<PAGE>
AIM GLOBAL INCOME FUNDS:
ADVISOR CLASS
PROSPECTUS -- JUNE 1, 1998
- --------------------------------------------------------------------------------
AIM GLOBAL GOVERNMENT INCOME FUND ("GOVERNMENT INCOME FUND") 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.
AIM STRATEGIC INCOME FUND ("STRATEGIC INCOME FUND") 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.
AIM GLOBAL HIGH INCOME FUND ("HIGH INCOME FUND") primarily seeks high current
income and secondarily seeks capital appreciation by investing all of its
investable assets in the Global High Income Portfolio ("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.
There can be no assurance that any Fund or the Portfolio will achieve its
investment objectives. The investment experience of the High Income Fund will
correspond directly with the investment experience of the Portfolio.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
The Funds and the Portfolio are managed by A I M Advisors, Inc. ("AIM") and are
sub-advised and sub-administered by INVESCO (NY), Inc. (the "Sub-adviser"). AIM
and the Sub-adviser 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-adviser 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.
The Funds are designed for long-term investors and not as trading vehicles, do
not represent a complete investment program and are not suitable for all
investors. An investment in any of the Funds involves risk factors that should
be reviewed carefully by potential investors. The Strategic Income Fund and the
Portfolio both are authorized to borrow money for investment purposes, which
would increase the volatility of their performance and involves additional
risks. See "Investment Objectives and Policies" and "Risk Factors."
THE STRATEGIC INCOME FUND INVESTS UP TO 50% OF ITS TOTAL ASSETS, AND 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 THESE FUNDS. SEE "INVESTMENT OBJECTIVES AND POLICIES" AND "RISK
FACTORS."
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.
This Prospectus sets forth concisely information an investor should know before
investing and should be read carefully and retained for future reference. A
Statement of Additional Information, dated June 1, 1998, has been filed with the
Securities and Exchange Commission ("SEC") and, as supplemented or amended from
time to time, is incorporated herein by reference. The Statement of Additional
Information is available without charge by writing to the Funds at 50 California
Street, 27th Floor, San Francisco, CA 94111, or by calling (800) 347-4246. It is
also available, along with other related materials, on the SEC's Internet web
site (http://www.sec.gov).
FOR FURTHER INFORMATION, CALL (800) 824-1580 OR CONTACT YOUR FINANCIAL ADVISER.
[LOGO]
- --------------------------------------------------------------------------------
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.
Prospectus Page 1
<PAGE>
AIM GLOBAL INCOME FUNDS
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 6
Investment Objectives and Policies........................................................ 12
Risk Factors.............................................................................. 21
How to Invest............................................................................. 27
How to Make Exchanges..................................................................... 29
How to Redeem Shares...................................................................... 30
Shareholder Account Manual................................................................ 32
Calculation of Net Asset Value............................................................ 33
Dividends, Other Distributions and Federal Income Taxation................................ 34
Management................................................................................ 36
Other Information......................................................................... 39
Appendix A -- Description of Debt Ratings................................................. 42
</TABLE>
Prospectus Page 2
<PAGE>
AIM GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus. Cross-references in the
summary are to headings in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds and the Portfolio: Each Fund is a non-diversified series of AIM Investment Funds, Inc. (the "Company"). The Portfolio is
a non-diversified, open-end management investment company.
Investment Objectives: The Government Income Fund primarily seeks high current income and secondarily seeks capital
appreciation and protection of principal. The Strategic Income Fund and the High Income Fund
primarily seek high current income and secondarily seek capital appreciation.
Principal Investments: The Government Income Fund invests primarily in high quality U.S. and foreign government debt
obligations.
The Strategic Income Fund allocates its assets 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.
The High Income Fund invests all of its investable assets in the Portfolio, which, in turn, invests
primarily in debt securities of issuers located in emerging markets.
Principal Risk Factors: There is no assurance that the Funds or the Portfolio will achieve their investment objectives. Each
Fund's net asset value will fluctuate, reflecting fluctuations in the market value of its or its
corresponding Portfolio's portfolio holdings. The value of debt securities held by the Government
Income Fund, Strategic Income Fund and Portfolio generally fluctuates with interest rate movements.
The Government Income Fund, Strategic Income Fund and 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 a 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 and the Strategic Income Fund may invest in such securities. Such investments entail
greater risk than investing in securities of issuers in developed markets.
The Government Income Fund, Strategic Income Fund and 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 Strategic Income Fund may invest up to 50% of its total assets, and 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-adviser to be of comparable quality. Investments of this type are subject to
greater risk of loss of principal and interest.
See "Investment Objectives and Policies" and "Risk Factors."
</TABLE>
Prospectus Page 3
<PAGE>
AIM GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Managers: AIM and the Sub-adviser 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-adviser 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 affiliates,
currently advises approximately 90 investment company portfolios. AIM advises the Funds and other
investment company portfolios which are sub-advised by the Sub-adviser ("AIM/GT Funds"). On May 29,
1998, AMVESCAP PLC acquired the Asset Management Division of Liechtenstein Global Trust AG, which
included the Sub-adviser and certain other affiliates. AIM also serves as the investment adviser to
other mutual funds, which are not sub-advised by the Sub-adviser, that are part of The AIM Family of
Funds-Registered Trademark- ("The AIM Family of Funds," and together with the AIM/GT Funds, the "AIM
Funds").
Advisor Class Shares: Advisor Class shares are offered through a separate 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 .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 .50% on 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 of any of
the AIM/GT Funds on June 1, 1998; and (e) any of the companies composing or affiliated with AMVESCAP
PLC.
Shares Available Through: Advisor Class shares of each Fund are available through Financial Advisers (as defined herein) that
have entered into agreements with the Funds' distributor, A I M Distributors, Inc. ("AIM
Distributors") or certain of its affiliates. See "How to Invest" and "Shareholder Account Manual."
Exchange Privileges: Advisor Class shares may be exchanged for Advisor Class shares of other AIM/GT Funds. See "How to
Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through the Transfer Agent. See "How to Redeem Shares" and "Shareholder
Account Manual."
Dividends and Other Dividends are paid monthly from net investment income; other distributions are paid annually from net
Distributions: short term capital gain, net capital gain and net gains from foreign currency transactions, if any.
Reinvestment: Dividends and other distributions may be reinvested automatically in Advisor Class shares of the
distributing Fund or in Advisor Class shares of other AIM/GT Funds.
</TABLE>
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS 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.
Prospectus Page 4
<PAGE>
AIM GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Advisor Class shares of the Funds are reflected in the
following tables (1):
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
INCOME FUND INCOME FUND FUND
--------------- --------------- ---------------
ADVISOR CLASS ADVISOR CLASS ADVISOR CLASS
--------------- --------------- ---------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION COSTS:
Maximum sales charge on purchases of shares (as a % of offering
price)................................................................. None None None
Sales charges on reinvested distributions to shareholders............... None None None
Maximum deferred sales charge (as a % of net asset value at time of
purchase or sale, whichever is less)................................... None None None
Redemption charges...................................................... None None None
Exchange fees........................................................... None None None
ANNUAL FUND OPERATING EXPENSES (2):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees........................... 0.73% 0.73% 0.90%
12b-1 distribution and service fees..................................... None None None
Other expenses.......................................................... 0.43% 0.36% 0.33%
------ ------ ------
Total Fund Operating Expenses........................................... 1.16% 1.09% 1.23%
------ ------ ------
------ ------ ------
</TABLE>
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES (3):
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 Funds, assuming a 5%
annual return:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
----- ------ ----- -----
<S> <C> <C> <C> <C>
Government Income Fund
Advisor Class Shares...................................... $ 12 $ 37 $ 64 $ 142
Strategic Income Fund
Advisor Class Shares...................................... $ 11 $ 35 $ 60 $ 133
High Income Fund
Advisor Class Shares...................................... $ 13 $ 39 $ 68 $ 150
</TABLE>
- ------------------------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN A FUND.
(2) Expenses are based on the Funds' 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 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. The Board of
Directors of the Company believes that the aggregate per share expenses of
the High Income 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.
(3) THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE
EXPENSES. THE FUNDS' AND THE PORTFOLIO'S ACTUAL EXPENSES, AND AN INVESTOR'S
DIRECT AND INDIRECT EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. The
tables 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 Funds' or
the Portfolio's projected or actual performance.
Prospectus Page 5
<PAGE>
AIM GLOBAL INCOME FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed financial information concerning income and
capital changes for one Class A and Advisor Class share of each Fund for the
periods shown. For the period March 29, 1988 (commencement of operations) to
October 21, 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 fiscal year ended October 31, 1997 have been audited by Coopers &
Lybrand L.L.P. independent accountants, whose report thereon also is included in
the Statement of Additional Information.
GOVERNMENT INCOME FUND
(FORMERLY GT GLOBAL GOVERNMENT INCOME FUND)
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------------------------
YEAR ENDED OCT. 31,
----------------------------------------------------------------------------
1997(c) 1996 1995(c) 1994(c) 1993(c) 1992 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <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 $ 10.29 $ 10.46
-------- -------- -------- -------- -------- -------- --------
Income from
investment
operations:
Net investment
income........... 0.52 0.57 0.62 0.65 0.74 0.92 0.99
Net realized and
unrealized gain
(loss) on
investments...... (0.13) 0.03 0.15 (1.52) 1.34 (0.31) (0.07)
-------- -------- -------- -------- -------- -------- --------
Net increase
(decrease) from
investment
operations..... 0.39 0.60 0.77 (0.87) 2.08 0.61 0.92
-------- -------- -------- -------- -------- -------- --------
Distributions:
From net
investment
income........... (0.31) (0.57) (0.59) (0.65) (0.74) (0.83) (1.00)
From net realized
gain on
investments...... -- (0.10) -- (0.27) -- (0.13) (0.09)
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) (0.11) --
-------- -------- -------- -------- -------- -------- --------
Total
distributions... (0.51) (0.67) (0.59) (1.57) (0.84) (1.07) (1.09)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end
of period.......... $ 8.62 $ 8.74 $ 8.81 $ 8.63 $ 11.07 $ 9.83 $ 10.29
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Total investment
return (d)......... 4.78% 7.11% 9.22% (8.87)% 21.9% 6.3% 9.4%
Ratios and
supplemental data:
Net assets, end of
period (in
000's)............. $154,272 $240,945 $385,404 $502,094 $708,301 $623,387 $399,200
Ratio of net
investment income
to average net
assets............. 6.04% 6.52% 6.98% 6.87% 7.1% 9.0% 9.5%
Ratio of expenses to
average net assets:
With expense
reductions....... 1.34% 1.34% 1.35% 1.33% 1.4% 1.6% 1.6%
Without expense
reductions....... 1.51% 1.39% 1.38% N/A N/A N/A N/A
Portfolio turnover
rate ++++.......... 241% 268% 385% 625% 495% 351% 326%
</TABLE>
- ------------------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
+++ 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.
* Net of $0.01 per share of Fund operating expenses reimbursed by the
Sub-adviser.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon average shares
outstanding during the period.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
Prospectus Page 6
<PAGE>
AIM GLOBAL INCOME FUNDS
GOVERNMENT INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS A+ ADVISOR CLASS+++
---------------------------------------- ----------------------------
MARCH 29, 1988 YEAR ENDED JUNE 1, 1995
YEAR ENDED OCT. 31, (COMMENCEMENT OCT. 31, TO
--------------------- OF OPERATIONS) TO -------------- OCT. 31,
1990 1989 OCT. 31, 1988 1997 1996 1995(c)
-------- -------- ----------------- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.45 $ 10.86 $ 11.43 $ 8.73 $ 8.80 $ 8.98
-------- -------- -------- ------ ------ ------------
Income from investment operations:
Net investment income................. 1.18 1.15 0.49* 0.55 0.60 0.26
Net realized and unrealized gain
(loss) on investments................ (0.02) (0.35) (0.44) (0.13) 0.03 (0.19)
-------- -------- -------- ------ ------ ------------
Net increase (decrease) from
investment operations.............. 1.16 0.80 0.05 0.42 0.63 0.07
-------- -------- -------- ------ ------ ------------
Distributions:
From net investment income............ (1.15) (1.20) (0.49) (0.33) (0.60) (0.25)
From net realized gain on
investments.......................... -- -- (0.12) -- (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............................... -- (0.01) (0.01) -- -- --
-------- -------- -------- ------ ------ ------------
Total distributions................. (1.15) (1.21) (0.62) (0.54) (0.70) (0.25)
-------- -------- -------- ------ ------ ------------
Net asset value, end of period.......... $ 10.46 $ 10.45 $ 10.86 $ 8.61 $ 8.73 $ 8.80
-------- -------- -------- ------ ------ ------------
-------- -------- -------- ------ ------ ------------
Total investment return (d)............. 11.9% 7.2% 1.10%(a) 5.15% 7.49% 0.83%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $259,726 $122,526 $57,063 $ 116 $ 86 $ 131
Ratio of net investment income to
average net assets..................... 11.4% 10.7% 7.41%*(b) 6.39% 6.87% 7.33%(b)
Ratio of expenses to average net assets:
With expense reductions............... 1.8% 1.7% 1.80%*(b) 0.99% 0.99% 1.00%(b)
Without expense reductions............ N/A N/A N/A 1.16% 1.04% 1.03%(b)
Portfolio turnover rate ++++............ 334% 413% 291%(b) 241% 268% 385%
</TABLE>
- ------------------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
+++ 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.
* Net of $0.01 per share of Fund operating expenses reimbursed by the
Sub-adviser.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon shares outstanding
during the period.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
----------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY AVERAGE MONTHLY
AMOUNT OF DEBT NUMBER OF AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT DURING THE OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ ---------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
October 31, 1997.............. $ 4,451,000 $ 1,616,315 38,476,908 $ 0.0420
</TABLE>
Prospectus Page 7
<PAGE>
AIM GLOBAL INCOME FUNDS
STRATEGIC INCOME FUND
(FORMERLY GT GLOBAL STRATEGIC INCOME FUND)
<TABLE>
<CAPTION>
CLASS A+
------------------------------------------------------------------------
YEAR ENDED OCT. 31,
------------------------------------------------------------------------
1997 1996(c) 1995(c) 1994 1993(c) 1992 1991
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <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 $ 10.91 $ 11.20
-------- -------- -------- -------- -------- ------- -------
Income from
investment
operations:
Net investment
income........... 0.74 0.89 0.97 0.79 0.96 0.86 0.84*
Net realized and
unrealized gain
(loss) on
investments...... 0.34 1.44 (0.69) (2.14) 2.85 0.31 (0.02)
-------- -------- -------- -------- -------- ------- -------
Net increase
(decrease) from
investment
operations..... 1.08 2.33 0.28 (1.35) 3.81 1.17 0.82
-------- -------- -------- -------- -------- ------- -------
Distributions:
From net
investment
income........... (0.78) (0.82) (0.80) (0.79) (0.96) (0.83) (0.60)
From net realized
gain on
investments...... -- -- -- (0.38) (0.37) -- (0.51)
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) (0.83) (1.11)
-------- -------- -------- -------- -------- ------- -------
Net asset value, end
of period.......... $ 12.00 $ 11.76 $ 10.32 $ 10.88 $ 13.61 $ 11.25 $ 10.91
-------- -------- -------- -------- -------- ------- -------
-------- -------- -------- -------- -------- ------- -------
Total investment
return (d)......... 9.40% 23.00% 3.06% (10.44)% 37.0% 11.1% 7.7%
Ratios and
supplemental data:
Net assets, end of
period (in
000's)............. $138,715 $185,126 $188,165 $275,241 $287,870 $83,849 $55,967
Ratio of net
investment income
to average net
assets............. 6.18% 8.09% 9.64% 6.74% 7.2% 7.6% 7.2%*
Ratio of expenses to
average net assets:
With expense
reductions....... 1.35% 1.38% 1.42% 1.40% 1.7% 1.8% 1.9%*
Without expense
reductions....... 1.44% 1.40% 1.45% N/A N/A N/A N/A
Ratio of interest
expenses to average
net assets......... N/A N/A N/A 0.10% N/A N/A N/A
Portfolio turnover
rate +++........... 149% 177% 238% 583% 310% 418% 630%
</TABLE>
- ------------------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Sub-adviser of Fund operating expenses of
$0.01, $0.04, $0.02 and 0.05 for the year ended October 31, 1991, 1990, 1989
and 1988, respectively. Without such reimbursements, the expense ratios
would have been 1.92%, 2.20%, 2.02% and 2.42% and the ratio of net
investment income to average net assets would have been 7.16%, 9.26%, 7.56%
and 6.42% for the year ended October 31, 1991, 1990, 1989 and 1988,
respectively.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(c) These selected per share data were calculated based upon average shares
outstanding during the period.
(d) Total investment return does not include sales charges.
(e) Annualized.
N/A Not Applicable.
Prospectus Page 8
<PAGE>
AIM GLOBAL INCOME FUNDS
STRATEGIC INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS A+ ADVISOR CLASS**
-------------------------------- --------------------------------------
MARCH 29,
1988
(COMMENCEMENT
YEAR ENDED OCT. OF YEAR ENDED OCT. 31, JUNE 1,
31, OPERATIONS) 1995 TO
------------------ TO OCT. ----------------------- OCT. 31,
1990 1989 31, 1988 1997 1996 1995(c)
------- ------- ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 11.17 $ 11.25 $ 11.43 $ 11.77 $ 10.33 $10.32
------- ------- ---------- -------- ----------- ------------
Income from investment
operations:
Net investment income....... 1.04* 0.82* 0.45* 0.79 0.93 0.41
Net realized and unrealized
gain (loss) on
investments................ (0.17) (0.10) (0.24) 0.34 1.44 (0.04)
------- ------- ---------- -------- ----------- ------------
Net increase (decrease)
from investment
operations............... 0.87 0.72 0.21 1.13 2.37 0.37
Distributions:
From net investment
income..................... (0.84) (0.80) (0.39) (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....... (0.84) (0.80) (0.39) (0.88) (0.93) (0.36)
------- ------- ---------- -------- ----------- ------------
Net asset value, end of
period....................... $ 11.20 $ 11.17 $ 11.25 $ 12.02 $ 11.77 $10.33
------- ------- ---------- -------- ----------- ------------
------- ------- ---------- -------- ----------- ------------
Total investment return (d)... 8.3% 6.8% 1.20%(a) 9.86% 23.39% 3.72%(a)
Ratios and supplemental data:
Net assets, end of period
(in 000's)................. $44,545 $37,820 $21,830 $ 533 $ 479 $ 443
Ratio of net investment
income to average net
assets..................... 9.6%* 7.7%* 7.22%*(e) 6.53% 8.44% 9.99%(e)
Ratio of expenses to average
net assets:
With expense reductions..... 1.9%* 1.8%* 1.70%*(e) 1.00% 1.03% 1.07%(e)
Without expense
reductions................. N/A N/A N/A 1.09% 1.05% 1.10%(e)
Ratio of interest expenses to
average net assets........... N/A N/A N/A N/A N/A N/A
Portfolio turnover rate +++... 501% 385% 340% 149% 177% 238%
</TABLE>
- ------------------------------
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Sub-adviser of Fund operating expenses of
$0.01, $0.04, $0.02 and 0.05 for the year ended October 31, 1991, 1990, 1989
and 1988, respectively. Without such reimbursements, the expense ratios
would have been 1.92%, 2.20%, 2.02% and 2.42% and the ratio of net
investment income to average net assets would have been 7.16%, 9.26%, 7.56%
and 6.42% for the year ended October 31, 1991, 1990, 1989 and 1988,
respectively.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(c) These selected per share data were calculated based upon average shares
outstanding during the period.
(d) Total investment return does not include sales charges.
(e) Annualized.
N/A Not Applicable.
----------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY AVERAGE MONTHLY
AMOUNT OF DEBT NUMBER OF AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT DURING THE OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ ---------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
October 31, 1997.............. -- $ 3,575,910 39,263,038 $ 0.0911
</TABLE>
Prospectus Page 9
<PAGE>
AIM GLOBAL INCOME FUNDS
HIGH INCOME FUND
(FORMERLY GT GLOBAL HIGH INCOME FUND)
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
OCT. 22, 1992
(COMMENCEMENT
YEAR ENDED OCT. 31, OF OPERATIONS)
------------------------------------------------ TO
1997 1996 1995 1994 1993(c) OCT. 31, 1992
-------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
year......................... $ 14.85 $ 11.70 $ 12.56 $ 14.92 $ 11.43 $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:
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) -- --
From sources other than net
investment income.......... -- -- -- -- (0.43) --
Return of capital........... -- -- (0.06) -- -- --
-------- -------- -------- -------- -------- -------
Total distributions....... (1.41) (1.21) (1.12) (1.43) (1.21) --
-------- -------- -------- -------- -------- -------
Net asset value, end of
year......................... $ 15.56 $ 14.85 $ 11.70 $ 12.56 $ 14.92 $11.43
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
Total investment return (e)... 14.46% 39.05% 2.81% (6.45)% 43.6% 0.0%(b)
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $133,973 $178,318 $142,002 $167,974 $143,171 $ 207
Ratio of net investment income
(loss) to average net
assets....................... 7.39% 9.52% 11.85% 7.00% 6.4% N/A(d)
Ratio of operating expenses to
average net assets:
With expense reductions..... 1.53% 1.69% 1.75% 1.57% 2.20% N/A(d)
Without expense
reductions................. 1.58% 1.69% 1.75% 1.57% 2.20% N/A(d)
Ratio of interest expense to
average net assets........... N/A 0.04% N/A 0.22% N/A N/A
Portfolio turnover rate (f)... 214% 290% --% --% --% --%
</TABLE>
- ------------------------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon average shares
during the year.
(d) Ratios are not meaningful due to short period of operation.
(e) Total investment return does not include sales charges.
(f) The Fund invests only in the Portfolio and does not engage in securities
transactions. Accordingly, the portfolio turnover rates presented are for
the Portfolio.
N/A Not Applicable.
Prospectus Page 10
<PAGE>
AIM GLOBAL INCOME FUNDS
HIGH INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
ADVISOR CLASS**
-------------------------------------
YEAR ENDED
OCT. 31, JUNE 1, 1995
--------------------- TO
1997 1996 OCT. 31, 1995
-------- ----------- -------------
<S> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
year......................... $ 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:
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........ -- -- --
From sources other than net
investment income.......... -- -- --
Return of capital........... -- -- (0.03)
-------- ----------- -------------
Total distributions....... (1.46) (1.27) (0.47)
-------- ----------- -------------
Net asset value, end of
year......................... $ 15.52 $ 14.83 $11.71
-------- ----------- -------------
-------- ----------- -------------
Total investment return (e)... 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
(loss) to average net
assets....................... 7.74% 9.87% 12.20%(a)
Ratio of operating expenses to
average net assets:
With expense reductions..... 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 (f)... 214% 290% 213%(a)
</TABLE>
- ------------------------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon average shares
during the year.
(d) Ratios are not meaningful due to short period of operation.
(e) Total investment return does not include sales charges.
(f) The Fund invests only in the Portfolio and does not engage in securities
transactions. Accordingly, the portfolio turnover rates presented are for
the Portfolio.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
N/A Not Applicable.
----------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY AVERAGE MONTHLY
AMOUNT OF DEBT NUMBER OF AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT DURING THE OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ ---------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
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>
Prospectus Page 11
<PAGE>
AIM GLOBAL INCOME FUNDS
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND
The Government Income 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.
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-adviser. 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-adviser 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-adviser 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 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-adviser 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.
STRATEGIC INCOME FUND
The Strategic Income Fund primarily seeks high current income and secondarily
seeks capital appreciation.
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-adviser 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.
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
Prospectus Page 12
<PAGE>
AIM GLOBAL INCOME FUNDS
market governments that are traded in the markets of developed countries or
groups of developed countries. The Sub-adviser 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.
HIGH INCOME FUND
The High Income 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.
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-adviser 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-adviser's credit analysis. The Portfolio may invest in securities
that are in default as to payment of principal and/or interest.
OTHER INFORMATION REGARDING THE PORTFOLIO. As previously described, investors
should be aware that the High Income 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 High Income Fund may redeem its investment from the Portfolio at any time,
if the Board of Trustees of the Company 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 High Income 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 adviser 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
its 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
Prospectus Page 13
<PAGE>
AIM GLOBAL INCOME FUNDS
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 High Income Fund is the only institutional
investor in the Portfolio.
Investors in the Fund should be aware that the Funds' investment in the
Portfolio may be materially affected by the actions of other large investors, if
any, in the Portfolio, if any. 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.
GENERAL POLICIES
ASSET ALLOCATION. The Government Income Fund, the Strategic Income Fund and the
Portfolio each invests in debt obligations allocated among diverse markets and
denominated in various currencies, including U.S. dollars, or in multinational
currency units such as European Currency Units. The Funds are 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 Government Income
Fund, the Strategic Income Fund and 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-adviser allocates the assets of the Government Income Fund, the
Strategic Income Fund and 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 (and, in the case of the
Government Income Fund, secondarily for capital appreciation and protection of
principal). In so doing, the Sub-adviser 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 Government Income Fund, the Strategic
Income Fund and the Portfolio. Securities held by the Government Income Fund,
the Strategic Income Fund and the Portfolio may be invested in without
limitation as to maturity.
The Sub-adviser 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-adviser 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-adviser may seek to protect a 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-adviser, 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-adviser believes that the Government
Income Fund's and the Strategic Income Fund's policy of investing in debt
securities throughout the world and 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 Funds and the Portfolio that invest solely in debt securities of U.S.
issuers.
TEMPORARY DEFENSIVE STRATEGIES. The Sub-adviser 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 Government Income Fund, the Strategic Income Fund and the Portfolio
temporarily may hold
Prospectus Page 14
<PAGE>
AIM GLOBAL INCOME FUNDS
cash (U.S. dollars, foreign currencies or multinational currency units) and/or
invest up to 100% of their 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 Government Income Fund's, the Strategic
Income Fund's or the Portfolio's investments may be made in the United States
and denominated in U.S. dollars. To the extent the Funds or the Portfolio employ
a temporary defensive strategy, they will not be invested so as to achieve
directly their investment objectives. In addition, pending investment of
proceeds from new sales of Fund shares or to meet ordinary daily cash needs, the
Government Income Fund, the Strategic Income Fund and 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
description of money market instruments in which the Funds or the Portfolio may
invest, see "Selection of Debt Investments" in the Investment Objectives and
Policies section of the Statement of Additional Information.
EMERGING MARKET SECURITIES. The Strategic Income Fund and the Portfolio consider
"emerging markets" to consist of all countries determined by the Sub-adviser 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
Strategic Income Fund and the Portfolio will consider investment in the
following emerging markets:
<TABLE>
<S> <C> <C>
Algeria Hong Kong Peru
Argentina Hungary Philippines
Bolivia India Poland
Botswana Indonesia Portugal
Brazil Israel Republic of
Bulgaria Ivory Coast Slovakia
Chile Jamaica Russia
China Jordan Singapore
Colombia Kazakhstan Slovenia
Costa Rica Kenya South Africa
Cyprus Lebanon South Korea
Czech Malaysia Sri Lanka
Republic Mauritius Swaziland
Dominican Mexico Taiwan
Republic Morocco Thailand
Ecuador Nicaragua Turkey
Egypt Nigeria Ukraine
El Salvador Oman Uruguay
Finland Pakistan Venezuela
Ghana Panama Zambia
Greece Paraguay Zimbabwe
</TABLE>
The Strategic Income Fund and 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 Government Income Fund, the Strategic Income Fund and 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 Government Income Fund, the Strategic Income Fund and the Portfolio are 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 Government Income Fund, Strategic Income Fund and 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.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Government Income Fund and the
Strategic Income Fund may invest in mortgage-backed and
Prospectus Page 15
<PAGE>
AIM GLOBAL INCOME FUNDS
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 Government Income
Fund and the Strategic Income 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 Government Income Fund
will be subject to the limitation of that Fund which allows no more than 35% of
its total assets to be invested in securities of non-governmental issuers.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Strategic Income Fund and 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 Fund's and the Portfolio'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 and/or the
Portfolio having a contractual relationship only with the Lender, not with the
borrower government. The Fund and/or 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 Fund and/or 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 Fund and/or the Portfolio may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participation. As a result,
the Fund and/or 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 Fund
and/or 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 Fund
and/or the Portfolio will acquire Participations only if the Lender
interpositioned between the Fund and/or the Portfolio and the borrower is
determined by the Sub-adviser to be creditworthy. When the Fund and/ or the
Portfolio purchases Assignments from Lenders, the Fund and/or 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 Fund and/or
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 Government Income Fund, the
Strategic Income Fund and 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 Funds and 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 a Fund or 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 a Fund or the Portfolio enters into a transaction on a when-issued or
forward commitment basis, a Fund or 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 a Fund or the
Portfolio may incur a loss. The Government Income 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.
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AIM GLOBAL INCOME FUNDS
The Strategic Income Fund and the Portfolio may also sell securities on a "when,
as and if issued" basis for hedging purposes. Under such a transaction, the Fund
or 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 Fund or 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 Fund or Portfolio can receive if the "when, as and if issued"
security is in fact issued.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Government
Income 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 Government Income Fund also may borrow up to 5%
of its total assets for temporary or emergency purposes other than to meet
redemptions. However, the Government Income Fund will not borrow for investment
purposes, nor will the Fund purchase securities while borrowings are
outstanding.
Both the Strategic Income Fund and the Portfolio are 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 Strategic
Income Fund and the Portfolio will borrow for investment purposes only when the
Sub-adviser believes that such borrowings will benefit the Fund or the
Portfolio, respectively, 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 Strategic Income Fund and 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
Fund or the Portfolio. Although the principal amount of such borrowings will be
fixed, the Fund's and the Portfolio's assets may change in value during the time
the borrowing is outstanding. By leveraging the Fund or 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 Fund or the
Portfolio will have to pay, the Fund's or 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 Fund or 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 Strategic Income Fund and the
Portfolio each expects that some of its borrowings may be made on a secured
basis.
In addition to the foregoing borrowings, the Strategic Income Fund and the
Portfolio each 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 Strategic
Income Fund or the Portfolio for any purpose does not exceed 33 1/3% of its
total assets.
The Funds and the Portfolio may also enter into reverse repurchase agreements
with a bank or recognized securities dealer, although the Strategic Income Fund
currently has no intention of doing so with respect to more than 5% of its total
assets. Under a reverse repurchase agreement, the Funds or the Portfolio would
sell securities and agree to repurchase them at a particular price at a future
date. At the time a Fund or 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 a Fund or the Portfolio may decline below the price of the securities a
Fund or 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 determine whether to enforce a Fund's or the Portfolio's
obligation to repurchase the securities, and a Fund's or the Portfolio's use of
the proceeds of the reverse repurchase agreement
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AIM GLOBAL INCOME FUNDS
may effectively be restricted pending such decision.
The Funds and the Portfolio also may enter into "dollar rolls," in which a Fund
or 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, a Fund or the Portfolio would forego principal and interest paid on such
securities. A Fund or 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 a Fund's or the Portfolio's assets for purposes of
calculating compliance with the Fund's or the Portfolio's borrowing limitation.
See "Investment Limitations" in the Statement of Additional Information.
SECURITIES LENDING. The Government Income Fund, the Strategic Income Fund and
the Portfolio may lend their 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, each Fund and the Portfolio
requires the borrower to maintain with the Fund's or 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.
Each Fund and 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 Government Income Fund, the Strategic Income Fund
and 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 investing Fund's or 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
the total amount of cash it actually receives (or, in the case of the High
Income Fund, its share of the total amount of cash the Portfolio actually
receives). These distributions must be made from the Fund's (or, in the case of
the High Income Fund, its, or its share of, the Portfolio's) cash assets or, if
necessary, from the proceeds of sales of portfolio securities. The Fund or 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 Government Income Fund, the Strategic Income
Fund and 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 for a Fund or
the Portfolio that is comparable to owning a Japanese government bond, the
Sub-adviser 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.
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AIM GLOBAL INCOME FUNDS
The Sub-adviser might roll over the futures and forward currency contract
positions before taking delivery in order to continue the Fund's or the
Portfolio's investment position, or the Sub-adviser 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-adviser would create synthetic security positions for a Fund or 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-adviser 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, a Fund or 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 Government Income Fund,
the Strategic Income Fund and 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
Funds' or Portfolio investment. The Strategic Income Fund and 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 "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 Government Income Fund, the
Strategic Income Fund and the Portfolio may enter into such instruments up to
the full value of their 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 Government Income Fund, the Strategic Income Fund and 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 Government Income Fund, the Strategic Income Fund
and the Portfolio may enter into forward currency contracts either with respect
to specific transactions or with respect to the respective Fund's or the
Portfolio's portfolio positions. Each Fund and 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, each Fund and 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 Fund or the Portfolio or that the Sub-adviser intends to
include in the Fund's or the Portfolio's portfolio. The Funds and 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 Funds and 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 Fund's or the Portfolio's portfolio. The Funds and 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. A Fund or
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 Strategic Income Fund and 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 Fund and the
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AIM GLOBAL INCOME FUNDS
Portfolio expect 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 or the
Portfolio anticipates purchasing at a later date. The Fund and the Portfolio
intend 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 Fund or the Portfolio may be
obligated to pay.
Interest rate swaps involve the exchange by the Fund or 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 Strategic Income Fund and 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 Strategic Income Fund and 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 Fund and 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 Fund and the Portfolio will not purchase such commercial paper for
speculation.
OTHER INDEXED SECURITIES. The Government Income Fund, Strategic Income Fund and
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. Each Fund and Portfolio may invest in such securities to the extent
consistent with its investment objectives.
OTHER INFORMATION. Each Fund's investment objectives may not be changed without
the approval of a majority of the respective 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, each 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. Each Fund's other investment policies described herein
and in the Statement of Additional Information may be changed by the Company's
Board of Directors without shareholder approval.
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AIM GLOBAL INCOME FUNDS
The approval of the High Income 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 High Income Fund thirty days prior to any
changes in the Portfolio's investment objectives.
The Funds and the Portfolio are authorized to make short sales of securities,
although they have 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 a Fund's or the Portfolio's investment policies or
restrictions.
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RISK FACTORS
- --------------------------------------------------------------------------------
GENERAL. There is no assurance that any 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 portfolio positions and its net currency
exposure. The value of fixed income securities held by the Government Income
Fund, the Strategic Income Fund and the Portfolio generally fluctuates inversely
with interest rate movements. Longer term bonds held by the Government Income
Fund, the Strategic Income Fund or the Portfolio are subject to greater interest
rate risk.
NON-DIVERSIFIED CLASSIFICATION. Each Fund and the Portfolio is classified under
the Investment Company Act of 1940 (the "1940 Act") as a "non-diversified" fund.
As a result, the Government Income Fund, the Strategic Income Fund and the
Portfolio each 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 a
Fund or the Portfolio invests in a smaller number of issuers, the value of each
Fund's shares may fluctuate more widely and the Funds and the Portfolio may be
subject to greater investment and credit risk with respect to their 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 Government Income and Strategic Income Funds'
and 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 Government Income Fund, the Strategic Income Fund and the
Portfolio, political or social instability, or diplomatic developments which
could affect the investments of the Government Income Fund, the Strategic Income
Fund and 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 Government Income Fund, the Strategic Income Fund and
the Portfolio normally invest 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
Funds' shares, and also
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AIM GLOBAL INCOME FUNDS
may affect the value of dividends and interest earned by the Funds and gains and
losses realized by the Funds. 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.
INVESTING IN EMERGING MARKETS. Because of the special risks associated with
investing in emerging markets, an investment in the Strategic Income Fund and
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 Strategic Income Fund or 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 Strategic Income Fund or the Portfolio to make intended
securities purchases due to settlement problems could cause the Strategic Income
Fund or 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 Strategic Income Fund or the Portfolio due to subsequent
declines in value of the portfolio security or, if the Strategic Income Fund or
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 Strategic Income Fund's or 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 Strategic Income Fund or 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
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AIM GLOBAL INCOME FUNDS
commencing from the Strategic Income Fund's or the Portfolio's identification of
such conditions until the date of SEC action, the portfolio securities of the
Strategic Income Fund or the Portfolio in the affected markets will be valued at
fair value as determined in good faith by or under the direction of the
Company's Board of Directors or the Portfolio'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 Government Income Fund or
the Strategic Income 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 Strategic Income Fund and the Portfolio
may have difficulty disposing of Assignments and Participations. The liquidity
of such securities is limited and, the Fund and the Portfolio anticipate 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 and the Portfolio's ability to
dispose of particular Assignments or Participations when necessary to meet the
Fund's and/or 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 Fund and/or the Portfolio to assign a value
to those securities for purposes of valuing the Fund's or the Portfolio's
portfolio and calculating its net asset value.
SOVEREIGN DEBT. The Strategic Income Fund and 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 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.
Prospectus Page 23
<PAGE>
AIM GLOBAL INCOME FUNDS
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing sovereign debt could adversely affect the Fund's or 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-adviser intends to manage the Strategic
Income Fund and 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 Fund or 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 Strategic
Income Fund and the Portfolio expect 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 Strategic Income Fund and 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
Strategic Income Fund and 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 Strategic Income Fund and the Portfolio
anticipate 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 Strategic
Income Fund may invest up to 50% of its total assets in debt securities rated
below investment grade, and up to 100% the Portfolio's total assets will be so
invested. 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
Prospectus Page 24
<PAGE>
AIM GLOBAL INCOME FUNDS
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 Strategic Income Fund and 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
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 Strategic Income Fund or the Portfolio. If an issuer exercises
these provisions in a declining interest rate market, the Strategic Income Fund
or the Portfolio may have to replace the security with a lower yielding
security, resulting in a decreased return for investors. In addition, the
Strategic Income Fund and 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 Strategic Income Fund and the Portfolio anticipate
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 Strategic Income Fund and the Portfolio to obtain accurate
market quotations for purposes of valuing the securities in the portfolios of
the Strategic Income Fund and 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 Strategic Income Fund and 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 Strategic Income Fund and the Portfolio
will adversely impact net asset value of the Strategic Income Fund and the High
Income 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 Strategic Income Fund and the Portfolio each 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 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
Prospectus Page 25
<PAGE>
AIM GLOBAL INCOME FUNDS
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 Strategic Income Fund and the Portfolio had 89.27%
and 86.59%, respectively, of their total net assets in debt securities that
received a rating from Moody's and 4.00% and 10.29%, respectively, of their
total net assets in debt securities that were not so rated. In addition, the
Strategic Income Fund and the Portfolio had 6.73% and 3.12%, respectively, of
their total net assets in cash and net receivables. The Strategic Income 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 Strategic Income Fund which, while unrated,
have been determined by the Sub-adviser to be of comparable quality to
securities in the following categories: Ba -- 1.03%; and B -- 2.97%. 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 which, while unrated, have
been determined by the Sub-adviser 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 Strategic Income Fund and the
Portfolio by rating on any given date will vary and should not be considered
representative of the future portfolio composition of the Strategic Income Fund
or the Portfolio.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Although each Fund and the
Portfolio is authorized to enter into options, futures and forward currency
transactions, the Funds and 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-adviser'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 a Fund or 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 a Fund or 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 a Fund or Portfolio 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 Government Income Fund, the Strategic Income Fund and
the Portfolio may invest up to 15% of their 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.
Prospectus Page 26
<PAGE>
AIM GLOBAL INCOME FUNDS
HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. 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 .50% on
the assets in the account ("Advisory 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 .50% on the assets in the account ("Wrap Fee 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 of any of the AIM/GT Funds on June 1, 1998; and (e) any of the
companies composing or affiliated with AMVESCAP PLC. Financial planners, trust
companies, bank trust companies and registered investment advisers referenced in
subpart (b) and sponsors of "wrap fee" programs referenced in subpart (c) are
collectively referred to as "Financial Advisers." Investors in Wrap Fee Accounts
and Advisory Accounts may only purchase Advisor Class shares through Financial
Advisers who have entered into agreements with AIM Distributors and certain of
its affiliates. Investors may be charged a fee by their agents or brokers if
they effect transactions other than through a dealer.
All purchase orders will be executed at the public offering price next
determined after the purchase order is received. Orders received by authorized
institutions (or their designees) before the close of regular trading on the New
York Stock Exchange ("NYSE") (currently 4:00 p.m. Eastern Time, unless weather,
equipment failure or other factors contribute to an earlier closing time) on any
Business Day will be executed at the public offering price for the applicable
class of shares determined that day. Orders received by authorized institutions
(or their designees) before the close of regular trading on the NYSE on a
Business Day will be deemed to have been received by a 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 the receipt of such orders. A "Business Day" is
any day Monday through Friday on which the NYSE is open for business. The
authorized institution (or its designee) will be responsible for forwarding the
investor's order to the Transfer Agent so that it will be received prior to such
time. THE FUNDS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER. In particular,
the Funds may reject purchase orders or exchanges by investors who appear to
follow, in the Sub-adviser's judgment, a market-timing strategy or otherwise
engage in excessive trading. See "How to Make Exchanges -- Limitations on
Purchase Orders and Exchanges."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to AIM Distributors concerning their eligibility to purchase
Advisor Class shares. For specific information on opening an account, please
contact your Financial Adviser or AIM Distributors.
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/GT 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 "How to Make Exchanges."
Prospectus Page 27
<PAGE>
AIM GLOBAL INCOME FUNDS
PURCHASES BY BANK WIRE. Shares of the Funds may also be purchased by bank wire.
Bank wire purchases will be effected at the next determined public offering
price after the bank wire is received. A wire investment is considered received
when the Transfer Agent is notified that the bank wire has been credited to the
Funds. Prior telephonic or facsimile notice that a bank wire is being sent must
be provided to the Transfer Agent. A bank may charge a service fee for wiring
money to the Funds. The Transfer Agent currently does not charge a service fee
for facilitating wire purchases, but reserves the right to do so in the future.
For more information, please refer to the Shareholder Account Manual in this
Prospectus.
CERTIFICATES. Physical certificates representing a Fund's shares will not be
issued unless a written request is submitted to the Transfer Agent. Shares of a
Fund are recorded on a register by the Transfer Agent, and shareholders who do
not elect to receive certificates have the same rights of ownership as if
certificates had been issued to them. Redemptions and exchanges by shareholders
who hold certificates may take longer to effect than similar transactions
involving non-certificated shares because the physical delivery and processing
of properly executed certificates is required. ACCORDINGLY, THE FUNDS RECOMMEND
THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders to establish and maintain an allocation across a
range of AIM/GT Funds. The Program automatically rebalances holdings of AIM/ GT
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, AIM/GT Funds
("Personal Portfolio") is to be rebalanced on a monthly, quarterly, semiannual,
or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more AIM/ GT Funds in the shareholder's Personal Portfolio for shares of
the same class of one or more other AIM/GT Funds in the shareholder's Personal
Portfolio. See "How to Make Exchanges." If shares of the AIM/GT Fund(s) in a
shareholder's Personal Portfolio have appreciated during a rebalancing period,
the Program will result in shares of AIM/GT Fund(s) that have appreciated most
during the period being exchanged for shares of AIM/GT 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, Other Distributions and Federal Income Taxation."
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 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 a Fund's shares. Exchanges made
under the Program are not subject to the four free exchanges per year
limitation. The Funds and AIM Distributors reserve the right to modify, suspend,
or terminate the Program at any time on 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 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 Financial Institutions
may charge a fee for establishing accounts relating to the Program. Investors
should contact their Financial Institution or AIM Distributors for more
information.
Prospectus Page 28
<PAGE>
AIM GLOBAL INCOME FUNDS
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Advisor Class shares of a Fund may be exchanged for Advisor Class shares of any
other AIM/GT Fund, based on their respective net asset values without imposition
of any sales charges, provided that the registration remains identical. Exchange
requests received in good order by the Transfer Agent before the close of
regular trading on the NYSE on any Business Day will be processed at the net
asset value calculated on that day.
EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A SHAREHOLDER REALIZING A GAIN OR
LOSS, AS THE CASE MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Other
Distributions and Federal Income Taxation." In addition to the Funds, the AIM/GT
Funds include the following:
- AIM AMERICA VALUE FUND
- AIM DEVELOPING MARKETS FUND
- AIM DOLLAR FUND
- AIM EMERGING MARKETS FUND
- AIM EUROPE GROWTH FUND
- AIM GLOBAL CONSUMER PRODUCTS AND 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 MID CAP GROWTH FUND
- AIM NEW DIMENSION FUND
- AIM NEW PACIFIC GROWTH FUND
- AIM SMALL CAP EQUITY FUND
- AIM WORLDWIDE GROWTH FUND
Investors in Wrap Fee Accounts and Advisory Accounts interested in making an
exchange should contact his or her Financial Adviser to request the prospectus
of the other AIM/GT Fund(s) being considered. Other investors should contact AIM
Distributors. The terms of the exchange offer may be modified at any time, on 60
days' prior written notice.
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to his or
her Financial Adviser. Exchange orders will be accepted by telephone provided
that the exchange involves only uncertificated shares on deposit in the
shareholder's account or for which certificates have previously been deposited.
Shareholders automatically have telephone privileges to authorize exchanges. The
Funds, AIM Distributors and the Transfer Agent will not be liable for any loss
or damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Funds employ reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The AIM/GT Funds are not intended
to serve as vehicles for frequent trading in response to short-term fluctuations
in the market. Due to the disruptive effect that market-timing investment
strategies and excessive trading can have on efficient portfolio management,
each AIM/GT Fund and AIM Distributors reserve the right to refuse purchase
orders and exchanges by any person or group, if, in the Sub-adviser's judgment,
such person or group was following a market-timing strategy or was otherwise
engaging in excessive trading.
In addition, each AIM/GT Fund and AIM Distributors reserve the right to refuse
purchase orders and exchanges by any person or group if, in the Sub-adviser's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although an AIM/GT Fund will attempt to give
investors prior notice whenever it is reasonably able to do so, it may impose
the above restrictions at any time.
Finally, as described above, each AIM/GT Fund and AIM Distributors reserve the
right to reject any purchase order.
Prospectus Page 29
<PAGE>
AIM GLOBAL INCOME FUNDS
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shares of each Fund may be redeemed at their net asset value and redemption
proceeds will be sent within seven days of the execution of a redemption
request. Redemption requests may be transmitted to the Transfer Agent by
telephone or by mail, in accordance with the instructions provided in the
Shareholder Account Manual. Redemptions will be effected at the net asset value
next determined after the Transfer Agent has received the request, provided that
the request is transmitted to the Transfer Agent prior to the time set for
receipt of such redemption request. Redemptions will only be effected if the
request is received in good order and accompanied by any required supporting
documentation. Redemption requests will not require a signature guarantee if the
redemption proceeds are to be sent either: (i) to the redeeming shareholder at
the shareholder's address of record as maintained by the Transfer Agent,
provided the shareholder's address of record has not been changed within the
preceding fifteen days; or (ii) directly to a pre-designated bank, savings and
loan or credit union account ("Pre-Designated Account"). ALL OTHER REDEMPTION
REQUESTS MUST BE ACCOMPANIED BY A SIGNATURE GUARANTEE OF THE REDEEMING
SHAREHOLDER'S SIGNATURE. A signature guarantee can be obtained from any bank,
U.S. trust company, a member firm of a U.S. stock exchange or a foreign branch
of any of the foregoing or other eligible guarantor institution. A notary public
is not an acceptable guarantor.
Shareholders with Pre-Designated Accounts should request that redemption
proceeds be sent either by bank wire or by check. The minimum redemption amount
for a bank wire is $500. Shareholders requesting a bank wire should allow two
business days from the time the redemption request is effected for the proceeds
to be deposited in the shareholder's Pre-Designated Account. See "How to Redeem
Shares -- Other Important Redemption Information." Shareholders may change their
Pre-Designated Accounts only by a letter of instruction to the Transfer Agent
containing all account signatures, each of which must be guaranteed. The
Transfer Agent currently does not charge a bank wire service fee for each wire
redemption sent, but reserves the right to do so in the future. The
shareholder's bank may charge a bank wire service fee.
REDEMPTIONS BY TELEPHONE. Redemption requests may be made by telephone by
calling the Transfer Agent at the appropriate toll-free number provided in the
Shareholder Account Manual. Shareholders who hold certificates for shares may
not redeem by telephone. REDEMPTION REQUESTS MAY NOT BE MADE BY TELEPHONE FOR
FIFTEEN DAYS FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, AIM Distributors and the Transfer Agent will not be liable for any
loss or damage for acting in good faith upon instructions received by telephone
and reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding fifteen days, a signature guarantee
is required. Redemptions of shares for which certificates have been issued must
be accompanied by properly endorsed share certificates.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the necessary documentation has been received in good
order. A shareholder in a Wrap Fee Account or Advisory Account who is in doubt
as to what documents are required should contact his Financial Adviser or the
Transfer Agent.
Prospectus Page 30
<PAGE>
AIM GLOBAL INCOME FUNDS
Except in extraordinary circumstances and as permitted under the Investment
Company Act of 1940 ("1940 Act"), payment for shares redeemed by telephone, or
by mail will be made promptly after receipt of a redemption request, if in good
order, but not later than seven days after the date the request is executed.
Requests for redemption which are subject to any special conditions or which
specify a future or past effective date cannot be accepted.
If the Transfer Agent is requested to redeem shares for which a Fund has not yet
received good payment, the Fund may delay payment of redemption proceeds until
the Transfer Agent has assured itself that good payment has been collected for
the purchase of the shares. In the case of purchases by check it can take up to
10 business days to confirm that the check has cleared and good payment has been
received. Redemption proceeds will not be delayed when shares have been paid for
by wire or when the investor's account holds a sufficient number of shares for
which funds already have been collected.
AIM Distributors reserves the right to redeem the shares of any Advisory Account
or Wrap Fee Account if the amount invested in AIM/GT Funds through such account
is reduced to less than $500 through redemptions or other action by the
shareholder. Written notice will be given to the shareholder at least 60 days
prior to the date fixed for such redemption, during which time the shareholder
may increase the amount invested in AIM/ GT Funds through such account to an
aggregate amount of $500 or more.
Prospectus Page 31
<PAGE>
AIM GLOBAL INCOME FUNDS
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Purchase, exchange and redemption orders should be placed in accordance with
this Manual. It is recommended that investors in Wrap Fee Accounts and Advisory
Accounts make such orders through their Financial Adviser. See "How to Invest,"
"How to Make Exchanges," "How to Redeem Shares" and "Dividends, Other
Distributions and Federal Income Taxation" for more information.
Each Fund's Transfer Agent is GT GLOBAL INVESTOR SERVICES, INC.
INVESTMENTS BY MAIL
Send the completed Account Application (if initial purchase) or letter stating
Fund name, class of shares, shareholder's registered name and account number (if
subsequent purchase) with a check to:
AIM/GT Funds
P.O. Box 7345
San Francisco, CA 94120-7345
INVESTMENTS BY BANK WIRE
A new account may be opened by calling 1-800-223-2138 to obtain an account
number. WITHIN SEVEN DAYS OF PURCHASE A COMPLETED ACCOUNT APPLICATION CONTAINING
THE APPROPRIATE CERTIFIED TAXPAYER IDENTIFICATION NUMBER MUST BE SENT TO THE
ADDRESS PROVIDED ABOVE UNDER "INVESTMENTS BY MAIL." Wire instructions must state
Fund name, class of shares, shareholder's registered name and account number.
Bank wires should be sent through the Federal Reserve Bank Wire System to:
WELLS FARGO BANK N.A.
ABA 121000248
Attn: GT GLOBAL
Account No. 4023-050701
EXCHANGES BY TELEPHONE
Call the Transfer Agent at 1-800-223-2138.
EXCHANGES BY MAIL
Send complete instructions, including name of Fund exchanging from, class of
shares, amount of exchange, name of the AIM/GT Fund exchanging into,
shareholder's registered name and account number, to:
AIM/GT Funds
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call the Transfer Agent at 1-800-223-2138.
REDEMPTIONS BY MAIL
Send complete instructions, including name of Fund, class of shares, amount of
redemption, shareholder's registered name and account number, to:
AIM/GT Funds
P.O. Box 7893
San Francisco, CA 94120-7893
OVERNIGHT MAIL
Overnight mail services do not deliver to post office boxes. To send purchase,
exchange or redemption orders by overnight mail, follow the above instructions
but send to the following address:
GT Global Investor Services, Inc.
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, CA 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures should call the Transfer Agent at 1-800-223-2138.
Prospectus Page 32
<PAGE>
AIM GLOBAL INCOME FUNDS
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Each Fund calculates its net asset value as of the close of normal trading on
the NYSE (currently 4:00 p.m., Eastern Time, unless weather, equipment failure
or other factors contribute to an earlier closing time) each Business Day. Each
Fund's net asset value per share is computed by determining the value of its
total assets (which, in the case of the High Income Fund, is the value of its
proportionate share of the total assets of the Portfolio) subtracting all of its
liabilities, and dividing the result by the total number of shares outstanding
at such time. Net asset value is determined separately for each class of shares
of each Fund.
Long-term debt obligations held by a Fund or the Portfolio are valued at the
mean of representative quoted bid and asked prices for such securities or, if
such prices are not available, at prices for securities of comparable maturity,
quality and type; however, when the Sub-adviser deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations, provided such valuations represent fair
value. Equity securities are valued at the last sale price on the exchange or in
the OTC market in which such securities are primarily 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. When market quotations for futures and options
positions held by a Fund or the Portfolio are readily available, those positions
are valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors or the Portfolio's Board of
Trustees. Securities and other assets quoted in foreign currencies are valued in
U.S. dollars based on the prevailing exchange rates on that day.
Each Fund's or the Portfolio's portfolio securities, from time to time, may be
listed primarily on foreign exchanges or OTC dealer markets that may trade on
days when the NYSE is closed (such as 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.
Prospectus Page 33
<PAGE>
AIM GLOBAL INCOME FUNDS
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund declares and pays monthly dividends
from its net investment income, if any, which includes accrued interest, earned
discount (including both original issue and market discounts) and dividends less
applicable expenses. Each Fund also annually distributes substantially all of
its realized net capital gains and net gains from foreign currency transactions,
if any. Each Fund may make an additional dividend or other distribution each
year if necessary to avoid a 4% excise tax on certain undistributed income and
gain.
Dividends and other distributions paid by each Fund with respect to all classes
of its shares are calculated in the same manner and at the same time. The per
share income dividends on Advisor Class shares of a Fund will be higher than the
per share income dividends on shares of other classes of that Fund as a result
of the service and distribution fees applicable to those other shares.
SHAREHOLDERS MAY ELECT:
/ / to have all dividends and other distributions automatically reinvested in
additional Advisor Class shares of the distributing Fund (or other AIM/ GT
Funds); or
/ / to receive dividends in cash and have other distributions automatically
reinvested in additional Advisor Class shares of the distributing Fund (or
other AIM/GT Funds); or
/ / to receive other distributions in cash and have dividends automatically
reinvested in additional Advisor Class shares of the distributing Fund (or
other AIM/GT Funds); or
/ / to receive dividends and other distributions in cash.
Automatic reinvestments in additional Advisor Class shares are made at net asset
value without imposition of a sales charge. IF NO ELECTION IS MADE BY A
SHAREHOLDER, ALL DIVIDENDS AND OTHER DISTRIBUTIONS WILL BE AUTOMATICALLY
REINVESTED IN ADDITIONAL ADVISOR CLASS SHARES OF THE DISTRIBUTING FUND.
Reinvestments in another AIM/GT Fund may only be directed to an account with the
identical shareholder registration and account number. These elections may be
changed by a shareholder at any time; to be effective with respect to a
distribution, the shareholder or the shareholder's broker must contact the
Transfer Agent by mail or telephone at least 15 Business Days prior to the
payment date. THE FEDERAL INCOME TAX CONSEQUENCES OF DIVIDENDS AND OTHER
DISTRIBUTIONS ARE THE SAME WHETHER THEY ARE RECEIVED IN CASH OR REINVESTED IN
ADDITIONAL SHARES.
Any dividend or other distribution paid by a Fund has the effect of reducing the
net asset value per share on the ex-distribution date by the amount thereof.
Therefore, a dividend or other distribution paid shortly after a purchase of
shares would represent, in substance, a return of capital to the shareholder (to
the extent the distribution is paid on the shares so purchased), even though
subject to income tax, as discussed below.
TAXES. Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code. In each taxable year that a Fund so
qualifies, the Fund (but not its shareholders) will be relieved of federal
income tax on that part of its investment company taxable income (consisting
generally of net investment income, net gains from certain foreign currency
transactions and net short-term capital gain) and net capital gain (i.e., the
excess of net long-term capital gain over net short-term capital loss) that it
distributes to its shareholders. In the case of the High Income Fund, its
investment company taxable income and net capital gain consists of its
proportionate share of the Portfolio's net investment income, net gains from
certain foreign currency transactions and net short-term capital gain and net
capital gain. The Portfolio expects that it also will not be liable for any
federal income tax.
Dividends from a Fund's investment company taxable income (whether paid in cash
or reinvested in additional shares) are taxable to its shareholders as ordinary
income to the extent of the Fund's earnings and profits. Distributions of a
Fund's net capital gain, when designated as such, are taxable to its
shareholders as long-term capital gains, regardless of how long they have held
their Fund shares and whether paid in cash or reinvested in additional shares.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
noncorporate
Prospectus Page 34
<PAGE>
AIM GLOBAL INCOME FUNDS
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
securities 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 securities
held for more than 18 months. Each Fund may divide each net capital gain
distribution into a 28% rate gain distribution and a 20% rate gain distribution
(in accordance with the Fund's holding periods for the securities it sold that
generated the distributed gain), in which event its shareholders must treat
those portions accordingly.
Each Fund provides federal tax information to its shareholders annually,
including information about dividends and capital gain distributions paid during
the preceding year and, under certain circumstances, the shareholders'
respective shares of any foreign taxes paid (directly or indirectly) by the
Fund, in which event each shareholder would be required to include in his or her
gross income his or her pro rata share of those taxes, but might be entitled to
claim a credit or deduction for them. The information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to noncorporate taxpayers' net capital gain indicated
above.
Each Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who have not furnished to the Fund a correct taxpayer
identification number or a properly completed claim for exemption on Form W-8 or
W-9. Withholding at that rate also is required from dividends and capital gain
distributions payable to such shareholders who otherwise are subject to backup
withholding. Fund accounts opened via a bank wire purchase (see "How to Invest
- -- Purchases Through the Distributor") are considered to have uncertified
taxpayer identification numbers unless a completed Form W-8 or W-9 or Account
Application is received by the Transfer Agent within seven days after the
purchase. A shareholder should contact the Transfer Agent if the shareholder is
uncertain whether a proper taxpayer identification number is on file with a
Fund.
A redemption of Fund shares may result in taxable gain or loss to the redeeming
shareholder, depending upon whether the redemption proceeds are more or less
than the shareholder's adjusted basis for the redeemed shares. An exchange of
Fund shares for shares of another mutual fund generally will have similar tax
consequences. In addition, if shares of a Fund are purchased within 30 days
before or after redeeming other shares of that Fund (regardless of class) at a
loss, all or a part of the loss will not be deductible and instead will increase
the basis of the newly purchased shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting each Fund and its shareholders. See "Taxes"
in the Statement of Additional Information for a further discussion. There may
be other federal, state, local or foreign tax considerations applicable to a
particular investor. Prospective investors are therefore urged to consult their
tax advisers.
Prospectus Page 35
<PAGE>
AIM GLOBAL INCOME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors and the Portfolio's Board of Trustees have
overall responsibility for the operation of the Funds and the Portfolio,
respectively. The Company's Board of Directors and the Portfolio's Board of
Trustees have approved all significant agreements between the Company and the
Portfolio on the one side and persons or companies furnishing services to the
Funds and the Portfolio on the other, including the investment advisory and
administrative services agreement with AIM, the investment sub-advisory and
sub-administration agreement with the Sub-adviser, the agreements with AIM
Distributors regarding distribution of each Fund's shares, the custody agreement
with State Street Bank and Trust Company and the transfer agency agreement with
GT Global Investor Services, Inc. The day-to-day operations of each of the Funds
and the Portfolio are delegated to the officers of the Company and the
Portfolio, subject always to the objective and policies of the applicable Fund
and the Portfolio and to the general supervision of the Company's Board of
Directors and the Portfolio's Board of Trustees. See "Directors and Executive
Officers" in the Statement of Additional Information for information on the
Company's Directors and the Portfolio's Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-adviser as the Government Income Fund's, the Strategic Income Fund's and the
Portfolio's investment managers and administrators include, but are not limited
to, determining the composition of the investment portfolio of the Government
Income Fund, the Strategic Income Fund and the Portfolio and placing orders to
buy, sell or hold particular securities. In addition, AIM and the Sub-adviser
provide the following administration services to the Funds and the Portfolio:
furnishing corporate officers and clerical staff; providing office space,
services and equipment; and supervising all matters relating to the Government
Income Fund's, the Strategic Income Fund's and the Portfolio's operation.
The Government Income Fund and the Strategic Income Fund each pays AIM
investment management and administration fees computed daily and payable
monthly, based on their respective 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 a Fund, AIM pays the Sub-adviser sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from
each Fund. The investment management and administration fees paid by the Funds
and the Portfolio are higher than those paid by most mutual funds. The High
Income 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-adviser 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-adviser. The Portfolio pays AIM such fees, based on the average daily
net assets of the Portfolio at the annualized rate of .475% on the first $500
million, .45% on the next $1 billion, .425% on the next $1 billion and .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 High
Income Fund and the Portfolio, AIM pays the Sub-adviser sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from the
High Income Fund and the Portfolio. Each Fund pays all expenses not assumed by
AIM, the Sub-adviser, AIM Distributors or any other agents. AIM has undertaken
to limit the expenses of the Advisor Class shares of the Government Income Fund
and the Strategic Income Fund (exclusive of brokerage commissions, taxes,
interest and extraordinary expenses) to the maximum annual level of 1.50% of the
average daily net assets of each such Fund's Advisor Class shares. AIM has
undertaken to limit the expenses of the High Income Fund's Advisor
Prospectus Page 36
<PAGE>
AIM GLOBAL INCOME FUNDS
Class shares (and such Fund's pro-rata portion of the Portfolio's expenses) to
the maximum annual level of 1.85% of the average daily net assets of such Fund's
Advisor Class shares.
The Sub-adviser also serves as each Fund's pricing and accounting agent. For
these services the Sub-adviser receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of the AIM/GT Funds and 0.02%
to the assets in excess of $5 billion and allocating the result according to
each Fund's average daily net assets.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment adviser to the Government Income Fund, the Strategic Income Fund and
the Portfolio pursuant to a master investment advisory agreement, dated as of
May 29, 1998 (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-adviser,
INVESCO (NY), Inc., 50 California Street, 27th Floor, San Francisco, California
94111, and 1166 Avenue of the Americas, New York, New York 10036, serves as the
sub-adviser to the Government Income Fund, the Strategic Income Fund and the
Portfolio pursuant to an investment sub-advisory agreement dated as of May 29,
1998. Prior to May 29, 1998, the Sub-adviser 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-adviser, consummated a purchase
agreement with AMVESCAP PLC pursuant to which AMVESCAP PLC acquired LGT's Asset
Management Division, which included the Sub-adviser and certain other
affiliates. As a result of this transaction, the Sub-adviser is now an indirect
wholly owned subsidiary of AMVESCAP PLC. Prior to the sale, the Sub-adviser 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-adviser 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-adviser 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-adviser 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 and the
Portfolio, the Sub-adviser employs a team approach, taking advantage of its
investment resources around the world in seeking each Fund's investment
objective.
Prospectus Page 37
<PAGE>
AIM GLOBAL INCOME FUNDS
The investment professionals primarily responsible for the portfolio management
of the Government Income Fund, the Strategic Income Fund and 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 since Chief Investment Officer for Global Fixed Income for the
New York 1996 (Government Income Sub-adviser since October 1996. Senior Portfolio Manager for
Fund and Strategic Global/International Fixed Income for the Sub-adviser from July
Income Fund); since 1997 1995 to October 1996. Employed by Chancellor Capital Management,
(High Income Portfolio) Inc. ("Chancellor Capital"), a predecessor of the Sub-adviser,
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 since Head of Global Fixed Income, North America, for the Sub-adviser
New York 1998 (Government Income since January 1998. Senior Portfolio Manager for
Fund) Global/International Fixed Income for the Sub-adviser from October
1996 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 since Portfolio Manager for the Sub-adviser since August 1997. Vice
New York 1998 (High Income President and Senior Analyst in the Emerging Markets Group of the
Portfolio) Global Fixed Income Division of Merrill Lynch Asset Management
from 1993 to August 1997.
</TABLE>
------------------------
In placing orders for the Government Income Fund's, Strategic Income Fund's and
the Portfolio's securities transactions, the Sub-adviser seeks to obtain the
best net results. Consistent with its obligation to obtain the best net results,
the Sub-adviser 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 Funds and Portfolio may be executed through
affiliates of AIM or the Sub-adviser. High portfolio turnover (over 100%)
involves correspondingly greater brokerage commissions and other transaction
costs that the Funds or the Portfolio will bear directly and could result in the
realization of net capital gains which would be taxable when distributed to
shareholders.
DISTRIBUTION OF FUND SHARES. AIM Distributors is the distributor of each Fund's
Advisor Class shares. Like the Sub-adviser, AIM Distributors is a wholly owned
subsidiary of AIM. The address of AIM Distributors is P.O. Box 4739, Houston,
Texas 77210-4739.
The Sub-adviser or an affiliate thereof may make ongoing payments to Financial
Advisors and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting or distributing securities. Accordingly, AIM Distributors
intends to engage banks (if at all) only to perform administrative and
shareholder servicing functions. Banks and broker/dealer affiliates of banks
also may execute dealer agreements with AIM Distributors for the purpose of
selling shares of the Funds. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders, and alternative
means for continuing the servicing of such shareholders would be sought. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these occurrences.
Prospectus Page 38
<PAGE>
AIM GLOBAL INCOME FUNDS
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in a Fund, the shareholder will receive from the
Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to a Fund's automatic dividend
reinvestment program may be provided quarterly. Shortly after the end of each
Fund's fiscal year on October 31 and fiscal half-year on April 30 of each year,
shareholders receive an annual and a semiannual report, respectively. In
addition, the federal income status of distributions made by a Fund to
shareholders are reported after the end of the calendar year on Form 1099-DIV.
Under certain circumstances, duplicate mailings of the foregoing reports to the
same household may be consolidated.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 27, 1987. Prior to May 29, 1998, the Company operated under the name
G.T. Investment Funds, Inc. 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 Company'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
or conversion rights.
On any matter submitted to a vote of shareholders, shares of a Fund will be
voted by a Fund's shareholders individually when the matter affects the specific
interest of that Fund only, such as approval of its investment management
arrangements. In addition, shares of a particular class of a Fund may vote on
matters affecting only that class. The shares of each fund and of the Company's
other funds will be voted in the aggregate on other matters, such as the
election of Directors and ratification of the Board of Directors' selection of
the Company's independent accountants.
Normally there will be no annual meeting of shareholders in any year, except as
required under the 1940 Act. The Company would be required to hold a
shareholders' meeting in the event that at any time less than a majority of the
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting shares may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other purpose. The 1940 Act requires the Company to assist
shareholders in calling such a meeting.
Each Fund offers Advisor Class shares through this prospectus to certain
investors. Each Fund also offers Class A shares and Class B shares to investors
through a separate prospectus. Each class of shares will experience different
net asset values and dividends as a result of different expenses borne by each
class of shares. The per share net asset value and dividends of the Advisor
Class shares of a Fund generally will be higher than that of the Class A and B
shares of that Fund because of the higher expenses borne by the Class A and B
shares. Consequently, during comparable periods, the Funds expect that the total
return on an investment in shares of the Advisor Class will be higher than the
total return on Class A or B shares.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Strategic Income Fund and High Income Fund; 100 million shares of each Fund have
been classified as Class A and Class B shares, respectively. In addition, 500
million shares have been classified as shares of Government Income Fund; 200
million shares have been classified as Class A and Class B shares, respectively.
Moreover, one hundred million shares have been classified as Advisor Class
shares for each Fund. These amounts may be increased from time to time in the
discretion of the Board of Directors. Each share of each Fund represents an
interest in that Fund only, has a par value of $0.0001 per share, represents an
equal proportionate interest in that Fund with other shares of that Fund and is
entitled to such dividends and other distributions out of the income earned and
gain realized on the assets belonging to that Fund as may be declared at the
Prospectus Page 39
<PAGE>
AIM GLOBAL INCOME FUNDS
discretion of the Board of Directors. Each Class A, Class B and Advisor Class
share of each Fund is equal in earnings, assets and voting privileges, except as
noted above, and each class bears the expenses, if any, related to the
distribution of its shares. Shares of each Fund, when issued, are fully paid and
nonassessable.
Shareholders have been asked to vote on the reorganization of the Company into a
Delaware business trust. If approved by shareholders, it is anticipated that the
reorganization would occur prior to October 1, 1998.
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a Delaware business
trust. The Portfolio's Declaration of Trust provides that the High Income Fund
and other entities investing in the Portfolio (E.G., other investment companies,
insurance company separate accounts and common and commingled trust funds), if
any, will each be liable for all obligations of the Portfolio. However, the
Directors of the Company believe that the risk of the High Income Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations, and that neither the High Income Fund nor its shareholders will
be exposed to a material risk of liability by reason of the High Income Fund's
investing in the Portfolio. Any information received from the Portfolio in the
Portfolio shareholder report will be provided to the High Income Fund's
shareholders.
Under Delaware law, the High Income 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 High Income Portfolio's Declaration of
Trust 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 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 High Income Fund is requested to vote on any proposal of the
Portfolio, the High Income 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.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll free at (800) 223-2138 or by writing to the Funds at 50 California Street,
27th Floor, San Francisco, CA 94111.
PERFORMANCE INFORMATION. The Funds, from time to time, may include information
on their investment results and/or comparisons of their investment results to
various unmanaged indices or results of other mutual funds or groups of mutual
funds in advertisements, sales literature or reports furnished to present or
prospective shareholders. Investors should be aware that as of October 22, 1992,
the investment objectives of the Strategic Income Fund were changed from
long-term high capital appreciation, primarily and moderate income, secondarily,
to primarily high current income and secondarily capital appreciation. In
addition, the investment policies and limitations of the Strategic Income Fund
were modified.
In such materials, the Funds may quote their average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of each Fund. Standardized Return shows percentage rates
reflecting the average annual change in the value of an assumed investment in
the Fund at the end of one-, five- and ten-year periods, reduced by the maximum
applicable sales charge imposed on sales of Fund shares. If a one-, five- and/or
ten-year period has not yet elapsed, data will be provided as of the end of a
shorter period corresponding to the life of a Fund. Standardized Return assumes
reinvestment of all dividends and other distributions.
In addition, in order to more completely represent the Funds' performance or
more accurately compare such performance to other measures of investment return,
the Funds also may include in advertisements, sales literature and shareholder
reports other total return performance data ("Non-Standardized Return").
Non-Standardized Return reflects percentage rates of return encompassing all
elements of return (i.e., income and capital appreciation or depreciation); it
assumes reinvestment of all dividends and other distributions. Non-Standardized
Return may be quoted for the same or different periods as those for which
Standardized Return is quoted; it may consist of an aggregate or average annual
percentage rate of return, actual year-by-year rates or any combination
Prospectus Page 40
<PAGE>
AIM GLOBAL INCOME FUNDS
thereof. Non-Standardized Return may or may not take sales charges into account;
performance data calculated without taking the effect of sales charges into
account will be higher than data including the effect of such charges.
The Funds also may refer in advertising and promotional materials to their
yield, which will fluctuate over time. A Fund's yield shows the rate of income
that it earns on its investments, expressed as a percentage of the public
offering price of its shares. A Fund calculates yield by determining the
interest income it earned from its portfolio investments for a specified
thirty-day period (net of expenses), dividing such income by the average number
of shares outstanding, and expressing the result as an annualized percentage
based on the public offering price at the end of that thirty-day period. Yield
accounting methods differ from the methods used for other accounting purposes.
Accordingly, a Fund's yield may not equal the dividend income actually paid to
investors or the income reported in its financial statements. Yield is
calculated separately for each class of shares of each Fund.
The Funds' performance data reflects past performance and will not necessarily
be indicative of future results. The Funds' investment results will vary from
time to time depending upon market conditions, the composition of their
portfolios and their operating expenses. These factors and possible differences
in calculation methods should be considered when comparing a Fund's investment
results with those published for other investment companies, other investment
vehicles and unmanaged indices. Each Fund's results also should be considered
relative to the risks associated with its investment objectives and policies.
See "Investment Results" in the Statement of Additional Information.
Each 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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the Funds, AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely on internal computer
systems as well as external computer systems provided by third parties. Some of
these systems were not originally designed to distinguish between the year 1900
and the year 2000. This inability, if not corrected, could adversely affect the
services AIM, AIM Distributors, the Transfer Agent and the Sub-adviser and
others provide the Funds and their shareholders.
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on which AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of Fund data in all systems. Phase (i) has been
completed; phase (ii) is substantially completed; phase (iii) has commenced; and
phase (iv) is expected to commence during the third quarter of 1998. The Project
is scheduled to be completed by December 31, 1998. Following completion of the
Project, AIM, AIM Distributors and the Sub-adviser will review any systems
subsequently acquired to confirm that they are year 2000 compliant.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Sub-adviser and AIM, and maintains its
offices at California Plaza, 2121 N. California Boulevard, Suite 450, Walnut
Creek, CA 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
02110, is custodian of each Fund's and the Portfolio's assets.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Company, the Funds and
the Portfolio. Kirkpatrick & Lockhart LLP also acts as counsel to the Sub-
adviser and the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and each Fund's and the Portfolio's
independent accountants are Coopers & Lybrand L.L.P., One Post Office Square,
Boston, MA 02109. Coopers & Lybrand L.L.P. conducts an annual audit of each Fund
and the Portfolio, assist in the preparation of each Fund's and the Portfolio's
federal and state income tax returns and consult with the Company, each Fund and
the Portfolio as to matters of accounting, regulatory filings, and federal and
state income taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 41
<PAGE>
AIM GLOBAL INCOME FUNDS
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.
Prospectus Page 42
<PAGE>
AIM GLOBAL INCOME FUNDS
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," 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.
Prospectus Page 43
<PAGE>
AIM GLOBAL INCOME FUNDS
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."
Prospectus Page 44
<PAGE>
AIM GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
AIM GLOBAL INCOME FUNDS
AIM/GT FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE FUNDS LISTED
BELOW, INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL 1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
AIM NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six global
theme funds
AIM WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
AIM INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
AIM EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
AIM DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / GLOBAL THEME FUNDS
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
AIM GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
AIM GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
AIM GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
AIM GLOBAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
AIM GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
AIM NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
AIM EUROPE GROWTH FUND
Focuses on investment opportunities in Europe
AIM LATIN AMERICAN GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
AIM SMALL CAP EQUITY FUND
Invests in equity securities of small U.S. companies
AIM MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
AIM AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
AIM JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
AIM GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
AIM GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
AIM STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
AIM GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
AIM FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
MONEY MARKET FUND
AIM DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY A I M ADVISORS, INC.,
INVESCO (NY), INC., AIM INVESTMENT FUNDS, INC., AIM GLOBAL GOVERNMENT INCOME
FUND, AIM STRATEGIC INCOME FUND, AIM GLOBAL HIGH INCOME FUND, GLOBAL HIGH
INCOME PORTFOLIO, OR A I M DISTRIBUTORS, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
GIN-PRO-2
<PAGE>
AIM GLOBAL INCOME FUNDS:
ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Advisor Class shares of
the AIM Global Government Income Fund ("Government Income Fund"), AIM Strategic
Income Fund ("Strategic Income Fund") and AIM Global High Income Fund ("High
Income Fund") (each, a "Fund," and, collectively, "Funds"). Each Fund is a
non-diversified series of AIM Investment Funds, Inc. (the "Company"), a
registered open-end management investment company. This Statement of Additional
Information, which is not a Prospectus, supplements and should be read in
conjunction with the Funds' current Advisor Class Prospectus dated June 1, 1998,
a copy of which is available without charge by writing to the above address or
by calling the Funds at the toll-free telephone number listed above.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for, and INVESCO (NY), Inc. (the "Sub-adviser") serves as the
sub-adviser and sub-administrator for the Government Income Fund, the Strategic
Income Fund and the Global High Income Portfolio (the "Portfolio"). AIM and the
Sub-adviser also serve as the administrator and sub-administrator, respectively,
of the High Income Fund. The distributor of the shares of each Fund is A I M
Distributors, Inc. ("AIM Distributors"). The Funds' transfer agent is GT Global
Investor Services, Inc. ("GT Services" or the "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 6
Risk Factors............................................................................................................. 15
Investment Limitations................................................................................................... 20
Execution of Portfolio Transactions...................................................................................... 24
Directors and Executive Officers......................................................................................... 26
Management............................................................................................................... 29
Valuation of Fund Shares................................................................................................. 31
Information Relating to Sales and Redemptions............................................................................ 32
Taxes.................................................................................................................... 34
Additional Information................................................................................................... 37
Investment Results....................................................................................................... 38
Description of Debt Ratings.............................................................................................. 43
Financial Statements..................................................................................................... 45
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
AIM GLOBAL INCOME FUNDS
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 High Income Fund primarily seek high current income and
secondarily seek capital appreciation. The High Income 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 Fund's investable assets" is used herein and in the Prospectus, it
means that the only investment securities held by the High Income Fund will be
its interest in the Portfolio. The High Income Fund may withdraw its investment
in the Portfolio at any time, if the Board of Directors of the Company
determines that it is in the best interests of the Fund and its shareholders to
do so. Upon any such withdrawal, the High Income Fund's assets would be invested
in accordance with the investment policies of the Portfolio described below and
in the Prospectus.
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-adviser 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 and the Portfolio, the Sub-adviser ordinarily considers the
following factors: prospects for relative economic growth among the different
countries in which the Government Income Fund, the Strategic 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.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by the Government Income Fund,
the Strategic 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-adviser 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 and the Portfolio anticipate investing directly in these
markets. The Government Income Fund, the
Statement of Additional Information Page 2
<PAGE>
AIM GLOBAL INCOME FUNDS
Strategic 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 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 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 High Income 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 and the Portfolio do not intend to invest in such investment
companies unless, in the judgment of the Sub-adviser, 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-adviser waives its
advisory fee to the extent that such fees are based on assets of a Fund invested
in Affiliated Funds.
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 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.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Government Income Fund, the
Strategic 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 Funds 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 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 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 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-adviser to be of good standing and will not
be made unless, in the judgment of the Sub-adviser, the consideration to be
earned from such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Strategic 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 the Strategic 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 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 either Fund 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 Fund or 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
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AIM GLOBAL INCOME FUNDS
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 Funds or Portfolio if the other party to the repurchase agreement
becomes bankrupt, the Government Income Fund, the Strategic Income Fund and the
Portfolio intend to enter into repurchase agreements only with banks and
broker/dealers believed by the Sub-adviser to present minimal credit risks in
accordance with guidelines approved by the Company's Board of Directors. The
Sub-adviser reviews and monitors the creditworthiness of such institutions under
the Board's general supervision.
The Government Income Fund, the Strategic 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. 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 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's or the Portfolio's ability to sell the collateral and the Government
Income Fund, the Strategic 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 and the Portfolio intend to comply with provisions
under such Code that would allow the immediate resale of such collateral. The
Government 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
its 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 borrowings will not exceed 30% of the Fund's total
assets, i.e., the 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 the
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. The Strategic Income
Fund's and the Portfolio's borrowings will not exceed 33 1/3% of the Strategic
Income Fund's or the Portfolio's, respective total assets. The Government Income
Fund, the Strategic 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 a 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 and the Portfolio's
fundamental investment limitations permit it to borrow money for leveraging
purposes. The Government Income Fund, however, currently is 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 Company's Board of Directors. The Strategic Income
Fund and 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 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 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.
The Government Income Fund, the Strategic 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 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 and the Portfolio will segregate with a custodian, cash or
liquid securities in an amount sufficient to cover its obligations under "roll"
transactions and reverse repurchase agreements with broker/ dealers. No
segregation is required for reverse repurchase agreements with banks.
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AIM GLOBAL INCOME FUNDS
SHORT SALES
The Government Income Fund, the Strategic 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 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 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 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 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 and the Portfolio might
make a short sale "against the box" in order to hedge against market risks when
the Sub-adviser 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 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 Fund 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.
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AIM GLOBAL INCOME FUNDS
OPTIONS, FUTURES AND CURRENCY STRATEGIES
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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-adviser'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-adviser 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 or the Portfolio
entered into a short hedge because the Sub-adviser 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
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 or the
Portfolio could suffer a loss. In either such case, the Fund or the
Portfolio would have been in a better position had it not hedged at all.
(4) As described below, a 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 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-adviser 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 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
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AIM GLOBAL INCOME FUNDS
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 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 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 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 and the Portfolio's fundamental investment 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 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 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-adviser 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 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 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 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
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 Fund or the Portfolio generally would write put options in circumstances where
the Sub-adviser 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
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AIM GLOBAL INCOME FUNDS
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 premiums 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.
PURCHASING PUT OPTIONS
The Government Income Fund, the Strategic 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 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 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 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 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 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
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AIM GLOBAL INCOME FUNDS
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 a Fund's
or the Portfolio's total assets at the time of purchase.
The Government Income Fund, the Strategic 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 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 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 Securities and Exchange Commission ("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 event 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 calls as are indicated above. When a
Fund or the
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AIM GLOBAL INCOME FUNDS
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.
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 AND CURRENCY FUTURES CONTRACTS
The Government Income Fund, the Strategic 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, the Strategic 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 Government Income Fund's, the Strategic Income Fund and the Portfolio only
will enter into Futures Contracts which 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
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AIM GLOBAL INCOME FUNDS
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 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 or the Portfolio realizes a gain; if it is more, the
Government Income Fund, the Strategic 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 or the
Portfolio realizes a gain; if it is less, the Government Income Fund, the
Strategic 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 or the Portfolio.
The Government Income Fund, the Strategic 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 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.
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AIM GLOBAL INCOME FUNDS
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 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 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.
In general, a call option on a Futures Contract is "in-the-money" if the value
of the underlying Futures
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AIM GLOBAL INCOME FUNDS
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 Company's Board of Directors or the Portfolio's Board of
Trustees, as applicable, without a shareholder vote. This limitation does not
limit the percentage of the Fund's or the Portfolio's assets at risk to 5%.
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 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 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 Company's Board of Directors or the Portfolio's Board of Trustees, as
applicable.
The Government Income Fund, the Strategic 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.
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AIM GLOBAL INCOME FUNDS
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 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-adviser 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-adviser, the Strategic Income Fund and
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AIM GLOBAL INCOME FUNDS
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 enhancements is rated at least A by Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Ratings Group ("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-adviser. 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.
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RISK FACTORS
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ILLIQUID SECURITIES
The Government Income Fund, the Strategic 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.
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AIM GLOBAL INCOME FUNDS
With respect to liquidity determinations generally, the Company's Board of
Directors 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-adviser in accordance with procedures
approved by the Board. The Sub-adviser 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-adviser will monitor the liquidity of securities held by each Fund and the
Portfolio and report periodically on such decisions to the Board of Directors.
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
illiquid. If the liquidity percentage restriction of each Fund and the Portfolio
is satisfied at the time of investment, a later increase in the percentage of
illiquid securities held by each Fund and 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 a Fund or the Portfolio increases above the applicable limit,
the Sub-adviser 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
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 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 may 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 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 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
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AIM GLOBAL INCOME FUNDS
available information concerning most foreign issuers of securities held by the
Government Income Fund, the Strategic 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-adviser 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 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 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-adviser will
consider such difficulties when determining the allocation of each Fund's or the
Portfolio's assets, although the Sub-adviser 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."
Statement of Additional Information Page 17
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AIM GLOBAL INCOME FUNDS
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") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, 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-adviser 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.
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
Statement of Additional Information Page 18
<PAGE>
AIM GLOBAL INCOME FUNDS
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 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
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. 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 the Strategic Income Fund's 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.
Statement of Additional Information Page 19
<PAGE>
AIM GLOBAL INCOME FUNDS
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
the lesser of (i) 67% of that Fund's shares or the total beneficial interests of
the Portfolio represented at a meeting at which more than 50% of the outstanding
shares of the Fund or the total beneficial interests of the Portfolio are
represented, or (ii) more than 50% of the outstanding shares of the Fund or the
total beneficial interests of the Portfolio. Whenever the High Income 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
(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
Directors 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;
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AIM GLOBAL INCOME FUNDS
(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 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
Directors 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
Statement of Additional Information Page 21
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AIM GLOBAL INCOME FUNDS
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.
HIGH INCOME FUND AND THE PORTFOLIO
The High Income 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;
(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 High Income Fund and the Portfolio are
not fundamental policies and may be changed by vote of the Company's Board of
Directors or the Portfolio's Board of Trustees without shareholder approval. The
Fund and the Portfolio each may not:
Statement of Additional Information Page 22
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AIM GLOBAL INCOME FUNDS
(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.
Investors should refer to the Prospectus for further information with respect to
each Fund's investment objectives, which may not be changed without the approval
of shareholders and the Portfolio's investment objectives, which may be changed
without the approval of investors in the Portfolio, and other investment
policies and techniques, which may be changed without shareholder approval.
Statement of Additional Information Page 23
<PAGE>
AIM GLOBAL INCOME FUNDS
EXECUTION OF PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the
Sub-adviser is responsible for the execution of the Government Income and
Strategic Income Funds' 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-adviser seeks the
best net results for the Government Income and Strategic Income Funds 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-adviser 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-adviser
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-adviser 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-adviser 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-adviser determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Sub-adviser 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-adviser 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-adviser 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-adviser
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 Company's Board of Directors and the Portfolio's
Board of Trustees, and subject to the policy of obtaining the best net results,
the Sub-adviser may consider a broker/dealer's sale of the shares of the Funds
and the other funds for which AIM or the Sub-adviser 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.
Statement of Additional Information Page 24
<PAGE>
AIM GLOBAL INCOME 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.
Foreign equity securities may be held by a Fund and the Portfolio in the form of
American Depository Receipts ("ADRs"), American Depository Shares ("ADSs"),
Continental Depository Receipts ("CDRs") or European Depository 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 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 affiliated with AIM or the Sub-adviser. The Company's
Board of Directors 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.
PORTFOLIO TRADING AND TURNOVER
Each Fund and the Portfolio engages in portfolio trading when the Sub-adviser
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-adviser 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 may result in the realization of net capital
gains that are taxable when distributed to each Fund's shareholders. The
portfolio turnover rates for the Government Income Fund, Strategic Income Fund
and the Portfolio the last two fiscal years were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCT. YEAR ENDED
31, 1997 OCT. 31, 1996
--------------- ---------------
<S> <C> <C>
Government Income Fund...................................................................... 241% 268%
Strategic Income Fund....................................................................... 149% 177%
High Income Portfolio....................................................................... 214% 290%
</TABLE>
Statement of Additional Information Page 25
<PAGE>
AIM GLOBAL INCOME FUNDS
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers and the Portfolio's Trustees and
Executive Officers are listed below. The term "Directors" as used below refers
to the Company's Directors and the Portfolio's Trustees collectively.
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global
Director, Chairman of the Board and President since 1991; Senior Vice President and Director of Sales and Marketing, GT Global
50 California Street from May 1992 to April 1995; Vice President and Director of Marketing, GT Global
San Francisco, CA 94111 from 1987 to 1992; Director, Liechtenstein Global Trust AG (holding company of
the various international GT companies) Advisory Board since January 1996;
Director, G.T. Global Insurance Agency ("G.T. Insurance") since 1996; President
and Chief Executive Officer, G.T. Insurance since 1995; Senior Vice President
and Director, Sales and Marketing, G.T. Insurance from April 1995 to November
1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992 to 1993.
Mr. Guilfoyle 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-adviser.
C. Derek Anderson, 57 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment
220 Sansome Street banking firm); Director, Anderson Capital Management, Inc. since 1988; Director,
Suite 400 PremiumWear, Inc. (formerly Munsingwear, Inc.) (a casual apparel company) and
San Francisco, CA 94104 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-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a
Director Director and Chairman of C.D. Stimson Company (a private investment company).
Two Embarcadero Center Mr. Bayley is also a trustee of each of the other investment companies
Suite 2400 registered under the 1940 Act that is sub-advised or sub- administered by the
San Francisco, CA 94111 Sub-adviser.
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He
Director also serves as a director of Viasoft and PageMart, Inc. (both public software
428 University Avenue companies), as well as several other privately held software and communications
Palo Alto, CA 94301 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-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of
Director Quigley Friedlander & Co., Inc. (a financial advisory services firm). Miss
1055 California Street Quigley is also a trustee of each of the other investment companies registered
San Francisco, CA 94108 under the 1940 Act that is sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the Sub-adviser.
Statement of Additional Information Page 26
<PAGE>
AIM GLOBAL INCOME FUNDS
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
John J. Arthur+, 53 Director, Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice
Vice President 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 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since 1997;
Vice President and Vice President -- Mutual Fund Accounting, the Sub-adviser from 1992 to 1997.
Principal Accounting Officer
50 California Street
San Francisco, CA 94111
Melville B. Cox, 54 Vice President and Chief Compliance Officer, A I M Advisors, Inc., A I M Capital
Vice President Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc. and Fund
Management Company.
Gary T. Crum, 50 Director and President, A I M Capital Management, Inc.; Director and Senior Vice
Vice President President, A I M Management Group Inc. and A I M Advisors, Inc.; and Director,
A I M Distributors, Inc. and AMVESCAP PLC.
Robert H Graham, 51 Director, President and Chief Executive Officer, A I M Management Group Inc.;
Vice President 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; Director, AMVESCAP PLC; Chairman of
the Board of Directors and President, INVESCO Holdings Canada Inc.; and
Director, AIM Funds Group Canada Inc. and INVESCO G.P. Canada Inc.
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser since
Vice President October 1997; Executive Vice President of the Asset Management Division of
50 California Street Liechtenstein Global Trust since October 1996; Senior Vice President, General
San Francisco, CA 94111 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 Director, Senior Vice President, General Counsel and Secretary, A I M Advisors,
Vice President 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 Fund Controller, A I M Advisors, Inc.; and Assistant Vice
Vice President and President and Assistant Treasurer, Fund Management Company.
Assistant Treasurer
</TABLE>
- ------------------
+ Mr. Arthur and Ms. Relihan are married to each other.
Statement of Additional Information Page 27
<PAGE>
AIM GLOBAL INCOME FUNDS
The Board of Directors 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 Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors of the
Company. Each of the Directors and Officers of the Company is also a Director or
Trustee and Officer of AIM Investment Portfolios, Inc., AIM Floating Rate Fund,
AIM Series Trust, AIM Growth Series, AIM Eastern Europe Fund, GT Global Variable
Investment Trust, GT Global Variable Investment Series, Global Investment
Portfolio, Floating Rate Portfolio and Growth Portfolio, which also are
registered investment companies advised by AIM and sub-advised by the
Sub-adviser or an affiliate thereof. Each Director, Trustee and Officer serves
in total as a Director, Trustee and Officer, respectively, of 12 registered
investment companies with 47 series managed or administered by AIM and
sub-advised or sub-administered by the Sub-adviser. Each Director who is not a
director, officer or employee of the Sub-adviser 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 Directors and Officers receive no
compensation or expense reimbursement from the Company. For the fiscal year
October 31, 1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who
are not directors, officers, or employees of the Sub-adviser or any affiliated
companies, received total compensation of $38,650, $38,650, $27,850 and $38,650,
respectively, from the Company's series Funds 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-adviser 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-adviser for which he or she serves as a Director or Trustee. Fees and
expenses disbursed to the Directors contained no accrued or payable pension or
retirement benefits. As of May 7, 1998, the Officers and Directors 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 Company's series in the
aggregate.
Statement of Additional Information Page 28
<PAGE>
AIM GLOBAL INCOME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as the Government Income Fund's and the Strategic Income Fund's
investment manager and administrator under an investment management and
administration contract between the Company and AIM ("Company Management
Contract"). The Sub-adviser serves as the sub-adviser and sub-administrator to
the Government Income Fund and Strategic Income Fund under a Sub-Advisory and
Sub-Administration Contract between AIM and the Sub-adviser ("Sub-Management
Contract," and together with the Management Contract, the "Management
Contracts"). AIM series 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-adviser serves as the Portfolio's sub-adviser and
sub-administrator under a Sub-Advisory and Sub-Administration Agreement between
AIM and the Sub-adviser ("Portfolio Management Sub-Contract," and together with
the Portfolio Management Contract, the "Portfolio Management Contracts"). AIM
serves as the High Income Fund's administrator under an Administration Contract
("Administration Contract") between the Company and AIM. The Sub-adviser serves
as sub-administrator to each Feeder Fund under a sub-administration contract
between AIM and the Sub-adviser ("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-adviser
make all investment decisions for the Government Income Fund, the Strategic
Income Fund and the Portfolio, and as administrators, AIM and the Sub-adviser
administer each Fund's and the Portfolio's affairs. Among other things, AIM and
the Sub-adviser furnish the services and pay the compensation and travel
expenses of persons who perform the executive, administrative, clerical and
bookkeeping functions of the Company, 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
Company's Board of Directors 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 Directors who are not parties to the Management Contracts or the
Administration Contracts, as applicable 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 and
the Portfolio and the Administration Contract provides that with respect to the
High Income Fund either the Company, the Portfolio or each of AIM or the
Sub-adviser may terminate the Management 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-adviser in the
following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 2,403,043
1996....................................................................................................... 3,672,503
1995....................................................................................................... 4,946,971
</TABLE>
In each of the last three fiscal years the Strategic Income Fund paid investment
management and administration fees to the Sub-adviser in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 3,474,804
1996....................................................................................................... 3,807,689
1995....................................................................................................... 4,293,053
</TABLE>
Statement of Additional Information Page 29
<PAGE>
AIM GLOBAL INCOME FUNDS
In each of the last three fiscal years, the High Income Portfolio paid
investment management and administration fees to the Sub-adviser 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 High Income Fund paid investment
management and administration fees to the Sub-adviser 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 separate distribution contracts between the Company and AIM
Distributors without a sales charge or a contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Funds to perform shareholder
servicing, reporting and general transfer agent functions for them. For these
services, the Transfer Agent 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. The
Transfer Agent also is reimbursed by each Fund for its out-of-pocket expenses
for such items as postage, forms, telephone charges, stationery and office
supplies. The Sub-adviser serves as each Fund's pricing and accounting agent.
For the fiscal years ended October 31, 1997, October 31, 1996 and October 31,
1995, the Fund paid accounting services fees to the Sub-adviser of Government
Income Fund, Strategic Income Fund, and High Income Fund were $85,149, $127,205
and $40,218; $123,309, $131,517 and $34,980; and $116,607, $101,697 and $22,563,
respectively.
EXPENSES OF THE FUNDS AND THE PORTFOLIO
Each Fund and the Portfolio pays all expenses not assumed by AIM, the
Sub-adviser, 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, directors' 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 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 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.
Statement of Additional Information Page 30
<PAGE>
AIM GLOBAL INCOME FUNDS
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, each Fund's net asset value per share for each
class of shares is determined at the close of regular trading on the New York
Stock Exchange ("NYSE") (currently, 4:00 P.M. Eastern time, unless weather,
equipment failure or other factors contribute to an earlier closing business
time) on each business day the NYSE is open for business. Currently, the NYSE is
closed on weekends and on certain days relating to the following holidays: New
Year's Day, Martin Luther King Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each Fund's and the Portfolio's portfolio securities and other assets are valued
as follows:
Equity securities, including ADRs, ADSs and EDRs, which are traded on stock
exchanges are valued at the last sale price on the exchange 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 the
Sub-adviser to be the primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Sub-adviser deems it appropriate, prices obtained for the day of valuation
from a bond pricing service will be used. Short-term debt investments are
amortized to maturity based on their cost, adjusted for foreign exchange
translation, provided such valuations represent fair value.
Options on indices, securities and currencies purchased by a Fund or the
Portfolio are valued at their last bid price in the case of listed options or,
in the case of OTC options at 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. When market quotations for futures and
options on futures held by a Fund or the Portfolio are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also are generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of a Fund's or the Portfolio's total assets.
The Fund's or the Portfolio's liabilities, including accruals for expenses, are
deducted from its total assets. Once the total value of a Fund's or the
Portfolio's net assets is so determined, that value is then divided by the total
number of shares outstanding (excluding treasury shares), and the result,
rounded to the nearest cent, is the net asset value per share.
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern or Latin American securities trading may not take place on
all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
Statement of Additional Information Page 31
<PAGE>
AIM GLOBAL INCOME FUNDS
NYSE is not open. Consequently, the calculation of the Funds' respective net
asset values therefore may not take place contemporaneously with the
determination of the prices of securities held by the Funds. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
the Funds' net asset values unless the Sub-adviser, under the supervision of the
Company's Board of Directors, determines that the particular event would
materially affect net asset value. As a result, a Fund's net asset value may be
significantly affected by such trading on days when a shareholder cannot
purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES AND
REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Advisor Class shares of a fund purchased should accompany the
purchase order, or funds should be wired to the Transfer Agent as described in
the Prospectus. Payment for Fund shares, other than by wire transfer, must be
made by check or money order drawn on a U.S. bank. Checks or money orders must
be payable in U.S. dollars.
As a condition of this offering, if an order to purchase Advisor Class shares is
cancelled due to nonpayment (for example, because a check is returned for
insufficient funds), the person who made the order will be responsible for any
loss incurred by a Fund by reason of such cancellation, and if such purchaser is
a shareholder, the Fund shall have the authority as agent of the shareholder to
redeem shares in his or her account at their then-current net asset value per
share to reimburse that Fund for the loss incurred. Investors whose purchase
orders have been cancelled due to nonpayment may be prohibited from placing
future orders.
Each Fund reserves the right at any time to waive or increase the minimum
requirements applicable to initial or subsequent investments with respect to any
person or class of persons. An order to purchase shares is not binding on a Fund
until it has been confirmed in writing by the Transfer Agent (or other
arrangements made with the Fund, in the case of orders utilizing wire transfer
of funds, as described above) and payment has been received. To protect existing
shareholders, each Fund reserves the right to reject any offer for a purchase of
shares by any individual.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") AND OTHER TAX-DEFERRED PLANS
IRAS: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless your and your spouse's
earnings exceed a certain level, you also may establish an "education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax adviser for more information. IRA
applications are available from brokers or AIM Distributors.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of series of substantially equal periodic payments, generally is subject
to regular wage withholding or withholding at the rate of 10% (depending on the
type and amount of the distribution), unless you elect not to have any
withholding apply. Please consult your tax adviser for more information.
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
Statement of Additional Information Page 32
<PAGE>
AIM GLOBAL INCOME FUNDS
CODE SECTION 403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A Section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Section 401(k)
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirement plans.
EXCHANGES BETWEEN FUNDS
Advisor Class shares of each Fund may be exchanged for Advisor Class shares of
the corresponding class of other AIM/GT Funds, based on their respective net
asset values without imposition of any sales charges, provided that the
registration remains identical. The exchange privilege is not an option or right
to purchase shares but is permitted under the current policies of the respective
AIM/GT Funds. The privilege may be discontinued or changed at any time by any of
those funds upon sixty days' prior notice to the shareholders of the fund and is
available only in states where the exchange may be made legally. Before
purchasing shares through the exercise of the exchange privilege, a shareholder
should obtain and read a copy of the prospectus of the fund to be purchased and
should consider its investment objective(s).
TELEPHONE REDEMPTIONS
A corporation or partnership wishing to utilize telephone redemption services
must submit a "Corporate Resolution" or "Certificate of Partnership" indicating
the names, titles and the required number of signatures of persons authorized to
act on its behalf. The certificate must be signed by a duly authorized
officer(s) and, in the case of a corporation, the corporate seal affixed. All
shareholders may request that redemption proceeds be transmitted by bank wire
directly to the shareholder's predesignated account at a domestic bank or
savings institution, if the proceeds are at least $500. Costs in connection with
the administration of this service, including wire charges, currently are borne
by the appropriate Fund. Proceeds of less than $500 will be mailed to the
shareholder's registered address of record. The Funds and the Transfer Agent
reserve the right to refuse any telephone instructions and may discontinue the
aforementioned redemption options upon fifteen days' written notice.
SUSPENSION OF REDEMPTION PRIVILEGES
The Funds may suspend redemption privileges or postpone the date of payment for
more than seven days after a redemption order is received during any period (1)
when the NYSE is closed other than customary weekend and holiday closings, or
trading on the NYSE is restricted as directed by the SEC, (2) when an emergency
exists, as defined by the SEC, which makes it not reasonably practicable for the
Funds to dispose of securities owned by them or fairly to determine the value of
their assets, or (3) as the SEC may otherwise permit.
REDEMPTIONS IN KIND
It is possible that conditions may arise in the future which would, in the
opinion of the Company's Board of Directors, make it undesirable for a Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of a Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that each Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the net asset value of
a Fund at the beginning of such period. This election is irrevocable so long as
Rule 18f-1 remains in effect, unless the SEC by order upon application permits
the withdrawal of such election.
Statement of Additional Information Page 33
<PAGE>
AIM GLOBAL INCOME FUNDS
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 High Income 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 High Income 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 High Income 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.
Because, as noted above, the High Income Fund will be 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 High Income Fund will be able to continue to satisfy
all those requirements.
Distributions to the High Income 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 High Income 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.
Statement of Additional Information Page 34
<PAGE>
AIM GLOBAL INCOME FUNDS
TAXATION OF CERTAIN INVESTMENT ACTIVITIES
For purposes of the following discussion, "Investor Fund" means the Government
Income Fund, the Strategic Income Fund or the Portfolio.
FOREIGN TAXES Dividends and interest 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 a Fund's
total assets (taking into account, in the case of the High Income 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
High Income Fund, its proportionate share of any foreign taxes paid by the
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, 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 High
Income 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 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 High Income 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 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 the High Income Fund, its
proportionate share of a part) of any "excess distribution" received by it (or,
in the case of the High Income Fund, by the Portfolio) on the stock of a PFIC or
of any gain from its (or, in the case of the High Income Fund, by the
Portfolio's) disposition of the 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 the Fund 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
High Income Fund) would be required to include in income each taxable year its
pro rata share (taking into account, in the case of High Income 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 High
Income 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
Statement of Additional Information Page 35
<PAGE>
AIM GLOBAL INCOME FUNDS
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 Investor Fund's 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 High Income 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). 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 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 the 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 High Income
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 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, either of them 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 High Income 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 High Income
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 a 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 a Fund (directly or through
the Portfolio) from U.S. corporations.
Statement of Additional Information Page 36
<PAGE>
AIM GLOBAL INCOME FUNDS
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.
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 taxpayers 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 Fund's, their shareholders and the Portfolio.
Investors are urged to consult their own tax advisers for more detailed
information and for information regarding any foreign, state and local taxes
applicable to distributions received from the 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.
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.
INDEPENDENT ACCOUNTANTS
The Funds' and the Portfolio's independent accountants are Coopers & Lybrand
L.L.P., One Post Office Square, Boston MA 02109. Coopers & Lybrand L.L.P.
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 Company, 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 Coopers & Lybrand
L.L.P., 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.
NAMES
Prior to May 29, 1998, 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; and AIM Global Government Income Fund operated
under the name of GT Global Government Income Fund.
Statement of Additional Information Page 37
<PAGE>
AIM GLOBAL INCOME FUNDS
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS
Each Fund's "Standardized Returns," as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), are calculated
separately for Class A and Advisor Class shares of each Fund, as follows:
Standardized Return (average annual total return ("T")) is computed by using the
ending redeeming value ("ERV") of a hypothetical initial investment of $1,000
("P") over a period of years ("n") according to the following formula as
required by the SEC: P(1+T) to the (n)th power = ERV. The following assumptions
will be reflected in computations made in accordance with this formula: (1) for
Class A shares, deduction of the maximum sales charge of 4.75% from the $1,000
initial investment; (2) reinvestment of dividends and other distributions at net
asset value on the reinvestment date determined by the Company's Board of
Directors; and (3) a complete redemption at the end of any period illustrated.
The Standardized Returns for the Class A and Advisor Class shares of the
Strategic Income Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
STRATEGIC STRATEGIC
INCOME INCOME
FUND FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- --------- ---------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997......... 4.21% 9.86%
October 31, 1992 through Oct. 31,
1997................................... 10.14% n/a
May 31, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 15.13%
March 29, 1988 (commencement of
operations) through Oct. 31, 1997...... 9.01% n/a
</TABLE>
The Standardized Returns for the Class A and Advisor Class shares of the
Government Income Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
GOVERNMENT GOVERNMENT
INCOME INCOME
FUND FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- ---------- ---------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997......... (0.20)% 5.15%
Oct. 31, 1992 through Oct. 31, 1997..... 5.34% n/a
May 31, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 5.55%
March 29, 1988 (commencement of
operations) through Oct. 31, 1997...... 6.52% n/a
</TABLE>
The Standardized Returns for the Class A and Advisor Class shares of the High
Income Fund, stated as average annualized total returns for the periods shown,
were:
<TABLE>
<CAPTION>
HIGH HIGH
INCOME INCOME
FUND FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- --------- ---------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997......... 9.03% 14.72%
May 31, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 24.63%
Oct. 22, 1992 (commencement of
operations) through Oct. 31, 1997...... 15.85% n/a
</TABLE>
NON-STANDARDIZED RETURNS
In addition to Standardized Returns, each Fund also may include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A and Advisor Class shares of each Fund and may
be calculated according to several different formulas. Non-Standardized Returns
may be quoted for the same or different time periods for which Standardized
Returns are quoted. Non-Standardized Returns may or may not take sales charges
into account; performance data calculated without taking the effect of sales
charges into account will be higher than data including the effect of such
charges. Advisor Class are not subject to sales charges.
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T = (VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions.
Statement of Additional Information Page 38
<PAGE>
AIM GLOBAL INCOME FUNDS
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Strategic Income Fund, stated as
aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
STRATEGIC STRATEGIC
INCOME INCOME
FUND FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- --------- ---------------
<S> <C> <C>
May 31, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 40.60%
March 29, 1988 (commencement of
operations) through Oct. 31, 1997...... 140.06% n/a
</TABLE>
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Government Income Fund, stated
as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
GOVERNMENT GOVERNMENT
INCOME INCOME
FUND FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- ---------- ---------------
<S> <C> <C>
May 31, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 13.96%
March 29, 1988 (commencement of
operations) through Oct. 31, 1997...... 92.49% n/a
</TABLE>
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the High Income Fund, stated as
aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
HIGH HIGH
INCOME INCOME
FUND FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- --------- ---------------
<S> <C> <C>
May 31, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 70.35%
Oct. 22, 1992 (commencement of
operations) through Oct. 31, 1997...... 119.88% n/a
</TABLE>
YIELD
Each Fund may also include its current yield ("Yield") in advertisements, sales
literature and shareholder reports. Yield, which is calculated separately for
Class A, Class B and Advisor Class shares of each Fund, is computed by dividing
the difference between dividends and interest earned during a one-month period
("a") and expenses accrued for the period (net of reimbursements) ("b") by the
product of the average daily number of shares outstanding during the period that
were entitled to receive dividends ("c") and the maximum offering price per
share on the last day of the period ("d") according to the following formula as
required by the SEC:
<TABLE>
<S> <C> <C> <C> <C> <C>
a-b
YIELD = 2 [( -- + 1 ) (6)-1]
cd
</TABLE>
The Yields of the Class A shares of the Strategic Income Fund, Government Income
Fund and High Income Fund for the one-month period ended October 31, 1996 were
6.58%, 6.23% and 7.29%, respectively. The Yields of the Class B shares of the
Strategic Income Fund, Government Income Fund and High Income 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 High Income Fund for the one-month period ended
October 31, 1996 were 7.27%, 6.74% and 8.04%, respectively.
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
Each Fund and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Funds with the following, among others:
(1) The Consumer Price Index ("CPI"), which is a measure of the average
change in prices over time in a fixed market basket of goods and services
(e.g., food, clothing, shelter, fuels, transportation fares, charges for
doctors' and dentists' services, prescription medicines, and other goods and
services that people buy for day-to-day living). There is inflation risk
which does not affect a security's value but its purchasing power, i.e., the
risk of changing price levels in the economy that affects security prices or
the price of goods and services.
(2) Data and mutual fund rankings and comparisons published or prepared
by Lipper Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger
Investment Company Services ("CDA/Wiesenberger"), Morningstar, Inc.
("Morningstar"), Micropal, Inc. and/or other companies that rank and/or
compare mutual funds by overall performance, investment objectives, assets,
expense levels, periods of existence and/or other factors. In this regard,
each Fund may be compared to its "peer group" as defined by Lipper,
CDA/Wiesenberger, Morningstar and/or other firms, as applicable or to
specific funds or groups of funds within or outside of such peer group.
Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or redemption
fees
Statement of Additional Information Page 39
<PAGE>
AIM GLOBAL INCOME FUNDS
into consideration, and is prepared without regard to tax consequences. In
addition to the mutual fund rankings, the Fund's performance may be compared
to mutual fund performance indices prepared by Lipper. Morningstar is a
mutual fund rating service that also rates mutual funds on the basis of
risk-adjusted performance. Morningstar ratings are calculated from a fund's
three, five and ten year average annual returns with appropriate fee
adjustments and a risk factor that reflects fund performance relative to the
three-month U.S. Treasury bill monthly returns. Ten percent of the funds in
an investment category receive five stars and 22.5% receive four stars. The
ratings are subject to change each month.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) Standard & Poor's 500 Composite Stock Price Index, which is a widely
recognized index composed of the capitalization-weighted average of the
prices of 500 of the largest publicly traded stocks in the U.S.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World Index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE") provides brief reports on most of the World Bank's borrowing
members. The World Development Report is published annually and looks at
global and regional economic trends and their implications for the
developing economies.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including but not limited to
international financial and economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's,
S&P and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measures for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on bond and stock markets in
developing countries.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) Average of savings accounts, which is a measure of all kinds of
savings deposits, including longer-term certificates. Savings accounts offer
a guaranteed rate of return on principal, but no opportunity for capital
growth. During a portion of the period, the maximum rates paid on some
savings deposits were fixed by law.
Statement of Additional Information Page 40
<PAGE>
AIM GLOBAL INCOME FUNDS
Indices, economic and financial data prepared by the research departments of
various financial organizations, such as Salomon Brothers, Inc., Lehman
Brothers, Merrill Lynch, Pierce, Fenner & Smith, Inc., Financial Research
Corporation, J. P. Morgan, Morgan Stanley, Smith Barney Shearson, S.G. Warburg,
Jardine Flemming, The Bank for International Settlements, Asian Development
Bank, Bloomberg, L.P. and Ibbotson Associates may be used as well as information
reported by the Federal Reserve and the respective Central Banks of various
nations. In addition, AIM Distributors may use performance rankings, ratings and
commentary reported periodically in national financial publications, including
Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance, EuroMoney,
Financial World, Forbes, Fortune, Business Week, Latin Finance, The Wall Street
Journal, Emerging Markets Weekly, Kiplinger's Guide To Personal Finance,
Barron's, The Financial Times, USA Today, The New York Times and Investors
Business Digest. Each Fund may compare its performance to that of other
compilations or indices of comparable quality to those listed above and other
indices that may be developed and made available in the future.
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. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
AIM Distributors believes that this information may be useful to investors
considering whether and to what extent to diversify their investments through
the purchase of mutual funds investing in securities on a global basis. However,
this data is not a representation of the past performance of the Funds, nor is
it a prediction of such performance. The performance of the Fund will differ
from the historical performance of relevant indices. The performance of indices
does not take expenses into account, while the Fund incurs expenses in its
operations, which will reduce performance. Each of these factors will cause the
performance of the Fund to differ from relevant indices.
From time to time, each Fund and AIM Distributors may refer to the number of
shareholders in the Funds or the aggregate number of shareholders in all AIM
Funds or the dollar amount of each Fund's assets under management in advertising
materials.
AIM Distributors believes the AIM Global Income Funds can be an appropriate
investment for long-term investment goals, including funding retirement, paying
for education or purchasing a house. AIM Distributors may provide information
designed to help individuals understand their investment goals and explore
various financial strategies. For example, AIM Distributors may describe general
principles of investing, such as asset allocation, diversification and risk
tolerance. The AIM Global Income Funds do not represent a complete investment
program and the investors should consider the Funds as appropriate for a portion
of their overall investment portfolio with regard to their long-term investment
goals. There is no assurance that any such information will lead to achieving
these goals or guarantee future results.
From time to time, AIM Distributors may refer to or advertise the names of U.S.
and non-U.S. companies and their products, although there can be no assurance
that any AIM Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets is based on the returns of different
indices.
AIM Funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the Funds.
Ibbotson calculates total returns in the same method as the Funds.
Each Fund may quote various measures of volatility and benchmark correlation,
such as beta, standard deviation and R(2), in advertising. In addition, each
Fund may compare these measures to those of other funds. Measures of volatility
seek to compare the Funds' historical share price fluctuations or total return
to those of a benchmark.
Each Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in a Fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a
Statement of Additional Information Page 41
<PAGE>
AIM GLOBAL INCOME FUNDS
profit or guard against loss in a declining market, the investor's average cost
per share can be lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their ability to
continue purchasing shares through periods of low price levels.
Each Fund may describe in its sales material and advertisements how an investor
may invest in AIM Funds through various retirement plans or other programs that
offer deferral of income taxes on investment earnings and pursuant to which an
investor may make deductible contributions. Because of their advantages, these
retirement plans and programs may produce returns superior to comparable
non-retirement investments. For example, a $10,000 investment earning a taxable
return of 10% annually would have an after-tax value of $17,976 after ten years,
assuming tax was deducted from the return each year at a 39.6% rate. An
equivalent tax-deferred investment would have an after-tax value of $19,626
after ten years, assuming tax was deducted at a 39.6% rate from the deferred
earnings at the end of the ten-year period. In sales material and
advertisements, the Fund may also discuss these plans and programs. See
"Information Relating to Sales and Redemptions -- Individual Retirement Accounts
("IRAs") and Other Tax-Deferred Plans."
AIM Distributors may from time to time in its sales methods and advertising
discuss the risks inherent in investing. The major types of investment risk are
market risk, industry risk, credit risk, interest rate risk, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
From time to time, the Funds and AIM Distributors will quote information
regarding industries, individual countries, regions, world stock exchanges, and
economic and demographic statistics from sources AIM Distributors deems
reliable, including the economic and financial data of financial organizations,
such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International World
Indices and IFC.
3) The number of listed companies: IFC, GT Guide to World Equity Markets,
Salomon Brothers, Inc. and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley Capital
International World Indices.
5) International industry performance: Morgan Stanley Capital International
World Indices, Wilshire Associates and Salomon Brothers, Inc.
6) Stock market performance: Morgan Stanley Capital International World
Indices, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry, or market: IFC, GT Guide to World
Equity Markets, Salomon Brothers, Inc. and S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
16) Supply, consumption, demand and growth in demand of certain products,
services and industries, including, but not limited to electricity, water,
transportation, construction materials, natural resources, technology, other
basic infrastructure, financial services, health care services and supplies,
consumer products and services and telecommunications equipment and services
(sources of such information may include, but would not be limited to, The
World Bank, OECD, IMF, Bloomberg and Datastream).
17) Standard deviation and performance returns for U.S. and non-U.S. equity and
bond markets: Morgan Stanley Capital International.
18) Countries restructuring their debt, including those under the Brady Plan:
the Sub-adviser.
19) Political and economic structure of countries: Economist Intelligence Unit.
Statement of Additional Information Page 42
<PAGE>
AIM GLOBAL INCOME FUNDS
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, AIM Distributors may include in its advertisements and sales
material, information about privatization, which is an economic process
involving the sale of state-owned companies to the private sector.
In advertising and sales materials, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser provided assistance to the government of Hong
Kong in linking its currency to the U.S. dollar, and that in 1987 Japan's
Ministry of Finance licensed GT Asset Management Ltd. as one of the first
foreign discretionary investment managers for Japanese investors. Such
accomplishments, however, should not be viewed as an endorsement of the
Sub-adviser by the government of Hong Kong, Japan's Ministry of Finance or any
other government or government agency. Nor do any such accomplishments of the
Sub-adviser provide any assurance that the Funds' investment objectives will be
achieved.
ECONOMIC DEVELOPMENT IN EMERGING MARKETS
The Sub-adviser has identified six phases to track the progress of developing
economies.
In addition, the Sub-adviser focuses on the transitions between each phase:
BETWEEN PHASES 1 & 2, STABILIZATION: Developing nations recognize the need
for economic reform and launch initiatives to stabilize their economies. Typical
measures might include initiating monetary reforms to contain inflation,
controlling government spending, and addressing external trade imbalances.
BETWEEN PHASES 2 & 3, RENOVATION: Economic development gathers momentum as
the governments of developing nations take further steps to increase
productivity and external competitiveness. Typical reforms include easing market
regulations, privatizing state-owned industries, lowering trade barriers and
reforming the national tax structure.
BETWEEN PHASES 3 & 4, NEW CONSTRUCTION: As economic reforms take hold,
infrastructure improvements are needed to facilitate and support long-term
growth. The construction and upgrading of highways and airports, communications
and utility systems generally require financing in the form of public debt.
Similarly, as the private sector develops, bolstered by new privatizations,
corporate debt securities typically are issued to finance business expansion.
EMERGING MARKET TRADING VOLUME
The annual trading volume of debt securities from developing economies according
to Salomon Brothers, Inc. has grown from $90 billion in 1990 to $150 billion in
1991 to $400 billion in 1992 and was estimated to be $1,200 billion at the end
of 1993 and $1.5 trillion at the end of 1994, respectively.
- --------------------------------------------------------------------------------
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.
Statement of Additional Information Page 43
<PAGE>
AIM GLOBAL INCOME FUNDS
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., 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.
Statement of Additional Information Page 44
<PAGE>
AIM GLOBAL INCOME FUNDS
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.
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 "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."
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Funds as of October 31, 1997 and the
fiscal year then ended appear on the following pages.
Statement of Additional Information Page 45
<PAGE>
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
F1
<PAGE>
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.
F2
<PAGE>
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.
F3
<PAGE>
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.
F4
<PAGE>
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.
F5
<PAGE>
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.
F6
<PAGE>
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.
F7
<PAGE>
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.
F8
<PAGE>
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.
F9
<PAGE>
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.
F10
<PAGE>
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.
F11
<PAGE>
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.
F12
<PAGE>
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.
F13
<PAGE>
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.
F14
<PAGE>
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.
F15
<PAGE>
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.
F16
<PAGE>
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.
F17
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<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.
F18
<PAGE>
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.
F19
<PAGE>
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.
F20
<PAGE>
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.
F21
<PAGE>
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.
F22
<PAGE>
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.
F23
<PAGE>
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.
F24
<PAGE>
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.
F25
<PAGE>
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.
F26
<PAGE>
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.
F27
<PAGE>
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.
F28
<PAGE>
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
F29
<PAGE>
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.
F30
<PAGE>
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.
F31
<PAGE>
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>
F32
<PAGE>
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>
F33
<PAGE>
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>
F34
<PAGE>
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
GT GLOBAL GOVERNMENT INCOME FUND AMOUNT IN 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>
F35
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
AIM GLOBAL INCOME FUNDS
AIM/GT FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE FUNDS LISTED
BELOW, INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL 1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
AIM NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six global
theme funds
AIM WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
AIM INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
AIM EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
AIM DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / GLOBAL THEME FUNDS
AIM GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
AIM GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
AIM GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
AIM GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
AIM GLOBAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
AIM GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
AIM NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
AIM EUROPE GROWTH FUND
Focuses on investment opportunities in Europe
AIM LATIN AMERICAN GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
AIM SMALL CAP EQUITY FUND
Invests in equity securities of small U.S. companies
AIM MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
AIM AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
AIM JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
AIM GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
AIM GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
AIM STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
AIM GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
AIM FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
MONEY MARKET FUND
AIM DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AIM
INVESTMENT FUNDS, INC., AIM GLOBAL GOVERNMENT INCOME FUND, AIM STRATEGIC
INCOME FUND, AIM GLOBAL HIGH INCOME FUND, GLOBAL HIGH INCOME PORTFOLIO,
A I M ADVISORS, INC., INVESCO (NY), INC. OR A I M DISTRIBUTORS, INC. THIS
STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
INCSX703MC
