993.
Without such reimbursement, the expense ratio would have been 1.9% and
the ratio of net investment income to average net assets would have
been 3.2%.
+ 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
class of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-11
<PAGE> 753
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME 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, 1998 ------------------- OCTOBER 31,
(UNAUDITED) (d) 1997 (d) 1996 1995
--------------- -------- -------- ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.20 $ 7.10 $ 6.35 $ 6.24
--------------- -------- -------- ------------
Income from investment operations:
Net investment income................. 0.08 0.23 0.23 0.11
Net realized and unrealized gain
(loss) on investments................ 1.33 1.13 0.82 0.13
--------------- -------- -------- ------------
Net increase from investment
operations......................... 1.41 1.36 1.05 0.24
--------------- -------- -------- ------------
Distributions to shareholders:
From net investment income............ (0.08) (0.24) (0.26) (0.13)
From net realized gain on
investments.......................... (0.15) (0.02) (0.04) --
In excess of net investment income.... (0.05) -- -- --
From sources other than net investment
income............................... -- -- -- --
--------------- -------- -------- ------------
Total distributions................. (0.28) (0.26) (0.30) (0.13)
--------------- -------- -------- ------------
Net asset value, end of period.......... $ 9.33 $ 8.20 $ 7.10 $ 6.35
--------------- -------- -------- ------------
--------------- -------- -------- ------------
Total investment return (c)............. 17.59% (b) 19.23% 17.19% 3.83% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 7,509 $ 3,057 $ 3,085 $ 944
Ratio of net investment income to
average net assets..................... 1.87% (a) 3.09% 3.52% 4.20% (a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.31% (a) 1.15% 1.24% 1.35% (a)
Without expense reductions............ 1.31% (a) 1.29% 1.31% 1.39% (a)
Portfolio turnover rate++............... 63% (a) 50% 39% 83%
Average commission rate per share paid
on portfolio transactions++............ $0.0131 $0.0151 $0.0139 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.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.005 for the year ended October 31, 1993.
Without such reimbursement, the expense ratio would have been 1.9% and
the ratio of net investment income to average net assets would have
been 3.2%.
+ 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
class of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-12
<PAGE> 754
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
NOTES TO
FINANCIAL STATEMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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 Growth & Income Fund ("Fund") is a separate series of GT Investment
Funds, Inc. ("Company"). Effective June 1, 1998, the Company was renamed AIM
Investment Funds, Inc. and the Fund was renamed AIM Global Growth & Income 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
Fund 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 fluctuations, 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 of the Fund 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 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-13
<PAGE> 755
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME 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
amounts shown in the Fund's "Statement of Assets and Liabilities." The Fund
could be exposed to risk if a counter party 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 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 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.
(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, 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 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 $97,486,245
were on loan to brokers. The loans were secured by cash collateral of
$101,528,232. 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
FS-14
<PAGE> 756
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
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 $371,976 of
income from securities lending.
(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.
(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
investment of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the price 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 each Fund's total
assets. On April 30, 1998, the Fund had $31,902,000 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 $10,098,097, with a weighted average interest rate of 6.42%.
Interest expense for the Fund for the six months ended April 30, 1998, was
$111,735, and is included in "Other Expenses" on the Statement of Operations.
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
$26,174 of such sales charges. Purchases of Class A shares exceeding $500,000
may be subject to a contingent deferred sales charge ("CDSC") upon redemption,
in accordance with the Fund's current prospectus. GT Global collected CDSCs in
the amount of $1,692 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 period ended April 30, 1998, GT Global collected CDSCs in
the amount of $627,678. In addition, GT Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
FS-15
<PAGE> 757
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME 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 0.35% 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 1.75%, 2.40%, and 1.40% 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 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, 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 and U.S. government
obligations, aggregated $164,691,801 and $228,001,192, respectively. Purchases
and sales of U.S. government obligations were $79,532,513 and $36,789,426,
respectively, 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 Latin America
Growth Fund; 200,000,000 were classified as shares of GT Global Small Companies
Fund (inactive); 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
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; 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-16
<PAGE> 758
AIM GLOBAL GROWTH & INCOME FUND
(FORMERLY GT GLOBAL GROWTH & INCOME FUND)
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 23,620,178 $ 204,075,876 37,585,791 $ 289,617,397
Shares issued in connection with
reinvestment of distributions......... 962,992 8,160,319 935,467 7,161,559
--------------- ------------------ --------------- ------------------
24,583,170 212,236,195 38,521,258 296,778,956
Shares repurchased...................... (25,453,190) (220,702,455) (43,156,190) (332,338,391)
--------------- ------------------ --------------- ------------------
Net decrease............................ (870,020) $ (8,466,260) (4,634,932) $ (35,559,435)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
----------------------------------- -----------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 6,646,214 $ 57,732,080 12,634,686 $ 97,336,518
Shares issued in connection with
reinvestment of distributions......... 1,363,410 11,516,364 1,087,287 8,343,350
--------------- ------------------ --------------- ------------------
8,009,624 69,248,444 13,721,973 105,679,868
Shares repurchased...................... (8,146,059) (71,078,253) (12,063,889) (93,059,122)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. (136,435) $ (1,829,809) 1,658,084 $ 12,620,746
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
----------------------------------- -----------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,118,403 $ 18,340,399 3,177,501 $ 24,442,634
Shares issued in connection with
reinvestment of distributions......... 15,791 135,659 9,792 74,879
--------------- ------------------ --------------- ------------------
2,134,194 18,476,058 3,187,293 24,517,513
Shares repurchased...................... (1,701,823) (14,969,971) (3,248,879) (24,964,241)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. 432,371 $ 3,506,087 (61,586) $ (446,728)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager 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 $7,140 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-17
<PAGE> 759
GT GLOBAL GROWTH & INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of GT Global Growth & Income Fund and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Growth & Income 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 Growth & Income 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-18
<PAGE> 760
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (28.4%)
Schweizerischer Bankverein (Swiss Bank Corp.) .......... SWTZ 74,750 $ 20,102,411 2.7
BANKS-MONEY CENTER
Royal & Sun Alliance Insurance Group PLC ............... UK 2,081,400 19,951,696 2.6
INSURANCE - MULTI-LINE
CS Holding AG - Registered ............................. SWTZ 108,300 15,258,696 2.0
BANKS-MONEY CENTER
AEGON N.V. ............................................. NETH 187,875 14,809,312 2.0
INSURANCE-LIFE
First Tennessee National Corp. ......................... US 245,400 14,141,175 1.9
BANKS-REGIONAL
Union Bank of Switzerland - Bearer ..................... SWTZ 11,752 13,531,589 1.8
BANKS-MONEY CENTER
ABN AMRO Holding N.V. .................................. NETH 667,296 13,442,181 1.8
BANKS-MONEY CENTER
ING Groep N.V. ......................................... NETH 264,262 11,096,009 1.5
OTHER FINANCIAL
Deutsche Bank AG ....................................... GER 134,150 8,774,787 1.2
BANKS-MONEY CENTER
American General Corp. ................................. US 170,000 8,670,000 1.1
INSURANCE-LIFE
IKB Deutsche Industriebank AG .......................... GER 394,000 8,339,229 1.1
BANKS-REGIONAL
General Accident PLC ................................... UK 400,000 6,806,441 0.9
INSURANCE - PROPERTY-CASUALTY
National Westminster Bank PLC .......................... UK 471,800 6,781,828 0.9
BANKS-MONEY CENTER
Fortis Amev N.V. ....................................... NETH 164,542 6,468,086 0.9
OTHER FINANCIAL
Lloyds TSB Group PLC ................................... UK 513,428 6,415,697 0.8
BANKS-REGIONAL
Commonwealth Bank of Australia ......................... AUSL 546,000 6,275,641 0.8
BANKS-SUPER REGIONAL
Generale de Banque S.A.: ............................... BEL -- -- 0.8
BANKS-MONEY CENTER
Common ............................................... -- 14,762 6,038,244 --
Strip VVPR-/- ........................................ -- 1,342 567 --
Kredietbank N.V. ....................................... BEL 12,980 5,446,409 0.7
BANKS-REGIONAL
Commercial Union PLC ................................... UK 361,550 5,093,962 0.7
INSURANCE - MULTI-LINE
Mercury Asset Management Group PLC ..................... UK 196,698 4,272,457 0.6
INVESTMENT MANAGEMENT
M & G Group PLC ........................................ UK 155,000 3,139,257 0.4
INVESTMENT MANAGEMENT
General Property Trust ................................. AUSL 1,500,000 2,688,928 0.4
REAL ESTATE
Reinsurance Australia Corporation Ltd. ................. AUSL 880,000 2,276,555 0.3
INSURANCE - MULTI-LINE
Infrastructure Trust of Australia Group ................ AUSL 2,830,000 2,188,401 0.3
OTHER FINANCIAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-19
<PAGE> 761
GT GLOBAL GROWTH & INCOME 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)
National Australia Bank Ltd. ........................... AUSL 125,000 $ 1,709,139 0.2
BANKS-REGIONAL
Realty Development Corp., Ltd. "A" ..................... HK 5,000 14,230 --
REAL ESTATE
------------
213,732,927
------------
Energy (14.2%)
Royal Dutch Petroleum Co. .............................. NETH 371,840 19,674,378 2.6
OIL
Elektrowatt "B" AG ..................................... SWTZ 49,068 18,821,083 2.5
ELECTRICAL & GAS UTILITIES
Exxon Corp. ............................................ US 182,600 11,218,488 1.5
OIL
Mobil Corp. ............................................ US 127,600 9,290,875 1.2
OIL
Shell Transport & Trading Co., PLC ..................... UK 1,121,700 7,953,685 1.1
OIL
Electrabel S.A. ........................................ BEL 34,760 7,801,667 1.0
ELECTRICAL & GAS UTILITIES
Elf Aquitaine .......................................... FR 52,475 6,498,283 0.9
OIL
RWE AG ................................................. GER 134,620 5,839,128 0.8
ELECTRICAL & GAS UTILITIES
PG&E Corp. ............................................. US 220,000 5,623,750 0.7
ELECTRICAL & GAS UTILITIES
Reunies Electrobel & Tractebel S.A. .................... BEL 57,935 4,935,325 0.7
ELECTRICAL & GAS UTILITIES
Groupe Bruxelles Lambert S.A. .......................... BEL 31,025 4,805,337 0.6
OIL
Santos Ltd. ............................................ AUSL 907,472 4,172,138 0.6
OIL
------------
106,634,137
------------
Consumer Non-Durables (7.8%)
Avon Products, Inc. .................................... US 182,000 11,921,000 1.6
PERSONAL CARE/COSMETICS
Universal Corp. ........................................ US 280,500 10,501,219 1.4
TOBACCO
Philip Morris Cos., Inc. ............................... US 255,000 10,104,375 1.3
TOBACCO
Guinness PLC ........................................... UK 871,500 7,791,169 1.0
BEVERAGES - ALCOHOLIC
Pernod Ricard .......................................... FR 158,720 7,358,318 1.0
BEVERAGES - ALCOHOLIC
Cadbury Schweppes PLC .................................. UK 670,000 6,742,704 0.9
BEVERAGES - NON-ALCOHOLIC
Brown-Forman Corp. "B" ................................. US 93,600 4,603,950 0.6
BEVERAGES - ALCOHOLIC
------------
59,022,735
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-20
<PAGE> 762
GT GLOBAL GROWTH & INCOME 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 (7.7%)
Telecom Corporation of New Zealand Limited: ............ NZ -- -- 1.9
TELEPHONE NETWORKS
Common ............................................... -- 2,614,200 $ 12,660,904 --
ADR{\/} .............................................. -- 38,000 1,479,625 --
McGraw-Hill, Inc. ...................................... US 162,000 10,590,750 1.4
BROADCASTING & PUBLISHING
Woolworths Ltd. ........................................ AUSL 2,100,000 6,776,098 0.9
RETAILERS-OTHER
PMP Communications Ltd. ................................ AUSL 2,656,500 5,509,086 0.7
BROADCASTING & PUBLISHING
Qantas Airways Ltd. .................................... AUSL 2,890,000 5,180,668 0.7
TRANSPORTATION - AIRLINES
Royal PTT Nederland N.V. ............................... NETH 112,735 4,309,602 0.6
TELEPHONE NETWORKS
Cognizant Corp. ........................................ US 109,800 4,302,788 0.6
CONSUMER SERVICES
Dun & Bradstreet Corp. ................................. US 109,800 3,136,163 0.4
BROADCASTING & PUBLISHING
EMI Group PLC .......................................... UK 381,600 3,088,259 0.4
LEISURE & TOURISM
ACNielsen Corp.-/- ..................................... US 36,600 837,218 0.1
CONSUMER SERVICES
------------
57,871,161
------------
Materials/Basic Industry (4.7%)
Akzo Nobel N.V. ........................................ NETH 58,950 10,389,900 1.4
CHEMICALS
BASF AG ................................................ GER 234,000 7,937,953 1.1
CHEMICALS
Solvay S.A. "A" ........................................ BEL 117,540 7,083,515 0.9
CHEMICALS
Monsanto Co. ........................................... US 160,500 6,861,375 0.9
CHEMICALS
Aberfoyle Ltd. ......................................... AUSL 1,160,000 2,324,077 0.3
METALS - NON-FERROUS
Solutia, Inc. .......................................... US 32,100 710,213 0.1
CHEMICALS
------------
35,307,033
------------
Health Care (4.4%)
Bristol Myers Squibb Co. ............................... US 277,400 24,341,850 3.2
PHARMACEUTICALS
Bayer AG ............................................... GER 258,600 9,072,369 1.2
PHARMACEUTICALS
------------
33,414,219
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-21
<PAGE> 763
GT GLOBAL GROWTH & INCOME 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 (2.7%)
General Electric PLC ................................... UK 1,473,000 $ 9,406,990 1.2
AEROSPACE/DEFENSE
Lockheed Martin Corp. .................................. US 69,545 6,611,122 0.9
AEROSPACE/DEFENSE
BICC PLC ............................................... UK 1,559,172 4,354,279 0.6
INDUSTRIAL COMPONENTS
------------
20,372,391
------------
Consumer Durables (1.4%)
GKN PLC ................................................ UK 460,400 10,324,636 1.4
------------
AUTO PARTS
Multi-Industry/Miscellaneous (1.3%)
VEBA AG ................................................ GER 170,200 9,484,616 1.3
CONGLOMERATE
------------ -----
TOTAL EQUITY INVESTMENTS (cost $338,444,171) ............. 546,163,855 72.6
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (20.6%)
Australia (0.7%)
Australian Government, 8.75% due 8/15/08 ............. AUD 5,774,000 4,934,994 0.7
Canada (1.2%)
Canadian Government, 8.75% due 12/1/05 ............... CAD 10,620,000 9,179,080 1.2
Denmark (0.7%)
Kingdom of Denmark, 7% due 11/15/07 .................. DKK 31,100,000 5,034,931 0.7
Germany (3.8%)
Deutschland Republic:
6.75% due 4/22/03 .................................. DEM 23,000,000 14,318,817 1.9
6.25% due 1/4/24 ................................... DEM 4,300,000 2,508,188 0.3
Treuhandanstalt:
6.625% due 7/9/03 .................................. DEM 12,060,000 7,473,074 1.0
6.375% due 7/1/99 .................................. DEM 7,000,000 4,192,288 0.6
Italy (1.8%)
Italian Buoni Poliennali del Tesoro (BTPS):
6% due 2/15/00 ..................................... ITL 18,365,000,000 10,984,835 1.5
10.5% due 9/01/05 .................................. ITL 2,725,000,000 2,039,827 0.3
New Zealand (0.4%)
New Zealand Government, 8% due 4/15/04 ............... NZD 4,440,000 2,955,320 0.4
Sweden (0.6%)
Swedish Government, 8% due 8/15/07 ................... SEK 30,000,000 4,469,072 0.6
United Kingdom (4.0%)
United Kingdom Treasury:
8% due 6/10/03 ..................................... GBP 14,000,000 24,942,355 3.3
7.5% due 12/7/06 ................................... GBP 3,116,000 5,556,353 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-22
<PAGE> 764
GT GLOBAL GROWTH & INCOME 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)
United States (7.4%)
United States Treasury Bonds:
6% due 2/15/26 ..................................... USD 24,060,000 $ 23,404,459 3.1
6.25% due 8/15/23 .................................. USD 9,075,000 9,101,587 1.2
United States Treasury Notes:
7.5% due 2/15/05 ................................... USD 15,460,000 16,928,096 2.2
6.5% due 8/15/05 ................................... USD 2,580,000 2,676,397 0.3
Federal National Mortgage Association, 6.375% due
8/15/07 ............................................. AUD 5,940,000 4,241,014 0.6
------------
Total Government & Government Agency Obligations (cost
$151,129,623) ........................................... 154,940,687
------------
Corporate Bonds (5.5%)
Germany (2.5%)
Siemens Capital Corp., 8% due 6/24/02+/+ ............. USD 4,710,000 7,985,805 1.1
Commerzbank AG, Convertible Bond, 9.45% due
12/31/00+ ........................................... DEM 4,173,000 6,630,339 0.9
Deutsche Bank AG, 9.00% due 12/31/02+/+ .............. DEM 5,625,000 3,892,976 0.5
United Kingdom (3.0%)
Daily Mail & General Trust, Convertible Bond, 5.75%
due 9/26/03 ......................................... GBP 3,405,000 7,795,748 1.0
Land Securities PLC, Convertible Bond, 9.375% due
7/31/04 ............................................. GBP 3,485,000 7,679,334 1.0
MBNA Chester Asset Receivable #3, 6.6% due
11/17/03+ ........................................... GBP 4,500,000 7,568,182 1.0
------------
Total Corporate Bonds (cost $33,669,644) ................. 41,552,384
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $184,799,267) ....... 196,493,071 26.1
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Societe Generale Banque put warrants due 11/15/99
Tractebel (cost $0) ................................... BEL 11,587 84,839 --
------------ -----
BANKS-MONEY CENTER
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Infrastructure Trust of Australia Group Rights, expire
12/1/97 (cost $0) ..................................... AUSL 943,333 6,632 --
------------ -----
OTHER FINANCIAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-23
<PAGE> 765
GT GLOBAL GROWTH & INCOME 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 $1,935,000 U.S. Treasury
Bonds, 8.875% due 8/15/17 (market value of collateral
is $2,538,597, including accrued interest). (cost
$2,485,384) ........................................... $ 2,485,383 0.3
------------ -----
TOTAL INVESTMENTS (cost $525,728,822) * ................. 745,233,780 99.0
Other Assets and Liabilities ............................. 7,244,043 1.0
------------ -----
NET ASSETS ............................................... $752,477,823 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
+ 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.
* For Federal income tax purposes, cost is $527,143,379 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 232,777,964
Unrealized depreciation: (14,687,563)
-------------
Net unrealized appreciation: $ 218,090,401
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depository Receipt
The accompanying notes are an integral part of the financial statements.
FS-24
<PAGE> 766
GT GLOBAL GROWTH & INCOME 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>
Australia (AUSL/AUD) ................. 5.2 0.7 5.9
Belgium (BEL/BEF) .................... 4.7 4.7
Canada (CAN/CAD) ..................... 1.2 1.2
Denmark (DEN/DKK) .................... 0.7 0.7
France (FR/FRF) ...................... 1.9 1.9
Germany (GER/DEM) .................... 6.7 6.3 13.0
Italy (ITLY/ITL) ..................... 1.8 1.8
Netherlands (NETH/NLG) ............... 10.8 10.8
New Zealand (NZ/NZD) ................. 1.9 0.4 2.3
Sweden (SWDN/SEK) .................... 0.6 0.6
Switzerland (SWTZ/CHF) ............... 9.0 9.0
United Kingdom (UK/GBP) .............. 13.5 7.0 20.5
United States & Other (US/USD) ....... 18.9 7.4 1.3 27.6
------ ----- --- -----
Total ............................... 72.6 26.1 1.3 100.0
------ ----- --- -----
------ ----- --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $752,477,823.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------ -------- -------- -------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 26,803,508 1.80000 11/21/97 $(1,136,841)
French Francs........................... 2,481,413 6.14000 11/21/97 (152,423)
French Francs........................... 1,238,580 5.72800 02/06/98 945
Netherland Guilders..................... 10,870,680 2.08800 11/14/97 (765,316)
Swiss Francs............................ 12,639,800 1.44000 12/19/97 (417,578)
------------ -------------
Total Contracts to Sell (Receivable
amount $51,562,768).................. 54,033,981 (2,471,213)
------------ -------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 7.18%.
Total Open Forward Foreign Currency
Contracts............................ $(2,471,213)
-------------
-------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-25
<PAGE> 767
GT GLOBAL GROWTH & INCOME FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $525,728,822) (Note 1)............................. $745,233,780
U.S. currency..................................................................... $ 710
Foreign currencies (cost $66,141)................................................. 65,897 66,607
---------
Receivable for Fund shares sold.............................................................. 6,808,910
Interest and interest withholding tax reclaims receivable.................................... 4,291,268
Dividends and dividend withholding tax reclaims receivable................................... 1,596,979
-----------
Total assets............................................................................... 757,997,544
-----------
Liabilities:
Payable for open forward foreign currency contracts (Note 1)................................. 2,471,213
Payable for Fund shares repurchased (Note 2)................................................. 1,507,330
Payable for investment management and administration fees (Note 2)........................... 631,265
Payable for service and distribution expenses (Note 2)....................................... 484,947
Payable for printing and postage expenses.................................................... 124,328
Payable for forward foreign currency contracts -- closed (Note 1)............................ 97,836
Payable for transfer agent fees (Note 2)..................................................... 94,599
Payable for custodian fees (Note 1).......................................................... 37,200
Payable for professional fees................................................................ 33,142
Payable for fund accounting fees (Note 2).................................................... 16,751
Payable for registration and filing fees..................................................... 9,540
Payable for Directors' fees and expenses (Note 2)............................................ 7,754
Other accrued expenses....................................................................... 3,816
-----------
Total liabilities.......................................................................... 5,519,721
-----------
Net assets..................................................................................... $752,477,823
-----------
-----------
Class A:
Net asset value and redemption price per share ($292,527,640 DIVIDED BY 35,620,970 shares
outstanding).................................................................................. $ 8.21
-----------
-----------
Maximum offering price per share (100/95.25 of $8.21) *........................................ $ 8.62
-----------
-----------
Class B:+
Net asset value and offering price per share ($456,893,047 DIVIDED BY 55,651,933 shares
outstanding).................................................................................. $ 8.21
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($3,057,136 DIVIDED
BY 372,705 shares outstanding)................................................................ $ 8.20
-----------
-----------
Net assets consist of:
Paid in capital (Note 4)..................................................................... $521,143,879
Accumulated net realized gain on investments and foreign currency transactions............... 14,233,867
Net unrealized depreciation on translation of assets and liabilities in foreign currencies... (2,404,881)
Net unrealized appreciation of investments................................................... 219,504,958
-----------
Total -- representing net assets applicable to capital shares outstanding...................... $752,477,823
-----------
-----------
<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-26
<PAGE> 768
GT GLOBAL GROWTH & INCOME 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 $1,854,546)............................ $16,116,249
Interest income (net of foreign withholding tax of $3,879)................................ 14,091,494
Other income.............................................................................. 43,134
-----------
Total investment income................................................................. 30,250,877
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 6,900,695
Service and distribution expenses: (Note 2)
Class A..................................................................... $ 994,519
Class B..................................................................... 4,233,024 5,227,543
----------
Transfer agent fees (Note 2).............................................................. 1,258,598
Custodian fees (Note 1)................................................................... 472,449
Printing and postage expenses............................................................. 230,825
Fund accounting fees (Note 2)............................................................. 183,323
Registration and filing fees.............................................................. 70,955
Audit fees................................................................................ 54,630
Legal fees................................................................................ 25,414
Directors' fees and expenses (Note 2)..................................................... 14,779
Other expenses (Note 1)................................................................... 30,664
-----------
Total expenses before reductions........................................................ 14,469,875
-----------
Expense reductions (Notes 1 & 5)...................................................... (1,009,844)
-----------
Total net expenses...................................................................... 13,460,031
-----------
Net investment income....................................................................... 16,790,846
-----------
Net realized and unrealized gain on investments and foreign currencies: (Note 1)
Net realized gain on investments.............................................. 11,255,273
Net realized gain on foreign currency transactions............................ 12,750,255
----------
Net realized gain during the year....................................................... 24,005,528
Net change in unrealized depreciation on translation of assets and liabilities
in foreign currencies........................................................ (4,059,448)
Net change in unrealized appreciation of investments.......................... 84,674,909
----------
Net unrealized appreciation during the year............................................. 80,615,461
-----------
Net realized and unrealized gain on investments and foreign currencies...................... 104,620,989
-----------
Net increase in net assets resulting from operations........................................ $121,411,835
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-27
<PAGE> 769
GT GLOBAL GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Increase in net assets
Operations:
Net investment income...................................................... $ 16,790,846 $ 18,175,444
Net realized gain on investments and foreign currency transactions......... 24,005,528 15,732,409
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies.............................. (4,059,448) 1,957,055
Net change in unrealized appreciation of investments....................... 84,674,909 62,236,320
------------ ------------
Net increase in net assets resulting from operations..................... 121,411,835 98,101,228
------------ ------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income................................................. (7,733,156) (9,963,848)
From net realized gain on investments...................................... (757,327) (1,766,763)
Class B:
Distributions to shareholders: (Note 1)
From net investment income................................................. (9,266,887) (10,894,963)
From net realized gain on investments...................................... (907,529) (2,225,842)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income................................................. (125,777) (65,132)
From net realized gain on investments...................................... (12,318) (5,890)
------------ ------------
Total distributions...................................................... (18,802,994) (24,922,438)
------------ ------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested........................... 426,976,337 237,835,679
Decrease from capital shares repurchased................................... (450,361,754) (279,569,655)
------------ ------------
Net decrease from capital share transactions............................. (23,385,417) (41,733,976)
------------ ------------
Total increase in net assets................................................. 79,223,424 31,444,814
Net assets:
Beginning of year.......................................................... 673,254,399 641,809,585
------------ ------------
End of year................................................................ $752,477,823* $673,254,399*
------------ ------------
------------ ------------
* Includes undistributed net investment income of........................... $ -- $ 755,291
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-28
<PAGE> 770
GT GLOBAL GROWTH & INCOME 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 1995 1994 1993 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 7.11 $ 6.35 $ 6.21 $ 6.29 $ 5.28
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.21 0.22 0.24 0.22 0.24*
Net realized and unrealized gain
(loss) on investments................ 1.12 0.82 0.13 (0.03) 1.05
---------- ---------- ---------- ---------- ----------
Net increase from investment
operations......................... 1.33 1.04 0.37 0.19 1.29
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.21) (0.24) (0.22) (0.21) (0.24)
From net realized gain on
investments.......................... (0.02) (0.04) (0.01) (0.06) --
From sources other than net investment
income............................... -- -- -- -- (0.04)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.23) (0.28) (0.23) (0.27) (0.28)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 19.01% 16.80% 6.27% 3.14% 25.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 292,528 $ 286,203 $ 284,069 $ 317,847 $ 251,428
Ratio of net investment income to
average net assets..................... 2.74% 3.17% 3.85% 3.30% 3.3%*
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.50% 1.59% 1.70% 1.67% 1.8%*
Without expense reductions............ 1.64% 1.66% 1.74% N/A N/A
Portfolio turnover rate++............... 50% 39% 83% 117% 24%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0151 $ 0.0139 N/A N/A N/A
</TABLE>
- ----------------
+ 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
class of shares issued.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.005 for the year ended October 31, 1993.
Without such reimbursement, the expense ratio would have been 1.9% and
the ratio of net investment income to average net assets would have
been 3.2%.
(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 year.
The accompanying notes are an integral part of the financial statements.
FS-29
<PAGE> 771
GT GLOBAL GROWTH & INCOME 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
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (d) 1996 1995 1994 1993 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 7.11 $ 6.35 $ 6.21 $ 6.29 $ 5.28
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.16 0.17 0.20 0.18 0.20
Net realized and unrealized gain
(loss) on investments................ 1.13 0.82 0.13 (0.03) 1.05
---------- ---------- ---------- ---------- ----------
Net increase from investment
operations......................... 1.29 0.99 0.33 0.15 1.25
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.17) (0.20) (0.18) (0.17) (0.20)
From net realized gain on
investments.......................... (0.02) (0.03) (0.01) (0.06) --
From sources other than net investment
income............................... -- -- -- -- (0.04)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.19) (0.23) (0.19) (0.23) (0.24)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 18.28% 16.06% 5.57% 2.48% 24.3%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 456,893 $ 383,966 $ 356,796 $ 359,242 $ 150,768
Ratio of net investment income to
average net assets..................... 2.09% 2.52% 3.20% 2.65% 2.6%
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.15% 2.24% 2.35% 2.32% 2.5%
Without expense reductions............ 2.29% 2.31% 2.39% N/A N/A
Portfolio turnover rate++............... 50% 39% 83% 117% 24%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0151 $ 0.0139 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 1995
----------- ----------- -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 7.10 $ 6.35 $ 6.24
----------- ----------- -------------
Income from investment operations:
Net investment income................. 0.23 0.23 0.11
Net realized and unrealized gain
(loss) on investments................ 1.13 0.82 0.13
----------- ----------- -------------
Net increase from investment
operations......................... 1.36 1.05 0.24
----------- ----------- -------------
Distributions to shareholders:
From net investment income............ (0.24) (0.26) (0.13)
From net realized gain on
investments.......................... (0.02) (0.04) --
From sources other than net investment
income............................... -- -- --
----------- ----------- -------------
Total distributions................. (0.26) (0.30) (0.13)
----------- ----------- -------------
Net asset value, end of period.......... $ 8.20 $ 7.10 $ 6.35
----------- ----------- -------------
----------- ----------- -------------
Total investment return (c)............. 19.23% 17.19% 3.83%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 3,057 $ 3,085 $ 944
Ratio of net investment income to
average net assets..................... 3.09% 3.52% 4.20%(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.15% 1.24% 1.35%(a)
Without expense reductions............ 1.29% 1.31% 1.39%(a)
Portfolio turnover rate++............... 50% 39% 83%
Average commission rate per share paid
on portfolio transactions++............ $0.0151 $ 0.0139 N/A
</TABLE>
- ----------------
+ 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
class of shares issued.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.005 for the year ended October 31, 1993.
Without such reimbursement, the expense ratio would have been 1.9% and
the ratio of net investment income to average net assets would have
been 3.2%.
(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 year.
The accompanying notes are an integral part of the financial statements.
FS-30
<PAGE> 772
GT GLOBAL GROWTH & INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Growth & Income 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
Fund 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 fluctuations, 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 of the Fund 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 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-31
<PAGE> 773
GT GLOBAL GROWTH & INCOME 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 amounts shown in the Fund's "Statement of
Assets and Liabilities." The Fund could be exposed to risk if a counter party 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 security
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 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.
(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, 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 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 $51,986,675
were on loan to brokers. The loans were secured by cash collateral of
$54,846,747. 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
FS-32
<PAGE> 774
GT GLOBAL GROWTH & INCOME FUND
received $976,164 of income from securities lending which was used to offset the
Fund's custody 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, or unrealized appreciation of securities held, and excise tax on income
and capital gains.
(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
investment of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the price 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 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 no loan 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 $2,560,909, with a weighted average interest rate of 6.41%.
Interest expense for the Fund for the year ended October 31, 1997 was $5,014,
included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc., is the Funds' 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.
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 $52,850
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 $32 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 $1,199,605. 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 0.35% 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.
FS-33
<PAGE> 775
GT GLOBAL GROWTH & INCOME FUND
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 1.85%, 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.
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 1.75%, 2.40% and 1.40% 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 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 year ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than short-term investments and U.S. government
obligations, aggregated $322,737,917 and $326,736,141, respectively. Purchases
and sales of U.S. government obligations were $32,891,598 and $17,886,577,
respectively, 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 Latin
America Growth Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 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
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; 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-34
<PAGE> 776
GT GLOBAL GROWTH & INCOME 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.................................................... 37,585,791 $289,617,397 21,196,018 $143,350,526
Shares issued in connection with reinvestment of
distributions................................................ 935,467 7,161,559 1,500,319 9,894,388
----------- ------------ ----------- ------------
38,521,258 296,778,956 22,696,337 153,244,914
Shares repurchased............................................. (43,156,190) (332,338,391) (27,157,086) (182,477,096)
----------- ------------ ----------- ------------
Net decrease................................................... (4,634,932) $(35,559,435) (4,460,749) $(29,232,182)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------- ----------- ------------ ----------- ------------
Shares sold.................................................... 12,634,686 $ 97,336,518 9,561,545 $ 63,970,280
Shares issued in connection with reinvestment of
distributions................................................ 1,087,287 8,343,350 1,656,409 10,934,244
----------- ------------ ----------- ------------
13,721,973 105,679,868 11,217,954 74,904,524
Shares repurchased............................................. (12,063,889) (93,059,122) (13,373,837) (89,395,191)
----------- ------------ ----------- ------------
Net increase (decrease)........................................ 1,658,084 $ 12,620,746 (2,155,883) $(14,490,667)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------- -------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------- ----------- ------------ ----------- ------------
Shares sold.................................................... 3,177,501 $ 24,442,634 1,416,928 $ 9,616,882
Shares issued in connection with reinvestment of
distributions................................................ 9,792 74,879 10,469 69,359
----------- ------------ ----------- ------------
3,187,293 24,517,513 1,427,397 9,686,241
Shares repurchased............................................. (3,248,879) (24,964,241) (1,141,817) (7,697,368)
----------- ------------ ----------- ------------
Net increase (decrease)........................................ (61,586) $ (446,728) 285,580 $ 1,988,873
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager directed certain portfolio trades to brokers who paid a portion of
the Fund's expenses. For the period ended October 31, 1997, the Fund's expenses
were reduced by $33,680 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$1,489,466 as a capital gain dividend for the fiscal year ended October 31,
1997.
Pursuant to Section 854 of the Internal Revenue Code, the Fund designates 76% of
the ordinary income dividends paid (including short-term capital gain
distributions, if any) as income qualifying for the corporate dividends received
deduction for the fiscal year ended October 31, 1997.
FS-35
<PAGE> 777
AIM GLOBAL HIGH INCOME FUND
(FORMERLY GT GLOBAL HIGH INCOME FUND)
AIM STRATEGIC INCOME FUND
(FORMERLY GT GLOBAL STRATEGIC INCOME FUND)
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of AIM Investment Funds, Inc. and the Shareholders of
AIM Global High Income Fund (formerly GT Global High Income Fund) and AIM
Strategic Income Fund (formerly GT Global Strategic Income Fund):
We have audited the accompanying statement of assets and liabilities of AIM
Global High Income Fund-Consolidated and AIM Strategic Income Fund, including
the portfolios 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 the periods indicated herein. These financial
statements and the financial highlights are the responsibility of the Funds'
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
Global High Income Fund-Consolidated and AIM Strategic Income Fund as of April
30, 1998, the results of their operations for the six months then ended, the
changes in their net assets for the six months then ended and for the year ended
October 31, 1997, and the financial highlights for the periods indicated herein,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JUNE 15, 1998
FS-36
<PAGE> 778
AIM GLOBAL GOVERNMENT INCOME FUND
(FORMERLY GT GLOBAL GOVERNMENT INCOME FUND)
PORTFOLIO OF INVESTMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (74.6%)
Australia (1.9%)
Commonwealth of Australia, 7.5% due 9/15/09 .......... AUD 6,100,000 $ 4,517,717 1.9
Canada (2.4%)
Canadian Government, 8% due 6/1/27 ................... CAD 5,920,000 5,509,240 2.4
Denmark (4.2%)
Kingdom of Denmark, 7% due 11/10/24 .................. DKK 56,700,000 9,736,506 4.2
Germany (9.2%)
Deutschland Republic:
6% due 1/5/06 ...................................... DEM 22,050,000 13,124,298 5.6
6.25% due 1/4/24 ................................... DEM 9,500,000 5,828,414 2.5
7.5% due 11/11/04 .................................. DEM 4,100,000 2,620,435 1.1
Italy (8.4%)
Italian Buoni Poliennali del Tesoro (BTPS):
8.5% due 1/1/04 .................................... ITL 14,480,000,000 9,573,466 4.1
7.25% due 11/1/26 .................................. ITL 13,200,000,000 9,093,963 3.9
9% due 11/1/23 ..................................... ITL 1,230,000,000 1,007,229 0.4
South Africa (7.9%)
Republic of South Africa, 12.5% due 1/15/02 .......... ZAR 54,500,000 10,766,244 4.6
Lesotho Highlands Water Authority, 12.5% due
4/15/02 ............................................. ZAR 38,800,000 7,630,219 3.3
Spain (1.8%)
Spanish Government, 7.35% due 3/31/07 ................ ESP 550,000,000 4,179,545 1.8
Sweden (3.6%)
Swedish Government, 8% due 8/15/07 ................... SEK 54,800,000 8,435,397 3.6
United Kingdom (10.6%)
United Kingdom Treasury:
9.5% due 4/18/05 ................................... GBP 6,730,000 13,505,017 5.8
6.75% due 11/26/04 ................................. GBP 6,390,000 11,173,150 4.8
United States (23.3%)
United States Treasury:
6.625% due 5/15/07 ................................. USD 20,800,000 22,059,981 9.5
8% due 11/15/21 .................................... USD 17,000,000 21,146,407 9.1
6.125% due 11/15/27 ................................ USD 5,800,000 5,939,563 2.6
Federal National Mortgage Association, 6.375% due
8/15/07 ............................................. AUD 7,300,000 4,850,335 2.1
Uruguay (1.3%)
Republic of Uruguay, 7.875% due 7/15/27 - 144A{.} .... USD 3,000,000 3,060,000 1.3
------------
Total Government & Government Agency Obligations (cost
$169,806,388) ........................................... 173,757,126
------------
Corporate Bonds (15.8%)
Germany (0.9%)
Kredit Fuer Wiederaufbau International Finance, 7.25%
due 7/16/07 ......................................... AUD 3,100,000 2,161,887 0.9
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-37
<PAGE> 779
AIM GLOBAL GOVERNMENT INCOME FUND
(FORMERLY GT GLOBAL GOVERNMENT INCOME FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
South Africa (5.3%)
Eskom, 11% due 6/1/08 ................................ ZAR 68,500,000 $ 12,029,725 5.2
Development Bank of South Africa, due 12/31/27{=} .... ZAR 39,300,000 238,211 0.1
Tunisia (2.0%)
Banque Centrais de Tunisie, 8.25% due 9/19/27 ........ USD 4,750,000 4,552,695 2.0
United Kingdom (6.6%)
SBC Jersey, 8.75% due 6/20/05 ........................ GBP 8,200,000 15,293,137 6.6
United States (1.0%)
Ford Motor Credit Co., 14% due 11/13/02 .............. ZAR 8,000,000 1,608,946 0.7
Walt Disney Co., 14% due 10/24/02 .................... ZAR 3,300,000 666,205 0.3
------------
Total Corporate Bonds (cost $36,208,675) ................. 36,550,806
------------
Mortgage Backed (14.1%)
Denmark (6.5%)
Realkredit Bank, 7% due 10/1/29 ...................... DKK 103,408,000 15,225,198 6.5
United States (7.6%)
Government National Mortgage Association:
Pool #462363, 7% due 11/15/27 ...................... USD 8,572,002 8,675,132 3.7
Pool #780515, 9.5% due 12/15/21 .................... USD 4,240,952 4,616,014 2.0
Federal Home Loan Mortgage Association Pool #E62449,
8.5% due 3/1/10 ..................................... USD 2,188,891 2,304,664 1.0
Salomon Brothers Mortgage Securities VII Series 1997 -
HUD1 Class AWAC, 6.0867% due 12/25/30 ............... USD 2,158,243 2,177,127 0.9
------------
Total Mortgage Backed (cost $32,531,938) ................. 32,998,135
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $238,547,001) ....... 243,306,067 104.5
------------ -----
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Deutsche Marks Put Option: ............................. USD -- -- --
CURRENCY OPTIONS
Strike 1.82, expires 5/12/98 ......................... 2,550,000 3,680 --
Strike 1.84, expires 5/7/98 .......................... 4,500,000 441 --
------------ -----
TOTAL OPTIONS (cost $26,535) ............................. 4,121 --
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-38
<PAGE> 780
AIM GLOBAL GOVERNMENT INCOME FUND
(FORMERLY GT GLOBAL GOVERNMENT INCOME FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (4.7%)
Mexico (4.7%)
Mexican Cetes: ....................................... MXN -- -- 4.7
due 5/7/98 current yield 17.62% .................... 25,000,000 $ 2,941,293 --
due 6/11/98 current yield 17.95% ................... 22,039,910 2,547,366 --
due 11/19/98 current yield 19.52% .................. 23,844,450 2,533,958 --
due 5/28/98 current yield 17.76% ................... 20,900,000 2,433,110 --
due 12/17/98 current yield 19.77% .................. 4,800,000 502,362 --
------------
Total Government & Government Agency Obligations (cost
$11,178,125) ............................................ 10,958,089
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $11,178,125) .......... 10,958,089 4.7
------------ -----
TOTAL INVESTMENTS (cost $249,751,661) * ................. 254,268,277 109.2
Other Assets and Liabilities ............................. (21,527,345) (9.2)
------------ -----
NET ASSETS ............................................... $232,740,932 100.0
------------ -----
------------ -----
</TABLE>
- -------------
{.} 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.
{=} Zero coupon bond.
* For Federal income tax purposes, cost is $250,105,125 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 7,238,966
Unrealized depreciation: (3,075,814)
-------------
Net unrealized appreciation: $ 4,163,152
-------------
-------------
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
FS-39
<PAGE> 781
AIM GLOBAL GOVERNMENT INCOME FUND
(FORMERLY GT GLOBAL GOVERNMENT INCOME FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
APRIL 30, 1998
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ------------ -------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 12,589,578 1.53713 8/4/98 $ 33,674
Australian Dollars...................... 3,786,006 1.49887 8/4/98 (86,249)
Danish Kroner........................... 5,036,480 6.76600 8/4/98 (32,172)
Deutsche Marks.......................... 12,092,282 1.78974 6/4/98 36,255
Deutsche Marks.......................... 5,102,183 1.78923 8/4/98 13,847
Swedish Kronor.......................... 5,350,910 7.97865 8/4/98 177,804
-------------- --------------
Total Contracts to Buy (Payable amount
$43,814,280)......................... 43,957,439 143,159
-------------- --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 18.89%.
<CAPTION>
CONTRACTS TO SELL:
- ---------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 18,551,692 1.45560 8/4/98 986,590
Australian Dollars...................... 6,564,845 1.48227 8/4/98 224,732
Australian Dollars...................... 2,127,834 1.48862 8/4/98 63,460
British Pounds.......................... 11,894,754 0.59966 8/4/98 115,301
Canadian Dollars........................ 5,421,805 1.42760 8/4/98 (2,921)
Danish Kroner........................... 8,517,863 6.88800 8/4/98 (97,421)
Danish Kroner........................... 2,294,095 7.00000 8/4/98 (62,524)
Danish Kroner........................... 1,962,046 6.89100 8/4/98 (23,285)
Danish Kroner........................... 1,786,842 6.66600 8/4/98 (19,924)
Deutsche Marks.......................... 6,078,770 1.80780 8/4/98 (78,770)
Deutsche Marks.......................... 5,051,802 1.81740 8/4/98 (91,802)
Deutsche Marks.......................... 4,954,746 1.80800 8/4/98 (64,746)
Deutsche Marks.......................... 4,050,720 1.80700 8/4/98 (50,720)
Deutsche Marks.......................... 1,849,388 1.83600 8/4/98 (52,002)
Deutsche Marks.......................... 213,134 1.81100 8/4/98 (3,134)
Italian Liras........................... 1,980,375 1800.00000 8/4/98 (35,931)
Spanish Pesetas......................... 303,227 153.32000 8/4/98 (3,201)
Swedish Kronor.......................... 7,778,540 8.03548 8/4/98 (311,655)
-------------- --------------
Total Contracts to Sell (Receivable
amount $91,874,525).................. 91,382,478 492,047
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 39.26%.
Total Open Forward Foreign Currency
Contracts, Net....................... $ 635,206
--------------
--------------
</TABLE>
- ---------------
See Note 1 of Notes to the Financial Statements.
The accompanying notes are an integral part of the financial statements.
FS-40
<PAGE> 782
AIM GLOBAL HIGH INCOME FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL HIGH INCOME FUND -- CONSOLIDATED)
PORTFOLIO OF INVESTMENTS
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 (76.0%)
Algeria (3.0%)
Algeria Tranche 1 Loan Assignment, 6.625% due
9/4/06+ ............................................. USD 9,250,000 $ 7,261,250 2.1
Algeria Tranche 3 Loan Assignment, 1.75% due
3/4/10+ ............................................. JPY 700,000,000 3,293,402 0.9
Argentina (12.9%)
Republic of Argentina:
Global Bond, 9.75% due 9/19/27 ..................... USD 26,462,000 25,515,984 7.2
Global Bond, 11.375% due 1/30/17 ................... USD 11,836,000 13,093,575 3.7
Par Bond Series L, 5.75% (6% at 4/99) due
3/31/23++ ......................................... USD 5,100,000 3,885,563 1.1
Discount Bond, 6.625% due 3/31/23+ ................. USD 3,500,000 3,016,563 0.9
Brazil (15.2%)
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 54,633,129 45,277,203 12.8
Par Z-L Bond, 5.50%, (5.75% at 4/99) due
4/15/24++ ......................................... USD 6,359,000 4,749,378 1.3
Debt Conversion Bond Series L, 6.6875% due
4/15/12+ ............................................ USD 4,814,000 3,827,130 1.1
Bulgaria (5.1%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
(2.5% at 8/98) due 7/28/12++ ...................... USD 18,357,000 12,413,921 3.5
Interest Arrears Bond, 6.625% due 7/28/11 -
Euro+ ............................................. USD 7,000,000 5,534,375 1.6
Croatia (1.8%)
Croatian Government Series A, 6.625% due 7/31/10+ .... USD 7,200,000 6,466,500 1.8
Ecuador (2.6%)
Ecuador, Past Due Interest Bond, 6.625% due
2/27/15+ ............................................ USD 14,606,019 9,384,367 2.6
Ivory Coast (1.0%)
Ivory Coast Past Due Interest Bond, 1.9% due
3/29/18 ............................................. FRF 55,000,000 3,683,444 1.0
Jordan (1.0%)
Kingdom of Jordan, 5% (5.5% at 12/98) due
12/23/23++ .......................................... USD 4,750,000 3,467,500 1.0
Korea (4.1%)
Republic of Korea, 8.875% due 4/15/08 ................ USD 12,600,000 12,424,230 3.5
Korea Electric Power, 7% due 2/1/27 .................. USD 2,510,000 2,154,200 0.6
Mexico (3.2%)
United Mexican States:
Global Bond, 11.375% due 9/15/16{./} ............... USD 5,859,000 6,885,790 1.9
Global Bond, 11.5 due 5/15/26 ...................... USD 3,826,000 4,619,895 1.3
Panama (1.7%)
Republic of Panama:
Interest Reduction Bond, 3.75% (4% at 7/98) due
7/17/14++ ......................................... USD 4,704,000 3,695,580 1.0
8.875% due 9/30/27 ................................. USD 2,689,000 2,633,876 0.7
Peru (1.6%)
Republic of Peru, Past Due Interest Bond, 4% (4.5% at
7/98) due 3/7/17++ .................................. USD 8,107,000 5,527,961 1.6
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-41
<PAGE> 783
AIM GLOBAL HIGH INCOME FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL HIGH INCOME FUND -- CONSOLIDATED)
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)
Philippines (1.6%)
Republic of Philippines, 8.875% due 4/15/08 -
144A{.} ............................................. USD 3,650,000 $ 3,610,215 1.0
Bangko Sentral Pilipinas, 8.6% due 6/15/27 ........... USD 2,416,000 2,202,099 0.6
Russia (16.6%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Principal Loans, 6.72% due 12/15/20+ ................ USD 59,184,372 37,578,135 10.6
Bank for Foreign Economic Affairs (Vnesheconombank)
Interest Notes, 6.72% due 12/15/15+ ................. USD 29,559,031 21,319,451 6.0
Venezuela (4.6%)
Republic of Venezuela, 9.25% due 9/15/27{./} ......... USD 18,355,000 16,257,941 4.6
------------
Total Government & Government Agency Obligations (cost
$252,885,532) ........................................... 269,779,528
------------
Corporate Bonds (18.5%)
Argentina (1.2%)
Mastellone Hermanos S.A., 11.75% due 4/1/08 -
144A{.} ............................................. USD 1,943,000 2,006,148 0.6
Telefonica de Argentina, 9.125% due 5/7/08 -
144A{.} ............................................. USD 1,983,000 1,992,241 0.6
Brazil (3.8%)
Banco Do Brasil (Cayman), 9.375% due 6/15/07 ......... USD 5,816,000 5,728,760 1.6
Banco Hipotecario Espana, 10% due 4/17/03 -
144A{.} ............................................. USD 3,679,000 3,720,389 1.1
Comtel Brasileira Ltd. "A", 10.75% due 9/26/04 -
144A{.} ............................................. USD 2,328,000 2,386,200 0.7
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ..... USD 1,378,000 1,384,890 0.4
China (0.7%)
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} .... USD 3,210,000 2,557,889 0.7
Hong Kong (1.1%)
GS Superhighway Holdings, 9.875% due 8/15/04 -
144A{.} ............................................. USD 2,434,000 2,056,730 0.6
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} ............................................. USD 2,100,000 1,715,280 0.5
Indonesia (0.3%)
Polysindo International Finance, 8.750% due
4/22/99(::) ......................................... IDR 27,500,000,000 1,037,736 0.3
Jamaica (1.0%)
Mechala Group Jamaica:
12.75% due 12/30/99 - Series B ..................... USD 2,846,000 2,618,320 0.7
12.75% due 12/30/99 - Reg S{c} ..................... USD 1,288,000 1,184,960 0.3
Korea (2.5%)
Pohang Iron & Steel Co., Ltd.:
8.26% due 2/19/99 .................................. USD 5,000,000 4,961,455 1.4
2% due 10/9/00 ..................................... JPY 224,000,000 1,506,764 0.4
L.G.-Caltex Oil Corp., 12.75% due 3/31/01 -
144A{.} ............................................. USD 2,112,000 2,148,960 0.6
Korea Development Bank, 4.35% due 5/25/99 ............ JPY 60,300,000 432,960 0.1
Malaysia (1.9%)
Petroliam Nasional Bhd.:
7.125% due 8/15/05 - 144A{.} ....................... USD 3,547,000 3,143,529 0.9
7.625% due 10/15/26 - 144A{.} ...................... USD 1,469,000 1,283,172 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-42
<PAGE> 784
AIM GLOBAL HIGH INCOME FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL HIGH INCOME FUND -- CONSOLIDATED)
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 (Continued)
Tenaga Nasional Bhd., 7.875% due 6/15/04 - 144A{.} ... USD 2,416,000 2,281,078 0.6
Mexico (3.5%)
Petroleos Mexicanos:
9.25% due 3/30/18 - 144A{.} ........................ USD 8,697,000 $ 8,501,318 2.4
9.5% due 9/15/27 - 144A{.} ......................... USD 3,968,000 3,977,920 1.1
Russia (1.9%)
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ... USD 4,200,000 3,717,000 1.1
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ............................................. USD 2,283,000 2,751,015 0.8
Singapore (0.6%)
Krung Thai Bank (Singapore), 6.73% due 9/30/04 ....... USD 2,500,000 2,131,250 0.6
------------
Total Corporate Bonds (cost $74,463,170) ................. 65,225,964
------------
Structured Notes (1.4%)
Korea (1.4%)
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 $5,050,000) ................................ USD 5,050,000 5,024,750 1.4
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $332,398,702) ....... 340,030,242 95.9
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Structured Notes (3.7%)
Indonesia (1.1%)
Indonesia Credit Linked Unsecured Note due 5/27/98
(Issued by Salomon Smith Barney Holdings, Inc. This
note has a credit risk component linked to the
value of referenced securities issued by the Bank
of Indonesia and the Republic of Indonesia.) ..... USD 3,985,151 3,938,126 1.1
Korea (2.6%)
Korean Credit Linked Unsecured Note due 4/27/99[::]
(Issued by Salomon Smith Barney Holdings, Inc. This
note has a currency and credit risk component
linked to the value of referenced securities issued
by the Korean Development Bank.) ................. USD 10,937,647 9,375,751 2.6
------------
Total Structured Notes (cost $13,133,663) ................ 13,313,877
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $13,133,663) .......... 13,313,877 3.7
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-43
<PAGE> 785
AIM GLOBAL HIGH INCOME FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL HIGH INCOME FUND -- CONSOLIDATED)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<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 $7,815,000 U.S. Treasury Bills,
6.125% due 8/31/98 (market value of collateral is
$7,912,688, including accrued interest). (cost
$7,757,000) .......................................... $ 7,757,000 2.2
------------ -----
TOTAL INVESTMENTS (cost $353,289,365) * ................. 361,101,119 101.8
Other Assets and Liabilities ............................. (6,411,126) (1.8)
------------ -----
NET ASSETS ............................................... $354,689,993 100.0
------------ -----
------------ -----
</TABLE>
- -------------
{.} 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.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (See Note 1 of Notes to Financial Statements).
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
+ 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.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for derivative instruments. (See Note 1 of Notes to
Financial Statements.)
[::] Certain events may cause the contract to terminate prior to date
shown.
* For Federal income tax purposes, cost is $353,438,753 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 19,507,848
Unrealized depreciation: (11,845,482)
-------------
Net unrealized appreciation: $ 7,662,366
-------------
-------------
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SWAP CONTRACT
APRIL 30, 1998
<TABLE>
<CAPTION>
TERMINATION NOTIONAL
DESCRIPTION DATE CURRENCY AMOUNT VALUE
- ---------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Mexico Credit Default Swap with
semiannual payments (fixed rate payment
1.72%)................................. 3/31/2000[::] USD $ 12,330,000 $ (58,987)
Contract counterparty is J.P. Morgan
Securities, Inc. The contract value
is related to the credit quality of a
referenced security: United Mexican
States 11.5% Global Bond due May 15,
2026.
</TABLE>
- -------------
[::] Certain events may cause the contract to terminate prior to date
shown.
- -------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
APRIL 30, 1998
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
French Francs........................... 3,932,754 6.05000 10/15/98 $(62,400)
Japanese Yen............................ 1,464,502 122.90000 7/31/98 91,202
Japanese Yen............................ 440,309 121.90000 7/31/98 31,257
-------------- --------------
Total Contracts to Sell (Receivable
amount $5,897,624)................... 5,837,565 60,059
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 1.65%.
Total Open Forward Foreign Currency
Contracts............................ $ 60,059
--------------
--------------
</TABLE>
- ---------------
See Note 1 of Notes to the Financial Statements.
The accompanying notes are an integral part of the financial statements.
FS-44
<PAGE> 786
AIM STRATEGIC INCOME FUND
(FORMERLY GT GLOBAL STRATEGIC INCOME FUND)
PORTFOLIO OF INVESTMENTS
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 (65.4%)
Algeria (1.3%)
Algeria Tranche 1 Loan Assignment, 6.625% due
9/4/06+ ............................................. USD 5,500,000 $ 4,317,500 1.1
Algeria Tranche 3 Loan Assignment, 1.75% due
3/4/10+ ............................................. JPY 150,000,000 705,729 0.2
Argentina (4.3%)
Republic of Argentina:
Global Bond, 11.375% due 1/30/17 ................... USD 7,575,000 8,379,844 2.2
Global Bond, 9.75% due 9/19/27 ..................... USD 5,192,000 5,006,386 1.3
Par Bond Series L, 5.75% (6% at 4/99) due
3/31/23++ ......................................... USD 2,500,000 1,904,688 0.5
Discount Bond, 6.625% due 3/31/23+ ................. USD 1,445,000 1,245,409 0.3
Australia (2.4%)
Commonwealth of Australia, 7.5% due 9/15/09 .......... AUD 12,290,000 9,102,089 2.4
Brazil (6.1%)
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 22,694,868 18,808,372 4.9
Par Z-L Bond, 5.5% (5.75% at 4/99) due 4/15/24++ ... USD 3,861,000 2,883,684 0.7
Debt Conversion Bond Series L, 6.6875% due
4/15/12+ .......................................... USD 2,562,000 2,036,790 0.5
Bulgaria (1.6%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
(2.5% at 7/98)due 7/28/12++ ....................... USD 7,396,000 5,001,545 1.3
Interest Arrears Bond, 6.625% due 7/28/11+ ......... USD 1,586,000 1,253,931 0.3
Canada (1.0%)
Canadian Government, 8% due 6/1/27 ................... CAD 4,230,000 3,936,501 1.0
Croatia (0.9%)
Croatian Government Series A, 6.625% due 7/31/10+ .... USD 3,700,000 3,323,063 0.9
Denmark (1.7%)
Kingdom of Denmark, 7% due 11/10/24 .................. DKK 39,300,000 6,748,583 1.7
Ecuador (0.8%)
Ecuador, Past Due Interest Bond, 6.625% due
2/27/15+ ............................................ USD 4,733,298 3,041,144 0.8
Germany (7.5%)
Deutschland Republic:
6% due 1/5/06 ...................................... DEM 35,500,000 21,120,150 5.5
6.25% due 1/4/24 ................................... DEM 12,700,000 7,791,669 2.0
Italy (2.5%)
Italian Government, 7.25% due 11/1/26 ................ ITL 11,000,000,000 7,578,302 2.0
Italian Buoni Poliennali Del Tesoro (BTPS), 8.5% due
1/1/04 .............................................. ITL 2,730,000,000 1,804,942 0.5
Ivory Coast (0.2%)
Ivory Coast Past Due Interest Bond, 1.9% due
3/29/18 ............................................. FRF 12,000,000 803,661 0.2
Jordan (0.6%)
Kingdom of Jordan, 5% (5.5% at 12/98) due
12/23/23++ .......................................... USD 3,250,000 2,372,500 0.6
Korea (1.8%)
Republic of Korea, 8.875% due 4/15/08 ................ USD 4,570,000 4,506,249 1.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-45
<PAGE> 787
AIM STRATEGIC INCOME FUND
(FORMERLY GT GLOBAL STRATEGIC INCOME 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)
Korea Electric Power, 7% due 2/1/27 .................. USD 2,540,000 $ 2,179,947 0.6
Netherlands (0.8%)
Netherlands Government Bond, 5.5% due 1/15/28 ........ NLG 6,000,000 2,934,641 0.8
New Zealand (1.8%)
New Zealand Government, 8% due 4/15/04 ............... NZD 12,000,000 6,930,003 1.8
Panama (0.9%)
Republic of Panama:
Interest Reduction Bond, 3.75% (4% at 7/98) due
7/17/14++ ......................................... USD 2,917,000 2,291,668 0.6
8.875% due 9/30/27 ................................. USD 1,373,000 1,344,854 0.3
Peru (0.8%)
Republic of Peru, Past Due Interest Bond, 4% (4.5% at
7/98) due 3/7/17++ .................................. USD 4,776,000 3,256,635 0.8
Philippines (0.5%)
Republic of Philippines, 8.875% due 4/15/08 -
144A{.} ............................................. USD 1,330,000 1,315,503 0.3
Bangko Sentral Pilipinas, 8.6% due 6/15/27 ........... USD 933,000 850,397 0.2
Russia (5.5%)
Bank for Foreign Economic Affairs (Venesheconombank)
Principal Loans, 6.72%due 12/15/20+ ................. USD 23,161,492 14,707,547 3.8
Bank for Foreign Economic Affairs (Venesheconombank)
Interest Notes, 6.72% due 12/15/15+ ................. USD 8,905,352 6,422,985 1.7
South Africa (2.6%)
Republic of South Africa, 12.5% due 1/15/02 .......... ZAR 51,800,000 10,232,871 2.6
Sweden (0.7%)
Swedish Government, 8% due 8/15/07 ................... SEK 19,000,000 2,924,681 0.7
United Kingdom (7.6%)
United Kingdom Conversion, 9.5% due 4/18/05 .......... GBP 7,400,000 14,849,498 3.8
United Kingdom Treasury, 7.5% due 12/7/06 ............ GBP 8,000,000 14,820,241 3.8
United States (9.9%)
United States Treasury:
6.875% due 8/15/25{./} ............................. USD 14,500,000 16,127,851 4.2
6.50% due 10/15/06{./} ............................. USD 13,170,000 13,808,179 3.6
6.625% due 5/15/07 ................................. USD 3,900,000 4,136,895 1.1
Federal National Mortgage Association, 7.25% due
6/20/02 ............................................. NZD 7,000,000 3,804,876 1.0
Venezuela (1.6%)
Republic of Venezuela, 9.25% due 9/15/27 ............. USD 6,989,000 6,190,507 1.6
------------
Total Government & Government Agency Obligations (cost
$246,787,697) ........................................... 252,802,510
------------
Corporate Bonds (18.7%)
Argentina (0.2%)
Mastellone Hermanos S.A., 11.75% due 4/1/08 -
144A{.} ............................................. USD 745,000 769,213 0.2
Brazil (0.9%)
Banco Hipotecario Espana, 10% due 4/17/03 -
144A{.} ............................................. USD 1,675,000 1,693,844 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-46
<PAGE> 788
AIM STRATEGIC INCOME FUND
(FORMERLY GT GLOBAL STRATEGIC INCOME 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 (Continued)
Comtel Brasileira Ltd. "A", 10.75% due 9/26/04 -
144A{.} ............................................. USD 1,171,000 1,200,275 0.3
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ..... USD 813,000 $ 817,065 0.2
Canada (0.2%)
Trench Electric & Trench, Inc., 10.25% due 12/15/07 -
144A{.} ............................................. USD 875,000 881,563 0.2
China (0.4%)
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} .... USD 1,720,000 1,370,582 0.4
Hong Kong (0.5%)
GS Superhighway Holdings, 9.875% due 8/15/04 -
144A{.} ............................................. USD 1,210,000 1,022,450 0.3
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} ............................................. USD 1,100,000 898,480 0.2
Jamaica (0.2%)
Mechala Group Jamaica, 12.75% due 12/30/99 - Reg
S{c} ................................................ USD 719,000 661,480 0.2
Korea (0.6%)
L.G.-Caltex Oil Corp., 12.75% due 3/31/01 -
144A{.} ............................................. USD 902,000 917,785 0.3
Pohang Iron & Steel, 2% due 10/9/00 .................. JPY 119,000,000 800,469 0.2
Korea Development Bank, 4.35% due 5/25/99 ............ JPY 32,000,000 229,763 0.1
Malaysia (0.7%)
Petroliam Nasional Bhd.:
7.125% due 8/15/05 - 144A{.} ....................... USD 1,908,000 1,690,965 0.4
7.875% due 6/15/04 - 144A{.} ....................... USD 933,000 880,897 0.2
Petroliam Nasional Bhd., 7.625% due 10/15/26 -
144A{.} ............................................. USD 575,000 502,263 0.1
Mexico (2.8%)
Petroleos Mexicanos:
9.25% due 3/30/18 - 144A{.} ........................ USD 8,010,000 7,829,775 2.0
9.5% due 9/15/27 - 144A{.} ......................... USD 2,028,000 2,033,070 0.5
Monterrey Power, S.A. de C.V., 9.625% due 11/15/09 -
144A{.} ............................................. USD 1,245,000 1,257,450 0.3
Russia (0.7%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ............................................. USD 1,526,000 1,838,830 0.5
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ... USD 1,040,000 920,400 0.2
Singapore (0.2%)
Krung Thai Bank (Singapore), 6.73% due 9/30/04 ....... USD 1,000,000 852,500 0.2
United States (11.3%)
Chase Manhattan Corp., 6.25% due 1/15/06 ............. USD 2,835,000 2,800,674 0.7
General Motors Acceptance Corp., 6.625% due
10/15/05 ............................................ USD 2,700,000 2,743,411 0.7
Engle Homes, Inc., 9.25% due 2/1/08 .................. USD 2,350,000 2,376,320 0.6
Unisys Corp., 7.875% due 4/1/08 ...................... USD 2,350,000 2,355,875 0.6
United Stationers Supply, 8.375% due 4/15/08 -
144A{.} ............................................. USD 2,000,000 2,015,000 0.5
Globalstar LP Capital, 11.375% due 2/15/04 ........... USD 1,900,000 1,957,000 0.5
Lenfest Communications, 8.25% due 2/15/08 -
144A{.} ............................................. USD 1,850,000 1,884,040 0.5
Hollywood Casino Corp., 12.75% due 11/1/03 ........... USD 1,700,000 1,878,500 0.5
Eagle Family Foods, 8.75% due 1/15/08 - 144A{.} ...... USD 1,875,000 1,856,250 0.5
Riddell Sports, Inc., 10.5% due 7/15/07 .............. USD 1,700,000 1,768,000 0.5
Accuride Corp., 9.25% due 2/1/08 - 144A{.} ........... USD 1,725,000 1,725,000 0.5
Graham Packaging/GPC Capital, 8.75% due 1/15/08 -
144A{.} ............................................. USD 1,725,000 1,725,000 0.5
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-47
<PAGE> 789
AIM STRATEGIC INCOME FUND
(FORMERLY GT GLOBAL STRATEGIC INCOME 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 (Continued)
Smithfield Foods, Inc., 7.625% due 2/15/08 -
144A{.} ............................................. USD 1,725,000 1,712,063 0.5
Trump Atlantic Association Funding, Inc., 11.25% due
5/1/06 .............................................. USD 1,700,000 $ 1,702,125 0.4
ACME Metal, Inc., 10.875% due 12/15/07 - 144A{.} ..... USD 1,500,000 1,517,580 0.4
Lin Television Corp., 8.375% due 3/1/08 - 144A{.} .... USD 1,500,000 1,492,668 0.4
Drypers Corp. Series B, 10.25% due 6/15/07 ........... USD 1,300,000 1,339,000 0.4
Chancellor Media Corp., 8.125% due 12/15/07 -
144A{.} ............................................. USD 1,300,000 1,303,250 0.4
BTI Telecommunications Corp., 10.5% due 9/15/07 -
144A{.} ............................................. USD 885,000 931,463 0.3
Penn National Gaming, Inc., 10.625% due 12/15/04 -
144A{.} ............................................. USD 875,000 918,750 0.2
Norampac, Inc., 9.5% due 2/1/08 - 144A{.} ............ USD 885,000 915,975 0.2
Hard Rock Hotel, Inc., 9.25% due 4/1/05 - 144A{.} .... USD 880,000 900,350 0.2
Revlon Consumer Products, 8.625% due 2/2/08 -
144A{.} ............................................. USD 885,000 887,213 0.2
Duane Reade, Inc., 9.25% due 2/15/08 ................. USD 885,000 884,706 0.2
Allbritton Communication, 8.875% due 2/1/08 -
144A{.} ............................................. USD 885,000 880,575 0.2
Anker Coal Group, Inc., 9.75% due 10/1/07 -
144A{.} ............................................. USD 875,000 855,313 0.2
Syratech Corp., 11% due 4/15/07 ...................... USD 880,000 756,800 0.2
Delco Remy International, Inc., 8.625% due
12/15/07 ............................................ USD 650,000 659,484 0.2
Pillowtex Corp., 9% due 12/15/07 - 144A{.} ........... USD 435,000 453,488 0.1
------------
Total Corporate Bonds (cost $72,365,567) ................. 72,264,992
------------
Mortgage Backed (10.4%)
Denmark (1.1%)
Realkredit Danmark, 6% due 10/1/26 ................... DKK 29,317,000 4,210,612 1.1
United States (9.3%)
Government National Mortgage Association:
TBA Pass Thru Pool, 6.5% due 5/15/28{*} ............ USD 14,000,000 13,877,500 3.6
TBA Pass Thru Pool, 6% due 5/15/28{*} .............. USD 14,000,000 13,562,500 3.5
Federal National Mortgage Association Pool #313439, 7%
due 3/1/04 .......................................... USD 8,313,847 8,451,549 2.2
------------
Total Mortgage Backed (cost $39,883,101) ................. 40,102,161
------------
Structured Notes (0.5%)
Korea (0.5%)
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 $1,930,000) ................................ USD 1,930,000 1,920,350 0.5
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $360,966,365) ....... 367,090,013 95.0
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-48
<PAGE> 790
AIM STRATEGIC INCOME FUND
(FORMERLY GT GLOBAL STRATEGIC INCOME FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Deutsche Marks Put Option: ............................. USD -- -- --
CURRENCY OPTIONS
Strike 1.82, expires 5/12/98 ......................... 2,320,000 3,348 --
Strike 1.84, expires 5/7/98 .......................... 4,100,000 402 --
------------ -----
TOTAL OPTIONS (cost $24,164) ............................. 3,750 --
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (7.2%)
United States (7.2%)
Ford Motor Credit Corp., effective yield 5.69%, due
5/20/98{./} ......................................... USD 14,000,000 $ 13,959,361 3.6
General Electric Co., effective yield 5.69%, due
5/20/98{./} ......................................... USD 14,000,000 13,959,361 3.6
------------
Total Commercial Paper - Discounted (cost $27,918,722) ... 27,918,722
------------
Government & Government Agency Obligations (1.5%)
Mexico (1.5%)
Mexican Cetes: ....................................... MXN -- -- 1.5
current yield 19.77% due 12/17/98 .................. 29,250,000 3,061,270 --
current yield 19.52% due 11/19/98 .................. 23,350,000 2,481,413 --
------------
Total Government & Government Agency Obligations (cost
$5,517,534) ............................................. 5,542,683
------------
Structured Notes (1.3%)
Indonesia (0.4%)
Indonesia Credit Linked Unsecured Note due 5/27/98
(Issued by Salomon Smith Barney Holdings, Inc. This
note has a credit risk component linked to the
value of referenced securities issued by the Bank
of Indonesia and the Republic of
Indonesia.) ...................................... USD 1,600,000 1,581,120 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-49
<PAGE> 791
AIM STRATEGIC INCOME FUND
(FORMERLY GT GLOBAL STRATEGIC INCOME FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Structured Notes (Continued)
Korea (0.9%)
Korean Credit Linked Unsecured Note due 4/27/99[::]
(Issued by Salomon Smith Barney Holdings, Inc. This
note has a currency and credit risk component
linked to the value of referenced securities issued
by the Korean Development Bank.) ................. USD 4,055,000 3,475,946 0.9
------------
Total Structured Notes (cost $4,989,984) ................. 5,057,066
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $38,426,240) .......... 38,518,471 10.0
------------ -----
TOTAL INVESTMENTS (cost $399,416,769) * ................. 405,612,234 105.0
Other Assets and Liabilities ............................. (19,242,576) (5.0)
------------ -----
NET ASSETS ............................................... $386,369,658 100.0
------------ -----
------------ -----
</TABLE>
- -------------
{.} 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.
+ 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.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for derivative instruments. (See Note 1 of Notes to
the Financial Statements.)
{*} Purchased on a forward commitment basis.
[::] Certain events may cause the contract to terminate prior to date
shown.
* For Federal income tax purposes, cost is $400,141,188 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 11,468,208
Unrealized depreciation: (5,997,162)
-------------
Net unrealized appreciation: $ 5,471,046
-------------
-------------
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
FS-50
<PAGE> 792
AIM STRATEGIC INCOME FUND
(FORMERLY GT GLOBAL STRATEGIC INCOME FUND)
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1998
- -------------------------------------------------------------------------------
SWAP CONTRACT
APRIL 30, 1998
<TABLE>
<CAPTION>
TERMINATION NOTIONAL
DESCRIPTION DATE CURRENCY AMOUNT VALUE
- ---------------------------------------- -------------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Mexico Credit Default Swap with
semiannual payments (fixed rate payment
1.72%)................................. 3/31/2000[::] USD $ 4,730,000 $ (22,628)
Contract counterparty is J.P. Morgan
Securities, Inc. The contract value
is related to the credit quality of a
referenced security: United Mexican
States 11.5% Global Bond due May 15,
2026.
</TABLE>
- -------------
[::] Certain events may cause the contract to terminate prior to date
shown.
- -------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
APRIL 30, 1998
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 2,139,576 1.59713 8/4/98 $ 5,723
Canadian Dollars........................ 5,121,354 1.41700 5/4/98 (45,901)
Canadian Dollars........................ 2,222,844 1.43000 5/4/98 466
Deutsche Marks.......................... 10,808,436 1.78974 8/4/98 32,406
Deutsche Marks.......................... 965,153 1.78923 8/4/98 2,619
-------------- --------------
Total Contracts to Buy (Payable amount
$21,262,050)......................... 21,257,363 (4,687)
-------------- --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 5.50%.
<CAPTION>
CONTRACTS TO SELL:
- ---------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 9,132,337 1.45560 8/4/98 485,663
Australian Dollars...................... 1,696,005 1.48862 8/4/98 50,581
British Pounds.......................... 10,672,577 0.59956 8/4/98 103,454
Canadian Dollars........................ 5,245,856 1.45170 5/4/98 (79,499)
Canadian Dollars........................ 2,098,342 1.43700 5/4/98 (10,660)
Canadian Dollars........................ 2,227,314 1.42760 8/4/98 (1,200)
Danish Kroner........................... 1,679,928 7.00000 8/4/98 (45,785)
Deutsche Marks.......................... 11,068,307 1.80715 8/4/98 (139,497)
Deutsche Marks.......................... 3,306,482 1.83600 8/4/98 (92,974)
French Francs........................... 858,055 6.05000 10/15/98 (13,615)
Japanese Yen............................ 779,174 122.90000 7/31/98 48,523
Japanese Yen............................ 233,666 121.89988 7/31/98 16,588
New Zealand Dollars..................... 10,961,561 1.81159 8/4/98 (31,961)
-------------- --------------
Total Contracts to Sell (Receivable
amount $60,249,222).................. 59,959,604 289,618
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 15.52%.
Total Open Forward Foreign Currency
Contracts, Net....................... $284,931
--------------
--------------
</TABLE>
- ---------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-51
<PAGE> 793
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
STATEMENTS OF ASSETS
AND LIABILITIES
April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM
-------------------------------------------
GLOBAL
GOVERNMENT GLOBAL HIGH
INCOME INCOME FUND- STRATEGIC
FUND CONSOLIDATED INCOME
(UNAUDITED) (NOTE 1) FUND
------------- ------------- -------------
<S> <C> <C> <C>
Assets:
Investments in securities, at value
(cost $249,751,661; $353,289,365; and
$399,416,769, respectively) (Note
1)................................... $ 254,268,277 $361,101,119 $ 405,612,234
U.S. currency......................... 387 598 812,050
Foreign currencies.................... 4,288,644 4,140 4,446,776
Interest receivable................... 6,347,624 5,445,023 6,216,285
Receivable for forward foreign
currency contracts -- closed (Note
1)................................... 211,857 -- 597,961
Receivable for Fund shares sold....... 1,302,028 2,282,498 1,032,304
Receivable for open forward foreign
currency contracts, net (Note 1)..... 635,206 60,059 284,931
Receivable for securities sold........ 3,909,049 33,894,448 23,058,652
------------- ------------- -------------
Total assets........................ 270,963,072 402,787,885 442,061,193
------------- ------------- -------------
Liabilities:
Payable for custodian fees............ 49,193 30,200 81,705
Payable for Directors' and Trustees'
fees and expenses (Note 2)........... 2,577 3,975 302
Payable for fund accounting fees (Note
2)................................... 5,186 7,573 8,223
Payable for Fund shares repurchased
(Note 2)............................. 4,399,466 1,541,198 2,846,926
Payable for investment management and
administration fees (Note 2)......... 147,478 273,226 259,083
Payable for loan outstanding (Note
1)................................... 21,178,000 -- 1,000,000
Payable for printing and postage
expenses............................. 97,549 68,350 81,902
Payable for professional fees......... 25,749 42,925 24,286
Payable for registration and filing
fees................................. 13,802 10,318 4,916
Payable for securities purchased...... 11,988,950 45,736,627 50,989,400
Payable for service and distribution
expenses (Note 2).................... 126,880 222,467 251,157
Payable for transfer agent fees (Note
2)................................... 143,845 72,177 108,413
Swap contracts outstanding............ -- 58,987 22,628
Other accrued expenses................ 43,465 29,769 12,594
------------- ------------- -------------
Total liabilities................... 38,222,140 48,097,792 55,691,535
Minority interest (Notes 1 & 2)..... -- 100 --
------------- ------------- -------------
Net assets.............................. $ 232,740,932 $354,689,993 $ 386,369,658
------------- ------------- -------------
------------- ------------- -------------
Class A:
Net asset value and redemption price
per share ($130,245,759 DIVIDED BY
14,942,768; $130,645,479 DIVIDED BY
9,958,093; and $131,367,400 DIVIDED
BY 10,690,444 shares outstanding,
respectively)........................ $ 8.72 $ 13.12 $ 12.29
------------- ------------- -------------
------------- ------------- -------------
Maximum offering price per share
(100/95.25 of $8.72; 100/95.25 of
$13.12; and 100/95.25 of $12.29,
respectively) *...................... $ 9.15 $ 13.77 $ 12.90
------------- ------------- -------------
------------- ------------- -------------
Class B:+
Net asset value and offering price per
share ($102,299,230 DIVIDED BY
11,735,659; $221,039,186 DIVIDED BY
16,866,817; and $254,225,104 DIVIDED
BY 20,671,013 shares outstanding,
respectively)........................ $ 8.72 $ 13.10 $ 12.30
------------- ------------- -------------
------------- ------------- -------------
Advisor Class:
Net asset value, offering, and
redemption price per share ($195,943
DIVIDED BY 22,401; $3,005,328 DIVIDED
BY 230,053; and $777,154 DIVIDED BY
63,127 shares outstanding,
respectively)........................ $ 8.75 $ 13.06 $ 12.31
------------- ------------- -------------
------------- ------------- -------------
Net assets consist of:
Paid in capital (Note 4).............. $ 372,865,738 $337,218,506 $ 441,635,549
Undistributed/Accumulated net
investment income.................... 1,018,033 1,361,701 165,400
Accumulated net realized gain (loss)
on investments....................... (146,316,185) 8,330,019 (61,899,072)
Net unrealized appreciation on
translation of assets and
liabilities.......................... 656,730 27,000 294,944
Net unrealized appreciation of
investments.......................... 4,516,616 7,752,767 6,172,837
------------- ------------- -------------
Total -- representing net assets
applicable to capital shares
outstanding............................ $ 232,740,932 $354,689,993 $ 386,369,658
------------- ------------- -------------
------------- ------------- -------------
<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-52
<PAGE> 794
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
STATEMENTS OF OPERATIONS
Six months ended April 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM
---------------------------------------
GLOBAL
GOVERNMENT GLOBAL HIGH
INCOME INCOME FUND- STRATEGIC
FUND CONSOLIDATED INCOME
(UNAUDITED) (NOTE 1) FUND
----------- ------------ -----------
<S> <C> <C> <C>
Investment income: (Note 1)
Interest income.................................................... $10,992,699 $ 24,460,748 $19,799,049
Securities lending income.......................................... 313,851 662,637 677,327
----------- ------------ -----------
Total investment income.......................................... 11,306,550 25,123,385 20,476,376
----------- ------------ -----------
Expenses:
Investment management and administration fees (Note 2)............. 961,579 1,764,370 1,460,302
Amortization of organization costs (Note 1)........................ -- 692 --
Custodian Fees..................................................... 99,007 54,900 126,700
Directors' and Trustees' fees and expenses (Note 2)................ 4,525 9,326 6,430
Fund accounting fees (Note 2)...................................... 34,976 46,902 53,088
Interest expense................................................... 425,956 17,282 11,355
Printing and postage expenses...................................... 33,485 66,985 72,401
Professional fees.................................................. 58,096 68,554 77,300
Registration and filing fees (Note 1).............................. 29,322 16,675 27,150
Service and distribution expenses: (Note 2)
Class A.......................................................... 264,969 228,195 235,253
Class B.......................................................... 567,064 1,109,235 1,338,087
Transfer agent fees (Note 2)....................................... 305,528 322,530 423,540
Other expenses..................................................... 5,612 8,524 8,145
----------- ------------ -----------
Total expenses..................................................... 2,790,119 3,714,170 3,839,751
----------- ------------ -----------
Net investment income................................................ 8,516,431 21,409,215 16,636,625
----------- ------------ -----------
Net realized and unrealized gain on investments: (Note 1)
Net realized gain (loss) on investments............................ (5,554,013) 8,329,245 3,769,467
Net realized gain (loss) on foreign currency transactions.......... 5,895,662 (2,059,452) 3,468,998
----------- ------------ -----------
Net realized gain during the period.............................. 341,649 6,269,793 7,238,465
----------- ------------ -----------
Net change in unrealized appreciation (depreciation) on translation
of assets and liabilities in foreign currencies................... (3,252,473) 946,476 (1,450,607)
Net change in unrealized appreciation of investments............... 4,464,608 3,389,849 158,475
----------- ------------ -----------
Net unrealized appreciation (depreciation) during the period..... 1,212,135 4,336,325 (1,292,132)
----------- ------------ -----------
Net realized and unrealized gain on investments and foreign
currencies.......................................................... 1,553,784 10,606,118 5,946,333
----------- ------------ -----------
Net increase in net assets resulting from operations................. $10,070,215 $ 32,015,333 $22,582,958
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-53
<PAGE> 795
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM
----------------------------------------------------------------------------------------------
GLOBAL GOVERNMENT INCOME FUND GLOBAL HIGH INCOME
------------------------------ FUND-CONSOLIDATED STRATEGIC INCOME FUND
SIX MONTHS ------------------------------ ------------------------------
ENDED YEAR ENDED SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
APRIL 30, 1998 OCTOBER 31, ENDED OCTOBER 31, ENDED OCTOBER 31,
(UNAUDITED) 1997 APRIL 30, 1998 1997 APRIL 30, 1998 1997
-------------- ------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income............ $ 8,516,431 $ 19,128,003 $ 21,409,215 $ 31,937,784 $ 16,636,625 $ 27,580,494
Net realized gain on investments
and foreign currency
transactions.................... 341,649 246,114 6,269,793 69,702,746 7,238,465 39,498,013
Net change in unrealized
appreciation (depreciation) on
translation of assets and
liabilities in foreign
currencies...................... (3,252,473) 5,553,094 946,476 (1,099,793) (1,450,607) 2,627,595
Net change in unrealized
appreciation (depreciation) of
investments..................... 4,464,608 (11,452,067) 3,389,849 (36,470,606) 158,475 (26,190,807)
-------------- ------------- -------------- ------------- -------------- -------------
Net increase in net assets
resulting from operations..... 10,070,215 13,475,144 32,015,333 64,070,131 22,582,958 43,515,295
-------------- ------------- -------------- ------------- -------------- -------------
Class A:
Distributions to shareholders:
(Note 1)
From net investment income....... (4,583,533) (6,827,721) (7,715,585) (12,555,399) (4,692,291) (10,228,265)
From net realized gain on
investments..................... -- -- (24,244,657) (2,751,509) -- --
In excess of net investment
income.......................... -- (4,449,488) -- -- -- (775,601)
Class B:
Distributions to shareholders:
(Note 1)
From net investment income....... (2,902,894) (4,503,257) (12,421,981) (17,789,317) (8,398,431) (18,434,103)
From net realized gain on
investments..................... -- -- (40,998,478) (3,911,565) -- --
In excess of net investment
income.......................... -- (2,934,682) -- -- -- (1,397,843)
Advisor Class:
Distributions to shareholders:
(Note 1)
From net investment income....... (11,971) (4,070) (213,548) (1,289,469) (29,497) (43,148)
From net realized gain on
investments..................... -- -- (625,775) (264,339) -- --
In excess of net investment
income.......................... -- (2,653) -- -- -- (3,272)
-------------- ------------- -------------- ------------- -------------- -------------
Total distributions.......... (7,498,398) (18,721,871) (86,220,024) (38,561,598) (13,120,219) (30,882,232)
-------------- ------------- -------------- ------------- -------------- -------------
Capital share transactions: (Note
4)
Increase from capital shares sold
and reinvested.................. 591,892,734 667,541,828 173,649,654 561,523,639 109,089,465 335,031,026
Decrease from capital shares
repurchased..................... (643,833,097) (787,794,141) (130,547,381) (665,858,246) (152,806,341) (445,823,540)
-------------- ------------- -------------- ------------- -------------- -------------
Net decrease from capital share
transactions.................. (51,940,363) (120,252,313) 43,102,273 (104,334,607) (43,716,876) (110,792,514)
-------------- ------------- -------------- ------------- -------------- -------------
Total increase (decrease) in net
assets............................ (49,368,546) (125,499,040) (11,102,418) (78,826,074) (34,254,137) (98,159,451)
Net assets:
Beginning of period.............. 282,109,478 407,608,518 365,792,411 444,618,485 420,623,795 518,783,246
-------------- ------------- -------------- ------------- -------------- -------------
End of period *................. $ 232,740,932 $ 282,109,478 $ 354,689,993 $ 365,792,411 $ 386,369,658 $ 420,623,795
-------------- ------------- -------------- ------------- -------------- -------------
-------------- ------------- -------------- ------------- -------------- -------------
* Includes undistributed
(distributions in excess of) net
investment income............... $ 1,018,033 $ -- $ 1,361,701 $ 303,600 $ 165,400 $ (3,351,006)
-------------- ------------- -------------- ------------- -------------- -------------
-------------- ------------- -------------- ------------- -------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-54
<PAGE> 796
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
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>
Global Government Income Fund
----------------------------------------------------------------------------
Class A
----------------------------------------------------------------------------
SIX MONTHS
ENDED Year ended October 31,
APRIL 30, 1998 -----------------------------------------------------------
(UNAUDITED)(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.... $ 8.62 $ 8.74 $ 8.81 $ 8.63 $ 11.07 $ 9.83
-------------- ----------- --------- --------- --------- ---------
Income from investment operations:
Net investment income................. 0.29 0.52 0.57 0.62 0.65 0.74
Net realized and unrealized gain
(loss) on investments................ 0.07 (0.13) 0.03 0.15 (1.52) 1.34
-------------- ----------- --------- --------- --------- ---------
Net increase (decrease) from
investment operations.............. 0.36 0.39 0.60 0.77 (0.87) 2.08
-------------- ----------- --------- --------- --------- ---------
Distributions to shareholders:
From net investment income............ (0.26) (0.31) (0.57) (0.59) (0.65) (0.74)
From net realized gain on
investments.......................... -- -- (0.10) -- (0.27) --
In excess of net investment income.... -- (0.20) -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.55) --
Return of capital..................... -- -- -- -- (0.10) --
From sources other than net investment
income............................... -- -- -- -- -- (0.10)
-------------- ----------- --------- --------- --------- ---------
Total distributions................. (0.26) (0.51) (0.67) (0.59) (1.57) (0.84)
-------------- ----------- --------- --------- --------- ---------
Net asset value, end of period.......... $ 8.72 $ 8.62 $ 8.74 $ 8.81 $ 8.63 $ 11.07
-------------- ----------- --------- --------- --------- ---------
-------------- ----------- --------- --------- --------- ---------
Total investment return (c)............. 4.05% (b) 4.78% 7.11% 9.22% (8.87)% 21.9%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $130,246 $154,272 $240,945 $385,404 $502,094 $708,301
Ratio of net investment income to
average net assets..................... 6.69% (a) 6.04% 6.52% 6.98% 6.87% 7.1%
Ratio of operating expenses to average
net assets:
With expense reductions (Note 1)...... 1.50% (a) 1.34% 1.34% 1.35% 1.33% 1.4%
Without expense reductions............ 1.50% (a) 1.51% 1.39% 1.38% N/A N/A
Ratio of interest expense to average net
assets................................. 0.32% (a) N/A N/A N/A N/A N/A
Portfolio turnover rate++............... 211% (a) 241% 268% 385% 625% 495%
</TABLE>
- ---------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-55
<PAGE> 797
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
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>
Global Government Income Fund
-----------------------------------------------------------------------------
Class B
-----------------------------------------------------------------------------
SIX MONTHS
ENDED Year ended October 31,
APRIL 30, 1998 ------------------------------------------------------------
(UNAUDITED)(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.... $ 8.62 $ 8.74 $ 8.80 $ 8.64 $ 11.07 $ 9.83
-------------- ------------ --------- --------- --------- ---------
Income from investment operations:
Net investment income................. 0.26 0.46 0.51 0.55 0.59 0.67
Net realized and unrealized gain
(loss) on investments................ 0.07 (0.12) 0.04 0.14 (1.52) 1.34
-------------- ------------ --------- --------- --------- ---------
Net increase (decrease) from
investment operations.............. 0.33 0.34 0.55 0.69 (0.93) 2.01
-------------- ------------ --------- --------- --------- ---------
Distributions to shareholders:
From net investment income............ (0.23) (0.28) (0.51) (0.53) (0.59) (0.67)
From net realized gain on
investments.......................... -- -- (0.10) -- (0.27) --
In excess of net investment income.... -- (0.18) -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.54) --
Return of capital..................... -- -- -- -- (0.10) --
From sources other than net investment
income............................... -- -- -- -- -- (0.10)
-------------- ------------ --------- --------- --------- ---------
Total distributions................. (0.23) (0.46) (0.61) (0.53) (1.50) (0.77)
-------------- ------------ --------- --------- --------- ---------
Net asset value, end of period.......... $ 8.72 $ 8.62 $ 8.74 $ 8.80 $ 8.64 $ 11.07
-------------- ------------ --------- --------- --------- ---------
-------------- ------------ --------- --------- --------- ---------
Total investment return (c)............. 3.85% (b) 4.00% 6.54% 8.22% (9.39)% 21.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $102,299 $127,722 $166,577 $235,481 $262,405 $182,972
Ratio of net investment income to
average net assets..................... 6.04% (a) 5.39% 5.87% 6.33% 6.22% 6.5%
Ratio of operating expenses to average
net assets:
With expense reductions (Note 1)...... 2.15% (a) 1.99% 1.99% 2.00% 1.98% 2.0%
Without expense reductions............ 2.15% (a) 2.16% 2.04% 2.03% N/A N/A
Ratio of interest expense to average net
assets................................. 0.32% (a) N/A N/A N/A N/A N/A
Portfolio turnover rate++............... 211% (a) 241% 268% 385% 625% 495%
</TABLE>
- ---------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-56
<PAGE> 798
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
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>
GLOBAL GOVERNMENT INCOME FUND
-------------------------------------------
Advisor Class+
-------------------------------------------
SIX
MONTHS June 1,
ENDED 1995
APRIL Year ended to
30, October 31, October
1998 ------------------- 31,
(UNAUDITED)(d) 1997(d) 1996(d) 1995(d)
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.61 $ 8.73 $ 8.80 $ 8.98
------- --------- ------- ---------
Income from investment operations:
Net investment income................. 0.30 0.55 0.60 0.26
Net realized and unrealized gain
(loss) on investments................ 0.11 (0.13) 0.03 (0.19)
------- --------- ------- ---------
Net increase (decrease) from
investment operations.............. 0.41 0.42 0.63 0.07
------- --------- ------- ---------
Distributions to shareholders:
From net investment income............ (0.27) (0.33) (0.60) (0.25)
From net realized gain on
investments.......................... -- -- (0.10) --
In excess of net investment income.... -- (0.21) -- --
In excess of net realized gain on
investments.......................... -- -- -- --
Return of capital..................... -- -- --
From sources other than net investment
income............................... -- -- -- --
------- --------- ------- ---------
Total distributions................. (0.27) (0.54) (0.70) (0.25)
------- --------- ------- ---------
Net asset value, end of period.......... $ 8.75 $ 8.61 $ 8.73 $ 8.80
------- --------- ------- ---------
------- --------- ------- ---------
Total investment return (c)............. 4.71%(b) 5.15% 7.49% 0.83%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 196 $ 116 $ 86 $ 131
Ratio of net investment income to
average net assets..................... 7.04%(a) 6.39% 6.87% 7.33%(a)
Ratio of operating expenses to average
net assets:
With expense reductions (Note 1)...... 1.15%(a) 0.99% 0.99% 1.00%(a)
Without expense reductions............ 1.15%(a) 1.16% 1.04% 1.03%(a)
Ratio of interest expense to average net
assets................................. 0.32%(a) N/A N/A N/A
Portfolio turnover rate++............... 211%(a) 241% 268% 385%
</TABLE>
- ---------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-57
<PAGE> 799
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
Global High Income Fund
------------------------------------------------------------------------
Class A
------------------------------------------------------------------------
SIX MONTHS
ENDED Year ended October 31,
APRIL 30, ---------------------------------------------------------
1998(d) 1997(d) 1996(d) 1995 1994(d) 1993(d)
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 15.56 $ 14.85 $ 11.70 $ 12.56 $ 14.92 $ 11.43
---------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income................. 0.84* 1.19 1.27 1.35 0.94 0.78
Net realized and unrealized gain
(loss) on investments................ 0.38 0.93 3.09 (1.09) (1.87) 3.92
---------- --------- --------- --------- --------- ---------
Net increase (decrease) from
investment operations.............. 1.22 2.12 4.36 0.26 (0.93) 4.70
---------- --------- --------- --------- --------- ---------
Distributions to shareholders:
From net investment income............ (0.83) (1.18) (1.11) (1.03) (0.94) (0.78)
From net realized gain on
investments.......................... (2.83) (0.23) (0.10) (0.03) (0.27) --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.22) --
Return of capital..................... -- -- -- (0.06) -- --
From sources other than net investment
income............................... -- -- -- -- -- (0.43)
---------- --------- --------- --------- --------- ---------
Total distributions................. (3.66) (1.41) (1.21) (1.12) (1.43) (1.21)
---------- --------- --------- --------- --------- ---------
Net asset value, end of period.......... $ 13.12 $ 15.56 $ 14.85 $ 11.70 $ 12.56 $ 14.92
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
Total investment return (c)............. 9.73%(b) 14.46% 39.05% 2.81% (6.45)% 43.6%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $130,645 $133,973 $178,318 $142,002 $167,974 $143,171
Ratio of net investment income to
average net assets..................... 10.87%(a) 7.39% 9.52% 11.85% 7.00% 6.40%
Ratio of operating expenses to average
net assets:
With expense reductions (Note 1)...... 1.68%(a) 1.53% 1.69% 1.75% 1.57% 2.20%
Without expense reductions............ 1.68%(a) 1.58% 1.69% 1.75% 1.57% 2.20%
Ratio of interest expense to average net
assets................................. 0.01%(a) N/A 0.04% N/A 0.22% N/A
Portfolio turnover rate++............... 222%(a) 214% 290% 213% 178% 195%
</TABLE>
- ---------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating 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. Without such a
payment net investment income would have been $0.63, $0.58 and $0.66
per share for Class A, B and Advisor, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
FS-58
<PAGE> 800
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
FINANCIAL HIGHLIGHTS (cont'd)
- -------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
Global High Income Fund
------------------------------------------------------------------------
Class B
------------------------------------------------------------------------
SIX MONTHS
ENDED Year ended October 31,
APRIL 30, ---------------------------------------------------------
1998(d) 1997(d) 1996(d) 1995 1994(d) 1993(d)
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 15.54 $ 14.83 $ 11.69 $ 12.56 $ 14.90 $ 11.43
----------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income................. 0.79* 1.09 1.17 1.27 0.86 0.70
Net realized and unrealized gain
(loss) on investments................ 0.39 0.93 3.09 (1.09) (1.85) 3.90
----------- --------- --------- --------- --------- ---------
Net increase (decrease) from
investment operations.............. 1.18 2.02 4.26 0.18 (0.99) 4.60
----------- --------- --------- --------- --------- ---------
Distributions to shareholders:
From net investment income............ (0.79) (1.08) (1.03) (0.96) (0.86) (0.70)
From net realized gain on
investments.......................... (2.83) (0.23) (0.09) (0.03) (0.27) --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.22) --
Return of capital..................... -- -- -- (0.06) -- --
From sources other than net investment
income............................... -- -- -- -- -- (0.43)
----------- --------- --------- --------- --------- ---------
Total distributions................. (3.62) (1.31) (1.12) (1.05) (1.35) (1.13)
----------- --------- --------- --------- --------- ---------
Net asset value, end of period.......... $ 13.10 $ 15.54 $ 14.83 $ 11.69 $ 12.56 $ 14.90
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
Total investment return (c)............. 9.37% (b) 13.77% 38.16% 2.07% (6.99)% 42.6%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $221,039 $228,101 $251,002 $214,897 $232,423 $127,035
Ratio of net investment income to
average net assets..................... 10.22% (a) 6.74% 8.87% 11.20% 6.35% 5.8%
Ratio of operating expenses to average
net assets:
With expense reductions (Note 1)...... 2.33% (a) 2.18% 2.34% 2.40% 2.22% 2.8%
Without expense reductions............ 2.33% (a) 2.23% 2.34% 2.40% 2.22% 2.8%
Ratio of interest expense to average net
assets................................. 0.01% (a) N/A 0.04% N/A 0.22% N/A
Portfolio turnover rate++............... 222% (a) 214% 290% 213% 178% 195%
</TABLE>
- ---------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating 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. Without such a
payment net investment income would have been $0.63, $0.58 and $0.66
per share for Class A, B and Advisor, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
FS-59
<PAGE> 801
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
FINANCIAL HIGHLIGHTS (cont'd)
- -------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
Global High Income Fund
--------------------------------------------
Advisor Class+
--------------------------------------------
SIX June 1,
MONTHS 1995
ENDED Year Ended to
APRIL October 31, October
30, ------------------ 31,
1998(d) 1997(d) 1996(d) 1995
-------- ------- -------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $15.52 $14.83 $ 11.71 $11.44
-------- ------- -------- ----------
Income from investment operations:
Net investment income................. 0.87* 1.22 1.34 0.57
Net realized and unrealized gain
(loss) on investments................ 0.36 0.93 3.05 0.17
-------- ------- -------- ----------
Net increase (decrease) from
investment operations.............. 1.23 2.15 4.39 0.74
-------- ------- -------- ----------
Distributions to shareholders:
From net investment income............ (0.86) (1.23) (1.16) (0.44)
From net realized gain on
investments.......................... (2.83) (0.23) (0.11) --
In excess of net realized gain on
investments.......................... -- -- -- --
Return of capital..................... -- -- -- (0.03)
From sources other than net investment
income............................... -- -- -- --
-------- ------- -------- ----------
Total distributions................. (3.69) (1.46) (1.27) (0.47)
-------- ------- -------- ----------
Net asset value, end of period.......... $13.06 $15.52 $ 14.83 $11.71
-------- ------- -------- ----------
-------- ------- -------- ----------
Total investment return (c)............. 9.81%(b) 14.72% 39.38% 6.54%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $3,005 $3,719 $15,298 $1,463
Ratio of net investment income to
average net assets..................... 11.22%(a) 7.74% 9.87% 12.20%(a)
Ratio of operating expenses to average
net assets:
With expense reductions (Note 1)...... 1.33%(a) 1.18% 1.34% 1.40%(a)
Without expense reductions............ 1.33%(a) 1.23% 1.34% 1.40%
Ratio of interest expense to average net
assets................................. 0.01%(a) N/A 0.04% N/A
Portfolio turnover rate++............... 222%(a) 214% 290% 213%(a)
</TABLE>
- ---------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating 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. Without such a
payment net investment income would have been $0.63, $0.58 and $0.66
per share for Class A, B and Advisor, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
FS-60
<PAGE> 802
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
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>
Strategic Income Fund
--------------------------------------------------------------------------------
Class A
--------------------------------------------------------------------------------
SIX MONTHS
ENDED Year ended October 31,
APRIL 30, -----------------------------------------------------------------
1998(d) 1997 1996(d) 1995(d) 1994 1993(d)
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.00 $ 11.76 $ 10.32 $ 10.88 $ 13.61 $ 11.25
---------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income................. 0.52* 0.74 0.89 0.97 0.79 0.96
Net realized and unrealized gain
(loss) on investments................ 0.19 0.34 1.44 (0.69) (2.14) 2.85
---------- --------- --------- --------- --------- ---------
Net increase (decrease) from
investment operations.............. 0.71 1.08 2.33 0.28 (1.35) 3.81
---------- --------- --------- --------- --------- ---------
Distributions to shareholders:
From net investment income............ (0.42) (0.78) (0.82) (0.80) (0.79) (0.96)
From net realized gain on
investments.......................... -- -- -- -- (0.38) (0.37)
In excess of net investment income.... -- (0.06) (0.07) -- -- --
Return of capital..................... -- -- -- (0.04) (0.21) --
From sources other than net investment
income............................... -- -- -- -- -- (0.12)
---------- --------- --------- --------- --------- ---------
Total distributions................. (0.42) (0.84) (0.89) (0.84) (1.38) (1.45)
---------- --------- --------- --------- --------- ---------
Net asset value, end of period.......... $ 12.29 $ 12.00 $ 11.76 $ 10.32 $ 10.88 $ 13.61
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
Total investment return (c)............. 5.92%(b) 9.40% 23.00% 3.06% (10.44)% 37.0%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $131,367 $138,715 $185,126 $188,165 $275,241 $287,870
Ratio of net investment income to
average net assets..................... 7.78%(a) 6.18% 8.09% 9.64% 6.74% 7.2%
Ratio of operating expenses to average
net assets:
With expense reductions (Note 1)...... 1.46%(a) 1.35% 1.38% 1.42% 1.40% 1.7%
Without expense reductions............ 1.46%(a) 1.44% 1.40% 1.45% N/A N/A
Ratio of interest expense to average net
assets................................. 0.01%(a) N/A N/A N/A 0.10% N/A
Portfolio turnover rate++............... 244%(a) 149% 177% 238% 583% 310%
</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. Without such a
payment net investment income would have been $0.41, $0.37 and $0.44
per share for Class A, B and Advisor, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is 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-61
<PAGE> 803
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
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>
Strategic Income Fund
--------------------------------------------------------------------------------
Class B
--------------------------------------------------------------------------------
SIX MONTHS
ENDED Year ended October 31,
APRIL 30, -----------------------------------------------------------------
1998(d) 1997 1996(d) 1995(d) 1994 1993(d)
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.01 $ 11.77 $ 10.33 $ 10.88 $ 13.60 $ 11.24
---------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income................. 0.48* 0.67 0.82 0.91 0.73 0.89
Net realized and unrealized gain
(loss) on investments................ 0.19 0.33 1.44 (0.69) (2.14) 2.85
---------- --------- --------- --------- --------- ---------
Net increase (decrease) from
investment operations.............. 0.67 1.00 2.26 0.22 (1.41) 3.74
---------- --------- --------- --------- --------- ---------
Distributions to shareholders:
From net investment income............ (0.38) (0.71) (0.75) (0.73) (0.72) (0.89)
From net realized gain on
investments.......................... -- -- -- -- (0.38) (0.37)
In excess of net investment income.... -- (0.05) (0.07) -- -- --
Return of capital..................... -- -- -- (0.04) (0.21) --
From sources other than net investment
income............................... -- -- -- -- -- (0.12)
---------- --------- --------- --------- --------- ---------
Total distributions................. (0.38) (0.76) (0.82) (0.77) (1.31) (1.38)
---------- --------- --------- --------- --------- ---------
Net asset value, end of period.......... $ 12.30 $ 12.01 $ 11.77 $ 10.33 $ 10.88 $ 13.60
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
Total investment return (c)............. 5.58%(b) 8.70% 22.15% 2.48% (11.02)% 36.2%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $254,225 $281,376 $333,178 $357,852 $458,550 $310,431
Ratio of net investment income to
average net assets..................... 7.13%(a) 5.53% 7.44% 8.99% 6.09% 6.5%
Ratio of operating expenses to average
net assets:
With expense reductions (Note 1)...... 2.11%(a) 2.00% 2.03% 2.07% 2.05% 2.4%
Without expense reductions............ 2.11%(a) 2.09% 2.05% 2.10% N/A N/A
Ratio of interest expense to average net
assets................................. 0.01%(a) N/A N/A N/A 0.10% N/A
Portfolio turnover rate++............... 244%(a) 149% 177% 238% 583% 310%
</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. Without such a
payment net investment income would have been $0.41, $0.37 and $0.44
per share for Class A, B and Advisor, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is 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-62
<PAGE> 804
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
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>
Strategic Income Fund
-----------------------------------------------------
Advisor Class+
-----------------------------------------------------
SIX MONTHS Year Ended June 1, 1995
ENDED October 31, to
APRIL 30, --------------------- October 31,
1998(d) 1997 1996(d) 1995(d)
---------- -------- -------- ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.02 $ 11.77 $ 10.33 $ 10.32
---------- -------- -------- ------------
Income from investment operations:
Net investment income................. 0.55* 0.79 0.93 0.41
Net realized and unrealized gain
(loss) on investments................ 0.18 0.34 1.44 (0.04)
---------- -------- -------- ------------
Net increase (decrease) from
investment operations.............. 0.73 1.13 2.37 0.37
---------- -------- -------- ------------
Distributions to shareholders:
From net investment income............ (0.44) (0.82) (0.86) (0.34)
From net realized gain on
investments.......................... -- -- -- --
In excess of net investment income.... -- (0.06) (0.07) --
Return of capital..................... -- -- -- (0.02)
From sources other than net investment
income............................... -- -- -- --
---------- -------- -------- ------------
Total distributions................. (0.44) (0.88) (0.93) (0.36)
---------- -------- -------- ------------
Net asset value, end of period.......... $ 12.31 $ 12.02 $ 11.77 $ 10.33
---------- -------- -------- ------------
---------- -------- -------- ------------
Total investment return (c)............. 6.09%(b) 9.86% 23.39% 3.72% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 777 $ 533 $ 479 $ 443
Ratio of net investment income to
average net assets..................... 8.13%(a) 6.53% 8.44% 9.99% (a)
Ratio of operating expenses to average
net assets:
With expense reductions (Note 1)...... 1.11%(a) 1.00% 1.03% 1.07% (a)
Without expense reductions............ 1.11%(a) 1.09% 1.05% 1.10% (a)
Ratio of interest expense to average net
assets................................. 0.01%(a) N/A N/A N/A
Portfolio turnover rate++............... 244%(a) 149% 177% 238%
</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. Without such a
payment net investment income would have been $0.41, $0.37 and $0.44
per share for Class A, B and Advisor, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is 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-63
<PAGE> 805
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
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 Government Income Fund, GT Global High Income Fund and GT Global
Strategic Income Fund ("Funds") are non-diversified separate series of GT
Investment Funds, Inc. ("Company"). Effective June 1, 1998, the Company was
renamed AIM Investment Funds, Inc. and these separate series were renamed as
follows: AIM Global Government Income Fund, AIM Global High Income Fund and AIM
Strategic Income Fund, respectively. Collectively, these Funds are now known as
the "AIM Global Income Funds." 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.
The GT Global High Income Fund invests substantially all of its investable
assets in Global High Income Portfolio ("Portfolio"). The Portfolio is organized
as a New York Trust and is registered under the 1940 Act as a non-diversified,
open-end management investment company.
The Portfolio has investment objectives, policies and limitations substantially
identical to those of its corresponding Fund. Therefore, the financial
statements of the Fund and its respective Portfolio have been presented on a
consolidated basis, and represent all activities of both the Fund and Portfolio.
Through April 30, 1998, all of the shares of beneficial interest of the
Portfolio were owned by either its Fund or Chancellor LGT Asset Management, Inc.
(the "Manager"), which has a nominal ($100) investment in the Portfolio.
The Funds offer 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 Funds calculate the net asset value of and complete 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 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 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 or the Trust's Board of Trustees.
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 or
the Trust's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of each Fund and Portfolio 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 Funds or
Portfolio (the phrase "Funds or Portfolio" hereinafter refers to the GT Global
Government Income Fund, the GT Global Strategic Income Fund, and the Global High
Income Portfolio) after translation to U.S. dollars based on the exchange rates
on that day. The cost of each security is determined
FS-64
<PAGE> 806
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
A Fund or Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
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 a
Fund's or Portfolio'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 period end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by a Fund or Portfolio, it is
the Fund's or Portfolio'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 or Portfolio 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 a Fund or Portfolio as an unrealized gain or loss.
When the Forward Contract is closed, the Fund or Portfolio 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 or Portfolio's "Statement of Assets
and Liabilities." A Fund or Portfolio 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. A Fund or Portfolio 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 a Fund or Portfolio writes a call or put option, an amount equal to the
premium received is included in the Fund's or Portfolio'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 or Portfolio 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 or Portfolio can write options only on a covered basis,
which, for a call, requires that the Fund or Portfolio hold the underlying
security and, for a put, requires the Fund or Portfolio 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 or Portfolio 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 or Portfolio for the purchase of a call or put
option is included in the Fund's or Portfolio'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 or Portfolio has
purchased expires on the stipulated expiration date, the Fund or Portfolio
realizes a loss in the amount of the cost of the option. If the Fund or
Portfolio enters into a closing sale transaction, the Fund or Portfolio 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 or Portfolio
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 or Portfolio
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 or Portfolio 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 Portfolio 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 or Portfolio 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 a
Fund or Portfolio 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 or Portfolio
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 or Portfolio as
FS-65
<PAGE> 807
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
unrealized gains or losses. When the contract is closed, the Fund or Portfolio
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 or Portfolio is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
A Fund or Portfolio may use futures contracts to manage its exposure to the
stock market and to fluctuations in currency values or interest rates.
(G) SWAP CONTRACTS AND OTHER DERIVATIVE INSTRUMENTS
Swap contracts involve the exchange by a Fund or Portfolio with a counterparty
of respective commitments to pay or receive, fixed or floating rates with
respect to a notional amount. A Fund or Portfolio may 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 or to protect against any
increase in the price of securities the Fund or Portfolio anticipates purchasing
at a later date. A Fund or Portfolio may be exposed to risk if a counterparty is
unable to meet the terms of the contract, the value of the contract changes
unfavorably, or the change in value of the underlying securities, indexes or
similar reference item does not correlate to the change in the value of the
contracts.
(H) 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. A Fund or Portfolio 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
or Portfolio to subsequently invest at less advantageous prices.
(I) PORTFOLIO SECURITIES LOANED
At April 30, 1998, stocks with an aggregate value listed below were on loan to
brokers. The loans were secured by cash collateral received by the Funds:
<TABLE>
<CAPTION>
APRIL 30, 1998 PERIOD ENDED
-------------------------------- APRIL 30, 1998
AGGREGATE VALUE CASH --------------
ON LOAN COLLATERAL FEES RECEIVED
--------------- -------------- --------------
<S> <C> <C> <C>
GT Global Government Income Fund........ $ 5,105,020 $ 7,410,000 $313,851
Global High Income Portfolio............ $ 41,346,275 $ 44,614,120 $662,637
GT Global Strategic Income Fund......... $ 23,358,514 $ 25,208,069 $677,327
</TABLE>
For international securities, cash collateral is received by a Fund or Portfolio
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 a Fund or Portfolio 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 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.
(J) TAXES
It is the intended policy of the Funds and Portfolios 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 Funds and
Portfolios 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 GT Global Government
Income Fund has a capital loss carryforward of $139,369,056 of which
$123,623,470 expires in 2002, and $15,745,586 expires in 2003. The GT Global
Strategic Income Fund has a capital loss carryforward of $65,749,433 which
expires in 2003.
(K) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by each 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 Funds or Portfolio and timing
differences.
(L) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the GT Global High Income Fund and the Portfolio in
connection with their organization, their initial registration with the
Securities and Exchange Commission and with various states and the initial
public offering of its shares aggregated $149,100 and $25,000, respectively.
These expenses are being amortized on a straightline basis over a five-year
period.
(M) 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 or Portfolio's investment in emerging
market countries may involve greater risks than investments in more developed
markets and the price 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.
FS-66
<PAGE> 808
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
(N) INDEXED SECURITIES
A Fund or Portfolio 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.
(O) RESTRICTED SECURITIES
A Fund or Portfolio 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
or Portfolio's Portfolio of Investments.
(P) LINE OF CREDIT
Each of the Funds, along with certain other funds ("Funds") advised and/or
administered by the Manager, has a line of credit with BankBoston. GT Global
Government Income Fund, along with certain other funds ("GT Funds") advised
and/or administered by the Manager, has a line of credit with State Street Bank
& Trust Company. The arrangements with the banks allow all specified funds and
the GT Funds to borrow an aggregate maximum amount of $250,000,000. Each of
these funds is limited to borrowing up to 33 1/3% of the value of each Fund's
total assets. On April 30, 1998, GT Global Government Income Fund and GT Global
Strategic Income Fund had $21,178,000 and $1,000,000, respectively, in loans
outstanding.
For the period ended April 30, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for GT Global Government Income Fund, GT Global High Income Fund, and GT Global
Strategic Income Fund was $14,452,819, $5,000,000 and $4,538,462 respectively,
with a weighted average interest rate of 6.34%, 6.24% and 6.24%, respectively.
Interest expense for the GT Global Government Income Fund, GT Global High Income
Fund and GT Global Strategic Income Fund for the period ended April 30, 1998 was
$394,370, $15,597 and $10,231, respectively. Other interest expense charges
amounted to $31,586, $1,685, and $1,124, respectively.
(Q) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
A Fund or Portfolio 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 or Portfolio 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 or Portfolio has set aside sufficient cash or liquid
securities as collateral for these purchase commitments.
2. RELATED PARTIES (SEE ALSO NOTE 6)
For the period ended April 30, 1998, Chancellor LGT Asset Management, Inc. was
the Funds' and Portfolios' investment manager and administrator. The GT Global
Government Income Fund and GT Global Strategic Income Fund each pays the Manager
investment management and administration fees at the annualized rate of 0.725%
on the first $500 million of the average daily net assets of the Fund; 0.70% on
the next $1 billion; 0.675% on the next $1 billion; and 0.65% on amounts
thereafter. The GT Global High Income Fund pays administration fees to the
Manager at the annualized rate of 0.25% of its average daily net assets. These
fees are computed daily and paid monthly.
The Global High Income Portfolio pays investment management and administration
fees to the Manager at the annualized rate of 0.475% on the first $500 million
of average daily net assets of the Portfolio; 0.45% on the next $1 billion;
0.425% on the next $1 billion; and 0.40% on amounts thereafter, plus 2% of the
Portfolio's total investment income calculated in accordance with generally
accepted accounting principles, adjusted daily for currency revaluations, on a
mark to market basis, of the Portfolio's assets; provided, however, that during
any fiscal year this amount shall not exceed 2% of the Portfolio's total
investment income calculated in accordance with generally accepted accounting
principles. 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 Funds' distributor. The Funds offer 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 Funds' 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 the
following sales charges: $1,501 for the GT Global Government Income Fund,
$30,238 for the GT Global High Income Fund, and $13,334 for the GT Global
Strategic Income Fund. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge ("CDSC") upon redemption, in
accordance with the Funds' current prospectus. GT Global collected CDSCs for the
period ended April 30, 1998, as follows: $1,119 for the GT Global Strategic
Income Fund. 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 Funds' current
prospectus. For the period ended April 30, 1998, GT Global collected CDSCs in
the amount of: $443,566 for the GT Global Government Income Fund, $520,304 for
the GT Global High Income Fund, and $815,729 for the GT Global Strategic Income
Fund. In addition, GT Global makes
FS-67
<PAGE> 809
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
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 Funds'
Class A shares ("Class A Plan") and Class B shares ("Class B Plan"), a Fund
reimbursed GT Global for a portion of its shareholder servicing and
distributions expenses. Under that Class A Plan, a 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 0.35% 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 Fund's Class B Plan, a
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 each GT Global
Government Income Fund, GT Global High Income Fund and GT Global Strategic
Income Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expense) to the maximum annual rate of 1.75%, 2.40%, and 1.40% 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 LGT and GT Global, is the transfer agent of the Funds. 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 Funds and Portfolio. The
monthly fee for these services to the Manager is a percentage, not to exceed
0.03% annually, of a Fund or Portfolio'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 each 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 other affiliated company, $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Director. Each Portfolio pays each of its Trustees who is not an employee,
officer, or director of the Manager, GT Global or GT Services $500 per year plus
$150 for each meeting of the board or any committee thereof attended by the
Trustees.
3. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities, other
than short-term investments, by each Fund or Portfolio for the period ended
April 30, 1998:
PURCHASES AND SALES OF SECURITIES
<TABLE>
<CAPTION>
PURCHASES
--------------------------------------------
U.S. GOVERNMENT AND
PORTFOLIO GOVERNMENT AGENCIES OTHER ISSUES
- ---------------------------------------- ------------------------- -----------------
<S> <C> <C>
GT Global Government Income Fund........ $ 133,735,073 $ 128,648,284
Global High Income Portfolio............ -- 379,500,657
GT Global Strategic Income Fund......... 187,793,767 270,132,637
</TABLE>
<TABLE>
<CAPTION>
SALES
--------------------------------------------
U.S. GOVERNMENT AND
PORTFOLIO GOVERNMENT AGENCIES OTHER ISSUES
- ---------------------------------------- ------------------------- -----------------
<S> <C> <C>
GT Global Government Income Fund........ $ 139,465,563 $ 124,729,282
Global High Income Portfolio............ 27,908,116 343,049,255
GT Global Strategic Income Fund......... 189,918,004 288,987,174
</TABLE>
FS-68
<PAGE> 810
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
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, 400,000,000 were classified as
shares of the GT Global Telecommunications 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; 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; 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
GT GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 49,640,287 $ 429,719,475 48,767,558 $ 419,503,866
Shares issued in connection with
reinvestment of distributions......... 287,743 2,491,642 741,916 6,372,599
--------------- ------------------ --------------- ------------------
49,928,030 432,211,117 49,509,474 425,876,465
Shares repurchased...................... (52,874,140) (457,771,262) (59,180,268) (509,133,563)
--------------- ------------------ --------------- ------------------
Net decrease............................ (2,946,110) $ (25,560,145) (9,670,794) $ (83,257,098)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ---------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 17,961,751 $ 155,476,178 27,713,479 $ 237,734,254
Shares issued in connection with
reinvestment of distributions......... 177,734 1,539,092 452,575 3,886,536
--------------- ------------------ --------------- ------------------
18,139,485 157,015,270 28,166,054 241,620,790
Shares repurchased...................... (21,223,134) (183,485,262) (32,406,087) (278,645,805)
--------------- ------------------ --------------- ------------------
Net decrease............................ (3,083,649) $ (26,469,992) (4,240,033) $ (37,025,015)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ---------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 306,611 $ 2,655,164 4,551 $ 38,769
Shares issued in connection with
reinvestment of distributions......... 1,290 11,183 680 5,804
--------------- ------------------ --------------- ------------------
307,901 2,666,347 5,231 44,573
Shares repurchased...................... (298,911) (2,576,573) (1,717) (14,773)
--------------- ------------------ --------------- ------------------
Net increase............................ 8,990 $ 89,774 3,514 $ 29,800
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
FS-69
<PAGE> 811
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
GT GLOBAL HIGH INCOME FUND
<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............................. 4,475,750 $ 60,464,937 17,142,418 $ 272,139,950
Shares issued in connection with
reinvestment of distributions......... 1,842,696 23,121,404 574,707 9,164,383
------------- ---------------- --------------- ------------------
6,318,446 83,586,341 17,717,125 281,304,333
Shares repurchased...................... (4,970,234) (66,962,848) (21,118,898) (335,756,037)
------------- ---------------- --------------- ------------------
Net increase (decrease)................. 1,348,212 $ 16,623,493 (3,401,773) $ (54,451,704)
------------- ---------------- --------------- ------------------
------------- ---------------- --------------- ------------------
<CAPTION>
CLASS B
- ---------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 3,832,158 $ 51,750,586 13,848,218 $ 221,702,040
Shares issued in connection with
reinvestment of distributions......... 2,557,448 32,030,312 721,148 11,494,889
------------- ---------------- --------------- ------------------
6,389,606 83,780,898 14,569,366 233,196,929
Shares repurchased...................... (4,198,490) (57,090,112) (16,813,796) (270,094,630)
------------- ---------------- --------------- ------------------
Net increase (decrease)................. 2,191,116 $ 26,690,786 (2,244,430) $ (36,897,701)
------------- ---------------- --------------- ------------------
------------- ---------------- --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ---------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 422,054 $ 5,476,786 2,868,282 $ 45,874,009
Shares issued in connection with
reinvestment of distributions......... 64,250 805,629 72,440 1,148,368
------------- ---------------- --------------- ------------------
486,304 6,282,415 2,940,722 47,022,377
Shares repurchased...................... (495,918) (6,494,421) (3,732,584) (60,007,579)
------------- ---------------- --------------- ------------------
Net decrease............................ (9,614) $ (212,006) (791,862) $ (12,985,202)
------------- ---------------- --------------- ------------------
------------- ---------------- --------------- ------------------
</TABLE>
GT GLOBAL STRATEGIC INCOME FUND
<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............................. 5,949,616 $ 72,536,998 13,750,221 $ 167,009,888
Shares issued in connection with
reinvestment of distributions......... 262,369 3,187,409 615,860 7,488,021
--------------- ------------------ --------------- ------------------
6,211,985 75,724,407 14,366,081 174,497,909
Shares repurchased...................... (7,078,583) (86,175,022) (18,557,237) (225,311,673)
--------------- ------------------ --------------- ------------------
Net decrease............................ (866,598) $ (10,450,615) (4,191,156) $ (50,813,764)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ---------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,051,347 $ 24,855,354 11,499,580 $ 140,731,511
Shares issued in connection with
reinvestment of distributions......... 390,707 4,751,410 896,610 10,918,610
--------------- ------------------ --------------- ------------------
2,442,054 29,606,764 12,396,190 151,650,121
Shares repurchased...................... (5,194,373) (63,078,359) (17,287,235) (211,600,543)
--------------- ------------------ --------------- ------------------
Net decrease............................ (2,752,319) $ (33,471,595) (4,891,045) $ (59,950,422)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ---------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 304,802 $ 3,731,180 712,165 $ 8,839,212
Shares issued in connection with
reinvestment of distributions......... 2,226 27,114 3,581 43,784
--------------- ------------------ --------------- ------------------
307,028 3,758,294 715,746 8,882,996
Shares repurchased...................... (288,256) (3,552,960) (712,116) (8,911,324)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. 18,772 $ 205,334 3,630 $ (28,328)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
FS-70
<PAGE> 812
AIM GLOBAL INCOME FUNDS
(FORMERLY GT GLOBAL INCOME FUNDS)
5. WRITTEN OPTIONS:
The GT Global Government Income Fund's written options contract activity for the
six months ended April 30, 1998 was as follows:
COVERED CALL AND PUT OPTIONS WRITTEN
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT IN
GT GLOBAL GOVERNMENT INCOME FUND USD PREMIUMS
- ---------------------------------------- ----------- ---------
<S> <C> <C>
Options outstanding at October 31,
1997.................................. $4,840,000 $ 44,673
Options written......................... 35,488,342 182,826
Options cancelled in closing purchase
transactions.......................... -- --
Options expired prior to exercise....... (40,328,342) (227,499)
Options exercised....................... -- --
----------- ---------
Options outstanding at April 30, 1998... $ -- $ --
----------- ---------
----------- ---------
</TABLE>
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 Funds and INVESCO (NY), Inc. became the
sub-adviser and sub-administrator of the Funds. In addition, A I M Distributors,
Inc. replaced GT Global, Inc. as the Fund's principal underwriter and the Funds
became subject to compensation-type Rule 12b-1 plans of distribution, which
replaced the Funds' 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-71
<PAGE> 813
GT GLOBAL INCOME FUNDS
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Government Income Fund, GT Global High Income Fund-Consolidated, and GT
Global Strategic Income Fund, including the portfolios of investments, as of
October 31, 1997, the related statements 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 periods indicated
herein. These financial statements and the financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and 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 positions of GT
Global Government Income Fund, GT Global High Income Fund-Consolidated and GT
Global Strategic Income Fund as of October 31, 1997, the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods indicated herein, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
FS-72
<PAGE> 814
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
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 (49.4%)
Australia (3.0%)
Commonwealth of Australia, 7.5% due 9/15/09 .......... AUD 10,660,000 $ 8,416,716 3.0
Canada (2.0%)
Canadian Government, 7.25% due 6/1/07 ................ CAD 6,920,000 5,548,964 2.0
Germany (4.7%)
Deutschland Republic, 6% due 1/5/06 .................. DEM 22,050,000 13,180,133 4.7
Italy (9.4%)
Italian Buoni Poliennali del Tesoro (BTPS):
9.50% due 1/1/05 ................................... ITL 13,100,000,000 9,228,992 3.3
9% due 11/1/23 ..................................... ITL 11,730,000,000 8,839,498 3.1
7.25% due 11/1/26 .................................. ITL 13,200,000,000 8,361,624 3.0
New Zealand (4.4%)
New Zealand Government, 8% due 4/15/04 ............... NZD 18,570,000 12,360,425 4.4
Spain (2.3%)
Spain Government, 10.5% due 10/30/03 ................. ESP 770,000,000 6,581,165 2.3
Sweden (2.9%)
Swedish Government, 8% due 8/15/07 ................... SEK 54,800,000 8,163,505 2.9
United Kingdom (4.4%)
United Kingdom Treasury:
9.5% due 4/18/05 ................................... GBP 5,000,000 9,775,453 3.5
7.25% due 12/7/07 .................................. GBP 1,420,000 2,503,816 0.9
United States (15.3%)
United States Treasury:
8% due 11/15/21{./} {z} ............................ USD 17,000,000 20,683,023 7.3
6.125% due 8/15/07 ................................. USD 9,750,000 9,958,711 3.5
6.375% due 8/15/27 ................................. USD 6,250,000 6,431,641 2.3
6.625% due 5/15/07 ................................. USD 5,800,000 6,106,992 2.2
Uruguay (1.0%)
Republic of Uruguay, 7.875% due 7/15/27 -
144A{./}{.} ......................................... USD 3,000,000 2,898,000 1.0
------------
Total Government & Government Agency Obligations (cost
$136,776,126) ........................................... 139,038,658
------------
Corporate Bonds (23.5%)
Denmark (5.4%)
Realkredit Bank, 7% due 10/1/29 ...................... DKK 104,000,000 15,287,266 5.4
Germany (2.0%)
Commerzbank O/S Financial, 8.5% due 5/13/02 .......... NZD 5,340,000 3,467,559 1.2
Kredit Fuer Wiederaufbau International Finance, 7.25%
due 7/16/07 ......................................... AUD 3,100,000 2,304,569 0.8
New Zealand (3.8%)
Transpower Finance Ltd., 8% due 3/15/02 .............. NZD 16,500,000 10,590,896 3.8
South Africa (5.5%)
Eskom, 11% due 6/1/08{./} ............................ ZAR 68,500,000 11,346,106 4.0
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-73
<PAGE> 815
GT GLOBAL GOVERNMENT INCOME 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)
Transnet Ltd., 7.5% due 4/1/08 ....................... ZAR 28,140,000 $ 3,612,816 1.3
Development Bank of South Africa, due 12/31/27 ....... ZAR 124,000,000 580,042 0.2
Tunisia (1.5%)
Banque Centrals de Tunisie, 8.25% due 9/19/27 ........ USD 4,750,000 4,314,235 1.5
United Kingdom (5.3%)
SBC Jersey, 8.75% due 6/20/05 ........................ GBP 8,200,000 14,927,163 5.3
------------
Total Corporate Bonds (cost $68,215,638) ................. 66,430,652
------------
Mortgage Backed (12.0%)
United States (12.0%)
Federal National Mortgage Association:
7.25% due 6/20/02 .................................. NZD 15,050,000 9,421,474 3.3
6.375% due 8/15/07 ................................. AUD 7,300,000 5,212,020 1.8
Government National Mortgage Association:
TBA Pool, 7% due 11/15/27{*} ....................... USD 8,725,000 8,774,078 3.1
Pool #780515, 9.5% due 12/15/21 .................... USD 5,026,270 5,475,493 1.9
Federal Home Loan Mortgage Association Pool #E62449,
8.5% due 3/1/10 ..................................... USD 2,595,424 2,769,195 1.0
Salomon Brothers Mortgage Securities CMO, effective
yield 6.0867% due 12/25/30 .......................... USD 2,342,065 2,400,617 0.9
------------
Total Mortgage Backed (cost $34,786,107) ................. 34,052,877
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $239,777,871) ....... 239,522,187 84.9
------------ -----
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Deutsche Marks Put Option, strike 1.7825, expires
11/13/97
(cost $80,102) ........................................ USD 4,840,000 3,896 --
------------ -----
CURRENCY OPTIONS
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (14.9%)
Egypt (1.1%)
Egypt Treasury Bill, 0% due 11/25/97 ................. EGP 11,000,000 3,215,643 1.1
Italy (7.1%)
Italian Buoni Poliennali del Tesoro (BTPS), 10.5% due
4/15/98 ............................................. ITL 33,520,000,000 20,073,397 7.1
Mexico (1.6%)
Mexican Cetes due 11/13/97 ........................... MXN 3,732,000 4,445,773 1.6
United Kingdom (5.1%)
United Kingdom Treasury, 7.25% due 3/30/98 ........... GBP 8,550,000 14,354,277 5.1
------------
Total Government & Government Agency Obligations (cost
$41,749,459) ............................................ 42,089,090
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-74
<PAGE> 816
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (3.1%)
United States (3.1%)
General Electric Capital Corp., effective yield 5.68%
due 11/19/97 (cost $8,659,446){./} .................. USD 8,725,000 $ 8,659,446 3.1
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $50,408,905) .......... 50,748,536 18.0
------------ -----
TOTAL INVESTMENTS (cost $290,266,878) * ................. 290,274,619 102.9
Other Assets and Liabilities ............................. (8,165,141) (2.9)
------------ -----
NET ASSETS ............................................... $282,109,478 100.0
------------ -----
------------ -----
</TABLE>
- --------------
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
{z} All or part of the Fund's holdings in this security is segregated
as collateral for written options. See Note 1 to the Financial
Statements.
{.} 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.
{*} Purchased on a forward commitment basis.
* For Federal income tax purposes, cost is $290,620,342 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 5,885,779
Unrealized depreciation: (6,231,502)
-------------
Net unrealized depreciation: $ (345,723)
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WRITTEN OPTIONS CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNDERLYING EXPIRATION STRIKE MARKET
PUT OPTIONS AMOUNT DATE PRICE VALUE
- ---------------------------------------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C>
DEM..................................... 4,840,000 11/13/97 DEM1.82 $ (406)
------
Total outstanding written options
(Premium received $44,673)........... (406)
------
------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-75
<PAGE> 817
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 14,130,053 1.33485 11/6/97 $ (927,862)
Australian Dollars...................... 2,108,963 1.37000 11/6/97 (80,812)
Australian Dollars...................... 4,077,329 1.37155 11/6/97 (151,451)
Australian Dollars...................... 8,168,717 1.36885 11/6/97 (320,158)
British Pounds.......................... 17,545,780 0.62087 2/5/98 505,103
Canadian Dollars........................ 1,412,149 1.37160 11/6/97 (38,712)
Danish Kroner........................... 5,263,096 6.67385 11/6/97 87,497
Deutsche Marks.......................... 4,607,616 1.79770 11/6/97 187,616
Deutsche Marks.......................... 7,647,020 1.72473 11/6/97 1,020
Deutsche Marks.......................... 8,632,762 1.85468 2/5/98 650,345
Deutsche Marks.......................... 9,831,529 1.86050 2/5/98 769,116
Deutsche Marks.......................... 9,121,259 1.84900 2/5/98 661,259
Deutsche Marks.......................... 10,320,977 1.82590 2/5/98 627,127
Deutsche Marks.......................... 22,031,550 1.76970 2/5/98 681,550
Deutsche Marks.......................... 15,399,073 1.74950 2/5/98 304,074
Deutsche Marks.......................... 7,856,456 1.74980 2/5/98 156,456
Deutsche Marks.......................... 7,924,376 1.74230 2/5/98 124,376
Italian Liras........................... 3,458,975 1,768.30000 2/5/98 138,837
Italian Liras........................... 8,545,464 1,747.52000 2/5/98 245,464
Italian Liras........................... 3,796,301 1,741.50000 2/5/98 96,301
Italian Liras........................... 15,238,110 1,732.32000 2/5/98 307,843
Italian Liras........................... 5,672,764 1,699.54000 2/5/98 7,399
Italian Liras........................... 996,994 1,697.70000 2/5/98 221
South African Rand...................... 873,181 4.81550 11/6/97 997
Swedish Kronor.......................... 8,468,638 7.57006 11/6/97 92,472
Swedish Kronor.......................... 2,827,601 7.49385 2/5/98 11,645
-------------- --------------
Total Contracts to Buy (Payable amount
$201,819,010)........................ 205,956,733 4,137,723
-------------- --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 73.01%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 35,852,373 1.34162 11/6/97 2,161,497
Australian Dollars...................... 8,548,124 1.43055 11/6/97 (48,124)
British Pounds.......................... 8,269,037 0.62724 11/6/97 (409,138)
British Pounds.......................... 9,476,686 0.63291 11/6/97 (549,686)
British Pounds.......................... 8,830,253 0.60165 2/5/98 19,747
Canadian Dollars........................ 1,412,149 1.39136 11/6/97 36,705
Canadian Dollars........................ 5,516,238 1.39136 2/5/98 43,762
Danish Kroner........................... 7,511,923 6.95000 11/6/97 (418,398)
Deutsche Marks.......................... 4,699,886 1.83370 11/6/97 (279,886)
Deutsche Marks.......................... 7,559,969 1.78347 11/6/97 (249,969)
Deutsche Marks.......................... 8,548,334 1.71846 2/5/98 (17,440)
Deutsche Marks.......................... 7,689,586 1.71600 2/5/98 (4,687)
Deutsche Marks.......................... 57,287,100 1.71600 2/5/98 (34,920)
Deutsche Marks.......................... 18,029,667 1.71800 2/5/98 (31,966)
Italian Lira............................ 39,768,497 1,696.15000 2/5/98 27,512
New Zealand Dollars..................... 36,510,209 1.57878 11/6/97 638,701
South African Rand...................... 8,879,420 4.83145 11/12/97 (39,420)
South African Rand...................... 7,946,694 4.95150 11/28/97 (171,272)
Swedish Kronor.......................... 4,273,847 7.94000 11/6/97 (243,620)
Swedish Kronor.......................... 9,215,482 8.00000 11/6/97 (590,482)
-------------- --------------
Total Contracts to Sell (Receivable
amount $295,664,390)................. 295,825,474 (161,084)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 104.86%.
Total Open Forward Foreign Currency
Contracts, Net....................... $ 3,976,639
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-76
<PAGE> 818
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
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 (53.2%)
Argentina (5.2%)
Republic of Argentina:
Global Bond, 11% due 10/9/06 ....................... USD 11,919,000 $ 11,814,709 3.2
Par Bond Series L, 5.50% due 3/31/23++ ............. USD 6,610,000 4,498,931 1.2
Global Bond, 11.375% due 1/30/17 ................... USD 3,048,000 2,910,840 0.8
Brazil (2.1%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24++ ........................................... USD 11,384,000 7,527,670 2.1
Bulgaria (5.1%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12++ ..................................... USD 18,357,000 10,004,565 2.7
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro+ ............................................. USD 13,522,000 8,882,264 2.4
Costa Rica (1.7%)
Banco Central de Costa Rica:
Interest Bond Series A, 6.5391% due 5/21/05
(effective maturity date 8/21/02)+ ................ USD 4,270,656 4,270,656 1.2
Principal Bond Series A, 6.25% due 5/21/10 ......... USD 1,900,000 1,653,000 0.5
Ecuador (2.1%)
Republic of Ecuador Discount Bond, 6.6875% due 2/28/25
- EURO+ ............................................. USD 11,069,000 7,775,973 2.1
Mexico (11.7%)
United Mexican States:
Discount Bond Series D, 6.8125% due 12/31/19+ ...... USD 24,328,000 22,032,045 6.0
Global Bond, 11.5 due 5/15/26 ...................... USD 7,290,000 7,873,200 2.2
Global Bond, 9.875% due 1/15/07 .................... USD 6,430,000 6,502,338 1.8
Global Bond, 11.375% due 9/15/16 ................... USD 5,793,000 6,162,304 1.7
Nigeria (3.4%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20+/+ ......................................... USD 18,750,000 12,281,250 3.4
Panama (3.4%)
Republic of Panama, Interest Reduction Bond, 3.75% due
7/17/14++ ........................................... USD 17,850,000 12,550,781 3.4
Peru (1.6%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17 - 144A{.} .................................... USD 10,086,000 5,749,020 1.6
South Africa (5.0%)
Republic of South Africa, 13% due 8/31/10{./} ........ ZAR 97,113,000 18,329,766 5.0
United States (7.5%)
United States Treasury:
6.375% due 8/15/27 ................................. USD 15,337,000 15,782,732 4.3
5.875% due 9/30/02{./} ............................. USD 11,747,000 11,811,242 3.2
Uruguay (2.1%)
Banco Central del Uruguay:
Debt Conversion Bond Series B, 6.8125% due
2/18/07+ .......................................... USD 4,000,000 4,000,000 1.1
Par Bond Series A, 6.75% due 2/19/21+/+ ............ USD 2,290,000 2,129,700 0.6
Par Bond Series B, 6.75% due 2/19/21+/+ ............ USD 1,500,000 1,395,000 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-77
<PAGE> 819
GLOBAL HIGH INCOME PORTFOLIO
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)
Venezuela (2.3%)
Republic of Venezuela, Par Bond Series A, 6.75% due
3/31/20+/+ .......................................... USD 10,025,000 $ 8,389,672 2.3
------------
Total Government & Government Agency Obligations (cost
$202,758,127) ........................................... 194,327,658
------------
Corporate Bonds (25.9%)
Argentina (1.7%)
Supermercados Norte, 10.875% due 2/9/04 - 144A{.} .... USD 2,655,000 2,469,150 0.7
Impsa Corp., 9.5% due 5/31/02 - 144A{.} .............. USD 2,409,000 2,276,505 0.6
Acindar Industrial Argentina, 11.25% due 2/15/04 ..... USD 1,497,000 1,482,030 0.4
Brazil (0.6%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ..... USD 2,273,000 2,216,175 0.6
Canada (0.8%)
Pacalta Resources Ltd., 10.75% due 6/15/04 -
144A{.} ............................................. USD 2,978,000 2,970,555 0.8
China (2.9%)
Panda Global Energy Co., 12.5% due 4/15/04 -
144A{.} ............................................. USD 7,559,000 7,105,460 1.9
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} .... USD 3,210,000 2,929,125 0.8
Huaneng Power International PLC Convertible, 1.75% due
5/21/04 ............................................. USD 790,000 743,390 0.2
Dominican Republic (0.7%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............ USD 2,628,000 2,601,720 0.7
Hong Kong (1.1%)
GS Superhighway Holdings, 9.875% due 8/15/04 -
144A{.} ............................................. USD 2,434,000 2,281,875 0.6
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} ............................................. USD 2,100,000 1,958,250 0.5
India (1.1%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ........ USD 4,395,000 3,836,835 1.1
Indonesia (3.9%)
Polysindo International Finance, 8.9063%, due
4/22/99 ............................................. IDR 27,500,000,000 5,114,793 1.4
DGS International Finance Co., 10% due 6/1/07 -
144A{.} ............................................. USD 4,961,000 4,564,120 1.3
Tjiwi Kimia Financial Mauritius, 10% due 8/1/04 -
144A{.} ............................................. USD 2,964,000 2,645,370 0.7
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} ............................................. USD 2,141,000 1,884,080 0.5
Jamaica (1.1%)
Mechala Group Jamaica Ltd.:
12.75% due 12/30/99 - Series B ..................... USD 2,846,000 2,760,620 0.8
12.75% due 12/30/99 - Reg S{c} ..................... USD 1,288,000 1,249,360 0.3
Mexico (6.4%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} ......................... USD 8,768,000 8,044,640 2.2
8.85% due 9/15/07 - 144A{.} ........................ USD 4,388,000 4,217,965 1.2
Fideicomiso Petacalco Trust, 10.16% due 12/23/09 - Reg
S{c} ................................................ USD 2,720,000 2,720,000 0.7
TV Azteca, S.A. de C.V., 10.5% due 2/15/07 -
144A{.} ............................................. USD 2,350,000 2,393,851 0.7
Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A{.} ..... USD 2,440,000 2,305,800 0.6
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} ............................................. USD 1,903,000 2,079,028 0.6
Hylsa, S.A. de C.V., 9.25% due 9/15/07{.} ............ USD 1,560,000 1,497,600 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-78
<PAGE> 820
GLOBAL HIGH INCOME PORTFOLIO
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)
Russia (1.3%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ............................................. USD 2,283,000 $ 3,070,635 0.8
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ... USD 2,184,000 1,921,920 0.5
South Africa (4.3%)
Eskom, 11% due 6/1/08 ................................ ZAR 94,900,000 15,718,912 4.3
------------
Total Corporate Bonds (cost $103,242,812) ................ 95,059,764
------------
Sovereign Debt (12.8%)
Russia (12.8%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- .................................. USD 46,757,000 41,583,888 11.4
Participation ** -/- ............................... DEM 9,819,000 5,224,084 1.4
------------
Total Sovereign Debt (cost $25,217,395) .................. 46,807,972
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $331,218,334) ....... 336,195,394 91.9
------------ -----
<CAPTION>
UNDERLYING 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
$1,032,750) ........................................... USD 57,375,000 418,608 0.1
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<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 $8,950,000 U.S. Treasury Bonds,
8.875% due 8/15/17 (market value of collateral is
$11,741,829, including accrued interest).
(cost $11,510,781) ................................... 11,510,781 3.2
------------ -----
TOTAL INVESTMENTS (cost $343,761,865) * ................. 348,124,783 95.2
Other Assets and Liabilities ............................. 17,667,628 4.8
------------ -----
NET ASSETS ............................................... $365,792,411 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} 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.
++ 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.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
* For Federal income tax purposes, cost is $343,911,253 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,533,602
Unrealized depreciation: (22,320,072)
-------------
Net unrealized appreciation: $ 4,213,530
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-79
<PAGE> 821
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 3,966,367 1.84950 11/6/97 $(268,070)
Indonesian Rupiah....................... 10,445,682 3,610.00000 11/5/97 (57,871)
South African Rand...................... 24,288,532 5.04500 1/30/98 (535,715)
South African Rand...................... 608,060 5.06350 1/30/98 (15,584)
-------------- --------------
Total Contracts to Sell (Receivable
amount $38,431,401).................. 39,308,641 (877,240)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 10.75%.
Total Open Forward Foreign Currency
Contracts............................ $(877,240)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-80
<PAGE> 822
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
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 (65.6%)
Argentina (2.0%)
Republic of Argentina:
Global Bond, 11% due 10/9/06 ....................... USD 5,618,000 $ 5,568,843 1.3
Global Bond, 11.375% due 1/30/17 ................... USD 3,177,000 3,034,035 0.7
Par Bond Series L, 5.5% due 3/31/23++ .............. USD 95,000 64,659 --
Australia (2.3%)
Commonwealth of Australia, 7.5% due 9/15/09 .......... AUD 12,500,000 9,869,508 2.3
Brazil (0.9%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24{./} ++ ...................................... USD 5,856,000 3,872,280 0.9
Bulgaria (2.0%)
Republic of Bulgaria:
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro{./} + ........................................ USD 6,486,000 4,260,491 1.0
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12{./} ++ ................................ USD 7,396,000 4,030,820 1.0
Canada (2.2%)
Canadian Government, 8.75% due 12/1/05 ............... CAD 10,500,000 9,075,362 2.2
Colombia (0.6%)
Republic of Colombia, 8.7% due 2/15/16 ............... USD 2,538,000 2,480,895 0.6
Costa Rica (0.9%)
Banco Central de Costa Rica:
Interest Bond Series A, 6.5391% due 5/21/05
(effective maturity date 8/21/02)+ ................ USD 1,918,176 1,918,176 0.5
Principal Bond Series A, 6.25% due 5/21/10 ......... USD 1,900,000 1,653,000 0.4
Ecuador (0.9%)
Discount Bond, 6.6875% due 2/28/25 - Euro+ ........... USD 5,485,000 3,853,213 0.9
France (1.9%)
France O.A.T., 7.25% due 4/25/06 ..................... FRF 40,000,000 7,779,107 1.9
Germany (11.0%)
Deutschland Republic:
6% due 1/5/06 ...................................... DEM 35,500,000 21,219,716 5.0
8.25% due 9/20/01 .................................. DEM 24,000,000 15,532,850 3.7
Treuhandanstalt, 7.125% due 1/29/03 .................. DEM 15,000,000 9,474,050 2.3
Italy (4.3%)
Italian Buoni Poliennali del Tesoro (BTPS):
9.5% due 2/1/99 .................................... ITL 18,000,000,000 11,092,869 2.6
Italian Government, 7.25% due 11/1/26 ................ ITL 11,000,000,000 6,968,020 1.7
Mexico (5.8%)
United Mexican States:
Discount Bond Series A, 6.6925% due 12/31/19+
+/+ ............................................... USD 10,849,000 9,825,126 2.3
Global Bond, 11.5% due 5/15/26 ..................... USD 7,755,000 8,375,400 2.0
Global Bond, 9.875% due 1/15/07 .................... USD 3,045,000 3,079,256 0.7
Global Bond, 11.375% due 9/15/16 ................... USD 2,744,000 2,918,930 0.7
Discount Bond Series D, 6.8125% due 12/31/19+ ...... USD 672,000 608,580 0.1
Netherlands (1.5%)
Netherlands Government Bond, 5.75% due 2/15/07 ....... NLG 12,000,000 6,260,896 1.5
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-81
<PAGE> 823
GT GLOBAL STRATEGIC INCOME 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)
New Zealand (1.9%)
New Zealand Government, 8% due 4/15/04 ............... NZD 12,000,000 $ 7,987,351 1.9
Nigeria (1.7%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20{./} +/+ .................................... USD 11,000,000 7,205,000 1.7
Panama (3.6%)
Republic of Panama:
Interest Reduction Bond, 3.75% due 7/17/14++ ....... USD 16,705,000 11,745,703 2.8
7.875% due 2/13/02 - 144A{.} ....................... USD 3,360,000 3,200,400 0.8
Peru (0.6%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17 - 144A++ {.} ................................. USD 4,776,000 2,722,320 0.6
South Africa (2.2%)
Republic of South Africa, 13% due 8/31/10 ............ ZAR 48,561,000 9,165,732 2.2
Spain (2.0%)
Spain Government, 10.5% due 10/30/03 ................. ESP 1,000,000,000 8,546,967 2.0
Sweden (1.3%)
Swedish Government, 8% due 8/15/07 ................... SEK 37,000,000 5,511,856 1.3
United Kingdom (6.6%)
United Kingdom Treasury, 7% due 6/7/02 ............... GBP 11,900,000 20,234,192 4.8
United Kingdom Conversion, 9.5% due 4/18/05 .......... GBP 3,800,000 7,429,344 1.8
United States (8.1%)
United States Treasury:
5.875% due 9/30/02{./} ............................. USD 12,865,000 12,935,356 3.1
6.875% due 8/15/25{./} {z} ......................... USD 8,000,000 8,686,250 2.1
6.375% due 8/15/27 ................................. USD 8,293,000 8,534,015 2.0
6.50% due 10/15/06{z} .............................. USD 3,500,000 3,639,111 0.9
Uruguay (0.3%)
Banco Central del Uruguay, Par Bond Series A, 6.75%
due2/19/21{./} +/+ .................................. USD 1,370,000 1,274,100 0.3
Venezuela (1.0%)
Republic of Venezuela:
Par Bond Series A, 6.75% due 3/31/20{./} +/+ ....... USD 4,880,000 4,083,950 1.0
------------
Total Government & Government Agency Obligations (cost
$281,695,109) ........................................... 275,717,729
------------
Corporate Bonds (10.5%)
Argentina (0.5%)
Impsa Corp., 9.5% due 5/31/02 - 144A{.} .............. USD 1,377,000 1,301,265 0.3
Acindar Industrial Argentina, 11.25% due 2/15/04 ..... USD 816,000 807,840 0.2
Brazil (0.3%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ..... USD 1,278,000 1,246,050 0.3
China (1.1%)
Panda Global Energy Co., 12.5% due 4/15/04 -
144A{.} ............................................. USD 3,145,000 2,956,300 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-82
<PAGE> 824
GT GLOBAL STRATEGIC INCOME 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)
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} .... USD 1,720,000 $ 1,569,500 0.4
Denmark (1.0%)
Realkredit Danmark, 6% due 10/1/26 ................... DKK 30,000,000 4,226,028 1.0
Dominican Republic (0.3%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............ USD 1,294,000 1,281,060 0.3
Ecuador (0.4%)
Pacalta Resources Ltd., 10.75% due 6/15/04 -
144A{.} ............................................. USD 1,601,000 1,596,998 0.4
Hong Kong (0.5%)
GS Superhighway Holdings, 9.875% due 8/15/04 -
144A{.} ............................................. USD 1,210,000 1,134,375 0.3
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} ............................................. USD 1,100,000 1,025,750 0.2
India (0.4%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ........ USD 2,151,000 1,877,823 0.4
Indonesia (1.1%)
DGS International Finance Co., 10% due 6/1/07 -
144A{.} ............................................. USD 2,717,000 2,499,640 0.6
Tjiwi Kimia Financial Mauritius, 10% due 8/1/04 -
144A{.} ............................................. USD 1,471,000 1,312,868 0.3
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} ............................................. USD 1,134,000 997,920 0.2
Jamaica (0.2%)
Mechala Group Jamaica, 12.75% due 12/30/99 - Reg
S{c} ................................................ USD 719,000 697,430 0.2
Mexico (2.5%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} ......................... USD 4,224,000 3,875,520 0.9
8.85% due 9/15/07 - 144A{.} ........................ USD 2,108,000 2,026,315 0.5
TV Azteca, S.A. de C.V., 10.5% due 2/15/07 -
144A{.} ............................................. USD 1,300,000 1,324,258 0.3
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} ............................................. USD 1,134,000 1,238,895 0.3
Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A{.} ..... USD 1,140,000 1,077,300 0.3
Hylsa, S.A. de C.V., 9.25% due 9/15/07{.} ............ USD 760,000 729,600 0.2
Russia (0.7%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ............................................. USD 1,526,000 2,052,470 0.5
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ... USD 1,040,000 915,200 0.2
South Africa (0.2%)
Eskom, 11% due 6/1/08 ................................ ZAR 6,175,000 1,022,806 0.2
United States (1.3%)
Chase Manhattan Corp., 6.25% due 1/15/06{z} .......... USD 2,835,000 2,774,864 0.7
General Motors Acceptance Corp., 6.625% due
10/15/05 ............................................ USD 2,700,000 2,719,405 0.6
------------
Total Corporate Bonds (cost $45,203,836) ................. 44,287,480
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-83
<PAGE> 825
GT GLOBAL STRATEGIC INCOME 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>
Mortgage Backed (9.9%)
United States (9.9%)
Government National Mortgage Association TBA Pass Thru
Pool, 6.5% due11/15/27{*} ........................... USD 28,000,000 $ 27,693,764 6.6
Federal National Mortgage Association Pool:
#313439, 7% due 3/1/04 ............................. USD 9,718,752 9,837,204 2.3
7.25% due 6/20/02{./} .............................. NZD 7,000,000 4,382,081 1.0
------------
Total Mortgage Backed (cost $42,198,154) ................. 41,913,049
------------
Sovereign Debt (7.3%)
Russia (7.3%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- .................................. USD 31,585,000 28,090,723 6.7
Participation ** -/- ............................... DEM 4,566,000 2,429,287 0.6
------------
Total Sovereign Debt (cost $16,899,775) .................. 30,520,010
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $385,996,874) ....... 392,438,268 93.3
------------ -----
<CAPTION>
UNDERLYING 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
$567,036) ............................................. USD 31,502,000 229,839 0.1
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (6.6%)
United States (6.6%)
Ford Motor Credit Corp., effective yield 5.50%, due
11/19/97{./} ........................................ USD 19,000,000 18,947,940 4.5
General Electric Capital Corp., effective yield 5.50%,
due 11/19/97{./} .................................... USD 9,000,000 8,975,340 2.1
------------
Total Commercial Paper - Discounted (cost $27,923,280) ... 27,923,280
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $27,923,280) .......... $ 27,923,280 6.6
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-84
<PAGE> 826
GT GLOBAL STRATEGIC INCOME 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 $7,860,000 U.S. Treasury
Bonds, 8.875% due 8/15/17 (market value of collateral
is $10,311,818, including accrued interest).
(cost $10,107,564) ................................... $ 10,107,564 2.4
------------ -----
TOTAL INVESTMENTS (cost $424,594,754) * ................. 430,698,951 102.4
Other Assets and Liabilities ............................. (10,075,156) (2.4)
------------ -----
NET ASSETS ............................................... $420,623,795 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} 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.
{z} All or part of the Fund's holdings in this security is segregated
as collateral for written futures. See Note 1 to the Financial
Statements.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
+ 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.
{*} Purchased on a forward commitment basis.
* For Federal income tax purposes, cost is $425,319,173 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 21,044,316
Unrealized depreciation: (15,664,538)
-------------
Net unrealized appreciation: $ 5,379,778
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-85
<PAGE> 827
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------ ----------- -------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 3,022,847 1.37155 11/6/97 $(112,283)
British Pounds.......................... 16,534,161 0.62123 2/5/98 485,452
British Pounds.......................... 11,608,739 0.60397 2/5/98 18,839
Danish Kroner........................... 7,886,019 6.86340 2/5/98 382,449
Deutsche Marks.......................... 25,918,384 1.77087 2/5/98 818,384
Deutsche Marks.......................... 24,380,246 1.81000 2/5/98 1,280,246
Deutsche Marks.......................... 11,573,533 1.74950 2/5/98 228,533
Deutsche Marks.......................... 5,831,060 1.70250 2/5/98 (42,655)
Deutsche Marks.......................... 4,932,669 1.82070 2/5/98 286,489
Deutsche Marks.......................... 3,702,605 1.77285 2/5/98 120,916
Italian Liras........................... 6,451,334 1,697.68000 2/5/98 1,355
Italian Liras........................... 3,240,396 1,766.50000 2/5/98 126,895
Netherland Guilders..................... 6,358,320 1.97453 2/5/98 144,185
Spanish Pasetas......................... 8,955,096 148.86800 2/5/98 222,526
------------ --------------
Total Contracts to Buy (Payable amount
$136,434,078)........................ 140,395,409 3,961,331
------------ --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 33.38%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 7,838,313 1.44611 11/6/97 (127,976)
Australian Dollars...................... 4,674,868 1.36032 11/6/97 213,680
British Pounds.......................... 11,858,437 0.61312 11/6/97 (327,267)
British Pounds.......................... 4,864,140 0.63386 11/6/97 (289,013)
British Pounds.......................... 11,724,826 0.62274 2/5/98 (371,820)
Canadian Dollars........................ 1,774,056 1.38250 11/6/97 34,262
Danish Kroner........................... 7,847,141 6.95000 11/6/97 (437,069)
Deutsche Marks.......................... 44,512,909 1.71600 2/5/98 (27,133)
Deutsche Marks.......................... 16,981,429 1.72000 2/5/98 (49,819)
Deutsche Marks.......................... 15,337,714 1.71800 2/5/98 (27,194)
Deutsche Marks.......................... 3,280,903 1.71600 2/5/98 (2,000)
Italian Lira............................ 9,691,730 1,696.15000 2/5/98 6,705
Netherland Guilders..................... 6,321,484 2.05140 11/6/97 (340,203)
New Zealand Dollars..................... 12,132,719 1.57878 11/6/97 212,247
South African Rand...................... 7,285,042 5.04500 1/30/98 (160,681)
Spanish Pesetas......................... 8,939,623 154.70000 11/6/97 (536,262)
------------ --------------
Total Contracts to Sell (Receivable
amount $172,835,791)................. 175,065,334 (2,229,543)
------------ --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 41.62%.
Total Open Forward Foreign Currency
Contracts, Net....................... $1,731,788
--------------
--------------
</TABLE>
- --------------
See Note 1 to the financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WRITTEN FUTURES CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MATURITY NO. OF MARKET
DESCRIPTION DATE CONTRACTS CURRENCY VALUE
- ---------------------------------------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C>
U.S. 10-Year Bond Future (face
$8,849,548)............................ 12/19/97 80 USD $8,902,400
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
FS-86
<PAGE> 828
GT GLOBAL INCOME FUNDS
STATEMENTS OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------
HIGH
INCOME
GOVERNMENT FUND- STRATEGIC
INCOME CONSOLIDATED INCOME
FUND (NOTE 1) FUND
----------- ----------- ----------
<S> <C> <C> <C>
Assets:
Investments in securities, at value (cost $290,266,878; $343,761,865; and
$424,594,754, respectively) (Note 1)......................................... $290,274,619 3$48,124,783 $430,698,951
U.S. currency................................................................. 63 598,195 906,033
Foreign Currencies (Cost $562,392; $2,793,297; and $740,247, respectively).... 572,795 2,785,516 734,313
Interest receivable........................................................... 5,620,712 6,748,730 7,672,126
Receivable for Fund shares sold............................................... 1,790,045 757,060 523,422
Receivable for open forward foreign currency contracts (Note 1)............... 3,976,639 -- 1,731,788
Receivable for securities sold................................................ 12,795,967 21,411,490 16,967,090
Miscellaneous receivable...................................................... -- 17,246 105,000
----------- ----------- ----------
Total assets................................................................ 315,030,840 380,443,020 459,338,723
----------- ----------- ----------
Liabilities:
Payable for custodian fees (Note 1)........................................... 13,985 19,132 31,825
Payable for Directors' and Trustees' fees and expenses (Note 2)............... 7,943 10,881 5,472
Payable for forward foreign currency contracts -- closed (Note 1)............. 6,013,174 -- 3,799,153
Payable for fund accounting fees (Note 2)..................................... 6,285 9,778 9,847
Payable for Fund shares repurchased (Note 2).................................. 13,090,101 3,038,650 1,446,639
Payable for investment management and administration fees (Note 2)............ 177,596 341,976 278,408
Payable for loan outstanding (Note 1)......................................... 4,451,000 -- --
Payable for open forward foreign currency contracts (Note 1).................. -- 877,240 --
Payable for printing and postage expenses..................................... 109,344 79,859 85,448
Payable for professional fees................................................. 37,427 52,845 28,107
Payable for registration and filing fees...................................... 16,015 5,502 14,782
Payable for securities purchased.............................................. 8,707,277 9,848,640 32,628,138
Payable for service and distribution expenses (Note 2)........................ 160,788 285,897 310,485
Payable for transfer agent fees (Note 2)...................................... 121,280 60,286 63,713
Payable for variation margin.................................................. -- -- 5,000
Payable for written options, at value......................................... 406 -- --
Other accrued expenses........................................................ 8,741 19,823 7,911
----------- ----------- ----------
Total liabilities........................................................... 32,921,362 14,650,509 38,714,928
Minority interest (Notes 1 & 2)............................................. -- 100 --
----------- ----------- ----------
Net assets...................................................................... $282,109,478 3$65,792,411 $420,623,795
----------- ----------- ----------
----------- ----------- ----------
Class A:
Net asset value and offering price per share ($154,272,250 DIVIDED BY
17,888,878; $133,972,818 DIVIDED BY 8,609,881; and $138,714,970 DIVIDED BY
11,557,042 shares outstanding, respectively)................................... $ 8.62 $ 15.56 $ 12.00
----------- ----------- ----------
----------- ----------- ----------
Maximum offering price per share (100/95.25 of $8.62; 100/95.25 of $15.56; and
100/95.25 of $12.00, respectively) *........................................... $ 9.05 $ 16.34 $ 12.60
----------- ----------- ----------
----------- ----------- ----------
Class B:+
Net asset value and offering price per share ($127,721,696 DIVIDED BY
14,819,308; $228,100,869 DIVIDED BY 14,675,701; and $281,375,602 DIVIDED BY
23,423,332 shares outstanding, respectively)................................... $ 8.62 $ 15.54 $ 12.01
----------- ----------- ----------
----------- ----------- ----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share
($115,532 DIVIDED BY 13,411; $3,718,724 DIVIDED BY 239,667; and $533,223
DIVIDED BY 44,355 shares outstanding, respectively)............................ $ 8.61 $ 15.52 $ 12.02
----------- ----------- ----------
----------- ----------- ----------
Net assets consist of:
Paid in capital (Note 4)...................................................... $424,806,101 2$94,116,233 $485,352,425
Undistributed net investment income/(distribution in excess of income)........ -- 303,600 (3,351,006)
Accumulated net realized gain (loss) on investments........................... (146,657,834) 67,929,136 (69,137,537)
Net unrealized appreciation (depreciation) on translation of assets and
liabilities in foreign currencies............................................ 3,909,203 (919,476) 1,745,551
Net unrealized appreciation of investments.................................... 52,008 4,362,918 6,014,362
----------- ----------- ----------
Total -- representing net assets applicable to capital shares outstanding....... $282,109,478 3$65,792,411 $420,623,795
----------- ----------- ----------
----------- ----------- ----------
<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> 829
GT GLOBAL INCOME FUNDS
STATEMENTS OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------
HIGH
INCOME
GOVERNMENT FUND- STRATEGIC
INCOME CONSOLIDATED INCOME
FUND (NOTE 1) FUND
----------- ----------- -----------
<S> <C> <C> <C>
Investment income:
Interest income................................................. $24,435,113 $40,562,334 $36,075,707
Other income.................................................... 51,190 -- 26,003
----------- ----------- -----------
Total investment income....................................... 24,486,303 40,562,334 36,101,710
----------- ----------- -----------
Expenses:
Investment management and administration fees (Note 2).......... 2,403,043 4,107,638 3,474,804
Amortization of organization costs (Note 1)..................... -- 34,678 --
Custodian Fees (Note 1)......................................... 203,911 182,500 256,523
Directors' and Trustees' fees and expenses (Note 2)............. 14,600 19,345 13,962
Fund accounting fees (Note 2)................................... 85,149 116,607 123,309
Printing and postage expenses................................... 131,035 88,337 144,457
Professional fees............................................... 79,570 119,674 81,841
Registration and filing fees (Note 1)........................... 52,925 68,590 44,726
Service and distribution expenses: (Note 2)
Class A....................................................... 672,237 605,133 560,886
Class B....................................................... 1,392,802 2,653,190 3,185,408
Transfer agent fees (Note 2).................................... 734,235 676,490 831,440
Other expenses (Note 1)......................................... 132,382 187,152 264,542
----------- ----------- -----------
Total expenses before reductions.............................. 5,901,889 8,859,334 8,981,898
----------- ----------- -----------
Expense reductions (Note 1)................................... (543,589) (234,784) (460,682)
----------- ----------- -----------
Total net expenses.............................................. 5,358,300 8,624,550 8,521,216
----------- ----------- -----------
Net investment income............................................. 19,128,003 31,937,784 27,580,494
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments: (Note 1)
Net realized gain (loss) on investments......................... (6,424,453) 65,778,885 35,321,536
Net realized gain on foreign currency transactions.............. 6,670,567 3,923,861 4,176,477
----------- ----------- -----------
Net realized gain during the year............................. 246,114 69,702,746 39,498,013
----------- ----------- -----------
Net change in unrealized appreciation(depreciation) on
translation of assets and liabilities in foreign currencies.... 5,553,094 (1,099,793) 2,627,595
Net change in unrealized appreciation of investments............ (11,452,067) (36,470,606) (26,190,807)
----------- ----------- -----------
Net unrealized depreciation during the year................... (5,898,973) (37,570,399) (23,563,212)
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign
currencies....................................................... (5,652,859) 32,132,347 15,934,801
----------- ----------- -----------
Net increase in net assets resulting from operations.............. $13,475,144 $64,070,131 $43,515,295
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-88
<PAGE> 830
GT GLOBAL INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
GT GLOBAL
----------------------------------------------------------------------------
HIGH INCOME
GOVERNMENT INCOME FUND FUND-CONSOLIDATED STRATEGIC INCOME FUND
------------------------ ------------------------ ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income................. $19,128,003 $31,802,934 $31,937,784 $37,117,017 $27,580,494 $40,286,756
Net realized gain (loss) on
investments and foreign currency
transactions......................... 246,114 (1,896,895) 69,702,746 62,517,472 39,498,013 36,675,981
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... 5,553,094 2,319,205 (1,099,793) 174,082 2,627,595 1,913,734
Net change in unrealized appreciation
(depreciation) of investments........ (11,452,067) (1,121,083) (36,470,606) 31,730,913 (26,190,807) 27,794,834
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations.................... 13,475,144 31,104,161 64,070,131 131,539,484 43,515,295 106,671,305
----------- ----------- ----------- ----------- ----------- -----------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............ (6,827,721) (15,504,590) (12,555,399) (13,418,057) (10,228,265) (12,520,881)
From net realized gain on
investments.......................... -- (8,183,323) (2,751,509) (1,230,117) -- --
In excess of net investment income.... (4,449,488) -- -- -- (775,601) (1,097,884)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............ (4,503,257) (9,165,193) (17,789,317) (18,753,394) (18,434,103) (22,200,673)
From net realized gain on
investments.......................... -- (5,303,358) (3,911,565) (1,719,241) -- --
In excess of net investment income.... (2,934,682) -- -- -- (1,397,843) (1,946,649)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............ (4,070) (7,915) (1,289,469) (505,715) (43,148) (46,547)
From net realized gain on
investments.......................... -- (2,893) (264,339) (46,362) -- --
In excess of net investment income.... (2,653) -- -- -- (3,272) (4,081)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................. (18,721,871) (38,167,272) (38,561,598) (35,672,886) (30,882,232) (37,816,715)
----------- ----------- ----------- ----------- ----------- -----------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested........................... 667,541,828 386,482,407 561,523,639 583,133,415 335,031,026 335,665,174
Decrease from capital shares
repurchased.......................... (787,794,141) (592,826,606) (665,858,246) (592,743,855) (445,823,540) (432,196,117)
----------- ----------- ----------- ----------- ----------- -----------
Net decrease from capital share
transactions....................... (120,252,313) (206,344,199) (104,334,607) (9,610,440) (110,792,514) (96,530,943)
----------- ----------- ----------- ----------- ----------- -----------
Total increase (decrease) in net
assets................................. (125,499,040) (213,407,310) (78,826,074) 86,256,158 (98,159,451) (27,676,353)
Net assets:
Beginning of year..................... 407,608,518 621,015,828 444,618,485 358,362,327 518,783,246 546,459,599
----------- ----------- ----------- ----------- ----------- -----------
End of year *........................ $282,109,478 $407,608,518 $365,792,411 $444,618,485 $420,623,795 $518,783,246
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
* Includes undistributed (distributions
in excess of) net investment income.. $ -- $ 364,918 $ 303,600 $ -- $(3,351,006) $ --
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-89
<PAGE> 831
GT GLOBAL GOVERNMENT INCOME 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 (d) 1993 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.74 $ 8.81 $ 8.63 $ 11.07 $ 9.83
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.52 0.57 0.62 0.65 0.74
Net realized and unrealized gain
(loss) on investments................ (0.13) 0.03 0.15 (1.52) 1.34
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.39 0.60 0.77 (0.87) 2.08
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.31) (0.57) (0.59) (0.65) (0.74)
From net realized gain on
investments.......................... -- (0.10) -- (0.27) --
In excess of net investment income.... (0.20) -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- (0.55) --
Return of capital..................... -- -- -- (0.10) --
From sources other than net investment
income............................... -- -- -- -- (0.10)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.51) (0.67) (0.59) (1.57) (0.84)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.62 $ 8.74 $ 8.81 $ 8.63 $ 11.07
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 4.78% 7.11% 9.22% (8.87)% 21.9%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 154,272 $ 240,945 $ 385,404 $ 502,094 $ 708,301
Ratio of net investment income to
average net assets..................... 6.04% 6.52% 6.98% 6.87% 7.1%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.34% 1.34% 1.35% 1.33% 1.4%
Without expense reductions............ 1.51% 1.39% 1.38% N/A N/A
Portfolio turnover rate++............... 241% 268% 385% 625% 495%
</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 year.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-90
<PAGE> 832
GT GLOBAL GOVERNMENT INCOME 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
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (d) 1996 (d) 1995 (d) 1994 (d) 1993 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.74 $ 8.80 $ 8.64 $ 11.07 $ 9.83
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.46 0.51 0.55 0.59 0.67
Net realized and unrealized gain
(loss) on investments................ (0.12) 0.04 0.14 (1.52) 1.34
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.34 0.55 0.69 (0.93) 2.01
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.28) (0.51) (0.53) (0.59) (0.67)
From net realized gain on
investments.......................... -- (0.10) -- (0.27) --
In excess of net investment income.... (0.18) -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- (0.54) --
Return of capital..................... -- -- -- (0.10) --
From sources other than net investment
income............................... -- -- -- -- (0.10)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.46) (0.61) (0.53) (1.50) (0.77)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.62 $ 8.74 $ 8.80 $ 8.64 $ 11.07
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 4.00% 6.54% 8.22% (9.39)% 21.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 127,722 $ 166,577 $ 235,481 $ 262,405 $ 182,972
Ratio of net investment income to
average net assets..................... 5.39% 5.87% 6.33% 6.22% 6.5%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.99% 1.99% 2.00% 1.98% 2.0%
Without expense reductions............ 2.16% 2.04% 2.03% N/A N/A
Portfolio turnover rate++............... 241% 268% 385% 625% 495%
</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 year.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-91
<PAGE> 833
GT GLOBAL GOVERNMENT INCOME 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+
-----------------------------------------
JUNE 1, 1995
YEAR ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 (d) 1996 (d) 1995 (d)
------------ ------------ -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.73 $ 8.80 $ 8.98
------------ ------------ -------------
Income from investment operations:
Net investment income................. 0.55 0.60 0.26
Net realized and unrealized gain
(loss) on investments................ (0.13) 0.03 (0.19)
------------ ------------ -------------
Net increase (decrease) from
investment operations.............. 0.42 0.63 0.07
------------ ------------ -------------
Distributions to shareholders:
From net investment income............ (0.33) (0.60) (0.25)
From net realized gain on
investments.......................... -- (0.10) --
In excess of net investment income.... (0.21) -- --
In excess of net realized gain on
investments.......................... -- -- --
Return of capital..................... -- -- --
From sources other than net investment
income............................... -- -- --
------------ ------------ -------------
Total distributions................. (0.54) (0.70) (0.25)
------------ ------------ -------------
Net asset value, end of period.......... $ 8.61 $ 8.73 $ 8.80
------------ ------------ -------------
------------ ------------ -------------
Total investment return (c)............. 5.15 % 7.49 % 0.83%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 116 $ 86 $ 131
Ratio of net investment income to
average net assets..................... 6.39 % 6.87 % 7.33%(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 0.99 % 0.99 % 1.00%(a)
Without expense reductions............ 1.16 % 1.04 % 1.03%(a)
Portfolio turnover rate++............... 241 % 268 % 385%
</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 year.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-92
<PAGE> 834
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the 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 1994 (d) 1993 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.85 $ 11.70 $ 12.56 $ 14.92 $ 11.43
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 1.19 1.27 1.35 0.94 0.78
Net realized and unrealized gain
(loss) on investments................ 0.93 3.09 (1.09) (1.87) 3.92
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.12 4.36 0.26 (0.93) 4.70
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (1.18) (1.11) (1.03) (0.94) (0.78)
From net realized gain on
investments.......................... (0.23) (0.10) (0.03) (0.27) --
In excess of net realized gain on
investments.......................... -- -- -- (0.22) --
Return of capital..................... -- -- (0.06) -- --
From sources other than net investment
income............................... -- -- -- -- (0.43)
---------- ---------- ---------- ---------- ----------
Total distributions................. (1.41) (1.21) (1.12) (1.43) (1.21)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 15.56 $ 14.85 $ 11.70 $ 12.56 $ 14.92
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 14.46% 39.05% 2.81% (6.45)% 43.6%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 133,973 $ 178,318 $ 142,002 $ 167,974 $ 143,171
Ratio of net investment income to
average net assets..................... 7.39% 9.52% 11.85% 7.00% 6.40%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.53% 1.69% 1.75% 1.57% 2.20%
Without expense reductions............ 1.58% 1.69% 1.75% 1.57% 2.20%
Ratio of interest expense to average net
assets................................. N/A 0.04% N/A 0.22% N/A
Portfolio turnover rate++............... 214% 290% 213% 178% 195%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the year.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
FS-93
<PAGE> 835
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (d) 1996 (d) 1995 1994 (d) 1993 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.83 $ 11.69 $ 12.56 $ 14.90 $ 11.43
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 1.09 1.17 1.27 0.86 0.70
Net realized and unrealized gain
(loss) on investments................ 0.93 3.09 (1.09) (1.85) 3.90
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.02 4.26 0.18 (0.99) 4.60
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (1.08) (1.03) (0.96) (0.86) (0.70)
From net realized gain on
investments.......................... (0.23) (0.09) (0.03) (0.27) --
In excess of net realized gain on
investments.......................... -- -- -- (0.22) --
Return of capital..................... -- -- (0.06) -- --
From sources other than net investment
income............................... -- -- -- -- (0.43)
---------- ---------- ---------- ---------- ----------
Total distributions................. (1.31) (1.12) (1.05) (1.35) (1.13)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 15.54 $ 14.83 $ 11.69 $ 12.56 $ 14.90
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 13.77% 38.16% 2.07% (6.99)% 42.6%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 228,101 $ 251,002 $ 214,897 $ 232,423 $ 127,035
Ratio of net investment income to
average net assets..................... 6.74% 8.87% 11.20% 6.35% 5.8%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 2.18% 2.34% 2.40% 2.22% 2.8%
Without expense reductions............ 2.23% 2.34% 2.40% 2.22% 2.8%
Ratio of interest expense to average net
assets................................. N/A 0.04% N/A 0.22% N/A
Portfolio turnover rate++............... 214% 290% 213% 178% 195%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the year.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
FS-94
<PAGE> 836
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
--------------------------------------
JUNE 1, 1995
YEAR 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.... $ 14.83 $ 11.71 $ 11.44
----------- ----------- ------------
Income from investment operations:
Net investment income................. 1.22 1.34 0.57
Net realized and unrealized gain
(loss) on investments................ 0.93 3.05 0.17
----------- ----------- ------------
Net increase (decrease) from
investment operations.............. 2.15 4.39 0.74
----------- ----------- ------------
Distributions to shareholders:
From net investment income............ (1.23) (1.16) (0.44)
From net realized gain on
investments.......................... (0.23) (0.11) --
In excess of net realized gain on
investments.......................... -- -- --
Return of capital..................... -- -- (0.03)
From sources other than net investment
income............................... -- -- --
----------- ----------- ------------
Total distributions................. (1.46) (1.27) (0.47)
----------- ----------- ------------
Net asset value, end of period.......... $ 15.52 $ 14.83 $ 11.71
----------- ----------- ------------
----------- ----------- ------------
Total investment return (c)............. 14.72% 39.38% 6.54 %(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 3,719 $ 15,298 $ 1,463
Ratio of net investment income to
average net assets..................... 7.74% 9.87% 12.20 %(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.18% 1.34% 1.40 %(a)
Without expense reductions............ 1.23% 1.34% 1.40 %
Ratio of interest expense to average net
assets................................. N/A 0.04% N/A
Portfolio turnover rate++............... 214% 290% 213 %(a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the year.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
FS-95
<PAGE> 837
GT GLOBAL STRATEGIC INCOME 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 1996 (d) 1995 (d) 1994 1993 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.76 $ 10.32 $ 10.88 $ 13.61 $ 11.25
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.74 0.89 0.97 0.79 0.96
Net realized and unrealized gain
(loss) on investments................ 0.34 1.44 (0.69) (2.14) 2.85
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.08 2.33 0.28 (1.35) 3.81
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.78) (0.82) (0.80) (0.79) (0.96)
From net realized gain on
investments.......................... -- -- -- (0.38) (0.37)
In excess of net investment income.... (0.06) (0.07) -- -- --
Return of capital..................... -- -- (0.04) (0.21) --
From sources other than net investment
income............................... -- -- -- -- (0.12)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.84) (0.89) (0.84) (1.38) (1.45)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 12.00 $ 11.76 $ 10.32 $ 10.88 $ 13.61
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 9.40% 23.00% 3.06% (10.44)% 37.0%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 138,715 $ 185,126 $ 188,165 $ 275,241 $ 287,870
Ratio of net investment income to
average net assets..................... 6.18% 8.09% 9.64% 6.74% 7.2%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.35% 1.38% 1.42% 1.40% 1.7%
Without expense reductions............ 1.44% 1.40% 1.45% N/A N/A
Ratio of interest expenses to average
net assets............................. N/A N/A N/A 0.10% N/A
Portfolio turnover rate++............... 149% 177% 238% 583% 310%
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is 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-96
<PAGE> 838
GT GLOBAL STRATEGIC INCOME 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
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 1996 (d) 1995 (d) 1994 1993 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.77 $ 10.33 $ 10.88 $ 13.60 $ 11.24
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.67 0.82 0.91 0.73 0.89
Net realized and unrealized gain
(loss) on investments................ 0.33 1.44 (0.69) (2.14) 2.85
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.00 2.26 0.22 (1.41) 3.74
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.71) (0.75) (0.73) (0.72) (0.89)
From net realized gain on
investments.......................... -- -- -- (0.38) (0.37)
In excess of net investment income.... (0.05) (0.07) -- -- --
Return of capital..................... -- -- (0.04) (0.21) --
From sources other than net investment
income............................... -- -- -- -- (0.12)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.76) (0.82) (0.77) (1.31) (1.38)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 12.01 $ 11.77 $ 10.33 $ 10.88 $ 13.60
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 8.70% 22.15% 2.48% (11.02)% 36.2%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 281,376 $ 333,178 $ 357,852 $ 458,550 $ 310,431
Ratio of net investment income to
average net assets..................... 5.53% 7.44% 8.99% 6.09% 6.5%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 2.00% 2.03% 2.07% 2.05% 2.4%
Without expense reductions............ 2.09% 2.05% 2.10% N/A N/A
Ratio of interest expenses to average
net assets............................. N/A N/A N/A 0.10% N/A
Portfolio turnover rate++............... 149% 177% 238% 583% 310%
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is 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-97
<PAGE> 839
GT GLOBAL STRATEGIC INCOME 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+
-----------------------------------------
JUNE 1, 1995
YEAR ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 (d) 1995 (d)
------------ ------------ -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.77 $ 10.33 $ 10.32
------------ ------------ -------------
Income from investment operations:
Net investment income................. 0.79 0.93 0.41
Net realized and unrealized gain
(loss) on investments................ 0.34 1.44 (0.04)
------------ ------------ -------------
Net increase (decrease) from
investment operations.............. 1.13 2.37 0.37
------------ ------------ -------------
Distributions to shareholders:
From net investment income............ (0.82) (0.86) (0.34)
From net realized gain on
investments.......................... -- -- --
In excess of net investment income.... (0.06) (0.07) --
Return of capital..................... -- -- (0.02)
From sources other than net investment
income............................... -- -- --
------------ ------------ -------------
Total distributions................. (0.88) (0.93) (0.36)
------------ ------------ -------------
Net asset value, end of period.......... $ 12.02 $ 11.77 $ 10.33
------------ ------------ -------------
------------ ------------ -------------
Total investment return (c)............. 9.86 % 23.39 % 3.72%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 533 $ 479 $ 443
Ratio of net investment income to
average net assets..................... 6.53 % 8.44 % 9.99%(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.00 % 1.03 % 1.07%(a)
Without expense reductions............ 1.09 % 1.05 % 1.10%(a)
Ratio of interest expenses to average
net assets............................. N/A N/A N/A
Portfolio turnover rate++............... 149 % 177 % 238%
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is 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-98
<PAGE> 840
GT GLOBAL INCOME FUNDS
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Government Income Fund, GT Global High Income Fund, GT Global
Strategic Income Fund ("Funds") are non-diversified separate series of G.T.
Investment Funds, Inc. ("Company"). Collectively, these Funds are known as the
"GT Global Income Funds". 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.
The GT Global High Income Fund invests substantially all of its investable
assets in Global High Income Portfolio ("Portfolio"). The Portfolio is organized
as a New York Trust and is registered under the 1940 Act as a non-diversified,
open-end management investment company.
The Portfolio has investment objectives, policies and limitations substantially
identical to those of its corresponding Fund. Therefore, the financial
statements of the Fund and its respective Portfolio have been presented on a
consolidated basis, and represent all activities of both the Fund and Portfolio.
Through October 31, 1997, all of the shares of beneficial interest of the
Portfolio were owned by either its Fund or Chancellor LGT Asset Management, Inc.
(the "Manager"), which has a nominal ($100) investment in the Portfolio.
The Funds 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 Funds 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
Funds. 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 Funds calculate the net asset value of and complete 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 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 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 or the Trust's Board of Trustees.
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 or
the Trust's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of each Fund and Portfolio 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 Funds or
Portfolio (the phrase "Funds or Portfolio" hereinafter refers to the GT Global
Government Income Fund, the GT Global Strategic Income Fund, and the Global High
Income Portfolio) 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.
A Fund or Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
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.
FS-99
<PAGE> 841
GT GLOBAL INCOME FUNDS
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 a
Fund's or Portfolio'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 period end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by a Fund or Portfolio, it is
the Fund's or Portfolio'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 or Portfolio 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 a Fund or Portfolio as an unrealized gain or loss.
When the Forward Contract is closed, the Fund or Portfolio 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 or Portfolio's "Statement of Assets
and Liabilities". A Fund or Portfolio 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. A Fund or Portfolio 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 a Fund or Portfolio writes a call or put option, an amount equal to the
premium received is included in the Fund's or Portfolio'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 or Portfolio 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 or Portfolio can write options only on a covered basis,
which, for a call, requires that the Fund or Portfolio hold the underlying
security and, for a put, requires the Fund or Portfolio 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 or Portfolio 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 or Portfolio for the purchase of a call or put
option is included in the Fund's or Portfolio'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 or Portfolio has
purchased expires on the stipulated expiration date, the Fund or Portfolio
realizes a loss in the amount of the cost of the option. If the Fund or
Portfolio enters into a closing sale transaction, the Fund or Portfolio 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 or Portfolio
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 or Portfolio
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 or Portfolio 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 or Portfolio 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 or Portfolio 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 a
Fund or Portfolio 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 or Portfolio
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 or Portfolio as unrealized gains
or losses. When the contract is closed, the Fund or Portfolio 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 or Portfolio is that the change in value of the underlying
securities may not correlate to the change in value of the contracts. A Fund or
FS-100
<PAGE> 842
GT GLOBAL INCOME FUNDS
Portfolio 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. A Fund or Portfolio 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
or Portfolio to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value listed below were on loan to
brokers. The loans were secured by cash collateral received by the Funds:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31,
-------------------------------- 1997
AGGREGATE VALUE CASH --------------
ON LOAN COLLATERAL FEES RECEIVED
--------------- -------------- --------------
<S> <C> <C> <C>
GT Global Government Income Fund........ $ 29,895,986 $ 31,386,675 $543,589
Global High Income Portfolio............ $ 25,907,465 $ 32,857,776 $234,784
GT Global Strategic Income Fund......... $ 37,623,556 $ 43,190,488 $460,682
</TABLE>
For international securities, cash collateral is received by a Fund or Portfolio
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 a Fund or Portfolio 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 the loan.
Fees received from securities loaned were used to reduce the Funds' or
Portfolios' custodian and other administrative expenses.
(I) TAXES
It is the intended policy of the Funds and Portfolios 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 Funds and
Portfolios 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 GT Global Government
Income Fund has a capital loss carryforward of $139,369,056 of which
$123,623,470 expires in 2002, and $15,745,586 expires in 2003. The GT Global
Strategic Income Fund has a capital loss carryforward of $65,749,433 which
expires in 2003.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by each 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 Funds or Portfolio and timing
differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the GT Global High Income Fund and the Portfolio in
connection with their organization, their initial registration with the
Securities and Exchange Commission and with various states and the initial
public offering of its shares aggregated $149,100 and $25,000, respectively.
These expenses were 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 or Portfolio's investment in emerging
market countries may involve greater risks than investments in more developed
markets and the price 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
A Fund or Portfolio 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
A Fund or Portfolio 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
or Portfolio's Portfolio of Investments.
FS-101
<PAGE> 843
GT GLOBAL INCOME FUNDS
(O) LINE OF CREDIT
Each of the Funds, along with certain other funds ("GT Funds") advised or
administered by the Manager, has a line of credit with BankBoston. GT Global
Income Funds, along with certain other funds ("GT Funds") advised or
administered by the Manager, has a line of credit with State Street Bank & Trust
Company. The arrangements with the banks allow all specified funds and the GT
Funds to borrow an aggregate maximum amount of $200,000,000. Each Fund is
limited to borrowing up to 33 1/3% of the value of each Fund's total assets. On
October 31, 1997, GT Global Government Income Fund had $4,451,000 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 GT Global Government Income Fund, GT Global High Income Fund, and GT Global
Strategic Income Fund was $7,107,892, $11,820,513 and $10,277,220 respectively,
with a weighted average interest rate of 6.33%, 6.47% and 6.38%, respectively.
Interest expense for the GT Global Government Income Fund, GT Global High Income
Fund and GT Global Strategic Income Fund for the year ended October 31, 1997 was
$103,696, $165,711 and $230,880, respectively, included in "Other Expenses" on
the Statement of Operations.
(P) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
A Fund or Portfolio 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 or Portfolio 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 or Portfolio has set aside sufficient cash or liquid
securities as collateral for these purchase commitments.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Funds' and Portfolio's investment
manager and administrator. The GT Global Government Income Fund and GT Global
Strategic Income Fund each pays the Manager investment management and
administration fees at the annualized rate of 0.725% on the first $500 million
of the average daily net assets of the Fund; 0.70% on the next $1 billion;
0.675% on the next $1 billion; and 0.65% on amounts thereafter. The GT Global
High Income Fund pays administration fees to the Manager at the annualized rate
of 0.25% of its average daily net assets. These fees are computed daily and paid
monthly.
The Global High Income Portfolio pays investment management and administration
fees to the Manager at the annualized rate of 0.475% on the first $500 million
of average daily net assets of the Portfolio; 0.45% on the next $1 billion;
0.425% on the next $1 billion; and 0.40% on amounts thereafter, plus 2% of the
Portfolio's total investment income calculated in accordance with generally
accepted accounting principles, adjusted daily for currency revaluations, on a
mark to market basis, of the Portfolio's assets; provided, however, that during
any fiscal year this amount shall not exceed 2% of the Portfolio's total
investment income calculated in accordance with generally accepted accounting
principles. These fees are computed daily and paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Funds'
distributor. The Funds offer 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 Funds' 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 the
following sales charges: $10,240 for the GT Global Government Income Fund,
$65,982 for the Global High Income Fund, and $29,451 for the GT Global Strategic
Income Fund. Purchases of Class A shares exceeding $500,000 may be subject to a
contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Funds' current prospectus. GT Global collected CDSCs for the year ended
October 31, 1997, as follows: $5,273 for the GT Global Government Income Fund,
$18,156 for the Global High Income Fund, and $0 for the GT Global Strategic
Income Fund. 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 Funds' current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of: $1,118,343 for the GT Global Government Income Fund, $1,598,989
for the Global High Income Fund, and $1,750,253 for the GT Global Strategic
Income Fund. 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 Funds' Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which a Fund
reimburses GT Global for a portion of its shareholder servicing and
distributions expenses. Under the Class A Plan, a 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 0.35% 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.
FS-102
<PAGE> 844
GT GLOBAL INCOME FUNDS
Pursuant to the Fund's Class B Plan, a 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 each GT Global
Government Income Fund's and GT Global Strategic Income Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary expense)
to the maximum annual rate of 1.85%, 2.50%, and 1.50% of the average daily net
assets of the Fund's Class A, Class B, and Advisor Class shares, respectively.
Similarly, they voluntarily have undertaken to limit GT Global High Income
Fund's expenses to the maximum annual rate of 2.20%, 2.85%, and 1.85% 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 1.75%, 2.40%, and 1.40% 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 Funds. 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 Funds and Portfolio. The
monthly fee for these services to the Manager is a percentage, not to exceed
0.03% annually, of a Fund or Portfolio'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 each 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 other affiliated company, $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Director. Each Portfolio pays each of its Trustees who is not an employee,
officer, or director of the Manager, GT Global or GT Services $500 per year plus
$150 for each meeting of the board or any committee thereof attended by the
Trustees.
3. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities, other
than short-term investments, by each Fund or Portfolio for the year ended
October 31, 1997:
PURCHASE AND SALES OF SECURITIES
<TABLE>
<CAPTION>
PURCHASES
------------------------------
U.S. GOVERNMENT
AND GOVERNMENT
AGENCIES OTHER ISSUES
--------------- ------------
<S> <C> <C>
GT Global Government Income Fund................................................ $133,075,601 $576,675,060
Global High Income Portfolio.................................................... $ 27,699,458 $829,268,070
GT Global Strategic Income Fund................................................. $ 67,247,574 $607,924,472
</TABLE>
<TABLE>
<CAPTION>
SALES
------------------------------
U.S. GOVERNMENT
AND GOVERNMENT
AGENCIES OTHER ISSUES
--------------- ------------
<S> <C> <C>
GT Global Government Income Fund................................................ $118,888,065 $702,800,147
Global High Income Portfolio.................................................... $ 11,689,150 $933,111,597
GT Global Strategic Income Fund................................................. $ 47,239,453 $728,047,126
</TABLE>
FS-103
<PAGE> 845
GT GLOBAL INCOME FUNDS
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, 400,000,000 were
classified as shares of the GT Global Telecommunications 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; 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; 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
GT GLOBAL GOVERNMENT INCOME FUND
<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............................. 48,767,558 $ 419,503,866 19,126,586 $ 164,293,090
Shares issued in connection with
reinvestment of distributions......... 741,916 6,372,599 1,643,833 14,228,931
--------------- ------------------ --------------- ------------------
49,509,474 425,876,465 20,770,419 178,522,021
Shares repurchased...................... (59,180,268) (509,133,563) (36,969,597) (318,856,283)
--------------- ------------------ --------------- ------------------
Net decrease............................ (9,670,794) $ (83,257,098) (16,199,178) $ (140,334,262)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 27,713,479 $ 237,734,254 23,047,364 $ 198,774,141
Shares issued in connection with
reinvestment of distributions......... 452,575 3,886,536 956,866 8,282,950
--------------- ------------------ --------------- ------------------
28,166,054 241,620,790 24,004,230 207,057,091
Shares repurchased...................... (32,406,087) (278,645,805) (31,688,935) (273,022,079)
--------------- ------------------ --------------- ------------------
Net decrease............................ (4,240,033) $ (37,025,015) (7,684,705) $ (65,964,988)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 4,551 $ 38,769 105,543 892,487
Shares issued in connection with
reinvestment of distributions......... 680 5,804 1,345 10,808
--------------- ------------------ --------------- ------------------
5,231 44,573 106,888 903,295
Shares repurchased...................... (1,717) (14,773) (111,905) (948,244)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. 3,514 $ 29,800 (5,017) $ (44,949)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
FS-104
<PAGE> 846
GT GLOBAL INCOME FUNDS
GT GLOBAL HIGH INCOME FUND
<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............................. 17,142,418 $ 272,139,950 25,694,335 $ 346,426,450
Shares issued in connection with
reinvestment of distributions......... 574,707 9,164,383 607,445 8,023,249
--------------- ------------------ --------------- ------------------
17,717,125 281,304,333 26,301,780 354,449,699
Shares repurchased...................... (21,118,898) (335,756,037) (26,422,858) (355,715,247)
--------------- ------------------ --------------- ------------------
Net decrease............................ (3,401,773) $ (54,451,704) (121,078) $ (1,265,548)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 13,848,218 $ 221,702,040 14,568,804 $ 194,636,619
Shares issued in connection with
reinvestment of distributions......... 721,148 11,494,889 765,798 10,086,445
--------------- ------------------ --------------- ------------------
14,569,366 233,196,929 15,334,602 204,723,064
Shares repurchased...................... (16,813,796) (270,094,630) (16,793,522) (225,719,415)
--------------- ------------------ --------------- ------------------
Net decrease............................ (2,244,430) $ (36,897,701) (1,458,920) $ (20,996,351)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,868,282 $ 45,874,009 1,706,101 $ 23,413,749
Shares issued in connection with
reinvestment of distributions......... 72,440 1,148,368 40,101 546,903
--------------- ------------------ --------------- ------------------
2,940,722 47,022,377 1,746,202 23,960,652
Shares repurchased...................... (3,732,584) (60,007,579) (839,670) (11,309,193)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. (791,862) $ (12,985,202) 906,532 $ 12,651,459
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
GT GLOBAL STRATEGIC INCOME FUND
<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............................. 13,750,221 $ 167,009,888 15,025,486 $ 168,473,834
Shares issued in connection with
reinvestment of distributions......... 615,860 7,488,021 829,046 9,085,802
--------------- ------------------ --------------- ------------------
14,366,081 174,497,909 15,854,532 177,559,636
Shares repurchased...................... (18,557,237) (225,311,673) (18,331,797) (204,237,090)
--------------- ------------------ --------------- ------------------
Net decrease............................ (4,191,156) $ (50,813,764) (2,477,265) $ (26,677,454)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 11,499,580 $ 140,731,511 12,778,909 $ 141,835,937
Shares issued in connection with
reinvestment of distributions......... 896,610 10,918,610 1,206,362 13,216,165
--------------- ------------------ --------------- ------------------
12,396,190 151,650,121 13,985,271 155,052,102
Shares repurchased...................... (17,287,235) (211,600,543) (20,318,197) (224,904,917)
--------------- ------------------ --------------- ------------------
Net decrease............................ (4,891,045) $ (59,950,422) (6,332,926) $ (69,852,815)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 712,165 $ 8,839,212 278,551 $ 3,010,280
Shares issued in connection with
reinvestment of distributions......... 3,581 43,784 3,931 43,156
--------------- ------------------ --------------- ------------------
715,746 8,882,996 282,482 3,053,436
Shares repurchased...................... (712,116) (8,911,324) (284,638) (3,054,110)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. 3,630 $ (28,328) (2,156) $ (674)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
FS-105
<PAGE> 847
GT GLOBAL INCOME FUNDS
5. WRITTEN OPTIONS:
The GT Global Government Income Fund's and the GT Global Strategic Income Fund's
written options contract activity for the year ended October 31, 1997 was as
follows:
COVERED CALL AND PUT OPTION WRITTEN
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT IN
GT GLOBAL GOVERNMENT INCOME FUND USD PREMIUMS
- -------------------------------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Options outstanding at October 31, 1996................................................................. $ -- $ --
Options written......................................................................................... 213,530,000 1,091,938
Options cancelled in closing purchase transactions...................................................... (14,700,000) (93,163)
Options expired prior to exercise....................................................................... (193,990,000) (954,102)
Options exercised....................................................................................... -- --
----------- ---------
Options outstanding at October 31, 1997................................................................. $ 4,840,000 $ 44,673
----------- ---------
----------- ---------
</TABLE>
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT IN
GT GLOBAL STRATEGIC INCOME FUND USD PREMIUMS
- -------------------------------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Options outstanding at October 31, 1996................................................................. $ -- $ --
Options written......................................................................................... 5,208,000 301,543
Options cancelled in closing purchase transactions...................................................... -- --
Options expired prior to exercise....................................................................... -- --
Options exercised....................................................................................... (5,208,000) (301,543)
----------- ---------
Options outstanding at October 31, 1997................................................................. $ -- $ --
----------- ---------
----------- ---------
</TABLE>
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as capital gain dividends for the fiscal year ended October
31, 1997:
<TABLE>
<CAPTION>
CAPITAL GAIN
FUND DIVIDEND
- -------------------------------------------------------------------------------------------------------- ------------
<S> <C>
GT Global Government Income Fund........................................................................ --
GT Global High Income Fund.............................................................................. $ 6,927,413
GT Global Strategic Income Fund......................................................................... --
</TABLE>
FS-106
