<PAGE> 1
AIM DEVELOPING
MARKETS FUND
- -------------------------------------------------------------------------------
AIM Developing Markets Fund primarily seeks to provide long-term growth of
capital with a secondary objective of income, to the extent consistent
with seeking growth of capital.
PROSPECTUS AIM --Registered Trademark--
FEBRUARY 28, 2000
This prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 2
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AIM DEVELOPING MARKETS FUND
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 3
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AIM DEVELOPING MARKETS FUND
---------------------------
INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's primary investment objective is long-term growth of capital and its
secondary investment objective is income, to the extent consistent with seeking
growth of capital.
The fund seeks to meet these objectives by investing substantially all of its
assets in issuers in developing countries, i.e., those that are in the initial
stages of their industrial cycles. The fund will invest a majority of its assets
in equity securities, and may also invest in debt securities, of developing
countries. The fund considers issuers in "developing countries" to be those (1)
organized under the laws of a developing country or have a principal office in a
developing country; (2) that derive 50% or more, alone or on a consolidated
basis, of their total revenues from business in developing countries; or (3)
whose securities are trading principally on a stock exchange, or in an over-the-
counter market, in a developing country. The fund will normally invest in
issuers in at least four countries, but it will invest no more than 25% of its
assets in issuers in any one country. The fund also may hold no more than 40% of
its assets in any one foreign currency and securities denominated in or indexed
to such currency. The fund may invest in debt securities when economic and other
factors appear to favor such investments. The fund may also invest up to 100% of
its assets in lower-quality debt securities, i.e., "junk bonds."
The fund may invest up to 50% of its total assets in the following types of
developing market debt securities: (1) debt securities issued or guaranteed by
governments, their agencies, instrumentalities or political subdivisions, or by
government owned, controlled or sponsored entities, including central banks
(sovereign debt), and "Brady Bonds"; (2) interests in issuers organized and
operated for the purpose of restructuring the investment characteristics of
sovereign debt; (3) debt securities issued by banks and other business entities;
and (4) debt securities denominated in or indexed to the currencies of emerging
markets. Brady Bonds are debt restructurings that provide for the exchange of
cash and loans for newly issued bonds. There is no requirement with respect to
the maturity or duration of debt securities in which the fund may invest.
The portfolio managers focus on companies that have experienced above-average,
long-term growth in earnings and have excellent prospects for future growth. In
selecting countries in which the fund will invest, the portfolio managers also
consider such factors as the prospect for relative economic growth among
countries or regions, economic or political conditions, currency exchange
fluctuations, tax considerations and the liquidity of a particular security. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
The fund is non-diversified. With respect to 50% of its assets, it is
permitted to invest more than 5% of its assets in the securities of any one
issuer.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold all
or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, shares of affiliated
money market funds, or high-quality debt securities. As a result, the fund may
not achieve its investment objectives.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term gains and losses, which
may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions, and market liquidity. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. Interest
rate increases may cause the price of a debt security to decrease. The longer a
bond's duration, the more sensitive it is to this risk. Junk bonds are less
sensitive to this risk than are higher-quality bonds.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
1
<PAGE> 4
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AIM DEVELOPING MARKETS FUND
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These factors may affect the prices of securities issued by foreign companies
and governments located in developing countries more than those in countries
with mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devalued their currencies against
the U.S. dollar, thereby causing the value of investments in companies located
in those countries to decline. Transaction costs are often higher in developing
countries and there may be delays in settlement procedures.
Sovereign debt securities of developing country governments are generally
lower-quality debt securities. Sovereign debt securities are subject to the
additional risk that, under some political, diplomatic, social or economic
circumstances, some developing countries that issue lower-quality debt
securities may be unable or unwilling to make principal or interest payments as
they come due.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors'
claims. The value of junk bonds often fluctuates in response to company,
political or economic developments and can decline significantly over short
periods of time or during periods of general or regional economic difficulty.
During those times, the bonds could be difficult to value or to sell at a fair
price. Credit ratings on junk bonds do not necessarily reflect their actual
market risk.
Because it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. The value of the fund's shares may vary more widely,
and the fund may be subject to greater investment and credit risk, than if the
fund invested more broadly.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 5
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AIM DEVELOPING MARKETS FUND
---------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Returns
- ----------- -------
<S> <C>
1995 .......................................................... -0.95%
1996 .......................................................... 23.59%
1997 .......................................................... -8.49%
1998 .......................................................... -35.32%
1999 .......................................................... 61.50%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
30.56% (quarter ended December 31, 1999) and the lowest quarterly return was
- -27.81% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 53.89% 2.20% (0.72)% 1/11/94
Class B 55.57 -- (1.31) 11/3/97
Class C -- -- -- 03/01/99
MSCI Emerging Markets Free Index(1) 66.41 2.00 0.38(2) 12/31/93(2)
- --------------------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International Emerging Markets Free Index
measures the performance of securities listed on the exchanges of 26
countries. The index excludes shares that are not readily purchased by
non-local investors.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
<PAGE> 6
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AIM DEVELOPING MARKETS FUND
---------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -----------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
Redemption Fee
(as a percentage of
amount redeemed,
if applicable) None(2) None None
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are
deducted from fund
assets) CLASS A CLASS B CLASS C
- -----------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.36 1.00 1.00
Other Expenses
Other 1.03 0.99 0.99
Interest 0.01 0.01 0.01
Total Other Expenses 1.04 1.00 1.00
Total Annual Fund
Operating Expenses 2.38 2.98 2.98
Expense
Reimbursement(2) 0.47 0.47 0.47
Net Expenses 1.91 2.51 2.51
- -----------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) Shares received as a result of the reorganization of AIM Eastern Europe Fund
into AIM Developing Markets Fund will be subject to a 2% redemption fee if
they are redeemed or exchanged before September 10, 2000.
(3) The investment advisor has contractually agreed to limit Total Annual Fund
Operating Expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) on Class A, Class B and Class C shares to 2.00%,
2.50% and 2.50%, respectively.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $705 $1,182 $1,685 $3,062
Class B 801 1,221 1,767 3,159
Class C 401 921 1,567 3,299
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $705 $1,182 $1,685 $3,062
Class B 301 921 1,567 3,159
Class C 301 921 1,567 3,299
- ----------------------------------------------
</TABLE>
4
<PAGE> 7
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asset Management Limited (the subadvisor), an affiliate of the advisor,
is the fund's subadvisor and is responsible for its day-to-day management. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The subadvisor is located at 11 Devonshire Square, London, EC2M 4YR, England.
The advisors supervise all aspects of the fund's operations and provide
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor has acted as an investment advisor since 1967. Today, the
advisor, together with its subsidiaries, advises or manages over 120 investment
portfolios, including the fund, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.51% of average daily net assets.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - William Barron, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1995.
- - John Cleary, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1998. From 1997 to 1998, he was Manager of a global markets fixed income fund
for West Merchant Bank Ltd. From 1993 to 1996, he was a portfolio manager for
Fischer Francis Trees and Watts. Mr. Cleary completed the investment
management program at the London Business School in 1996.
- - Christine Rowley, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1991.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Developing Markets Fund are subject to the
maximum of 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of income.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
5
<PAGE> 8
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AIM DEVELOPING MARKETS FUND
---------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A(a)
-----------------------------------------------------------------------------
YEAR YEAR TEN MONTHS JANUARY 11,
ENDED ENDED ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
1999(a) 1998(a) 1997(b) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.53 $ 12.56 $ 13.84 $ 11.60 $ 12.44 $ 15.00
Income from investment operations:
Net investment income 0.06 0.39(c)(d) 0.25 0.53 0.72 0.35
Net realized and unrealized gain (loss) on
investments 2.36 (5.10) (1.53) 2.19 (0.84) (2.46)
Net increase (decrease) from investment
operations 2.42 (4.71) (1.28) 2.72 (0.12) (2.11)
Redemption fees retained 0.03 0.28 -- -- -- --
Distributions to shareholders:
From net investment income (0.12) (0.60) -- (0.48) (0.72) (0.35)
From net realized gain on investments -- -- -- -- -- (0.10)
Total distributions (0.12) (0.60) -- (0.48) (0.72) (0.45)
Net asset value, end of period $ 9.86 $ 7.53 $ 12.56 $ 13.84 $ 11.60 $ 12.44
Total return(e) 33.11% (37.09)% (9.25)% 23.59% (0.95)% (14.07)%
- -------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $157,198 $87,517 $457,379 $504,012 $422,348 $452,872
Ratio of net investment income to average net
assets:
With fee waivers 0.68%(f) 3.84% 2.03%(g) 4.07% 6.33% 2.75%(g)
Without fee waivers 0.21%(f) 3.43% 1.95%(g) 4.04% 6.30% 2.75%(g)
Ratio of expenses to average net assets
excluding interest expense:
With fee waivers 1.90%(f) 1.73% 1.75%(g) 1.82% 1.77% 2.01%(g)
Without fee waivers 2.37%(f) 2.14% 1.83%(g) 1.85% 1.80% 2.01%(g)
Ratio of interest expense to average net assets 0.01% 0.20% N/A N/A N/A N/A
Portfolio turnover rate 125% 111% 184%(g) 138% 75% 56%(g)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Prior to November 1, 1997 the Fund was known as G.T. Developing Markets
Fund, Inc. All capital shares issued and outstanding on October 31, 1997
were reclassified as Class A shares.
(c) Before reimbursement the net investment income per share would have been
reduced by $0.04.
(d) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.14 per share.
(e) Total return does not include sales charges and is not annualized for
periods less than one year.
(f) Ratios are based on average net assets of $123,758,642.
(g) Annualized.
N/A Not applicable.
6
<PAGE> 9
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AIM DEVELOPING MARKETS FUND
---------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999(a) 1998(a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 7.49 $ 12.56
Income from investment operations:
Net investment income 0.01 0.31(b)(c)
Net realized and unrealized gain (loss) on investments 2.37 (5.07)
Net increase (decrease) from investment operations 2.38 (4.76)
Redemption fees retained -- 0.28
Distributions to shareholders:
From net investment income (0.08) (0.59)
Net asset value, end of period $ 9.79 $ 7.49
Total return (d) 32.14% (39.76)%
- --------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $49,723 $ 154
Ratio of net investment income (loss) to average net assets:
With fee waivers 0.08%(e) 3.09%
Without fee waivers (0.39)%(e) 2.68%
Ratio of expenses to average net assets excluding interest
expense:
With fee waivers 2.50%(e) 2.48%
Without fee waivers 2.97%(e) 2.89%
Ratio of interest expense to average net assets 0.01% 0.20%
Portfolio turnover rate 125% 111%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a)These selected per share data were calculated based upon the average shares
outstanding during the period.
(b)Before reimbursement the net investment income per share would have been
reduced by $0.04.
(c)Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.14 per share.
(d)Total return does not include sales charges and is not annualized for periods
less than one year.
(e)Ratios are based on average net assets of $35,727,260.
<TABLE>
<CAPTION>
CLASS C
----------------------
MARCH 1, 1999
TO OCTOBER 31, 1999(a)
- ------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 7.47
Income from investment operations:
Net investment income (loss) --
Net realized and unrealized gain (loss) on investments 2.32
Net increase (decrease) from investment operations 2.32
Redemption fees retained --
Distributions to shareholders:
From net investment income --
Net asset value, end of period $ 9.79
Total return (b) 31.06%
- ------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $ 412
Ratio of net investment income (loss) to average net assets:
With fee waivers 0.08%(c)
Without fee waivers (0.39)%(c)
Ratio of expenses to average net assets excluding interest
expense:
With fee waivers 2.50%(c)
Without fee waivers 2.97%(c)
Ratio of interest expense to average net assets 0.01%
Portfolio turnover rate 125%
- ------------------------------------------------------------------------------------
</TABLE>
(a)These selected per share data were calculated based upon the average shares
outstanding during the period.
(b)Total return does not include sales charges and is not annualized for periods
less than one year.
(c)Ratios are annualized and based on average net assets of $208,934.
7
<PAGE> 10
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 11
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 12
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 13
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 14
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 15
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 16
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 17
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 18
---------------------------
AIM DEVELOPING MARKETS FUND
---------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
- --Registered Trademark-- or your account, or wish to obtain free copies of the
fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ------------------------------------
AIM Developing Markets Fund
SEC 1940 Act file number: 811-05426
- ------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com DVM-PRO-1 INVEST WITH DISCIPLINE
--REGISTERED TRADEMARK--
<PAGE> 19
AIM EMERGING MARKETS
DEBT FUND
------------------------------------------------------------------------------
AIM Emerging Markets Debt Fund primarily seeks high current income and,
secondarily, growth of capital.
PROSPECTUS AIM --Registered Trademark--
FEBRUARY 28, 2000
This Prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 20
------------------------------
AIM EMERGING MARKETS DEBT FUND
------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 21
------------------------------
AIM EMERGING MARKETS DEBT FUND
------------------------------
INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's primary investment objective is high current income, and its
secondary investment objective is growth of capital.
The fund seeks to meet these objectives by investing all of its investable
assets in the Emerging Markets Debt Portfolio (the portfolio). The portfolio, in
turn, normally invests at least 65% of its total assets in debt securities of
issuers located in developing or emerging market countries, i.e., those that are
in the initial stages of their industrial cycles. The portfolio may invest 100%
of its total assets in lower-quality debt securities, i.e., "junk bonds,"
including securities that are in default. The portfolio will invest in (1) debt
securities issued or guaranteed by the governments of developing countries, or
their agencies or instrumentalities; (2) securities issued or guaranteed by the
central banks of emerging market countries; (3) securities issued by other banks
and companies in such countries; and (4) securities denominated in or indexed to
the currencies of developing countries.
The portfolio will normally invest substantially all of its assets in debt
securities of governmental and corporate issuers in emerging markets. These
securities may consist primarily of "Brady Bonds" and other sovereign debt
securities. Brady Bonds are debt restructurings that provide for the exchange of
cash and loans for newly issued bonds. The portfolio may also invest up to 35%
of its total assets in equity securities of issuers in developing countries;
equity and debt securities of issuers in developed countries, including the
U.S.; and cash and money market instruments.
The portfolio managers allocate assets among securities of issuers in
countries and in currency denominations where opportunities for meeting the
fund's investment objectives are expected to be the most attractive. The
principal determinants of the emphasis given to various country, geographic, and
industry sectors within the portfolio are fundamental economic strength, credit
quality, and currency and interest rate trends. Further, the portfolio managers
select particular issuers based on additional economic criteria such as yield,
maturity, issue classification, and quality characteristics. Currency
investments are based on economic factors (such as relative inflation, interest
rate levels and trends, growth rate forecasts, balance of payments status, and
economic policies) and on political and technical data. The portfolio managers
consider whether to sell a particular security when any of those factors
materially changes.
The fund and the portfolio are non-diversified. With respect to 50% of their
assets, they are permitted to invest more than 5% of their assets in the
securities of any one issuer.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the portfolio may temporarily
hold all or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, shares of affiliated
money market funds, or high-quality debt securities. As a result, the fund or
the portfolio may not achieve its investment objectives.
The portfolio may engage in active and frequent trading of portfolio
securities to achieve its investment objective. If the portfolio does trade in
this way, it may incur increased transaction costs, which can lower the actual
return on your investment. Active trading may also increase short-term capital
gains and losses, which may affect the taxes you have to pay.
If the fund's Board of Trustees determines that it is in the best interests of
the fund and its shareholders, the fund may redeem its investment in the
portfolio.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the portfolio invests. Debt securities are particularly
vulnerable to credit risk and interest rate fluctuations. When interest rates
rise, bond prices fall; the longer a bond's duration, the more sensitive it is
to this risk.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about emerging market companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
and governments located in developing or emerging market countries more than
those in countries with mature economies. For example, many developing countries
have, in the past, experienced high rates of inflation or sharply devalued their
currencies against the U.S. dollar, thereby causing the value of investments in
companies located in those countries to decline. Transaction costs are often
higher in
1
<PAGE> 22
------------------------------
AIM EMERGING MARKETS DEBT FUND
------------------------------
developing countries and there may be delays in settlement procedures.
Sovereign debt securities of developing country governments are generally
lower-quality debt securities. Sovereign debt securities are subject to the
additional risk that, under some political, diplomatic, social, or economic
circumstances, some developing countries that issue lower-quality debt
securities may be unable or unwilling to make principal or interest repayments
as they come due.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors'
claims. The value of junk bonds often fluctuates in response to company,
political or economic developments and can decline significantly over short
periods of time or during periods of general or regional economic difficulty.
During those times, the bonds could be difficult to value or to sell at a fair
price. Credit ratings on junk bonds do not necessarily reflect their actual
market risk.
Because they are non-diversified, the fund and the portfolio may invest in
fewer issuers than if they were diversified funds. Thus, the value of the fund's
shares may vary more widely, and the portfolio may be subject to greater
investment and credit risk, than if the portfolio invested more broadly.
An investment in the portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
2
<PAGE> 23
------------------------------
AIM EMERGING MARKETS DEBT FUND
------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1993 .................................... 51.57%
1994 .................................... -19.24%
1995 .................................... 20.19%
1996 .................................... 36.78%
1997 .................................... 11.89%
1998 .................................... -28.91%
1999 .................................... -20.80%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
18.61% (quarter ended June 30, 1995) and the lowest quarterly return was -33.02%
(quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 15.01% 8.51% 9.11% 10/22/92
Class B 15.01 8.63 9.15 10/22/92
Class C -- -- -- 03/01/99
J.P. Morgan EMBI (Brady)(1) 21.56 16.54 13.76(2) 10/31/92(2)
- --------------------------------------------------------------------------------------
</TABLE>
(1) The J.P. Morgan Emerging Markets Bond Index (Brady) is a market
value-weighted average of Brady Bonds from ten emerging bond markets.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
<PAGE> 24
------------------------------
AIM EMERGING MARKETS DEBT FUND
------------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets)(2) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 0.46 0.46 0.46
Interest Expenses 0.13 0.13 0.13
Total Other Expenses 0.59 0.59 0.59
Total Annual Fund
Operating Expenses 1.92 2.57 2.57
Fees Waived(3) 0.04 0.04 0.04
Net Expenses 1.88 2.53 2.53
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) This fee table, and the expense example below, reflect the expenses of both
the fund and the portfolio.
(3) The investment advisor has contractually agreed to limit Total Annual Fund
Operating Expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) on Class A, Class B and Class C shares to 1.75%,
2.40% and 2.40, respectively.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. To the extent fees are waived or
expenses reimbursed, your expenses will be lower. Although your actual returns
and costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $661 $1,049 $1,462 $2,612
Class B 760 1,099 1,565 2,747
Class C 360 799 1,365 2,905
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $661 $1,049 $1,462 $2,612
Class B 260 799 1,365 2,747
Class C 260 799 1,365 2,905
- ----------------------------------------------
</TABLE>
4
<PAGE> 25
------------------------------
AIM EMERGING MARKETS DEBT FUND
------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the investment advisor of Emerging
Markets Debt Portfolio (the portfolio). INVESCO Asset Management Limited (the
subadvisor), an affiliate of the advisor, is the portfolio's subadvisor and is
responsible for its day-to-day management. The advisor is located at 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173. The subadvisor is located at 11
Devonshire Square, London, EC2M 4YR, England. The advisors supervise all aspects
of the portfolio's operations and provide investment advisory services to the
portfolio, including obtaining and evaluating economic, statistical and
financial information to formulate and implement investment programs for the
portfolio.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor has acted as an investment advisor since 1967. Today, the
advisor, together with its subsidiaries, advises or manages over 120 investment
portfolios, including the portfolio, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.94% of average daily net assets.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the portfolio are
- - John Cleary, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1998. From 1997 to 1998, he was Manager of a global emerging markets fixed
income fund for West Merchant Bank Ltd. From 1993 to 1996, he was a portfolio
manager for Fischer Francis Trees and Watts. Mr. Cleary completed the
investment management program at the London Business School in 1996.
- - Edwin Gutierrez, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1998. From 1994 to 1998, he was an economist for Chancellor LGT Asset
Management.
- - Jonathan Mann, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1998. From 1994 to 1998, he was an economist for LGT Asset Management.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Emerging Markets Debt Fund are subject to the
maximum of 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of income.
DIVIDENDS
The fund generally declares and pays dividends, if any, monthly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
5
<PAGE> 26
------------------------------
AIM EMERGING MARKETS DEBT FUND
------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
- -----------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998(a) 1997(a) 1996(a) 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.86 $ 15.56 $ 14.85 $ 11.70 $ 12.56
Income from investment operations:
Net investment income 0.86 1.35(b) 1.19 1.27 1.35
Net realized and unrealized gain (loss) on
investments 0.51 (4.80) 0.93 3.09 (1.09)
Net increase (decrease) from investment
operations 1.37 (3.45) 2.12 4.36 0.26
Distributions to shareholders:
From net investment income (0.93) (1.06) (1.18) (1.11) (1.03)
From net realized gain on investments -- (2.83) (0.23) (0.10) (0.03)
Return of capital -- (0.36) -- -- (0.06)
Total distributions (0.93) (4.25) (1.41) (1.21) (1.12)
Net asset value, end of period $ 8.30 $ 7.86 $ 15.56 $ 14.85 $ 11.70
Total return(c) 18.38% (30.07)% 14.46% 39.05% 2.81%
- -----------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- -----------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $ 54,330 $ 69,321 $ 133,973 $ 178,318 $ 142,002
Ratio of net investment income to average net
assets(d) 10.73%(e) 11.27% 7.39% 9.52% 11.85%
Ratio of expenses to average net assets
excluding interest expense(f) 1.75%(e) 1.74% 1.58% 1.69% 1.75%
Ratio of interest expense to average net assets 0.13% N/A N/A 0.04% N/A
Portfolio turnover rate 336% 339% 214% 290% 213%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.21 per share.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 10.69% for 1999.
(e) Ratios are based on average net assets of $62,817,833.
(f) After fee waiver and/or expense reimbursements. Ratio of expenses to average
net assets prior to fee waivers and/or expense reimbursements was 1.79% for
1999.
N/A Not applicable.
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998(a) 1997(a) 1996(a) 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.86 $ 15.54 $ 14.83 $ 11.69 $ 12.56
Income from investment operations:
Net investment income 0.81 1.28(b) 1.09 1.17 1.27
Net realized and unrealized gain (loss) on
investments 0.51 (4.79) 0.93 3.09 (1.09)
Net increase (decrease) from investment
operations 1.32 (3.51) 2.02 4.26 0.18
Distributions to shareholders:
From net investment income (0.88) (0.98) (1.08) (1.03) (0.96)
From net realized gain on investments -- (2.83) (0.23) (0.09) (0.03)
Return of capital -- (0.36) -- -- (0.06)
Total distributions (0.88) (4.17) (1.31) (1.12) (1.05)
Net asset value, end of period $ 8.30 $ 7.86 $ 15.54 $ 14.83 $ 11.69
Total return(c) 17.61% (30.49)% 13.77% 38.16% 2.07%
- -----------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- -----------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $ 97,394 $109,406 $228,101 $251,002 $ 214,897
Ratio of net investment income to average net
assets(d) 10.08%(e) 10.62% 6.74% 8.87% 11.20%
Ratio of expenses to average net assets
excluding interest expense(f) 2.40%(e) 2.39% 2.23% 2.34% 2.40%
Ratio of interest expense to average net assets 0.13% N/A N/A 0.04% N/A
Portfolio turnover rate 336% 339% 214% 290% 213%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share operating data were calculated based upon the
average shares outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.21 per share.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 10.04% for 1999.
(e) Ratios are based on average net assets of $109,729,116.
(f) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.44% for 1999.
6
<PAGE> 27
------------------------------
AIM EMERGING MARKETS DEBT FUND
-------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
----------------
MARCH 1, 1999
TO
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 7.96
Income from investment operations:
Net investment income 0.53
Net realized and unrealized gain (loss) on investments 0.37
Net increase (decrease) from investment operations 0.90
Distributions to shareholders:
From net investment income (0.56)
From net realized gain on investments --
Return of capital --
Total distributions (0.56)
Net asset value, end of period $ 8.30
Total return(a) 11.74%
- ------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------
Net assets, end of period (in 000s) $208
Ratio of net investment income to average net assets(b) 10.08%(c)
Ratio of expenses to average net assets excluding interest
expense(d) 2.40%(c)
Ratio of interest expenses to average net assets 0.13%
Portfolio turnover rate 336%
- ------------------------------------------------------------------------------
</TABLE>
(a) Total return does not include sales charges and is not annualized for
periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 10.04% (annualized) and 11.04% for Class C and Advisor
class, respectively, for 1999.
(c) Ratios are annualized and based on average net assets of $99,297.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.44% (annualized) and 1.44% for Class C and Advisor Class, respectively,
for 1999.
7
<PAGE> 28
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 29
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 30
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 31
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 32
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 33
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 34
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 35
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 36
------------------------------
AIM EMERGING MARKETS DEBT FUND
------------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies
of the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- --------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ------------------------------------
AIM Emerging Markets Debt Fund
SEC 1940 Act file number: 811-05426
- ------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com EMD-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 37
AIM GLOBAL CONSUMER
PRODUCTS AND SERVICES FUND
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
AIM Global Consumer Products and Services Fund seeks to provide long-term
growth of capital.
PROSPECTUS AIM--Registered Trademark--
FEBRUARY 28, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 38
----------------------------------------------
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
----------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 39
----------------------------------------------
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
----------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing all of its investable
assets in the Global Consumer Products and Services Portfolio (the portfolio),
which in turn normally invests at least 65% of its total assets in equity
securities of domestic and foreign consumer products and services companies. The
portfolio considers a "consumer products or services" company to be one that (1)
derives at least 50% of either its revenues or earnings from activities related
to consumer products or services; or (2) devotes at least 50% of its assets to
such activities, based on the company's most recent fiscal year. Such companies
include those that manufacture, market, retail, or distribute consumer products
(such as homes, automobiles, appliances, computers, household goods, food, and
apparel) and goods and services related to entertainment, publishing, sports,
and media (such as television broadcasts, motion pictures, theme parks,
restaurants, and lodging) or supply goods and services to such companies (such
as advertising, textile, and shipping companies).
The portfolio may invest up to 35% of its assets in debt securities of
domestic and foreign consumer products and services companies and/or in equity
and debt securities of companies outside the consumer products or services
industry, which, in the opinion of the portfolio managers, stand to benefit from
development in such industries. The portfolio will normally invest in the
securities of issuers located in at least three countries, including the United
States, and may invest a significant portion of its assets in the securities of
U.S. issuers. However, the portfolio will invest no more than 50% of its total
assets in the securities of issuers in any one country, other than the U.S. The
portfolio may invest up to 20% of its total assets in lower-quality debt
securities, i.e., "junk bonds."
The portfolio managers allocate the portfolio's assets among securities of
countries and in currency denominations that are expected to provide the best
opportunities for meeting the portfolio's investment objective. In analyzing
specific companies for possible investment, the portfolio managers ordinarily
look for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the portfolio may temporarily
hold all or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, shares of affiliated
money market funds, or high-quality debt securities. As a result, the fund or
the portfolio may not achieve its investment objective.
The portfolio may engage in active and frequent trading of portfolio
securities to achieve its investment objective. If the portfolio does trade in
this way, it may incur increased transaction costs and brokerage commissions,
both of which can lower the actual return on your investment. Active trading may
also increase short-term capital gains and losses, which may affect the taxes
you have to pay.
If the fund's Board of Trustees determines that it is in the best interests of
the fund and its shareholders, the fund may redeem its investment in the
portfolio.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the portfolio invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
the consumer products and services industries, such as government regulation,
demographic shifts, and intense competition. These factors may, among other
things, affect the demand for and success of certain consumer products and
services. Because the portfolio focuses its investments in the consumer products
and services industries, the value of your fund shares may rise and fall more
than the value of shares of a fund that invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
1
<PAGE> 40
----------------------------------------------
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
----------------------------------------------
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and their prices may be more volatile than U.S. securities.
The portfolio may participate in the initial public offering (IPO) market.
Because of the portfolio's small asset base, any investment the portfolio may
make in IPOs may significantly increase the fund's or the portfolio's total
return. As the portfolio's assets grow, the impact of IPO investments will
decline, which may reduce the fund's or the portfolio's total return.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 41
----------------------------------------------
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
----------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1995 ............................................................ 35.37%
1996 ............................................................ 38.30%
1997 ............................................................ 17.55%
1998 ............................................................ 22.80%
1999 ............................................................ 42.62%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
26.01% (quarter ended December 31, 1999) and the lowest quarterly return was
- -15.69% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 35.84% 29.70% 29.69% 12/30/94
Class B 36.91 30.18 30.23 12/30/94
Class C -- -- -- 03/01/99
MSCI AC World Index(1) 27.31 18.90 18.90(2) 12/31/94(2)
- ------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International All Country World Index measures
the performance of securities listed on the major world stock exchanges of
47 markets, including both developed and emerging markets.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest history.
3
<PAGE> 42
----------------------------------------------
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
----------------------------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- ------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets)(2) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.50 1.00 1.00
Other Expenses 0.44 0.44 0.44
Total Annual Fund
Operating
Expenses(3) 1.92 2.42 2.42
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) This fee table, and the expense example below, reflect the expenses of both
the fund and the portfolio.
(3) The investment advisor reimbursed a portion of the portfolio expenses. Total
Annual Operating Expenses including the reimbursement for Class A, Class B
and Class C shares were 1.91%, 2.41% and 2.41%, respectively.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 660 $1,047 $1,458 $2,602
Class B 744 1,051 1,485 2,623
Class C 344 751 1,285 2,746
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 660 $1,047 $1,458 $2,602
Class B 244 751 1,285 2,623
Class C 244 751 1,285 2,746
- ----------------------------------------------
</TABLE>
4
<PAGE> 43
----------------------------------------------
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
----------------------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment advisor of Global
Consumer Products and Services Portfolio (the portfolio) and is responsible for
its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173. The advisor supervises all aspects of the
portfolio's operations and provides investment advisory services to the
portfolio, including obtaining and evaluating economic, statistical and
financial information to formulate and implement investment programs for the
portfolio.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the portfolio, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.97% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the portfolio are
- - Derek S. Izuel, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1997. From 1995 to 1997 he was a full time student at the University of
Michigan. From 1991 to 1995 he was a software engineer with Bank of America.
- - Roger Mortimer, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1995.
- - Derek H. Webb, Portfolio Manager, who has been responsible for the fund since
1994 and has been associated with the advisor and/or its affiliates since
1992.
- - Michael Yellen, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1994.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Global Consumer Products and Services Fund
are subject to the maximum 4.75% initial sales charge as listed under the
heading "CATEGORY II Initial Sales Charges" in the "Shareholder
Information--Choosing a Share Class" section of this prospectus. Purchases of
Class B and Class C shares are subject to the contingent deferred sales charges
listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
5
<PAGE> 44
----------------------------------------------
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
----------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED OCTOBER 31, DECEMBER 30, 1994
--------------------------------------- TO
1999(a) 1998(a) 1997(a) 1996(a) OCTOBER 31, 1995(a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 22.16 $ 22.19 $ 20.98 $ 14.59 $ 11.43
Income from investment operations:
Net investment income (loss) (0.19) (0.19) (0.15) (0.22) 0.02(b)
Net realized and unrealized gain on
investments 9.38 2.05 2.27 7.13 3.14
Net increase from investment operations 9.19 1.86 2.12 6.91 3.16
Distributions to shareholders:
From net realized gain on investments (0.56) (1.89) (0.91) (0.52) --
Total distributions (0.56) (1.89) (0.91) (0.52) --
Net asset value, end of period $ 30.79 $ 22.16 $ 22.19 $ 20.98 $ 14.59
Total return(c) 42.20% 8.66% 10.55% 48.82% 27.65%
- ------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $73,695 $59,880 $62,637 $76,900 $ 4,082
Ratio of net investment income (loss) to average
net assets (0.70)%(d) (0.83)% (0.87)% (1.24)% (11.11)%(e)
Ratio of expenses to average net assets 1.91%(d) 1.95% 1.99% 2.34% 13.63%(e)
Portfolio turnover rate 160% 221% 392% 169% 240%(e)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a)These selected per share operating data were calculated based upon average
shares outstanding during the period.
(b)Before reimbursement net investment income (loss) per share would have been
reduced (increased) by $1.12.
(c)Total return does not include sales charges and is not annualized for periods
less than one year.
(d)Ratios are based on average net assets of $68,839,613.
(e)Annualized.
6
<PAGE> 45
----------------------------------------------
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
----------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
--------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------- DECEMBER 30, 1994 TO
1999(a) 1998(a) 1997(a) 1996(a) OCTOBER 31, 1995(a)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.70 $ 21.86 $ 20.79 $ 14.53 $ 11.43
Income from investment operations:
Net investment income (loss) (0.31) (0.30) (0.24) (0.31) (0.04)(b)
Net realized and unrealized gain on
investments 9.16 2.03 2.22 7.09 3.14
Net increase from investment operations 8.85 1.73 1.98 6.78 3.10
Distributions to shareholders:
From net realized gain on investments (0.56) (1.89) (0.91) (0.52) --
Total distributions (0.56) (1.89) (0.91) (0.52) --
Net asset value, end of period $ 29.99 $ 21.70 $ 21.86 $ 20.79 $ 14.53
Total return(c) 41.52% 8.16% 9.95% 48.11% 27.12%
- ---------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $109,808 $91,613 $93,978 $87,904 $ 2,959
Ratio of net investment income (loss) to average
net assets (1.20)%(d) (1.33)% (1.37)% (1.74)% (11.61)%(e)
Ratio of expenses to average net assets 2.41%(d) 2.45% 2.49% 2.84% 14.13%(e)
Portfolio turnover rate 160% 221% 392% 169% 240%(e)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a)These selected per share operating data were calculated based upon average
shares outstanding during the period.
(b)Before reimbursement net investment income (loss) per share would have been
reduced (increased) by $1.04.
(c)Total return does not include sales charges and is not annualized for periods
less than one year.
(d)Ratios are based on average net assets of $103,242,997.
(e)Annualized.
<TABLE>
<CAPTION>
CLASS C
-------------------------------
MARCH 1, 1999 TO
OCTOBER 31, 1999(a)
- ---------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $24.70
Income from investment operations:
Net investment income (loss) (0.22)
Net realized and unrealized gain on
investments 5.51
Net increase from investment operations 5.29
Distributions to shareholders:
From net realized gains on investments --
Total distributions --
Net asset value, end of period $29.99
Total return(b) 21.42%
- ---------------------------------------------------------------------------------
Ratios and supplemental data:
- ---------------------------------------------------------------------------------
Net assets, end of period (in 000s) $ 232
Ratio of net investment income (loss) to average
net assets (1.20)%(c)
Ratio of expenses to average net assets 2.41%(c)
Portfolio turnover rate 160%
- ---------------------------------------------------------------------------------
</TABLE>
(a)These selected per share data were calculated based upon average shares
outstanding during the period.
(b)Total return does not include sales charges and is not annualized for periods
less than one year.
(c)Ratios are annualized and based on average net assets of $123,130.
7
<PAGE> 46
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 47
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 48
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 49
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 50
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 51
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 52
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 53
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 54
----------------------------------------------
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
----------------------------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports only)
</TABLE>
- -------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- -----------------------------------------------
AIM Global Consumer Products and Services Fund
SEC 1940 Act file number: 811-05426
- -----------------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com GCPS-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 55
AIM GLOBAL
FINANCIAL SERVICES FUND
--------------------------------------------------------------------------
AIM Global Financial Services Fund seeks to provide long-term growth of
capital.
PROSPECTUS AIM --Registered Trademark--
FEBRUARY 28, 2000
This prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells
you otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 56
----------------------------------
AIM GLOBAL FINANCIAL SERVICES FUND
----------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 57
----------------------------------
AIM GLOBAL FINANCIAL SERVICES FUND
----------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing all of its investable
assets in the Global Financial Services Portfolio (the portfolio), which in turn
normally invests at least 65% of its total assets in equity securities of
domestic and foreign financial services companies. The portfolio considers a
"financial services" company to be one that (1) derives at least 50% of its
revenues or earnings from financial services activities; or (2) devotes at least
50% of its assets to such activities, based on its most recent fiscal year. Such
companies include those that provide financial services (such as commercial
banks, insurance brokerages, securities brokerages, investment banks, leasing
companies, and real estate-related companies).
The portfolio may invest up to 35% of its assets in debt securities of
domestic and foreign financial services companies and/or in equity and debt
securities of companies outside the financial services industry, which, in the
opinion of the portfolio managers, stand to benefit from developments in the
financial services industries. The portfolio will normally invest in securities
of issuers in at least three countries, including the United States, and may
invest a significant portion of its assets in the securities of U.S. issuers.
However, the portfolio will invest no more than 40% of its total assets in
securities of issuers in any one country, other than the U.S.
The portfolio managers allocate the portfolio's assets among securities of
countries and in currency denominations that are expected to provide the best
opportunities for meeting the portfolio's investment objective. In analyzing
specific companies for possible investment, the portfolio managers ordinarily
look for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the portfolio may temporarily
hold all or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, shares of affiliated
money market funds, or high-quality debt securities. As a result, the fund or
the portfolio may not achieve its investment objective.
If the fund's Board of Trustees determines that it is in the best interests of
the fund and its shareholders, the fund may redeem its investment in the
portfolio.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term gains and losses, which
may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of securities in which the portfolio invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
the financial services industry, such as government regulation, rapid business
changes, significant competition, and value fluctuations. Such factors may limit
the financial commitments that financial services companies can make, including
amounts and types of loans, and interest rates they can charge. Because the
portfolio focuses its investments in the financial services industries, the
value of your fund shares may rise and fall more than the value of shares of a
fund that invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
1
<PAGE> 58
----------------------------------
AIM GLOBAL FINANCIAL SERVICES FUND
----------------------------------
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
The portfolio may participate in the initial public offering (IPO) market.
Because of the portfolio's small asset base, any investment the portfolio may
make in IPOs may significantly increase the fund's and the portfolio's total
returns. As the portfolio's assets grow, the impact of IPO investments will
decline, which may reduce the fund's and the portfolio's total return.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 59
----------------------------------
AIM GLOBAL FINANCIAL SERVICES FUND
----------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1995 ............................................................. 19.06%
1996 ............................................................. 15.21%
1997 ............................................................. 30.32%
1998 ............................................................. 13.13%
1999 ............................................................. 24.24%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
24.04% (quarter ended December 31, 1998) and the lowest quarterly return was
- -21.49% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 18.33% 19.07% 15.90% 05/31/94
Class B 18.67 19.47 16.25 05/31/94
Class C -- -- -- 03/01/99
MSCI AC World Index(1) 27.31 18.90 17.10(2) 05/31/94(2)
- -----------------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International All Country World Index measures
the performance of securities listed on the major world stock exchanges of
47 markets, including both developed and emerging markets.
(2) The average annual total return given is since the inception date of the
class with the longest performance history.
3
<PAGE> 60
----------------------------------
AIM GLOBAL FINANCIAL SERVICES FUND
----------------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets)(2) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.50 1.00 1.00
Other Expenses 0.64 0.64 0.64
Total Annual Fund
Operating Expenses 2.12 2.62 2.62
Fee Waiver(3) 0.13 0.13 0.13
Net Expenses 1.99 2.49 2.49
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) This fee table, and the expense example below, reflect the expenses of both
the fund and the portfolio.
(3) The investment advisor has contractually agreed to limit Total Annual Fund
Operating Expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) on Class A, Class B and Class C shares to 2.00%,
2.50% and 2.50, respectively.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. To the extent fees are waived or
expenses reimbursed, the expenses will be lower. Although your actual returns
and costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $680 $1,107 $1,560 $2,810
Class B 765 1,114 1,590 2,833
Class C 365 814 1,390 2,954
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $680 $1,107 $1,560 $2,810
Class B 265 814 1,390 2,833
Class C 265 814 1,390 2,954
- ----------------------------------------------
</TABLE>
4
<PAGE> 61
----------------------------------
AIM GLOBAL FINANCIAL SERVICES FUND
----------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment advisor of Global
Financial Services Portfolio (the portfolio) and is responsible for its
day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173. The advisor supervises all aspects of the portfolio's
operations and provides investment advisory services to the portfolio, including
obtaining and evaluating economic, statistical and financial information to
formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the portfolio, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.85% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Clas G. Olsson, Senior Portfolio Manager, who has been responsible for the
fund since 2000 and has been associated with the advisor and/or its affiliates
since 1994.
- - Christopher P. Perras, Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1999. From 1997 to 1999, he was an equity analyst at Van Wagoner Capital
Management. From 1995 to 1997, he was Associate Portfolio Manager for Van
Kampen American Capital Asset Management, Inc.
- - Robert A. Shelton, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1995. From 1991 to 1995, he was a financial analyst for CS First Boston.
- - Barrett K. Sides, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1990.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Global Financial Services Fund are subject to
the maximum 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
5
<PAGE> 62
----------------------------------
AIM GLOBAL FINANCIAL SERVICES FUND
----------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------
YEAR ENDED OCTOBER 31,
1999(a) 1998(a) 1997(a) 1996(a) 1995(a)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.05 $17.22 $14.20 $11.92 $11.62
Income from investment operations:
Net investment income (loss) (0.02) 0.07 0.04 0.05(b) 0.17(c)
Net realized and unrealized gain on
investments 6.25 0.37 3.97 2.36 0.13
Net increase from investment operations 6.23 0.44 4.01 2.41 0.30
Distributions to shareholders:
From net investment income (0.02) (0.01) -- (0.12) --
From net realized gain on investments (0.03) (0.60) (0.99) (0.01) --
Total distributions (0.05) (0.61) (0.99) (0.13) --
Net asset value, end of period $23.23 $17.05 $17.22 $14.20 $11.92
Total return(d) 36.62% 2.53% 29.91% 20.21% 2.58%
- -------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- -------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $30,987 $28,433 $29,639 $7,302 $5,687
Ratio of net investment income (loss) to average
net assets:
With fee waivers (0.08)%(e) 0.37% 0.23% 0.41% 1.46%
Without fee waivers (0.21)%(e) 0.35% 0.16% (0.66)% (5.34)%
Ratio of expenses to average net assets:
With fee waivers 1.99%(e) 1.97% 2.29% 2.32% 2.34%
Without fee waivers 2.12%(e) 1.99% 2.36% 3.39% 9.14%
Portfolio turnover rate 107% 111% 91% 103% 170%
- -------------------------------------------------------------------------------------------------
</TABLE>
(a)These selected per share data were calculated based upon the average shares
outstanding during the period.
(b)Before reimbursement the net investment income per share would have been
reduced by $0.13.
(c)Before reimbursement the net investment income per share would have been
reduced by $0.59.
(d)Total return does not include sales charge.
(e)Ratios are based on average net assets of $30,233,569.
6
<PAGE> 63
----------------------------------
AIM GLOBAL FINANCIAL SERVICES FUND
----------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------
1999(a) 1998(a) 1997(a) 1996(a) 1995(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.71 $16.97 $14.06 $11.83 $11.60
Income from investment operations:
Net investment income (loss) (0.12) (0.02) (0.04) (0.01)(b) 0.11(c)
Net realized and unrealized gain on
investments 6.11 0.37 3.94 2.34 0.12
Net Increase from investment operations 5.99 0.35 3.90 2.33 0.23
Distributions to shareholders:
From net investment income -- (0.01) -- (0.09) --
From net realized gain on investments (0.03) (0.60) (0.99) (0.01) --
Total distributions (0.03) (0.61) (0.99) (0.10) --
Net asset value, end of period $ 22.67 $16.71 $16.97 $14.06 $11.83
Total return(d) 35.91% 2.08% 29.13% 19.81% 1.98%
- ----------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ----------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $49,619 $48,785 $47,585 $9,886 $4,548
Ratio of net investment income (loss) to average
net assets:
With fee waivers (0.58)%(e) (0.13)% (0.27)% (0.09)% 0.96%
Without fee waivers (0.71)%(e) (0.15)% (0.34)% (1.16)% (5.84)%
Ratio of expenses to average net assets:
With fee waivers 2.49%(e) 2.47% 2.79% 2.82% 2.84%
Without fee waivers 2.62%(e) 2.49% 2.86% 3.89% 9.64%
Portfolio turnover rate 107% 111% 91% 103% 170%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a)These selected per share data were calculated based upon average shares
outstanding during the period.
(b)Before reimbursement the net investment income per share would have been
reduced by $0.13.
(c)Before reimbursement the net investment income per share would have been
reduced by $0.59.
(d)Total return does not include sales charges.
(e)Ratios are based on average net assets of $49,539,408.
<TABLE>
<CAPTION>
CLASS C
-----------------
MARCH 1, 1999 TO
OCTOBER 31,
1999(a)
- -------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $19.58
Income from investment operations:
Net investment income (loss) (0.08)
Net realized and unrealized gain on investments 3.17
Net increase from investment operations 3.09
Distributions to shareholders:
From net investment income --
From net realized gain on investments --
Total distributions --
Net asset value, end of period $22.67
Total return(b) 15.78%
- -------------------------------------------------------------------------------
Ratios and supplemental data:
- -------------------------------------------------------------------------------
Net assets, end of period (in 000s) $ 605
Ratio of net investment income (loss) to average net assets:
With fee waivers (0.58)%(c)
Without fee waivers (0.71)%(c)
Ratio of expenses to average net assets:
With fee waivers 2.49%(c)
Without fee waivers 2.62%(c)
Portfolio turnover rate 107%
- -------------------------------------------------------------------------------
</TABLE>
(a)These selected per share data were calculated based upon average shares
outstanding during the period.
(b)Total return does not include sales charges and is not annualized for periods
less than one year.
(c)Ratios are annualized and based on average net assets of $251,286.
7
<PAGE> 64
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 65
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 66
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 67
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 68
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 69
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 70
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 71
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 72
----------------------------------
AIM GLOBAL FINANCIAL SERVICES FUND
----------------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies
of the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ------------------------------------
AIM Global Financial Services Fund
SEC 1940 Act file number: 811-05426
- ------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com GFS-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 73
AIM GLOBAL
GOVERNMENT INCOME FUND
--------------------------------------------------------------------------
AIM Global Government Income Fund primarily seeks to provide high current
income and, secondarily, growth of capital and protection of principal.
AIM--Registered Trademark--
PROSPECTUS
FEBRUARY 28, 2000
This prospectus contains important
information about Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information in
this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 74
---------------------------------
AIM GLOBAL GOVERNMENT INCOME FUND
---------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 75
---------------------------------
AIM GLOBAL GOVERNMENT INCOME FUND
---------------------------------
INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's primary investment objective is high current income, and its
secondary investment objectives are growth of capital and protection of
principal.
The fund seeks to meet these objectives by investing at least 65% of its total
assets in debt securities (including mortgage-backed securities) issued or
guaranteed by U.S. and foreign governments or by their agencies, authorities,
and instrumentalities, as well as by supranational entities, such as the World
Bank. The fund primarily invests in high-quality government debt securities that
are rated in the top two ratings categories by Moody's Investors Service, Inc.
or Standard & Poor's or deemed by the portfolio managers to be of comparable
quality. The fund may invest in lower-quality debt securities, i.e., "junk
bonds."
The fund may invest up to 35% of its total assets in (1) foreign government
securities that are rated within the third and fourth highest ratings categories
by Moody's or S&P or deemed by the fund's portfolio managers to be of comparable
quality; (2) corporate debt obligations of U.S. or foreign issuers rated at
least investment grade (rated within the four highest ratings categories by
Moody's or S&P); (3) privately issued mortgage-backed and asset-backed
securities that are rated at least investment grade, or deemed by the portfolio
managers to be of comparable quality; and (4) common stocks, preferred stocks
and warrants, provided that the fund will invest no more than 20% of its total
assets in such securities.
The fund will normally invest in securities issued by at least three different
countries, including the United States, and may invest a significant portion of
its assets in the securities of U.S. issuers. However, the fund will invest no
more than 40% of its total assets in securities of any one country, other than
the U.S. The fund will only invest in a foreign currency or in securities
denominated in a foreign currency if the portfolio managers consider the
currency to be fully exchangeable into U.S. dollars or a multinational currency
unit.
The portfolio managers allocate assets among securities of countries and in
currency denominations where the combination of fixed-income market returns, the
price appreciation of fixed-income securities and currency exchange rate
movements will present opportunities for meeting the fund's investment
objectives. The principal determinants of the emphasis given to various country,
geographic, and industry sectors within the fund are fundamental economic
strength, credit quality, and currency and interest rate trends. Further, the
portfolio managers select particular issuers based on additional economic
criteria such as yield, maturity, issue classification, and quality
characteristics. Currency investments are based on economic factors (such as
relative inflation, interest rate levels and trends, growth rate forecasts,
balance of payments status, and economic policies) and on political and
technical data. The portfolio managers consider whether to sell a particular
security when any of those factors materially changes.
The fund is a non-diversified portfolio. With respect to 50% of its assets, it
is permitted to invest more than 5% of its assets in the securities of any one
issuer.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold all
or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, shares of affiliated
money market funds, or high-quality debt securities. As a result, the fund may
not achieve its investment objectives.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objectives. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term capital gains and
losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. Debt securities are particularly
vulnerable to credit risk and interest rate fluctuations. When interest rates
rise, bond prices fall; the longer a bond's duration, the more sensitive it is
to this risk. The fund could also lose money if any debt securities that the
fund holds are downgraded or go into default.
Mortgage-backed and asset-backed securities are subject to different risks
from bonds and, as a result, may respond to changes in interest rates
differently. If interest rates fall, people refinance or pay off their mortgages
ahead of time, which may cause mortgage-backed securities to lose value. If
interest rates rise, many people may refinance or prepay their mortgages at a
slower-than-expected rate. This may effectively lengthen the life of
mortgage-backed securities, which may cause the securities to be more sensitive
to changes in interest rates.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
1
<PAGE> 76
---------------------------------
AIM GLOBAL GOVERNMENT INCOME FUND
---------------------------------
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
and governments located in developing countries more than those in countries
with mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devalued their currencies against
the U.S. dollar, thereby causing the value of investments in companies located
in those countries to decline. Transaction costs are often higher in developing
countries and there may be delays in settlement procedures.
Sovereign debt securities of developing country governments are generally
lower-quality debt securities. Sovereign debt securities are subject to the
additional risk that, under some political, diplomatic, social or economic
circumstances, some developing countries that issue lower-quality debt
securities may be unable or unwilling to make principal or interest repayments
as they come due.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors'
claims. The value of junk bonds often fluctuates in response to company,
political or economic developments and can decline significantly over short
periods of time or during periods of general or regional economic difficulty.
During those times, the bonds could be difficult to value or to sell at a fair
price. Credit ratings on junk bonds do not necessarily reflect their actual
market risk.
Because it is non-diversified, the fund may invest in fewer issuers than if it
was a diversified fund. Thus, the value of the fund's shares may vary more
widely, and the fund may be subject to greater investment and credit risk, than
if the fund invested more broadly.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 77
---------------------------------
AIM GLOBAL GOVERNMENT INCOME FUND
---------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1990 ....................................... 8.77%
1991 ....................................... 13.67%
1992 ....................................... 1.95%
1993 ....................................... 25.52%
1994 ....................................... -13.95%
1995 ....................................... 15.63%
1996 ....................................... 6.06%
1997 ....................................... 3.37%
1998 ....................................... 12.13%
1999 ....................................... -7.82%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
7.01% (quarter ended September 30, 1998) and the lowest quarterly return was
- -8.76% (quarter ended March 31, 1994).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (12.16)% 4.54% 5.44% 5.65% 03/29/88
Class B (12.76) 4.52 -- 4.25 10/22/92
Class C -- -- -- -- 03/01/99
J.P. Morgan Global Government Bond Index(1) (5.08) 6.69 7.81 7.34(2) 03/31/88(2)
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) The J.P. Morgan Global Government Bond Index is an average of government
bonds from 13 major bond markets.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
<PAGE> 78
---------------------------------
AIM GLOBAL GOVERNMENT INCOME FUND
---------------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.73% 0.73% 0.73%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses
Other 0.41 0.41 0.41
Interest 0.04 0.04 0.04
Total Other Expenses 0.45 0.45 0.45
---- ---- ----
Total Annual Fund
Operating Expenses 1.53 2.18 2.18
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $623 $935 $1,270 $2,212
Class B 721 982 1,370 2,349
Class C 321 682 1,170 2,513
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $623 $935 $1,270 $2,212
Class B 221 682 1,170 2,349
Class C 221 682 1,170 2,513
- ----------------------------------------------
</TABLE>
4
<PAGE> 79
---------------------------------
AIM GLOBAL GOVERNMENT INCOME FUND
---------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asset Management Limited (the subadvisor), an affiliate of the advisor,
is the fund's subadvisor and is responsible for its day-to-day management. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The subadvisor is located at 11 Devonshire Square, London EC2M 4YR, England. The
advisors supervise all aspects of the fund's operations and provide investment
advisory services to the fund, including obtaining and evaluating economic,
statistical and financial information to formulate and implement investment
programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor has acted as an investment advisor since 1967. Today, the
advisor, together with its subsidiaries, advises or manages over 120 investment
portfolios, including the fund, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.73% of average daily net assets.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - Thomas J. Berger, Portfolio Manager, has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1997. From 1993 to 1997 he was Director of Mercury Asset Management PLC.
- - Paul Griffiths, Portfolio Manager, has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1994.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Global Government Income Fund are subject to
the maximum 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of income.
DIVIDENDS
The fund generally declares and pays dividends, if any, monthly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
5
<PAGE> 80
---------------------------------
AIM GLOBAL GOVERNMENT INCOME FUND
---------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
YEAR ENDED OCTOBER 31,
1999(a) 1998(a) 1997(a) 1996(a) 1995(a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.97 $ 8.62 $ 8.74 $ 8.81 $ 8.63
Income from investment operations:
Net investment income 0.41 0.54 0.52 0.57 0.62
Net realized and unrealized gain (loss) on
investments (0.76) 0.32 (0.13) 0.03 0.15
Net increase (decrease) from investment
operations (0.35) 0.86 0.39 0.60 0.77
Distributions to shareholders:
From net investment income (0.43) (0.16) (0.31) (0.57) (0.59)
From net realized gain on investments -- -- -- (0.10) --
In excess of net investment income -- (0.35) (0.20) -- --
Total distributions (0.43) (0.51) (0.51) (0.67) (0.59)
Net asset value, end of period $ 8.19 $ 8.97 $ 8.62 $ 8.74 $ 8.81
Total return(b) (3.97)% 10.20% 4.78% 7.11% 9.22%
- ------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $85,669 $121,268 $154,272 $240,945 $385,404
Ratio of net investment income to average net
assets 4.72%(c) 6.06% 6.04% 6.52% 6.98%
Ratio of expenses to average net assets
(excluding interest expense) 1.49%(c) 1.52% 1.51% 1.39% 1.38%
Ratio of interest expense to average net assets 0.04% 0.29% N/A N/A N/A
Portfolio turnover rate 110% 305% 241% 268% 385%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $103,919,944.
N/A Not applicable.
6
<PAGE> 81
---------------------------------
AIM GLOBAL GOVERNMENT INCOME FUND
---------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------
YEAR ENDED OCTOBER 31,
1999(a) 1998(a) 1997(a) 1996(a) 1995(a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.97 $ 8.62 $ 8.74 $ 8.80 $ 8.64
Income from investment operations:
Net investment income 0.35 0.47 0.46 0.51 0.55
Net realized and unrealized gain (loss) on
investments (0.75) 0.34 (0.12) 0.04 0.14
Net increase (decrease) from investment
operations (0.40) 0.81 0.34 0.55 0.69
Distributions to shareholders:
From net investment income (0.38) (0.11) (0.28) (0.51) (0.53)
From net realized gain on investments -- -- -- (0.10) --
In excess of net investment income -- (0.35) (0.18) -- --
Total distributions (0.38) (0.46) (0.46) (0.61) (0.53)
Net asset value, end of period $ 8.19 $ 8.97 $ 8.62 $ 8.74 $ 8.80
Total return(b) (4.62)% 9.65% 4.00% 6.54% 8.22%
- ------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $55,849 $91,852 $127,722 $166,577 $235,481
Ratio of net investment income (loss) to average
net assets 4.07%(c) 5.41% 5.39% 5.87% 6.33%
Ratio of expenses to average net assets
(excluding interest expense) 2.14%(c) 2.17% 2.16% 2.04% 2.03%
Ratio of interest expense to average net assets 0.04% 0.29% N/A N/A N/A
Portfolio turnover rate 110% 305% 241% 268% 385%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $71,016,370.
N/A Not applicable.
<TABLE>
<CAPTION>
CLASS C
-------------------------------
MARCH 1, 1999 TO
OCTOBER 31, 1999(a)
- ------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 8.63
Income from investment operations:
Net investment income 0.20
Net realized and unrealized gain (loss) on
investments (0.44)
Net increase (decrease) from investment
operations (0.24)
Distributions to shareholders:
From net investment income (0.21)
From net realized gain on investments --
In excess of net investment income --
Total distributions (0.21)
Net asset value, end of period $ 8.18
Total return(b) (2.80)%
- ------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $ 243
Ratio of net investment income to average net
assets 4.07%(c)
Ratio of expenses to average net assets (excluding
interest expense) 2.14%(c)
Ratio of interest expense to average net assets 0.04%
Portfolio turnover rate 110%
- ------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $196,715.
7
<PAGE> 82
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 83
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 84
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 85
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 86
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 87
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 88
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 89
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 90
---------------------------------
AIM GLOBAL GOVERNMENT INCOME FUND
---------------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies
of the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ------------------------------------
AIM Global Government Income Fund
SEC 1940 Act file number: 811-05426
- ------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com GGVI-PRO-1 INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 91
AIM GLOBAL GROWTH
& INCOME FUND
-------------------------------------------------------------------------
AIM Global Growth & Income Fund seeks to provide long-term growth of
capital together with current income.
PROSPECTUS AIM--Registered Trademark--
FEBRUARY 28, 2000
This prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 92
-------------------------------
AIM GLOBAL GROWTH & INCOME FUND
-------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com,
La Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 93
-------------------------------
AIM GLOBAL GROWTH & INCOME FUND
-------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital together with
current income.
The fund seeks to meet this objective by investing, normally, at least 65% of
its total assets in a combination of blue-chip equity securities and
high-quality government bonds of U.S. and foreign issuers. "Blue chip" equity
securities are those which (1) offered, during the issuer's most recent fiscal
year, an above average dividend yield relative to the latest reported dividend
yield on the Morgan Stanley Capital International World Index; and (2) are
issued by a company with total equity market capitalization of at least $1
billion. High-quality government bonds are rated within one of the two highest
ratings categories by Moody's Investors Service, Inc. or Standard & Poor's, or
are deemed by the portfolio managers to be of comparable quality.
The fund may invest up to 35% of its total assets in other equity securities
and government and corporate debt securities that are investment grade, i.e.,
rated within one of the four highest ratings categories by Moody's or S&P, or
are deemed by the portfolio managers to be of comparable quality. The fund may
purchase debt obligations issued or guaranteed by the U.S. or foreign
governments, including foreign states, provinces or municipalities, or their
agencies, authorities or instrumentalities and debt obligations of supranational
organizations, such as the World Bank. The fund will normally invest in
securities of issuers in at least three countries, including the United States,
and the fund may invest a significant portion of its assets in the securities of
U.S. issuers. However, the fund may invest no more than 40% of its assets in
securities of issuers in any one country, other than the U.S. The fund may
invest up to 100% of its total assets in either equity or debt securities in
response to general economic changes and market conditions around the world.
The portfolio managers allocate assets among securities of countries and in
currency denominations where opportunities for meeting the fund's investment
objective are expected to be the most attractive. The portfolio managers select
fixed-income securities based on economic criteria such as yield, maturity,
issue classification, and quality characteristics. The portfolio managers select
equity securities that they believe are undervalued relative to the issuer's
current or projected earnings and that they believe have above-average prospects
for future growth. Currency investments are based on economic factors and on
political and technical data. The portfolio managers consider whether to sell a
particular security when any of those factors materially changes.
The fund is non-diversified. With respect to 50% of its assets, it is
permitted to invest more than 5% of its assets in the securities of any one
issuer.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold all
or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, shares of affiliated
money market funds, or high-quality debt securities. As a result, the fund may
not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions, and market liquidity. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. When
interest rates rise, bond prices fall; the longer a bond's duration, the more
sensitive it is to this risk.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
Because it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. The value of the fund's shares may vary more widely,
and the fund may be subject to greater investment and credit risk, than if the
fund invested more broadly.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 94
-------------------------------
AIM GLOBAL GROWTH & INCOME FUND
-------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Returns
- ----------- -------
<S> <C>
1991 ........................................................... 19.14%
1992 ........................................................... 2.57%
1993 ........................................................... 27.36%
1994 ........................................................... -3.57%
1995 ........................................................... 15.32%
1996 ........................................................... 17.02%
1997 ........................................................... 18.16%
1998 ........................................................... 20.45%
1999 ........................................................... 0.12%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
12.27% (quarter ended December 31, 1998) and the lowest quarterly return was
- -7.69% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (5.41)% 12.67% 11.66% 09/25/90
Class B (4.88) 12.98 12.22 10/22/92
Class C -- -- -- 03/01/99
MSCI World Index(1) 24.93 19.76 15.84(2) 09/30/90(2)
- ------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International World Index measures the
performance of 1,578 securities listed on the major world stock exchanges.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
<PAGE> 95
-------------------------------
AIM GLOBAL GROWTH & INCOME FUND
-------------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - -- - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.97% 0.97% 0.97%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 0.33 0.33 0.33
Total Annual Fund
Operating Expenses 1.65 2.30 2.30
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $709 $1,042 $1,398 $2,397
Class B 733 1,018 1,430 2,473
Class C 333 718 1,230 2,636
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $709 $1,042 $1,398 $2,397
Class B 233 718 1,230 2,473
Class C 233 718 1,230 2,636
- ----------------------------------------------
</TABLE>
3
<PAGE> 96
-------------------------------
AIM GLOBAL GROWTH & INCOME FUND
-------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asset Management Limited (the subadvisor), an affiliate of the advisor,
is the fund's subadvisor and is responsible for its day-to-day management. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The subadvisor is located at 11 Devonshire Square, London EC2M 4YR, England. The
advisors supervise all aspects of the fund's operations and provide investment
advisory services to the fund, including obtaining and evaluating economic,
statistical and financial information to formulate and implement investment
programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor has acted as an investment advisor since 1967. Today, the
advisor, together with its subsidiaries, advises or manages over 120 investment
portfolios, including the fund, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.97% of average net assets.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - Anthony Broccardo, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1993.
- - Paul Griffiths, Portfolio Manager, who has been responsible for the fund since
1995 and has been associated with the advisor and/or its affiliates since
1994.
- - John Nadell, Portfolio Manager, who has been responsible for the fund since
1998 and has been associated with the advisor and/or its affiliates since
1994.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Global Growth & Income Fund are subject to
the maximum 5.50% initial sales charge as listed under the heading "CATEGORY I
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, quarterly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
4
<PAGE> 97
-------------------------------
AIM GLOBAL GROWTH & INCOME FUND
-------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999(a) 1998(a) 1997(a) 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.26 $ 8.21 $ 7.11 $ 6.35 $ 6.21
Income from investment operations:
Net investment income 0.20 0.17 0.21 0.22 0.24
Net realized and unrealized gain (loss) on
investments (0.05) 1.25 1.12 0.82 0.13
Net increase from investment operations 0.15 1.42 1.33 1.04 0.37
Distributions to shareholders:
From net investment income (0.11) (0.13) (0.21) (0.24) (0.22)
From net realized gain on investments (1.50) (0.24) (0.02) (0.04) (0.01)
Total distributions (1.61) (0.37) (0.23) (0.28) (0.23)
Net asset value, end of period $ 7.80 $ 9.26 $ 8.21 $ 7.11 $ 6.35
Total return(b) 1.03% 17.76% 19.01% 16.80% 6.27%
- ----------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $254,060 $306,279 $292,528 $286,203 $284,069
Ratio of net investment income to average net
assets 2.34%(c) 1.87% 2.74% 3.17% 3.85%
Ratio of expenses to average net assets 1.65%(c) 1.65% 1.64% 1.66% 1.74%
Portfolio turnover rate 89% 92% 50% 39% 83%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a)These selected per share data were calculated based upon the average shares
outstanding during the period.
(b)Total return does not include sales charges and is not annualized for periods
less than one year.
(c)Ratios are based on average net assets of $297,130,261.
5
<PAGE> 98
-------------------------------
AIM GLOBAL GROWTH & INCOME FUND
-------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
- ------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999(a) 1998(a) 1997(a) 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.25 $ 8.21 $ 7.11 $ 6.35 $ 6.21
Income from investment operations:
Net investment income 0.14 0.11 0.16 0.17 0.20
Net realized and unrealized gain (loss) on
investments (0.04) 1.25 1.13 0.82 0.13
Net increase from investment operations 0.10 1.36 1.29 0.99 0.33
Distributions to shareholders:
From net investment income (0.05) (0.08) (0.17) (0.20) (0.18)
From net realized gain on investments (1.50) (0.24) (0.02) (0.03) (0.01)
Total distributions (1.55) (0.32) (0.19) (0.23) (0.19)
Net asset value, end of period $ 7.80 $ 9.25 $ 8.21 $ 7.11 $ 6.35
Total return(b) 0.42% 16.93% 18.28% 16.06% 5.57%
- ------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $376,181 $483,307 $456,893 $383,966 $356,796
Ratio of net investment income to average net
assets 1.69%(c) 1.22% 2.09% 2.52% 3.20%
Ratio of expenses to average net assets 2.30%(c) 2.30% 2.29% 2.31% 2.39%
Portfolio turnover rate 89% 92% 50% 39% 83%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a)These selected per share data were calculated based upon the average shares
outstanding during the period.
(b)Total return does not include sales charges and is not annualized for periods
less than one year.
(c)Ratios are based on average net assets of $453,590,643.
<TABLE>
<CAPTION>
CLASS C
- ---------------------------------------------------------------------------------
MARCH 1, 1999
TO OCTOBER 31,
1999(a)
- ---------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 8.05
Income from investment operations:
Net investment income (loss) 0.10
Net realized and unrealized gain (loss) on investments (0.26)
Net increase (decrease) from investment operations (0.16)
Distributions to shareholders:
From net investment income (0.02)
From net realized gain on investments (0.07)
Total distributions (0.09)
Net asset value, end of period $ 7.80
Total return(b) (1.98)%
- ---------------------------------------------------------------------------------
Ratios and supplemental data:
- ---------------------------------------------------------------------------------
Net assets, end of period (in 000s) $1,344
Ratio of net investment income to average net assets 1.69%(c)
Ratio of expenses to average net assets 2.30%(c)
Portfolio turnover rate 89%
- ---------------------------------------------------------------------------------
</TABLE>
(a)These selected per share data were calculated based upon the average shares
outstanding during the period.
(b)Total return does not include sales charges and is not annualized for periods
less than one year.
(c)Ratios are annualized and based on average net assets of $944,451.
6
<PAGE> 99
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 100
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 101
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 102
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 103
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 104
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 105
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 106
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 107
-------------------------------
AIM GLOBAL GROWTH & INCOME FUND
-------------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ------------------------------------
AIM Global Growth & Income Fund
SEC 1940 Act file number: 811-05426
- ------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com GGI-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 108
AIM GLOBAL
INFRASTRUCTURE FUND
- --------------------------------------------------------------------------------
AIM Global Infrastructure Fund seeks to provide long-term growth of
capital.
AIM --Registered Trademark--
PROSPECTUS
FEBRUARY 28, 2000
This prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 109
------------------------------
AIM GLOBAL INFRASTRUCTURE FUND
------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com,
La Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, sales person or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 110
------------------------------
AIM GLOBAL INFRASTRUCTURE FUND
------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing all of its investable
assets in the Global Infrastructure Portfolio (the portfolio), which in turn
normally invests at least 65% of its total assets in equity securities of
domestic and foreign infrastructure companies. The portfolio considers an
"infrastructure company" to be one that (1) derives at least 50% of its revenues
or earnings from infrastructure activities; or (2) devotes at least 50% of its
assets to such activities, based on its most recent fiscal year. Such companies
include those that design, develop, or provide products and services significant
to a country's infrastructure (such as transportation systems, communications
equipment and services, nuclear power and other energy sources, water supply,
and oil, gas, and coal exploration). The portfolio may invest up to 35% of its
assets in debt securities issued by infrastructure companies, or in equity and
debt securities of other companies the portfolio managers believe will benefit
from developments in the infrastructure industry.
The portfolio will normally invest in the securities of companies located in
at least three different countries, including the United States, and may invest
a significant portion of its assets in the securities of U.S. issuers. However,
the portfolio will invest no more than 50% of its total assets in the securities
of issuers in any one country, other than the U.S. The portfolio may invest
substantially in securities denominated in one or more currencies. The portfolio
may invest in companies located in developing countries, i.e., those that are in
the initial stages of their industrial cycles. The portfolio may also invest up
to 20% of its total assets in lower-quality debt securities, i.e., "junk bonds."
The portfolio managers allocate the portfolio's assets among securities of
countries and in currency denominations that are expected to provide the best
opportunities for meeting the portfolio's investment objective. In analyzing
specific companies for possible investment, the portfolio managers ordinarily
look for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the portfolio may temporarily
hold all or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, shares of affiliated
money market funds, or high-quality debt securities. As a result, the fund or
the portfolio may not achieve its investment objective.
If the fund's Board of Trustees determines that it is in the best interests of
the fund and its shareholders, the fund may redeem its investment in the
portfolio.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the portfolio invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
the infrastructure industry, such as substantial political, environmental, and
other governmental regulation. Such regulation may, among other things, increase
compliance costs and proscribe the development of new technologies. In addition,
increases in fuel, energy and other prices have historically limited the growth
potential of infrastructure companies.
Because the portfolio focuses its investments in the infrastructure industry,
the value of your fund shares may rise and fall more than the value of shares of
a fund that invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign
1
<PAGE> 111
------------------------------
AIM GLOBAL INFRASTRUCTURE FUND
------------------------------
securities may be less liquid and their prices may be more volatile than U.S.
securities.
These factors may affect the prices of securities issued by foreign companies
and governments located in developing countries more than those in countries
with mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devalued their currencies against
the U.S. dollar, thereby causing the value of investments in companies located
in those countries to decline. Transaction costs are often higher in developing
countries and there may be delays in settlement procedures.
The portfolio may participate in the initial public offering (IPO) market.
Because of the portfolio's small asset base, any investment the portfolio may
make in IPOs may significantly increase the fund's and the portfolio's total
return. As the portfolio's assets grow, the impact of IPO investments will
decline, which may reduce the fund's and the portfolio's total return.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 112
------------------------------
AIM GLOBAL INFRASTRUCTURE FUND
------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1995 ....................................... 6.11%
1996 ....................................... 22.56%
1997 ....................................... 3.10%
1998 ....................................... 4.35%
1999 ....................................... 38.96%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
32.53% (quarter ended December 31, 1999) and the lowest quarterly return was
- -15.23% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 32.36% 13.11% 12.27% 05/31/94
Class B 33.29 13.43 12.58 05/31/94
Class C -- -- -- 03/01/99
MSCI AC World Index(1) 27.31 18.90 17.10(2) 05/31/94(2)
- ---------------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International All Country World Index measures
the performance of securities listed on the major world stock exchanges of
47 markets, including both developed and emerging markets.
(2) The average annual total return given is since the inception date of the
class with the longest performance history.
3
<PAGE> 113
------------------------------
AIM GLOBAL INFRASTRUCTURE FUND
------------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- ---------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets)(2) CLASS A CLASS B CLASS C
- ---------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.50 1.00 1.00
Other Expenses 0.74 0.74 0.74
Total Annual Fund
Operating Expenses 2.22 2.72 2.72
Expense
Reimbursement(3) 0.22 0.22 0.22
Net Expenses 2.00 2.50 2.50
- ---------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) This fee table, and the expense example below, reflect the expenses of both
the fund and the portfolio.
(3) The investment advisor has contractually agreed to limit Total Annual Fund
Operating Expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) on Class A, Class B and Class C shares to 2.00%,
2.50% and 2.50%, respectively.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------
<S> <C> <C> <C> <C>
Class A $689 $1,136 $1,608 $2,908
Class B 775 1,144 1,640 2,931
Class C 375 844 1,440 3,051
- ---------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------
<S> <C> <C> <C> <C>
Class A $689 $1,136 $1,608 $2,908
Class B 275 844 1,440 2,931
Class C 275 844 1,440 3,051
- ---------------------------------------------------
</TABLE>
4
<PAGE> 114
------------------------------
AIM GLOBAL INFRASTRUCTURE FUND
------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment advisor of Global
Infrastructure Portfolio (the portfolio) and is responsible for its day-to-day
management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173. The advisor supervises all aspects of the portfolio's
operations and provides investment advisory services to the portfolio, including
obtaining and evaluating economic, statistical and financial information to
formulate and implement investment programs for the portfolio.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the portfolio, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.76% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the portfolio, all of whom are officers of A I M Capital Management, Inc., a
wholly owned subsidiary of the advisor, are
- - Robert G. Alley, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1992.
- - Claude C. Cody IV, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1992.
- - Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1989.
- - Craig A. Smith, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1989.
- - Meggan M. Walsh, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1991.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Global Infrastructure Fund are subject to the
maximum 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes any long-term and short-term capital gains, if
any, annually.
5
<PAGE> 115
------------------------------
AIM GLOBAL INFRASTRUCTURE FUND
------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------
1999 1998(a) 1997(a) 1996(a) 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.18 $ 15.01 $ 14.42 $ 12.11 $ 12.47
Income from investment operations:
Net investment income (loss) -- 0.07(b) (0.01) (0.03) (0.03)(c)
Net realized and unrealized gain (loss) on
investments 3.07 (0.79) 1.32 2.34 (0.33)
Net increase (decrease) from investment
operations 3.07 (0.72) 1.31 2.31 (0.36)
Distributions to shareholders:
From net investment income (0.07) -- -- -- --
From net realized gain on investments (0.85) (0.11) (0.72) -- --
Total distributions (0.92) (0.11) (0.72) -- --
Net asset value, end of period $ 16.33 $ 14.18 $ 15.01 $ 14.42 $ 12.11
Total return(d) 22.72% (4.82)% 9.38% 19.08% (2.89)%
- -----------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- -----------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $ 19,958 $23,531 $38,281 $38,397 $36,241
Ratio of net investment income (loss) to
average net assets:
With fee waivers 0.09%(e) 0.52% (0.09)% (0.19)% (0.32)%
Without fee waivers (0.13)%(e) 0.28% (0.17)% (0.30)% (0.58)%
Ratio of expenses to average net assets:
With fee waivers 2.00%(e) 1.99% 2.00% 2.14% 2.36%
Without fee waivers 2.22%(e) 2.23% 2.08% 2.25% 2.62%
Portfolio turnover rate 49% 96% 41% 41% 45%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.03.
(c) Before reimbursement the net investment income per share would have been
reduced by $0.03.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $21,681,105.
6
<PAGE> 116
------------------------------
AIM GLOBAL INFRASTRUCTURE FUND
------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------
1999(a) 1998(a) 1997(a) 1996(a) 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.87 $ 14.75 $ 14.24 $ 12.03 $ 12.45
Income from investment operations:
Net investment income (loss) (0.06) -- (b) (0.09) (0.09) (0.09)(c)
Net realized and unrealized gain (loss) on
investments 2.98 (0.77) 1.32 2.30 (0.33)
Net increase (decrease) from investment
operations 2.92 (0.77) 1.23 2.21 (0.42)
Distributions to shareholders:
From net realized gain on investments (0.85) (0.11) (0.72) -- --
Total distributions (0.85) (0.11) (0.72) -- --
Net asset value, end of period $ 15.94 $ 13.87 $ 14.75 $ 14.24 $ 12.03
Total return(d) 22.03% (5.31)% 8.83% 18.37% (3.37)%
- -----------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- -----------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $ 25,134 $32,349 $57,199 $53,678 $ 50,181
Ratio of net investment income (loss) to average
net assets:
With fee waivers (0.41)%(e) 0.02% (0.59)% (0.69)% (0.82)%
Without fee waivers (0.63)%(e) (0.22)% (0.67)% (0.80)% (1.08)%
Ratio of expenses to average net assets:
With fee waivers 2.50%(e) 2.49% 2.50% 2.64% 2.86%
Without fee waivers 2.72%(e) 2.73% 2.58% 2.75% 3.12%
Portfolio turnover rate 49% 96% 41% 41% 45%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.03.
(c) Before reimbursement the net investment income per share would have been
reduced by $0.03.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $28,390,371.
<TABLE>
<CAPTION>
CLASS C
-------------
MARCH 1, 1999
TO
OCTOBER 31,
1999(a)
- ---------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $13.99
Income from investment operations:
Net investment income (loss) (0.03)
Net realized and unrealized gain (loss) on investments 1.98
Net increase (decrease) from investment operations 1.95
Distributions to shareholders:
From net investment income --
From net realized gain on investments --
Total distributions --
Net asset value, end of period $15.94
Total return(b) 13.94%
- ---------------------------------------------------------------------------
Ratios and supplemental data:
- ---------------------------------------------------------------------------
Net assets, end of period (in 000s) $ 16
Ratio of net investment income (loss) to average net assets:
With fee waivers (0.41)%(c)
Without fee waivers (0.63)%(c)
Ratio of expenses to average net assets:
With fee waivers 2.50%(c)
Without fee waivers 2.72%(c)
Portfolio turnover rate 49%
- ---------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $10,439.
7
<PAGE> 117
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 118
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 119
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 120
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 121
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 122
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 123
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 124
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 125
------------------------------
AIM GLOBAL INFRASTRUCTURE FUND
------------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
- --Registered Trademark-- or your account, or wish to obtain free copies of the
fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- -----------------------------------
AIM Global Infrastructure Fund
SEC 1940 Act file number: 811-05426
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com GIF-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 126
AIM GLOBAL HEALTH
CARE FUND
-------------------------------------------------------------------------
AIM Global Health Care Fund seeks to provide long-term growth of capital.
AIM --Registered Trademark--
PROSPECTUS
FEBRUARY 28, 2000
This prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells
you otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 127
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 128
----------------------------
AIM GLOBAL HEALTH CARE FUND
----------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing, normally, at least 65% of
its total assets in equity securities of domestic and foreign health care
companies. The fund considers a "health care company" to be one that (1) derives
at least 50% of its revenues or earnings from health care activities; or (2)
devotes at least 50% of its assets to such activities, based on its most recent
fiscal year. Such companies include those that design, manufacture, or sell
products or services used for or in connection with health care or medicine
(such as pharmaceutical companies, biotechnology research firms, companies that
sell medical products, and companies that own or operate health care
facilities). The fund may invest up to 35% of its assets in debt securities
issued by health care companies, or in equity and debt securities of other
companies the portfolio manager believes will benefit from developments in the
health care industry.
The fund will normally invest in the securities of companies located in at
least three different countries, including the United States, and may invest a
significant portion of its assets in the securities of U.S. issuers. However,
the fund will invest no more than 50% of its total assets in the securities of
issuers in any one country, other than the U.S. The fund may invest
substantially in securities denominated in one or more currencies.
The fund may invest in companies located in developing countries, i.e., those
that are in the initial stages of their industrial cycles. The fund may also
invest up to 5% of its total assets in lower-quality debt securities, i.e.,
"junk bonds."
The portfolio managers allocate the fund's assets among securities of
countries and in currency denominations that are expected to provide the best
opportunities for meeting the fund's investment objective. In analyzing specific
companies for possible investment, the portfolio managers ordinarily look for
several of the following characteristics: above-average per share earnings
growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold all
or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, shares of affiliated
money market funds or high-quality debt securities. As a result, the fund may
not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
the health care industry, such as substantial government regulation. Government
regulation may impact the demand for products and services offered by health
care companies. Also, the products and services offered by health care companies
may be subject to rapid obsolescence caused by scientific advances and
technological innovations. Because the fund focuses its investments in the
health care industry, the value of your fund shares may rise and fall more than
the value of shares of a fund that invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
1
<PAGE> 129
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and their prices may be more volatile than U.S. securities.
The fund may participate in the initial public offering (IPO) market. Because
of the fund's small asset base, any investment the fund may make in IPOs may
significantly increase the fund's total return. As the fund's assets grow, the
impact of IPO investments will decline, which may reduce the fund's total
return.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 130
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ------------- --------
<S> <S>
1990 .................................... 13.14%
1991 .................................... 57.88%
1992 .................................... (13.51)%
1993 .................................... 2.61%
1994 .................................... 0.29%
1995 .................................... 36.96%
1996 .................................... 23.84%
1997 .................................... 7.96%
1998 .................................... 18.43%
1998 .................................... 5.52%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
22.13% (quarter ended March 31, 1991) and the lowest quarterly return was
- -14.87% (quarter ended March 31, 1993).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 0.51% 16.86% 13.23% 13.61% 08/07/89
Class B 0.25 17.21 -- 15.91 04/01/93
Class C -- -- -- -- 03/01/99
MSCI AC World Index(1) 27.31 18.90 11.51 11.48(2) 07/31/89(2)
- --------------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International All Country World Index measures
the performance of securities listed on the major world stock exchanges of
47 markets, including both developed and emerging markets.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
<PAGE> 131
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- ------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of offering
price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase price
or redemption proceeds,
whichever is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- ------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.50 1.00 1.00
Other Expenses 0.34 0.35 0.35
Total Annual Fund
Operating Expenses 1.82 2.33 2.33
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $651 $1,020 $1,413 $2,511
Class B 736 1,027 1,445 2,539
Class C 336 727 1,245 2,666
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $651 $1,020 $1,413 $2,511
Class B 236 727 1,245 2,539
Class C 236 727 1,245 2,666
- ----------------------------------------------
</TABLE>
4
<PAGE> 132
----------------------------
AIM GLOBAL HEALTH CARE FUND
----------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.98% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - Derek S. Izuel, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1997. From 1995 to 1997 he was a full time student at the University of
Michigan. From 1991 to 1995 he was a software engineer with Bank of America.
- - Roger Mortimer, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1995.
- - Derek H. Webb, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1992.
- - Michael Yellen, Senior Portfolio Manager, who has been responsible for the
fund since 1996 and has been associated with the advisor and/or its affiliates
since 1994.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Global Health Care Fund are subject to the
maximum 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
5
<PAGE> 133
----------------------------
AIM GLOBAL HEALTH CARE FUND
----------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999(a) 1998(a) 1997(a) 1996(a) 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.15 $ 27.98 $ 23.60 $ 21.84 $ 19.60
Income from investment operations:
Net investment income (loss) (0.19) (0.21) (0.25) (0.17) (0.15)
Net realized and unrealized gain (loss) on
investments 4.04 (0.91) 6.48 4.79 3.73
Net increase (decrease) from investment
operations 3.85 (1.12) 6.23 4.62 3.58
Distributions to shareholders:
From net realized gain on investments -- (6.70) (1.85) (2.86) (1.34)
In excess of net realized gain on investments -- (0.01) -- -- --
Total distributions -- (6.71) (1.85) (2.86) (1.34)
Net asset value, end of period $ 24.00 $ 20.15 $ 27.98 $ 23.60 $ 21.84
Total return(b) 19.11% (4.71)% 28.36% 23.14% 19.79%
- ---------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $357,747 $357,534 $472,083 $467,861 $426,380
Ratio of net investment income (loss) to average
net assets (0.81)%(c) (0.98)% (1.03)% (0.75)% (0.78)%
Ratio of expenses to average net assets 1.82%(c) 1.84% 1.80% 1.84% 1.91%
Portfolio turnover rate 123% 187% 149% 157% 99%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $383,895,122.
N/A Not applicable.
6
<PAGE> 134
----------------------------
AIM GLOBAL HEALTH CARE FUND
----------------------------
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
- -----------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999(a) 1998(a) 1997(a) 1996(a) 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.37 $ 27.27 $ 23.15 $ 21.56 $ 19.46
Income from investment operations:
Net investment income (loss) (0.30) (0.30) (0.37) (0.27) (0.25)
Net realized and unrealized gain (loss) on
investments 3.89 (0.89) 6.34 4.72 3.69
Net increase (decrease) from investment
operations 3.59 (1.19) 5.97 4.45 3.44
Distributions to shareholders:
From net realized gain on investments -- (6.70) (1.85) (2.86) (1.34)
In excess of net realized gain on investments -- (0.01) -- -- --
Total distributions -- (6.71) (1.85) (2.86) (1.34)
Net asset value, end of period $ 22.96 $ 19.37 $ 27.27 $ 23.15 $ 21.56
Total return(b) 18.53% (5.20)% 27.75% 22.59% 19.17%
- ------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $102,916 $100,311 $147,440 $107,622 $70,740
Ratio of net investment income (loss) to average
net assets (1.32)%(c) (1.48)% (1.53)% (1.25)% (1.28)%
Ratio of expenses to average net assets 2.33%(c) 2.34% 2.30% 2.34% 2.41%
Portfolio turnover rate(c) 123% 187% 149% 157% 99%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $108,881,226.
N/A Not applicable.
<TABLE>
<CAPTION>
CLASS C
--------------
MARCH 1, 1999
TO
OCTOBER 31,
1999(a)
- ----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $22.50
Income from investment operations:
Net investment income (loss) (0.21)
Net realized and unrealized gain (loss) on investments 0.67
Net increase (decrease) from investment operations 0.46
Distributions to shareholders:
From net realized gain on investments --
In excess of net realized gain on investments --
Total distributions --
Net asset value, end of period $22.96
Total return(b) 2.04%
- ----------------------------------------------------------------------------
Ratios and supplemental data:
- ----------------------------------------------------------------------------
Net assets, end of period (in 000s) $1,278
Ratio of net investment income (loss) to average net assets: (1.32)%(c)
Ratio of expenses to average net assets: 2.33%(c)
Portfolio turnover rate 123%
- ----------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $670,519.
7
<PAGE> 135
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 136
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 137
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 138
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 139
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 140
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 141
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 142
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 143
----------------------------
AIM GLOBAL HEALTH CARE FUND
----------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies
of the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
------------------------------------
AIM Global Health Care Fund
SEC 1940 Act file number: 811-05426
-----------------------------------
[AIM LOGO
APPEARS HERE] www.aimfunds.com GHC-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 144
AIM GLOBAL RESOURCES FUND
----------------------------------------------------------------------
AIM Global Resources Fund seeks to provide long-term growth of capital.
PROSPECTUS AIM --Registered Trademark--
FEBRUARY 28, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 145
-------------------------
AIM GLOBAL RESOURCES FUND
-------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 146
-------------------------
AIM GLOBAL RESOURCES FUND
-------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing all of its total assets in
the Global Resources Portfolio (the portfolio), which in turn normally invests
at least 65% of its investable assets in equity securities of domestic and
foreign natural resources companies. The portfolio considers a "natural
resources" company to be one that (1) derives at least 50% of its revenues or
earnings from natural resource activities; or (2) devotes at least 50% of its
assets to such activities, based on its most recent fiscal year. Such companies
include those that own, explore, or develop natural resources (such as oil,
metals, forest products, and chemicals) and other basic commodities (such as
foodstuffs) or supply goods and services to such companies. The portfolio may
invest up to 35% of its assets in debt securities issued by natural resources
companies, or in equity and debt securities of other companies the portfolio
managers believe will benefit from developments in the natural resources
industry.
The portfolio will normally invest in the securities of issuers located in at
least three different countries, including the United States, and may invest a
significant portion of its assets in the securities of U.S. issuers. However,
the portfolio will invest no more than 50% of its total assets in the securities
of issuers in any one country, other than the U.S. The portfolio may invest in
companies located in developing countries, i.e., those that are in the initial
stages of their industrial cycles. The portfolio may invest substantially in
securities denominated in one or more currencies. The portfolio may invest up to
20% of its total assets in lower-quality debt securities, i.e., "junk bonds."
The portfolio managers allocate the portfolio's assets among securities of
countries and in currency denominations that are expected to provide the best
opportunities for meeting the portfolio's investment objective. In analyzing
specific companies for possible investment, the portfolio managers ordinarily
look for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the portfolio may temporarily
hold all or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, shares of affiliated
money market funds, or high-quality debt securities. As a result, the fund or
the portfolio may not achieve its investment objective.
If the fund's Board of Trustees determines that it is in the best interests of
the fund and its shareholders, the fund may redeem its investment in the
portfolio.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term gains and losses, which
may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the portfolio invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
the natural resources industry, such as increasing regulation of the environment
by both U.S. and foreign governments. Increased environmental regulations may,
among other things, increase compliance costs and affect business opportunities
for the companies in which the portfolio invests. The value is also affected by
changing commodity prices, which can be highly volatile and are subject to risks
of oversupply and reduced demand.
Because the portfolio focuses its investments in the natural resources
industry, the value of your fund shares may rise and fall more than the value of
shares of a fund that invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
1
<PAGE> 147
-------------------------
AIM GLOBAL RESOURCES FUND
-------------------------
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and their prices may be more volatile than U.S. securities.
The portfolio may participate in the initial public offering (IPO) market.
Because of the portfolio's small asset base, any investment the portfolio may
make in IPOs may significantly increase the fund's and the portfolio's total
return. As the portfolio's assets grow, the impact of IPO investments will
decline, which may reduce the fund's and the portfolio's total return.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 148
-------------------------
AIM GLOBAL RESOURCES FUND
-------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1995 ............................................................. 7.05%
1996 ............................................................. 47.20%
1997 ............................................................. -1.51%
1998 ............................................................. -34.31%
1999 ............................................................. 18.69%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
31.87% (quarter ended September 30, 1997) and the lowest quarterly return was
- -21.61% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ---------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 13.02% 2.88% 2.89% 05/31/94
Class B 13.23 3.04 3.14 05/31/94
Class C -- -- -- 03/01/99
MSCI AC World Index(1) 27.31 18.90 17.10(2) 05/31/94(2)
- ---------------------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International All Country World Index measures
the performance of securities listed on the major world stock exchanges of
47 markets, including both developed and emerging markets.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
<PAGE> 149
-------------------------
AIM GLOBAL RESOURCES FUND
-------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of offering
price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets)(2) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.50 1.00 1.00
Other Expenses 0.82 0.82 0.82
Total Annual Fund
Operating Expenses 2.30 2.80 2.80
Expense
Reimbursement(3) 0.30 0.30 0.30
Net Expenses 2.00 2.50 2.50
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) This fee table, and the expense example below, reflect the expenses of both
the fund and the portfolio.
(3) The investment advisor has contractually agreed to limit Total Annual Fund
Operating Expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) on Class A, Class B and Class C shares to 2.00%,
2.50% and 2.50%, respectively.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $697 $1,159 $1,647 $2,985
Class B 783 1,168 1,679 3,009
Class C 383 868 1,479 3,128
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $697 $1,159 $1,647 $2,985
Class B 283 868 1,479 3,009
Class C 283 868 1,479 3,128
- ----------------------------------------------
</TABLE>
4
<PAGE> 150
-------------------------
AIM GLOBAL RESOURCES FUND
-------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment advisor of Global
Resources Portfolio (the portfolio) and is responsible for its day-to-day
management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173. The advisor supervises all aspects of the portfolio's
operations and provides investment advisory services to the portfolio, including
obtaining and evaluating economic, statistical and financial information to
formulate and implement investment programs for the portfolio.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the portfolio, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.68% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the portfolio are:
- - Derek S. Izuel, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1997. From 1995 to 1997 he was a full time student at the University of
Michigan. From 1991 to 1995 he was a Software Engineer with Bank of America.
- - Roger Mortimer, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1995.
- - Derek H. Webb, Portfolio Manager, who has been responsible for the fund since
1994 and has been associated with the advisor and/or its affiliates since
1992.
- - Michael Yellen, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1994.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Global Resources Fund are subject to the
maximum 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
5
<PAGE> 151
-------------------------
AIM GLOBAL RESOURCES FUND
-------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
- ------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999(a) 1998(a) 1997(a) 1996(a) 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.95 $ 20.65 $ 17.43 $ 11.44 $ 12.41
Income from investment operations:
Net investment income (loss) 0.02 (0.11)(b) (0.25) (0.24) 0.04 (c)
Net realized and unrealized gain (loss) on
investments 1.15 (8.91) 4.08 6.28 (0.98)
Net increase (decrease) from investment
operations 1.17 (9.02) 3.83 6.04 (0.94)
Distributions to shareholders:
From net investment income -- (0.19) -- (0.04) (0.03)
From net realized gain on investments -- (0.49) (0.61) (0.01) --
Total distributions -- (0.68) (0.61) (0.05) (0.03)
Net asset value, end of period $ 12.12 $ 10.95 $ 20.65 $ 17.43 $ 11.44
Total return(d) 10.68% (45.02)% 22.64% 53.04% (7.58)%
- ------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $15,664 $19,463 $69,975 $48,729 $12,598
Ratio of net investment income (loss) to average
net assets:
With fee waivers 0.19%(e) (0.75)% (1.41)% (1.55)% 0.41%
Without fee waivers (0.11)%(e) (1.06)% (1.51)% (1.65)% (0.69)%
Ratio of expenses to average net assets:
With fee waivers 2.00%(e) 1.98% 2.03% 2.20% 2.37%
Without fee waivers 2.30%(e) 2.29% 2.13% 2.30% 3.47%
Portfolio turnover rate 123% 201% 321% 94% 87%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Before reimbursement the net investment loss per share would have been
increased by $0.04.
(c) Before reimbursement the net investment (loss) per share would have been
reduced (increased) by $0.14.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets on $17,347,953.
6
<PAGE> 152
-------------------------
AIM GLOBAL RESOURCES FUND
-------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------
YEAR ENDED OCTOBER 31,
1999(a) 1998(a) 1997(a) 1996(a) 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.75 $ 20.37 $ 17.29 $ 11.36 $ 12.38
Income from investment operations:
Net investment income (loss) (0.04) (0.18)(b) (0.33) (0.31) (0.02)(c)
Net realized and unrealized gain (loss) on
investments 1.13 (8.76) 4.02 6.25 (0.98)
Net increase (decrease) from investment
operations 1.09 (8.94) 3.69 5.94 (1.00)
Distributions to shareholders:
From net investment income -- (0.19) -- -- (0.02)
From net realized gain on investments -- (0.49) (0.61) (0.01) --
Total distributions -- (0.68) (0.61) (0.01) (0.02)
Net asset value, end of period $ 11.84 $ 10.75 $ 20.37 $ 17.29 $ 11.36
Total return(d) 10.14% (45.25)% 21.99% 52.39% (8.05)%
- ------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $20,019 $28,996 $86,812 $ 57,749 $13,978
Ratio of net investment income (loss) to average
net assets:
With fee waivers (0.31)%(e) (1.25)% (1.91)% (2.05)% (0.09)%
Without fee waivers (0.61)%(e) (1.56)% (2.01)% (2.15)% (1.19)%
Ratio of expenses to average net assets:
With fee waivers 2.50%(e) 2.48% 2.53% 2.70% 2.87%
Without fee waivers 2.80%(e) 2.79% 2.63% 2.80% 3.97%
Portfolio turnover rate 123% 201% 321% 94% 87%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Before reimbursement the net investment loss per share would have been
increased by $0.04.
(c) Before reimbursement the net investment income (loss) per share would have
been reduced (increased) by $0.13.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $23,930,469.
<TABLE>
<CAPTION>
CLASS C
-------------------------------
MARCH 1, 1999
TO
OCTOBER 31, 1999(a)
- ---------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 10.00
Income from investment operations:
Net investment income (loss) (0.03)
Net realized and unrealized gain (loss) on investments 1.87
Net increase (decrease) from investment operations 1.84
Distributions to shareholders:
From net investment income --
From net realized gain on investments --
Total distributions --
Net asset value, end of period $ 11.84
Total return(b) 18.40%
- ---------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ---------------------------------------------------------------------------------------------
Net assets, end of period (in 000's) $ 41
Ratio of net investment income (loss) to average net assets:
With fee waivers (0.31)%(c)
Without fee waivers (0.61)%(c)
Ratio of expenses to average net assets:
With fee waivers 2.50%(c)
Without fee waivers 2.80%(c)
Portfolio turnover rate 123%
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $60,471.
7
<PAGE> 153
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 154
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 155
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 156
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 157
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 158
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 159
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 160
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 161
-------------------------
AIM GLOBAL RESOURCES FUND
-------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services,
Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
data base on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ------------------------------------
AIM Global Resources Fund
SEC 1940 Act file number: 811-05426
- ------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com GRS-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 162
AIM GLOBAL
TELECOMMUNICATIONS AND
TECHNOLOGY FUND
--------------------------------------------------------------------------
AIM Global Telecommunications and Technology Fund seeks to provide
long-term growth of capital.
AIM--Registered Trademark--
PROSPECTUS
FEBRUARY 28, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells
you otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 163
-------------------------------------------------
AIM GLOBAL TELECOMMUNICATIONS AND TECHNOLOGY FUND
-------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 164
-------------------------------------------------
AIM GLOBAL TELECOMMUNICATIONS AND TECHNOLOGY FUND
-------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet its objective by investing at least 65% of its total
assets in equity securities of domestic and foreign telecommunications and
technology companies. Such companies include those that develop, manufacture, or
sell computer and electronic components and equipment, software, semiconductors,
Internet technology, communications services and equipment, mobile
communications and broadcasting. The fund may also invest up to 35% of its
assets in debt securities issued by domestic and foreign telecommunications and
technology companies, or in equity or debt securities of other companies the
portfolio managers believe will benefit from developments in the
telecommunications and technology industries.
The fund will normally invest in the securities of companies located in at
least three different countries, including the United States, and may invest a
significant portion of its assets in the securities of U.S. issuers. However,
the fund will invest no more than 40% of its total assets in the securities of
issuers in any one country, other than the U.S. The fund may invest
substantially in securities denominated in one or more currencies.
The fund may invest in companies located in developing countries, i.e., those
that are in the initial stages of their industrial cycles. The fund may also
invest up to 5% of its total assets in lower-quality debt securities, i.e.,
"junk bonds."
The portfolio managers allocate the fund's assets among securities of
countries and in currency denominations that are expected to provide the best
opportunities for meeting the fund's investment objective. In analyzing specific
companies for possible investment, the portfolio managers ordinarily look for
several of the following characteristics: above-average per share earnings
growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold all
or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, shares of affiliated
money market funds, or high-quality debt securities. As a result, the fund may
not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term gains and losses, which
may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
Because the fund focuses its investments in the telecommunications and
technology industries, the value of your fund shares may rise and fall more than
the value of shares of a fund that invests more broadly.
The value of the fund's shares is particularly vulnerable to factors affecting
the telecommunications and technology industries, such as substantial government
regulations and the need for governmental approvals, dependency on consumer and
business acceptance as new technologies evolve, and large and rapid price
movements resulting from, among other things, fierce competition in these
industries. Additional factors affecting the technology industry and the value
of your shares include rapid obsolescence of products and services, short
product cycles, and aggressive pricing. Many technology companies are small and
at an earlier state of development and, therefore, may be subject to risks such
as those arising out of limited product lines, markets, and financial and
managerial resources.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
1
<PAGE> 165
-------------------------------------------------
AIM GLOBAL TELECOMMUNICATIONS AND TECHNOLOGY FUND
-------------------------------------------------
These factors may affect the prices of securities issued by foreign companies
and governments located in developing countries more than those in countries
with mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devalued their currencies against
the U.S. dollar, thereby causing the value of investments in companies located
in those countries to decline. Transaction costs are often higher in developing
countries and there may be delays in settlement procedures.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 166
-------------------------------------------------
AIM GLOBAL TELECOMMUNICATIONS AND TECHNOLOGY FUND
-------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Returns
- ----------- -------
<S> <C>
1993 ............................................................ 47.66%
1994 ............................................................ -4.40%
1995 ............................................................ 8.59%
1996 ............................................................ 5.24%
1997 ............................................................ 13.18%
1998 ............................................................ 18.14%
1999 ............................................................ 108.08%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
62.18% (quarter ended December 31, 1999) and the lowest quarterly return was
- -23.98% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 98.15% 24.80% 20.83% 01/27/92
Class B 102.04 25.25 23.02 04/01/93
Class C -- -- -- 03/01/99
S&P 500(1) 21.03 28.54 20.20(2) 01/31/92(2)
MSCI AC WORLD INDEX(3) 27.31 18.90 15.08(2) 01/31/92(2)
- ------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
The fund has elected to use the S&P 500 as its primary index rather than
the MSCI AC World Index since the S&P 500 more closely reflects the
performance of the securities in which the fund invests.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
(3) The Morgan Stanley Capital International All Country World Index measures
the performance of securities listed on the major world stock exchanges
of 47 markets, including both developed and emerging markets.
3
<PAGE> 167
-------------------------------------------------
AIM GLOBAL TELECOMMUNICATIONS AND TECHNOLOGY FUND
-------------------------------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -----------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -----------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.95% 0.95% 0.95%
Distribution and/or
Service (12b-1) Fees 0.50 1.00 1.00
Other Expenses 0.32 0.33 0.33
Total Annual Fund
Operating Expenses 1.77 2.28 2.28
- -----------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------
<S> <C> <C> <C> <C>
Class A $646 $1,006 $1,389 $2,460
Class B 731 1,012 1,420 2,488
Class C 331 712 1,220 2,615
- ---------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------
<S> <C> <C> <C> <C>
Class A.... $646 $1,006 $1,389 $2,460
Class B.... 231 712 1,220 2,488
Class C.... 231 712 1,220 2,615
- ----------------------------------------------------
</TABLE>
4
<PAGE> 168
-------------------------------------------------
AIM GLOBAL TELECOMMUNICATIONS AND TECHNOLOGY FUND
-------------------------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.95% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor are
- - David P. Barnard, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1982.
- - Claude C. Cody IV, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1992.
- - Jason T. Holzer, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates
since 1996. From 1994 to 1996, he was an associate with JMB Realty.
- - Robert M. Kippes, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1989.
- - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1986.
- - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1990.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Global Telecommunications and Technology Fund
are subject to the maximum 4.75% initial sales charge as listed under the
heading "CATEGORY II Initial Sales Charges" in the "Shareholder
Information--Choosing a Share Class" section of this prospectus. Purchases of
Class B and Class C shares are subject to the contingent deferred sales charges
listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
5
<PAGE> 169
-------------------------------------------------
AIM GLOBAL TELECOMMUNICATIONS AND TECHNOLOGY FUND
-------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998(a) 1997(a) 1996(a) 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.28 $ 18.04 $ 16.69 $ 16.42 $ 17.80
Income from investment operations:
Net investment income (loss) (0.25) (0.17) (0.17) (0.13) (0.09)
Net realized and unrealized gain (loss) on
investments 10.97 (0.39) 2.93 1.22 (0.43)
Net increase (decrease) from investment
operations 10.72 (0.56) 2.76 1.09 (0.52)
Distributions to shareholders:
From net realized gain on investments (0.56) (1.20) (1.41) (0.82) (0.86)
Net asset value, end of period $ 26.44 $ 16.28 $ 18.04 $ 16.69 $ 16.42
Total return(b) 67.63% (3.16)% 17.70% 7.00% (2.88)%
- --------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $ 1,023,124 $713,904 $910,801 $1,204,428 $1,353,722
Ratio of net investment income (loss) to average
net assets (1.11)%(c) (0.93)% (1.06)% (0.89)% (0.55)%
Ratio of expenses to average net assets 1.77%(c) 1.88% 1.84% 1.79% 1.83%
Portfolio turnover rate 122% 75% 35% 37% 62%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges.
(c) Ratios are based on average net assets of $862,610,444.
N/A Not applicable.
6
<PAGE> 170
-------------------------------------------------
AIM GLOBAL TELECOMMUNICATIONS AND TECHNOLOGY FUND
-------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998(a) 1997(a) 1996(a) 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.76 $ 17.58 $ 16.37 $ 16.20 $ 17.66
Income from investment operations:
Net investment income (loss) (0.35) (0.25) (0.25) (0.23) (0.17)
Net realized and unrealized gain (loss) on
investments 10.58 (0.37) 2.87 1.22 (0.43)
Net increase (decrease) from investment
operations 10.23 (0.62) 2.62 0.99 (0.60)
Distributions to shareholders:
From net realized gain on investments (0.56) (1.20) (1.41) (0.82) (0.86)
Net asset value, end of period $ 25.43 $ 15.76 $ 17.58 $ 16.37 $ 16.20
Total return(b) 66.84% (3.67)% 17.15% 6.46% (3.37)%
- ---------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $ 898,400 $614,715 $805,535 $1,007,654 $1,111,520
Ratio of net investment income (loss) to average
net assets (1.62)%(c) (1.43)% (1.56)% (1.39)% (1.05)%
Ratio of expenses to average net assets 2.28%(c) 2.38% 2.34% 2.29% 2.33%
Portfolio turnover rate 122% 75% 35% 37% 62%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges.
(c) Ratios are based on average net assets of $760,527,702.
N/A Not applicable.
<TABLE>
<CAPTION>
CLASS C
--------------
MARCH 1, 1999
TO OCTOBER 31,
1999
- ----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 19.23
Income from investment operations:
Net investment income (loss) (0.11)
Net realized and unrealized gain (loss) on investments 6.31
Net increase (decrease) from investment operations 6.20
Distributions to shareholders:
From net realized gain on investments --
Net asset value, end of period $ 25.43
Total return(a) 32.24%
- ----------------------------------------------------------------------------
Ratios and supplemental data:
- ----------------------------------------------------------------------------
Net assets, end of period (in 000's) $12,352
Ratio of net investment income (loss) to average net assets (1.62)%(b)
Ratio of expenses to average net assets 2.28%(b)
Portfolio turnover rate 122%
- ----------------------------------------------------------------------------
</TABLE>
(a) Total return does not include sales charges and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average net assets of $4,047,890.
7
<PAGE> 171
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 172
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 173
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 174
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 175
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 176
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 177
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 178
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 179
-------------------------------------------------
AIM GLOBAL TELECOMMUNICATIONS AND TECHNOLOGY FUND
-------------------------------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus
(is legally a part of this prospectus). Annual and semiannual reports to
shareholders contain additional information about the fund's investments. The
fund's annual report also discusses the market conditions and investment
strategies that significantly affected the fund's performance during its last
fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services,
Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
- -----------------------------------------------------
</TABLE>
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- --------------------------------------------------
AIM Global Telecommunications and Technology Fund
SEC 1940 Act file number: 811-05426
- --------------------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com GTL-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 180
AIM LATIN AMERICAN
GROWTH FUND
------------------------------------------------------------------------
AIM LATIN AMERICAN GROWTH FUND SEEKS TO PROVIDE GROWTH OF CAPITAL.
AIM --Registered Trademark--
PROSPECTUS
FEBRUARY 28, 2000
This prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
o is not FDIC insured;
o may lose value; and
o is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 181
------------------------------
AIM LATIN AMERICAN GROWTH FUND
------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 5
Advisor Compensation 5
Portfolio Manager 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 182
------------------------------
AIM LATIN AMERICAN GROWTH FUND
------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is growth of capital.
The fund seeks to meet this objective by investing, normally, at least 65% of
its total assets in equity and debt securities of Latin American issuers. The
fund considers securities of "Latin American issuers" to include (1) securities
of companies organized under the laws of, or having a principal office located
in, a Latin American country; (2) securities of companies that derive 50% or
more of their total revenues from business in Latin America, provided that, in
the view of the portfolio manager, the value of such issuers' securities reflect
Latin American developments to a greater extent than developments elsewhere; (3)
securities issued or guaranteed by the government of a country in Latin America,
its agencies or instrumentalities, or municipalities, or the central bank of
such country; (4) U.S. dollar-denominated securities or securities denominated
in a Latin American currency issued by companies to finance operations in Latin
America; and (5) securities of Latin American issuers in the form of depositary
shares. The fund considers Latin America to include Mexico and the countries
within Central and South America and the Caribbean, many of which are considered
developing countries, i.e., those that are in the initial stages of their
industrial cycles.
The fund will normally invest a majority of its assets in equity securities.
The fund may invest up to 35% of its total assets in a combination of equity and
debt securities of U.S. issuers. The fund may also invest up to 50% of its total
assets in debt securities, which may consist of lower-quality debt securities,
i.e., "junk bonds," and "Brady Bonds." Brady Bonds are debt restructurings that
provide for the exchange of cash and loans for newly-issued bonds. The fund
currently expects to invest primarily in securities issued by companies and
governments in Mexico, Chile, Brazil and Argentina. The fund may invest more
than 25% of its total assets in any of these four countries but expects to
invest no more than 60% of its total assets in any one country.
In allocating investments among the various Latin American countries, the
portfolio manager looks principally at the stage of industrialization, potential
for productivity gains through economic deregulation, the impact of financial
liberalization, and monetary conditions and the political outlook in each
country. Further, the portfolio manager selects between debt and equity
investments based on additional economic criteria such as fundamental economic
strength, expected corporate profits, the condition of balance of payments,
changes in terms of trade, and currency and interest rate trends. The portfolio
manager considers whether to sell a particular security when any of those
factors materially changes.
The fund is non-diversified. With respect to 50% of its assets, it is
permitted to invest more than 5% of its assets in the securities of any one
issuer.
In anticipation of or in response to adverse market conditions, or for cash
management purposes or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash (U.S. dollars, foreign currencies and
multinational currency units), money market instruments, shares of affiliated
money market funds, or high-quality debt securities. As a result, the fund may
not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity. Debt
securities are particularly vulnerable to credit risk and interest rate
fluctuations. When interest rates rise, bond prices fall; the longer a bond's
duration, the more sensitive it is to this risk.
Because the fund focuses its investments in Latin America, the value of your
shares may rise and fall more than the value of shares of a fund that invests in
a broader geographic region.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and their prices may be more volatile than U.S. securities.
1
<PAGE> 183
------------------------------
AIM LATIN AMERICAN GROWTH FUND
------------------------------
These factors may affect the prices of securities issued by foreign companies
and governments located in developing countries more than those in countries
with mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devalued their currencies against
the U.S. dollar, thereby causing the value of investments in companies located
in those countries to decline. Transaction costs are often higher in developing
countries and there may be delays in settlement procedures.
Because it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. Thus, the value of the fund's shares may vary more
widely, and the fund may be subject to greater investment and credit risk, than
if the fund invested more broadly.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 184
------------------------------
AIM LATIN AMERICAN GROWTH FUND
------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1992 ...................................... (2.32)%
1993 ...................................... 52.95%
1994 ...................................... (6.64)%
1995 ...................................... (21.34)%
1996 ...................................... 17.00%
1997 ...................................... 14.52%
1998 ...................................... (44.27)%
1999 ...................................... 60.10%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
35.55% (quarter ended December 31, 1999) and the lowest quarterly return was
- -34.35% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payments of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 52.51% (2.18)% 4.94% 08/13/91
Class B 54.28 (2.08) 3.12 04/01/93
Class C -- -- 79.19 03/01/99
MSCI Emerging Latin America
Index(1) 65.45 8.25 14.37(2) 07/31/91(2)
- -------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International Emerging Latin America Index
measures the performance of companies listed in Argentina, Brazil, Chile,
Colombia, Mexico, Peru and Venezuela. The index has an aggregate market
capitalization of $318.95 billion.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
<PAGE> 185
------------------------------
AIM LATIN AMERICAN GROWTH FUND
------------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - -- - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.50 1.00 1.00
Other Expenses
Other 1.11 1.11 1.11
Interest 0.06 0.06 0.06
Total Other Expenses 1.17 1.17 1.17
Total Annual Fund
Operating Expenses 2.65 3.15 3.15
Expense
Reimbursement(2) 0.59 0.59 0.59
Net Expenses 2.06 2.56 2.56
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The investment advisor has contractually agreed to limit Total Annual Fund
Operating Expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) on Class A, Class B and Class C shares to 2.00%,
2.50% and 2.50%, respectively.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $730 $1,259 $1,813 $3,316
Class B 818 1,272 1,849 3,342
Class C 418 972 1,649 3,457
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $730 $1,259 $1,813 $3,316
Class B 318 972 1,649 3,342
Class C 318 972 1,649 3,457
- ----------------------------------------------
</TABLE>
4
<PAGE> 186
------------------------------
AIM LATIN AMERICAN GROWTH FUND
------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asset Management Limited (the subadvisor), an affiliate of the advisor,
is the fund's subadvisor and is responsible for its day-to-day management. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The subadvisor is located at 11 Devonshire Square, London EC2M 4YR, England. The
advisors supervise all aspects of the fund's operations and provide investment
advisory services to the fund, including obtaining and evaluating economic,
statistical and financial information to formulate and implement investment
programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor has acted as an investment adviser since 1967. Today, the
advisor, together with its subsidiaries, advises or manages over 120 investment
portfolios, including the fund, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.39% of average daily net assets.
PORTFOLIO MANAGER
The advisors use a team approach to investment management. The individual member
of the team who is primarily responsible for the day-to-day management of the
fund's portfolio is
- - David Manuel, Portfolio Manager, who has been responsible for the fund since
1997 and has been associated with the advisor and/or its affiliates since
1997. From 1987 to 1997, he was an Investment Analyst and Portfolio Manager
for Abbey Life Investment Services Ltd. (Bournemouth), and was Head of Latin
American Equities from 1994 to 1997.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Latin American Growth Fund are subject to the
maximum 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of income.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
5
<PAGE> 187
------------------------------
AIM LATIN AMERICAN GROWTH FUND
------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998(a) 1997(a) 1996(a) 1995(a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.70 $19.50 $ 17.95 $ 15.38 $ 26.11
Income from investment operations:
Net investment income (loss) 0.21 0.13(b) 0.11 0.09 0.15
Net realized and unrealized gain (loss) on
investments 2.20 (7.90) 1.44 2.59 (9.28)
Net increase (decrease) from investment
operations 2.41 (7.77) 1.55 2.68 (9.13)
Distributions to shareholders:
From net investment income (0.14) (0.03) -- (0.08) --
From net realized gain on investments -- -- -- -- (1.60)
In excess of net investment income -- -- -- (0.03) --
Total distributions (0.14) (0.03) -- (0.11) (1.60)
Net asset value, end of period $ 13.97 $11.70 $ 19.50 $ 17.95 $ 15.38
Total return(c) 20.93% (39.86)% 8.52% 17.52% (37.16)%
- ------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $49,789 $60,720 $159,496 $177,373 $182,462
Ratio of net investment income to average net
assets:
With fee waivers 1.44%(d) 0.78% 0.52% 0.46% 0.86%
Without fee waivers 0.85%(d) 0.64% 0.42% 0.39% 0.85%
Ratio of expenses to average net assets
(excluding interest expense)
With fee waivers 2.00%(d) 2.00% 1.96% 2.03% 2.11%
Without fee waivers 2.59%(d) 2.14% 2.06% 2.10% 2.12%
Ratio of interest expenses to average net assets 0.06% 0.17% N/A N/A N/A
Portfolio turnover rate 30% 39% 130% 101% 125%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.02.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) Ratios are based on average net assets of $54,713,405.
N/A Not applicable.
6
<PAGE> 188
------------------------------
AIM LATIN AMERICAN GROWTH FUND
------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998(a) 1997(a) 1996(a) 1995(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.49 $19.23 $ 17.78 $ 15.21 $ 25.94
Income from investment operations:
Net investment income 0.17 0.04(b) 0.01 -- 0.06
Net realized and unrealized gain (loss) on
investments 2.16 (7.78) 1.44 2.59 (9.19)
Net increase (decrease) from investment
operations 2.33 (7.74) 1.45 2.59 (9.13)
Distributions to shareholders:
From net investment income (0.03) -- -- (0.01) --
From net realized gain on investments -- -- -- -- (1.60)
In excess of net investment income -- -- -- (0.01) --
Total distributions (0.03) -- -- (0.02) (1.60)
Net asset value, end of period $13.79 $11.49 $ 19.23 $ 17.78 $ 15.21
Total return(c) 20.36% (40.19)% 8.04% 17.02% (37.42)%
- ----------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ----------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $38,456 $46,599 $133,448 $137,400 $134,527
Ratio of net investment income (loss) to average
net assets:
With fee waivers 0.94%(d) 0.28% 0.02% (0.04)% 0.36%
Without fee waivers 0.35%(d) 0.14% (0.08)% (0.11)% 0.35%
Ratio of expenses to average net assets
(excluding interest expense)
With fee waivers 2.50%(d) 2.50% 2.46% 2.53% 2.61%
Without fee waivers 3.09%(d) 2.64% 2.56% 2.60% 2.62%
Ratio of interest expenses to average net assets 0.06% 0.17% N/A N/A N/A
Portfolio turnover rate 30% 39% 130% 101% 125%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.02.
(c) Total return does not include sales charges.
(d) Ratios are based on average net assets of $42,277,069.
N/A Not applicable.
<TABLE>
<CAPTION>
CLASS C
----------------------------
MARCH 1, 1999 TO
OCTOBER 31, 1999
- ------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 10.21
Income from investment operations:
Net investment income 0.12
Net realized and unrealized gain (loss) on investments 3.46
Net increase (decrease) from investment operations 3.58
Distributions to shareholders:
From net investment income --
In excess of net investment income --
Total distributions --
Net asset value, end of period $ 13.79
Total return(a) 35.06%
- ------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------
Net assets, end of period (in 000's) $ 147
Ratio of net investment income to average net assets:
With fee waivers 0.94%(b)
Without fee waivers 0.35%(b)
Ratio of expenses to average net assets (excluding interest
expense)
With fee waivers 2.50%(b)
Without fee waivers 3.09%(b)
Ratio of interest expense to average net assets 0.06%
Portfolio turnover rate 30%
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not include sales charges and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average net assets of $106,283.
7
<PAGE> 189
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 190
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 191
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 192
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 193
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
<PAGE> 194
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
<PAGE> 195
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
<PAGE> 196
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 197
------------------------------
AIM LATIN AMERICAN GROWTH FUND
------------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- -----------------------------------
AIM Latin American Growth Fund
SEC 1940 Act file number: 811-05426
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com LAG-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 198
AIM STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
AIM Strategic Income Fund primarily seeks to provide high current income
and, secondarily, seeks growth of capital.
PROSPECTUS AIM --Registered Trademark--
FEBRUARY 28, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells
you otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 199
-------------------------
AIM STRATEGIC INCOME FUND
-------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 200
-------------------------
AIM STRATEGIC INCOME FUND
-------------------------
INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's primary investment objective is high current income, and its
secondary investment objective is growth of capital.
The fund seeks to meet these objectives by investing primarily in debt
securities, including mortgage-backed and asset-backed securities, of issuers in
the United States and developed and developing countries, i.e., those that are
in the initial stages of their industrial cycles. The securities of issuers in
developing countries may consist substantially of "Brady Bonds" and other
sovereign debt securities issued by governments of such countries and traded in
the markets of developed countries or groups of developed countries without
regard to ratings. Brady Bonds are debt restructurings that provide for the
exchange of cash and loans for newly issued bonds.
The fund normally invests at least 35% of its total assets in U.S. and foreign
debt and other fixed income securities that are either rated at least investment
grade by Moody's Investors Service, Inc. or Standard & Poor's (rated in the four
highest ratings categories by Moody's or S&P), or the fund's portfolio managers,
believe to be of comparable quality. The fund may invest up to 65% of its total
assets in debt securities that are rated below investment grade by such agencies
or that the fund's portfolio managers believe to be of comparable quality, i.e.,
"junk bonds." The fund may also invest up to 35% of its total assets in equity
securities. The fund may invest a significant portion of its assets in the
securities of U.S. issuers.
The portfolio managers allocate assets among securities of countries and in
currency denominations that are expected to provide the most attractive
opportunities for meeting the fund's investment objectives. The portfolio
managers consider fundamental economic strength, credit quality, and currency
and interest rate trends in emphasizing various country, geographic, and
industry sectors within the fund. Further, the portfolio managers select
particular issuers based on additional economic criteria such as yield,
maturity, issue classification, and quality characteristics. Currency
investments are based on factors such as relative inflation, interest rate
levels and trends, growth rate forecasts, balance of payments status, and
economic policies. The portfolio managers consider whether to sell a particular
security when any of those factors materially changes.
The fund is non-diversified. With respect to 50% of its assets, it is
permitted to invest more than 5% of its assets in the securities of only one
issuer.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold all
or a portion of its assets in cash (U.S. dollars, foreign currencies or
multinational currency units), money market instruments, shares of affiliated
money market funds, or high-quality debt securities. As a result, the fund may
not achieve its investment objectives.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term capital gains and
losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. Debt securities are particularly
vulnerable to credit risk and interest rate fluctuations. When interest rates
rise, bond prices fall; the longer a bond's duration, the more sensitive it is
to this risk. The fund could also lose money if any debt securities that the
fund holds are downgraded or go into default.
Mortgage-backed and asset-backed securities are subject to different risks
from bonds and, as a result, may respond to changes in interest rates
differently. If interest rates fall, people refinance or pay off their mortgages
ahead of time, which may cause mortgage-backed securities to lose value. If
interest rates rise, many people may refinance or prepay their mortgages at a
slower-than-expected rate. This may effectively lengthen the life of
mortgage-backed securities, which may cause the securities to be more sensitive
to changes in interest rates.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
1
<PAGE> 201
-------------------------
AIM STRATEGIC INCOME FUND
-------------------------
These factors may affect the price of securities issued by foreign companies
and governments located in developing countries more than those in countries
with mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devalued their currencies against
the U.S. dollar, thereby causing the value of investments in companies located
in those countries to decline. Transaction costs are often higher in developing
countries and there may be delays in settlement procedures.
Sovereign debt securities of developing country governments are generally
lower-quality debt securities. Sovereign debt securities are subject to the
additional risk that, under some political, diplomatic, social, or economic
circumstances, some developing countries that issue lower-quality debt
securities may be unable or unwilling to make principal or interest repayments
as they come due.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors'
claims. The value of junk bonds often fluctuates in response to company,
political or economic developments and can decline significantly over short
periods of time or during periods of general or regional economic difficulty.
During those times, the bonds could be difficult to value or to sell at a fair
price. Credit ratings on junk bonds do not necessarily reflect their actual
market risk.
Because it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. Thus, the value of the fund's shares may vary more
widely, and the fund may be subject to greater investment and credit risk, than
if the fund invested more broadly.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE> 202
-------------------------
AIM STRATEGIC INCOME FUND
-------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1990 ....................................... 8.38%
1991 ....................................... 15.78%
1992 ....................................... 1.27%
1993 ....................................... 43.95%
1994 ....................................... (20.85)%
1995 ....................................... 17.05%
1996 ....................................... 21.03%
1997 ....................................... 6.94%
1998 ....................................... (1.81)%
1999 ....................................... (0.47)%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
11.43% (quarter ended December 31, 1993) and the lowest quarterly return was
- -18.16% (quarter ended March 31, 1994).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ---------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (5.19)% 7.12% 7.40% 7.24% 03/29/88
Class B (5.82) 7.14 -- 6.77 10/22/92
Class C -- -- -- -- 03/01/99
Lehman Brothers Aggregate Bond
Index(1) (0.82) 7.73 7.70 8.11(2) 03/31/88(2)
- ---------------------------------------------------------------------------------------
</TABLE>
(1) The Lehman Aggregate Bond Index is an unmanaged index generally considered
representative of treasury issues, agency issues, corporate bond issues and
mortgage-backed securities.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
<PAGE> 203
-------------------------
AIM STRATEGIC INCOME FUND
-------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- ------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- ------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- ------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.73% 0.73% 0.73%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 0.32 0.32 0.32
Interest Expense 0.02 0.02 0.02
Total Other Expenses 0.34 0.34 0.34
Total Annual Fund
Operating Expenses 1.42 2.07 2.07
Fee Waiver(2) 0.35 0.35 0.35
Net Expenses 1.07 1.72 1.72
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) Fee waiver has been restated to reflect current agreement. The investment
advisor has contractually agreed to limit Total Annual Fund Operating
Expenses (excluding interest, taxes, brokerage commissions and extraordinary
expenses) on Class A, Class B and Class C shares to 1.05%, 1.70% and 1.70%,
respectively.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. To the extent fees are waived or
expenses reimbursed, expenses will be lower. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $613 $903 $1,214 $2,096
Class B 710 949 1,314 2,234
Class C 310 649 1,114 2,400
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $613 $903 $1,214 $2,096
Class B 210 649 1,114 2,234
Class C 210 649 1,114 2,400
- ----------------------------------------------
</TABLE>
4
<PAGE> 204
-------------------------
AIM STRATEGIC INCOME FUND
-------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The advisor supervises all aspects of the fund's operations and provides
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.73% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Robert G. Alley, Senior Portfolio Manager, who has been responsible for the
fund since 2000 and has been associated with the advisor and/or its affiliates
since 1992.
- - Jan H. Friedli, Portfolio Manager, who has been responsible for the fund since
2000 and has been associated with the advisor and/or its affiliates since
1999. From 1997 to 1999, he was global fixed-income portfolio manager for
Nicholas-Applegate Capital Management. From 1994 to 1997, he was international
fixed-income trader and analyst for Strong Capital Management.
- - Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the
fund since 2000 and has been associated with the advisor and/or its affiliates
since 1992.
- - Eric J. Peyton, Portfolio Manager, who has been responsible for the fund since
2000 and has been associated with the advisor and/or its affiliates since
1998. From 1993 to 1998, he was an equity derivative trader for Cargill
Financial Markets.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Strategic Income Fund are subject to the
maximum 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus.
Purchases of Class B and Class C shares are subject to the contingent deferred
sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of income.
DIVIDENDS
The fund generally declares and pays dividends, if any, monthly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
5
<PAGE> 205
-------------------------
AIM STRATEGIC INCOME FUND
-------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
- ------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998(a) 1997 1996(a) 1995(a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.80 $ 12.00 $ 11.76 $ 10.32 $ 10.88
Income from investment operations:
Net investment income 0.68 0.91(b) 0.74 0.89 0.97
Net realized and unrealized gain (loss) on
investments and foreign currencies (0.66) (1.27) 0.34 1.44 (0.69)
Net increase (decrease) from investment
operations 0.02 (0.36) 1.08 2.33 0.28
Distributions to shareholders:
From net investment income (0.65) (0.65) (0.78) (0.82) (0.80)
In excess of net investment income -- -- (0.06) (0.07) --
Return of capital (0.04) (0.19) -- -- (0.04)
Total distributions (0.69) (0.84) (0.84) (0.89) (0.84)
Net asset value, end of period $ 10.13 $ 10.80 $ 12.00 $ 11.76 $ 10.32
Total return(c) 0.06% (3.41)% 9.40% 23.00% 3.06%
- ------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000s) $68,675 $102,280 $138,715 $185,126 $188,165
Ratio of net investment income to average net
assets 6.44%(d) 7.73% 6.18% 8.09% 9.64%
Ratio of expenses to average net assets
excluding interest expense 1.39%(d) 1.56% 1.44% 1.40% 1.45%
Ratio of interest expense to average net assets 0.02% N/A N/A N/A N/A
Portfolio turnover rate 235% 306% 149% 177% 238%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.11 per share.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) Ratios are based on average net assets of $86,462,180.
N/A Not applicable.
6
<PAGE> 206
-------------------------
AIM STRATEGIC INCOME FUND
-------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
- --------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998(a) 1997 1996(a) 1995(a)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.81 $ 12.01 $ 11.77 $ 10.33 $ 10.88
Income from investment operations:
Net investment income 0.62 0.84(b) 0.67 0.82 0.91
Net realized and unrealized gain (loss) on
investments and foreign currencies (0.66) (1.28) 0.33 1.44 (0.69)
Net increase (decrease) from investment
operations (0.04) (0.44) 1.00 2.26 0.22
Distributions to shareholders:
From net investment income (0.58) (0.57) (0.71) (0.75) (0.73)
In excess of net investment income -- -- (0.05) (0.07) --
Return of capital (0.04) (0.19) -- -- (0.04)
Total distributions (0.62) (0.76) (0.76) (0.82) (0.77)
Net asset value, end of period $ 10.15 $ 10.81 $ 12.01 $ 11.77 $ 10.33
Total return(c) (0.52)% (4.04)% 8.70% 22.15% 2.48%
- --------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (in 000's) $118,904 $188,660 $281,376 $333,178 $357,852
Ratio of net investment income to average net
assets 5.78%(d) 7.08% 5.53% 7.44% 8.99%
Ratio of expenses to average net assets
excluding interest expense 2.05%(d) 2.21% 2.09% 2.05% 2.10%
Ratio of interest expense to average net assets 0.02% N/A N/A N/A N/A
Portfolio turnover rate 235% 306% 149% 177% 238%
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.11 per share.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) Ratios are based on average net assets of $155,200,726.
N/A Not applicable
<TABLE>
<CAPTION>
CLASS C
--------------
MARCH 1, 1999
TO OCTOBER 31,
1999
- ----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.78
Income from investment operations:
Net investment income 0.33
Net realized and unrealized gain (loss) on investments and
foreign currencies (0.63)
Net increase (decrease) from investment operations (0.30)
Distributions to shareholders:
From net investment income (0.31)
In excess of net investment income --
Return of capital (0.03)
Total distributions (0.34)
Net asset value, end of period $10.14%
Total return(a) (1.08)%
- ----------------------------------------------------------------------------
Ratios and supplemental data:
- ----------------------------------------------------------------------------
Net assets, end of period (in 000's) $ 251
Ratio of net investment income to average net assets 5.78%(b)
Ratio of expenses to average net assets excluding interest
expense 2.05%(b)
Ratio of interest expense to average net assets 0.02%
Portfolio turnover rate 235%
- ----------------------------------------------------------------------------
</TABLE>
(a)Total return does not include sales charges and is not annualized for periods
less than one year.
(b)Ratios are annualized and based on average net assets of $53,046.
7
<PAGE> 207
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--02/00
<PAGE> 208
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--02/00 A-2
<PAGE> 209
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--02/00
<PAGE> 210
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/00 A-4
<PAGE> 211
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--02/00
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THE AIM FUNDS
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REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--02/00 A-6
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THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- --------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
- --------------------------------------------------------------------------------
A-7 MCF--02/00
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THE AIM FUNDS
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PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the customary trading session of the NYSE on each day the NYSE is open for
business. AIM Money Market Fund also determines its net asset value as of 12:00
noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--02/00 A- 8
<PAGE> 215
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AIM STRATEGIC INCOME FUND
-------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports only)
</TABLE>
- --------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- -----------------------------------
AIM Strategic Income Fund
SEC 1940 Act file number: 811-05426
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com SINC-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 216
STATEMENT OF
ADDITIONAL INFORMATION
CLASS A, CLASS B AND CLASS C SHARES OF
AIM DEVELOPING MARKETS FUND
AIM LATIN AMERICAN GROWTH FUND
(SERIES PORTFOLIOS OF
AIM INVESTMENT FUNDS)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF THE
ABOVE-NAMED FUNDS, A COPY OF WHICH MAY BE OBTAINED FREE
OF CHARGE FROM AUTHORIZED DEALERS OR BY WRITING
AIM DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 347-4246
STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 2000,
RELATING TO THE AIM DEVELOPING MARKETS FUND
PROSPECTUS DATED FEBRUARY 28, 2000,
AND THE AIM LATIN AMERICAN GROWTH FUND PROSPECTUS DATED FEBRUARY 28, 2000
<PAGE> 217
TABLE OF CONTENTS
<TABLE>
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PAGE
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INTRODUCTION......................................................................................................1
GENERAL INFORMATION ABOUT THE FUNDS...............................................................................1
The Trust and Its Shares.................................................................................1
INVESTMENT STRATEGIES AND RISKS...................................................................................2
Investment Objectives....................................................................................2
Selection of Investments and Asset Allocation............................................................5
Equity-Linked Derivatives................................................................................6
Investments in Other Investment Companies................................................................6
Privatizations...........................................................................................7
When-Issued and Forward Commitment Securities............................................................7
Depositary Receipts......................................................................................7
Warrants or Rights.......................................................................................8
Lending of Portfolio Securities..........................................................................8
Commercial Bank Obligations..............................................................................9
Repurchase Agreements....................................................................................9
Borrowing and Reverse Repurchase Agreements..............................................................9
Short Sales.............................................................................................10
Temporary Defensive Strategies..........................................................................11
Samurai and Yankee Bonds................................................................................12
Debt Conversions........................................................................................12
Debt Securities.........................................................................................12
Premium Securities......................................................................................13
Indexed Debt Securities.................................................................................13
Structured Investments..................................................................................13
Stripped Income Securities..............................................................................14
Floating and Variable Rate Income Securities............................................................14
Zero Coupon Securities..................................................................................14
Indexed Commercial Paper................................................................................14
Other Indexed Securities................................................................................15
Swaps, Caps, Floors and Collars.........................................................................15
Loan Participations and Assignments.....................................................................15
OPTIONS, FUTURES AND CURRENCY STRATEGIES.........................................................................16
Special Risks of Options, Futures and Currency Strategies...............................................16
Writing Call Options....................................................................................18
Writing Put Options.....................................................................................19
Purchasing Put Options..................................................................................19
Purchasing Call Options.................................................................................20
Index Options...........................................................................................21
Interest Rate, Currency and Stock Index Futures.........................................................22
Options on Futures Contracts............................................................................24
Limitations on Use of Futures, Options on Futures and Certain Options on Currencies.....................25
Forward Contracts.......................................................................................25
Foreign Currency Strategies--Special Considerations.....................................................26
Cover...................................................................................................27
RISK FACTORS.....................................................................................................27
General.................................................................................................27
</TABLE>
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<TABLE>
<S> <C> <C>
Non-Diversified Classification..........................................................................28
Illiquid Securities.....................................................................................28
Debt Securities.........................................................................................29
Loan Participations and Assignments.....................................................................30
Foreign Securities......................................................................................31
INVESTMENT LIMITATIONS...........................................................................................39
Developing Markets Fund.................................................................................39
Latin American Fund.....................................................................................40
EXECUTION OF PORTFOLIO TRANSACTIONS..............................................................................42
Portfolio Trading and Turnover..........................................................................44
MANAGEMENT.......................................................................................................44
Trustees and Executive Officers.........................................................................44
Investment Management and Administration Services.......................................................46
THE DISTRIBUTION PLANS...........................................................................................49
The Class A and C Plan..................................................................................49
The Class B Plan........................................................................................50
Both Plans..............................................................................................50
THE DISTRIBUTOR..................................................................................................54
Expenses of the Funds...................................................................................56
SALES CHARGES AND DEALER CONCESSIONS.............................................................................56
REDUCTIONS IN INITIAL SALES CHARGES..............................................................................59
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS......................................................................62
HOW TO PURCHASE AND REDEEM SHARES................................................................................64
Backup Withholding......................................................................................65
NET ASSET VALUE DETERMINATION....................................................................................66
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................67
Reinvestment of Dividends and Distributions.............................................................67
Tax Matters.............................................................................................67
General.................................................................................................68
Exchange and Reinstatement Privileges and Wash Sales....................................................68
Foreign Taxes...........................................................................................68
Passive Foreign Investment Companies....................................................................69
Non-U.S. Shareholders...................................................................................69
Options, Futures and Foreign Currency Transactions......................................................70
SHAREHOLDER INFORMATION..........................................................................................70
MISCELLANEOUS INFORMATION........................................................................................73
Charges for Certain Account Information.................................................................73
Custodian and Transfer Agent............................................................................73
Independent Accountants.................................................................................73
Legal Matters...........................................................................................74
Shareholder Liability...................................................................................74
</TABLE>
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<TABLE>
<S> <C> <C>
Control Persons and Principal Holders of Securities.....................................................74
INVESTMENT RESULTS...............................................................................................76
Total Return Quotations.................................................................................76
Performance Information.................................................................................80
APPENDIX.........................................................................................................83
Description of Bond Ratings.............................................................................83
Description of Commercial Paper Ratings.................................................................84
Absence of Rating.......................................................................................84
FINANCIAL STATEMENTS.............................................................................................FS
</TABLE>
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INTRODUCTION
This Statement of Additional Information relates to the Class A, Class
B and Class C shares of AIM Developing Markets Fund ("Developing Markets Fund")
and AIM Latin American Growth Fund ("Latin American Fund") (each, a "Fund," and
collectively, the "Funds"). Developing Markets Fund and Latin American Fund each
is a non-diversified series of AIM Investment Funds (the "Trust"), a registered
open-end management investment company organized as a Delaware business trust.
On October 31, 1997, the Developing Markets Fund, which had no prior operating
history, acquired the assets and assumed the liabilities of G.T. Global
Developing Markets Fund, Inc. (the "Predecessor Fund"), a closed-end investment
company.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for, and INVESCO Asset Management Limited (the "Sub-advisor")
serves as the investment sub-advisor for the Funds.
The Trust is a series mutual fund. The rules and regulations of the
Securities and Exchange Commission (the "SEC") require all mutual funds to
furnish prospective investors certain information concerning the activities of
the fund being considered for investment. This information for Developing
Markets Fund is included in a separate Prospectus dated February 28, 2000, and
for Latin American Fund is included in a separate Prospectus dated February 28,
2000. Additional copies of the Prospectuses and this Statement of Additional
Information may be obtained without charge by writing the principal distributor
of the Funds' shares, A I M Distributors, Inc. ("AIM Distributors"), P.O. Box
4739, Houston, TX 77210-4739 or by calling (800) 347-4246. Investors must
receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Prospectus; and, in order to avoid repetition, reference
will be made to sections of the Prospectus. Additionally, the Prospectus and
this Statement of Additional Information omit certain information contained in
the Registration Statement filed with the SEC. Copies of the Registration
Statement, including items omitted from the Prospectus and this Statement of
Additional Information, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE FUNDS
THE TRUST AND ITS SHARES
The Trust was organized as a Delaware business trust on May 7, 1998 and
previously operated under the name G.T. Investment Funds, Inc., which was
organized as a Maryland corporation on October 29, 1987 and later renamed AIM
Investment Funds, Inc. On September 8, 1998, the Trust acquired the assets of
and assumed the liabilities of AIM Investment Funds, Inc. The Trust is
registered with the SEC as a diversified open-end series management investment
company. The Trust currently consists of the following portfolios: AIM
Developing Markets Fund, AIM Emerging Markets Debt Fund (formerly AIM Global
High Income Fund), AIM Global Consumer Products and Services Fund, AIM Global
Financial Services Fund, AIM Global Government Income Fund, AIM Global Growth &
Income Fund, AIM Global Healthcare Fund, AIM Global High Income Fund, AIM Global
Infrastructure Fund, AIM Global Resources Fund, AIM Global Telecommunications
and Technology Fund (formerly AIM Global Telecommunications Fund), AIM Latin
American Growth Fund and AIM Strategic Income Fund. Each of these funds has
three separate classes: Class A, Class B and Class C shares. The Board is
authorized to establish additional series of shares, or additional classes of
shares of any fund, at any time. All historical financial and other information
contained in this Statement of Additional Information for periods prior to
September 8, 1998, is that of the series of AIM Investment Funds, Inc.
The term "majority of the Funds' outstanding shares" of the Trust, of a
particular Fund or of a particular class of a Fund means, respectively, the vote
of the lesser of (a) 67% or more of the shares of the Trust, such Fund or such
class present at a meeting of the Trust's shareholders, if the holders of more
than
1
<PAGE> 221
50% of the outstanding shares of the Trust, such Fund or such class are present
or represented by proxy, or (b) more than 50% of the outstanding shares of the
Trust, such Fund or such class.
Class A, Class B and Class C shares of Developing Markets Fund and
Latin American Fund have equal rights and privileges. Each share of a particular
class is entitled to one vote, to participate equally in dividends and
distributions declared by the Trust's Board of Trustees with respect to the
class of such Fund and, upon liquidation of the Fund, to participate
proportionately in the net assets of the Fund allocable to such class remaining
after satisfaction of outstanding liabilities of the Fund allocable to such
class. Fund shares are fully paid, non-assessable and fully transferable when
issued and have no preemptive rights and have such conversion and exchange
rights as set forth in the Prospectus and this Statement of Additional
Information. Fractional shares have proportionately the same rights, including
voting rights, as are provided for a full share. Other than the automatic
conversion of Class B shares to Class A shares, there are no conversion rights.
Shareholders of the Funds do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all Funds
voting together for election of trustees may elect all of the members of the
Board of Trustees of the Trust. In such event, the remaining holders cannot
elect any trustees of the Trust.
On any matter submitted to a vote of shareholders, shares of each Fund
will be voted by each Fund's shareholders individually when the matter affects
the specific interest of a 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 will be voted
in the aggregate on other matters, such as the election of Trustees and
ratification of the selection of the Trust's independent accountants.
Normally there will be no annual meeting of shareholders for any of the
Funds in any year, except as required under the Investment Company Act of 1940,
as amended (the "1940 Act"). A Trustee may be removed at any meeting of the
shareholders of the Trust by a vote of the shareholders owning at least
two-thirds of the outstanding shares. Any Trustee may call a special meeting of
shareholders for any purpose. Furthermore, Trustees shall promptly call a
meeting of shareholders solely for the purpose of removing one or more Trustees
when requested in writing to do so by shareholders holding 10% of the Trust's
outstanding shares.
Pursuant to the Trust's Agreement and Declaration of Trust, the Trust
may issue an unlimited number of shares of each Fund. Each share of a Fund
represents an interest in the Fund only, has a par value of $0.01 per share,
represents an equal proportionate interest in the Fund with other shares of the
Fund and is entitled to such dividends and distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
by the Board of Trustees. Each share of a Fund is equal in earnings, assets and
voting privileges except that each class normally has exclusive voting rights
with respect to its distribution plan and bears the expenses, if any, related to
the distribution of its shares.
INVESTMENT STRATEGIES AND RISKS
The following discussion of investment strategies and risks supplements
the discussion of investment objectives and risks set forth in the Prospectus
under the headings "Investment Objectives and Strategies" and "Principal Risks
of Investing in the Funds."
INVESTMENT OBJECTIVES
The Funds' investment objectives may not be changed without the
approval of a majority of the Funds' outstanding voting securities. 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
2
<PAGE> 222
of a security or kind of securities resulting from changing market values or a
similar type of event will not be considered a violation of the Fund's
investment policies or restrictions.
DEVELOPING MARKETS FUND. The primary investment objective of Developing
Markets Fund is long-term growth of capital. Its secondary investment objective
is income, to the extent consistent with seeking capital appreciation. The Fund
normally invests substantially all of its assets in issuers in the developing
(or "emerging") markets of Asia, Europe, Latin America and elsewhere. A majority
of Developing Markets Fund's assets normally are invested in emerging market
equity securities. The Developing Markets Fund may invest in the following types
of equity securities: common stock, preferred stock, securities convertible into
common stock, American Depositary Receipts ("ADRs"), Global Depositary Receipts
("GDRs"), rights and warrants to acquire such securities and substantially
similar forms of equity with comparable risk characteristics. Developing Markets
Fund may also invest in emerging market debt securities that will be selected
based on their potential to provide a combination of capital appreciation and
current income. There can be no assurance Developing Markets Fund will achieve
its investment objectives.
For purposes of Developing Markets Fund's operations, emerging markets
consist of all countries determined by the Sub-advisor to have developing or
emerging economies and markets. These countries generally include every country
in the world except the United States, Canada, Japan, Australia, New Zealand and
most countries located in Western Europe.
In determining what countries constitute emerging markets with respect
to Developing Markets Fund, the Sub-advisor will consider, among other things,
data, analysis, and classification of countries published or disseminated by the
International Bank for Reconstruction and Development (commonly known as the
World Bank) and the International Finance Corporation ("IFC").
Developing Markets Fund will consider investments in the following
emerging markets:
<TABLE>
<S> <C> <C>
Algeria Hungary Peru
Argentina India Philippines
Bolivia Indonesia Poland
Botswana Israel Portugal
Brazil Ivory Coast Republic of Slovakia
Bulgaria Jamaica Russia
Chile Jordan Singapore
China Kazakhstan Slovenia
Colombia Kenya South Africa
Costa Rica Lebanon South Korea
Cyprus Malaysia Sri Lanka
Czech Republic Mauritius Swaziland
Dominican Republic Mexico Taiwan
Ecuador Morocco Thailand
Egypt Nicaragua Turkey
El Salvador Nigeria Ukraine
Finland Oman Uruguay
Ghana Pakistan Venezuela
Greece Panama Zambia
Hong Kong Paraguay Zimbabwe
</TABLE>
Although Developing Markets Fund considers each of the above-listed
countries eligible for investment, it will not be invested in all such markets
at all times. Moreover, investing in some of those markets currently may not be
desirable or feasible, due to the lack of adequate custody arrangements for the
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Fund's assets, overly burdensome repatriation and similar restrictions, the lack
of organized and liquid securities markets, unacceptable political risks or for
other reasons.
As used in the Prospectus and this Statement of Additional Information,
an issuer in an emerging market is an entity (1) for which the principal
securities trading market is an emerging market, as defined above, (2) that
(alone or on a consolidated basis) derives 50% or more of its total revenues
from business in emerging markets, provided that, in the Sub-advisor's view, the
value of such issuer's securities will tend to reflect emerging market
developments to a greater extent than developments elsewhere, or (3) organized
under the laws of, or with a principal office in, an emerging market.
LATIN AMERICAN FUND. The investment objective of Latin American Fund is
growth of capital. Latin American Fund will normally invest at least 65% of its
total assets in securities of a broad range of Latin American issuers. The Fund
may invest in common stock, preferred stock, rights, warrants and securities
convertible into common stock, and other substantially similar forms of equity
securities with comparable risk characteristics, as well as bonds, notes,
debentures or other forms of indebtedness that may be developed in the future.
The receipt of income from debt securities owned by the fund is incidental to
its objective of capital appreciation. Though Latin American Fund can normally
invest up to 35% of its total assets in U.S. securities, Latin American Fund
reserves the right to be primarily invested in U.S. securities for temporary
defensive purposes or pending investment of the proceeds of the offering made
hereby.
Unless otherwise indicated, Latin American Fund defines Latin America
to include the following countries: Argentina, the Bahamas, Barbados, Belize,
Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El
Salvador, French Guiana, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico,
the Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad
and Tobago, Uruguay and Venezuela. Under current market conditions, Latin
American Fund expects to invest primarily in securities issued by companies and
governments in Mexico, Chile, Brazil and Argentina. Latin American Fund may
invest more than 25% of its total assets in any of these four countries but does
not expect to invest more than 60% of its total assets in any one country.
Latin American Fund defines securities of Latin American issuers to
include: (a) securities of companies organized under the laws of, or having a
principal office located in, a Latin American country; (b) securities of
companies that derive 50% or more of their total revenues from business in Latin
America, provided that, in the Sub-advisor's view, the value of such issuers'
securities reflect Latin American developments to a greater extent than
developments elsewhere; (c) securities issued or guaranteed by the government of
a country in Latin America, its agencies or instrumentalities, or
municipalities, or the central bank of such country; (d) U.S. dollar-denominated
securities or securities denominated in a Latin American currency issued by
companies to finance operations in Latin America; and (e) securities of Latin
American issuers, as defined herein, in the form of depositary shares. For
purposes of the foregoing definition, Latin American Fund's purchases of
securities issued by companies outside of Latin America to finance their Latin
American operations will be limited to securities the performance of which is
materially related to such company's Latin American activities.
Certain sectors of the economies of certain Latin American countries
are closed to equity investments by foreigners. Further, due to the absence of
securities markets and publicly owned corporations and due to restrictions on
direct investment by foreign entities in certain Latin American countries, the
Fund may be able to invest in such countries solely or primarily through
governmentally approved investment vehicles or companies. In addition, the
portion of Latin American Fund's assets invested directly in Chile may be less
than the portion invested in other Latin American countries because, at present,
capital directly invested in Chile normally cannot be repatriated for at least
one year. As a result, Latin American Fund currently intends to limit most of
its Chilean investments to indirect investments through ADRs and established
Chilean investment companies, the shares of which are not subject to
repatriation restrictions.
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SELECTION OF INVESTMENTS AND ASSET ALLOCATION
In determining the appropriate distribution of investments among
various countries and geographic regions for the Funds, the Sub-advisor
ordinarily considers the following factors: prospects for relative economic
growth among the different countries in which a Fund may invest; expected levels
of inflation; government policies influencing business conditions; the outlook
for currency relationships; and the range of the individual investment
opportunities available to international investors.
In analyzing companies for investment by each Fund, the Sub-advisor
ordinarily looks for one or more of the following characteristics: an
above-average earnings growth per share; high return on invested capital;
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their respective marketplaces. In
allocating Latin American Fund's assets between debt and equity securities, the
Sub-advisor considers, in addition to the factors listed in the Prospectus,
changes in Latin American governmental policy including regulation governing
industry, trade, financial markets, and foreign and domestic investment, as well
as the substance and likely development of government finances. In certain
countries, governmental restrictions and other limitations on investment may
affect the maximum percentage of equity ownership in any one company by the
Funds. In addition, in some instances only special classes of securities may be
purchased by foreigners and the market prices, liquidity and rights with respect
to those securities may vary from shares owned by nationals.
Although the Funds value their assets daily in terms of U.S. dollars,
the Funds do not intend to convert their holdings of foreign currencies into
U.S. dollars on a daily basis. The Funds will do so from time to time, and
investors should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference ("spread") between the prices at which they are buying
and selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the Funds at one rate, while offering a lesser rate of exchange
should a Fund desire to sell that currency to the dealer.
There may be times when, in the opinion of the Sub-advisor, prevailing
market, economic or political conditions warrant reducing the proportion of each
Fund's assets invested in equity securities and increasing the proportion held
in cash or short-term obligations denominated in U.S. dollars or other
currencies. A portion of each Fund's assets may be held in U.S. dollars or
short-term interest-bearing dollar-denominated securities to provide for ongoing
expenses and redemptions. Latin American Fund may invest up to 35% of its total
assets in a combination of equity and debt securities of U.S. issuers. In
evaluating investments in securities of U.S. issues, the Sub-Advisor will
consider, among other factors, the issuer's Latin American business activities
and the impact that development in Latin America may have on the issuer's
operations and financial condition.
The Funds may be prohibited under the 1940 Act, from purchasing the
securities of any foreign company that, in its most recent fiscal year, derived
more than 15% of its gross revenues from securities-related activities
("securities-related companies"). In a number of countries, including those in
Latin America, commercial banks act as securities broker/dealers, investment
advisors and underwriters or otherwise engage in securities-related activities,
which may limit the Fund's ability to hold securities issued by such banks. The
Fund has obtained an exemption from the SEC to permit it to invest in certain of
these securities subject to certain restrictions.
For investment purposes, an issuer is typically considered as located
in a particular country if it (a) is incorporated under the laws of or has its
principal office in that country, or (b) it normally derives 50% or more of its
total revenue from business in that country. However, these are not absolute
requirements, and certain companies incorporated in a particular country and
considered by the Sub-advisor to be located in that country may have substantial
offshore operations or subsidiaries and/or export sales exceeding in size the
assets or sales in that country.
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In selecting investments for Developing Markets Fund, the Sub-advisor
seeks to identify those countries and industries where economic and political
factors, including currency movements, are likely to produce above-average
growth rates over the long term. The Sub-advisor seeks those emerging markets
that have strongly developing economies and in which the markets are becoming
more sophisticated. The Sub-advisor then invests in those companies in such
countries and industries that it believes are best positioned and managed to
take advantage of these economic and political factors. The Sub-advisor believes
that the issuers of securities in emerging markets often have sales and earnings
growth rates that exceed those in developed countries and that such growth rates
may in turn be reflected in more rapid share price appreciation.
As opportunities to invest in securities in other emerging markets
develop, Developing Markets Fund expects to expand and further broaden the group
of emerging markets in which it invests. In some cases, investments in debt
securities could provide Developing Markets Fund with access to emerging markets
in the early stages of their economic development, when equity securities are
not yet generally available or, in the Sub-advisor's view, do not yet present an
acceptable investment alternative. While Developing Markets Fund generally is
not restricted in the portion of its assets that may be invested in a single
region, under normal conditions its assets will be invested in issuers in at
least four countries, and it will not invest more than 25% of its assets in
issuers in one country. Developing Markets Fund's holdings of any one foreign
currency together with securities denominated in or indexed to such currency
will not exceed 40% of its assets.
In allocating investments among the various Latin American countries
for Latin American Fund, the Sub-advisor looks principally at the stage of
industrialization, potential for productivity gains through economic
deregulation, the impact of financial liberalization and monetary conditions and
the political outlook in each country. In allocating assets between equity and
debt securities, the Sub-advisor will consider, among other factors: the level
and anticipated direction of interest rates; expected rates of economic growth
and corporate profits growth; changes in Latin American government policy
including regulation governing industry, trade, financial markets, and foreign
and domestic investment; substance and likely development of government
finances; and the condition of the balance of payments and changes in the terms
of trade. In evaluating investments in securities of U.S. issuers, the
Sub-advisor will consider, among other factors, the issuer's Latin American
business activities and the impact that development in Latin America may have on
the issuer's operations and financial condition.
EQUITY-LINKED DERIVATIVES
The Funds may invest in equity-linked derivative products designed to
replicate the composition and performance of particular indices. Examples of
such products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark
Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial
Average Instruments ("DIAMONDS") and Optimised Portfolios as Listed Securities
("OPALS"). Investments in equity-linked derivatives involve the same risks
associated with a direct investment in the types of securities included in the
indices such products are designed to track. There can be no assurance that the
trading price of the equity-linked derivatives will equal the underlying value
of the basket of securities purchased to replicate a particular index or that
such basket will replicate the index. Investments in equity-linked derivatives
may constitute investment in other investment companies. See "Investments in
Other Investment Companies."
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by a Fund presently may
be made only by acquiring shares of other investment companies (including
investment vehicles or companies advised by AIM or its affiliates) with local
governmental approval to invest in those countries. At such time as direct
investment in these countries is allowed, the Funds anticipate investing
directly in these markets.
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Each Fund may invest in other investment companies to the extent
permitted by the 1940 Act, and the rules and regulations thereunder, and if
applicable, exemptive orders granted by the SEC. The following restrictions
apply to investments in other investment companies other than Affiliated Money
Market Funds (defined below): (i) a Fund may not purchase more than 3% of the
total outstanding voting stock of another investment company; (ii) a Fund may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) a Fund may not invest more than 10% of its total
assets in securities issued by other investment companies other than Affiliated
Money Market Funds. With respect to a Fund's purchase of shares of another
investment company, including Affiliated Money Market Funds, the Fund will
indirectly bear its proportionate share of the advisory fees and other operating
expenses of such investment company. The Funds have obtained an exemptive order
from the SEC allowing them to invest in money market funds that have AIM or an
affiliate of AIM as an investment adviser (the "Affiliated Money Market Funds"),
provided that investments in Affiliated Money Market Funds do not exceed 25% of
the total assets of such Fund.
PRIVATIZATIONS
The governments in some Latin American countries and emerging markets
have been engaged in programs of selling part or all of their stakes in
government owned or controlled enterprises ("privatizations"). The Sub-advisor
believes that privatizations may offer opportunities for significant capital
appreciation and intends to invest assets of each Fund in privatizations in
appropriate circumstances. In certain Latin American and emerging markets, the
ability of foreign entities such as the Fund to participate in privatizations
may be limited by local law or the terms on which the Funds may be permitted to
participate may be less advantageous than those afforded local investors. There
can be no assurance that governments in Latin American emerging markets will
continue to sell companies currently owned or controlled by them or that
privatization programs will be successful.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
Each Fund may purchase debt securities on a "when-issued" basis and may
purchase or sell such securities on a "forward commitment" basis in order to
hedge against anticipated changes in interest rates and prices. The price, which
is generally expressed in yield terms, is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but the Funds will purchase or sell when-issued securities and
forward commitments only with the intention of actually receiving or delivering
the securities, as the case may be. No income accrues on securities that have
been purchased pursuant to a forward commitment or on a when-issued basis prior
to delivery to the Fund. If a Fund disposes of the right to acquire a
when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it may incur a gain or loss. At
the time a Fund enters into a transaction on a when-issued or forward commitment
basis, the Fund will segregate cash or liquid securities equal to the value of
the when-issued or forward commitment securities with its custodian bank and
will mark to market daily such assets. There is a risk that the securities may
not be delivered and that the Fund may incur a loss.
DEPOSITARY RECEIPTS
Each Fund may hold equity securities of foreign issuers in the form of
ADRs, American Depositary Shares ("ADSs"), GDRs and European Depositary Receipts
("EDRs"), or other securities convertible into securities of eligible issuers.
These securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. ADRs and ADSs typically are issued
by an American bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. EDRs, which are sometimes referred
to as Continental Depository Receipts ("CDRs"), are issued in Europe typically
by foreign banks and trust companies and evidence ownership of either foreign or
domestic securities. GDRs are similar to EDRs and are designed for use in
several international financial markets. Generally, ADRs and ADSs in registered
form are designed for use in United States securities markets and EDRs in bearer
form are designed for use in European securities markets. For purposes of each
Fund's investment policies, a
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Fund's investments in ADRs, ADSs, GDRs and EDRs will be deemed to be investments
in the equity securities representing securities of foreign issuers into which
they may be converted.
ADR facilities may be established as either "unsponsored" or
"sponsored." While ADRs issued under these two types of facilities are in some
respects similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depository usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into U.S. dollars, the disposition of non-cash distributions, and
the performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass-through voting
rights to ADR holders in respect of the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depositary. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. Each
Fund may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by each Fund in connection with
other securities or separately and provide a Fund with the right to purchase at
a later date other securities of the issuer. Warrants are securities permitting,
but not obligating, their holder to subscribe for other securities or
commodities. Warrants do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle their holder to
purchase, and they do not represent any rights in the assets of the issuer. As a
result, warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to its expiration date.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each Fund may make
secured loans of portfolio securities amounting to not more than 30% of its
total assets, measured at the time any such loan is made. Securities loans are
made to broker/dealers or institutional investors pursuant to agreements
requiring that the loans continuously be secured by collateral consisting of
cash, U.S. government securities or certain irrevocable letters of credit (or
such other collateral as permitted by a Fund's investment program and regulatory
agencies and as approved by the Board) 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 collateral for such loans, if received in cash, may be held in
investment vehicles with investment objectives and policies similar to those of
money market funds or limited duration income funds (longer maturities than may
be held by money market funds), advised by the Advisor or its affiliates or by
unaffiliated advisers. The Funds may pay a fee to the Advisor of such investment
vehicles for its services. The collateral for such loans, if received in cash,
may be held in investment vehicles with investment objectives and policies
similar to those of money market funds or limited duration income funds (longer
maturities than may be held by money market funds), advised by the Advisor or
its affiliates or by unaffiliated advisers. The Funds may pay a fee to the
Advisor of such investment vehicles for its services. The Funds may pay
reasonable administrative and custodial fees in connection with loans of its
securities. While the securities loan is outstanding with respect to a Fund, the
Fund will continue to receive the equivalent of the interest or dividends paid
by the issuer on the securities, as well as interest
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on the investment of the collateral or a fee from the borrower. The Fund will
have a right to call each loan and obtain the securities within the stated
settlement period. The Fund will not have the right to vote equity securities
while they are lent, but it may call in a loan in anticipation of any important
vote. Loans will be made only to firms deemed by the Sub-advisor to be of good
standing and will not be made unless, in the judgment of the Sub-advisor, the
consideration to be earned from such loans would justify the risk. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delays in receiving additional collateral or in recovery of
the securities and possible loss of rights in the collateral if the borrower
fails financially.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each Fund's investment policies with respect to
bank obligations, obligations of foreign branches of U.S. banks and of foreign
banks are obligations of the issuing bank and may be general obligations of the
parent bank. Such obligations, however, may be limited by the terms of a
specific obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject a Fund to investment risks that are
different in some respects from those of investments in obligations of domestic
issuers. Although a Fund typically will acquire obligations issued and supported
by the credit of U.S. or foreign banks having total assets at the time of
purchase in excess of $1 billion, this $1 billion figure is not an investment
policy or restriction of any Fund. For the purposes of calculation with respect
to the $1 billion figure, the assets of a bank will be deemed to include the
assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction in which a Fund purchases a
security from a bank or recognized securities dealer and simultaneously commits
to resell that security to the bank or dealer at an agreed upon price, date, and
market rate of interest unrelated to the coupon rate or maturity of the
purchased security. Although repurchase agreements carry certain risks not
associated with direct investments in securities, including possible decline in
the market value of the underlying securities and delays and costs to a Fund if
the other party to the repurchase agreement becomes bankrupt, the Funds intend
to enter into repurchase agreements only with banks and dealers believed by the
Sub-advisor to present minimum credit risks in accordance with guidelines
established by the Trust's Board of Trustees. The Sub-advisor will review and
monitor the creditworthiness of such institutions under the Board's general
supervision.
The Funds will invest only in repurchase agreements collateralized at
all times in an amount at least equal to the repurchase price plus accrued
interest. To the extent that the proceeds from any sale of such collateral upon
a default in the obligation to repurchase were less than the repurchase price, a
Fund would suffer a loss. If the financial institution which is party to the
repurchase agreement petitions for bankruptcy or otherwise becomes subject to
bankruptcy or other liquidation proceedings, there may be restrictions on a
Fund's ability to sell the collateral and the Fund could suffer a loss. However,
with respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, each Fund intends to comply
with provisions under the U.S. Bankruptcy Code that would allow it immediately
to resell the collateral. There is no limitation on the amount of a Fund's
assets that may be subject to repurchase agreements at any given time. The Funds
will not enter into a repurchase agreement with a maturity of more than seven
days if, as a result, more than 15% (for Developing Markets Fund) or 10% (for
Latin American Fund) of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING AND REVERSE REPURCHASE AGREEMENTS
Neither Fund's borrowings will exceed 33 1/3% of the Fund's total
assets, i.e., each Fund's total assets at all times will equal at least 300% of
the amount of outstanding borrowings. If market fluctuations in the value of a
Fund's portfolio holdings or other factors cause the ratio of the Fund's total
assets to outstanding borrowings to fall below 300%, within three days
(excluding Sundays and holidays) of such event
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the Fund may be required to sell portfolio securities to restore the 300% asset
coverage, even though from an investment standpoint such sales might be
disadvantageous. Each Fund also may borrow up to 5% of its total assets for
temporary or emergency purposes other than to meet redemptions. Any borrowing by
a Fund may cause greater fluctuation in the value of its shares than would be
the case if the Fund did not borrow.
The Funds' fundamental investment limitations permit them to borrow
money for leveraging purposes. Developing Markets Fund, however, currently is
prohibited, pursuant to a non-fundamental investment policy, from borrowing
money in order to purchase securities. In addition, each Fund currently is
prohibited, pursuant to a non-fundamental investment policy, from purchasing
securities during times when outstanding borrowings represent more than 5% of
its assets. Nevertheless, this policy may be changed in the future by a vote of
a majority of the Trust's Board of Trustees. If a Fund employs leverage in the
future, it would be subject to certain additional risks. Use of leverage creates
an opportunity for greater growth of capital but would exaggerate any increases
or decreases in the Fund's net asset value. When the income and gains on
securities purchased with the proceeds of borrowings exceed the costs of such
borrowings, the Fund's earnings or net asset value will increase faster than
otherwise would be the case; conversely, if such income and gains fail to exceed
such costs, the Fund's earnings or net asset value would decline faster than
would otherwise be the case.
Each Fund may enter into reverse repurchase agreements. A reverse
repurchase agreement is a borrowing transaction in which a Fund transfers
possession of a security to another party, such as a bank or broker/dealer in
return for cash, and agrees to repurchase the security in the future at an
agreed upon price, which includes an interest component. Each Fund will
segregate liquid assets in an amount sufficient to cover its obligations and
reverse repurchase agreements with broker/dealers. No segregation is required
for reverse repurchase agreements with banks.
SHORT SALES
Each Fund may make short sales of securities, although it has no
current intention of doing so. A short sale is a transaction in which the Fund
sells a security in anticipation that the market price of that security will
decline. Each Fund may make short sales (i) as a form of hedging to offset
potential declines in long positions in securities it owns, or anticipates
acquiring, and (ii) in order to maintain portfolio flexibility.
When a Fund makes a short sale of a security it does not own, it must
borrow the security sold short and deliver it to the broker-dealer or other
intermediary through which it made the short sale. The Fund may have to pay a
fee to borrow particular securities and will often be obligated to pay over any
payments received on such borrowed securities.
A Fund's obligation to replace the borrowed security when the borrowing
is called or expires will be secured by collateral deposited with the
intermediary. The Fund will also be required to deposit collateral with its
custodian to the extent, if any, necessary so that the value of both collateral
deposits in the aggregate is at all times equal to at least 100% of the current
market value of the security sold short. Depending on arrangements made with the
intermediary from which it borrowed the security regarding payment of any
amounts received by the Fund on such security, the Fund may not receive any
payments (including interest) on its collateral deposited with such
intermediary.
If the price of the security sold short increases between the time of
the short sale and the time the Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a
gain. Any gain will be decreased, and any loss increased, by the transaction
costs associated with the transaction. Although the Fund's gain is limited by
the price at which it sold the security short, its potential loss is
theoretically unlimited.
Latin American Fund will not make a short sale if, after giving effect
to such sale, the market value of the securities sold short exceeds 25% of the
value of its total assets or the Fund's aggregate short sales
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of the securities of any one issuer exceed the lesser of 2% of the Fund's net
assets or 2% of the securities of any class of the issuer. Moreover, Latin
American Fund may engage in short sales only with respect to securities listed
on a national securities exchange. Latin American Fund may make short sales
"against the box" without respect to such limitations. In this type of short
sale, at the time of the sale the Fund owns the security it has sold short or
has the immediate and unconditional right to acquire at no additional cost the
identical security.
Developing Markets Fund may only make short sales "against the box."
The Fund might make a short sale "against the box" in order to hedge against
market risks when the Sub-advisor believes that the price of a security may
decline, causing a decline in the value of a security owned by the Fund or a
security convertible into or exchangeable for such security. In such case, any
future losses in the Fund's long position should be reduced by a gain in the
short position. Conversely, any gain in the long position should be reduced by a
loss in the short position. The extent to which such gains or losses in the long
position are reduced will depend upon the amount of the securities sold short
relative to the amount of the securities the Fund owns, either directly or
indirectly, and, in the case where the Fund owns convertible securities, changes
in the investment values or conversion premiums of such securities. There will
be certain additional transaction costs associated with short sales "against the
box," but the Fund will endeavor to offset these costs with income from the
investment of the cash proceeds of short sales.
TEMPORARY DEFENSIVE STRATEGIES
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, each of the Funds may
temporarily hold all or a portion of its assets in cash (U.S. dollars, foreign
currencies or multinational currency units such as Euros), money market
instruments, or high-quality debt securities. Each of the Funds may also invest
up to 25% of its total assets in Affiliated Money Market Funds for these
purposes. In addition, for temporary defensive purposes, most or all of each
Fund's investments may be made in the United States and denominated in U.S.
dollars. To the extent a Fund employs a temporary defensive strategy, it will
not be invested so as to achieve directly its investment objectives.
In addition, Latin American Fund may be primarily invested in U.S.
securities for temporary defensive purposes or pending investment of the
proceeds of sales of new Fund shares. Latin American Fund may assume a temporary
defensive position when, due to political, market or other factors broadly
affecting Latin American markets, the Sub-advisor determines that opportunities
for capital appreciation in those markets would be significantly limited over an
extended period or that investing in those markets presents undue risk of loss.
The Funds may invest in the following types of money market instruments
(i.e., debt instruments with less than 12 months remaining until maturity)
denominated in U.S. dollars or other currencies (in the case of Latin American
Fund, the currency of any Latin American country): (a) obligations issued or
guaranteed by the U.S. or foreign governments (in the case of Latin American
Fund, the government of any Latin American country), their agencies,
instrumentalities or municipalities; (b) obligations of international
organizations designed or supported by multiple foreign governmental entities to
promote economic reconstruction or development; (c) finance company obligations,
corporate commercial paper and other short-term commercial obligations; (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances); (e) repurchase agreements with respect to the
foregoing; and (f) other substantially similar short-term debt securities with
comparable characteristics.
The Funds may invest in commercial paper rated as low as A-3 by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") or P-3
by Moody's Investors Service, Inc. ("Moody's") or, if not rated, determined by
the Manager to be of comparable quality. Obligations rated A-3 and P-3 are
considered by S&P and Moody's, respectively, to have an acceptable capacity for
timely repayment. However, these securities may be more vulnerable to adverse
effects of changes in circumstances than obligations carrying higher
designations.
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SAMURAI AND YANKEE BONDS
Subject to its fundamental investment restrictions, Developing Markets
Fund may invest in yen-denominated bonds sold in Japan by non-Japanese issuers
("Samurai bonds"), and may invest in dollar-denominated bonds sold in the United
States by non-U.S. issuers ("Yankee bonds"). As compared with bonds issued in
their countries of domicile, such bond issues normally carry a higher interest
rate but are less actively traded. It is the policy of Developing Markets Fund
to invest in Samurai or Yankee bond issues only after taking into account
considerations of quality and liquidity, as well as yield.
DEBT CONVERSIONS
Several Latin American countries have adopted debt conversion programs,
pursuant to which investors may use external debt of a country, directly or
indirectly, to make investments in local companies. The terms of the various
programs vary from country to country, although each program includes
significant restrictions on the application of the proceeds received in the
conversion and on the remittance of profits on the investment and of the
invested capital. Latin American Fund intends to acquire Sovereign Debt, as
defined in the Prospectus, to hold and trade in appropriate circumstances as
described in the Prospectus, as well as to participate in Latin American debt
conversion programs. The Sub-advisor will evaluate opportunities to enter into
debt conversion transactions as they arise but does not currently intend to
invest more than 5% of the Fund's assets in such programs.
DEBT SECURITIES
Developing Markets Fund may invest up to 50% of its total assets in the
following types of emerging market debt securities: (1) debt securities issued
or guaranteed by governments, their agencies, instrumentalities or political
subdivisions, or by government owned, controlled or sponsored entities,
including central banks (collectively, "Sovereign Debt"), including Brady Bonds;
(2) interests in issuers organized and operated for the purpose of restructuring
the investment characteristics of Sovereign Debt; (3) debt securities issued by
banks and other business entities; and (4) debt securities denominated in or
indexed to the currencies of emerging markets. Debt securities held by those
Funds may take the form of bonds, notes, bills, debentures, bank debt
obligations, short-term paper, loan participations, assignments and interests
issued by entities organized and operated for the purpose of restructuring the
investment characteristics of any of the foregoing. There is no requirement with
respect to the maturity or duration of debt securities in which either Fund may
invest.
Under normal circumstances, the Latin American Fund may invest up to
50% of its total assets in debt securities. There is no limitation on the
percentage of its assets that may be invested in debt securities that are rated
below investment grade. Investment in below investment grade debt securities
involves a high degree of risk and can be speculative. These debt securities are
the equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Most debt securities in which the fund will invest are not rated; if rated, it
is expected that such ratings would be below investment grade. However, the Fund
will not invest in debt securities that are in default in payment as to
principal or interest.
Developing Markets Fund and Latin American Fund may invest in "Brady
Bonds," which are debt restructurings that provide for the exchange of cash and
loans for newly issued bonds. Brady Bonds have been issued by the countries of
Albania, Argentina, Brazil, Bulgaria, Costa Rica, Dominican Republic, Ecuador,
Ivory Coast, Jordan, Mexico, Nigeria, Panama, Peru, Philippines, Poland,
Uruguay, Venezuela and Vietnam, and are expected to be issued by other emerging
market countries. As of the date of this Prospectus, the Fund is not aware of
the occurrence of any payment defaults on Brady Bonds. Investors should
recognize, however, that Brady Bonds do not have a long payment history. In
addition, Brady Bonds are often rated below investment grade.
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Developing Markets Fund and Latin American Fund may invest in either
collateralized or uncollateralized Brady Bonds. U.S. dollar-denominated
collateralized Brady Bonds, which may be fixed rate par bonds or floating rate
discount bonds, are collateralized in full as to principal by U.S. Treasury zero
coupon bonds having the same maturity as the bonds. Interest payments on such
bonds generally are collateralized by cash or securities in an amount that, in
the case of fixed rate bonds, is equal to at least one year of rolling interest
payments or, in the case of floating rate bonds, initially is equal to at least
one year's rolling interest payments based on the applicable interest rate at
the time of issuance and is adjusted at regular intervals thereafter.
Capital appreciation in debt securities may arise as a result of a
favorable change in relative foreign exchange rates, relative interest rate
levels and/or the creditworthiness of issuers. The receipt of income from debt
securities owned by Latin American Fund is incidental to its objective of growth
of capital.
PREMIUM SECURITIES
Developing Markets Fund may invest in income securities bearing coupon
rates higher than prevailing market rates. Such "premium" securities are
typically purchased at prices greater than the principal amounts payable on
maturity. The Fund will not amortize the premium paid for such securities in
calculating its net investment income. As a result, in such cases the purchase
of such securities provides the Fund a higher level of investment income
distributable to shareholders on a current basis than if the Fund purchased
securities bearing current market rates of interest. If securities purchased by
the Fund at a premium are called or sold prior to maturity, the Fund will
realize a loss to the extent the call or sale price is less than the purchase
price. Additionally, the Fund will realize a loss if it holds such securities to
maturity.
INDEXED DEBT SECURITIES
Developing Markets Fund may invest in debt securities issued by banks
and other business entities not located in developing market countries that are
indexed to certain specific foreign currency exchange rates, interest rates or
other reference rates. The terms of such securities provide that their principal
amount is adjusted upwards or downwards (but ordinarily not below zero) at
maturity to reflect changes in the exchange rate between two currencies (or
other rates) while the obligations are outstanding. While such securities offer
the potential for an attractive rate of return, they also entail the risk of
loss of principal. New forms of such securities continue to be developed. The
Fund may invest in such securities to the extent consistent with its investment
objectives.
STRUCTURED INVESTMENTS
Developing Markets Fund may invest a portion of its assets in interests
in entities organized and operated solely for the purpose of restructuring the
investment characteristics of Sovereign Debt. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, of specified instruments (such as commercial bank loans or Brady Bonds)
and the issuance by that entity of one or more classes of securities
("Structured Investments") backed by, or representing interests in, the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Investments to create securities
with different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Investments is dependent on the extent of the cash
flow on the underlying instruments. Because Structured Investments of the type
in which the Fund anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments.
Developing Markets Fund is permitted to invest in a class of Structured
Investments that is either subordinated or not subordinated to the right of
payment of another class. Subordinated Structured Investments typically have
higher yields and present greater risks than unsubordinated Structured
Investments.
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Certain issuers of Structured Investments may be deemed to be
"investment companies" as defined in the 1940 Act. As a result, Developing
Markets Fund's investment in these Structured Investments may be limited by the
restrictions contained in the 1940 Act described above under "Investment
Strategies and Risks--Investments in Other Investment Companies." Structured
Investments are typically sold in private placement transactions, and there
currently is no active trading market for Structured Investments.
STRIPPED INCOME SECURITIES
Developing Markets Fund may invest a portion of its assets in stripped
income securities, which are obligations representing an interest in all or a
portion of the income or principal components of an underlying or related
security, a pool of securities or other assets. In the most extreme case, one
class will receive all of the interest (the "interest only class" or the "IO
class"), while the other class will receive all of the principal (the
"principal-only class" or the "PO class"). The market values of stripped income
securities tend to be more volatile in response to changes in interest rates
than are conventional income securities.
FLOATING AND VARIABLE RATE INCOME SECURITIES
Developing Markets Fund may invest a portion of its assets in floating
or variable rate income securities. Income securities may provide for floating
or variable rate interest or dividend payments. The floating or variable rate
may be determined by reference to a known lending rate, such as a bank's prime
rate, a certificate of deposit rate or the London Inter Bank Offered Rate
(LIBOR). Alternatively, the rate may be determined through an auction or
remarketing process. The rate also may be indexed to changes in the values of
interest rate or securities indexes, currency exchange rates or other
commodities. The amount by which the rate paid on an income security may
increase or decrease may be subject to periodic or lifetime caps. Floating and
variable rate income securities include securities whose rates vary inversely
with changes in market rates of interest. Such securities may also pay a rate of
interest determined by applying a multiple to the variable rate. The extent of
increases and decreases in the value of securities whose rates vary inversely
with changes in market rates of interest generally will be larger than
comparable changes in the value of an equal principal amount of a fixed rate
security having similar credit quality, redemption provisions and maturity.
ZERO COUPON SECURITIES
Developing Markets Fund may invest in certain zero coupon securities
that are "stripped" U.S. Treasury notes and bonds. Developing Markets Fund also
may invest in zero coupon and other deep discount securities issued by foreign
governments and domestic and foreign corporations, including certain Brady Bonds
and other foreign debt, and in payment-in-kind securities. Zero coupon
securities pay no interest to holders prior to maturity, and payment-in-kind
securities pay "interest" in the form of additional securities. However, a
portion of the original issue discount on zero coupon securities and the
interest on payment-in-kind securities will be included in Developing Markets
Fund's income. Accordingly, for Developing Markets Fund to continue to qualify
for tax treatment as a regulated investment company and to avoid a certain
excise tax (see "Dividends, Distributions and Tax Matters"), it may be required
to distribute an amount that is greater than the total amount of cash it
actually receives. These distributions may be made from Developing Markets
Fund's cash assets or, if necessary, from the proceeds of sales of portfolio
securities. Developing Markets Fund will not be able to purchase additional
income-producing securities with cash used to make such distributions, and its
current income ultimately may be reduced as a result. Zero coupon and
payment-in-kind securities usually trade at a deep discount from their face or
par value and will be subject to greater fluctuations of market value in
response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.
INDEXED COMMERCIAL PAPER
Developing Markets Fund may invest without limitation in commercial
paper that is indexed to certain specific foreign currency exchange rates. The
terms of such commercial paper provide that its principal
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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. Developing Markets Fund will purchase such commercial paper with
the currency in which it is denominated and, at maturity, will receive interest
and principal payments thereon in that currency, but the amount of principal
payable by the issuer at maturity will change in proportion to the change (if
any) in the exchange rate between the two specified currencies between the date
the instrument is issued and the date the instrument matures. While such
commercial paper entails the risk of loss of principal, the potential for
realizing gains as a result of changes in foreign currency exchange rates
enables Developing Markets Fund to hedge against a decline in the U.S. dollar
value of investments denominated in foreign currencies while seeking to provide
an attractive money market rate of return. Developing Markets Fund will not
purchase such commercial paper for speculation.
OTHER INDEXED SECURITIES
Developing Markets Fund may invest in certain other indexed securities,
which are securities whose prices are indexed to the prices of other securities,
securities indices, currencies, precious metals or other commodities or other
financial indicators. Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or coupon rate is determined by
reference to a specific instrument or statistic. The performance of indexed
securities depends to a great extent on the performance of the security,
currency or other instrument to which they are indexed and also may be
influenced by interest rate changes in the United States and abroad. At the same
time, indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more volatile
than the underlying instruments. New forms of indexed securities continue to be
developed. Developing Markets Fund may invest in such securities to the extent
consistent with its investment objectives.
SWAPS, CAPS, FLOORS AND COLLARS
Developing Markets Fund may enter into interest rate, currency and
index swaps and may purchase or sell related caps, floors and collars and other
derivative instruments. The Fund expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio, to protect against currency fluctuations, as a technique for
managing the portfolio's duration (i.e., the price sensitivity to changes in
interest rates) or to protect against any increase in the price of securities
the Fund anticipates purchasing at a later date. The Fund intends to use these
transactions as hedges and will not sell interest rate caps, floors or collars
if it does not own securities or other instruments providing an income stream
roughly equivalent to what the Fund may be obligated to pay.
Interest rate swaps involve the exchange by Developing Markets Fund
with another party of their respective commitments to pay or receive interest
(for example, an exchange of floating rate payments for fixed rate payments)
with respect to a notional amount of principal. A currency swap is an agreement
to exchange cash flows on a notional amount based on changes in the values of
the reference indices.
The purchase of a cap entitles the purchaser to receive payments on a
notional principal amount from the party selling the cap to the extent that a
specified index exceeds a predetermined interest rate. The purchase of an
interest rate floor entitles the purchaser to receive payments on a notional
principal amount from the party selling the floor to the extent that a specified
index falls below a predetermined interest rate or amount. A collar is a
combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates or values.
LOAN PARTICIPATIONS AND ASSIGNMENTS
Developing Markets Fund may invest in fixed and floating rate loans
("Loans") arranged through private negotiations between a foreign entity and one
or more financial institutions ("Lenders"). The majority of Developing Markets
Fund's investments in Loans in emerging markets is expected to be in the form of
participations in Loans ("Participations") and assignments of portions of Loans
from third parties
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("Assignments"). Participations typically will result in Developing Markets Fund
having a contractual relationship only with the Lender, not with the borrower.
Developing Markets Fund will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In connection with purchasing Participations, Developing Markets Fund
generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the loan, nor any rights of set-off
against the borrower, and Developing Markets Fund may not directly benefit from
any collateral supporting the Loan in which it has purchased the Participation.
As a result, Developing Markets Fund will assume the credit risk of both the
borrower and the Lender that is selling the Participation.
In the event of the insolvency of the Lender selling a Participation,
Developing Markets Fund may be treated as a general creditor of the Lender and
may not benefit from any set-off between the Lender and the borrower. Developing
Markets Fund will acquire Participations only if the Lender interpositioned
between Developing Markets Fund and the borrower is determined by the
Sub-advisor to be creditworthy. When the Fund purchases Assignments from
Lenders, the Developing Markets Fund will acquire direct rights against the
borrower on the Loan. However, because Assignments are arranged through private
negotiations between potential assignees and assignors, the rights and
obligations acquired by Developing Markets Fund as the purchaser of an
Assignment may differ from, and be more limited than, those held by the
assigning Lender.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
To attempt to increase return, Developing Markets Fund may write call
options on securities. This strategy will be employed only when, in the opinion
of the Sub-advisor, the size of the premium Developing Markets Fund receives for
writing the option is adequate to compensate it against the risk that
appreciation in the underlying security may not be fully realized if the option
is exercised. Developing Markets Fund also is authorized to write put options to
attempt to enhance return, although it does not currently intend to do so.
Each Fund may use forward currency contracts, futures contracts,
options on securities, options on currencies, options on indices and options on
futures contracts to attempt to hedge against the overall level of investment
and currency risk (i.e. fluctuations in exchange rates) normally associated with
its investments. These instruments are often referred to as "derivatives," which
may be defined as financial instruments whose performance is derived, at least
in part, from the performance of another asset (such as a security, currency or
an index of securities). Each Fund may enter into such instruments up to the
full value of its portfolio assets.
To attempt to hedge against adverse movements in exchange rates between
currencies, each Fund may enter into forward currency contracts for the purchase
or sale of a specified currency at a specified future date. Such contracts may
involve the purchase or sale of a foreign currency against the U.S. dollar or
may involve two foreign currencies. Each Fund may enter into forward currency
contracts either with respect to specific transactions or with respect to its
portfolio positions. Each Fund also may purchase and sell put and call options
on currencies, futures contracts on currencies and options on such futures
contracts to hedge its portfolio against movements in exchange rates.
Only a limited market, if any, currently exists for options and futures
transactions relating to currencies of most emerging markets including Latin
American markets, to securities denominated in such currencies or to securities
of issuers domiciled or principally engaged in business in such emerging
markets. To the extent that such a market does not exist, the Sub-advisor may
not be able to effectively hedge its investment in such markets.
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Each Fund may also purchase and sell put and call options on equity and
debt securities to hedge against the risk of fluctuations in the prices of
securities held by a Fund or that the Sub-advisor intends to include in a Fund's
portfolio. Each Fund may also purchase and sell put and call options on stock
indices to hedge against overall fluctuations in the securities markets or in a
specific market sector.
Further, each Fund may sell stock index futures contracts and may
purchase put options or write call options on such futures contracts to protect
against a general stock market decline or a decline in a specific market sector
that could adversely affect a Fund's portfolio. Each Fund may also purchase
stock index futures contracts and purchase call options or write put options on
such contracts to hedge against a general stock market or market sector advance
and thereby attempt to lessen the cost of future securities acquisitions. A Fund
may use interest rate futures contracts and options thereon to hedge the debt
portion of its portfolios against changes in the general level of interest
rates.
The use of options, futures contracts and forward currency contracts
("Forward Contracts") involves special considerations and risks, as described
below. Risks pertaining to particular instruments are described in the sections
that follow.
(1) Successful use of most of these instruments depends upon
the Sub-advisor's ability to predict movements of the overall
securities and currency markets, which requires different skills than
predicting changes in the prices of individual securities. While the
Sub-advisor is experienced in the use of these instruments, there can
be no assurance that any particular strategy adopted will succeed since
the skills and techniques needed to trade Forward Contracts are
different from those needed to select securities in which a Fund
invests.
(2) There might be imperfect correlation, or even no
correlation, between price movements of an instrument and price
movements of the currency or the investments being hedged. For example,
if the value of an instrument used in a short hedge increased by less
than the decline in value of the hedged investment, the hedge would not
be fully successful. Such a lack of correlation might occur due to
factors unrelated to the value of the investments being hedged, such as
speculative or other pressures on the markets in which the hedging
instrument is traded. The effectiveness of hedges using hedging
instruments on indices will depend on the degree of correlation between
price movements in the index and price movements in the investments
being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss
by wholly or partially offsetting the negative effect of unfavorable
price movements in the investments being hedged. However, hedging
strategies can also reduce opportunity for gain by offsetting the
positive effect of favorable price movements in the hedged investments.
For example, if a Fund entered into a short hedge because the
Sub-advisor projected a decline in the price of a security in the
Fund's portfolio, and the price of that security increased instead, the
gain from that increase might be wholly or partially offset by a
decline in the price of the hedging instrument. Moreover, if the price
of the hedging instrument declined by more than the increase in the
price of the security, the Fund could suffer a loss including the
possible loss of principal under certain conditions. In either such
case, the Fund would have been in a better position had it not hedged
at all.
(4) As described below, a Fund might be required to maintain
assets as "cover," maintain segregated accounts or make margin payments
when it takes positions in instruments involving obligations to third
parties (i.e., instruments other than purchased options). If the Fund
were unable to close out its positions in such instruments, it might be
required to continue to maintain such assets or accounts or make such
payments until the position expired or matured. The requirements might
impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous
time. A Fund's ability to close out a position in an instrument prior
to expiration or maturity depends on the existence of a liquid
secondary market of which there is no assurance of any particular time
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or, in the absence of such a market, the ability and willingness of the
other party to the transaction ("contra party") to enter into a
transaction closing out the position. Therefore, there is no assurance
that any position can be closed out at a time and price that is
favorable to the Funds. In addition, a Fund may be unable to purchase
or sell a portfolio security at a time when it would otherwise be
favorable for it to do so. A Fund may also need to sell a security at a
disadvantageous time, due to the need for the Fund to maintain "cover"
or to set aside securities in connection with hedging transactions.
Although each Fund is authorized to enter into options, futures and
forward currency transactions, it might not enter into any such transactions.
WRITING CALL OPTIONS
Each Fund may write (sell) call options on securities, indices and
currencies. This strategy will be employed only when, in the opinion of the
Sub-advisor, the size of the premium a Fund receives for writing the option is
adequate to compensate it against the risk that appreciation in the underlying
security may not be fully realized if the option is exercised. Call options
generally will be written on securities and currencies that, in the opinion of
the Sub-advisor are not expected to make any major price moves in the near
future but that, over the long term, are deemed to be attractive investments for
a Fund.
A call option gives the holder (buyer) the right to purchase a security
or currency at a specified price (the exercise price) at any time until
(American Style) or on (European Style) a certain date (the expiration date). So
long as the obligation of the writer of a call option continues, he may be
assigned an exercise notice, requiring him to deliver the underlying security or
currency against payment of the exercise price. This obligation terminates upon
the expiration of the call option, or such earlier time at which the writer
effects a closing purchase transaction by purchasing an option identical to that
previously sold.
Portfolio securities or currencies on which call options may be written
will be purchased solely on the basis of investment considerations consistent
with each Fund's investment objective. When writing a call option, a Fund, in
return for the premium, gives up the opportunity for profit from a price
increase in the underlying security or currency above the exercise price, and
retains the risk of loss should the price of the security or currency decline.
Unlike one who owns securities or currencies not subject to an option, a Fund
has no control over when it may be required to sell the underlying securities or
currencies, since most options may be exercised at any time prior to the
option's expiration. If a call option that a Fund has written expires, the Fund
will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security or currency
during the option period. If the call option is exercised, the Fund will realize
a gain or loss from the sale of the underlying security or currency, which will
be increased or offset by the premium received. The Funds do not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Funds' policies that limit the pledging or mortgaging of their
assets.
Writing call options can serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security or
currency appreciates to a price higher than the exercise price of the call
option, it can be expected that the option will be exercised and a Fund will be
obligated to sell the security or currency at less than its market value.
The premium that a Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium a Fund will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the underlying investment, and
the length of the option period. In determining whether a particular call option
should be written, the Sub-advisor will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
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Closing transactions will be effected in order to realize a profit on
an outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit a Fund to write another
call option on the underlying security or currency with either a different
exercise price, expiration date or both.
Each Fund will pay transaction costs in connection with the writing of
options and in entering into closing purchase contracts. Transaction costs
relating to options activity normally are higher than those applicable to
purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the
current market values of the underlying securities or currencies at the time the
options are written. From time to time, a Fund may purchase an underlying
security or currency for delivery in accordance with the exercise of an option,
rather than delivering such security or currency from its portfolio. In such
cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more, respectively, than
the premium received from writing the option. Because increases in the market
price of a call option generally will reflect increases in the market price of
the underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Fund.
WRITING PUT OPTIONS
Each Fund may write put options on securities, indices and currencies.
A put option gives the purchaser of the option the right to sell, and the writer
(seller) the obligation to buy, the underlying security or currency at the
exercise price at any time until (American style) or on (European style) the
expiration date. The operation of put options in other respects, including their
related risks and rewards, is identical substantially to that of call options.
A Fund generally would write put options in circumstances where the
Sub-advisor wishes to purchase the underlying security or currency for the
Fund's portfolio at a price lower than the current market price of the security
or currency. In such event, the Fund would write a put option at an exercise
price that, reduced by the premium received on the option, reflects the lower
price it is willing to pay. Since the Fund would also receive interest on debt
securities or currencies maintained to cover the exercise price of the option,
this technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying security or currency would decline below the exercise price less
the premium received.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the Fund will be obligated
to sell the security or currency at more than its market value.
PURCHASING PUT OPTIONS
Each Fund may purchase put options on securities, indices and
currencies. As the holder of a put option, a Fund would have the right to sell
the underlying security or currency at the exercise price at any time until
(American style) or on (European style) the expiration date. A Fund may enter
into closing sale transactions with respect to such options, exercise them or
permit them to expire.
A Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund to protect against an anticipated decline
in the value of the security or currency. Such protection is provided only
during the life of the put option when the Fund, as the holder of the put
option, is able to sell the underlying security or currency at the put exercise
price regardless of any decline in the underlying
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security's market price or currency's exchange value. The premium paid for the
put option and any transaction costs would reduce any profit otherwise available
for distribution when the security or currency is eventually sold.
A Fund also may purchase put options at a time when the Fund does not
own the underlying security or currency. By purchasing put options on a security
or currency it does not own, the Fund seeks to benefit from a decline in the
market price of the underlying security or currency. If the put option is not
sold when it has remaining value, and if the market price of the underlying
security or currency remains equal to or greater than the exercise price during
the life of the put option, the Fund will lose its entire investment in the put
option. In order for the purchase of a put option to be profitable, the market
price of the underlying security or currency must decline sufficiently below the
exercise price to cover the premium and transaction costs, unless the put option
is sold in a closing sale transaction.
PURCHASING CALL OPTIONS
Each Fund may purchase call options on securities, indices and
currencies. As the holder of a call option, a Fund would have the right to
purchase the underlying security or currency at the exercise price at any time
until (American style) or on (European style) the expiration date. A Fund may
enter into closing sale transactions with respect to such options, exercise them
or permit them to expire.
Call options may be purchased by a Fund for the purpose of acquiring
the underlying security or currency for its portfolio. Utilized in this fashion,
the purchase of call options would enable the Fund to acquire the security or
currency at the exercise price of the call option plus the premium paid. At
times, the net cost of acquiring the security or currency in this manner may be
less than the cost of acquiring the security or currency directly. This
technique also may be useful to a Fund in purchasing a large block of securities
that would be more difficult to acquire by direct market purchases. So long as
it holds such a call option, rather than the underlying security or currency
itself, the Fund is partially protected from any unexpected decline in the
market price of the underlying security or currency and, in such event, could
allow the call option to expire, incurring a loss only to the extent of the
premium paid for the option.
A Fund also may purchase call options on underlying securities or
currencies it owns to avoid realizing losses that would result in a reduction of
its current return. For example, where a Fund has written a call option on an
underlying security or currency having a current market value below the price at
which it purchased the security or currency, an increase in the market price
could result in the exercise of the call option written by the Fund and the
realization of a loss on the underlying security or currency. Accordingly, the
Fund could purchase a call option on the same underlying security or currency,
which could be exercised to fulfill the Fund's delivery obligations under its
written call (if it is exercised). This strategy could allow the Fund to avoid
selling the portfolio security or currency at a time when it has an unrealized
loss; however, the Fund would have to pay a premium to purchase the call option
plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of
a Fund's total assets at the time of purchase.
Each Fund may attempt to accomplish objectives similar to those
involved in its use of Forward Contracts by purchasing put or call options on
currencies. A put option gives a Fund as purchaser the right (but not the
obligation) to sell a specified amount of currency at the exercise price at any
time until (American style) or on (European style) the expiration date. A call
option gives a Fund as purchaser the right (but not the obligation) to purchase
a specified amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration date. A Fund might purchase a
currency put option, for example, to protect itself against a decline in the
dollar value of a currency in which it holds or anticipates holding securities.
If the currency's value should decline against the dollar, the loss in currency
value should be offset, in whole or in part, by an increase in the value of the
put. If the value of the currency instead should rise against the dollar, any
gain to the Fund would be reduced by the premium it had paid for the put
option. A
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currency call option might be purchased, for example, in anticipation of, or to
protect against, a rise in the value against the dollar of a currency in which a
Fund anticipates purchasing securities.
Options may be either listed on an exchange or traded in
over-the-counter ("OTC") markets. Listed options are third-party contracts
(i.e., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation), and have standardized strike prices
and expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. A Fund will not purchase an OTC option unless it
believes that daily valuations for such options are readily obtainable. OTC
options differ from exchange-traded options in that OTC options are transacted
with dealers directly and not through a clearing corporation (which guarantees
performance). Consequently, there is a risk of non-performance by the dealer.
Since no exchange is involved, OTC options are valued on the basis of an average
of the last bid prices obtained from dealers, unless a quotation from only one
dealer is available, in which case only that dealer's price will be used. In the
case of OTC options, there can be no assurance that a liquid secondary market
will exist for any particular option at any specific time.
The staff of the SEC considers purchased OTC options to be illiquid
securities. A Fund may also sell OTC options and, in connection therewith,
segregate assets or cover its obligations with respect to OTC options written by
the Fund. The assets used as cover for OTC options written by the Fund will be
considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Fund may repurchase any OTC option it writes at a maximum price
to be calculated by a formula set forth in the option agreement. The cover for
an OTC option written subject to this procedure would be considered illiquid
only to the extent that the maximum repurchase price under the formula exceeds
the intrinsic value of the option.
A Fund's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. Each Fund
intends to purchase or write only those exchange-traded options for which there
appears to be a liquid secondary market. However, there can be no assurance that
such a market will exist at any particular time. Closing transactions can be
made for OTC options only by negotiating directly with the contra party or by a
transaction in the secondary market if any such market exists. Although each
Fund will enter into OTC options only with contra parties that are expected to
be capable of entering into closing transactions with the Fund, there is no
assurance that the Funds will in fact be able to close out an OTC option
position at a favorable price prior to expiration. In the event of insolvency of
the contra party, a Fund might be unable to close out an OTC option position at
any time prior to its expiration.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities
or futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. When a Fund writes a
call on an index, it receives a premium and agrees that, prior to the expiration
date, the purchaser of the call, upon exercise of the call, will receive from
the Fund an amount of cash if the closing level of the index upon which the call
is based is greater than the exercise price of the call. The amount of cash is
equal to the difference between the closing price of the index and the exercise
price of the call times a specified multiple (the "multiplier"), which
determines the total dollar value for each point of such difference. When a Fund
buys a call on an index, it pays a premium and has the same rights as to such
call as are indicated above. When a Fund buys a put on an index, it pays a
premium and has the right, prior to the expiration date, to require the seller
of the put, upon the Fund's exercise of the put, to deliver to the Fund an
amount of cash if the closing level of the index upon which the put is based is
less than the exercise price of the put, which amount of cash is determined by
the multiplier, as described above for calls. When a Fund writes a put on an
index, it receives a premium and the purchaser has the right, prior to the
expiration date, to require the Fund to deliver to it an amount of cash equal to
the difference between the closing level of the index and the exercise price
times the multiplier, if the closing level is less than the exercise price.
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The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, a Fund cannot, as a practical matter, acquire and hold
a portfolio containing exactly the same securities as underlie the index and, as
a result, bears a risk that the value of the securities held will vary from the
value of the index.
Even if a Fund could assemble a securities portfolio that exactly
reproduced the composition of the underlying index, it still would not be fully
covered from a risk standpoint because of the "timing risk" inherent in writing
index options. When an index option is exercised, the amount of cash that the
holder is entitled to receive is determined by the difference between the
exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, a Fund, as the call writer, will not
know that it has been assigned until the next business day at the earliest. The
time lag between exercise and notice of assignment poses no risk for the writer
of a covered call on a specific underlying security, such as common stock,
because there the writer's obligation is to deliver the underlying security, not
to pay its value as of a fixed time in the past. So long as the writer already
owns the underlying security, it can satisfy its settlement obligations by
simply delivering it, and the risk that its value may have declined since the
exercise date is borne by the exercising holder. In contrast, even if the writer
of an index call holds securities that exactly match the composition of the
underlying index, it will not be able to satisfy its assignment obligations by
delivering those securities against payment of the exercise price. Instead, it
will be required to pay cash in an amount based on the closing index value on
the exercise date; and by the time it learns that it has been assigned, the
index may have declined, with a corresponding decline in the value of its
securities portfolio. This "timing risk" is an inherent limitation on the
ability of index call writers to cover their risk exposure by holding securities
positions.
If a Fund purchases an index option and exercises it before the closing
index value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES
Each Fund may enter into interest rate or currency futures contracts,
and may enter into stock index futures contracts (collectively, "Futures" or
"Futures Contracts"), as a hedge against changes in prevailing levels of
interest rates, currency exchange rates or stock prices in order to establish
more definitely the effective return on securities or currencies held or
intended to be acquired by the Fund. A Fund's transactions may include sales of
Futures as an offset against the effect of expected increases in interest rates,
and decreases in currency exchange rates and stock prices, and purchases of
Futures as an offset against the effect of expected declines in interest rates,
and increases in currency exchange rates and stock prices.
A Fund will only enter into Futures Contracts that are traded on
futures exchanges and are standardized as to maturity date and underlying
financial instrument. Futures exchanges and trading thereon in the United States
are regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"). Futures are exchanged in London at the London International
Financial Futures Exchange.
Although techniques other than sales and purchases of Futures Contracts
could be used to reduce a Fund's exposure to interest rate, currency exchange
rate and stock market fluctuations, a Fund may be able to hedge its exposure
more effectively and at a lower cost through using Futures Contracts.
A Futures Contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial
instrument (security or currency) for a specified price at a designated
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date, time and place. An index Futures Contract provides for the delivery, at a
designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the index value at the close of
trading on the contract and the price at which the Futures Contract is
originally struck; no physical delivery of the securities comprising the index
is made. Brokerage fees are incurred when a Futures Contract is bought or sold,
and margin deposits must be maintained at all times the Futures Contract is
outstanding.
Although Futures Contracts typically require future delivery of and
payment for financial instruments or currencies, Futures Contracts are usually
closed out before the delivery date. Closing out an open Futures Contract sale
or purchase is effected by entering into an offsetting Futures Contract purchase
or sale, respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, a Fund realizes a gain; if it is
more, a Fund realizes a loss. Conversely, if the offsetting sale price is more
than the original purchase price, a Fund realizes a gain; if it is less, the
Fund realizes a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that a Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If a Fund is not able to enter into an offsetting
transaction, the Fund will continue to be required to maintain the margin
deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one Futures Contract of September Deutschemarks on an
exchange may be fulfilled at any time before delivery under the Futures Contract
is required (i.e., on a specified date in September, the "delivery month") by
the purchase of another Futures Contract of September Deutschemarks on the same
exchange. In such instance the difference between the price at which the Futures
Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Fund.
Each Fund's Futures transactions will be entered into for hedging
purposes only; that is, Futures Contracts will be sold to protect against a
decline in the price of securities or currencies that the Fund owns, or Futures
Contracts will be purchased to protect the Fund against an increase in the price
of securities or currencies it has committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that
must be deposited by a Fund in order to initiate Futures trading and to maintain
the Fund's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to assure a
Fund's performance under the Futures Contract. The margin required for a
particular Futures Contract is set by the exchange on which the Futures Contract
is traded and may be modified significantly from time to time by the exchange
during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which a Fund entered into the Futures Contract will
be made on a daily basis as the price of the underlying security, currency or
index fluctuates making the Futures Contract more or less valuable, a process
known as marking-to-market.
Risks of Using Futures Contracts. The prices of Futures Contracts are
volatile and are influenced by, among other things, actual and anticipated
changes in interest rates and currency exchange rates, and in stock market
movements, which in turn are affected by fiscal and monetary policies and
national and international political and economic events.
There is a risk of imperfect correlation between changes in prices of
Futures Contracts and prices of the securities or currencies in a Fund's
portfolio being hedged. The degree of imperfection of correlation depends upon
circumstances such as: variations in speculative market demand for Futures and
for securities or currencies, including technical influences in Futures trading;
and differences between the financial instruments being hedged and the
instruments underlying the standard Futures Contracts available for trading. A
decision of whether, when, and how to hedge involves skill and judgment, and
even a
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well-conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves
an extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted
in Futures Contract and options on Futures Contract prices during a single
trading day. The daily limit establishes the maximum amount that the price of a
Futures Contract or option may vary either up or down from the previous day's
settlement price at the end of a trading session. Once the daily limit has been
reached in a particular type of Futures Contract or option, no trades may be
made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures Contract and option prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of positions and subjecting some traders
to substantial losses.
If a Fund were unable to liquidate a Futures or option on Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the Future or option or to maintain cash or securities in a segregated
account.
Certain characteristics of the Futures market might increase the risk
that movements in the prices of Futures Contracts or options on Futures might
not correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the Futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account,
which represents the amount by which the market price of the Futures Contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the Futures Contract. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the securities, currencies
or index
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upon which the Futures Contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and
the purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If a Fund writes an option on a Futures Contract, it will be required
to deposit initial and variation margin pursuant to requirements similar to
those applicable to Futures Contracts. Premiums received from the writing of an
option on a Futures Contract are included in the initial margin deposit.
A Fund may seek to close out an option position by selling an option
covering the same Futures Contract and having the same exercise price and
expiration date. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund enters into Futures Contracts, options on
Futures Contracts, and options on foreign currencies traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums required to establish those
positions (excluding the amount by which options are "in-the-money") will not
exceed 5% of the total assets of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has entered
into. In general, a call option on a Futures Contract is "in-the-money" if the
value of the underlying Futures Contract exceeds the strike, i.e., exercise,
price of the call; a put option on a Futures Contract is "in-the-money" if the
value of the underlying Futures Contract is exceeded by the strike price of the
put. This guideline may be modified by the Trust's Board of Trustees without a
shareholder vote. This limitation does not limit the percentage of the Fund's
assets at risk to 5%.
FORWARD CONTRACTS
To attempt to hedge against adverse movements in exchange rates between
currencies, each Fund may enter into forward currency contracts for the purchase
or sale of a specified currency at a specified future date. Such contracts may
involve the purchase or sale of a foreign currency against the U.S. dollar or
may involve two foreign currencies. A Fund may enter into forward currency
contracts either with respect to specific transactions or with respect to its
portfolio positions. Each Fund may also purchase and sell put and call options
on equity and debt securities to hedge against the risk of fluctuations in the
prices of securities held by a Fund or that the Sub-advisor intends to include
in a Fund's portfolio. Each Fund may also purchase and sell put and call options
on stock indices to hedge against overall fluctuations in the securities markets
or in a specific market sector.
A Forward Contract is an obligation, usually arranged with a commercial
bank or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. A Fund either
may accept or make delivery of the currency at the maturity of the Forward
Contract. The Fund may also, if its contra party agrees, prior to maturity,
enter into a closing transaction involving the purchase or sale of an offsetting
contract.
A Fund engages in forward currency transactions in anticipation of, or
to protect itself against, fluctuations in exchange rates. A Fund might sell a
particular foreign currency forward, for example, when it holds bonds
denominated in a foreign currency but anticipates, and seeks to be protected
against, a decline in the currency against the U.S. dollar. Similarly, the Fund
might sell the U.S. dollar forward when it holds bonds denominated in U.S.
dollars but anticipates, and seeks to be protected against, a decline in the
U.S. dollar relative to other currencies. Further, the Fund might purchase a
currency forward to "lock in" the price of securities denominated in that
currency that it anticipates purchasing.
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Forward Contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
Forward Contract generally has no deposit requirement and no commissions are
charged at any stage for trades. Each Fund will enter into such Forward
Contracts with major U.S. or foreign banks and securities or currency dealers in
accordance with the guidelines approved by the Trust's Board of Trustees.
Each Fund may enter into Forward Contracts either with respect to
specific transactions or with respect to the Fund's portfolio positions. The
precise matching of the Forward Contract amounts and the value of specific
securities generally will not be possible because the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the Forward Contract
is entered into and the date it matures. Accordingly, it may be necessary for a
Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency the Fund is obligated to deliver. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain. Forward Contracts involve
the risk that anticipated currency movements will not be predicted accurately,
causing a Fund to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Fund to
sell a currency, the Fund either may sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, a Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract, if its contra party agrees, entitling it to
sell the same amount of the same currency on the maturity date of the first
contract. The Fund would realize a gain or loss as a result of entering into
such an offsetting Forward Contract under either circumstance to the extent the
exchange rate or rates between the currencies involved moved between the
execution dates of the first contract and the offsetting contract.
The cost to a Fund of engaging in Forward Contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because Forward Contracts usually are entered
into on a principal basis, no fees or commissions are involved. The use of
Forward Contracts does not eliminate fluctuations in the prices of the
underlying securities a Fund owns or intends to acquire, but it does establish a
rate of exchange in advance. In addition, while Forward Contract sales limit the
risk of loss due to a decline in the value of the hedged currencies, they also
limit any potential gain that might result should the value of the currencies
increase.
FOREIGN CURRENCY STRATEGIES--SPECIAL CONSIDERATIONS
Each Fund may use options on foreign currencies, Futures on foreign
currencies, options on Futures on foreign currencies and Forward Contracts to
hedge against movements in the values of the foreign currencies in which the
Fund's securities are denominated. Such currency hedges can protect against
price movements in a security that a Fund owns or intends to acquire that are
attributable to changes in the value of the currency in which it is denominated.
Such hedges do not, however, protect against price movements in the securities
that are attributable to other causes.
A Fund might seek to hedge against changes in the value of a particular
currency when no Futures Contract, Forward Contract or option involving that
currency is available or one of such contracts is more expensive than certain
other contracts. In such cases, a Fund may hedge against price movements in that
currency by entering into a contract on another currency or basket of
currencies, the values of which the Sub-advisor believes will have a positive
correlation to the value of the currency being hedged. The risk that
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movements in the price of the contract will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward
Contracts, and options on foreign currencies depends on the value of the
underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of Futures Contracts, Forward
Contracts or options, a Fund could be disadvantaged by dealing in the odd lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options
involving foreign currencies might be required to take place within the country
issuing the underlying currency. Thus, a Fund might be required to accept or
make delivery of the underlying foreign currency in accordance with any U.S. or
foreign regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options
(other than options purchased by a Fund) expose the Fund to an obligation to
another party. No Fund will enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities, currencies, or
other options, Forward Contracts or Futures Contracts, or (2) cash, receivables
and short-term debt securities with a value sufficient at all times to cover its
potential obligations not covered as provided in (1) above. The Funds will
comply with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Forward Contract, Futures Contract or
option is open, unless they are replaced with other appropriate assets. If a
large portion of a Fund's assets are used for cover or otherwise set aside, it
could affect portfolio management or the Fund's ability to meet redemption
requests or other current obligations.
RISK FACTORS
GENERAL
There is no assurance that either Fund will achieve its investment
objectives. Investing in a Fund entails a substantial degree of risk, and an
investment in each Fund should be considered speculative. Investors are strongly
advised to consider carefully the special risks involved in investing in
emerging markets, and specifically Latin America, which are in addition to the
usual risks of investing in developed markets around the world.
Each Fund's net asset value will fluctuate, reflecting fluctuations in
the market value of its portfolio positions and its net currency exposure.
Equity securities, particularly common stocks, generally represent the most
junior position in an issuer's capital structure and entitle holders to an
interest in the assets of an
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issuer, if any, remaining after all more senior claims have been satisfied. The
value of equity securities held by a Fund will fluctuate in response to general
market and economic developments, as well as developments affecting the
particular issuers of such securities.
In addition, the value of debt securities held by each Fund generally
will fluctuate with the perceived creditworthiness of the issuers of such
securities and interest rates.
NON-DIVERSIFIED CLASSIFICATION
Developing Markets Fund and Latin American Fund are classified under
the 1940 Act as "non-diversified" funds. As a result, these Funds will be able
to invest in a smaller number of issuers than if they were classified under the
1940 Act as "diversified" funds. To the extent that a Fund invests in a smaller
number of issuers, the net asset value of its shares may fluctuate more widely
and it may be subject to greater investment and credit risk with respect to its
portfolio.
ILLIQUID SECURITIES
Developing Markets Fund may invest up to 15% of its net assets, and
Latin American Fund may invest up to 10% of its net assets, in illiquid
securities. Securities may be considered illiquid if a Fund cannot reasonably
expect within seven days to sell the security for approximately the amount at
which the Fund values such securities. Illiquid securities may be harder to
value than liquid securities. The sale of illiquid securities, if they can be
sold at all, generally will require more time and result in higher brokerage
charges or dealer discounts and other selling expenses than the sale of liquid
securities, such as securities eligible for trading on U.S. securities exchanges
or in the over-the-counter markets. Moreover, restricted securities which may be
illiquid for purposes of this limitation, often sell, if at all, at a price
lower than similar securities that are not subject to restrictions on resale.
Latin American Fund may invest in joint ventures, cooperatives,
partnerships and state enterprises and other similar vehicles which are illiquid
(collectively, "Special Situations"). The Sub-advisor believes that carefully
selected investments in Special Situations could enable Latin American Fund to
achieve capital appreciation substantially exceeding the appreciation Latin
American Fund would realize if it did not make such investments. However, in
order to limit investment risk, Latin American Fund will invest no more than 5%
of its total assets in Special Situations.
Illiquid securities include those that are subject to restrictions
contained in the securities laws of other countries. However, securities that
are freely marketable in the country where they are principally traded, but
would not be freely marketable in the United States, will not be considered
illiquid. Where registration is required, a Fund may be obligated to pay all or
part of the registration expenses and a considerable period may elapse between
the time of the decision to sell and the time the Fund may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended ("1933 Act"), including
private placements, repurchase agreements, commercial paper, foreign securities
and corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted
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securities have developed as a result of Rule 144A, providing both readily
ascertainable values for restricted securities and the ability to liquidate an
investment to satisfy share redemption orders. Such markets include automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the
National Association of Securities Dealers, Inc. An insufficient number of
qualified institutional buyers interested in purchasing Rule 144A-eligible
restricted securities held by a Fund, however, could affect adversely the
marketability of such portfolio securities and the Fund might be unable to
dispose of such securities promptly or at favorable prices.
With respect to liquidity determinations generally, the Trust's Board
of Trustees has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Sub-advisor in accordance with
procedures approved by the Board. The Sub-advisor takes into account a number of
factors in reaching liquidity decisions, including (i) the frequency of trading
in the security, (ii) the number of dealers who make quotes for the security,
(iii) the number of dealers who have undertaken to make a market in the
security, (iv) the number of other potential purchasers and (v) the nature of
the security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited and the mechanics of transfer). The
Sub-advisor monitors the liquidity of securities in each Fund's portfolio and
periodically reports such determinations to the Board. If the liquidity
percentage restriction of a Fund is satisfied at the time of investment, a later
increase in the percentage of illiquid securities held by the Fund resulting
from a change in market value or assets will not constitute a violation of that
restriction. If as a result of a change in market value or assets, the
percentage of illiquid securities held by a Fund increases above the applicable
limit, the Sub-advisor will take appropriate steps to bring the aggregate amount
of illiquid assets back within the prescribed limitations as soon as reasonably
practicable, taking into account the effect of any disposition on the Fund.
DEBT SECURITIES
The value of the debt securities held by a Fund generally will vary
inversely with market interest rates. If interest rates in a market fall, a
Fund's debt securities issued by governments or companies in that market
ordinarily will increase in value. If market interest rates increase, however,
the debt securities owned by a Fund in that market will likely decrease in
value. Latin American Fund may invest up to 50% of its total assets in debt
securities of any rating. Developing Markets Fund may invest up to 50% of its
total assets in debt securities rated below investment grade. All 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 rated debt that is not in default as to
principal or interest and such issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing. Lower
quality debt securities are also generally considered to be subject to greater
risk than securities with higher ratings with regard to a deterioration of
general economic conditions. These foreign debt securities are the equivalent of
high yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion
regarding their quality and are not a guarantee of quality. Rating agencies
attempt to evaluate the safety of principal and interest payments and do not
evaluate the risks of fluctuations in market value. Also, rating agencies may
fail to make timely changes in credit ratings in response to subsequent events,
so that an issuer's current financial condition may be better or worse than a
rating indicates.
The market values of lower quality debt securities tend to reflect
individual developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions
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and generally have more volatile prices than higher quality securities. Issuers
of lower quality securities are often highly leveraged and may not have
available to them more traditional methods of financing. For example, during an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of lower quality securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific developments affecting
the issuer, such as the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. Similarly, certain
emerging market governments that issue lower quality debt securities are among
the largest debtors to commercial banks, foreign governments and supranational
organizations such as the World Bank, and may not be able or willing to make
principal and/or interest repayments as they come due. The risk of loss due to
default by the issuer is significantly greater for the holders of lower quality
securities because such securities are generally unsecured and may be
subordinated to the claims of other creditors of the issuer.
Lower quality debt securities frequently have call or buy-back features
which would permit an issuer to call or repurchase the security from a Fund. In
addition, a Fund may have difficulty disposing of lower quality securities
because they may have a thin trading market. There may be no established retail
secondary market for many of these securities, and the Funds 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 a Fund to obtain accurate market quotations for purposes of
valuing a Fund's portfolio. Each Fund may also acquire lower quality debt
securities during an initial underwriting or which are sold without registration
under applicable securities laws. Such securities involve special considerations
and risks.
In addition to the foregoing, factors that could have an adverse effect
on the market value of lower quality debt securities in which a Fund may invest
include: (i) potential adverse publicity; (ii) heightened sensitivity to general
economic or political conditions; and (iii) the likely adverse impact of a major
economic recession.
Each Fund may invest in debt securities, including Brady Bonds, issued
as part of debt restructurings and such debt is to be considered speculative.
There is a history of defaults with respect to commercial bank loans by public
and private entities issuing Brady Bonds.
Each Fund may also incur additional expenses to the extent it is
required to seek recovery upon a default in the payment of principal or interest
on its portfolio holdings, and a Fund may have limited legal recourse in the
event of a default. Debt securities issued by governments in emerging markets
(including those in Latin American markets) can differ from debt obligations
issued by private entities in that remedies from defaults generally must be
pursued in the courts of the defaulting government, and legal recourse is
therefore somewhat diminished. Political conditions, in terms of a government's
willingness to meet the terms of its debt obligations, also are of considerable
significance. There can be no assurance that the holders of commercial bank debt
may not contest payments to the holders of debt securities issued by governments
in emerging markets in the event of default by the governments under commercial
bank loan agreements.
LOAN PARTICIPATIONS AND ASSIGNMENTS
Developing Markets Fund may have difficulty disposing of Assignments
and Participations. The liquidity of such securities is limited, and the Fund
anticipates that such securities could be sold only to a limited number of
institutional investors. The lack of a liquid secondary market could have an
adverse impact on the value of such securities and on a Fund's ability to
dispose of particular Assignments or Participations when necessary to meet its
liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for a Fund to assign a value to those securities for purposes of
valuing its portfolio and calculating its net asset value.
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FOREIGN SECURITIES
Political, Social and Economic Risks. Investing in securities of
non-U.S. companies may entail additional risks due to the potential political,
social and economic instability of certain countries and the risks of
expropriation, nationalization, confiscation or the imposition of restrictions
on foreign investment, convertibility of currencies into U.S. dollars and on
repatriation of capital invested. In the event of such expropriation,
nationalization or other confiscation by any country, a Fund could lose its
entire investment in any such country.
In addition, even though opportunities for investment may exist in
emerging markets, any change in the leadership or policies of the governments of
those countries or in the leadership or policies of any other government which
exercises a significant influence over those countries, may halt the expansion
of or reverse the liberalization of foreign investment policies now occurring
and thereby eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian
regimes, the governments of a number of Latin American countries previously
expropriated large quantities of real and personal property similar to the
property which will be represented by the securities purchased by the Funds. The
claims of property owners against those governments were never finally settled.
There can be no assurance that any property represented by securities purchased
by the Funds will not also be expropriated, nationalized, or otherwise
confiscated. If such confiscation were to occur, the Funds could lose their
entire investment in such countries. The Funds' investments would similarly be
adversely affected by exchange control regulation in any of those countries.
Economies in individual emerging markets may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rates of inflation, currency depreciation, capital reinvestment,
resource self-sufficiency and balance of payments positions. Many emerging
market countries have experienced high rates of inflation for many years.
Inflation and rapid fluctuations in inflation rates have had and may continue to
have negative effects on the economies and securities markets of certain
countries with emerging markets.
Emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade.
Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, rate of savings and capital reinvestment, currency
depreciation, resource self-sufficiency and balance of payments positions.
Investments in foreign government securities involve special risks, including
the risk that the government issuers may be unable or unwilling to repay
principal or interest when due.
Religious and Ethnic Stability. Certain countries in which the Funds
may invest may have groups that advocate radical religious or revolutionary
philosophies or support ethnic independence. Any disturbance on the part of such
individuals could carry the potential for widespread destruction or confiscation
of property owned by individuals and entities foreign to such country and could
cause the loss of a Fund's investment in those countries. Instability may also
result from, among other things, (i) authoritarian governments or military
involvement in political and economic decision-making, including changes in
government through extra-constitutional means, (ii) popular unrest associated
with demands for improved political, economic and social conditions and (iii)
hostile relations with neighboring or other countries. Such political, social
and economic instability could disrupt the principal financial markets in which
the Funds invest and adversely affect the value of the Funds' assets.
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Foreign Investment Restrictions. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as the Funds. These restrictions
or controls may at times limit or preclude investment in certain securities and
may increase the cost and expenses of the Funds. For example, certain countries
require prior governmental approval before investments by foreign persons may be
made or may limit the amount of investment by foreign persons in a particular
company, or limit the investment by foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals. Moreover, the national policies
of certain countries may restrict investment opportunities in issuers or
industries deemed sensitive to national interests. In addition, some countries
require governmental approval for the repatriation of investment income, capital
or the proceeds of securities sales by foreign investors. If there is a
deterioration in a country's balance of payments or for other reasons, a country
may impose restrictions on foreign capital remittances abroad. The Funds could
be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
Non-Uniform Corporate Disclosure Standards and Governmental Regulation.
Disclosure and regulatory standards in many respects are less stringent than in
the U.S. and other major markets. There also may be a lower level of monitoring
and regulation of emerging markets and the activities of investors in such
markets, and enforcement of existing regulations has been extremely limited.
Foreign companies are subject to accounting, auditing and financial standards
and requirements that differ in some cases significantly from those applicable
to U.S. companies. In particular, the assets, liabilities and profits appearing
on the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Most of the securities held by the Funds will not be
registered with the SEC or regulators of any foreign country, nor will the
issuers thereof be subject to the SEC's reporting requirements. Thus, there will
be less available information concerning most foreign issuers of securities held
by the Funds than is available concerning U.S. issuers. In instances where the
financial statements of an issuer are not deemed to reflect accurately the
financial situation of the issuer, the Sub-advisor will take appropriate steps
to evaluate the proposed investment, which may include on-site inspection of the
issuer, interviews with its management and consultations with accountants,
bankers and other specialists. There is substantially less publicly available
information about foreign companies than there are reports and ratings published
about U.S. companies and the U.S. government. In addition, where public
information is available, it may be less reliable than such information
regarding U.S. issuers. Issuers of securities on foreign jurisdictions are
generally not subject to the same degree of regulation as are U.S. issuers with
respect to such matters as restrictions on market manipulation, insider trading
rules, shareholder proxy requirements and timely disclosure of information. In
addition, for companies that keep accounting records in local currency,
inflation accounting rules in some Latin American countries require, for both
tax and accounting purposes, that certain assets and liabilities be restated on
the company's balance sheet in order to express items in terms of currency of
constant purchasing power. Inflation accounting may indirectly generate losses
or profits.
Currency Fluctuations. Because the Funds, under normal circumstances,
each will invest a substantial portion of its total assets in the securities of
foreign issuers which are denominated in foreign currencies, the strength or
weakness of the U.S. dollar against such foreign currencies will account for
part of each Fund's investment performance. Changes in currency exchange rates
will influence the value of a Fund's shares, and also may affect the value of
dividends and interest earned by a Fund and gains and losses realized by a Fund.
A decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of a Fund's holdings of securities and
cash denominated in such currency and, therefore, will cause an overall decline
in the Fund's net asset value and any net investment income and capital gains
derived from such securities to be distributed in U.S. dollars to shareholders
of that Fund. Moreover, if the value of the foreign currencies in which a Fund
receives its income falls relative to the U.S. dollar between receipt of the
income and the making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if the Fund has insufficient
cash in U.S. dollars to meet distribution requirements.
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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 rate of exchange between the U.S. dollar and
other currencies is determined by several factors including the supply and
demand for particular currencies, central bank efforts to support particular
currencies, the movement of interest rates, the pace of business activity in
certain other countries and the United States, the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors affecting the world economy. If the currency in
which a security is denominated appreciates against the U.S. dollar, the dollar
value of the security will increase. Conversely, a decline in the exchange rate
of the currency would adversely affect the value of the security expressed in
dollars.
Some countries also may have fixed currencies where values against the
U.S. dollar are not independently determined. In addition, there is a risk that
certain countries may restrict the free conversion of their currencies into
other currencies. Further, certain currencies may not be internationally traded.
Although the Funds value their assets daily in terms of U.S. dollars,
they do not intend to convert their holdings of foreign currencies into U.S.
dollars on a daily basis. The Funds will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference ("spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to a Fund at one rate, while offering a lesser rate of exchange should a Fund
desire to sell that currency to the dealer.
Many of the currencies of emerging market countries including Latin
American countries, have experienced steady devaluations relative to the U.S.
dollar, and major devaluations have historically occurred in certain countries.
Any devaluations in the currencies in which a Fund's portfolio securities are
denominated may have a detrimental impact on the Fund.
Certain Latin American countries may have managed currencies which are
maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the currency which, in turn, can have a disruptive and negative
effect on foreign investors. For example, in late 1994 the value of the Mexican
peso lost more than one-third of its value relative to the dollar. Certain Latin
American countries also may restrict the free conversion of their currency into
foreign currencies, including the U.S. dollar. There is no significant foreign
exchange market for certain currencies and it would, as a result, be difficult
for the Funds to engage in foreign currency transactions designed to protect the
value of the Funds' interests in securities denominated in such currencies.
Some countries also may have fixed currencies whose values against the
U.S. dollar are not independently determined. In addition, there is a risk that
certain countries may restrict the free conversion of their currencies into
other currencies. Further, certain currencies may not be internationally traded.
On January 1, 1999, certain members of the European Economic and
Monetary Union ("EMU"), namely Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain established a
common European currency known as the "euro" and each member's local currency
became a denomination of the euro. It is anticipated that each participating
country will replace its local currency with the euro on July 1, 2002. Any other
European country that is a member of the European Union and satisfies the
criteria for participation in the EMU may elect to participate in the EMU and
may supplement its existing currency with the euro. The anticipated replacement
of existing currencies with the euro on July 1, 2002 could cause market
disruptions before or after July 1, 2002 and could adversely affect the value of
securities held by a Fund.
Adverse Market Characteristics. Securities of many foreign issuers may
be less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States and
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foreign securities transactions usually are subject to fixed commissions, which
generally are higher than negotiated commissions on U.S. transactions. In
addition, foreign securities transactions may be subject to difficulties
associated with the settlement of such transactions. Delays in settlement could
result in temporary periods when assets of the Funds are uninvested and no
return is earned thereon. The inability of a Fund to make intended security
purchases due to settlement problems could cause the Fund to miss attractive
opportunities. Inability to dispose of a portfolio security due to settlement
problems either could result in losses to a Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser. The
Sub-advisor will consider such difficulties when determining the allocation of
the Funds' assets, although the Sub-advisor does not believe that such
difficulties will have a material adverse effect on the Funds' portfolio trading
activities.
Each Fund may use foreign custodians, which are generally more
expensive than those in the U.S. and may involve risks in addition to those
related to the use of U.S. custodians. Such risks include uncertainties relating
to (i) determining and monitoring the financial strength, reputation and
standing of the foreign custodian, (ii) maintaining appropriate safeguards to
protect a Fund's investments, (iii) possible difficulties in obtaining and
enforcing judgments against such custodians and (iv) different settlement and
clearance procedures which may be unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of a Fund to make intended securities purchases due to settlement
problems could cause a Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security caused by settlement problems could
result either in losses to a Fund due to subsequent declines in value of the
portfolio security or, if a Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
A high proportion of the shares of many Latin American companies may be
held by a limited number of persons, which may further limit the number of
shares available for investment by the Funds, particularly Latin American Fund.
A limited number of issuers in most, if not all, Latin American securities
markets may represent a disproportionately large percentage of market
capitalization and trading value. The limited liquidity of Latin American
securities markets also may affect a Fund's ability to acquire or dispose of
securities at the price and time it wishes to do so. In addition, certain Latin
American securities markets, including those of Argentina, Brazil, Chile and
Mexico, are susceptible to being influenced by large investors trading
significant blocks of securities or by large dispositions of securities
resulting from the failure to meet margin calls when due.
The high volatility of certain Latin American securities markets is
evidenced by dramatic movements in the Brazilian and Mexican markets in recent
years. This market volatility may result in greater volatility in a Fund's net
asset value than would be the case for companies investing in domestic
securities. If a Fund were to experience unexpected net redemptions, it could be
forced to sell securities in its portfolio without regard to investment merit,
thereby decreasing the asset base over which Fund expenses can be spread and
possibly reducing the Fund's rate of return.
Withholding Taxes. Each Fund's net investment income from securities of
foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing that income or delaying the receipt of income where
those taxes may be recaptured. See "Dividends, Distributions and Tax Matters."
Concentration. To the extent a Fund invests a significant portion of
its assets in securities of issuers located in a particular country or region of
the world, it may be subject to greater risks and may experience greater
volatility than a fund that is more broadly diversified geographically.
Special Considerations Affecting Emerging Markets. Investing in equity
securities of companies in emerging markets may entail greater risks than
investing in equity securities in developed countries. These risks include (i)
less social, political and economic stability; (ii) the small current size of
the markets for such securities and the currently low or nonexistent volume of
trading, which result in a lack of liquidity and in greater price volatility;
(iii) certain national policies which may restrict a Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign
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taxation; and (v) the absence of developed structures governing private or
foreign investment or allowing for judicial redress for injury to private
property.
Investing in the securities of companies in emerging markets, including
the markets of Latin America and certain Asian markets such as Taiwan, Malaysia
and Indonesia, may entail special risks relating to potential political and
economic instability and the risks of expropriation, nationalization,
confiscation or the imposition of restrictions on foreign investment,
convertibility into U.S. dollars and on repatriation of capital invested. In the
event of such expropriation, nationalization or other confiscation by any
country, a Fund could lose its entire investment in any such country.
Emerging securities markets such as the markets of Latin America are
substantially smaller, less developed, less liquid and more volatile than the
major securities markets. The limited size of emerging securities markets and
limited trading value in issuers compared to the volume of trading in U.S.
securities could cause prices to be erratic for reasons apart from factors that
affect the quality of the securities. For example, limited market size may cause
prices to be unduly influenced by traders who control large positions. Adverse
publicity and investors' perceptions, whether or not based on fundamental
analysis, may decrease the value and liquidity of portfolio securities,
especially in these markets. In addition, securities traded in certain emerging
markets may be subject to risks due to the inexperience of financial
intermediaries, a lack of modern technology, the lack of a sufficient capital
base to expand business operations, and the possibility of permanent or
temporary termination of trading.
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 a Fund to make intended securities purchases due to settlement
problems could cause it to miss attractive investment opportunities. Inability
to dispose of a portfolio security caused by settlement problems could result
either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
The securities markets of emerging countries including Latin American
countries are substantially smaller, less developed, less liquid and more
volatile than the securities markets of the developed countries. The risk also
exists that an emergency situation may arise in one or more emerging markets as
a result of which trading of securities may cease or may be substantially
curtailed and prices for a Fund's portfolio securities in such markets may not
be readily available. Section 22(e) of the 1940 Act permits registered
investment companies, such as the Funds, to suspend redemption of its shares for
any period during which an emergency exists, as determined by the SEC.
Accordingly, when a Fund believes that circumstances dictate, it will promptly
apply to the SEC for a determination that such an emergency exists within the
meaning of Section 22(e) of the 1940 Act. During the period commencing from a
Fund's identification of such conditions until the date of any SEC action, a
Fund's portfolio securities in the affected markets will be valued at fair value
determined in good faith by or under the direction of the Trust's Board of
Trustees.
Settlement mechanisms in emerging securities markets may be less
efficient and reliable than in more developed markets. In such emerging
securities there may be share registration and delivery delays or failures.
Many emerging market countries including countries in Latin America
have experienced substantial, and in some periods extremely high, rates of
inflation for many years. This has, in turn, led to high interest rates, extreme
measures by governments to keep inflation in check and a generally debilitating
effect on economic growth. Inflation and rapid fluctuations in inflation rates
and corresponding currency devaluations have had and may continue to have
negative effects on the economies and securities markets of certain emerging
market countries including countries in Latin America.
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Special Considerations Affecting Russia and Eastern European Countries.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
U.S. securities markets and should be considered highly speculative. Such risks
include the following: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on the ability of Developing Markets Fund to exchange local
currencies for U.S. dollars; (7) political instability and social unrest and
violence; (8) the risk that the governments of Russia and Eastern European
countries may decide not to continue to support the economic reform programs
implemented recently and could follow radically different political and/or
economic policies to the detriment of investors, including non-market-oriented
policies such as the support of certain industries at the expense of other
sectors or investors, or a return to the centrally planned economy that existed
when such countries had a communist form of government; (9) the financial
condition of companies in these countries, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (10)
dependency on exports and the corresponding importance of international trade;
(11) the risk that the tax system in these countries will not be reformed to
prevent inconsistent, retroactive and/or exorbitant taxation; and (12) the
underdeveloped nature of the securities markets.
Special Considerations Affecting Pacific Region Countries. Certain of
the risks associated with international investments are heightened for
investments in Pacific region countries. For example, some of the currencies of
Pacific region countries have experienced steady devaluations relative to the
U.S. dollar, and major adjustments have been made periodically in certain of
such currencies. Certain countries, such as India, face serious exchange
constraints.
Many of the Asia Pacific region countries may be subject to a greater
degree of social, political and economic instability than is the case in the
United States. Such instability may result from, among other things, the
following: (i) authoritarian governments or military involvement in political
and economic decision making, and changes in government through
extra-constitutional means; (ii) popular unrest associated with demands for
improved political, economic and social conditions; (iii) internal insurgencies;
(iv) hostile relations with neighboring countries; and (v) ethnic, religious and
racial disaffection. Such social, political and economic instability could
significantly disrupt the principal financial markets in which Developing
Markets Fund invests and adversely affect the value of such Fund's assets. In
addition, asset expropriations or future confiscatory levels of taxation
possibly may affect the Fund.
The economies of most of the Asia Pacific region countries are heavily
dependent upon international trade and are accordingly affected by protective
trade barriers and the economic conditions of their trading partners,
principally the United States, Japan, China and the European Community. The
enactment by the United States or other principal trading partners of
protectionist trade legislation, reduction of foreign investment in the local
economies and general declines in the international securities markets could
have a significant adverse effect upon the securities markets of the Asia
Pacific region countries. In addition, the economies of some of the Asia Pacific
region countries, Australia and Indonesia, for example, are vulnerable to
weakness in world prices for their commodity exports, including crude oil.
China assumed sovereignty over Hong Kong in July 1997. Although China
has committed by treaty to preserve the economic and social freedoms enjoyed in
Hong Kong for fifty years, the continuation of the current form of the economic
system in Hong Kong will depend on the actions of the government of China. In
addition, such assumption of sovereignty has increased sensitivity in Hong Kong
to political developments and statements by public figures in China. Business
confidence in Hong Kong, therefore, can be significantly affected by such
developments and statements, which in turn can affect markets and business
performance.
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In addition, there is a continuing risk that the Hong Kong dollar will
be devalued and a risk of possible loss of investor confidence in the Hong Kong
markets and dollar. However, factors exist that are likely to mitigate this
risk. First, China has stated its intention to implement a "one country, two
systems" policy, which would preserve monetary sovereignty and leave control in
the hands of the Hong Kong Monetary Authority ("HKMA").
Second, fixed rate parity with the U.S. dollar is seen as critical to
maintaining investors' confidence in the transition to Chinese rule, and,
therefore, it is anticipated that, if international investors lose confidence in
Hong Kong dollar assets, the HKMA would intervene to support the currency,
though such intervention cannot be assured. Third, Hong Kong's and China's
sizable combined foreign exchange reserve may be used to support the value of
the Hong Kong dollar, provided that China does not appropriate such reserves for
other uses, which is not anticipated but cannot be assured. Finally, China would
be likely to experience significant adverse political and economic consequences
if confidence in the Hong Kong dollar and the territory assets were to be
endangered.
Special Considerations Affecting Latin American Countries. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. The
Funds, particularly Latin American Fund, may invest in debt securities,
including Brady Bonds, issued as part of debt restructurings and such debt is to
be considered speculative. There is a history of defaults with respect to
commercial bank loans by public and private entities issuing Brady Bonds. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
The securities of Latin American countries are substantially smaller,
less developed, less liquid and more volatile than the major securities markets
in the United States. Latin American countries may also close certain sectors of
their economies to equity investments by foreigners. The limited size of many
Latin American securities markets and limited trading volume in issuers compared
to volume of trading in U.S. securities could cause prices to be erratic for
reasons apart from factors that affect the quality of the securities. For
example, limited market size may cause prices to be unduly influenced by traders
who control large positions. Adverse publicity and investors' perceptions,
whether or not based on fundamental analysis, may decrease the value and
liquidity of portfolio securities, especially in these markets. Further due to
the absence of securities markets and publicly owned corporations and due to
restrictions on direct investment by foreign entities, investments may only be
made in certain Latin American countries solely or primarily through
governmentally approved investment vehicles or companies.
Certain Latin American countries may have managed currencies that are
maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the currency which, in turn, can have a disruptive and negative
effect on foreign investors. For example, in late 1994, the value of the Mexican
peso lost more than one-third of its value relative to the U.S. dollar.
It should be noted that some Latin American countries require
governmental approval for the repatriation of investment income, capital or the
proceeds of securities sales by foreign investors. For instance, at present,
capital invested directly in Chile cannot under most circumstances be
repatriated for at least one year. The Funds, particularly Latin American Fund,
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
Sovereign Debt. Each Fund may invest in sovereign debt securities of
emerging market governments. 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 to unwilling to repay principal or interest
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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. Sovereign Debt
generally offers high yields, reflecting not only perceived credit risk, but
also the need to compete with other local investments in domestic financial
markets. Certain Latin American countries are among the largest debtors to
commercial banks and foreign governments. A sovereign debtor's willingness or
ability to repay principal and interest due in a timely manner may be affected
by, among other factors, its cash flow situation, the extent of its foreign
reserves, the availability of sufficient foreign exchange on the date a payment
is due, the relative size of the debt service burden to the economy as a whole,
the sovereign debtor's policy towards the International Monetary Fund and the
political constraints to which a sovereign debtor may be subject. Sovereign
debtors may default on their Sovereign Debt. Sovereign debtors may also be
dependent on expected disbursements from foreign governments, multilateral
agencies and others abroad to reduce principal and interest arrearages on their
debt. The commitment on the part of these governments, agencies and others to
make such disbursements may be conditioned on a sovereign debtor's
implementation of economic reforms and/or economic performance and the timely
service of such debtor's obligations. Failure to implement such reforms, achieve
such levels of economic performance or repay principal or interest when due, may
result in the cancellation of such third parties' commitments to lend funds to
the sovereign debtor, which may further impair such debtor's ability or
willingness to timely service its debts.
In recent years, some of the emerging market and Latin American
countries in which the Funds expect to invest have encountered difficulties in
servicing their Sovereign Debt. Some of these countries have withheld payments
of interest and/or principal of Sovereign Debt. These difficulties have also led
to agreements to restructure external debt obligations--in particular,
commercial bank loans, typically by rescheduling principal payments, reducing
interest rates and extending new credits to finance interest payments on
existing debt. In the future, holders of Sovereign Debt may be requested to
participate in similar reschedulings of such debt. Certain emerging markets
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 markets countries have
declared a moratorium on the payment of principal and interest on external debt;
such a moratorium is currently in effect for 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 and Latin American governments to make
timely payments on their Sovereign Debt is likely to be influenced strongly by a
country's balance of trade and its access to trade and other international
credits. A country whose exports are concentrated in a few commodities could be
vulnerable to a decline in the international prices of one or more of such
commodities. Increased protectionism on the part of a country's trading partners
could also adversely affect its exports. Such events could diminish a country's
trade account surplus, if any. To the extent that a country receives payment for
its exports in currencies other than hard currencies, its ability to make hard
currency payments could be affected.
The occurrence of political, social or diplomatic changes in one or
more of the countries issuing Sovereign Debt could adversely affect a Fund's
investments. The countries issuing such instruments are faced with social and
political issues and some of them have experienced high rates of inflation in
recent years and have extensive internal debt. Among other effects, high
inflation and internal debt service requirements may adversely affect the cost
and availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their Sovereign Debt. While the Sub-advisor intends to manage each Fund's
portfolio in a manner that will minimize the exposure to such risks, there can
be no assurance that adverse political changes will not cause the Funds to
suffer losses of interest or principal on any of their holdings.
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
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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 Funds 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 Funds anticipate that such securities could be
sold only to a limited number of dealers or institutional investors.
Periods of economic uncertainty may result in the volatility of market
prices of Sovereign Debt and in turn, a Fund's net asset value, to a greater
extent than the volatility inherent in domestic securities. The value of
Sovereign Debt will likely vary inversely with changes in prevailing interest
rates, which are subject to considerable variance in the international market.
If a Fund were to experience unexpected net redemptions, it may be forced to
sell Sovereign Debt in its portfolio without regard to investment merit, thereby
decreasing its asset base over which Fund expenses can be spread and possibly
reducing its rate of return.
INVESTMENT LIMITATIONS
DEVELOPING MARKETS FUND
Developing Markets Fund has adopted the following investment
limitations as fundamental policies which may not be changed without approval of
a majority of the Fund's outstanding shares.
Developing Markets Fund may not:
(1) issue senior securities or borrow money, except as
permitted under the 1940 Act and then not in excess of 33 1/3% of
Developing Markets Fund's total assets (including the amount borrowed
but reduced by any liabilities not constituting borrowings) at the time
of the borrowing, except that the Fund may borrow up to an additional
5% of its total assets (not including the amount borrowed) for
temporary or emergency purposes;
(2) purchase any security if, as a result of that purchase,
25% or more of Developing Markets Fund's total assets would be invested
in securities of issuers having their principal business activities in
the same industry, except that this limitation does not apply to
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities;
(3) engage in the business of underwriting securities of other
issuers, except to the extent that Developing Markets Fund might be
considered an underwriter under the federal securities laws in
connection with its disposition of portfolio securities;
(4) purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other
instruments supported by interests in real estate are not subject to
this limitation, and except that Developing Markets Fund may exercise
rights under agreements relating to such securities, including the
right to enforce security interests and to hold real estate acquired by
reason of such enforcement until that real estate can be liquidated in
an orderly manner;
(5) purchase or sell physical commodities, but Developing
Markets Fund may purchase, sell or enter into financial options and
futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments; or
(6) make loans, except through loans of portfolio securities
or through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other
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debt securities or instruments, or participations or other interests
therein and investments in government obligations, commercial paper,
certificates of deposit, bankers' acceptances or similar instruments
will not be considered the making of a loan.
Notwithstanding any other investment policy, Developing Markets Fund
may invest all of its investable assets (cash, securities and receivables
related to securities) in an open-end management investment company having
substantially the same investment objective, policies and limitations as the
Fund.
For purposes of the concentration policy of Developing Markets Fund
contained in limitation (2) above, the Fund intends to comply with the SEC staff
position that securities issued or guaranteed as to principal and interest by
any one single foreign government, or by all supranational organizations in the
aggregate, are considered to be securities of issuers in the same industry.
In addition, to comply with federal tax requirements for qualification
as a "regulated investment company" ("RIC"), Developing Markets Fund's
investments will be limited so that, at the close of each quarter of its taxable
year, (a) not more than 25% of the value of its total assets is invested in the
securities (other than U.S. government securities or the securities of other
RICs) of any one issuer and (b) at least 50% of the value of its total assets is
represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities, with these other securities limited, in respect
of any one issuer, to an amount that does not exceed 5% of the value of its
total assets and that does not represent more than 10% of the issuer's
outstanding voting securities ("Diversification Requirements"). These
tax-related limitations may be changed by the Trust's Board of Trustees to the
extent necessary to comply with changes to applicable tax requirements.
The following investment policy of Developing Markets Fund is not a
fundamental policy and may be changed by vote of the Trust's Board of Trustees
without shareholder approval: Developing Markets Fund will not purchase
securities on margin, provided that the Fund may obtain short-term credits as
may be necessary for the clearance of purchases and sales of securities, and
further provided that the Fund may make margin deposits in connection with its
use of financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.
Investors should refer to the Developing Markets Fund's Prospectus for
further information with respect to the Developing Markets Fund's investment
objective, which may not be changed without the approval of its shareholders,
and other investment policies, techniques and limitations, which may be changed
without shareholder approval.
LATIN AMERICAN FUND
Latin American Fund has adopted the following investment limitations as
fundamental policies which may not be changed without approval of a majority of
the Fund's outstanding shares.
Latin American Fund may not:
(1) Purchase any security if, as a result of that purchase,
25% or more of Latin American Fund's total assets would be invested in
securities of issuers having their principal business activities in the
same industry, except that this limitation does not apply to securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities;
(2) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other
instruments supported by interests in real estate are not subject to
this limitation, and except that Latin American Fund may exercise
rights under agreements relating to such securities, including the
right to enforce security interests and to hold real estate acquired by
reason of such enforcement until that real estate can be liquidated in
an orderly manner;
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(3) Engage in the business of underwriting securities of other
issuers, except to the extent that Latin American Fund might be
considered an underwriter under the federal securities laws in
connection with its disposition of portfolio securities;
(4) Make loans, except through loans of portfolio securities
or through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities
or instruments, or participations or other interests therein and
investments in government obligations, commercial paper, certificates
of deposit, bankers' acceptances or similar instruments will not be
considered the making of a loan;
(5) Issue senior securities or borrow money, except as
permitted under the 1940 Act and then not in excess of 33 1/3% of Latin
American Fund's total assets (including the amount borrowed but reduced
by any liabilities not constituting borrowings) at the time of the
borrowing, except that the Fund may borrow up to an additional 5% of
its total assets (not including the amount borrowed) for temporary or
emergency purposes; or
(6) Purchase or sell physical commodities, but Latin American
Fund may purchase, sell or enter into financial options and futures,
forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
Notwithstanding any other investment policy, Latin American Fund may
invest all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
For purposes of Latin American Fund's concentration policy contained in
limitation (1), above, the Fund intends to comply with the SEC staff position
that securities issued or guaranteed as to principal and interest by any single
foreign government are considered to be securities of issuers in the same
industry.
The following operating policies of Latin American Fund are not
fundamental policies and may be changed by vote of the Trust's Board of Trustees
without shareholder approval. Latin American Fund may not:
(1) Invest in securities of an issuer if the investment would
cause Latin American Fund to own more than 10% of any class of
securities of any one issuer, except that the Fund may purchase
securities of Affiliated Money Market Funds to the extent permitted by
exemptive order;
(2) Invest in companies for the purpose of exercising control
or management;
(3) Invest more than 10% of its net assets in illiquid
securities, including securities that are illiquid by virtue of the
absence of a readily available market;
(4) Enter into a futures contract, an option on a futures
contract, or an option on foreign currency traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as
defined by the CFTC), if the aggregate initial margin and premiums
required to establish all of those positions (excluding the amount by
which options are "in-the-money") exceeds 5% of the liquidation value
of Latin American Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into;
(5) Make any additional investments while borrowings exceed 5%
of Latin American Fund's total assets;
(6) Purchase securities on margin, provided that Latin
American Fund may obtain short-term credits as may be necessary for the
clearance of purchases and sales of securities, and further provided
that the Fund may make margin deposits in connection with its use of
financial options and
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futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments; or
(7) Mortgage, pledge, or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements
in connection with permissible activities.
Latin American Fund has the authority to invest up to 10% of its total
assets in shares of other investment companies pursuant to the 1940 Act. The
Fund may not invest more than 5% of its total assets in any one investment
company or acquire more than 3% of the outstanding voting securities of any one
investment company, except that the Fund may purchase securities of Affiliated
Money Market Funds to the extent permitted by exemptive order.
Investors should refer to the Latin American Fund's Prospectus for
further information with respect to the Latin American Fund's investment
objective, which may not be changed without the approval of its shareholders,
and other investment policies, techniques and limitations, which may be changed
without shareholder approval.
EXECUTION OF PORTFOLIO TRANSACTIONS
Subject to policies established by the Trust's Board of Trustees, the
Sub-advisor is responsible for the execution of each Fund's portfolio
transactions and the selection of broker/dealers who execute such transactions
on behalf of the Funds. In executing portfolio transactions, the Sub-advisor
seeks the best net results for each Fund, taking into account such factors as
the price (including the applicable brokerage commission or dealer spread), size
of the order, difficulty of execution and operational facilities of the firm
involved. Although the Sub-advisor generally seeks reasonably competitive
commission rates and spreads, payment of the lowest commission or spread is not
necessarily consistent with the best net results. While the Funds may engage in
soft dollar arrangements for research services, as described below, the Funds
have no obligation to deal with any broker/dealer or group of broker/dealers in
the execution of portfolio transactions.
Debt securities generally are traded on a "net" basis with a dealer
acting as principal for its own account without a stated commission, although
the price of the security usually includes a profit to the dealer. U.S. and
foreign government securities and money market instruments generally are traded
in the OTC markets. In underwritten offerings, securities usually are purchased
at a fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of each Fund, the Sub-advisor may select
brokers to execute a Fund's portfolio transactions, on the basis of the research
and brokerage services they provide to the Sub-advisor for its use in managing
the Fund and its other advisory accounts. Such services may include furnishing
analyses, reports and information concerning issuers, industries, securities,
geographic regions, economic factors and trends, portfolio strategy, and
performance of accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement). Broker/dealers
may communicate such information electronically, orally, in written form or on
computer software. Research and brokerage services received from such brokers
are in addition to, and not in lieu of, the services required to be performed by
the Sub-advisor under the investment management and administration contracts. A
commission paid to such brokers may be higher than that which another qualified
broker would have charged for effecting the same transaction, provided that the
Sub-advisor determines in good faith that such commission is reasonable in terms
either of that particular transaction or the overall responsibility of the
Sub-advisor to a Fund and its other clients and that the total commissions paid
by the Fund will be reasonable in relation to
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the benefits it received over the long term. Research services may also be
received from dealers who execute Fund transactions in OTC markets.
The Sub-advisor may allocate brokerage transactions to broker/dealers
who have entered into arrangements under which the broker/dealer allocates a
portion of the commissions paid by a Fund toward payment of the Fund's expenses,
such as transfer agent and custodian fees.
Investment decisions for each Fund and for other investment accounts
managed by the Sub-advisor are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts including the Funds. In such cases,
simultaneous transactions may occur.
Purchases or sales are then allocated as to price or amount in a manner
deemed fair and equitable to all accounts involved. While in some cases this
practice could have a detrimental effect upon the price or value of the security
as far as a Fund is concerned, in other cases, the Sub-advisor believes that
coordination and the ability to participate in volume transactions will be
beneficial to that Fund.
Under a policy adopted by the Trust's Board of Trustees, and subject to
the policy of obtaining the best net results, the Sub-advisor may consider a
broker/dealer's sale of the shares of a Fund and the other funds for which AIM
or the Sub-advisor serves as investment manager in selecting brokers and dealers
for the execution of portfolio transactions. This policy does not imply a
commitment to execute portfolio transactions through all broker/dealers that
sell shares of the Funds and such other funds.
Each Fund contemplates purchasing most foreign equity securities in
over-the-counter markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. The fixed commissions paid in
connection with most such foreign stock transactions generally are higher than
negotiated commissions on U.S. transactions. There generally is less government
supervision and regulation of foreign stock exchanges and brokers than in the
United States. Foreign security settlements may in some instances be subject to
delays and related administrative uncertainties.
Foreign equity securities may be held by each Fund in the form of ADRs,
ADSs, EDRs, GDRs, CDRs or securities convertible into foreign equity securities.
ADRs, ADSs, EDRs, GDRs and CDRs may be listed on stock exchanges, or traded in
the OTC markets in the United States or Europe, as the case may be. ADRs, like
other securities traded in the United States, will be subject to negotiated
commission rates. The foreign and domestic debt securities and money market
instruments in which a Fund may invest generally are traded in the OTC markets.
Each Fund contemplates that, consistent with the policy of obtaining
the best net results, brokerage transactions may be conducted through certain
companies affiliated with AIM or the Sub-advisor. The Trust's Board of Trustees
has adopted procedures in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to such affiliates are reasonable and
fair in the context of the market in which they are operating. Any such
transactions will be effected and related compensation paid only in accordance
with applicable SEC regulations.
The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of a Fund, provided the conditions of an exemptive order received by
the Funds from the SEC are met. In addition, a Fund may purchase or sell a
security from or to another AIM Fund provided the Funds follow procedures
adopted by the Boards of Directors/Trustees of the various AIM Funds, including
the Trust. These inter-fund transactions do not generate brokerage commissions
but may result in custodial fees or taxes or other related expenses.
For the fiscal years ended October 31, 1999 and 1998, Developing
Markets Fund paid aggregate brokerage commissions of $732,921 and $1,409,401,
and for the fiscal year ended October 31, 1997, the
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Predecessor Fund paid aggregate brokerage commissions of $2,212,022. For the
fiscal years ended October 31, 1999, 1998 and 1997, Latin American Fund paid
aggregate brokerage commissions of $252,182, $700,006 and $2,719,660,
respectively.
PORTFOLIO TRADING AND TURNOVER
Each Fund engages in portfolio trading when the Sub-advisor has
concluded that the sale of a security owned by the Fund and/or the purchase of
another security of better value can enhance principal and/or increase income. A
security may be sold to avoid any prospective decline in market value, or a
security may be purchased in anticipation of a market rise. Consistent with each
Fund's investment objective, a security also may be sold and a comparable
security purchased coincidentally in order to take advantage of what is believed
to be a disparity in the normal yield and price relationship between the two
securities. Although none of the Funds generally intends to trade for short-term
profits, the securities in a Fund's portfolio will be sold whenever management
believes it is appropriate to do so, without regard to the length of time a
particular security may have been held. Portfolio turnover rate is calculated by
dividing the lesser of sales or purchases of portfolio securities by a Fund's
average month-end portfolio values, excluding short-term investments. The
portfolio turnover rate will not be a limiting factor when the Sub-advisor deems
portfolio changes appropriate. Higher portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs that a
Fund will bear directly and may result in the realization of net capital gains
that are taxable when distributed to that Fund's shareholders.
The portfolio turnover rates for Developing Markets Fund and Latin
American Fund the last two fiscal years were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCT. 31, OCT. 31,
1999 1998
---- ----
<S> <C> <C>
Developing Markets Fund .......... 125% 111%
Latin American Fund .............. 30% 39%
</TABLE>
High portfolio turnover (over 100%) involves correspondingly greater
brokerage commissions and other transaction costs that the Fund will bear
directly and could result in the realization of net capital gains which would be
taxable when distributed to shareholders. See "Dividends, Distributions and Tax
Matters."
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the
operation of the Funds. The Trust's Board of Trustees has approved all
significant agreements between the Trust on the one side and persons or
companies furnishing services to the Fund on the other, including the investment
management and administration agreement with AIM, the investment sub-advisory
agreement between AIM and the Sub-advisor, the agreements with AIM Distributors
regarding distribution of the Fund's shares, the custody agreement and the
transfer agency agreement. The day-to-day operations of the Fund are delegated
to the officers of the Trust, subject always to the investment objectives and
policies of the Fund and to the general supervision of the Trust's Board of
Trustees. Certain trustees and officers of the Trust are affiliated with AIM and
AIM Management Group Inc. ("AIM Management"), the parent corporation of AIM.
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below. Unless
otherwise indicated, the address of each Executive Officer is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046.
44
<PAGE> 264
<TABLE>
<CAPTION>
======================================= ================= ==============================================================
POSITIONS
HELD WITH PRINCIPAL OCCUPATION WITH REGISTRANT
NAME, ADDRESS AND AGE REGISTRANT
- --------------------------------------- ----------------- --------------------------------------------------------------
<S> <C> <C> <C>
*ROBERT H. GRAHAM (53) Trustee, Director, President and Chief Executive Officer, A I M
Chairman and Management Group, Inc.; Director and President,
President A I M Advisors, Inc.; Director and Senior Vice President,
A I M Capital Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc. and Fund Management Company; and
Director and Chief Executive Officer, Managed Products,
AMVESCAP PLC.
- --------------------------------------- ----------------- --------------------------------------------------------------
C. DEREK ANDERSON (58) Trustee Senior Managing Partner, Plantagenet Capital Management, LLC
220 Sansome Street (an investment partnership); Chief Executive Officer,
Suite 400 Plantagenet Holdings, Ltd. (an investment banking firm); and
San Francisco, CA 94104 Director, Premium Wear, Inc. (formerly Munsingwear, Inc.) (a
casual apparel company), "R" Homes, Inc., Big Online Inc.,
Champagne Albert Le Brun and various other privately owned
companies.
- --------------------------------------- ----------------- --------------------------------------------------------------
FRANK S. BAYLEY (60) Trustee Partner, law firm of Baker & McKenzie; Director and
Two Embarcadero Center Chairman, C.D. Stimson Company (a private investment
Suite 2400 company) and Stimson Marina, Inc., (a subsidiary of C.D.
San Francisco, CA 94111 Stimson Company); and Trustee, The Badgley Funds.
- --------------------------------------- ----------------- --------------------------------------------------------------
RUTH H. QUIGLEY (65) Trustee Private investor; and President, Quigley Friedlander & Co.,
1055 California Street Inc. (a financial advisory services firm) from 1984 to 1986.
San Francisco, CA 94108
- --------------------------------------- ----------------- --------------------------------------------------------------
SAMUEL D. SIRKO (40) Vice President Vice President, Assistant General Counsel and Assistant
and Secretary Secretary, A I M Advisors, Inc.; and Assistant General
Counsel and Assistant Secretary, A I M Management Group,
Inc., A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and Fund Management Company.
- --------------------------------------- ----------------- --------------------------------------------------------------
MELVILLE B. COX (56) Vice President Vice President and Chief Compliance Officer, A I M Advisors,
Inc., A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and Fund Management Company.
======================================= ================= ==============================================================
</TABLE>
- --------------
* A trustee who is an "Interested person" of the Trust and A I M Advisors,
Inc. as defined in the 1940 Act.
45
<PAGE> 265
<TABLE>
<CAPTION>
======================================= ================= ==============================================================
POSITIONS
HELD WITH PRINCIPAL OCCUPATION WITH REGISTRANT
NAME, ADDRESS AND AGE REGISTRANT
- --------------------------------------- ----------------- --------------------------------------------------------------
<S> <C> <C> <C>
GARY T. CRUM (52) Vice President Director and President, A I M Capital Management, Inc.;
Director and Executive Vice President, A I M Management
Group Inc.; Director and Senior Vice President, A I M
Advisors, Inc.; and Director, A I M Distributors, Inc. and
AMVESCAP PLC.
- --------------------------------------- ----------------- --------------------------------------------------------------
CAROL F. RELIHAN (45) Vice President Director, Senior Vice President, General Counsel and
Secretary, A I M Advisors, Inc.; Senior Vice President,
General Counsel and Secretary, A I M Management Group Inc.;
Director, Vice President and General Counsel, Fund
Management Company; Vice President and General Counsel,
A I M Fund Services, Inc.; and Vice President, A I M Capital
Management, Inc. and A I M Distributors, Inc.
- --------------------------------------- ----------------- --------------------------------------------------------------
DANA R. SUTTON (41) Vice President Vice President and Fund Controller, A I M Advisors, Inc.;
and Treasurer and Assistant Vice President and Assistant Treasurer, Fund
Management Company.
======================================= ================= ==============================================================
</TABLE>
The Board of Trustees has a Nominating and Audit Committee, comprised
of Miss Quigley (Chairman) and Messrs. Anderson and Bayley, which is responsible
for nominating persons to serve as Trustees, reviewing audits of the Trust and
its funds and recommending firms to serve as independent auditors for the Trust.
All of the Trust's Trustees also serve as directors or trustees of some or all
of the other investment companies managed, administered or advised by AIM. All
of the Trust's executive officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM.
Each Trustee who is not a director, officer or employee of AIM and/or
the Sub-advisor or any affiliated company is paid an annual retainer component
plus a per-meeting fee component, and reimbursed travel and other expenses
incurred in connection with attendance at such meetings. Other Trustees and
Officers receive no compensation or expense reimbursement from the Trust. For
the fiscal year ended October 31, 1999, Mr. Anderson, Mr. Bayley, Mr. Arthur C.
Patterson (a trustee until September 27, 1999, when he retired) and Miss
Quigley, who are not trustees, officers or employees of the Sub-advisor or any
affiliated company, received total compensation of $50,353, $51,376, $45,584 and
$51,376, respectively, from the Trust for their services as Trustees. For the
fiscal year ended October 31, 1999, Mr. Anderson, Mr. Bayley, Mr. Patterson and
Miss Quigley, who are not directors, officers or employees of the Sub-advisor or
any other affiliated company, received total compensation of $101,833, $103,833,
$93,583 and $103,083, respectively, from the investment companies managed or
administered by AIM and sub-advised or sub-administered by the Sub-advisor for
which he or she serves as a Director or Trustee. Fees and expenses disbursed to
the Trustees contained no accrued or payable pension or retirement benefits.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, was organized
in 1976 and, together with its subsidiaries, manages or advises approximately
120 investment portfolios encompassing a broad range of investment objectives.
INVESCO Asset Management Limited, 11 Devonshire Square, London, EC2M 4YR,
England, has provided investment management and/or administrative services to
pension funds, insurance funds, index funds, unit trusts, offshore funds and a
variety of institutional accounts since 1967.
46
<PAGE> 266
AIM, the Sub-advisor and their world-wide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world.
AIM is a direct, wholly owned subsidiary of AIM Management, a holding
company that has been engaged in the financial services business since 1976. AIM
is also the sole shareholder of the Funds' principal underwriter, AIM
Distributors.
AIM Management, AIM and the Sub-Advisor are indirect wholly owned
subsidiaries of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR, England.
AMVESCAP PLC and its subsidiaries are an independent 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.
Certain of the directors and officers of AIM are also executive officers of the
Trust and their affiliations are shown under "Management" herein.
In addition to the investment resources of their Houston and London
offices, AIM and the Sub-advisor draw upon the expertise, personnel, data and
systems of other offices in Atlanta, Boston, Dallas, Denver, Louisville, Miami,
New York, Portland (Oregon), Frankfurt, Hong Kong, Singapore, Sydney, Tokyo and
Toronto. In managing the Funds and the Portfolio, AIM and the Sub-advisor employ
a team approach, taking advantage of their investment resources around the
world.
AIM and Trust have adopted a Code of Ethics (the "Code of Ethics")
which requires investment personnel and certain other employees (a) to pre-clear
all personal securities transactions subject to the Code of Ethics, (b) to file
reports or duplicate confirmations regarding such transactions, (c) to refrain
from personally engaging in (i) short-term trading of a security (ii)
transactions involving a security within seven days of an AIM Fund transaction
involving the same security, unless the security qualifies for the De minimus
exemption. The De minimus exemption would allow the trade if the issuer of the
security has a market capitalization of $2 billion or more. In addition such a
request can only be granted once every thirty days for no more than 2,000 shares
total, and (iii) transactions involving securities being considered for
investment by an AIM Fund, unless the security qualifies for the De minimus
exemption, as previously explained, for which the personal security trade would
be allowed even if the security is being considered for investment by an AIM
Fund and (d) abide by certain other provisions under the Code of Ethics. The
Code of Ethics also prohibits employees who are registered with the NASD from
purchasing securities in an initial public offering. Personal trading reports
are reviewed periodically by AIM, and the Board of Trustees review quarterly and
annual reports (including information on any substantial violations of the Code
of Ethics). Sanctions for violations of the Code of Ethics may include censure,
monetary penalties, suspension or termination of employment.
AIM serves as each Fund's investment manager and administrator under an
investment management and administration contract ("Management Contract")
between the Trust and AIM. The Sub-advisor serves as the sub-advisor to each
Fund under a sub-advisory contract between AIM and the Sub-advisor
("Sub-Management Contract," and together with the Management Contract, the
"Management Contracts"). As investment managers and administrators, AIM and the
Sub-advisor make all investment decisions for the Funds and administer each
Fund's affairs. AIM and the Sub-advisor also determine the composition of each
Fund's portfolio, places orders to buy, sell or hold particular securities and
supervise all matters relating to each Fund's operation. Among other things, AIM
and the Sub-advisor furnish the services and pay the compensation and travel
expenses of persons who perform the executive, administrative, clerical and
bookkeeping functions of the Trust and the Funds, and provide suitable office
space, necessary small office equipment and utilities.
For these services, each Fund pays AIM investment management and
administration fees, computed daily and paid monthly, based on its average daily
net assets, at the annualized rate of 0.975% on the first $500 million, 0.95% on
the next $500 million, 0.925% on the next $500 million and 0.90% on the amounts
thereafter. AIM pays the Sub-advisor sub-advisory fees computed weekly and paid
monthly, based on each Fund's average daily net assets, at the annualized rate
of 0.39% of the first $500 million, 0.38% on the next
47
<PAGE> 267
$500 million, 0.37% on the next $500 million, and 0.36% on the amounts
thereafter. The investment management and administration fees paid by the Funds
are higher than those paid by most mutual funds. The Funds pay all expenses not
assumed by AIM, the Sub-advisor, AIM Distributors or other agents. AIM has
undertaken to limit each Fund's expenses (exclusive of brokerage commissions,
taxes, interest and extraordinary expenses) to the annual rate of 2.00%, 2.50%
and 2.50% of the average daily net assets of each Fund's Class A, Class B and
Class C shares, respectively, until June 30, 2000.
The Management Contracts for each Fund may be renewed for one-year
terms, provided that any such renewal has been specifically approved at least
annually by (i) the Trust's Board of Trustees, or by the vote of a majority of a
Fund's outstanding voting securities (as defined in the 1940 Act) and (ii) a
majority of Trustees who are not parties to the Management Contracts or
"interested persons" of any such party (as defined in the 1940 Act), cast in
person at a meeting called for the specific purpose of voting on such approval.
The Management Contracts provide that with respect to each Fund, the Trust or
each of AIM or the Sub-advisor may terminate the Management Contracts without
penalty upon sixty days' written notice. The Management Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
AIM may from time to time waive or reduce its fee. Voluntary fee
waivers or reductions may be rescinded at any time without further notice to
investors. During periods of voluntary fee waivers or reductions, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund.
In placing securities for a Fund's portfolio transactions, the
Sub-advisor seeks to obtain the best net results. Consistent with its obligation
to obtain the best net results, the Sub-advisor may consider a broker/dealer's
sale of shares of the AIM Funds as a factor in considering through whom
portfolio transactions will be effected. Brokerage transactions may be executed
through affiliates of AIM or the Sub-advisor.
AIM became investment manager and administrator to the Funds effective
June 1, 1998. Prior to that date, Chancellor LGT Asset Management, Inc. served
as investment manager and administrator.
For the fiscal years ended October 31, 1999, 1998 and 1997, each Fund
paid AIM and the prior manager and administrator the following net investment
management and administration fees:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Developing Markets Fund* .......... $ 813,308 $1,049,576 $7,383,823
Latin American Fund ............... 379,902 1,738,497 3,538,586
</TABLE>
o The Predecessor Fund of Developing Markets Fund paid the investment
management and administration fees for the fiscal year ended October
31, 1997.
For the fiscal year ended October 31, 1999 and 1998, AIM waived
management fees for Developing Markets Fund in the amounts of $747,433 and
$691,157, respectively, and Latin American Fund in the amounts of $572,144 and
$297,829, respectively.
INVESCO Asset Management Limited became sub-advisor to the Funds
effective June 1, 1998. Prior to that date, INVESCO Asset Management Limited's
predecessor served as sub-advisor.
For the fiscal years ended October 31, 1999, 1998 and 1997, AIM and the
prior investment manager and administrator paid, with respect to the Funds, the
following sub-advisory fees:
48
<PAGE> 268
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Developing Markets Fund ...... $ 325,323 $419,830 $2,953,529
Latin American Fund .......... 151,961 695,399 1,415,434
</TABLE>
AIM also serves as the Funds' pricing and accounting agent pursuant to
the Master Accounting Services Agreement. For these services, the Funds' pay AIM
such fees as are determined in accordance with methodologies established, from
time to time, by the Trust's Board of Trustees.
For the fiscal years ended October 31, 1999, 1998 and 1997, each Fund
paid the current and former advisers the following accounting services fees:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Developing Markets Fund* ..... $ 42,462 $ 53,782 $ 108,484
Latin American Fund .......... 38,349 55,950 90,733
</TABLE>
* The Predecessor Fund of Developing Markets Fund paid the accounting
services fees for the fiscal year ended October 31, 1997.
THE DISTRIBUTION PLANS
THE CLASS A AND C PLAN
The Trust has adopted a Master Distribution Plan pursuant to Rule 12b-1
under the 1940 Act relating to the Class A and Class C shares of the Funds (the
"Class A and C Plan"). The Class A and C Plan provides that the Class A shares
of each Fund pays 0.50% per annum of the average daily net assets attributable
to Class A shares as compensation to AIM Distributors for the purpose of
financing any activity which is primarily intended to result in the sale of
Class A shares. Under the Class A and C Plan, Class C shares of each fund pay
compensation to AIM Distributors at an annual rate of 1.00% of the average daily
net assets attributable to Class C shares. The Class A and C Plan is designed to
compensate AIM Distributors, on a quarterly basis, for certain promotional and
other sales-related costs, and to implement a dealer incentive program which
provides for periodic payments to selected dealers who furnish continuing
personal shareholder services to their customers who purchase and own Class A or
Class C shares of a Fund. Payments can also be directed by AIM Distributors to
selected institutions who have entered into service agreements with respect to
Class A and Class C shares of each Fund and who provide continuing personal
services to their customers who own Class A and Class C shares of the Fund. The
service fees payable to selected institutions are calculated at the annual rate
of 0.25% of the average daily net asset value of those Fund shares that are held
in such institution's customers' accounts which were purchased on or after a
prescribed date set forth in the Plan. Activities appropriate for financing
under the Class A and C Plan include, but are not limited to, the following:
printing of prospectuses and statements of additional information and reports
for other than existing shareholders; overhead; preparation and distribution of
advertising material and sales literature; expenses of organizing and conducting
sales seminars; supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements; and costs of administering the Class A and C Plan.
Of the aggregate amount payable under the Class A and C Plan, payments
to dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average net assets of the Fund attributable to
the customers of such dealers or financial institutions are characterized as a
service fee, and payments to dealers and other financial institutions in excess
of such amount and payments to AIM Distributors would be characterized as an
asset-based sales charge pursuant to the Class A and C Plan. The Class A and C
Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be
49
<PAGE> 269
paid by the Trust with respect to the Fund. The Class A and C Plan does not
obligate the Fund to reimburse AIM Distributors for the actual expenses AIM
Distributors may incur in fulfilling its obligations under the Class A and C
Plan on behalf of the Fund. Thus, under the Class A and C Plan, even if AIM
Distributors' actual expenses exceed the fee payable to AIM Distributors
thereunder at any given time, the Fund will not be obligated to pay more than
that fee. If AIM Distributors' expenses are less than the fee it receives, AIM
Distributors will retain the full amount of the fee.
THE CLASS B PLAN
The Trust has also adopted a Master Distribution Plan pursuant to Rule
12b-1 under the 1940 Act relating to Class B shares of the Funds (the "Class B
Plan", and collectively with the Class A and C Plan, the "Plans"). Under the
Class B Plan, each Fund pays compensation to AIM Distributors at an annual rate
of 1.00% of the average daily net assets attributable to Class B shares. Of such
amount, each Fund pays a service fee of 0.25% of the average daily net assets
attributable to Class B shares to selected dealers and other institutions which
furnish continuing personal shareholder services to their customers who purchase
and own Class B shares. Any amounts not paid as a service fee would constitute
an asset-based sales charge. Amounts paid in accordance with the Class B Plan
may be used to finance any activity primarily intended to result in the sale of
Class B shares, including but not limited to printing of prospectuses and
statements of additional information and reports for other than existing
shareholders; overhead; preparation and distribution of advertising material and
sales literature; expenses of organizing and conducting sales seminars;
supplemental payments to dealers and other institutions such as asset-based
sales charges or as payments of service fees under shareholder service
arrangements; and costs of administering the Class B Plan.
BOTH PLANS
Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Funds; assisting customers
in changing dividend options, account designations and addresses, and in
enrolling in any of the several special investment plans offered in connection
with the purchase of the Funds' shares; assisting in the establishment and
maintenance of customer accounts and records and in the processing of purchase
and redemption transactions; investing dividends and any capital gains
distributions automatically in the Funds' shares; and providing such other
information and services as the Funds or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding the Funds;
performing sub-accounting; establishing and maintaining shareholder accounts and
records; processing customer purchase and redemption transactions; providing
periodic statements showing a shareholder's account balance and the integration
of such statements with those of other transactions and balances in the
shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as the Funds reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions which
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive
compensation for selling Fund shares may receive different compensation for
selling shares of one particular class over another.
50
<PAGE> 270
Under a Shareholder Service Agreement, each Fund agrees to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement generally will be calculated at the end of each payment period
for each business day of the Funds during such period at the annual rate of
0.25% of the average daily net asset value of the Funds' shares purchased or
acquired through exchange. Fees calculated in this manner shall be paid only to
those selected dealers or other institutions who are dealers or institutions of
record at the close of business on the last business day of the applicable
payment period for the account in which each Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc. ("NASD"). The Plans conform to rules of the NASD by limiting payments made
to dealers and other financial institutions who provide continuing personal
shareholder services to their customers who purchase and own shares of the Funds
to no more than 0.25% per annum of the average daily net assets of the Funds
attributable to the customers of such dealers or financial institutions, and by
imposing a cap on the total sales charges, including asset based sales charges,
that may be paid by the Funds and their respective classes.
AIM Distributors may from time to time waive or reduce any portion of
its 12b-1 fee for Class A and Class C shares. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM Distributors will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM Distributors and the Fund.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Fund on an agency basis, may
receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent for the Funds, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Funds and not of AIM Distributors.
Financial intermediaries and any other person entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one class over another.
Prior to June 1, 1998, GT Global Inc. was the distributor of the Funds.
For the fiscal year ended October 31, 1999 for Class A and Class B
shares, and for the period March 1, 1999 (date operations commenced) through
October 31, 1999 for Class C shares, each Fund paid the following amounts under
the Plans:
<TABLE>
<CAPTION>
% OF CLASS
AVERAGE DAILY
NET ASSETS
----------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Developing Markets Fund $ 439,522 $ 357,273 $ 1,425 .50% 1.00% 1.00%
Latin American Fund 273,567 422,771 713 .50% 1.00% 1.00%
</TABLE>
51
<PAGE> 271
An estimate by category of actual fees paid by each Fund with regard to
the Class A shares during the fiscal year ended October 31, 1999 follows:
<TABLE>
<CAPTION>
DEVELOPING LATIN
MARKETS AMERICAN
FUND FUND
------------ ------------
<S> <C> <C>
CLASS A
Advertising ...................................... $ 163,422 $ 38,119
Printing and Mailing prospectuses,
semi-annual reports and annual
reports (other than to current
shareholders) ................................. 16,163 3,186
Seminars ......................................... 44,896 13,768
Compensation to Underwriters to partially
offset other marketing expenses ............... 0 0
Compensation to Dealers including Finder's Fees .. 215,041 218,494
Compensation to Sales Personnel .................. 0 0
Annual Report Total .............................. $ 439,522 $ 273,567
</TABLE>
An estimate by category of actual fees paid by each Fund with regard to
the Class B shares during the year ended October 31, 1999 as follows:
<TABLE>
<CAPTION>
DEVELOPING LATIN
MARKETS AMERICAN
FUND FUND
---------- ----------
<S> <C> <C>
CLASS B
Advertising ...................................... $ 3,756 $ 3,355
Printing and Mailing prospectuses,
semi-annual reports and annual reports
(other than to current shareholders) .......... 371 332
Seminars ......................................... 1,376 922
Compensation to Underwriters to partially
offset other marketing expenses ............... 267,954 317,078
Compensation to Dealers .......................... 83,816 101,084
Compensation to Sales Personnel .................. 0 0
Annual Report Total .............................. $ 357,273 $ 422,771
</TABLE>
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<PAGE> 272
An estimate by category of actual fees paid by each Fund with regard to
the Class C shares for the period March 1, 1999 (date operations commenced)
through October 31, 1999 as follows:
<TABLE>
<CAPTION>
DEVELOPING LATIN
MARKETS AMERICAN
FUND FUND
---------- ----------
<S> <C> <C>
CLASS C
Advertising ...................................... $ 272 $ 80
Printing and Mailing prospectuses,
semi-annual reports and annual reports
(other than to current shareholders) .......... 0 0
Seminars ......................................... 0 0
Compensation to Underwriters to partially
offset other marketing expenses ............... 1,069 535
Compensation to Dealers .......................... 84 98
Compensation to Sales Personnel .................. 0 0
Annual Report Total .............................. $ 1,425 $ 713
</TABLE>
The Plans require AIM Distributors to provide the Board of Trustees at
least quarterly with a written report of the amounts expended pursuant to the
Plans and the purposes for which such expenditures were made. The Board of
Trustees reviews these reports in connection with their decisions with respect
to the Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Trustees, including a majority
of the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust and who have no direct or indirect financial interest in the operation
of the Plans or in any agreements related to the Plans ("Qualified Trustees").
In approving the Plans in accordance with the requirements of Rule 12b-1, the
Trustees considered various factors and determined that there is a reasonable
likelihood that the Plans would benefit each class of each Fund and their
respective shareholders.
The Plans do not obligate the Funds to reimburse AIM Distributors for
the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Funds will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Unless terminated earlier in accordance with their terms, the Plans
continue in effect from year to year, as long as such continuance is
specifically approved at least annually by the Board of Trustees, including a
majority of the Qualified Trustees.
The Plans may be terminated by the vote of a majority of the Qualified
Trustees, or, with respect to a particular class, by the vote of a majority of
the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
it may be amended by the Trustees, including a majority of the Qualified
Trustees, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plans are in effect, the selection or
nomination of the Qualified Trustees is committed to the discretion of the
Qualified Trustees. In the event the Class A and C Plan is amended in a manner
which the Board of Trustees determines would materially increase the charges
paid under the Class A and C Plan, the Class B shares of the Funds will no
longer convert into Class A shares of the same Funds unless the Class B shares,
voting separately, approve such amendment. If the Class B shareholders do not
approve such amendment, the Board of Trustees will (i) create a new class of
shares of the Funds which is
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<PAGE> 273
identical in all material respects to the Class A shares as they existed prior
to the implementation of the amendment and (ii) ensure that the existing Class B
shares of the Funds will be exchanged or converted into such new class of shares
no later than the date the Class B shares were scheduled to convert into Class A
shares.
The principal differences between the Class A and C Plan and the Class
B Plan are: (i) the Class A and C Plan allows payment to AIM Distributors or to
dealers or financial institutions of up to 0.50% of average daily net assets of
the Class A shares of each Fund, as compared to 1.00% of such assets of each
Fund's Class B shares; (ii) the Class B Plan obligates the Class B shares to
continue to make payments to AIM Distributors following termination of the Class
B shares Distribution Agreement with respect to Class B shares sold by or
attributable to the distribution efforts of AIM Distributors or its predecessor,
GT Global, Inc. unless there has been a complete termination of the Class B Plan
(as defined in such Plan) and (iii) the Class B Plan expressly authorizes AIM
Distributors to assign, transfer or pledge its rights to payments pursuant to
the Class B Plan.
THE DISTRIBUTOR
The Trust has entered into a Master Distribution Agreement with AIM
Distributors relating to the Class A shares and Class C shares of the Funds and
a Master Distribution Agreement with AIM Distributors relating to the Class B
shares of the Funds. Such Master Distribution Agreements are hereinafter
collectively referred to as the "Distribution Agreements."
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing the Funds'
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Fund), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of the Fund's shares, including expenses
of advertising in connection with such public offerings. AIM Distributors has
not undertaken to sell any specified number of shares of any classes of the
Funds.
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Funds directly and through institutions with
whom AIM Distributors has entered into selected dealer agreements. Under the
Distribution Agreement for the Class B shares, AIM Distributors sells Class B
shares of the Funds at net asset value subject to a contingent deferred sales
charge established by AIM Distributors. AIM Distributors is authorized to
advance to institutions through whom Class B shares are sold a sales commission
under schedules established by AIM Distributors. The Distribution Agreement for
the Class B shares provides that AIM Distributors (or its assignee or
transferee) will receive 0.75% (of the total 1.00% payable under the
distribution plan applicable to Class B shares) of each Fund's average daily net
assets attributable to Class B shares attributable to the sales efforts of AIM
Distributors.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B shares of the Funds at
the time of such sales. Payments with respect to Class B shares will equal 4.00%
of the purchase price of the Class B shares sold by the dealer or institution,
and will consist of a sales commission equal to 3.75% of the purchase price of
the Class B shares sold plus an advance of the first year service fee of 0.25%
with respect to such shares. The portion of the payments to AIM Distributors
under the Class B Plan which constitutes an asset-based sales charge (0.75%) is
intended in part to permit AIM Distributors to recoup a portion of such sales
commissions plus financing costs. AIM Distributors anticipates that it will
require a number of years to recoup from Class B Plan payments the sales
commissions paid to dealers and institutions in connection with sales of Class B
shares. In the future, if multiple distributors serve a Fund, each such
distributor (or its assignee or transferee) would receive a share of the
payments under the Class B Plan based on the portion of the Fund's Class B
shares sold by or attributable to the distribution efforts of that distributor.
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The Trust (on behalf of any class of any Fund) or AIM Distributors may
terminate the Distribution Agreements on sixty (60) days' written notice without
penalty. The Distribution Agreements will terminate automatically in the event
of their assignment. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset based
distribution fees in respect of the outstanding Class B shares attributable to
the distribution efforts of AIM Distributors and its predecessor; provided,
however, that a complete termination of the Class B Plan (as defined in such
Plan) would terminate all payments by the Fund of asset based distribution fees
and service fees to AIM Distributors. Termination of the Class B Plan or
Distribution Agreement does not affect the obligation of Class B shareholders to
pay contingent deferred sales charges.
From time to time, AIM Distributors may transfer and sell its right to
payments under the Distribution Agreement relating to Class B shares in order to
finance distribution expenditures in respect of Class B shares.
The following chart reflects the total sales charges paid in connection
with the sale of Class A shares of each Fund and the amount retained by GT
Global, Inc., the Trust's distributor prior to June 1, 1998, for the fiscal year
or period ended October 31, 1998 and 1997.
<TABLE>
<CAPTION>
NOVEMBER 1, 1997
TO MAY 31, 1998 1997
------------------------ ----
SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Developing Markets Fund $ 0 $ 0 N/A N/A
Latin American Fund $ 47,006 $ 16,513 $ 168,598 $ 50,871
</TABLE>
Developing Markets Fund and Latin American Fund pay AIM Distributors
sales charges on sales of Class A shares of the Funds. AIM Distributors retains
certain amounts of such charges and reallows other amounts of such charges to
broker/dealers who sell shares.
The following chart reflects the total sales charges paid in connection
with the sale of Class A shares of each Fund and the amount retained by AIM
Distributors for the fiscal year or period ended October 31, 1999 and 1998:
<TABLE>
<CAPTION>
JUNE 1, 1998 TO
1999 OCTOBER 31, 1998
---- -----------------------
SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Developing Markets Fund $ 69,225 $ 16,209 $ 819 $ 770
Latin American Fund $ 67,706 $ 12,934 $ 10,956 $ 10,703
</TABLE>
The following chart reflects the contingent deferred sales charges paid
by Class A, Class B and Class C* shareholders for the fiscal years ended October
31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Developing Markets Fund $ 6,877 $ 4,252 N/A
Latin American Fund $ 536 $ 791,308 $ 923,769
</TABLE>
- ---------------
* Class C shares of each Fund commenced operations on 03/01/99.
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<PAGE> 275
Developing Markets Fund and Latin American Fund pay AIM Distributors a
contingent deferred sales charge with respect to redemptions of Class B shares
and certain Class A shares.
EXPENSES OF THE FUNDS
Each Fund pays all expenses not assumed by AIM, the Sub-advisor, AIM
Distributors and other agents. These expenses include, in addition to the
advisory, distribution, transfer agency, pricing and accounting agency and
brokerage fees discussed above, legal and audit expenses, custodian fees,
trustees' fees, organizational fees, fidelity bond and other insurance premiums,
taxes, extraordinary expenses and the expenses of reports and prospectuses sent
to existing investors. The allocation of general Trust expenses and expenses
shared among the Funds and other funds organized as series of the Trust are
allocated on a basis deemed fair and equitable, which may be based on the
relative net assets of the Funds or the nature of the services performed and
relative applicability to the Funds. Expenditures, including costs incurred in
connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. The ratio of each Fund's expenses to its relative net assets can be
expected to be higher than the expense ratios of funds investing solely in
domestic securities, since the cost of maintaining the custody of foreign
securities and the rate of investment management fees paid by each Fund
generally are higher than the comparable expenses of such other funds.
SALES CHARGES AND DEALER CONCESSIONS
CATEGORY I. Certain AIM Funds are currently sold with a sales charge
ranging from 5.50% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds include Class A shares of each of AIM Advisor Flex
Fund, AIM Advisor International Value Fund, AIM Advisor Large Cap Value Fund,
AIM Aggressive Growth Fund, AIM Asian Growth Fund, AIM Basic Value Fund, AIM
Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM
Constellation Fund, AIM Dent Demographic Trends Fund, AIM European Development
Fund, AIM Euroland Growth Fund, AIM Global Utilities Fund, AIM Global Growth &
Income Fund, AIM International Equity Fund, AIM Japan Growth Fund, AIM Large Cap
Basic Value Fund, AIM Large Cap Growth Fund, AIM Large Cap Opportunities Fund,
AIM Mid Cap Equity Fund, AIM Mid Cap Growth Fund, AIM Mid Cap Opportunities
Fund, AIM New Pacific Growth Fund, AIM Select Growth Fund, AIM Small Cap Growth
Fund, AIM Small Cap Opportunities Fund, AIM Value Fund and AIM Weingarten Fund.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------
------------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
------------------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
- ---------------------
(1) AIM Small Cap Opportunities Fund will not accept any single
purchase in excess of $250,000.
CATEGORY II. Certain AIM Funds are currently sold with a sales charge
ranging from 4.75% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds are: the Class A shares
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<PAGE> 276
of each of AIM Advisor Real Estate Fund, AIM Balanced Fund, AIM Developing
Markets Fund, AIM Emerging Markets Debt Fund, AIM Global Aggressive Growth Fund,
AIM Global Consumer Products and Services Fund, AIM Global Financial Services
Fund, AIM Global Government Income Fund, AIM Global Growth Fund, AIM Global
Health Care Fund, AIM Global Income Fund, AIM Global Infrastructure Fund, AIM
Global Resources Fund, AIM Global Telecommunications and Technology Fund, AIM
Global Trends Fund, AIM High Income Municipal Fund, AIM High Yield Fund, AIM
High Yield Fund II, AIM Income Fund, AIM Intermediate Government Fund, AIM Latin
American Growth Fund, AIM Municipal Bond Fund, AIM Strategic Income Fund and AIM
Tax-Exempt Bond Fund of Connecticut.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------
--------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
CATEGORY III. Certain AIM Funds are currently sold with a sales charge
ranging from 1.00% to 0.50% of the offering price on purchases of less than
$1,000,000. These AIM Funds are the Class A shares of each of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------
--------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more of Category
I, II or III funds; however, AIM Distributors may pay a dealer concession and/or
advance a service fee on such transactions as set forth below.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the
entire initial sales charge to dealers for all sales with respect to which
orders are placed with AIM Distributors during a particular period. Dealers to
whom substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of
the initial sales charge paid by investors, AIM Distributors may, from time to
time, at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time.
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<PAGE> 277
At the option of the dealer, such incentives may take the form of payment for
travel expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives and their families to places within or
outside the United States. The total amount of such additional bonus payments or
other consideration shall not exceed 0.25% of the public offering price of the
shares sold. Any such bonus or incentive programs will not change the price paid
by investors for the purchase of the applicable AIM Fund's shares or the amount
that any particular AIM Fund will receive as proceeds from such sales. Dealers
may not use sales of the AIM Funds' shares to qualify for any incentives to the
extent that such incentives may be prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are
dealers of record for purchases of $1 million or more of Class A shares (or
shares which normally involve payment of initial sales charges), which are sold
at net asset value and are subject to a contingent deferred sales charge, for
all AIM Funds other than Class A shares of each of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund as follows: 1% of the first $2 million
of such purchases, plus 0.80% of the next $1 million of such purchases, plus
0.50% of the next $17 million of such purchases, plus 0.25% of amounts in excess
of $20 million of such purchases. AIM Distributors may make payments to dealers
and institutions who are dealers of record for purchases of $1 million or more
of Class A shares (or shares which normally involve payment of initial sales
charges), and which are sold at net asset value and are not subject to a
contingent deferred sales charge, in an amount up to 0.10% of such purchases of
Class A shares of AIM Limited Maturity Treasury Fund, and in an amount up to
0.25% of such purchases of Class A shares of AIM Tax-Free Intermediate Fund.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class B shares of the AIM Funds at the time of such sales. Payments
with respect to Class B shares will equal 4.00% of the purchase price of the
Class B shares sold by the dealer or institution, and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
The portion of the payments to AIM Distributors under the Class B Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of such sales commissions plus financing
costs.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of the AIM Funds at the time of such sales. Payments
with respect to Class C shares will equal 1.00% of the purchase price of the
Class C shares sold by the dealer or institution, and will consist of a sales
commission of 0.75% of the purchase price of the Class C shares sold plus an
advance of the first year service fee of 0.25% with respect to such shares. AIM
Distributors will retain all payments received by it relating to Class C shares
for the first year after they are purchased. The portion of the payments to AIM
Distributors under the Class A and C Plan attributable to Class C shares which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of on-going sales commissions to dealers
plus financing costs, if any. After the first full year, AIM Distributors will
make such payments quarterly to dealers and institutions based on the average
net asset value of Class C shares which are attributable to shareholders for
whom the dealers and institutions are designated as dealers of record. These
commissions are not paid on sales to investors exempt from the CDSC, including
shareholders of record of AIM Advisor Funds, Inc. on April 30, 1995, who
purchase additional shares in any of the Funds on or after May 1, 1995, and in
circumstances where AIM Distributors grants an exemption on particular
transactions.
Exchanges of AIM Cash Reserve Shares of AIM Money Market Fund for Class
B shares or Class C shares are considered sales of such Class B shares or Class
C shares for purposes of the sales charges and dealer concessions discussed
above.
AIM Distributors may pay investment dealers or other financial service
firms for share purchases (measured on an annual basis) of Class A Shares of all
AIM Funds except AIM Limited Maturity Treasury Fund, AIM Tax-Free Intermediate
Fund and AIM Tax-Exempt Cash Fund sold at net asset value to an employee benefit
plan as follows: 1% of the first $2 million of such purchases, plus 0.80% of the
next $1 million of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in
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excess of $20 million of such purchases and up to 0.10% of the net asset value
of any Class A shares of AIM Limited Maturity Treasury Fund sold at net asset
value to an employee benefit plan in accordance with this paragraph.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge
tables (quantity discounts) apply to purchases of shares of the AIM Funds that
are otherwise subject to an initial sales charge, provided that such purchases
are made by a "purchaser" as hereinafter defined. Purchases of Class A shares of
AIM Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and
Class B and Class C shares of the AIM Funds will not be taken into account in
determining whether a purchase qualifies for a reduction in initial sales
charges.
The term "purchaser" means:
o an individual and his or her spouse and children, including any
trust established exclusively for the benefit of any such person;
or a pension, profit-sharing, or other benefit plan established
exclusively for the benefit of any such person, such as an IRA,
Roth IRA, a single-participant money-purchase/profit-sharing plan
or an individual participant in a 403(b) Plan (unless such 403(b)
plan qualifies as the purchaser as defined below);
o a 403(b) plan, the employer/sponsor of which is an organization
described under Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code"), if:
a. the employer/sponsor must submit contributions for all
participating employees in a single contribution transmittal
(i.e., the Funds will not accept contributions submitted with
respect to individual participants);
b. each transmittal must be accompanied by a single check or
wire transfer; and
c. all new participants must be added to the 403(b) plan by
submitting an application on behalf of each new participant
with the contribution transmittal;
o a trustee or fiduciary purchasing for a single trust, estate or
single fiduciary account (including a pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Code) and 457 plans, although more than
one beneficiary or participant is involved;
o a Simplified Employee Pension (SEP), Salary Reduction and other
Elective Simplified Employee Pension account (SAR-SEP) or a
Savings Incentive Match Plans for Employees IRA (SIMPLE IRA),
where the employer has notified the distributor in writing that
all of its related employee SEP, SAR-SEP or SIMPLE IRA accounts
should be linked; or
o any other organized group of persons, whether incorporated or
not, provided the organization has been in existence for at least
six months and has some purpose other than the purchase at a
discount of redeemable securities of a registered investment
company.
Investors or dealers seeking to qualify orders for a reduced initial
sales charge must identify such orders and, if necessary, support their
qualification for the reduced charge. AIM Distributors reserves the right to
determine whether any purchaser is entitled, by virtue of the foregoing
definition, to the reduced sales charge. No person or entity may distribute
shares of the AIM Funds without payment of the applicable sales charge other
than to persons or entities who qualify for a reduction in the sales charge as
provided herein.
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<PAGE> 279
1. LETTERS OF INTENT. A purchaser, as previously defined, may pay
reduced initial sales charges by completing the appropriate section of the
account application and by fulfilling a Letter of Intent ("LOI"). The LOI
privilege is also available to holders of the Connecticut General Guaranteed
Account, established for tax qualified group annuities, for contracts purchased
on or before June 30, 1992. The LOI confirms such purchaser's intention as to
the total investment to be made in shares of the AIM Funds (except for (i) Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund, (ii) Class B and Class C shares of the AIM Funds and (iii) shares
of AIM Floating Rate Fund) within the following 13 consecutive months. By
marking the LOI section on the account application and by signing the account
application, the purchaser indicates that he understands and agrees to the terms
of the LOI and is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales
charge made during the 13-month period will be made at the public offering price
applicable to a single transaction of the total dollar amount indicated by the
LOI, as described under "Sales Charges and Dealer Concessions." It is the
purchaser's responsibility at the time of purchase to specify the account
numbers that should be considered in determining the appropriate sales charge.
The offering price may be further reduced as described under "Rights of
Accumulation" if the Transfer Agent is advised of all other accounts at the time
of the investment. Shares acquired through reinvestment of dividends and capital
gains distributions will not be applied to the LOI. At any time during the
13-month period after meeting the original obligation, a purchaser may revise
his intended investment amount upward by submitting a written and signed
request. Such a revision will not change the original expiration date. By
signing an LOI, a purchaser is not making a binding commitment to purchase
additional shares, but if purchases made within the 13-month period do not total
the amount specified, the investor will pay the increased amount of sales charge
as described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the
initial purchase (or subsequent purchases if necessary) the Transfer Agent will
escrow in the form of shares an appropriate dollar amount (computed to the
nearest full share). All dividends and any capital gain distributions on the
escrowed shares will be credited to the purchaser. All shares purchased,
including those escrowed, will be registered in the purchaser's name. If the
total investment specified under this LOI is completed within the 13-month
period, the escrowed shares will be promptly released. If the intended
investment is not completed, the purchaser will pay the Transfer Agent the
difference between the sales charge on the specified amount and the amount
actually purchased. If the purchaser does not pay such difference within 20 days
of the expiration date, he irrevocably constitutes and appoints the Transfer
Agent as his attorney to surrender for redemption any or all shares, to make up
such difference within 60 days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes
to cancel the agreement, he must give written notice to AIM Distributors. If at
any time before completing the LOI Program the purchaser requests the Transfer
Agent to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
2. RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may
also qualify for reduced initial sales charges based upon such purchaser's
existing investment in shares of any of the AIM Funds (except for (i) Class A
shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund, (ii) Class B and Class C shares of the AIM Funds and (iii) shares
of AIM Floating Rate Fund) at the time of the proposed purchase. Rights of
Accumulation are also available to holders of the Connecticut General Guaranteed
Account, established for tax-qualified group annuities, for contracts purchased
on or
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<PAGE> 280
before June 30, 1992. To determine whether or not a reduced initial sales charge
applies to a proposed purchase, AIM Distributors takes into account not only the
money which is invested upon such proposed purchase, but also the value of all
shares of the AIM Funds (except for (i) Class A shares of AIM Tax-Exempt Cash
Fund and AIM Cash Reserve Shares of AIM Money Market Fund, (ii) Class B and
Class C shares of the AIM Funds and (iii) shares of AIM Floating Rate Fund)
owned by such purchaser, calculated at their then current public offering price.
If a purchaser so qualifies for a reduced sales charge, the reduced sales charge
applies to the total amount of money then being invested by such purchaser and
not just to the portion that exceeds the breakpoint above which a reduced sales
charge applies. For example, if a purchaser already owns qualifying shares of
any AIM Fund with a value of $20,000 and wishes to invest an additional $20,000
in a fund, with a maximum initial sales charge of 5.50%, the reduced initial
sales charge of 5.25% will apply to the full $20,000 purchase and not just to
the $15,000 in excess of the $25,000 breakpoint. To qualify for obtaining the
discount applicable to a particular purchase, the purchaser or his dealer must
furnish AFS with a list of the account numbers and the names in which such
accounts of the purchaser are registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM
Funds at net asset value (without payment of an initial sales charge) may be
made in connection with: (a) the reinvestment of dividends and distributions
from a fund; (b) exchanges of shares of certain funds; (c) use of the
reinstatement privilege; or (d) a merger, consolidation or acquisition of assets
of a fund.
The following purchasers will not pay initial sales charges on
purchases of Class A shares because there is a reduced sales effort involved in
sales to these purchasers:
o AIM Management and its affiliates, or their clients;
o Any current or retired officer, director or employee (and members
of their immediate family) of AIM Management, its affiliates or
The AIM Family of Funds--Registered Trademark--, and any
foundation, trust or employee benefit plan established
exclusively for the benefit of, or by, such persons;
o Any current or retired officer, director, or employee (and
members of their immediate family), of CIGNA Corporation or its
affiliates, or of First Data Investor Services Group; and any
deferred compensation plan for directors of investment companies
sponsored by CIGNA Investments, Inc. or its affiliates;
o Sales representatives and employees (and members of their
immediate family) of selling group members or financial
institutions that have arrangements with such selling group
members;
o Purchases through approved fee-based programs;
o Employee benefit plans designated as purchasers as defined above,
and non-qualified plans offered in conjunction therewith,
provided the initial investment in the plan(s) is at least $1
million; the sponsor signs a $1 million LOI; the
employer-sponsored plan(s) has at least 100 eligible employees;
or all plan transactions are executed through a single omnibus
account per Fund and the financial institution or service
organization has entered into the appropriate agreements with the
distributor. Section 403(b) plans sponsored by public educational
institutions are not eligible for a sales charge exception based
on the aggregate investment made by the plan or the number of
eligible employees. Purchases of AIM Small Cap Opportunities Fund
by such plans are subject to initial sales charges;
o Shareholders of record or discretionary advised clients of any
investment advisor holding shares of AIM Weingarten Fund or AIM
Constellation Fund on September 8, 1986, or of AIM Charter Fund
on November 17, 1986, who have continuously owned shares having a
market value of at least $500 and who purchase additional shares
of the same Fund;
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o Shareholders of record of Advisor Class shares of AIM
International Growth Fund or AIM Worldwide Growth Fund on
February 12, 1999 who have continuously owned shares of the AIM
Funds.
o Unitholders of G/SET series unit investment trusts investing
proceeds from such trusts in shares of AIM Weingarten Fund or AIM
Constellation Fund; provided, however, prior to the termination
date of the trusts, a unitholder may invest proceeds from the
redemption or repurchase of his units only when the investment in
shares of AIM Weingarten Fund and AIM Constellation Fund is
effected within 30 days of the redemption or repurchase;
o A shareholder of a fund that merges or consolidates with an AIM
Fund or that sells its assets to an AIM Fund in exchange for
shares of an AIM Fund;
o Shareholders of the GT Global funds as of April 30, 1987 who
since that date continually have owned shares of one or more of
these funds; and
o Certain former AMA Investment Advisers' shareholders who became
shareholders of the AIM Global Health Care Fund in October 1989,
and who have continuously held shares in the GT Global funds
since that time.
o Shareholders of record of Advisor Class shares of an AIM Fund on
February 11, 2000 who have continuously owned shares of that AIM
Fund, and who purchase additional shares of that AIM Fund.
As used above, immediate family includes an individual and his or her
spouse, children, parents and parents of spouse.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
Former GT Global funds Class A shares that are subject to a contingent
deferred sales charge and that were purchased before June 1, 1998 are entitled
to the following waivers from the contingent deferred sales charge otherwise due
upon redemption: (1) minimum required distributions made in connection with an
IRA, Keogh Plan or custodial account under Section 403(b) of the Code or other
retirement plan following attainment of age 70 1/2; (2) total or partial
redemptions resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement plan; (3) when a redemption results
from a tax-free return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code or from the death or disability of the employee; (4)
redemptions pursuant to a Fund's right to liquidate a shareholder's account
involuntarily; (5) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in the former GT Global
funds, which are permitted to be made without penalty pursuant to the Code,
other than tax-free rollovers or transfers of assets, and the proceeds of which
are reinvested in the former GT Global funds; (6) redemptions made in connection
with participant-directed exchanges between options in an employer-sponsored
benefit plan; (7) redemptions made for the purpose of providing cash to fund a
loan to a participant in a tax-qualified retirement plan; (8) redemptions made
in connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (9) redemptions made in connection with
a distribution from any retirement plan or account that involves the return of
an excess deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of
the Code; (10) redemptions made in connection with a distribution from a
qualified profit-sharing or stock bonus plan described in Section 401(k) of the
Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code
upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (11) redemptions made by or for the
benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof where such entities are prohibited or limited
by applicable law from paying a sales charge or commission.
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Former GT Global funds Class B shares purchased before June 1, 1998 are
subject to the following waivers from the contingent deferred sales charge
otherwise due upon redemption: (1) total or partial redemptions resulting from a
distribution following retirement in the case of a tax-qualified
employer-sponsored retirement; (2) minimum required distributions made in
connection with an IRA, Keogh Plan or custodial account under Section 403(b) of
the Code or other retirement plan following attainment of age 70 1/2; (3)
redemptions pursuant to distributions from a tax-qualified employer-sponsored
retirement plan, which is invested in the former GT Global funds, which are
permitted to be made without penalty pursuant to the Code, other than tax-free
rollovers or transfers of assets, and the proceeds of which are reinvested in
the former GT Global funds; (4) redemptions made in connection with
participant-directed exchanges between options in an employer-sponsored benefit
plan; (5) redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan; (6) redemptions made in
connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (7) redemptions made in connection with
a distribution from a qualified profit-sharing or stock bonus plan described in
Section 401(k) of the Code to a participant or beneficiary under Section
401(k)(2)(B)(IV) of the Code upon hardship of the covered employee (determined
pursuant to Treasury Regulation Section 1.401(k)-1(d)(2)); and (8) redemptions
made by or for the benefit of certain states, counties or cities, or any
instrumentalities, departments or authorities thereof where such entities are
prohibited or limited by applicable law from paying a sales charge or
commission.
CDSCs will not apply to the following:
o Additional purchases of Class C shares of AIM Advisor Flex Fund,
AIM Advisor International Value Fund, AIM Advisor Large Cap Value
Fund and AIM Advisor Real Estate Fund by shareholders of record
on April 30, 1995, of these Funds, except that shareholders whose
broker-dealers maintain a single omnibus account with AFS on
behalf of those shareholders, perform sub-accounting functions
with respect to those shareholders, and are unable to segregate
shareholders of record prior to April 30, 1995, from shareholders
whose accounts were opened after that date will be subject to a
CDSC on all purchases made after March 1, 1996;
o Redemptions following the death or post-purchase disability of
(1) any registered shareholders on an account or (2) a settlor of
a living trust, of shares held in the account at the time of
death or initial determination of post-purchase disability;
o Certain distributions from individual retirement accounts,
Section 403(b) retirement plans, Section 457 deferred
compensation plans and Section 401 qualified plans, where
redemptions result from (i) required minimum distributions to
plan participants or beneficiaries who are age 70-1/2 or older,
and only with respect to that portion of such distributions that
does not exceed 12% annually of the participant's or
beneficiary's account value in a particular AIM Fund; (ii) in
kind transfers of assets where the participant or beneficiary
notifies the distributor of the transfer no later than the time
the transfer occurs; (iii) tax-free rollovers or transfers of
assets to another plan of the type described above invested in
Class B or Class C shares of one or more of the AIM Funds; (iv)
tax-free returns of excess contributions or returns of excess
deferral amounts; and (v) distributions on the death or
disability (as defined in the Internal Revenue Code of 1986, as
amended) of the participant or beneficiary;
o Amounts from a Systematic Withdrawal Plan of up to an annual
amount of 12% of the account value on a per fund basis, at the
time the withdrawal plan is established, provided the investor
reinvests his dividends;
o Liquidation by the Fund when the account value falls below the
minimum required account size of $500;
o Investment account(s) of AIM; and
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o Class C shares where the investor's dealer of record notifies the
distributor prior to the time of investment that the dealer
waives the payment otherwise payable to him.
Upon the redemption of shares of funds in sales charge Categories I and
II (see "Sales Charges and Dealer Concessions") purchased in amounts of $1
million or more, no CDSC will be applied in the following situations:
o Shares held more than 18 months;
o Redemptions from employee benefit plans designated as qualified
purchasers, as defined above, where the redemptions are in
connection with employee terminations or withdrawals, provided
the total amount invested in the plan is at least $1,000,000; the
sponsor signs a $1 million LOI; or the employer-sponsored plan
has at least 100 eligible employees; provided, however, that
403(b) plans sponsored by public educational institutions shall
qualify for the CDSC waiver on the basis of the value of each
plan participant's aggregate investment in the AIM Funds, and not
on the aggregate investment made by the plan or on the number of
eligible employees;
o Private foundations or endowment funds;
o Redemption of shares by the investor where the investor's dealer
waives the amounts otherwise payable to it by the distributor and
notifies the distributor prior to the time of investment; and
o Shares acquired by exchange from Class A shares of funds in sales
charge Categories I and II unless the shares acquired by exchange
are redeemed within 18 months of the original purchase of the
Class A shares.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of each Fund may
be purchased appears in the Prospectus under the heading "Purchasing Shares --
How to Purchase Shares."
The sales charge normally deducted on purchases of Class A shares of
the Funds is used to compensate AIM Distributors and participating dealers for
their expenses incurred in connection with the distribution of such shares.
Since there is little expense associated with unsolicited orders placed directly
with AIM Distributors by persons, who because of their relationship with the
Funds or with AIM and its affiliates, are familiar with the Funds, or whose
programs for purchase involve little expense (e.g., because of the size of the
transaction and shareholder records required), AIM Distributors believes that it
is appropriate and in the Funds' best interests that such persons be permitted
to purchase Class A shares of the Funds through AIM Distributors without payment
of a sales charge. The persons who may purchase Class A shares of the Funds
without a sales charge are set forth under the caption "Reductions in Initial
Sales Charges--Purchases At Net Asset Value."
Complete information concerning the method of exchanging shares of the
Funds for shares of the other AIM Funds is set forth in the Prospectus under the
heading "Exchanging Shares."
Information concerning redemption of each Fund's shares is set forth in
the Prospectus under the caption "Redeeming Shares." Shares of the AIM Funds may
be redeemed directly through AIM Distributors or through any dealer who has
entered into an agreement with AIM Distributors. In addition to the Funds'
obligation to redeem shares, AIM Distributors may also repurchase shares as an
accommodation to shareholders. To effect a repurchase, those dealers who have
executed Selected Dealer Agreements with
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AIM Distributors must phone orders to the order desk of the Fund telephone:
(800) 347-4246 and guarantee delivery of all required documents in good order. A
repurchase is effected at the net asset value of the Fund next determined after
such order is received. Such arrangement is subject to timely receipt by AFS of
all required documents in good order. If such documents are not received within
a reasonable time after the order is placed, the order is subject to
cancellation. While there is no charge imposed by the Funds or by AIM
Distributors (other than any applicable CDSC) when shares are redeemed or
repurchased, dealers may charge a fair service fee for handling the transaction.
AIM intends to redeem all shares of the Funds in cash.
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange ("NYSE") is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the NYSE is closed for other than customary weekend and holiday closings, (c)
the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of a Fund not reasonably practicable.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification
number or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8
(for non-resident aliens) or Form W-9 (certifying exempt status) accompanying
the registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, must, according to IRS regulations,
withhold 31% of redemption payments and reportable dividends (whether paid or
accrued) in the case of any shareholder who fails to provide the Fund with a
taxpayer identification number ("TIN") and a certification that he is not
subject to backup withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an
incorrect TIN, or
(3) the investor or the Fund is notified by the IRS that the investor
is subject to backup withholding because the investor failed to
report all of the interest and dividends on such investor's tax
return (for reportable interest and dividends only), or
(4) the investor fails to certify to the Fund that the investor is
not subject to backup withholding under (3) above (for reportable
interest and dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to
non-exempt mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in all
five situations discussed above. Redemption proceeds and long-term gain
distributions are subject to backup withholding only if (1) (2) or (5) above
applies.
Certain payees and payments are exempt from backup withholding and
information reporting. A complete listing of such exempt entities appears in the
Instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
o a corporation
o an organization exempt from tax under Section 501(a), an
individual retirement plan (IRA), or a custodial account under
Section 403(b)(7)
o the United States or any of its agencies or instrumentalities
o a state, the District of Columbia, a possession of the United
States, or any of their political subdivisions or
instrumentalities
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o a foreign government or any of its political subdivisions,
agencies or instrumentalities
o an international organization or any of its agencies or
instrumentalities
o a foreign central bank of issue
o a dealer in securities or commodities required to register in the
U.S. or a possession of the U.S.
o a futures commission merchant registered with the Commodity
Futures Trading Commission
o a real estate investment trust
o an entity registered at all times during the tax year under the
1940 Act
o a common trust fund operated by a bank under Section 584(a)
o a financial institution
o a middleman known in the investment community as a nominee or
listed in the most recent publication of the American Society of
Corporate Secretaries, Inc., Nominee List
o a trust exempt from tax under Section 664 or described in Section
4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a
correct TIN will be subject to a $50 penalty imposed by the IRS unless such
failure is due to reasonable cause and not willful neglect. If an investor
falsifies information on this form or makes any other false statement resulting
in no backup withholding on an account which should be subject to backup
withholding, such investor may be subject to a $500 penalty imposed by the IRS
and to certain criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign
entities are not subject to the backup withholding previously discussed, but
must certify their foreign status by attaching IRS Form W-8 to their
application. Form W-8 remains in effect for three calendar years beginning with
the calendar year in which it is received by the Fund. Such shareholders may,
however, be subject to federal income tax withholding at a 30% rate on ordinary
income dividends and distributions and return of capital distributions. Under
applicable treaty law, residents of treaty countries may qualify for a reduced
rate of withholding or a withholding exemption.
NET ASSET VALUE DETERMINATION
The net asset value per share of each Fund or Portfolio is normally
determined once daily as of the close of the customary trading session of the
NYSE (generally 4:00 p.m. Eastern time) on each business day of the Fund or
Portfolio. In the event the NYSE closes early (i.e., before 4:00 p.m. Eastern
time) on a particular day, the net asset value of a Fund or Portfolio share is
determined as of the close of the NYSE on such day. Net asset value per share is
determined by dividing the value of the equity securities, cash and other assets
(including interest accrued but not collected) attributable to a particular
class, less all its liabilities (including accrued expenses and dividends
payable) attributable to that class, by the total number of shares
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outstanding of that class. Determination of each Fund's or Portfolio's net asset
value per share is made in accordance with generally accepted accounting
principles.
Each equity security held by a Fund is valued at its last sales price
on the exchange where the security is principally traded or, lacking any sales
on a particular day, the security is valued at the last available bid. Each
security traded in the over-the-counter market (but not including securities
reported on the NASDAQ National Market System) is valued at the mean between the
last bid and asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the mean between the closing bid and asked prices on that day. Debt
securities are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments related
to special securities, yield, quality, coupon rate, maturity, type of issue,
individual trading characteristics and other market data. Securities for which
market quotations are not readily available or are questionable are valued at
fair value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of Trustees.
Short-term obligations having 60 days or less to maturity are valued on the
basis of amortized cost. For purposes of determining net asset value per share,
futures and options contracts generally will be valued 15 minutes after the
close of the customary trading session of the NYSE.
Generally, trading in foreign securities, corporate bonds, U.S.
Government securities and money market instruments is substantially completed
each day at various times prior to the close of the customary trading session of
the NYSE. The values of such securities used in computing the net asset value of
each Fund's shares are determined at such times. Foreign currency exchange rates
are also generally determined prior to the close of the NYSE. Occasionally,
events affecting the values of such securities and such exchange rates may occur
between the times at which such values are determined and the close of the
customary trading session of the NYSE which will not be reflected in the
computation of a Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gain distributions are automatically
reinvested in additional shares of the same class of each Fund unless the
shareholder has requested in writing to receive such dividends and distributions
in cash or that they be invested in shares of another AIM Fund, subject to the
terms and conditions set forth in each Fund's Prospectus under the caption
"Shareholder Information -- Purchasing Shares - Special Plans - Automatic
Dividend Investment." If a shareholder's account does not have any shares in it
on a dividend or capital gain distribution payment date, the dividend or
distribution will be paid in cash whether or not the shareholder has elected to
have such dividends or distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning.
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GENERAL
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. These requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, futures or forward
contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); and (2) the Diversification
Requirements.
By qualifying for treatment as a RIC, each Fund (but not its
shareholders) will be relieved of federal income tax on the part of its
investment company taxable income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) that it distributes to
its shareholders. If a Fund failed to qualify for treatment as a RIC for any
taxable year, (1) it would be taxed as an ordinary corporation on the full
amount of its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and (2) the shareholders would treat
all those distributions, including distributions of net capital gain, as
dividends (that is, ordinary income) to the extent of the Fund's earnings and
profits. In addition, the Fund could be required to recognize unrealized gains,
pay substantial taxes and interest and make substantial distributions before
requalifying for RIC treatment.
Dividends and other distributions declared by a Fund in, and payable to
shareholders of record as of a date in, October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
Investors also should be aware that if shares are purchased shortly before the
record date for any dividend or other distribution, the shareholder will pay
full price for the shares and receive some portion of the price back as a
taxable distribution.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
EXCHANGE AND REINSTATEMENT PRIVILEGES AND WASH SALES
If a shareholder disposes of a Fund's shares ("original shares")
within 90 days after purchase thereof and subsequently reacquires shares of that
Fund or acquires shares of another AIM Fund on which a sales charge normally is
imposed ("replacement shares"), without paying the sales charge (or paying a
reduced charge) due to an exchange privilege or a reinstatement privilege, then
(1) any gain on the disposition of the original shares will be increased, or
the loss thereon decreased, by the amount of the sales charge paid when those
shares were acquired and (2) that amount will increase the adjusted basis of
the replacement shares that were subsequently acquired. In addition, if a
shareholder purchases shares of a Fund (whether pursuant to the reinstatement
privilege or otherwise) within 30 days before or after redeeming at a loss
other shares of that Fund (regardless of class), all or part of that loss will
not be deductible and instead will increase the basis of the newly purchased
shares.
FOREIGN TAXES
Dividends and interest received by each Fund, and gains realized
thereby, may be subject to income, withholding or other taxes imposed by foreign
countries and U.S. possessions ("foreign taxes") that would reduce the yield
and/or total return on its securities. Tax conventions between certain countries
and the United States may reduce or eliminate foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors. If more than 50% of the value of a Fund's total assets at
the close of its taxable year consists of securities of foreign corporations,
the Fund will be eligible to, and may, file an election with the Internal
Revenue Service that will enable its shareholders, in effect, to receive the
benefit of the foreign tax credit with respect to any foreign taxes paid by it.
Pursuant to the election, the Fund would treat those taxes as dividends paid to
its shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his share of those taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents income from
foreign and U.S. possessions sources as his own income from those sources and
(3) either deduct the taxes deemed paid by him in computing his taxable income
or, alternatively, use the foregoing information in calculating the foreign tax
credit against his federal income tax. Each Fund will report to its shareholders
shortly after each taxable year their respective shares of the Fund's foreign
taxes and income from sources within, and taxes
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paid to, foreign countries and U.S. possessions if it makes this election.
Pursuant to the Taxpayer Relief Act of 1997 ("Tax Act"), individuals who have no
more than $300 ($600 for married persons filing jointly) of creditable foreign
taxes included on Form 1099 and all of whose foreign source income is "qualified
passive income" may elect each year to be exempt from the foreign tax credit
limitation and will be able to claim a foreign tax credit without having to file
the Form 1116 that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
Each Fund may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is any foreign corporation (with certain
exceptions) that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under certain
circumstances, a Fund will be subject to federal income tax on a portion of any
"excess distribution" received on, or of any gain from the disposition of, stock
of a PFIC (collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Fund's investment company
taxable income and, accordingly, will not be taxable to it to the extent it
distributes that income to its shareholders.
If a Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Fund would be required to include in income each year
its pro rata share of the QEF's ordinary earnings and net capital gain which
most likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax--even if those earnings and
gain were not received by the Fund from the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
Each Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of the stock over a
Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, a Fund also will be allowed to deduct (as an ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included in income by the
Fund for prior taxable years. A Fund's adjusted basis in each PFIC's stock
subject to the election will be adjusted to reflect the amounts of income
included and deductions taken thereunder. Regulations proposed in 1992 provided
a similar election with respect to the stock of certain PFICs.
NON-U.S. SHAREHOLDERS
Dividends paid by a Fund to a shareholder who, as to the United States,
is a nonresident alien individual, nonresident alien fiduciary of a trust or
estate, foreign corporation or foreign partnership ("foreign shareholder")
generally will be subject to U.S. withholding tax (at a rate of 30% or lower
treaty rate). Withholding will not apply, however, to a dividend paid by a Fund
to a foreign shareholder that is "effectively connected with the conduct of a
U.S. trade or business," in which case the reporting and withholding
requirements applicable to domestic shareholders will apply. A distribution of
net capital gain by a Fund to a foreign shareholder generally will be subject to
U.S. federal income tax (at the rates applicable to domestic persons) only if
the distribution is "effectively connected" or the foreign shareholder is
treated as a resident alien individual for federal income tax purposes.
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OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
Each Fund's use of hedging transactions, such as selling (writing) and
purchasing options and futures and entering into forward contracts, involves
complex rules that will determine, for federal income tax purposes, the amount,
character and timing of recognition of the gains and losses a Fund realizes in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
options, futures and forward contracts derived by a Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement.
Futures and forward contracts that are subject to section 1256 of the
Code (other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by a Fund at the end of its taxable year generally
will be deemed to have been sold at that time at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. That 60% portion
will qualify for the reduced maximum tax rates on noncorporate taxpayers' net
capital gain--20% (10% for non-corporate taxpayers in the 15% marginal tax
bracket) for gain recognized on capital assets held for more than 12 months.
Section 988 of the Code also may apply to gains and losses from
transactions in foreign currencies, foreign-currency-denominated debt securities
and options, futures and forward contracts on foreign currencies ("Section 988"
gains and losses). Each Section 988 gain or loss generally is computed
separately and treated as ordinary income or loss. In the case of overlap
between sections 1256 and 988, special provisions determine the character and
timing of any income, gain or loss. The Funds attempt to monitor section 988
transactions to minimize any adverse tax impact.
If a Fund has an "appreciated financial position"--generally, an
interest (including an interest through an option, futures or forward contract
or short sale) with respect to any stock, debt instrument (other than "straight
debt") or partnership interest the fair market value of which exceeds its
adjusted basis--and enters into a "constructive sale" of identical property, the
Fund will be treated as having made an actual sale thereof, with the result that
gain will be recognized at that time unless the closed transaction exception
applies. A constructive sale generally consists of a short sale, an offsetting
notional principal contract or futures or forward contract entered into by a
Fund or a related person with respect to the same or substantially identical
property. In addition, if the appreciated financial position is itself a short
sale or such a contract, acquisition of the underlying property or substantially
identical property will be deemed a constructive sale.
The foregoing is a general and abbreviated summary of certain federal
tax considerations in effect at the date of this Statement of Additional
Information and affecting each Fund and its shareholders. Investors are urged to
consult their own tax advisors for more detailed information and for information
regarding any foreign, state and local taxes applicable to distributions
received from the Funds.
SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus
under the title "Shareholder Information."
TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent.
Any loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. If a check used to purchase
shares does not clear, or if any investment order must be canceled due to
nonpayment, the investor will be responsible for any resulting loss to an AIM
Fund or to AIM Distributors.
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<PAGE> 290
SHARE CERTIFICATES. AIM Funds will issue share certificates upon
written request to AFS. Otherwise, shares are held on the shareholder's behalf
and recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, all
shares are to be held by the Transfer Agent and all dividends and distributions
are reinvested in shares of the applicable AIM Fund by the Transfer Agent. To
provide funds for payments made under the Systematic Withdrawal Plan, the
Transfer Agent redeems sufficient full and fractional shares at their net asset
value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events.
Since such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the AIM Funds and AIM Cash Reserve
Shares of AIM Money Market Fund), it is disadvantageous to effect such purchases
while a Systematic Withdrawal Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
TERMS AND CONDITIONS OF EXCHANGE. Normally, shares of an AIM Fund to be
acquired by exchange are purchased at their net asset value or applicable
offering price, as the case may be, determined on the date that such request is
received, but under unusual market conditions such purchases may be delayed for
up to five business days if it is determined that a fund would be materially
disadvantaged by an immediate transfer of the proceeds of the exchange. If a
shareholder is exchanging into a fund paying daily dividends, and the release of
the exchange proceeds is delayed for the foregoing five-day period, such
shareholder will not begin to accrue dividends until the sixth business day
after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with
certain dealers and investment advisory firms to accept telephone instructions
to exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by telegraph or use overnight courier services to expedite exchanges by mail,
which will be effective on the business day received by the Transfer Agent as
long as such request is received prior to NYSE Close. The Transfer Agent and AIM
Distributors may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction.
By signing an account application form, an investor appoints the
Transfer Agent as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by the Transfer Agent in the
designated account(s), or in any other account with any of the AIM Funds,
present or future, which has the identical registration as the designated
account(s), with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption proceeds to be applied to purchase shares
in any one or more of the AIM Funds, provided that such fund is available for
sale and provided that the registration and mailing address of the shares to be
purchased are identical to the registration of the shares being redeemed. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone exchange requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
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<PAGE> 291
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transactions. The Transfer Agent reserves the
right to modify or terminate the telephone exchange privilege at any time
without notice. An investor may elect not to have this privilege by marking the
appropriate box on the application. Then any exchanges must be effected in
writing by the investor.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an
investor appoints the Transfer Agent as his true and lawful attorney-in-fact to
surrender for redemption any and all unissued shares held by the Transfer Agent
in the designated account(s), present or future, with full power of substitution
in the premises. The Transfer Agent and AIM Distributors are thereby authorized
and directed to accept and act upon any telephone redemptions of shares held in
any of the account(s) listed, from any person who requests the redemption. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone redemption requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transaction. The Transfer Agent reserves the
right to cease to act as attorney-in-fact subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone redemption
privilege at any time without notice. An investor may elect not to have this
privilege by marking the appropriate box on the application. Then any
redemptions must be effected in writing by the investor.
SIGNATURE GUARANTEES. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the SEC, and
further provided that such guarantor institution is listed in one of the
reference guides contained in the Transfer Agent's current Signature Guarantee
Standards and Procedures, such as certain domestic banks, credit unions,
securities dealers, or securities exchanges. The Transfer Agent will also accept
signatures with either: (1) a signature guaranteed with a medallion stamp of the
STAMP Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
TRANSACTIONS BY INTERNET. An investor may effect transactions in his
account through the Internet by selecting the AIM Internet Connect option on his
completed account application form or completing an AIM Internet Connect
Authorization Form. By signing either form the investor acknowledges and agrees
that the Transfer Agent and AIM Distributors will not be liable for any loss,
expense or cost arising out of any internet transaction effected in accordance
with the instructions set forth in the forms if they reasonably believe such
request to be genuine. Procedures for verification of internet transactions
include requests for confirmation of the shareholder's personal identification
number and mailing of confirmations promptly after the transactions. The
investor also acknowledges that (1) if he no longer wants the AIM Internet
Connect option, he will notify the Transfer Agent in writing, and (2) the AIM
Internet Connect option may be terminated at any time by the AIM Funds.
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<PAGE> 292
DIVIDENDS AND DISTRIBUTIONS. In determining the amount of capital
gains, if any, available for distribution, net capital gains are offset against
available net capital losses, if any, carried forward from previous fiscal
periods.
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than
those for Class A shares or AIM Cash Reserve Shares because of higher
distribution fees paid by Class B and Class C shares. Dividends on all shares
may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made
by the shareholder at any time by notice to the Transfer Agent and are effective
as to any subsequent payment if such notice is received by the Transfer Agent
prior to the record date of such payment. Any dividend and distribution election
remains in effect until the Transfer Agent receives a revised written election
by the shareholder.
Any dividend or distribution paid by a fund which does not declare
dividends daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
MISCELLANEOUS INFORMATION
CHARGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying charges for requests for
copies of shareholder account statements and other historical account
information older than the current year and the immediately preceding year.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of all securities and cash of
the Funds. The Custodian attends to the collection of principal and income, pays
and collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. AIM Fund Services, Inc., a wholly owned
subsidiary of AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, acts
as transfer and dividend disbursing agent for the Funds. These services do not
include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Funds pay the Custodian and the
Transfer Agent such compensation as may be agreed upon from time to time.
INDEPENDENT ACCOUNTANTS
The Funds' independent accountants are PricewaterhouseCoopers LLP.
PricewaterhouseCoopers LLP conducts an annual audit of each Fund, assists in the
preparation of the Funds' federal and state income tax returns and consults with
the Trust and the Funds as to matters of accounting, regulatory filings, and
federal and state income taxation.
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<PAGE> 293
The audited financial statements of the Trust included in this
Statement of Additional Information have been examined by PricewaterhouseCoopers
LLP, as stated in their opinion appearing herein and are included in reliance
upon such opinion given upon the authority of that firm as experts in accounting
and auditing.
LEGAL MATTERS
The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue
N.W., Washington, D.C. 20036-1800, acts as counsel to the Trust and the Funds.
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of the Trust enjoy the same
limitations extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
the Trust Agreement disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
trustee. If a shareholder is held personally liable for the obligations of the
Trust, the Trust Agreement provides that the shareholder shall be entitled out
of the assets belonging to the applicable Fund (or allocable to the applicable
Class), to be held harmless from and indemnified against all loss and expense
arising from such liability in accordance with the Trust's Bylaws and applicable
law. Thus, the risk of a shareholder incurring financial loss on account of such
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations and where the other party was held not to be bound by
the disclaimer.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding shares of any class of each Fund as of
February 14, 2000, and the percentage of the outstanding shares held by such
holders are set forth below:
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
NAME AND ADDRESS OWNED OF RECORD AND
FUND OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- ---- ---------------- ------------ ------------
<S> <C> <C> <C>
AIM Developing Markets Fund -
Class A Merrill Lynch Pierce Fenner & Smith 5.70% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
AIM Developing Markets Fund -
Class B Merrill Lynch Pierce Fenner & Smith 6.10% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
</TABLE>
- ----------------------
* The Trust has no knowledge as to whether all or any portion of the
shares owned of record are also owned beneficially.
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<PAGE> 294
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
NAME AND ADDRESS OWNED OF RECORD AND
FUND OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- ---- ---------------- ------------ ------------
<S> <C> <C> <C>
AIM Developing Markets Fund -
Class C First Clearing Corporation -0- 11.70%
W L Burgess IRA R/O FCC as Custodian 7893
Vue Estates Road Meridian, ID 83642-5207
Painewebber for the Benefit of -0- 6.26%
Jeffrey D. Salzman Trustee
Jeffrey D. Salzman Trust
1720 Sunset Blvd.
Boulder, CO 80304-4243
AIM Latin American Growth Fund -
Class A Santander SA Para Fondo 11.92% -0-
Mutuo Mutinaional
Natias Cousino 199 Piso 6
Santiage, Chile
AIM Latin American Growth Fund -
Class B Merrill Lynch Pierce Fenner & Smith 10.55% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
AIM Latin American Growth Fund -
Class C Merrill Lynch Pierce Fenner & Smith 31.23% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
Prudential Securities Inc FBO -0- 24.46%
Mr. Donald Ellis and
Ms. Janice Burrows Ellis
Ten Com
64 Walnut Cir
Basking Ridge, NJ 07920-1020
</TABLE>
- -------------------------
* The Trust has no knowledge as to whether all or any portion of the
shares owned of record are also owned beneficially.
As of February 14, 2000, the trustees and officers of the Trust as a
group owned beneficially less than 1% of the outstanding shares of each class of
Developing Markets Fund and Latin American Fund.
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<PAGE> 295
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return is as follows:
n
P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the
applicable maximum sales load is deducted at the
beginning of the 1, 5, or 10 year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the 1, 5, or 10 year periods
(or fractional portion of such period).
The standard total returns of Class A and Class B shares of Developing
Markets Fund, stated as average annualized total returns for the periods shown,
were as follows. Standard total returns for Class A shares reflect, where
appropriate, the fees and expenses of the Predecessor Fund and are recomputed to
reflect the deduction of the maximum sales charge of 4.75%.
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Developing Markets Fund Class A ........ 53.89% 2.20% N/A (0.72)%
Developing Markets Fund Class B ........ 55.57% N/A N/A (1.31)
</TABLE>
* The inception dates for Class A and Class B shares are 01/11/94 and
11/03/97, respectively.
The standard total returns of Class C shares of Developing Markets
Fund, stated as aggregate total return for the periods shown, were as follows:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Developing Markets Fund.................. N/A N/A N/A 63.66%
</TABLE>
* The inception date for Developing Markets Fund Class C shares is
03/01/99.
The standard total returns for the Class A and Class B shares of Latin
American Fund, stated as average annualized total returns for the periods shown,
were as follows. Total returns for the Class A shares reflect the deduction of
the maximum sales charge of 4.75%.
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Latin American Fund Class A.............. 52.51% (2.18)% N/A 4.94%
Latin American Fund Class B.............. 54.28% (2.08)% N/A 3.12%
</TABLE>
* The inception dates for Latin American Fund Class A and Class B shares
are 08/13/91 and 04/01/93, respectively.
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<PAGE> 296
The standard total return for Class C shares of Latin American Fund,
stated as aggregate total return for the periods shown, were as follows:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Latin American Fund.................... N/A N/A N/A 79.19%
</TABLE>
* The inception date for Class C shares of Latin American Fund is
03/01/99.
Standard total return quotes may be accompanied by total return figures
calculated by alternative methods. For example, average annual total return may
be calculated without assuming payment of the full sales load according to the
following formula:
n
P(1+U) =ERV
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only a
stated portion of, or none of, the applicable maximum sales
load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.
The average annual non-standard total returns of Class A and Class B
shares of Developing Markets Fund, stated as average annualized total returns
for the periods shown, were as follows. Non-standard total returns for Class A
shares reflect, where appropriate, the fees and expenses of the Predecessor
Fund.
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
----- ----- ---- ----------
<S> <C> <C> <C> <C>
Developing Markets Fund Class A ... 61.50% 3.19% N/A 0.09%
Developing Markets Fund Class B ... 60.57% N/A N/A 0.01%
</TABLE>
* The inception dates for Developing Markets Fund Class A and Class B
shares are 01/11/94 and 11/03/97, respectively.
The average annual non-standard total return of Class C shares of
Developing Markets Fund, stated as aggregate total return for the periods shown,
were as follows:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C>
Developing Markets Fund............ N/A N/A N/A 64.66%
</TABLE>
* The inception date for Class C shares of Developing Markets Fund is
03/01/99.
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<PAGE> 297
The average annual non-standard total returns for the Class A and Class
B shares of Latin American Fund, stated as average annualized total returns for
the periods shown, were as follows:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Latin American Fund Class A.................... 60.10% (1.22)% N/A 5.55%
Latin American Fund Class B.................... 59.28% (1.69)% N/A 3.12%
</TABLE>
* The inception dates for Class A and Class B shares of Latin American
Fund are 08/13/91 and 04/01/93, respectively.
The aggregate non-standard total return for Class C shares of Latin
American Fund, stated as aggregate total return for the periods shown, were as
follows:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Latin American Fund............................ N/A N/A N/A 80.19%
</TABLE>
* The inception date for Class C shares of Latin American Fund is
03/01/99.
Cumulative total return across a stated period may be calculated as
follows:
n
P(1+V) =ERV
Where P = a hypothetical initial payment of $1,000.
V = cumulative total return assuming payment of all of,
a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
The cumulative total returns of Class A, Class B and Class C shares of
Developing Markets Fund (not taking sales charges into account) for the periods
shown were as follows. The cumulative total returns for Class A shares reflects,
where appropriate, the fees and expenses of the Predecessor Fund.
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Developing Markets Fund Class A ........ 61.50% 17.03% N/A 0.57%
Developing Markets Fund Class B ........ 60.57% N/A N/A 0.02%
Developing Markets Fund Class C ........ N/A N/A N/A 64.66%
</TABLE>
* The inception dates for Developing Markets Fund Class A, Class B and
Class C shares are 01/11/94, 11/03/97 and 03/01/99, respectively.
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<PAGE> 298
The cumulative total returns of Class A and Class B shares of
Developing Markets Fund (taking sales charges into account) for the periods
shown were as follows. The cumulative total returns for Class A shares reflects,
where appropriate, the fees and expenses of the Predecessor Fund and are
recomputed to reflect the deduction of the maximum sales charge of 4.75%.
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Developing Markets Fund Class A............ 53.89% 11.47% N/A (4.22)%
Developing Markets Fund Class B............ 55.57% N/A N/A (2.81)%
Developing Markets Fund Class C............ N/A N/A N/A 63.66%
</TABLE>
* The inception dates for Developing Markets Fund Class A, Class B and
Class C shares are 01/11/94, 11/03/97 and 03/01/99, respectively.
The cumulative total returns (not taking sales charges into account)
for the Class A, Class B and Class C shares of Latin American Fund, stated as
aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Latin American Fund Class A.................. 60.10% (5.95)% N/A 57.28%
Latin American Fund Class B.................. 59.28% (8.16)% N/A 23.07%
Latin American Fund Class C.................. N/A N/A N/A 80.19%
</TABLE>
* The inception dates for Class A, Class B and Class C shares of Latin
American Fund are 08/31/91, 04/01/93 and 03/01/99, respectively.
The aggregate cumulative total returns (taking sales charges into
account) for the Class A, Class B and Class C shares of Latin American Fund,
stated as aggregate total returns for the periods shown, where:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Latin American Fund Class A.................. 52.51% (10.42)% N/A 49.84%
Latin American Fund Class B.................. 54.28% (9.98)% N/A 23.07%
Latin American Fund Class C.................. N/A N/A N/A 79.19%
</TABLE>
* The inception dates for Class A, Class B and Class C shares of Latin
American Fund are 08/13/91, 04/01/93 and 03/01/99, respectively.
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<PAGE> 299
PERFORMANCE INFORMATION
All advertisements of a Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
A Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. Standardized total return
for Class A shares reflects the deduction of the Fund's maximum front-end sales
charge at the time of purchase. Standardized total return for Class B shares
reflects the deduction of the maximum applicable contingent deferred sales
charge on a redemption of shares held for the period.
A Fund's total return shows its overall change in value, including
changes in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
From time to time AIM or its affiliates may waive all or a portion of
their fees and/or assume certain expenses of any Fund. Voluntary fee waivers or
reductions or commitments to assume expenses may be rescinded at any time
without further notice to investors. During periods of voluntary fee waivers or
reductions or commitments to assume expenses, AIM will retain its ability to be
reimbursed for such fee prior to the end of each fiscal year. Contractual fee
waivers or reductions or reimbursement of expenses set forth in the Fee Table in
a Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund. Fee waivers or
reductions or commitments to reduce expenses will have the effect of increasing
that Fund's yield and total return.
The performance of each Fund will vary from time to time and past
results are not necessarily indicative of future results. A Fund's performance
is a function of its portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses of the Fund and
market conditions. A shareholder's investment in a Fund is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in any Fund.
Total return and yield figures for the Funds are neither fixed nor
guaranteed, and no Fund's principal is insured. Performance quotations reflect
historical information and should not be considered representative of a Fund's
performance for any period in the future. Performance is a function of a number
of factors which can be expected to fluctuate. The Funds may provide performance
information in reports, sales literature and advertisements. The Funds may also,
from time to time, quote information about the Funds published or aired by
publications or other media entities which contain articles or segments relating
to investment results or other data about one or more of the Funds. Such
publications or media entities may include the following, among others:
80
<PAGE> 300
<TABLE>
<S> <C> <C>
Advertising Age Fortune New York Times
Barron's Global Finance Pension World
Best's Review Hartford Courant Inc. Pensions & Investments
Broker World Institutional Investor Personal Investor
Business Week Insurance Forum Financial Services Week
Changing Times Insurance Week Philadelphia Inquirer
Christian Science Monitor Investor's Daily Smart Money
Consumer Reports Journal of the American USA Today
Economist Society of CLU & ChFC U.S. News & World Report
EuroMoney Kiplinger Letter Wall Street Journal
FACS of the Week Money Washington Post
Financial Planning Mutual Fund Forecaster CNN
Financial Product News Mutual Fund Magazine CNBC
Financial World Nation's Business PBS
Forbes
</TABLE>
The Funds and AIM Distributors may from time to time, in
advertisements, sales literature and reports furnished to present or prospective
shareholders, compare each Fund with the following, or compare each Fund's
performance to performance data of similar mutual funds as published in the
following, among others:
<TABLE>
<S> <C>
Bank Rate National Monitor Index Moody's Investors Service (publications)
Bear Stearns Foreign Bond Index Morgan Stanley Capital International All
Bond Buyer Index Country (AC) World Index
CDA/Wiesenberger Investment Company Services Morgan Stanley Capital International World
(data and mutual fund rankings and Indices
comparisons) Morningstar, Inc. (data and mutual fund rankings
CNBC/Financial News Composite Index and comparisons)
COFI NASDAQ
Consumer Price Index Organization for Economic Cooperation and
Datastream Development (publications)
Donoghue's Salomon Brothers Global Telecommunications
Dow Jones Industrial Average Index
EAFE Index Salomon Brothers World Government Bond
First Boston High Yield Index Index -Non U.S.
Fitch IBCA, Inc. (publications) Salomon Brothers World Government Bond
Ibbotson Associates International Bond Index Index
International Bank for Reconstruction and Standard & Poor's (publications)
Development (publications) Standard & Poor's 500 Composite Stock Price
International Finance Corporation Emerging Index
Markets Database Stangar
International Financial Statistics Wilshire Associates
Lehman Bond Indices World Bank (publications and reports)
Lipper Inc. (data and The World Bank Publication of Trends in
mutual fund rankings and comparisons) Developing Countries
Micropal, Inc. (data and mutual fund rankings Worldscope
and comparisons)
</TABLE>
81
<PAGE> 301
Each Fund may also compare its performance to rates on Certificates of
Deposit and other fixed rate investments such as the following:
10-year Treasuries
30-year Treasuries
30-day Treasury Bills
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Funds or AIM
Distributors. Advertising for the Funds may from time to time include
discussions of general economic conditions and interest rates. Advertising for
the Funds may also include reference to the use of those Funds as part of an
individual's overall retirement investment program. From time to time, sales
literature and/or advertisements for any of the Funds may disclose (i) the
largest holdings in the Fund's portfolio, (ii) certain selling group members
and/or (iii) certain institutional shareholders.
From time to time, the Funds' sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. This
includes, but is not limited to, literature addressing general information about
mutual funds, variable annuities, dollar-cost averaging, stocks, bonds, money
markets, certificates of deposit, retirement, retirement plans, asset
allocation, tax-free investing, college planning, and inflation.
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential investments,
investors should note that the methods of computing performance of other
potential investments are not necessarily comparable to the methods employed by
a Fund.
82
<PAGE> 302
APPENDIX
DESCRIPTION OF BOND RATINGS
Moody's Investors Service, Inc. ("Moody's") rates the debt securities
issued by various entities from "Aaa" to "C." Investment grade ratings are the
first four categories: Aaa--Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues. Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bond because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future. Baa--Bonds
which are rated Baa are considered as medium-grade obligations, (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. Ba--Bonds which are rated Ba are judged to
have speculative elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during other good and bad times over the
future. Uncertainty of position characterizes bonds in this class. B--Bonds
which are rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small. Caa--Bonds which are
rated Caa are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest. Ca--Bonds
which are rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. C--Bonds
which are rated C are the lowest rated class of bonds, and issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
("S&P"), rates the securities debt of various entities in categories ranging
from "AAA" to "D" according to quality. Investment grade ratings are the first
four categories: AAA--An obligation rated "AAA" has the highest rating assigned
by S&P. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong. AA--An obligation rated "AA" differs from the
highest rated obligations only in a small degree. The obligor's capacity to meet
its financial commitment on the obligation is very strong. A--An obligation
rated "A" is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories. BBB--An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation. BB, B, CCC, CC, C--Obligations rated "BB," "B,"
"CCC," "CC," and "C" are regarded as having significant speculative
characteristics. "BB" indicates the least degree of speculation and "C" the
highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions. BB--An obligation rated "BB" is less vulnerable
to nonpayment than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation. B--An obligation rated "B" is more vulnerable to
nonpayment than obligations rated "BB," but the obligor currently has the
capacity to meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's capacity or
willingness to meet its financial commitment on the obligation. CCC--An
obligation rated "CCC" is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial
83
<PAGE> 303
commitment on the obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the capacity to meet its
financial commitment on the obligation. CC--An obligation rated "CC" is
currently highly vulnerable to nonpayment. C--The "C" rating may be used to
cover a situation where a bankruptcy petition has been filed or similar action
has been taken, but payments on this obligation are being continued. D--An
obligation rated "D" is in payment default. The "D" rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The "D" rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's employs the designation "Prime-1" to indicate commercial paper
having a superior ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 have a strong ability for repayment of
senior short-term debt obligations. This normally will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into several categories
ranging from "A-1" for the highest quality obligations to "D" for the lowest.
Issues in the "A" category are delineated with numbers 1, 2, and 3 to indicate
the relative degree of safety. A-1--This highest category indicates that the
degree of safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics will be denoted with a plus sign
(+) designation. A-2--Capacity for timely payments on issues with this
designation is satisfactory; however, the relative degree of safety is not as
high as for issues designated "A-1."
ABSENCE OF RATING
Where no rating has been assigned or where a rating has been suspended
or withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
84
<PAGE> 304
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.
85
<PAGE> 305
FINANCIAL STATEMENTS
FS
<PAGE> 306
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Developing Markets Fund
and Board of Trustees of AIM Investment Funds:
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Developing Markets Fund at October 31, 1999, and the
results of its operations, the changes in its net assets
and the financial highlights for the periods indicated
therein, in conformity with generally accepted accounting
principles. These financial statements and financial
highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
October 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
FS-1
<PAGE> 307
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-97.49%
ARGENTINA-0.95%
Banco de Galicia y Buenos Aires
S.A. de C.V.-ADR
(Banks-Regional) 62,236 $ 1,314,743
- --------------------------------------------------------------
Nortel Inversora S.A.-ADR
(Telephone) 43,400 656,425
- --------------------------------------------------------------
1,971,168
- --------------------------------------------------------------
AUSTRIA-0.26%
Julius Meinl International A.G.
(Retail-Food Chains) 44,854 537,951
- --------------------------------------------------------------
BRAZIL-10.14%
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar-Pfd. GDR (Retail-Food
Chains) 55,700 1,218,437
- --------------------------------------------------------------
Companhia de Saneamento Basico do
Estado de Sao Paulo (Water
Utilities) 11,791,509 794,356
- --------------------------------------------------------------
Companhia de Tecidos Norte de
Minas (Textiles-Specialty) 7,836,000 553,980
- --------------------------------------------------------------
Companhia Energetica de Minas
Gerais-ADR (Electric Companies) 167,280 2,390,883
- --------------------------------------------------------------
Companhia Paranaense de Energia-
Copel-ADR (Electric Companies) 209,000 1,384,625
- --------------------------------------------------------------
Companhia Vale do Rio Doce-Pfd. A
(Iron & Steel) 124,700,000 2,478,029
- --------------------------------------------------------------
Eletropaulo
Metropolitana-Eletricidade de
Sao Paulo S.A. (Electric
Companies) 31,201,339 1,422,602
- --------------------------------------------------------------
Petroleo Brasileiro
S.A.-Petrobras-Pfd. (Oil &
Gas-Exploration & Production) 21,999,978 3,499,484
- --------------------------------------------------------------
Telebras-ADR (Telephone) 43,853 3,415,052
- --------------------------------------------------------------
Telecomunicacoes de Sao Paulo
S.A. (Telephone) 17,750,000 1,228,587
- --------------------------------------------------------------
Telecomunicacoes de Sao Paulo
S.A.-Pfd. (Telephone) 335,563 31,545
- --------------------------------------------------------------
Uniao de Bancos Brasileiros
S.A.-GDR (Banks-Regional) 76,816 1,776,370
- --------------------------------------------------------------
Unibanco-Uniao de Bancos
Brasileiros S.A. (Banks-Major
Regional)(a) 19,000,472 876,144
- --------------------------------------------------------------
21,070,094
- --------------------------------------------------------------
CHILE-0.99%
Compania Cervecerias Unidas
S.A.-ADR (Beverages-Alcoholic) 40,000 872,500
- --------------------------------------------------------------
Enersis S.A.-ADR (Electric
Companies) 52,596 1,183,410
- --------------------------------------------------------------
2,055,910
- --------------------------------------------------------------
CHINA-0.96%
Beijing Yanhua Petrochemical Co.
Ltd. (Chemical Diversified)(b) 11,026,000 1,987,153
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
EGYPT-1.11%
Al-Ahram Beverages Co. S.A.E.-GDR
(Beverages-Alcoholic) 163 $ 4,809
- --------------------------------------------------------------
Al-Ahram Beverages Co. S.A.E.-GDR
(Beverages-Alcoholic) (Acquired
06/10/97-08/07/97; Cost
$838,350)(c) 37,049 1,092,946
- --------------------------------------------------------------
Suez Cement Co.-GDR (Building
Materials) 71,830 1,203,153
- --------------------------------------------------------------
2,300,908
- --------------------------------------------------------------
GREECE-3.32%
Alpha Credit Bank
(Banks-Regional) 20,660 1,579,762
- --------------------------------------------------------------
Commercial Bank of Greece, S.A.
(Banks-Major Regional) 20,400 1,516,985
- --------------------------------------------------------------
Hellenic Telecommunication
Organization S.A.
(Telecommunication-Cellular/Wireless) 122,988 2,605,761
- --------------------------------------------------------------
National Bank of Greece S.A.
(Banks-Money Center) 16,708 1,197,725
- --------------------------------------------------------------
6,900,233
- --------------------------------------------------------------
HONG KONG-1.22%
China Everbright Ltd. (Land
Development) 3,535,500 2,525,975
- --------------------------------------------------------------
HUNGARY-2.77%
Matv Rt.-ADR (Telephone)(b) 110,000 3,169,375
- --------------------------------------------------------------
MOL Magyar Olaj-es Gazipari
Rt.-GDR (Oil- Domestic
Integrated) 128,000 2,540,800
- --------------------------------------------------------------
Pannonplast Rt. (Building
Materials)(b) 2,270 36,886
- --------------------------------------------------------------
Technoimpex (Services-Commercial
& Consumer)(b) 1,400 0
- --------------------------------------------------------------
5,747,061
- --------------------------------------------------------------
INDIA-6.21%
Associated Cement Co. Ltd.
(Construction-
Cement/Aggregates) 164 757
- --------------------------------------------------------------
BSES Ltd. (Electric Companies) 200 743
- --------------------------------------------------------------
Hindustan Lever Ltd. (Aluminum) 73,850 3,914,679
- --------------------------------------------------------------
Indian Hotels Co. Ltd.
(Lodging-Hotels) 50 423
- --------------------------------------------------------------
ITC Ltd. (Tobacco) 110,428 1,770,638
- --------------------------------------------------------------
KEC International Ltd. (Electric
Companies) 100 141
- --------------------------------------------------------------
Larsen & Toubro Ltd.
(Manufacturing- Diversified) 150,400 1,379,273
- --------------------------------------------------------------
Larsen & Tourbo Ltd.-GDR
(Manufacturing- Diversified) 65,900 1,430,030
- --------------------------------------------------------------
Mahanagar Telephone Nigam Ltd.
(Telephone) 142,100 561,067
- --------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 308
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INDIA-(CONTINUED)
Mahindra & Mahindra Ltd.
(Automobiles)(b) 379,700 $ 3,109,499
- --------------------------------------------------------------
Ranbaxy Laboratories Ltd. (Health
Care- Drugs-Generic & Other) 200 4,008
- --------------------------------------------------------------
State Bank of India (Banks-Major
Regional) 4,650 26,565
- --------------------------------------------------------------
Tata Engineering and Locomotive
Co. Ltd. (Automobiles) 100 552
- --------------------------------------------------------------
Videsh Sanchar Nigam Ltd.
(Telecommunications-Cellular/Wireless) 44,600 712,485
- --------------------------------------------------------------
12,910,860
- --------------------------------------------------------------
INDONESIA-2.87%
PT Indah Kiat Pulp & Paper Corp.
TbK (Paper & Forest
Products)(b) 4,074,000 1,753,217
- --------------------------------------------------------------
PT Lippo Bank Tbk (Banks-Major
Regional)(b) 128,519,400 4,218,361
- --------------------------------------------------------------
5,971,578
- --------------------------------------------------------------
IRELAND-0.28%
Central Asia Growth Fund
(Investment Management)(b) 331,000 579,250
- --------------------------------------------------------------
ISRAEL-3.60%
Bank Leumi Le-Israel (Banks-Money
Center) 1,180,113 2,082,201
- --------------------------------------------------------------
Blue Square Chain Investments and
Properties Ltd. (Retail-Food
Chains) 78,589 1,079,313
- --------------------------------------------------------------
Blue Square-Israel Ltd.-ADR
(Retail-Food Chains) 78,100 1,020,181
- --------------------------------------------------------------
Discount Investment Corp.
(Investment Banking/Brokerage) 40,500 1,544,611
- --------------------------------------------------------------
Internet Gold-Golden Lines
(Computers-Software &
Services)(b) 74,861 561,458
- --------------------------------------------------------------
Jacada Ltd. (Computers-Software &
Services)(b) 81,687 1,184,462
- --------------------------------------------------------------
Makhteshim-Agan Industries Ltd.
(Investment Management)(b) 1 2
- --------------------------------------------------------------
7,472,228
- --------------------------------------------------------------
LITHUANIA-0.15%
Vilniaus Bankas A.B.-GDR
(Banks-Regional) 54,591 313,898
- --------------------------------------------------------------
MALAYSIA-6.61%
Berjaya Sports Toto Berhad
(Leisure Time- Products) 1,157,000 2,511,908
- --------------------------------------------------------------
Commerce Asset-Holdings Berhad
(Finance- Asset Management)(b) 1,393,000 3,079,263
- --------------------------------------------------------------
Public Finance Berhad
(Banks-Regional) 1,034,000 1,110,189
- --------------------------------------------------------------
Resorts World Berhad
(Lodging-Hotels) 776,000 2,225,895
- --------------------------------------------------------------
RHB Capital Berhad (Banks-Major
Regional) 480,000 432,000
- --------------------------------------------------------------
Rothmans of Pall Mall (Malaysia)
Berhad (Tobacco)(b) 159,000 1,108,816
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MALAYSIA-(CONTINUED)
Telekom Malaysia Berhad
(Telephone) 1,059,000 $ 3,260,605
- --------------------------------------------------------------
13,728,676
- --------------------------------------------------------------
MEXICO-10.51%
Alpha S.A. de C.V.-Class A
(Manufacturing- Diversified) 121,000 464,368
- --------------------------------------------------------------
Cemex S.A. de C.V.
(Construction-Cement &
Aggregates) 570,392 2,580,557
- --------------------------------------------------------------
Cifra S.A. de C.V.
(Retail-General Merchandise)(b) 1,156,392 1,818,476
- --------------------------------------------------------------
Consorcio Ara, S.A. de C.V.
(Homebuilding)(b) 1,182,600 1,330,809
- --------------------------------------------------------------
Corporacion GEO S.A. de
C.V.-Series B
(Construction-Cement &
Aggregates)(b) 380,400 965,342
- --------------------------------------------------------------
Fomento Economico Mexicano, S.A.
de C.V.-ADR
(Beverages-Alcoholic) 105,474 3,460,866
- --------------------------------------------------------------
Grupo Bimbo S.A. de C.V.
(Foods)(b) 655,700 1,202,969
- --------------------------------------------------------------
Grupo Financiero Bancomer, S.A.
de C.V.-Class O
(Banks-Regional)(b) 5,275,388 1,399,089
- --------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Entertainment)(b) 50,699 2,154,708
- --------------------------------------------------------------
Telefonos de Mexico S.A.-ADR
(Telephone) 56,062 4,793,301
- --------------------------------------------------------------
Tubos de Acero de Mexico S.A.-ADR
(Oil & Gas-Drilling &
Equipment) 152,088 1,663,463
- --------------------------------------------------------------
21,833,948
- --------------------------------------------------------------
PAKISTAN-0.00%
Dewan Salman Fibre Ltd.
(Chemicals-Specialty)(b) 4 2
- --------------------------------------------------------------
Pakistan State Oil Co. Ltd.
(Oil-International Integrated) 78 207
- --------------------------------------------------------------
209
- --------------------------------------------------------------
PHILIPPINES-1.63%
Far East Bank & Trust Co.
(Banks-Regional) 531,663 908,202
- --------------------------------------------------------------
Manila Electric Co. (Electric
Power) 409,290 1,122,741
- --------------------------------------------------------------
Philippine Long Distance
Telephone Co.-ADR (Telephone) 66,500 1,367,406
- --------------------------------------------------------------
3,398,349
- --------------------------------------------------------------
POLAND-1.98%
Bank Handlowy w Warszawie
(Banks-Major Regional)(b) 70,000 987,084
- --------------------------------------------------------------
Bank Handlowy w Warszawie-GDR
(Banks-Major Regional) 2,590 37,057
- --------------------------------------------------------------
BRE Bank S.A. (Banks-Major
Regional) 31,295 852,927
- --------------------------------------------------------------
Elektrim Spolka Akcyjna S.A.
(Electrical Equipment)(b) 117,144 1,013,332
- --------------------------------------------------------------
Telekomunikacja Polska S.A.-GDR
(Telephone)(b) 242,000 1,216,050
- --------------------------------------------------------------
4,106,450
- --------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 309
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RUSSIA-1.27%
Nizhnekamsknefte Khim (Chemicals-
Diversified)(b) 100,000 $ 67,000
- --------------------------------------------------------------
Russian Telecommunications
Development Corp.-Non-Voting
(Telecommunications-
Cellular-Wireless)(b) 52,600 1
- --------------------------------------------------------------
Russian Telecommunications
Development Corp.-Voting
(Telecommunications-
Cellular-Wireless)(b) 38,400 0
- --------------------------------------------------------------
Surgutneftegaz-ADR
(Oil-International Integrated) 307,930 2,563,517
- --------------------------------------------------------------
2,630,518
- --------------------------------------------------------------
SOUTH AFRICA-8.98%
Anglo American Platinum Corp.
Ltd. (Metals Mining) 105,000 3,025,641
- --------------------------------------------------------------
Anglo American PLC (Metals
Mining) 39,600 2,108,132
- --------------------------------------------------------------
Barlow Ltd.
(Manufacturing-Diversified) 327,200 1,595,383
- --------------------------------------------------------------
FirstRand Ltd. (Banks-Regional) 1,643,600 1,899,806
- --------------------------------------------------------------
Liberty Life Association of
Africa Ltd. (Insurance Brokers) 122,624 1,137,903
- --------------------------------------------------------------
Rembrandt Group Ltd. (Investment
Management) 294,270 2,201,336
- --------------------------------------------------------------
Sanlam Ltd.
(Insurance-Life/Health) 1,798,960 2,064,740
- --------------------------------------------------------------
Sappi Ltd. (Paper & Forest
Products) 305,000 2,527,391
- --------------------------------------------------------------
South African Breweries PLC
(Beverages- Alcoholic) 210,538 1,844,028
- --------------------------------------------------------------
Standard Bank Investment Corp.
Ltd. (Banks-Major Regional)(b) 75,550 258,291
- --------------------------------------------------------------
18,662,651
- --------------------------------------------------------------
SOUTH KOREA-12.31%
Housing & Commercial Bank-GDR
(Banks-Major Regional)(b) 37,500 991,039
- --------------------------------------------------------------
Kia Motors Corp. (Automobiles)(b) 180,900 1,809,754
- --------------------------------------------------------------
Kia Motors Corp.-Rts., expiring
11/09/99 (Automobiles)(b) 30,898 69,549
- --------------------------------------------------------------
Korea Electric Power Corp.-ADR
(Electric Companies) 116,847 1,840,340
- --------------------------------------------------------------
Korea Telecom Corp.-ADR
(Telephone)(b) 57,450 2,025,113
- --------------------------------------------------------------
Merrill Lynch International & Co.
KOSPI 200-Wts., expiring
09/14/00 (Investment Banking) 1,582,230 13,101,814
- --------------------------------------------------------------
Pohang Iron & Steel Co. Ltd.-ADR
(Iron & Steel) 123,540 4,123,148
- --------------------------------------------------------------
Shinhan Bank-GDR (Banks-Major
Regional)(b) 75,747 1,619,092
- --------------------------------------------------------------
25,579,849
- --------------------------------------------------------------
TAIWAN-14.79%
ABN AMRO Bank N.V.-EPN, expiring
04/28/00 (Investment
Management)(b)(d) 465 5,184,285
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TAIWAN-(CONTINUED)
ABN AMRO Bank N.V.-EPN, expiring
09/28/00 (Investment
Management)(b)(d) 600 $ 5,692,200
- --------------------------------------------------------------
Asian Petro Equity Linke (Oil &
Gas-Refining & Marketing)(b) 361 2,623,835
- --------------------------------------------------------------
Austek Computer, Inc. (Computers-
Hardware)(b) 773 10,924
- --------------------------------------------------------------
Cathay Life Insurance Co., Ltd.
(Insurance Brokers) 200,000 517,024
- --------------------------------------------------------------
China Development Industrial Bank
(Investment Management)(b) 937,438 1,391,971
- --------------------------------------------------------------
China Steel Corp. (Metals Mining) 3,172,000 2,440,000
- --------------------------------------------------------------
Compeq Manufacturing Co., Ltd.
(Computers-Hardware) 297,700 1,520,410
- --------------------------------------------------------------
Delta Electronics, Inc.
(Electronics-Component
Distributors) 267,480 1,117,311
- --------------------------------------------------------------
Hon Hai Precision Industry Co.,
Ltd. (Electronics-Component
Distributors)(b) 355,544 2,432,316
- --------------------------------------------------------------
Hon Hai Precision Industry Co.,
Ltd.-GDR (Electronics-Component
Distributors)(b) 46,413 753,051
- --------------------------------------------------------------
Nan Ya Plastic Corp.
(Chemicals-Specialty) 1 1
- --------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd.
(Electronics-Semiconductors)(b) 300,000 1,333,544
- --------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd.-ADR
(Electronics-Semiconductors) 80,000 2,770,000
- --------------------------------------------------------------
United Microelectronics Corp.
Ltd. (Electronics-Component
Distributors)(b) 578,000 1,503,310
- --------------------------------------------------------------
Yang Ming Marine Transport
(Shipping)(b) 2,571,000 1,434,637
- --------------------------------------------------------------
30,724,819
- --------------------------------------------------------------
THAILAND-0.90%
Siam Commercial Bank PLC
(Banks-Regional)(b) 303,850 330,571
- --------------------------------------------------------------
Siam Commercial Bank PLC-Pfd.
(Banks-Regional)(b) 972,442 1,102,042
- --------------------------------------------------------------
Siam Commercial Bank-Wts.,
expiring 05/10/02
(Banks-Regional)(b) 1,248,542 436,093
- --------------------------------------------------------------
1,868,706
- --------------------------------------------------------------
TURKEY-3.27%
Haci Omer Sabanci Holding A.S.
(Investment Management) 71,501,500 2,119,301
- --------------------------------------------------------------
Turkiye Is Bankasi (Isbank)
(Banks-Money Center) 85,258,247 1,684,700
- --------------------------------------------------------------
Yapi ve Kredi Bankasi A.S.
(Banks-Money Center) 205,904,400 2,997,963
- --------------------------------------------------------------
6,801,964
- --------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 310
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
VENEZUELA-0.41%
Cia. Anonima Nacional Telefonos
de Venezuela-ADR
(Telecommunications- Long
Distance) 32,900 $ 849,231
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$205,590,442) 202,529,637
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES-0.00%
SOVEREIGN DEBT-0.00%
Bank of Foreign Economic Affairs
(Vnesheconombank) (Russia),
Interest in Arrears Notes,
5.968%, 12/15/15 (Cost
$7,777)(e)(f) $ 45,784 5,322
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-1.74%
STIC Liquid Assets Portfolio(g) 1,806,852 $ 1,806,852
- --------------------------------------------------------------
STIC Prime Portfolio(g) 1,806,852 1,806,852
- --------------------------------------------------------------
Total Money Market Funds
(Cost $3,613,704) 3,613,704
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.23% 206,148,663
- --------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.77% 1,599,357
- --------------------------------------------------------------
NET ASSETS-100.00% $207,748,020
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
EPN - Equity Participation Notes
GDR - Global Depositary Receipt
Pfd. - Preferred
Rts. - Rights
Wts. - Warrants
Notes to Schedule of Investments:
(a) Each unit represents one preferred share of Unibanco and one preferred "B"
share of Unibanco Holdings.
(b) Non-income producing security.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at 10/31/99 was $1,092,945 which
represented 0.53% of the Fund's net assets.
(d) Equity participation notes on basket of Taiwan stocks.
(e) The coupon rate shown in floating rate note represents the rate at period
end.
(f) Defaulted security. Currently, the issuer is in default with respect to
interest payments.
(g) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-5
<PAGE> 311
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $209,211,923) $206,148,663
- ------------------------------------------------------------
Foreign currencies, at value (cost $2,528,014) 2,503,509
- ------------------------------------------------------------
Receivables for:
Investments sold 570,570
- ------------------------------------------------------------
Fund shares sold 699,871
- ------------------------------------------------------------
Dividends and interest 799,063
- ------------------------------------------------------------
Total assets 210,721,676
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,384,045
- ------------------------------------------------------------
Fund shares reacquired 946,210
- ------------------------------------------------------------
Amount due to custodian bank 3,446
- ------------------------------------------------------------
Accrued advisory fees 173,001
- ------------------------------------------------------------
Accrued distribution fees 135,524
- ------------------------------------------------------------
Accrued accounting services fees 4,201
- ------------------------------------------------------------
Accrued transfer agent fees 127,021
- ------------------------------------------------------------
Accrued trustees' fees 4,882
- ------------------------------------------------------------
Accrued operating expenses 195,326
- ------------------------------------------------------------
Total liabilities 2,973,656
- ------------------------------------------------------------
Net assets applicable to shares outstanding $207,748,020
============================================================
NET ASSETS:
Class A $157,197,964
============================================================
Class B $ 49,723,202
============================================================
Class C $ 411,826
============================================================
Advisor Class $ 415,028
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 15,944,507
============================================================
Class B 5,079,702
============================================================
Class C 42,079
============================================================
Advisor Class 42,020
============================================================
Class A:
Net asset value and redemption price per
share $ 9.86
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $9.86 divided by
95.25%) $ 10.35
============================================================
Class B:
Net asset value and offering price per share $ 9.79
============================================================
Class C:
Net asset value and offering price per share $ 9.79
============================================================
Advisor Class:
Net asset value, redemption and offering
price per share $ 9.88
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $294,405 foreign withholding
tax) $ 3,536,471
- ------------------------------------------------------------
Interest 452,845
- ------------------------------------------------------------
Securities lending 141,802
- ------------------------------------------------------------
Total investment income 4,131,118
- ------------------------------------------------------------
EXPENSES:
Advisory and administrative fees 1,560,741
- ------------------------------------------------------------
Accounting services fees 42,462
- ------------------------------------------------------------
Custodian fees 152,242
- ------------------------------------------------------------
Distribution fees -- Class A 439,522
- ------------------------------------------------------------
Distribution fees -- Class B 357,273
- ------------------------------------------------------------
Distribution fees -- Class C 1,425
- ------------------------------------------------------------
Transfer agent fees -- Class A 654,830
- ------------------------------------------------------------
Transfer agent fees -- Class B 189,040
- ------------------------------------------------------------
Transfer agent fees -- Class C 754
- ------------------------------------------------------------
Transfer agent fees -- Advisor Class 2,367
- ------------------------------------------------------------
Interest (Note 4) 18,797
- ------------------------------------------------------------
Printing fees 335,170
- ------------------------------------------------------------
Other 265,876
- ------------------------------------------------------------
Total expenses 4,020,499
- ------------------------------------------------------------
Less: Expenses paid indirectly (9,544)
- ------------------------------------------------------------
Fees waived by advisor (747,433)
- ------------------------------------------------------------
Net expenses 3,263,522
- ------------------------------------------------------------
Net investment income 867,596
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment securities 3,287,085
- ------------------------------------------------------------
Foreign currencies (466,771)
- ------------------------------------------------------------
2,820,314
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 23,953,037
- ------------------------------------------------------------
Foreign currencies (65,862)
- ------------------------------------------------------------
23,887,175
- ------------------------------------------------------------
Net gain from investment securities and
foreign currencies 26,707,489
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $27,575,085
============================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE> 312
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 867,596 $ 6,869,096
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 2,820,314 (83,359,123)
- --------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 23,887,175 13,741,429
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 27,575,085 (62,748,598)
- --------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (1,347,785) (11,841,080)
- --------------------------------------------------------------------------------------------
Class B (1,895) (1,499)
- --------------------------------------------------------------------------------------------
Advisor Class (510) (46)
- --------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A 46,116,184 (295,354,688)
- --------------------------------------------------------------------------------------------
Class B 46,956,910 226,865
- --------------------------------------------------------------------------------------------
Class C 409,272 --
- --------------------------------------------------------------------------------------------
Advisor Class 340,305 40,312
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 120,047,566 (369,678,734)
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 87,700,454 457,379,188
- --------------------------------------------------------------------------------------------
End of period $ 207,748,020 $ 87,700,454
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 462,286,688 $ 250,014,000
- --------------------------------------------------------------------------------------------
Undistributed net investment income 601,051 1,105,906
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (252,000,704) (136,393,263)
- --------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies (3,139,015) (27,026,189)
- --------------------------------------------------------------------------------------------
$ 207,748,020 $ 87,700,454
============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Developing Markets Fund (the "Fund") is a separate series of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware business trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twelve
separate series portfolios, each having an unlimited number of shares of
beneficial interest. The Fund consists of four different classes of shares:
Class A shares, Class B shares, Class C shares and Advisor Class shares. Class A
shares are sold with a front-end sales charge. Class B shares and Class C shares
are sold with a contingent deferred sales charge. Advisor Class shares were sold
without a sales charge. Matters affecting each portfolio or class will be voted
on exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital and its
secondary objective is income, to the extent consistent with seeking growth of
capital.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on
FS-7
<PAGE> 313
quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market quotations
are not readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Trust's officers
in a manner specifically authorized by the Board of Trustees. Short-term
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. For purposes of determining net asset value
per share, futures and options contracts generally will be valued 15 minutes
after the close of trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Trustees.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of fund
share redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was decreased by
$22,262, undistributed net realized losses increased by $118,427,755 and
paid-in capital increased by $118,450,017 in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassification discussed above.
C. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $251,405,753 as of October 31, 1999 which may be carried
forward to offset future taxable gains, if any, and expires in varying
increments, if not previously utilized, in the year 2007.
D. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
E. Foreign Currency Contracts--A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
F. Expenses--Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
G. 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
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 fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
H. Indexed Securities--The Fund may invest in indexed securities whose value
is linked either directly or indirectly to changes in foreign currencies,
interest rates, equities, indices, or other reference instruments. Indexed
securities may be more volatile than the reference instrument itself, but any
loss is limited to the amount of the original investment.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
INVESCO Asset Management Limited is the Fund's sub-advisor and
sub-administrator. The Fund pays AIM investment management and administration
fees at an annual rate of 0.975% on the first $500 million of the Fund's average
daily net assets, plus 0.95% on the next $500 million of the Fund's average
daily net assets, plus 0.925% on the next $500 million of the Fund's average
daily net assets, plus 0.90% on the Fund's average daily net assets exceeding
$1.5 billion. AIM has contractually agreed to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest and extraordinary expenses)
to the maximum annual rate of 2.00%, 2.50%, 2.50% and 1.50% of the average daily
net assets of the Fund's Class A, Class B, Class C and Advisor Class shares,
respectively. During the year ended October 31, 1999, the AIM waived fees of
$747,433.
FS-8
<PAGE> 314
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund. Prior to July 1, 1999, AIM was the
pricing and accounting agent for the Fund. The monthly fee for these services
paid to AIM was a percentage, not to exceed 0.03% annually, of a Fund's average
daily net assets. The annual fee rate was derived based on the aggregate net
assets of the funds which comprised the following investment companies: AIM
Growth Series, AIM Investment Funds, AIM Series Trust, G.T. Global Variable
Investment Series and G.T. Global Variable Investment Trust. The fee was
calculated at the rate of 0.03% of the first $5 billion of assets and 0.02% to
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets. For the year ended
October 31, 1999, AIM was paid $42,462 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended October 31, 1999, AFS was
paid $686,201 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares, Class B shares and Class C shares (collectively the
"Plans"). The Fund , pursuant to the Plans, pays AIM Distributors compensation
at the annual rate of 0.50% of the Fund's average daily net assets of Class A
shares and 1.00% of the average daily net assets of Class B and C shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. For the year ended October 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $439,522, $357,273 and $1,425, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $16,209 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $6,877 in contingent deferred sales charges imposed on
redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AFS and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $9,544 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$9,544 during the year ended October 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among the
funds based on their respective average net assets for the period. Prior to May
28, 1999, the Fund, along with certain other funds advised and/or administered
by AIM, had a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allowed the Fund and certain other
funds to borrow, on a first come, first served basis, an aggregate maximum
amount of $250,000,000.
During the year ended October 31, 1999, the average outstanding daily balance
of bank loans for the Fund was $337,903 with a weighted average interest rate of
5.33%. Interest expense for the Fund for the year ended October 31, 1999 was
$18,797.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, securities with an aggregate value of $17,226,481 were on
loan to brokers. The loans were secured by cash collateral of $17,571,010
received by the Fund. For the year ended October 31, 1999, the Fund received
fees of $141,802 for securities lending.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$280,768,924 and $191,097,959, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 26,747,536
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (37,735,639)
- ---------------------------------------------------------
Net unrealized depreciation of investment
securities $(10,988,103)
=========================================================
Cost of investments for tax purposes is $217,136,766.
</TABLE>
FS-9
<PAGE> 315
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 3,932,389 $ 45,584,475 486,628 $ 5,011,027
- ---------------------------------------------------------------------------------------------------------------------
Class B 911,202 18,260,670 30,654 314,666
- ---------------------------------------------------------------------------------------------------------------------
Class C* 68,223 667,879 -- --
- ---------------------------------------------------------------------------------------------------------------------
Advisor Class 67,714 758,300 4,782 49,262
- ---------------------------------------------------------------------------------------------------------------------
Issued in connection with acquisition:**
Class A 9,961,789 87,235,238 -- --
- ---------------------------------------------------------------------------------------------------------------------
Class B 5,660,631 42,680,510 -- --
- ---------------------------------------------------------------------------------------------------------------------
Advisor Class 64,652 488,221 -- --
- ---------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 125,865 932,660 676,257 8,203,222
- ---------------------------------------------------------------------------------------------------------------------
Class B 255 1,881 124 1,499
- ---------------------------------------------------------------------------------------------------------------------
Advisor Class 69 510 4 46
- ---------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (9,691,690) (87,636,190)+ (25,963,398) (308,568,937)
- ---------------------------------------------------------------------------------------------------------------------
Class B (1,512,951) (13,986,150) (10,213) (89,300)
- ---------------------------------------------------------------------------------------------------------------------
Class C* (26,144) (258,606) -- --
- ---------------------------------------------------------------------------------------------------------------------
Advisor Class (94,292) (906,727) (909) (8,996)
- ---------------------------------------------------------------------------------------------------------------------
9,467,712 $ 93,822,671 (24,776,071) $(295,087,511)
=====================================================================================================================
</TABLE>
* Class C shares commenced sales on March 1, 1999.
** AIM Emerging Markets Fund ("Emerging Markets Fund") and AIM Eastern Europe
Fund ("Eastern Europe Fund") transferred all of their assets to the Fund on
February 12, 1999 and September 10, 1999, respectively, pursuant to a plan of
reorganization and termination. The Fund assumed all of the liabilities of the
Emerging Markets Fund and the Eastern Europe Fund. Shareholders of the Emerging
Markets Fund and Eastern Europe Fund were issued full and fractional shares of
the applicable class of the Fund. The acquisitions, which were approved by the
shareholders of Emerging Markets Fund and Eastern Europe Fund on February 10,
1999 and August 25, 1999, respectively, were accomplished by an exchange of
10,912,463 shares of the Fund for the 11,087,719 shares then outstanding of the
Emerging Markets Fund and 4,774,609 shares of the Fund for the 5,864,782 shares
then outstanding of the Eastern Europe Fund. Based on the opinion of the Fund
counsel, the reorganization qualified as a tax-free reorganization for federal
income tax purposes with no gain or loss recognized to the Fund or its
shareholders. Emerging Markets Fund's and Eastern Europe Fund's net assets,
including ($18,098,264) and ($1,068,554), respectively, of unrealized
depreciation were combined with the Fund for total net assets after the
acquisition of $159,666,366 and $238,151,276, respectively.
+ This amount includes $370,669 of redemption fees associated with merger of
Eastern Europe.
FS-10
<PAGE> 316
NOTE 8-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 YEAR TEN MONTHS YEAR ENDED
ENDED ENDED ENDED DECEMBER 31, JANUARY 11, 1994
OCTOBER 31, OCTOBER 31, OCTOBER 31, ------------------- TO DECEMBER 31,
1999(a) 1998(a) 1997(b) 1996 1995 1994
--------- ---------- ----------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period 7.53 $ 12.56 $ 13.84 $ 11.60 $ 12.44 $ 15.00
- --------------------------------------------- -------- --------- ---------- --------- --------- --------
Income from investment operations:
Net investment income 0.06 0.39(c)(d) 0.25 0.53 0.72 0.35
- --------------------------------------------- -------- --------- ---------- --------- --------- --------
Net realized and unrealized gain (loss) on
investments 2.36 (5.10) (1.53) 2.19 (0.84) (2.46)
- --------------------------------------------- -------- --------- ---------- --------- --------- --------
Net increase (decrease) from investment
operations 2.42 (4.71) (1.28) 2.72 (0.12) (2.11)
- --------------------------------------------- -------- --------- ---------- --------- --------- --------
Redemption fees retained 0.03 0.28 -- -- -- --
- --------------------------------------------- -------- --------- ---------- --------- --------- --------
Distributions to shareholders:
From net investment income (0.12) (0.60) -- (0.48) (0.72) (0.35)
- --------------------------------------------- -------- --------- ---------- --------- --------- --------
From net realized gain on investments -- -- -- -- -- (0.10)
- --------------------------------------------- -------- --------- ---------- --------- --------- --------
Total distributions (0.12) (0.60) -- (0.48) (0.72) (0.45)
- --------------------------------------------- -------- --------- ---------- --------- --------- --------
Net asset value, end of period 9.86 $ 7.53 $ 12.56 $ 13.84 $ 11.60 $ 12.44
============================================= ======== ========= ========== ========= ========= ========
Total return(e) 33.11% (37.09)% (9.25)% 23.59% (0.95)% (14.07)%
============================================= ======== ========= ========== ========= ========= ========
Ratios and supplemental data:
Net assets, end of period (in 000's) 157,198 $ 87,517 $ 457,379 $ 504,012 $ 422,348 $ 452,872
============================================= ======== ========= ========== ========= ========= ========
Ratio of net investment income to average net
assets:
With fee waivers 0.68%(f) 3.84 2.03%(g) 4.07% 6.33% 2.75%(g)
============================================= ======== ========= ========== ========= ========= ========
Without fee waivers 0.21%(f) 3.43% 1.95%(g) 4.04% 6.30% 2.75%(g)
============================================= ======== ========= ========== ========= ========= ========
Ratio of expenses to average net assets
excluding interest expense:
With fee waivers 1.90%(f) 1.73% 1.75%(g) 1.82% 1.77% 2.01%(g)
============================================= ======== ========= ========== ========= ========= ========
Without fee waivers 2.37%(f) 2.14% 1.83%(g) 1.85% 1.80% 2.01%(g)
============================================= ======== ========= ========== ========= ========= ========
Ratio of interest expense to average net
assets (Note 5) 0.01% 0.20% N/A N/A N/A N/A
============================================= ======== ========= ========== ========= ========= ========
Portfolio turnover rate 125% 111% 184%(g) 138% 75% 56%(g)
============================================= ======== ========= ========== ========= ========= ========
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Prior to November 1, 1997 the Fund was known as G.T. Developing Markets
Fund, Inc. All capital shares issued and outstanding on October 31, 1997
were reclassified as Class A shares.
(c) Before reimbursement the net investment income per share would have been
reduced by $0.04.
(d) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.14 per share.
(e) Total return does not include sales charges and is not annualized for
periods less than one year.
(f) Ratios are based on average net assets of $123,758,642.
(g) Annualized.
FS-11
<PAGE> 317
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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 CLASS C ADVISOR CLASS
----------------------- -------------- --------------------
YEAR YEAR MARCH 1, YEAR ENDED
ENDED ENDED 1999 OCTOBER 31,
OCTOBER 31, OCTOBER 31, TO OCTOBER 31, --------------------
1999(a) 1998(a) 1999(a) 1999(a) 1998(a)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.49 $ 12.56 $ 7.47 $ 7.55 $ 12.56
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) 0.01 0.31(b)(c) -- 0.10 0.40(b)(c)
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) on investments 2.37 (5.07) 2.32 2.39 (5.09)
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Net increase (decrease) from investment operations 2.38 (4.76) 2.32 2.49 (4.69)
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Redemption fees retained -- 0.28 -- -- 0.28
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Distributions to shareholders:
From net investment income (0.08) (0.59) -- (0.16) (0.60)
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Net asset value, end of period $ 9.79 $ 7.49 $ 9.79 $ 9.88 $ 7.55
========================================================== ======= ======= ======= ======= =======
Total return (based on net asset value)(d) 32.14% (39.76)% 31.06% 33.62% (42.63)%
========================================================== ======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in 000's) $49,723 $ 154 $ 412 $ 415 $ 29
========================================================== ======= ======= ======= ======= =======
Ratio of net investment income (loss) to average net
assets:
With fee waivers 0.08%(e) 3.09% 0.08%(f) 1.07%(e) 4.09%
========================================================== ======= ======= ======= ======= =======
Without fee waivers (0.39)%(e) 2.68% (0.39)%(f) 0.60%(e) 3.68%
========================================================== ======= ======= ======= ======= =======
Ratio of expenses to average net assets excluding interest
expense:
With fee waivers 2.50%(e) 2.48% 2.50%(f) 1.51%(e) 1.48%
========================================================== ======= ======= ======= ======= =======
Without fee waivers 2.97%(e) 2.89% 2.97%(f) 1.98%(e) 1.89%
========================================================== ======= ======= ======= ======= =======
Ratio of interest expense to average net assets (Note 5) 0.01% 0.20% 0.01% 0.01% 0.20%
========================================================== ======= ======= ======= ======= =======
Portfolio turnover rate 125% 111% 125% 125% 111%
========================================================== ======= ======= ======= ======= =======
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.04.
(c) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.14 per share.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $35,727,260 and $447,433 for
Class B and Advisor Class, respectively.
(f) Ratios are annualized and based on average net assets of $208,934.
NOTE 9-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
FS-12
<PAGE> 318
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Latin American Growth Fund
and Board of Trustees of AIM Investment Funds:
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Latin American Growth Fund at October 31, 1999, and
the results of its operations, the changes in its net
assets and the financial highlights for the periods
indicated, in conformity with generally accepted
accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
October 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
FS-13
<PAGE> 319
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-97.58%
ARGENTINA-11.90%
Acindar Industria Argentina de
Aceros S.A.-Series B (Iron &
Steel)(a) 400,000 $ 640,301
- --------------------------------------------------------------
Banco de Galicia y Buenos Aires
S.A. de C.V.-ADR (Banks-Regional) 46,118 974,243
- --------------------------------------------------------------
Banco Hipotecario S.A.-Wts.
(Banks-Regional), expiring
02/02/04(b) 617 339,350
- --------------------------------------------------------------
Banco Rio de La Plata S.A.-ADR
(Banks-Major Regional) 100,233 1,290,500
- --------------------------------------------------------------
Fivenez Banco Hipotecario
(Banks-Regional) 122,243 1,388,143
- --------------------------------------------------------------
IRSA Inversiones y Representaciones
S.A.-GDR (Land Development) 35,157 1,061,302
- --------------------------------------------------------------
Juan Minetti S.A.
(Construction-Cement &
Aggregates)(a) 170,390 461,974
- --------------------------------------------------------------
Nortel Inversora S.A.-ADR
(Telephone) 200,500 3,032,563
- --------------------------------------------------------------
Quilmes Industrial S.A.-ADR
(Beverages-Alcoholic) 132,164 1,379,462
- --------------------------------------------------------------
10,567,838
- --------------------------------------------------------------
BRAZIL-35.74%
C.A. La Electricidad de Caracas-ADR
(Electric Companies) 88,588 1,669,866
- --------------------------------------------------------------
Caemi Mineracao E Metalurgica
S.A.-Pfd. (Iron & Steel) 12,750,000 597,656
- --------------------------------------------------------------
Companhia Brasileira de Petroleo
Ipiranga (Oil & Gas-Refining &
Marketing) 120,000,000 960,861
- --------------------------------------------------------------
Companhia Cimento Portland Itau
(Construction-Cement &
Aggregates) 650,000 64,101
- --------------------------------------------------------------
Companhia de Saneamento Basico do
Estado de Sao Paulo (Water
Utilities) 17,292,622 1,164,949
- --------------------------------------------------------------
Companhia de Tecidos Norte de Minas
(Textiles-Specialty) 11,622,000 821,637
- --------------------------------------------------------------
Companhia Energetica de Minas
Gerais-ADR (Electric Companies) 114,506 1,636,600
- --------------------------------------------------------------
Companhia Paranaense de
Energia-Copel-ADR (Electric
Companies) 150,782 602,510
- --------------------------------------------------------------
Companhia Paranaense de Energia-
Copel-(Electric Companies) 147,935 980,069
- --------------------------------------------------------------
Companhia Vale do Rio Doce-Pfd. A
(Iron & Steel) 141,823 2,818,296
- --------------------------------------------------------------
Eletropaulo Metropolitana-
Eletricidade de Sao
Paulo S.A. (Electric Companies) 38,440,242 1,752,654
- --------------------------------------------------------------
Embratel Participacoes S.A.-Pfd.
(Telecommunications-Long
Distance) 109,450,000 1,396,160
- --------------------------------------------------------------
Itausa-Investimentos Itau S.A.-Pfd.
(Investment Management) 3,749,289 2,266,476
- --------------------------------------------------------------
Itausa-Investimentos Itau S.A.-Pfd.
Receipts (Investment Management) 151,050 91,311
- --------------------------------------------------------------
Petroleo Brasileiro
S.A.-Petrobras-Pfd. (Oil &
Gas-Exploration & Production) 30,958,655 4,924,520
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BRAZIL-(CONTINUED)
Tele Centro Sul Participacoes
S.A.-ADR (Telephone) 22,500 $ 1,344,375
- --------------------------------------------------------------
Tele Norte Leste Participacoes
S.A.-Pfd. (Telephone) 52,745,000 886,289
- --------------------------------------------------------------
Telecomunicacoes Brasileiras C.M.
(Telephone) 41,725,004 2,167,477
- --------------------------------------------------------------
Telecomunicacoes Brasileiras S.A.
(Telephone)(a) 86,027,000 2,644
- --------------------------------------------------------------
Telecomunicacoes de Sao Paulo
S.A.-Pfd. (Telephone) 7,448,813 700,234
- --------------------------------------------------------------
Telesp Celular S.A.
(Telecommunications-
Cellular/Wireless) 12,532,000 436,933
- --------------------------------------------------------------
Telesp Celular S.A.-Pfd. B
(Telecommunications-
Cellular/Wireless) 6,373,727 333,053
- --------------------------------------------------------------
Uniao de Bancos Brasileiros
S.A.-GDR (Banks-Regional) 49,672,000 1,148,665
- --------------------------------------------------------------
Unibanco-Uniao de Bancos
Brasileiros S.A. (Banks-Major
Regional)(c) 15,000,200 691,684
- --------------------------------------------------------------
Usinas Siderurgicas de Minas Gerais
S.A.-Pfd. A
(Manufacturing-Diversified) 160,300,000 583,058
- --------------------------------------------------------------
Votorantim Celulose e Papel S.A.
(Paper & Forest Products) 57,900,000 1,690,727
- --------------------------------------------------------------
31,732,805
- --------------------------------------------------------------
CHILE-7.50%
Administradora de Fondos de
Peniones Provida S.A.-ADR
(Financial-Diversified) 100,642 1,736,075
- --------------------------------------------------------------
Banco de A. Edwards-ADR
(Banks-Regional) 41,904 612,846
- --------------------------------------------------------------
Compania Cervecerias Unidas
S.A.-ADR (Beverages-Alcoholic) 67,500 1,472,344
- --------------------------------------------------------------
Embotelladora Arica S.A.-ADR
(Beverages- Non-Alcoholic)
(Acquired 04/23/99; Cost
$536,625(d) 40,500 391,092
- --------------------------------------------------------------
Quinenco S.A.-ADR
(Financial-Diversified) 29,900 278,444
- --------------------------------------------------------------
Sociedad Quimica y Minera de Chile
S.A.-ADR (Chemicals) 59,100 1,717,594
- --------------------------------------------------------------
Supermercados Unimarc S.A.-ADR
(Retail-Food Chains) 207,200 453,250
- --------------------------------------------------------------
6,661,645
- --------------------------------------------------------------
MEXICO-35.62%
Alpha S.A. de C.V.-Class A
(Manufacturing- Diversified) 472,700 1,814,106
- --------------------------------------------------------------
Apasco S.A. de C.V.
(Construction-Cement &
Aggregates) 213,731 1,133,675
- --------------------------------------------------------------
Carso Global Telecom-Class A1
(Telephone)(a) 550,000 3,660,946
- --------------------------------------------------------------
Cemex S.A. de C.V.
(Construction-Cement &
Aggregates) 364,968 1,651,181
- --------------------------------------------------------------
Cintra S.A. (Airlines) 393,300 173,437
- --------------------------------------------------------------
Consorcio Ara, S.A. de C.V.
(Homebuilding)(a) 690,000 776,474
- --------------------------------------------------------------
Controladora Comercial Mexicana
S.A. de C.V. (Retail-Department
Stores)(e) 1,750,000 1,448,778
- --------------------------------------------------------------
</TABLE>
FS-14
<PAGE> 320
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEXICO-(CONTINUED)
Corporacion GEO S.A. de C.V.-Series
B (Construction-Cement &
Aggregates)(a) 271,000 $ 687,717
- --------------------------------------------------------------
El Puerto de Liverpool S.A. de
C.V.-Series 1 (Retail-Department
Stores) 45,941 78,838
- --------------------------------------------------------------
Fomento Economico Mexicano, S.A. de
C.V.-ADR (Beverages-Alcoholic)(b) 80,000 2,625,000
- --------------------------------------------------------------
Grupo Bimbo S.A. de C.V. (Foods)(a) 579,800 1,063,720
- --------------------------------------------------------------
Grupo Carso S.A. de C.V.-Series A1
(Manufacturing-Diversified)(a) 611,000 2,560,926
- --------------------------------------------------------------
Grupo Cementos de Chihuahua S.A. de
C.V.-Class B (Construction-Cement
& Aggregates) 210,000 133,229
- --------------------------------------------------------------
Grupo Financiero Bancomer, S.A. de
C.V.-Class O (Banks-Regional)(a) 4,715,464 1,250,591
- --------------------------------------------------------------
Grupo Financiero Banorte S.A. de
C.V.-Class O
(Financial-Diversified)(a) 1,500,000 1,872,075
- --------------------------------------------------------------
Grupo Industrial Maseca S.A. de
C.V.-Class B (Foods) 1,686,100 841,735
- --------------------------------------------------------------
Grupo Mexico S.A.-Series B (Metals
Mining) 205,824 744,948
- --------------------------------------------------------------
Grupo Posadas S.A.-Series A
(Lodging-Hotels)(a) 471,000 254,727
- --------------------------------------------------------------
Grupo Posadas S.A.-Series L
(Lodging-Hotels)(a) 752,300 344,266
- --------------------------------------------------------------
Grupo Televisa S.A.-GDR
(Entertainment)(a) 105,600 4,488,000
- --------------------------------------------------------------
Industrias Penoles S.A. (Metals
Mining) 484,600 1,527,133
- --------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de
C.V.-Class A (Paper & Forest
Products) 600,000 1,921,997
- --------------------------------------------------------------
Pepsi-Gemex S.A.-GDR (Beverages-
Non-Alcoholic)(a) 122,800 567,950
- --------------------------------------------------------------
31,621,449
- --------------------------------------------------------------
PANAMA-1.55%
Banco Latinoamericano de
Exportaciones, S.A.
(Banks-Regional) 57,597 1,378,728
- --------------------------------------------------------------
PERU-2.80%
Credicorp Ltd.
(Financial-Diversified) 152,332 1,618,528
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PERU-(CONTINUED)
Telefonica del Peru S.A.A.-ADR
(Telephone) 42,500 $ 491,406
- --------------------------------------------------------------
Union de Cervecerias Backus &
Johnston S.A.A.
(Beverages-Alcoholic) 1,008,223 371,948
- --------------------------------------------------------------
2,481,882
- --------------------------------------------------------------
UNITED KINGDOM-1.86%
Antofagasta Holdings PLC (Gold &
Precious Metals Mining) 240,000 1,649,361
- --------------------------------------------------------------
VENEZUELA-0.61%
C.A. La Electricidad de Caracas
(Electric Companies)(f) 186,266 70,768
- --------------------------------------------------------------
Corporacion Venezolana de Cementos
S.A.C.A.-I (Constructions-Cement
& Aggregates) 675,057 293,875
- --------------------------------------------------------------
Corporacion Venezolana de Cementos
S.A.C.A.-II (Constructions-Cement
& Aggregates) 446,248 176,606
- --------------------------------------------------------------
541,249
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$102,130,895) 86,634,957
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT(g)
<S> <C> <C>
CORPORATE BONDS-0.00%
BRAZIL-0.00%
Companhia Vale do Rio Doce-Non
Convertible (Cost $0) BRL 276,400 0
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-0.91%
STIC Liquid Assets Portfolio(h) 404,169 404,169
- --------------------------------------------------------------
STIC Prime Portfolio(h) 404,169 404,169
- --------------------------------------------------------------
Total Money Market Funds (Cost
$808,338) 808,338
- --------------------------------------------------------------
TOTAL INVESTMENTS-98.49% 87,443,295
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.51% 1,344,875
- --------------------------------------------------------------
NET ASSETS-100.00% $88,788,170
- --------------------------------------------------------------
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
Pfd. - Preferred
Wts. - Warrants
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(c) Each unit represents one preferred share of Unibanco and one preferred B
share of Unibanco Holdings.
(d) Restricted security. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933, as
amended. The valuation of this security has been determined in accordance
with procedures established by the Board of Trustees. The market value at
10/31/99 was $391,092 which represented 0.44% of the Fund's net assets.
(e) Each unit represents three B shares and one C share.
(f) Each unit represents one share of Electricidad de Caracas and one share of
Corporacion EDC.
(g) Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(h) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-15
<PAGE> 321
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $102,939,233) $ 87,443,295
- -------------------------------------------------------------
Foreign currencies, at value (cost $568,244) 573,893
- -------------------------------------------------------------
Receivables for:
Investments sold 843,462
- -------------------------------------------------------------
Fund shares sold 80,031
- -------------------------------------------------------------
Dividends and interest 279,049
- -------------------------------------------------------------
Other assets 20,338
- -------------------------------------------------------------
Total assets 89,240,068
- -------------------------------------------------------------
LIABILITIES:
Payable for fund shares reacquired 254,077
- -------------------------------------------------------------
Accrued advisory fees 9,838
- -------------------------------------------------------------
Accrued distribution fees 40,251
- -------------------------------------------------------------
Accrued accounting services fees 4,247
- -------------------------------------------------------------
Accrued transfer agent fees 21,021
- -------------------------------------------------------------
Accrued trustees' fees 2,762
- -------------------------------------------------------------
Other liabilities 119,702
- -------------------------------------------------------------
Total liabilities 451,898
- -------------------------------------------------------------
Net assets applicable to shares outstanding $ 88,788,170
- -------------------------------------------------------------
NET ASSETS:
Class A $ 49,788,968
- -------------------------------------------------------------
Class B $ 38,455,515
- -------------------------------------------------------------
Class C $ 146,525
- -------------------------------------------------------------
Advisor Class $ 397,162
- -------------------------------------------------------------
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 3,564,736
- -------------------------------------------------------------
Class B 2,788,851
- -------------------------------------------------------------
Class C 10,624
- -------------------------------------------------------------
Advisor Class 28,479
- -------------------------------------------------------------
Class A:
Net asset value and redemption price per
share $ 13.97
- -------------------------------------------------------------
Offering price per share:
(Net asset value of $13.97 divided by
95.25%) $ 14.67
- -------------------------------------------------------------
Class B:
Net asset value and offering price per
share $ 13.79
- -------------------------------------------------------------
Class C:
Net asset value and offering price per
share $ 13.79
- -------------------------------------------------------------
Advisor Class:
Net asset value, redemption and offering
price per share $ 13.95
- -------------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $479,760 foreign withholding
tax) $ 3,291,105
- ------------------------------------------------------------
Interest 35,745
- ------------------------------------------------------------
Securities lending 91,156
- ------------------------------------------------------------
Total investment income 3,418,006
- ------------------------------------------------------------
EXPENSES:
Advisory and administrative fees 952,046
- ------------------------------------------------------------
Accounting services fees 38,349
- ------------------------------------------------------------
Custodian fees 53,267
- ------------------------------------------------------------
Interest expense (Note 5) 54,310
- ------------------------------------------------------------
Distribution fees -- Class A 273,567
- ------------------------------------------------------------
Distribution fees -- Class B 422,771
- ------------------------------------------------------------
Distribution fees -- Class C 713
- ------------------------------------------------------------
Printing fees 284,503
- ------------------------------------------------------------
Trustees' fees 11,926
- ------------------------------------------------------------
Transfer agent fees -- Class A 338,413
- ------------------------------------------------------------
Transfer agent fees -- Class B 261,324
- ------------------------------------------------------------
Transfer agent fees -- Class C 445
- ------------------------------------------------------------
Transfer agent fees -- Advisor Class 3,624
- ------------------------------------------------------------
Other 93,931
- ------------------------------------------------------------
Total expenses 2,789,189
- ------------------------------------------------------------
Less: Expenses paid indirectly (3,131)
- ------------------------------------------------------------
Fees waived by advisor (572,144)
- ------------------------------------------------------------
Net expenses 2,213,914
- ------------------------------------------------------------
Net investment income 1,204,092
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities (29,737,138)
- ------------------------------------------------------------
Foreign currencies (539,564)
- ------------------------------------------------------------
(30,276,702)
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 48,113,915
- ------------------------------------------------------------
Foreign currencies (35,910)
- ------------------------------------------------------------
48,078,005
- ------------------------------------------------------------
Net gain from investment securities and
foreign currencies 17,801,303
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $ 19,005,395
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-16
<PAGE> 322
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,204,092 $ 1,153,228
- -------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (30,276,702) (18,715,746)
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies 48,078,005 (54,475,416)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 19,005,395 (72,037,934)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (703,214) (219,544)
- -------------------------------------------------------------------------------------------
Class B (122,741) --
- -------------------------------------------------------------------------------------------
Advisor Class (9,487) (5,514)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A (22,064,281) (61,587,566)
- -------------------------------------------------------------------------------------------
Class B (15,015,084) (52,032,524)
- -------------------------------------------------------------------------------------------
Class C 158,037 --
- -------------------------------------------------------------------------------------------
Advisor Class (144,362) (13,073)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (18,895,737) (185,896,155)
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 107,683,907 293,580,062
- -------------------------------------------------------------------------------------------
End of period $ 88,788,170 $ 107,683,907
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $167,043,253 $ 204,122,934
- -------------------------------------------------------------------------------------------
Undistributed net investment income 675,072 831,995
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (63,367,151) (33,630,013)
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies (15,563,004) (63,641,009)
- -------------------------------------------------------------------------------------------
$ 88,788,170 $ 107,683,907
===========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-17
<PAGE> 323
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Latin American Growth Fund (the "Fund") is a separate series of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware business
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of twelve separate series portfolios, each having an unlimited number of shares
of beneficial interest. The Fund consists of four different classes of shares:
Class A shares, Class B shares, Class C shares and Advisor Class shares. Class A
shares are sold with a front-end sales charge. Class B shares and Class C shares
are sold with a contingent deferred sales charge. Advisor Class shares were sold
without a sales charge. Matters affecting each portfolio or class will be voted
on exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is growth of capital.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. For purposes of
determining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the New
York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Trustees.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
fund share redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was decreased by
$525,573, undistributed net realized gains increased by $539,564 and
paid-in capital decreased by $13,991 as a result of differing book/tax
treatment of foreign currency transactions and net operating loss
reclassifications in order to comply with the requirements of the American
Institute of Certified Public Accountants Statement of Position 93-2. Net
assets of the Fund were unaffected by the reclassifications discussed
above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $61,871,107 as of October 31, 1999 which may be carried
forward to offset future taxable gains, if any, and expires in varying
increments, if not previously utilized, in the year 2007.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in
FS-18
<PAGE> 324
foreign exchange rates on investments and the fluctuations arising from
changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
F. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits
required upon entering into futures contracts are satisfied by the
segregation of specific securities as collateral for the account of the
broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and that a change in value of the
contracts may not correlate with changes in the value of the securities
being hedged.
G. Expenses -- Distribution expenses directly attributable to a class of
shares are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
H. 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
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 fluctuations, perceived credit
risk,adverse political and economic developments and possible adverse
foreign government intervention.
I. Indexed Securities -- The Fund may invest in indexed securities whose value
is linked either directly or indirectly to changes in foreign currencies,
interest rates, equities, indices, or other reference instruments. Indexed
securities may be more volatile than the reference instrument itself, but
any loss is limited to the amount of the original investment.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
INVESCO Asset Management Limited is the Fund's sub-advisor and
sub-administrator. The Fund pays AIM investment management and administration
fees at an annual rate of 0.975% on the first $500 million of the Fund's average
daily net assets, plus 0.95% on the next $500 million of the Fund's average
daily net assets, plus 0.925% on the next $500 million of the Fund's average
daily net assets, plus 0.90% on the Fund's average daily net assets exceeding
$1.5 billion. AIM has contractually agreed to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest and extraordinary expenses)
to the maximum annual rate of 2.00%, 2.50%, 2.50% and 1.50% of the average daily
net assets of the Fund's Class A, Class B, Class C and Advisor Class shares,
respectively. During the year ended October 31, 1999, AIM waived fees of
$572,144.
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund. Prior to July 1, 1999, AIM was the
pricing and accounting agent for the Fund. The monthly fee for these services
paid to AIM was a percentage, not to exceed 0.03% annually, of a Fund's average
daily net assets. The annual fee rate was derived based on the aggregate net
assets of the funds which comprised the following investment companies: AIM
Growth Series, AIM Investment Funds, AIM Series Trust, G.T. Global Variable
Investment Series and G.T. Global Variable Investment Trust. The fee was
calculated at the rate of 0.03% of the first $5 billion of assets and 0.02% to
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets. For the year ended
October 31, 1999, AIM was paid $38,349 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended October 31, 1999, AFS was
paid $570,779 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares, Class B shares and Class C shares (collectively the
"Plans"). The Fund , pursuant to the Plans, pays AIM Distributors compensation
at the annual rate of 0.50% of the Fund's average daily net assets of Class A
shares and 1.00% of the average daily net assets of Class B and C shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. For the
FS-19
<PAGE> 325
year ended October 31, 1999, the Class A, Class B and Class C shares paid AIM
Distributors $273,567, $422,771 and $713, respectively, as compensation under
the Plans.
AIM Distributors received commissions of $12,934 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $536 in contingent deferred sales charges imposed on
redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AFS and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $3,131 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$3,131 during the year ended October 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among the
funds based on their respective average net assets for the period. Prior to May
28, 1999, the Fund, along with certain other funds advised and/or administered
by AIM, had a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allowed the Fund and certain other
funds to borrow, on a first come, first served basis, an aggregate maximum
amount of $250,000,000.
During the year ended October 31, 1999, the average outstanding daily balance
of bank loans for the Fund was $965,592 with a weighted average interest rate of
5.62%. Interest expense for the Fund for the year ended October 31, 1999 was
$54,310.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, securities with an aggregate value of $2,926,733 were on
loan to brokers. The loans were secured by cash collateral of $2,985,267
received by the Fund. For the year ended October 31, 1999, the Fund received
fees of $91,156 for securities lending.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$28,967,058 and $62,536,455, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 10,237,584
- ---------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (27,229,564)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities $(16,991,980)
=========================================================
</TABLE>
Cost of investments for tax purposes is $104,435,275.
FS-20
<PAGE> 326
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 10,698,303 $130,700,031 31,480,158 $ 504,106,417
- ----------------------------------------------------------------------------------------------------------------------
Class B 1,074,686 14,304,893 14,533,097 243,328,768
- ----------------------------------------------------------------------------------------------------------------------
Class C* 20,395 302,050 -- --
- ----------------------------------------------------------------------------------------------------------------------
Advisor Class 103,353 1,459,954 1,261,470 24,366,740
- ----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 56,745 633,836 8,770 183,909
- ----------------------------------------------------------------------------------------------------------------------
Class B 9,959 110,343 -- --
- ----------------------------------------------------------------------------------------------------------------------
Advisor Class 833 9,259 261 5,468
- ----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (12,381,943) (153,398,148) (34,474,810) (565,877,892)
- ----------------------------------------------------------------------------------------------------------------------
Class B (2,351,288) (29,430,320) (17,417,330) (295,361,292)
- ----------------------------------------------------------------------------------------------------------------------
Class C* (9,771) (144,013) -- --
- ----------------------------------------------------------------------------------------------------------------------
Advisor Class (106,874) (1,613,575) (1,263,040) (24,385,281)
- ----------------------------------------------------------------------------------------------------------------------
(2,885,602) $(37,065,690) (5,871,424) $(113,633,163)
======================================================================================================================
</TABLE>
* Class C shares commenced sales on March 1, 1999.
NOTE 8-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,
----------------------------------------------------------
1999 1998(a) 1997(a) 1996(a) 1995(a)
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.70 $ 19.50 $ 17.95 $ 15.38 $ 26.11
- -------------------------------------------------------- ------- ------- -------- -------- --------
Income from investment operations:
Net investment income (loss) 0.21 0.13(b) 0.11 0.09 0.15
- -------------------------------------------------------- ------- ------- -------- -------- --------
Net realized and unrealized gain (loss) on investments 2.20 (7.90) 1.44 2.59 (9.28)
- -------------------------------------------------------- ------- ------- -------- -------- --------
Net increase (decrease) from investment operations 2.41 (7.77) 1.55 2.68 (9.13)
- -------------------------------------------------------- ------- ------- -------- -------- --------
Distributions to shareholders:
From net investment income (0.14) (0.03) -- (0.08) --
- -------------------------------------------------------- ------- ------- -------- -------- --------
From net realized gain on investments -- -- -- -- (1.60)
- -------------------------------------------------------- ------- ------- -------- -------- --------
In excess of net investment income -- -- -- (0.03) --
- -------------------------------------------------------- ------- ------- -------- -------- --------
Total distributions (0.14) (0.03) -- (0.11) (1.60)
- -------------------------------------------------------- ------- ------- -------- -------- --------
Net asset value, end of period $ 13.97 $ 11.70 $ 19.50 $ 17.95 $ 15.38
======================================================== ======= ======= ======== ======== ========
Total return(c) 20.93% (39.86)% 8.52% 17.52% (37.16)%
======================================================== ======= ======= ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in 000s) $49,789 $60,720 $159,496 $177,373 $182,462
- -------------------------------------------------------- ------- ------- -------- -------- --------
Ratio of net investment income to average net assets:
With fee waivers 1.44%(d) 0.78% 0.52% 0.46% 0.86%
- -------------------------------------------------------- ------- ------- -------- -------- --------
Without fee waivers 0.85%(d) 0.64% 0.42% 0.39% 0.85%
======================================================== ======= ======= ======== ======== ========
Ratio of expenses to average net assets (excluding
interest expense):
With fee waivers 2.00%(d) 2.00% 1.96% 2.03% 2.11%
- -------------------------------------------------------- ------- ------- -------- -------- --------
Without fee waivers 2.59%(d) 2.14% 2.06% 2.10% 2.12%
======================================================== ======= ======= ======== ======== ========
Ratio of interest expense to average net assets 0.06% 0.17% N/A N/A N/A
- -------------------------------------------------------- ------- ------- -------- -------- --------
Portfolio turnover rate 30% 39% 130% 101% 125%
======================================================== ======= ======= ======== ======== ========
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $.02.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) Ratios are based on average net assets of $54,713,405.
FS-21
<PAGE> 327
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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,
-----------------------------------------------------------
1999 1998(a) 1997(a) 1996(a) 1995(a)
------------ ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.49 $ 19.23 $ 17.78 $ 15.21 $ 25.94
- ----------------------------------------------------------- ------- ------- -------- -------- --------
Income from investment operations:
Net investment income 0.17 0.04(b) 0.01 -- 0.06
- ----------------------------------------------------------- ------- ------- -------- -------- --------
Net realized and unrealized gain (loss) on investments 2.16 (7.78) 1.44 2.59 (9.19)
- ----------------------------------------------------------- ------- ------- -------- -------- --------
Net increase (decrease) from investment operations 2.33 (7.74) 1.45 2.59 (9.13)
- ----------------------------------------------------------- ------- ------- -------- -------- --------
Distributions to shareholders:
From net investment income (0.03) -- -- (0.01) --
- ----------------------------------------------------------- ------- ------- -------- -------- --------
From net realized gain on investments -- -- -- -- (1.60)
- ----------------------------------------------------------- ------- ------- -------- -------- --------
In excess of net investment income -- -- -- (0.01) --
- ----------------------------------------------------------- ------- ------- -------- -------- --------
Total distributions (0.03) -- -- (0.02) (1.60)
- ----------------------------------------------------------- ------- ------- -------- -------- --------
Net asset value, end of period $ 13.79 $ 11.49 $ 19.23 $ 17.78 $ 15.21
=========================================================== ======= ======= ======== ======== ========
Total return(c) 20.36% (40.19)% 8.04% 17.02% (37.42)%
=========================================================== ======= ======= ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in 000's) $38,456 $46,599 $133,448 $137,400 $134,527
=========================================================== ======= ======= ======== ======== ========
Ratio of net investment income (loss) to average net assets:
With fee waivers 0.94%(d) 0.28% 0.02% (0.04)% 0.36%
- ----------------------------------------------------------- ------- ------- -------- -------- --------
Without fee waivers 0.35%(d) 0.14% (0.08)% (0.11)% 0.35%
=========================================================== ======= ======= ======== ======== ========
Ratio of expenses to average net assets (excluding interest
expense):
With fee waivers 2.50%(d) 2.50% 2.46% 2.53% 2.61%
- ----------------------------------------------------------- ------- ------- -------- -------- --------
Without fee waivers 3.09%(d) 2.64% 2.56% 2.60% 2.62%
=========================================================== ======= ======= ======== ======== ========
Ratio of interest expenses to average net assets 0.06% 0.17% N/A N/A N/A
- ----------------------------------------------------------- ------- ------- -------- -------- --------
Portfolio turnover rate 30% 39% 130% 101% 125%
=========================================================== ======= ======= ======== ======== ========
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.02.
(c) Total return does not include sales charges.
(d) Ratios are based on average net assets of $42,277,069.
FS-22
<PAGE> 328
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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 C ADVISOR CLASS
---------------- -----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
MARCH 1, 1999 TO ------------------------------------------- JUNE 1, 1995 TO
OCTOBER 31, 1999 1999 1998(a) 1997(a) 1996(a) OCTOBER 31, 1995(a)
---------------- ------ ------- ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.21 $11.71 $19.57 $17.94 $15.40 $15.95
- ----------------------------------------- ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.12 0.31 0.21(b) 0.19 0.17 0.09
- ----------------------------------------- ------ ------ ------ ------ ------ ------
Net realized and unrealized gain (loss)
on investments 3.46 2.16 (7.92) 1.44 2.58 (0.64)
- ----------------------------------------- ------ ------ ------ ------ ------ ------
Net increase (decrease) from
investment operations 3.58 2.47 (7.71) 1.63 2.75 (0.55)
- ----------------------------------------- ------ ------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income -- (0.23) (0.15) -- (0.14) --
- ----------------------------------------- ------ ------ ------ ------ ------ ------
In excess of net investment income -- -- -- -- (0.07) --
- ----------------------------------------- ------ ------ ------ ------ ------ ------
Total distributions -- (0.23) (0.15) -- (0.21) --
- ----------------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $13.79 $13.95 $11.71 $19.57 $17.94 $15.40
========================================= ====== ====== ====== ====== ====== ======
Total return(c) 35.06% 21.56% (39.67)% 8.91% 18.16% (3.45)%
========================================= ====== ====== ====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in 000's) $ 147 $ 397 $ 365 $ 636 $ 818 $ 369
========================================= ====== ====== ====== ====== ====== ======
Ratio of net investment income to average
net assets:
With fee waivers 0.94%(d) 1.94%(e) 1.28% 1.02% 0.96% 1.36%(f)
- ----------------------------------------- ------ ------ ------ ------ ------ ------
Without fee waivers 0.35%(d) 1.35%(e) 1.14% 0.92% 0.89% 1.35%(f)
========================================= ====== ====== ====== ====== ====== ======
Ratio of expenses to average net assets
(excluding interest expense):
With fee waivers 2.50%(d) 1.50%(e) 1.50% 1.46% 1.53% 1.61%(f)
- ----------------------------------------- ------ ------ ------ ------ ------ ------
Without fee waivers 3.09%(d) 2.09%(e) 1.64% 1.56% 1.60% 1.62%(f)
========================================= ====== ====== ====== ====== ====== ======
Ratio of interest expense to average net
assets 0.06% 0.06% 0.17% N/A N/A N/A
- ----------------------------------------- ------ ------ ------ ------ ------ ------
Portfolio turnover rate 30% 30% 39% 130% 101% 125%
========================================= ====== ====== ====== ====== ====== ======
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.02.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) Ratios are annualized and based on average net assets of $106,283.
(e) Ratios are based on average net assets of $583,904.
(f) Annualized.
NOTE 9-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
FS-23
<PAGE> 329
STATEMENT OF
ADDITIONAL INFORMATION
CLASS A, CLASS B AND CLASS C SHARES OF
AIM EMERGING MARKETS DEBT FUND
AIM GLOBAL GOVERNMENT INCOME FUND
AIM GLOBAL GROWTH & INCOME FUND
AIM STRATEGIC INCOME FUND
(SERIES PORTFOLIOS OF
AIM INVESTMENT FUNDS)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF THE
ABOVE-NAMED FUNDS, A COPY OF WHICH MAY BE OBTAINED FREE
OF CHARGE FROM AUTHORIZED DEALERS OR BY WRITING
AIM DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 347-4246
STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 2000
RELATING TO AIM EMERGING MARKETS DEBT FUND PROSPECTUS DATED FEBRUARY 28, 2000,
RELATING TO AIM GLOBAL GOVERNMENT INCOME FUND PROSPECTUS DATED
FEBRUARY 28, 2000,
RELATING TO AIM GLOBAL GROWTH & INCOME FUND PROSPECTUS DATED FEBRUARY 28, 2000
AND RELATING TO AIM STRATEGIC INCOME FUND PROSPECTUS DATED FEBRUARY 28, 2000
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TABLE OF CONTENTS
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INTRODUCTION......................................................................................................1
GENERAL INFORMATION ABOUT THE FUNDS...............................................................................1
The Trust and Its Shares.................................................................................1
INVESTMENT STRATEGIES AND RISKS...................................................................................3
Investment Objectives....................................................................................3
Investment Strategies....................................................................................4
Selection of Debt Investments............................................................................7
Selection of Equity Investments..........................................................................7
Selection of Investments and Asset Allocation............................................................7
Investment In Emerging Markets...........................................................................9
Sovereign Debt..........................................................................................10
Brady Bonds.............................................................................................11
Loan Participations and Assignments.....................................................................12
Mortgage-Backed and Asset-Backed Securities.............................................................12
When-Issued and Forward Commitment Securities...........................................................13
Temporary Defensive Strategies..........................................................................13
Equity-Linked Derivatives...............................................................................13
Investments in Other Investment Companies...............................................................14
Depositary Receipts.....................................................................................14
Samurai and Yankee Bonds................................................................................15
Warrants or Rights......................................................................................15
Lending of Portfolio Securities.........................................................................15
Commercial Bank Obligations.............................................................................16
Repurchase Agreements...................................................................................16
Borrowing, Reverse Repurchase Agreements and............................................................17
Zero Coupon Securities..................................................................................18
Synthetic Security Positions............................................................................18
Swaps, Caps, Floors, and Collars........................................................................19
Indexed Commercial Paper................................................................................19
Other Indexed Securities................................................................................20
Short Sales.............................................................................................20
OPTIONS, FUTURES AND CURRENCY STRATEGIES.........................................................................21
Options, Futures, and Forward Currency Transactions.....................................................21
Special Risks of Options, Futures and Currency Strategies...............................................21
Writing Call Options....................................................................................22
Writing Put Options.....................................................................................24
Purchasing Put Options..................................................................................24
Purchasing Call Options.................................................................................25
Index Options...........................................................................................26
Interest Rate, Currency and Stock Index Futures Contracts...............................................27
Options on Futures Contracts............................................................................29
Limitations on Use of Futures, Options on Futures and Certain Options on Currencies.....................30
Forward Contracts.......................................................................................30
Foreign Currency Strategies--Special Considerations.....................................................31
Cover...................................................................................................32
Interest Rate and Currency Swaps........................................................................32
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RISK FACTORS.....................................................................................................33
Non-Diversified Classification..........................................................................33
Illiquid Securities.....................................................................................33
Foreign Securities......................................................................................34
Mortgage-Backed and Asset-Backed Securities.............................................................39
Lower Quality Debt Securities...........................................................................39
INVESTMENT LIMITATIONS...........................................................................................41
Emerging Markets Debt Fund and the Portfolio............................................................41
Government Income Fund..................................................................................43
Growth & Income Fund....................................................................................44
Strategic Income Fund...................................................................................46
EXECUTION OF PORTFOLIO TRANSACTIONS..............................................................................47
Portfolio Trading and Turnover..........................................................................49
MANAGEMENT.......................................................................................................49
Trustees and Executive Officers.........................................................................50
Investment Management and Administration Services.......................................................52
Expenses of the Funds and the Portfolio.................................................................55
THE DISTRIBUTION PLANS...........................................................................................55
The Class A and C Plan..................................................................................55
The Class B Plan........................................................................................56
Both Plans..............................................................................................56
THE DISTRIBUTOR..................................................................................................60
SALES CHARGES AND DEALER CONCESSIONS.............................................................................62
REDUCTIONS IN INITIAL SALES CHARGES..............................................................................65
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS......................................................................68
HOW TO PURCHASE AND REDEEM SHARES................................................................................70
Backup Withholding......................................................................................71
NET ASSET VALUE DETERMINATION....................................................................................73
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................73
Reinvestment of Dividends and Distributions.............................................................73
Tax Matters.............................................................................................74
Taxation of the Funds...................................................................................74
Taxation of the Portfolio--General......................................................................74
Taxation of Certain Investment Activities...............................................................75
Taxation of the Funds' Shareholders.....................................................................77
Exchange and Reinstatement Privileges and Wash Sales....................................................78
SHAREHOLDER INFORMATION..........................................................................................78
MISCELLANEOUS INFORMATION........................................................................................81
Charges for Certain Account Information.................................................................81
Custodian and Transfer Agent............................................................................81
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Independent Accountants.................................................................................81
Legal Matters...........................................................................................81
Shareholder Liability...................................................................................81
Control Persons and Principal Holders of Securities.....................................................82
INVESTMENT RESULTS...............................................................................................85
Total Return Quotations.................................................................................85
Non-Standardized Returns................................................................................86
Yield Quotations........................................................................................89
Performance Information.................................................................................89
APPENDIX.........................................................................................................93
Description of Bond Ratings.............................................................................93
Description of Commercial Paper Ratings.................................................................94
Absence of Rating.......................................................................................94
FINANCIAL STATEMENTS.............................................................................................FS
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INTRODUCTION
This Statement of Additional Information relates to the Class A, Class B
and Class C shares of AIM Emerging Markets Debt Fund (formerly known as AIM
Global High Income Fund) ("Emerging Markets Debt Fund"), AIM Global Government
Income Fund ("Government Income Fund"), AIM Global Growth & Income Fund ("Growth
& Income Fund") and AIM Strategic Income Fund ("Strategic Income Fund") (each, a
"Fund," and collectively, the "Funds"). All references to the Funds shall
include references to the Portfolio where applicable. All references to the
Funds shall include references to the Portfolio where applicable. Each Fund is a
non-diversified series of AIM Investment Funds (the "Trust"), a registered
open-end management investment company organized as a Delaware business trust.
AIM Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for the Funds and Emerging Markets Debt Portfolio (formerly known
as the Global High Income Portfolio), in which the Emerging Markets Debt Fund
invests (the "Portfolio"). INVESCO Asset Management Limited (the "Sub-Advisor")
serves as the investment sub-advisor for Government Income Fund, Growth & Income
Fund and the Portfolio.
The Trust is a series mutual fund. The rules and regulations of the
Securities and Exchange Commission (the "SEC") require all mutual funds to
furnish prospective investors certain information concerning the activities of
the fund being considered for investment. This information for Emerging Markets
Debt Fund is included in a separate Prospectus dated February 28, 2000, for
Government Income Fund is included in a separate Prospectus dated February 28,
2000, for Growth & Income Fund is included in a separate Prospectus dated
February 28, 2000, and for Strategic Income Fund is included in a separate
Prospectus dated February 28, 2000. Additional copies of the Prospectuses and
this Statement of Additional Information may be obtained without charge by
writing the principal distributor of the Funds' shares, AIM Distributors, Inc.
("AIM Distributors"), P.O. Box 4739, Houston, TX 77210-4739 or by calling (800)
347-4246. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Funds. Some of the
information required to be in this Statement of Additional Information is also
included in the Prospectus, and, in order to avoid repetition, reference will be
made to sections of the Prospectus. Additionally, the Prospectus and this
Statement of Additional Information omit certain information contained in the
Registration Statement filed with the SEC. Copies of the Registration Statement,
including items omitted from the Prospectus and this Statement of Additional
Information, may be obtained from the SEC by paying the charges prescribed under
its rules and regulations.
GENERAL INFORMATION ABOUT THE FUNDS
THE TRUST AND ITS SHARES
The Trust was organized as a Delaware business trust on May 7, 1998, and
previously operated under the name G.T. Investment Funds, Inc., which was
organized as a Maryland corporation on October 29, 1987. The Trust was
reorganized on September 8, 1998 as a Delaware business trust, and is registered
with the SEC as a diversified open-end series management investment company. The
Trust currently consists of the following portfolios: AIM Developing Markets
Fund, AIM Emerging Markets Debt Fund, AIM Global Consumer Products and Services
Fund, AIM Global Financial Services Fund, AIM Global Government Income Fund, AIM
Global Growth & Income Fund, AIM Global Health Care Fund, AIM Global
Infrastructure Fund, AIM Global Resources Fund, AIM Global Telecommunications
and Technology Fund (formerly AIM Global Telecommunications Fund), AIM Latin
American Growth Fund, and AIM Strategic Income Fund. Each of these funds has
three separate classes: Class A, Class B and Class C shares. The Board is
authorized to establish additional series of shares, or additional classes of
shares of any fund, at any time. All historical financial and other information
contained in this Statement of Additional Information for periods prior to
September 8, 1998, is that of the series of AIM Investment Funds, Inc.
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The term "majority of the outstanding shares" of the Trust, of a particular
Fund or of a particular class of a Fund means, respectively, the vote of the
lesser of (a) 67% or more of the shares of the Trust, such Fund or such class
present at a meeting of the Trust's shareholders, if the holders of more than
50% of the outstanding shares of the Trust, such Fund or such class are present
or represented by proxy, or (b) more than 50% of the outstanding shares of the
Trust, such Fund or such class.
Class A, Class B and Class C shares of each Fund have equal rights and
privileges. Each share of a particular class is entitled to one vote, to
participate equally in dividends and distributions declared by the Trust's Board
of Trustees with respect to the class of such Fund and, upon liquidation of the
Fund, to participate proportionately in the net assets of the Fund allocable to
such class remaining after satisfaction of outstanding liabilities of the Fund
allocable to such class. Fund shares are fully paid, non-assessable and fully
transferable when issued and have no preemptive rights and have such conversion
and exchange rights as set forth in the Prospectus and this Statement of
Additional Information. Fractional shares have proportionately the same rights,
including voting rights, as are provided for a full share. Other than the
automatic conversion of Class B shares to Class A shares, there are no
conversion rights.
Shareholders of the Funds do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all Funds
voting together for election of trustees may elect all of the members of the
Board of Trustees of the Trust. In such event, the remaining holders cannot
elect any trustees of the Trust.
From time to time, the Trust may establish other funds, each corresponding
to a distinct investment portfolio and a distinct series of the Trust's shares
of beneficial interest. Shares of each fund are entitled to one vote per share
(with proportional voting for fractional shares) and are freely transferable.
Shareholders have no preemptive rights.
On any matter submitted to a vote of shareholders, shares of the Funds will
be voted by the Fund's shareholders individually when the matter affects the
specific interest of the Funds only, such as approval of its investment
management arrangements. In addition, shares of particular classes of the Funds
may vote on matters affecting only those Classes. The shares of the Funds and of
the Trust's other series will be voted in the aggregate on other matters, such
as the election of Trustees and ratification of the selection of the Trust's
independent accountants.
Normally there will be no annual meeting of shareholders in any year,
except as required under the Investment Company Act of 1940, as amended ("1940
Act"). A Trustee may be removed at any meeting of the shareholders of the Trust
by a vote of the shareholders owning at least two-thirds of the outstanding
shares. Any Trustee may call a special meeting of shareholders for any purpose.
Furthermore, Trustees shall promptly call a meeting of shareholders solely for
the purpose of removing one or more Trustees when requested in writing to do so
by shareholders holding 10% of the Trust's outstanding shares.
Pursuant to the Trust's Agreement and Declaration of Trust, the Trust may
issue an unlimited number of shares of the Funds. Each share of a Fund
represents an interest in that Fund only, has a par value of $0.01 per share,
represents an equal proportionate interest in that Fund with other shares of
that Fund and is entitled to such dividends and distributions out of the income
earned and gain realized on the assets belonging to that Fund as may be declared
by the Board of Trustees. Each share of a Fund is equal in earnings, assets and
voting privileges except that each class normally has exclusive voting rights
with respect to its distribution plan and bears the expenses, if any, related to
the distribution of its shares.
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a Delaware
business trust. Under Delaware law, Emerging Markets Debt Fund and other
entities that invest in the Portfolio enjoy the same limitations of liability
extended to shareholders of private, for-profit corporations. There is a remote
possibility, however, that under certain circumstances an investor in the
Portfolio may be held liable for the Portfolio's
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obligations. However, the Agreement and Declaration of Trust of the Portfolio
disclaims shareholder liability for acts or obligations of the Portfolio and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Portfolio or a trustee. The
Agreement and Declaration of Trust also provides for indemnification from the
Portfolio property for all losses and expenses of any shareholder held
personally liable for the Portfolio's obligations. Thus, the risk of an investor
incurring financial loss on account of such liability is limited to
circumstances in which the Portfolio itself would be unable to meet its
obligations and where the other party was held not to be bound by the
disclaimer.
Whenever Emerging Markets Debt Fund is requested to vote on any proposal of
the Portfolio, Emerging Markets Debt Fund will hold a meeting of Emerging
Markets Debt Fund shareholders and will cast its vote as instructed by Emerging
Markets Debt 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.
INVESTMENT STRATEGIES AND RISKS
The following discussion of investment policies supplements the discussion
of the investment objectives and policies set forth in the applicable Prospectus
under the heading "Investment Objective and Strategies" and "Principal Risks of
Investing in the Fund."
INVESTMENT OBJECTIVES
The Funds' investment objectives may not be changed without the approval of
a majority of the Funds' outstanding voting securities. If a percentage
restriction on investment or utilization of assets in an investment policy or
restriction is adhered to at the time an investment is made, a later change in
percentage ownership of a security or kind of securities resulting from changing
market values or a similar type of event will not be considered a violation of
the Fund's investment policies or restrictions.
Government Income Fund primarily seeks high current income and secondarily
seeks growth of capital and protection of principal. Strategic Income Fund and
Emerging Markets Debt Fund primarily seek high current income and secondarily
growth of capital. The Emerging Markets Debt Fund seeks to achieve its
investment objectives by investing all of its investable assets in the
Portfolio, which is a non-diversified open-end management investment company
with investment objectives identical to those of the Fund. Whenever the phrase
"all of Emerging Markets Debt Fund's investable assets" is used herein and in
the Prospectus, it means that the only investment securities held by Emerging
Markets Debt Fund will be its interest in the Portfolio. Emerging Markets Debt
Fund may withdraw its investment in the Portfolio at any time, if the Board of
Trustees of the Trust determines that it is in the best interests of the Fund
and its shareholders to do so. Upon any such withdrawal, Emerging Markets Debt
Fund's assets would be invested in accordance with the investment policies of
the Portfolio described below and in the Prospectus. The investment objective of
Growth & Income Fund is long-term growth of capital together with current
income.
In addition to the primary investment policies set forth in such Fund's
Prospectus, Strategic Income Fund, Government Income Fund, the Portfolio, and
Growth & Income Fund may engage in other types of investments, as described
below.
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INVESTMENT STRATEGIES
Strategic Income Fund
Strategic Income Fund's investments in debt securities of issuers in: (1)
the United States; (2) developed foreign countries; and (3) emerging markets.
Strategic Income 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. Under normal market conditions, Strategic Income Fund will
invest at least 35% of its total assets in U.S. and foreign debt and other fixed
income securities that, at the time of purchase, are either rated at least
investment grade by Moody's or S&P or, if not rated, are determined by AIM to be
of comparable quality. Up to 65% of Strategic Income Fund's total assets may be
invested in debt securities that, at the time of purchase are either rated below
investment grade by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") or, if not rated,
are determined by AIM to be of comparable quality. 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." Strategic Income
Fund may also invest in securities that are in default as to payment of
principal and/or interest. Strategic Income Fund may invest up to 35% of its
total assets in equity securities (including convertible securities). AIM
anticipates investing in equity securities when market conditions appear to
present opportunities favorable for capital appreciation due to such factors as
improved corporate earnings or favorable interest rates.
Strategic Income Fund's investments in emerging market securities may
consist substantially of Brady Bonds and other sovereign debt securities issued
by emerging market governments that are traded in the markets of developed
countries or groups of developed countries. AIM may invest in debt securities of
emerging market issuers that it determines to be suitable investments for
Strategic Income Fund without regard to ratings. Currently, the substantial
majority of emerging market debt securities are considered to have a credit
quality below investment grade. Strategic Income 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 65% limitation.
Government Income Fund
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 or S&P, or, if not rated, determined to be of comparable quality by
the Sub-advisor. A description of Moody's and S&P ratings is included in the
Appendix to this Statement of Additional Information.
Government Income 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, Government Income 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 Government Income Fund's total assets. Government Income
Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
the Sub-advisor to be fully exchangeable into U.S. dollars (or a multinational
currency unit) without legal restriction.
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Government Income Fund may also invest up to 35% of its total assets in:
(1) foreign government securities that are not high quality but are rated at
least "investment grade," (i.e., rated within the four highest ratings
categories of Moody's or S&P or, if not rated, determined by the Sub-advisor to
be of comparable quality); (2) corporate debt obligations of U.S. or foreign
issuers rated at least investment grade by Moody's or S&P, including debt
obligations convertible into equity securities or having attached warrants or
rights to purchase equity securities; (3) privately issued mortgage-backed and
asset-backed securities that are rated at least investment grade by Moody's or
S&P, or if unrated, determined by the Sub-advisor to be of comparable quality;
and (4) common stocks, preferred stocks and warrants to acquire such securities,
provided that Government Income Fund will not invest more than 20% of its total
assets in such securities.
Emerging Markets Debt Fund
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 "Brady Bonds," below) and other
sovereign debt securities.
The Portfolio may 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 "Investing in 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
Statement of Additional Information; and (4) cash and money market instruments.
In evaluating investments in securities of issuers in developed markets, the
Sub-advisor will consider, among other things, the business activities of the
issuer in emerging markets and the impact that developments in emerging markets
are likely to have on the issuer's financial condition.
Under normal circumstances, substantially all of the Portfolio's assets
will be invested in debt securities of both governmental and corporate issuers
in emerging markets. Emerging markets debt securities generally are considered
to have a credit quality below investment grade, as defined above. Lower quality
securities involve a high degree of risk and are predominantly speculative.
These debt securities are the equivalent of high yield, high risk bonds,
commonly known as "junk bonds." See "Risk Factors." Many emerging market debt
securities are not rated by U.S. ratings agencies such as Moody's and S&P. The
Portfolio's ability to achieve its investment objectives is thus more dependent
on the Sub-advisor's credit analysis. The Portfolio may invest in securities
that are in default as to payment of principal and/or interest.
As previously described, investors should be aware that the Fund, unlike
mutual funds that directly acquire and manage their own portfolios of
securities, seeks to achieve its investment objectives by investing all of its
investable assets in the Portfolio, which is a separate investment company.
Because the Fund will invest only in the Portfolio, the Fund's shareholders will
acquire only an indirect interest in the investments of the Portfolio.
The Fund may redeem its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the Fund and its shareholders to do so.
A change in the Portfolio's investment objectives, policies or limitations
that is not approved by the Board or the shareholders of Emerging Markets Debt
Fund could require Emerging Markets Debt 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 Emerging Markets Debt Fund and could adversely affect its
liquidity. Upon redemption, the Board would consider what action might be taken,
including the investment
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of all the investable assets of Emerging Markets Debt Fund in another pooled
investment entity having substantially the same investment objectives as
Emerging Markets Debt Fund or the retention by Emerging Markets Debt Fund of its
own investment advisor to manage its assets in accordance with its investment
objectives, policies and limitations discussed herein.
In addition to selling an interest therein to Emerging Markets Debt Fund,
the Portfolio may sell interests therein to other non-affiliated investment
companies and/or other institutional investors. All institutional investors in
the Portfolio will pay a proportionate share of the Portfolio's expenses and
will invest in the Portfolio on the same terms and conditions. However, if
another investment company invests any or all of its assets in the Portfolio, it
would not be required to sell its shares at the same public offering price as
Emerging Markets Debt Fund and may charge different sales commissions.
Therefore, investors in Emerging Markets Debt Fund may experience different
returns than investors in another investment company that invests exclusively in
the Portfolio. As of the date of this Statement of Additional Information,
Emerging Markets Debt Fund is the only institutional investor in the Portfolio.
Investors in the Fund should be aware that Emerging Markets Debt Fund's
investment in the Portfolio may be materially affected by the actions of other
large investors, if any, in the Portfolio. For example, as with all open-end
investment companies, if a large investor were to redeem its interest in the
Portfolio, (1) the Portfolio's remaining investors could experience higher pro
rata operating expenses, thereby producing lower returns and (2) the Portfolio's
security holdings may become less diverse, resulting in increased risk.
Institutional investors in the Portfolio that have a greater pro rata ownership
interest in the Portfolio than Emerging Markets Debt Fund could have effective
voting control over the operation of the Portfolio.
Growth & Income Fund
The Fund seeks its objective by investing in a global portfolio of both
equity and debt securities, allocated among diverse international markets. There
is no assurance that the Fund will achieve its investment objective.
At least 65% of the Fund's total assets normally will be invested in a
combination of blue-chip equity securities and high quality government bonds.
The Fund considers an equity security to be "blue chip" if: (i) during the
issuer's most recent fiscal year the security offered an above average dividend
yield relative to the latest reported dividend yield on the Morgan Stanley
Capital International World Index; and (ii) the total equity market
capitalization of the issuer is at least $1 billion. Government bonds are deemed
to be high quality if at the time of the Fund's investment they are rated within
one of the two highest ratings categories of Moody's, S&P, or, if not rated, are
deemed to be of equivalent quality in the judgment of the Sub-advisor.
Up to 35% of Growth & Income Fund's assets may be invested in other equity
securities and investment grade government and corporate debt obligations which
the Sub-advisor believes will assist Growth & Income Fund in achieving its
objective. "Investment grade" debt securities are those rated within one of the
four highest ratings categories of Moody's or S&P, or, if not rated, deemed to
be of equivalent quality in the judgment of the Sub-advisor.
Equity securities that Growth & Income Fund may purchase include common
stocks, preferred stocks, and warrants to acquire stocks and other equity
securities. Government bonds that Growth & Income Fund may purchase include debt
obligations issued or guaranteed by the United States or foreign governments
(including foreign states, provinces, or municipalities) or their agencies,
authorities or instrumentalities and debt obligations of supranational entities
organized or supported by several national governments, such as the World Bank
and the Asian Development Bank. The debt obligations held by the Growth & Income
Fund may include debt obligations convertible into equity securities or having
attached warrants or rights to purchase equity securities. Growth & Income Fund
may purchase securities that are issued by the government or a corporation or
financial institution of one nation but denominated in the currency of another
nation (or a multinational currency unit).
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SELECTION OF DEBT INVESTMENTS
In determining the appropriate distribution of investments among various
countries and geographic regions for Government Income Fund, Strategic Income
Fund, Growth & Income Fund, and the Portfolio, AIM and/or the Sub-advisor
ordinarily consider the following factors: prospects for relative economic
growth among the different countries in which Government Income Fund, Strategic
Income Fund, Growth & Income Fund, and the Portfolio may invest; expected levels
of inflation; government policies influencing business conditions; the outlook
for currency relationships; and the range of the individual investment
opportunities available to international investors.
In evaluating debt securities considered for Growth & Income Fund and
Strategic Income Fund, AIM and/or the Sub-advisor analyze their yield, maturity,
issue classification and quality characteristics, coupled with expectations
regarding local and world economies, movements in the general level and term of
interest rates, currency values, political developments, and variations in the
supply of funds available for investment in the world bond market relative to
the demands placed upon it. There are no limitations on the maximum or minimum
maturities of the debt securities considered by Growth & Income Fund and
Strategic Income Fund or on the average weighted maturity of the debt portion of
Growth & Income Fund and Strategic Income Fund's portfolio. Should the rating of
a debt security be revised while such security is owned by Growth & Income Fund
and Strategic Income Fund, AIM and/or the Sub-advisor will evaluate what action,
if any, is appropriate with respect to such security.
Government Income Fund, 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 Government Income Fund, Strategic Income Fund and the Portfolio
may not invest more than 25% of their respective total assets in bank
securities; (e) repurchase agreements with respect to the foregoing; and (f)
other substantially similar short-term debt securities with comparable
characteristics. Money market instruments in which the Growth & Income Fund may
invest include U.S. government securities, high-grade commercial paper, bank
certificates of deposit, bankers' acceptances and repurchase agreements related
to any of the foregoing. "High-grade commercial paper" refers to commercial
paper rated A-1 by S&P, or P-1 by Moody's or, if not rated, determined by AIM
and/or the Sub-advisor to be of comparable quality.
SELECTION OF EQUITY INVESTMENTS
With respect to Growth & Income Fund and Strategic Income Fund, for
investment purposes, an issuer is typically considered as located in a
particular country if it (a) is incorporated under the laws of or has its
principal office in that country, or (b) it normally derives 50% or more of its
total revenue from business in that country. However, these are not absolute
requirements, and certain companies incorporated in a particular country and
considered by AIM and/or the Sub-advisor to be located in that country may have
substantial off-shore operations or subsidiaries and/or export sales exceeding
in size the assets or sales in that country.
SELECTION OF INVESTMENTS AND ASSET ALLOCATION
AIM and/or the Sub-advisor allocate the assets of Government Income Fund,
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. In so doing, AIM and/or
the Sub-advisor intend to take full advantage of the different
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yield, risk and return characteristics that investment in the fixed income
markets of different countries can provide for U.S. investors. The Fund invests
in debt obligations allocated among diverse markets and denominated in various
currencies, including U.S. dollars, or in multinational currency units such as
Euros. The Fund is designed for investors who wish to accept the risks entailed
in such investments, which are different from those associated with a portfolio
consisting entirely of securities of U.S. issuers denominated in U.S. dollars.
The Fund may purchase securities that are issued by the government or a company
or financial institution of one country but denominated in the currency of
another country (or a multinational currency unit). 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 Government Income Fund, Strategic Income Fund, and the Portfolio.
Securities held by Government Income Fund, Strategic Income Fund, and the
Portfolio may be invested in without limitation as to maturity.
AIM and/or the Sub-advisor select securities of particular issuers on the
basis of the 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.
AIM and/or the Sub-advisor generally evaluate 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. AIM and/or the Sub-advisor
may seek to protect Government Income Fund, Strategic Income Fund, and the
Portfolio against such negative currency movements through the use of
sophisticated investment techniques.
According to AIM and the Sub-advisor, as of the date of this Statement of
Additional Information, 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, AIM and/or the
Sub-advisor believe that Government Income Fund's, Strategic Income Fund's, and
the Portfolio's policy of investing in debt securities throughout the World may
enable the achievement of results superior to those produced by mutual funds
with similar objectives to those of the Funds and the Portfolio that invest
solely in debt securities of U.S. Issuers.
In addition to the factors listed in the Prospectus, AIM and the
Sub-advisor's view on what securities constitute the best values are also a
function of 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.
Growth & Income Fund
The relative proportions of equity and debt securities held by Growth &
Income Fund at any one time will vary, depending upon the Sub-advisor's
assessment of global political and economic conditions and the relative
strengths and weaknesses of the world equity and debt markets. To enable Growth
& Income Fund to respond to general economic changes and market conditions
around the world, Growth & Income Fund is authorized to invest up to 100% of its
total assets in either equity securities or debt securities.
In selecting equity securities for investment, the Sub-advisor attempts to
identify and acquire only securities it deems to represent high or improving
investment quality. Securities representing high investment quality generally
will include those of well-known, established and successful issuers that the
Sub-advisor believes will continue to be successful in the future. Securities
representing improving investment quality may include those of an issuer that
has improved its sales or earnings or of an issuer the balance sheet and
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financial condition of which is improving. The Sub-advisor seeks to avoid
investing in equity securities that appear overly speculative or risky, even if
they have attractive features or investment potential.
The Fund currently contemplates that it will invest principally in
securities of issuers in the United States, Canada, Japan, Western Europe, New
Zealand and Australia. The Fund may invest substantially in securities
denominated in one or more currencies. Under normal conditions, the Fund invests
in issuers of not less than three different countries and issuers of any one
country, other than the United States, will represent no more than 40% of the
Fund's total assets.
The Sub-advisor generally evaluates currencies on the basis of fundamental
economic criteria (e.g. relative inflation and interest rate levels and trends,
growth rate forecasts, balance of payments, status and economic policies, as
well as technical and political data. Growth & Income Fund may seek to protect
itself against negative currency movements by engaging in hedging techniques
through the use of options, futures and forward currency contracts.
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. Strategic Income Fund may invest up to 65% of its assets in
debt securities of issuers in emerging markets. 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.
Emerging markets debt securities generally are considered to have a credit
quality below investment grade. 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." Many
emerging market debt securities are not rated by U.S. ratings agencies such as
Moody's and S&P. Strategic Income Fund and the Portfolio's ability to achieve
their respective investment objectives are thus more dependent on AIM and/or the
Sub-advisor's credit analysis. Strategic Income Fund and the Portfolio may
invest in securities that are in default as to payment of principal and/or
interest.
Strategic Income Fund and the Portfolio consider "emerging markets" to
consist of all countries determined by AIM and/or the Sub-advisor to have
developing or emerging economies and markets. These countries generally include
every country in the world except the United States, Canada, Japan, Australia,
New Zealand and most countries located in Western Europe. Strategic Income Fund
and the Portfolio each will consider investment in the following emerging
markets:
<TABLE>
<S> <C> <C>
Algeria Finland Mexico
Argentina Ghana Morocco
Bolivia Greece Nicaragua
Botswana Hong Kong Nigeria
Brazil Hungary Oman
Bulgaria India Pakistan
Chile Indonesia Panama
China Israel Paraguay
Columbia Ivory Coast Peru
Costa Rica Jamaica Philippines
Cyprus Jordan Poland
Czech Republic Kazakhstan Portugal
Dominican Republic Kenya Republic of Slovakia
Ecuador Lebanon Russia
Egypt Malaysia Singapore
El Salvador Mauritius Slovenia
</TABLE>
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<TABLE>
<S> <C> <C>
South Africa Thailand Zambia
South Korea Turkey Zimbabwe
Sri Lanka Ukraine
Swaziland Uruguay
Taiwan Venezuela
</TABLE>
Neither Strategic Income Fund nor the Portfolio will 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 the Prospectuses 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.
When determining what countries constitute emerging markets, AIM and/or the
Sub-advisor will consider 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.
SOVEREIGN DEBT
Government Income Fund, 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.
The occurrence of political, social or diplomatic changes in one or more of
the countries issuing sovereign debt could adversely affect the Fund's
investments. Emerging markets are faced with social and political issues and
some of them have experienced high rates of inflation in recent years and have
extensive internal debt. Among other effects, high inflation and internal debt
service requirements may adversely affect the cost and availability of future
domestic sovereign borrowing to finance governmental programs, and may have
other adverse social, political and economic consequences. Political changes or
a deterioration of a country's domestic economy or balance of trade may affect
the willingness of countries to service their sovereign debt. Although AIM and
the Sub-advisor intend to manage the Funds in a manner that will minimize
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the exposure to such risks, there can be no assurance that adverse political
changes will not cause a Fund to suffer a loss of interest or principal on any
of its holdings.
In recent years, some of the emerging market countries in which the Funds
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 in 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 a Fund may invest involve great risk. As noted above, sovereign debt
obligations issued by emerging market governments generally are deemed to be the
equivalent in terms of quality to securities rated below investment grade by
Moody's 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 Funds 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 Funds anticipate that
such securities could be sold only to a limited number of dealers or
institutional investors.
BRADY BONDS
Government Income Fund, 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 Statement of
Additional Information, Government Income Fund, 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.
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 per
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
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least one year's rolling interest payments based on the applicable interest rate
at the time of issuance and is adjusted at regular intervals thereafter.
LOAN PARTICIPATIONS AND ASSIGNMENTS
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
Funds' investments in Loans in emerging markets is expected to be in the form of
participations in Loans ("Participations") and assignment of portions of Loans
from third parties ("Assignments"). Participations typically will result in
Strategic Income Fund and the Portfolio having a contractual relationship only
with the Lender, not with the borrower government. Strategic Income Fund and 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, Strategic Income Fund and 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 or set off against the borrowers, and Strategic Income Fund and the
Portfolio may not directly benefit from any collateral supporting the Loan in
which they have purchased any Participations. As a result, Strategic Income Fund
and 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,
Strategic Income Fund and 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. Strategic Income Fund and the Portfolio will acquire Participations
only if the Lender interpositioned between the Funds and the borrower is
determined by AIM and/or the Sub-advisor to be creditworthy. When a Fund
purchases Assignments from Lenders, the Fund will acquire direct rights against
the borrower on the Loan. However, since Assignments are arranged through
private negotiations between potential assignees and assignors, the rights and
obligations acquired by Strategic Income Fund and the Portfolio as the purchaser
of an Assignment may differ from, and be more limited than, those held by the
assigning Lender.
The liquidity of Assignments and Participations is limited and the Funds
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 Funds' ability to
dispose of particular Assignments or Participations when necessary to meet the
Funds' respective 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 Funds to assign a value to those securities for purposes of
valuing the Funds' respective portfolios and calculating each portfolio's net
asset value.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
Government Income Fund and Strategic Income Fund may invest in
mortgage-backed and asset-backed securities of U.S. and foreign issuers,
including privately issued mortgage-backed and asset-backed securities.
Mortgage-backed securities represent direct or indirect interests in pools of
underlying mortgage loans that are secured by real property. Investors typically
receive payments out of the interest on and principal of the underlying
mortgages. Asset-backed securities are similar to mortgage-backed securities,
except that the underlying assets are other financial assets or financial
receivables, such as motor vehicle installment sales contracts, home equity
loans, leases of various types of real and personal property, and receivables
from credit cards. Any mortgage-backed and asset-backed securities purchased by
the Fund will be subject to the same rating requirements that apply to its other
investments.
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WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
Government Income Fund, 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 Government
Income Fund, Strategic Income Fund, 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 Government
Income Fund, Strategic Income Fund, and the Portfolio dispose 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 Government Income Fund, Strategic Income Fund, and the Portfolio
enter into a transaction on a when-issued or forward commitment basis, the Funds
will each segregate cash or liquid securities equal to the value of the
when-issued or forward commitment securities with its custodian and will each
mark to market daily such assets. There is a risk that the securities may not be
delivered and that Government Income Fund, Strategic Income Fund, and the
Portfolio may incur a loss.
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 arrangements.
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,
Strategic Income Fund and the Portfolio are each 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
Strategic Income Fund and the Portfolio would have no obligation to the other
party, and would not receive payment for the sale. Selling securities on a
"when, as and if issued" basis may reduce risk of loss to the extent that such a
sale wholly or partially offsets unfavorable price movements on the investments
being hedged. However, such sales also limit the amount Strategic Income Fund
and the Portfolio can receive if the "when, as and if issued" security is in
fact issued.
TEMPORARY DEFENSIVE STRATEGIES
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, each of the Funds and the
Portfolio may temporarily hold all or a portion of its assets in cash (U.S.
dollars, and for the Growth & Income Fund, the Strategic Income Fund and
Government Income Fund foreign currencies or multinational currency units such
as euros), money market instruments, or high-quality debt securities. Each of
the Funds and the Portfolio may also invest up to 25% of its total assets in
money market investment companies advised by AIM or its affiliates ("Affiliated
Money Market Funds") for these purposes. In addition, for temporary defensive
purposes, most or all of each Fund's and the Portfolio's investments may be made
in the United States and denominated in U.S. dollars. To the extent a Fund or
the Portfolio employs a temporary defensive strategy, it will not be invested so
as to achieve directly its investment objectives.
EQUITY-LINKED DERIVATIVES
Growth & Income Fund may invest in equity-linked derivative products
designed to replicate the composition and performance of particular indices.
Examples of such products include S&P Depositary Receipts ("SPDRs"), World
Equity Benchmark Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones
Industrial Average Instruments ("DIAMONDS") and Optimised Portfolios as Listed
Securities ("OPALS"). Investments in equity-linked derivatives involve the same
risks associated with a direct investment in the types of securities included in
the indices such products are designed to track. There can
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be no assurance that the trading price of the equity-linked derivatives will
equal the underlying value of the basket of securities purchased to replicate a
particular index or that such basket will replicate the index. Investments in
equity-linked derivatives may constitute investment in other investment
companies. See "Investments in Other Investment Companies."
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by Government Income Fund,
Strategic Income Fund, Growth & Income Fund, and the Portfolio presently may be
made only by acquiring shares of other investment companies (including
investment vehicles or companies advised by AIM or its affiliates) with local
governmental approval to invest in those countries. At such time as direct
investment in these countries is allowed, Government Income Fund, Strategic
Income Fund, Growth & Income Fund, and the Portfolio anticipate investing
directly in these markets.
Government Income Fund, Strategic Income Fund, Growth & Income Fund, and
the Portfolio may invest in other investment companies to the extent permitted
by the 1940 Act, and the rules and regulations thereunder, and if applicable,
exemptive orders granted by the SEC. The following restrictions apply to
investments in other investment companies other than Affiliated Money Market
Funds: (i) Government Income Fund, Strategic Income Fund, Growth & Income Fund,
and the Portfolio may not purchase more than 3% of the total outstanding voting
stock of another investment company; (ii) Government Income Fund, Strategic
Income Fund, Growth & Income Fund, and the Portfolio may not invest more than 5%
of its total assets in securities issued by another investment company; and
(iii) Government Income Fund, Strategic Income Fund, Growth & Income Fund, and
the Portfolio may not invest more than 10% of its total assets in securities
issued by other investment companies other than Affiliated Money Market Funds.
With respect to Government Income Fund's, Strategic Income Fund's, Growth &
Income Fund's, and the Portfolio's purchase of shares of another investment
company, including Affiliated Money Market Funds, Government Income Fund,
Strategic Income Fund, Growth & Income Fund, and the Portfolio will indirectly
bear its proportionate share of the advisory fees and other operating expenses
of such investment company. Government Income Fund, Strategic Income Fund,
Growth & Income Fund, and the Portfolio have obtained an exemptive order from
the SEC allowing them to invest in Affiliated Money Market Funds, provided that
investments in Affiliated Money Market Funds do not exceed 25% of the total
assets of such Fund.
DEPOSITARY RECEIPTS
Growth & Income Fund may hold equity securities of foreign issuers in the
form of American Depositary Receipts ("ADRs"), American Depositary Shares
("ADSs"), Global Depositary Receipts ("GDRs") and European Depositary Receipts
("EDRs"), or other securities convertible into securities of eligible issuers.
These securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. ADRs and ADSs typically are issued
by an American bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. EDRs, which are sometimes referred
to as Continental Depositary Receipts ("CDRs"), are issued in Europe typically
by foreign banks and trust companies and evidence ownership of either foreign or
domestic securities. GDRs are similar to EDRs and are designed for use in
several international financial markets. Generally, ADRs and ADSs in registered
form are designed for use in United States securities markets and EDRs in bearer
form are designed for use in European securities markets. For purposes of the
Fund's investment policies, the Fund's investments in ADRs, ADSs, GDRs and EDRs
will be deemed to be investments in the equity securities representing
securities of foreign issuers into which they may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored."
While ADRs issued under these two types of facilities are in some respects
similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such
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facilities. The depository usually charges fees upon the deposit and withdrawal
of the deposited securities, the conversion of dividends into U.S. dollars, the
disposition of non-cash distributions, and the performance of other services.
The depository of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
securities or to pass-through voting rights to ADR holders in respect of the
deposited securities. Sponsored ADR facilities are created in generally the same
manner as unsponsored facilities, except that the issuer of the deposited
securities enters into a deposit agreement with the depository. The deposit
agreement sets out the rights and responsibilities of the issuer, the depository
and the ADR holders. With sponsored facilities, the issuer of the deposited
securities generally will bear some of the costs relating to the facility (such
as dividend payment fees of the depository), although ADR holders continue to
bear certain other costs (such as deposit and withdrawal fees). Under the terms
of most sponsored arrangements, depositories agree to distribute notices of
shareholder meetings and voting instructions, and to provide shareholder
communications and other information to the ADR holders at the request of the
issuer of the deposited securities. The Fund may invest in both sponsored and
unsponsored ADRs.
SAMURAI AND YANKEE BONDS
Government Income Fund, 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 Government Income Fund,
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 Government Income Fund, Strategic
Income Fund, Growth & Income Fund or the Portfolio in connection with other
securities or separately and provide a Fund or the Portfolio with the right to
purchase at a later date other securities of the issuer. Warrants are securities
permitting, but not obligating, their holder to subscribe for other securities
or commodities. Warrants do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle their holder to
purchase, and they do not represent any rights in the assets of the issuer. As a
result, warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to its expiration date.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, Government Income Fund,
Strategic Income Fund, Growth & Income Fund or the Portfolio may make secured
loans of portfolio securities amounting to not more than 30% of its total
assets. Securities loans are made to broker/dealers or institutional investors
pursuant to agreements requiring that the loans continuously be secured by
collateral consisting of cash, U.S. government securities or certain irrevocable
letters of credit equal to at least the value of the borrowed securities, plus
any accrued interest or such other collateral as permitted by the Fund's
investment program and regulatory agencies, and as approved by the Board,
"marked to market" on a daily basis. The collateral for such loans, if received
in cash, may be held in investment vehicles with investment objectives and
policies similar to those of money market funds or limited duration income funds
(longer maturities than may be held by money market funds), advised by the
Advisor or its affiliates or by unaffiliated advisors. The Funds may pay a fee
to the Advisor of such investment vehicles for its services. Government Income
Fund, Strategic Income Fund, Growth & Income Fund and the Portfolio may pay
reasonable administrative and custodial fees in connection with loans of its
securities. While the securities loan is outstanding, Government Income Fund,
Strategic Income Fund, Growth & Income Fund and the Portfolio will continue to
receive the equivalent of the interest or dividends paid by the issuer on the
securities, as well as interest on the investment of the collateral or a fee
from the borrower. Government Income Fund, Strategic Income Fund, Growth &
Income Fund and the Portfolio each will have a right to call each loan and
obtain the securities within the stated settlement
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period. Government Income Fund, Strategic Income Fund, Growth & Income Fund and
the Portfolio will not have the right to vote equity securities while they are
lent, but each may call in a loan in anticipation of any important vote. Loans
will be made only to firms deemed by AIM and/or the Sub-advisor to be of good
standing and will not be made unless, in the judgment of AIM and/or the
Sub-advisor, the consideration to be earned from such loans would justify the
risk. The risks in lending portfolio securities, as with other extension 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.
COMMERCIAL BANK OBLIGATIONS
For the purposes of Strategic Income Fund's, Growth & Income Fund's and the
Portfolio's investment policies with respect to bank obligations, obligations of
foreign branches of U.S. banks and of foreign banks are obligations of the
issuing bank and may be general obligations of the parent bank. Such
obligations, however, may be limited by the terms of a specific obligation and
by government regulation. As with investment in non-U.S. securities in general,
investments in the obligations of foreign branches of U.S. banks and of foreign
banks may subject Strategic Income Fund, Growth & Income Fund and the Portfolio
to investment risks that are different in some respects from those of
investments in obligations of domestic issuers. Although Strategic Income Fund,
Growth & Income Fund and the Portfolio typically will acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not an
investment policy or restriction of Strategic Income Fund, Growth & Income 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 Government Income Fund,
Strategic Income Fund, Growth & Income Fund or the Portfolio buys a security
from a bank or recognized securities dealer and simultaneously commits to resell
that security to the bank or dealer at an agreed upon price, date and market
rate of interest unrelated to the coupon rate or maturity of the purchased
security. Although repurchase agreements carry certain risks not associated with
direct investments in securities, including possible decline in the market value
of the underlying securities and delays and costs to Government Income Fund,
Strategic Income Fund, Growth & Income Fund or the Portfolio if the other party
to the repurchase agreement becomes bankrupt, Government Income Fund, Strategic
Income Fund, Growth & Income Fund and the Portfolio intend to enter into
repurchase agreements only with banks and broker/dealers believed by AIM and/or
the Sub-advisor to present minimal credit risks in accordance with guidelines
approved by the Trust's or the Portfolio's Board of Trustees. AIM and/or the
Sub-advisor review and monitor the creditworthiness of such institutions under
the Board's general supervision.
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. 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, Government
Income Fund, Strategic Income Fund, Growth & Income Fund or the Portfolio would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings there may be restrictions on Government Income
Fund's, Strategic Income Fund's, Growth & Income Fund's or the Portfolio's
ability to sell the collateral and Government Income Fund, Strategic Income
Fund, Growth & Income Fund or the Portfolio could suffer a loss. However, with
respect to financial institutions whose bankruptcy or liquidation proceedings
are subject to the U.S. Bankruptcy Code, Government Income Fund, Strategic
Income Fund, Growth & Income Fund and the Portfolio intend to comply with
provisions under such Code that would allow the immediate resale of such
collateral. Government Income Fund and Growth & Income Fund will not enter into
a repurchase agreement with a maturity of more than seven days if, as a result,
more than 15% of the value of each Fund's total assets would be invested in such
repurchase agreements and other illiquid investments and securities for which no
readily available
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market exists. There is no limitation on the amount of the Growth & Income
Fund's assets that may be subject to repurchase agreements at any time.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
Government Income Fund's, Strategic Income Fund's, Growth & Income Fund's
and the Portfolio's borrowings will not exceed 33 1/3% of the Fund's or the
Portfolio's respective total assets, i.e., Government Income Fund's, Strategic
Income Fund's, Growth & Income Fund's or the Portfolio's respective total assets
at all times will equal at least 300% of the amount of outstanding borrowings.
If market fluctuations in the value of Government Income Fund's, Strategic
Income Fund's, Growth & Income Fund's or the Portfolio's holdings or other
factors cause the ratio of Government Income Fund's, Strategic Income Fund's,
Growth & Income Fund's or the Portfolio's total assets to outstanding borrowings
to fall below 300%, within three days (excluding Sundays and holidays) of such
event the respective Fund or the Portfolio may be required to sell portfolio
securities to restore the 300% asset coverage, even though from an investment
standpoint such sales might be disadvantageous. Government Income Fund,
Strategic Income Fund, Growth & Income Fund and the Portfolio each may borrow up
to 5% of its respective total assets for temporary or emergency purposes other
than to meet redemptions. Any borrowing by Government Income Fund, Strategic
Income Fund, Growth & Income Fund or the Portfolio may cause greater fluctuation
in the value of its shares than would be the case if the Fund or the Portfolio
did not borrow. Government Income Fund and Growth & Income Fund will not
purchase securities while borrowings in excess of 5% of total assets are
outstanding.
Government Income Fund's, Strategic Income Fund's, Growth & Income Fund's
and the Portfolio's fundamental investment limitations permit them to borrow
money for leveraging purposes. Government Income Fund, Strategic Income Fund and
Growth & Income Fund, however, currently are prohibited, pursuant to a
non-fundamental investment policy, from borrowing money in order to purchase
securities. Nevertheless, this policy may be changed in the future by a vote of
a majority of the Trust's Board of Trustees. A Fund or Portfolio will borrow for
investment purposes only when AIM and/or the Sub-advisor believe that such
borrowings will benefit the Fund after taking into account considerations such
as the costs of the borrowing and the likely investment returns on the
securities purchased with the borrowed monies. If 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 Portfolio's net asset value. When the income and
gains on securities purchased with the proceeds of borrowings exceed the costs
of such borrowings, Government Income Fund's, Strategic Income Fund's, Growth &
Income Fund's or the Portfolio's earnings or net asset value will increase
faster than otherwise would be the case; conversely, if such income and gains
fail to exceed such costs, the Fund's or the Portfolio's earnings or net asset
value would decline faster than would otherwise be the case. Each Fund and the
Portfolio expects that some of its borrowings may be made on a secured basis.
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which Government Income Fund, Strategic
Income Fund, Growth & Income 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. Government Income Fund, Strategic Income
Fund, Growth & Income Fund and the Portfolio also may engage in "roll" borrowing
transactions which involve Government Income Fund's, Strategic Income Fund's,
Growth & Income Fund's or the Portfolio's sale of Government National Mortgage
Association certificates or other securities together with a commitment (for
which Government Income Fund, Strategic Income Fund, Growth & Income Fund or the
Portfolio may receive a fee) to purchase similar, but not identical, securities
at a future date. Government Income Fund, Strategic Income Fund, Growth & Income
Fund and the Portfolio will segregate liquid assets in an amount sufficient to
cover its obligations under "roll" transactions and reverse repurchase
agreements with broker/dealers. No segregation is required for reverse
repurchase agreements with banks.
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Reverse repurchase agreements involve the risk that the market value of the
securities regained in lieu of sale by the Funds may decline below the price of
the securities Government Income Fund, Strategic Income Fund, Growth & Income
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 the Portfolio's obligation to
repurchase the securities, and the Portfolio's use of the proceeds of the
reverse repurchase agreement may effectively be restricted pending such
decision.
Growth & Income Fund, Strategic Income Fund, Government Income Fund and the
Portfolio also may enter into "dollar rolls," in which the Fund sells fixed
income securities for delivery in the current month and simultaneously contracts
to repurchase substantially similar (same type, coupon and maturity) securities
on a specified future date. During the roll period, Growth & Income Fund,
Strategic Income Fund, Government Income Fund and the Portfolio would forego
principal and interest paid on such securities. Growth & Income Fund, Strategic
Income Fund, Government Income Fund and 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.
Reverse repurchase agreements and dollar rolls will be treated as
borrowings and will be deducted from Government Income Fund's, Strategic Income
Fund's, Growth & Income Fund's, and the Portfolio's respective assets for
purposes of calculating compliance with the Funds' and the Portfolio's
respective borrowing limitations.
ZERO COUPON SECURITIES
Government Income Fund, Strategic Income Fund, and the Portfolio may invest
in certain zero coupon securities that are "stripped" U.S. Treasury notes and
bonds. Government Income Fund, Strategic Income Fund and the Portfolio 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 Funds' incomes. Accordingly,
for a Fund to continue to qualify for tax treatment as a regulated investment
company and to avoid a certain excise tax (see "Dividends, Distributions and Tax
Matters" below), it may be required to distribute an amount that is greater than
its share of the total amount of cash it actually receives. These distributions
must be made from the Funds' cash assets or, if necessary, from the proceeds of
sales of portfolio securities. Government Income Fund, Strategic Income Fund and
the Portfolio will not be able to purchase additional income-producing
securities with cash used to make such distributions, and their respective
current incomes 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
Government Income Fund, 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 the Funds that is comparable to owning a Japanese government bond, AIM
and/or the Sub-advisor might purchase futures contracts on Japanese governmental
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. AIM and/or the Sub-advisor might roll over the futures and
forward currency contract positions before taking delivery in order to continue
the Funds' investment position, or AIM
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and/or the Sub-advisor might close out those positions, thus effectively selling
the synthetic security. Further, the amount of each contract might be adjusted
in response to market conditions and the forward currency contract might be
changed in amount or eliminated in order to hedge against currency fluctuations.
AIM and/or the Sub-advisor would create synthetic security positions for
the Funds when they believe that they 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 AIM and/or the Sub-advisor believe that the cost
of creating synthetic security positions generally will be materially lower than
the cost of acquiring comparable bonds in the cash market, the Funds 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 Currency Strategies," below.
SWAPS, CAPS, FLOORS, AND COLLARS
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. Strategic Income Fund and the 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 their respective portfolios' duration
(i.e., price sensitivity to changes in interest rates) or to protect against any
increase in the price of securities the Funds anticipate purchasing at a later
date. Strategic Income 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 Funds may be obligated to pay.
Interest rate swaps involve the exchange by either of the Funds 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 leased 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
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. 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 Funds 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
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rate of return. Strategic Income Fund and the Portfolio will not purchase such
commercial paper for speculation.
OTHER INDEXED SECURITIES
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.
Government Income Fund, Strategic Income Fund and the Portfolio may invest in
such securities to the extent consistent with their respective investment
objectives.
SHORT SALES
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio may make short sales of securities, although they have no current
intention of doing so. A short sale is a transaction in which a Fund or the
Portfolio sells a security in anticipation that the market price of that
security will decline. Government Income Fund, Strategic Income Fund, Growth &
Income Fund and the Portfolio may make short sales as a form of hedging to
offset potential declines in long positions in securities it owns, or
anticipates acquiring, and in order to maintain portfolio flexibility.
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio only may make short sales "against the box." In this type of short
sale, at the time of the sale, the Fund or the Portfolio owns the security it
has sold short or has the immediate and unconditional right to acquire the
identical security at no additional cost.
In a short sale, the seller does not immediately deliver the securities
sold and does not receive the proceeds from the sale. To make delivery to the
purchaser, the executing broker borrows the securities being sold short on
behalf of the seller. The seller is said to have a short position in the
securities sold until it delivers the securities sold, at which time it receives
the proceeds of the sale. To secure its obligation to deliver securities sold
short, Government Income Fund, Strategic Income Fund, Growth & Income Fund or
the Portfolio will deposit in a separate account with its custodian an equal
amount of the securities sold short or securities convertible into or
exchangeable for such securities at no cost. Government Income Fund, Strategic
Income Fund, Growth & Income Fund or the Portfolio could close out a short
position by purchasing and delivering an equal amount of the securities sold
short, rather than by delivering securities already held by the Fund or the
Portfolio, because the Fund or the Portfolio might want to continue to receive
interest and dividend payments on securities in its portfolio that are
convertible into the securities sold short.
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio might make a short sale "against the box" in order to hedge against
market risks when AIM and/or the Sub-advisor believe that the price of a
security may decline, causing a decline in the value of a security owned by
Government Income Fund, Strategic Income Fund, Growth & Income Fund or the
Portfolio or a security convertible into or exchangeable for such security. In
such case, any future losses in Government Income Fund's, Strategic Income
Fund's, Growth & Income Fund's or the Portfolio's long position should be
reduced by a gain in the short position. Conversely, any gain in the long
position should be reduced by a loss in the short position. The extent to which
such gains or losses in the long position are reduced will depend upon the
amount of the securities sold short relative to the amount of the securities the
Fund or the Portfolio owns, either directly or indirectly, and, in the case
where a Fund or the Portfolio owns convertible securities, changes in the
investment values or conversion premiums of such securities. There will be
certain additional
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transaction costs associated with short sales "against the box," but a Fund or
the Portfolio will endeavor to offset these costs with income from the
investment of the cash proceeds of short sales.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
OPTIONS, FUTURES, AND FORWARD CURRENCY TRANSACTIONS
Each Fund and the Portfolio may use forward currency contracts, futures
contracts, options on securities, options on currencies, options on indices and
options on futures contracts to attempt to hedge against the overall level of
investment and currency risk normally associated with the Fund's investments.
These instruments are often referred to as "derivatives," which may be defined
as financial instruments whose performance is derived, at least in part, from
the performance of another asset (such as a security, currency, or an index of
securities). Each Fund and the Portfolio may enter into such instruments up to
the full value of its portfolio assets.
To attempt to hedge against adverse movements in exchange rates between
currencies, a Fund or 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. A Fund or the Portfolio
may enter into forward currency contracts either with respect to specific
transactions or with respect to a 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 a Fund's or the Portfolio's portfolio against movements in
exchange rates.
In addition, each Fund and the Portfolio may purchase and sell put and call
options on equity and debt securities to hedge against the risk of fluctuations
in the prices of securities held by the Fund or that AIM and/or the Sub-advisor
intend to include in a Fund's or the Portfolio's portfolio. Each Fund and the
Portfolio also may purchase and sell put and call options on stock indices to
hedge against overall fluctuations in the securities markets or in a specific
market sector. To attempt to increase return, Growth & Income Fund may write
call options on securities. This strategy will be employed only when, in the
opinion of the Sub-advisor, the size of the premium Growth & Income Fund
receives for writing the option is adequate to compensate Growth & Income Fund
against the risk that appreciation in the underlying security may not be fully
realized if the option is exercised. Growth & Income Fund also is authorized to
write put options to attempt to enhance return, although it does not have the
current intention of so doing.
Further, each Fund 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 a specific market sector decline that could
adversely affect a Fund's or the Portfolio's portfolio. Each Fund 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. Similarly, a Fund or the Portfolio may use interest rate futures
contracts and options thereon to hedge the debt portion of its portfolio against
changes in the general level of interest rates.
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
Although a Fund or the Portfolio is authorized to enter into options,
futures and forward currency transactions, it might not enter into any such
transactions. 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 AIM
and/or the Sub-advisor's ability to predict movements of the overall
securities and currency markets, which requires different skills than
predicting changes in the prices of individual securities. While AIM and
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the Sub-advisor are 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
Government Income Fund, Strategic Income Fund, Growth & Income Fund or the
Portfolio entered into a short hedge because AIM and/or the Sub-advisor
projected a decline in the price of a security in the Fund's or the
Portfolio's portfolio, and the price of that security increased instead,
the gain from that increase might 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, Government Income Fund, Strategic Income Fund, Growth &
Income Fund or the Portfolio could suffer a loss. In either such case,
Government Income Fund, Strategic Income Fund, Growth & Income Fund or the
Portfolio would have been in a better position had it not hedged at all.
(4) There is no assurance that a liquid secondary market will exist
for any particular option, futures contract or option thereon at any
particular time.
(5) As described below, Government Income Fund, Strategic Income Fund,
Growth & Income Fund or the Portfolio might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in instruments involving obligations to third parties
(i.e., instruments other than purchased options). If a Fund or the
Portfolio were unable to close out its positions in such instruments, it
might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. The requirements might
impair the Fund's ability or the Portfolio's ability to sell a portfolio
security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund or the Portfolio sell a
portfolio security at a disadvantageous time. The Fund's or the Portfolio's
ability to close out a position in an instrument prior to expiration or
maturity depends on the existence of a liquid secondary market or, in the
absence of such a market, the ability and willingness of the other party to
the transaction ("contra party") to enter into a transaction closing out
the position. Therefore, there is no assurance that any position can be
closed out at a time and price that is favorable to the Fund or the
Portfolio.
WRITING CALL OPTIONS
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio may write (sell) call options on securities, indices and currencies.
Call options generally will be written on securities and currencies that, in the
opinion of AIM and/or the Sub-advisor are not expected to make any major price
moves in the near future but that, over the long term, are deemed to be
attractive investments for Government Income Fund, Strategic Income Fund, Growth
& Income Fund and the Portfolio.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
Style) or on (European Style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice,
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requiring him to deliver the underlying security or currency against payment of
the exercise price. This obligation terminates upon the expiration of the call
option, or such earlier time at which the writer effects a closing purchase
transaction by purchasing an option identical to that previously sold.
Portfolio securities or currencies on which call options may be written
will be purchased solely on the basis of investment considerations consistent
with a Fund's or the Portfolio's investment objectives. When writing a call
option, Government Income Fund, Strategic Income Fund, Growth & Income Fund or
the Portfolio, in return for the premium, gives up the opportunity for profit
from a price increase in the underlying security or currency above the exercise
price, and retains the risk of loss should the price of the security or currency
decline. Unlike one who owns securities or currencies not subject to an option,
a Fund or the Portfolio has no control over when it may be required to sell the
underlying securities or currencies, since most options may be exercised at any
time prior to the option's expiration. If a call option that a Fund or the
Portfolio has written expires, the Fund or the Portfolio will realize a gain in
the amount of the premium; however, such gain may be offset by a decline in the
market value of the underlying security 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. Government Income Fund, Strategic
Income Fund, Growth & Income Fund and the Portfolio do not consider a security
or currency covered by a call option to be "pledged" as that term is used in
Government Income Fund's, Strategic Income Fund's, Growth & Income Fund's and
the Portfolio's fundamental investment policies that limit the pledging or
mortgaging of their assets.
Writing call options can serve as a limited short hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and a Fund or the Portfolio will
be obligated to sell the security or currency at less than its market value.
The premium that Government Income Fund, Strategic Income Fund, Growth &
Income Fund or the Portfolio receives for writing a call option is deemed to
constitute the market value of an option. The premium a Fund or the Portfolio
will receive from writing a call option will reflect, among other things, the
current market price of the underlying investment, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying investment, and the length of the option period. In determining
whether a particular call option should be written, AIM and/or the Sub-advisor
will consider the reasonableness of the anticipated premium and the likelihood
that a liquid secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Government Income
Fund, the Strategic Income Fund, the Growth & Income Fund or the Portfolio to
write another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio will pay transaction costs in connection with the writing of options
and in entering into closing purchase contracts. Transaction costs relating to
options activity normally are higher than those applicable to purchases and
sales of portfolio securities.
The exercise price of the options may be below, equal to or above the
current market values of the underlying securities or currencies at the time the
options are written. From time to time, a Fund or the Portfolio may purchase an
underlying security or currency for delivery in accordance with the exercise of
an option, rather than delivering such security or currency from its portfolio.
In such cases, additional costs will be incurred.
A Fund or the Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more,
respectively, than the premium received from writing the option. Because
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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
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio may write put options on securities, indices and currencies. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) the obligation to buy, the underlying security or currency at the
exercise price at anytime until (American Style) or on (European Style) the
expiration date. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call options.
A Fund or the Portfolio generally would write put options in circumstances
where AIM and/or the Sub-advisor wish to purchase the underlying security or
currency for the Fund's or the Portfolio's portfolio at a price lower than the
current market price of the security or currency. In such event, the Fund or the
Portfolio would write a put option at an exercise price that, reduced by the
premium received on the option, reflects the lower price it is willing to pay.
Since the Fund or the Portfolio also would receive interest on debt securities
or currencies maintained to cover the exercise price of the option, this
technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying security or currency would decline below the exercise price less
the premium received.
Writing put options can serve as a limited long hedge because increases in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and a Fund or the Portfolio
will be obligated to purchase the security or currency at greater than its
market value.
PURCHASING PUT OPTIONS
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio may purchase put options on securities, indices and currencies. As the
holder of a put option, Government Income Fund, Strategic Income Fund, Growth &
Income Fund or the Portfolio would have the right to sell the underlying
security or currency at the exercise price at any time until (American Style) or
on (European Style) the expiration date. Government Income Fund, Strategic
Income Fund, Growth & Income Fund or the Portfolio may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire.
A Fund or the Portfolio may purchase a put option on an underlying security
or currency ("protective put") owned by the Fund or the Portfolio as a hedging
technique in order to protect against an anticipated decline in the value of the
security or currency. Such hedge protection is provided only during the life of
the put option when the Fund or the Portfolio, as the holder of the put option,
is able to sell the underlying security or currency at the put exercise price
regardless of any decline in the underlying security's market price or
currency's exchange value. The premium paid for the put option and any
transaction costs would reduce any profit otherwise available for distribution
when the security or currency eventually is sold.
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio also may purchase put options at a time when that Fund or the
Portfolio does not own the underlying security or currency. By purchasing put
options on a security or currency it does not own, a Fund or the Portfolio seeks
to benefit from a decline in the market price of the underlying security or
currency. If the put option is not sold when it has remaining value, and if the
market price of the underlying security or currency remains equal to or greater
than the exercise price during the life of the put option, the Fund or the
Portfolio will lose its entire investment in the put option. In order for the
purchase of a put option to be profitable, the market price of the underlying
security or currency must decline sufficiently below the exercise price to cover
the premium and transaction costs, unless the put option is sold in a closing
sale transaction.
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PURCHASING CALL OPTIONS
Government Income Fund, Strategic Income Fund, Growth & Income Fund or the
Portfolio may purchase call options on securities, indices and currencies. As
the holder of a call option, a Fund or the Portfolio would have the right to
purchase the underlying security or currency at the exercise price at any time
until (American Style) or on (European Style) the expiration date. A Fund or the
Portfolio may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire.
Call options may be purchased by a Fund or the Portfolio for the purpose of
acquiring the underlying security or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable the Fund or the
Portfolio to acquire the security or currency at the exercise price of the call
option plus the premium paid. At times, the net cost of acquiring the security
or currency in this manner may be less than the cost of acquiring the security
or currency directly. This technique also may be useful to a Fund or the
Portfolio in purchasing a large block of securities that would be more difficult
to acquire by direct market purchases. So long as it holds such a call option,
rather than the underlying security or currency itself, a Fund or the Portfolio
is partially protected from any unexpected decline in the market price of the
underlying security or currency and, in such event, could allow the call option
to expire, incurring a loss only to the extent of the premium paid for the
option.
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio also may purchase call options on underlying securities or currencies
it owns to avoid realizing losses that would result in a reduction of a Fund's
or the Portfolio's current return. For example, where a Fund or the Portfolio
has written a call option on an underlying security or currency having a current
market value below the price at which it purchased the security or currency, an
increase in the market price could result in the exercise of the call option
written by the Fund or the Portfolio and the realization of a loss on the
underlying security or currency. Accordingly, the Fund or the Portfolio could
purchase a call option on the same underlying security or currency, which could
be exercised to fulfill the Fund's or the Portfolio's delivery obligations under
its written call (if it is exercised). This strategy could allow the Fund or the
Portfolio to avoid selling the portfolio security or currency at a time when it
has an unrealized loss; however, the Fund or the Portfolio would have to pay a
premium to purchase the call option plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of
Government Income Fund's, Strategic Income Fund's, Growth & Income Fund's or the
Portfolio's total assets at the time of purchase.
Government Income Fund, Strategic Income Fund, Growth & Income Fund or the
Portfolio may attempt to accomplish objectives similar to those involved in
using Forward Contracts by purchasing put or call options on currencies. A put
option gives a Fund or the Portfolio as purchaser the right (but not the
obligation) to sell a specified amount of 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
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will not purchase an OTC option unless the Fund or the Portfolio believes that
daily valuations for such options are readily obtainable. OTC options differ
from exchange-traded options in that OTC options are transacted with dealers
directly and not through a clearing corporation (which guarantees performance).
Consequently, there is a risk of non-performance by the dealer. Since no
exchange is involved, OTC options are valued on the basis of the average of the
last bid prices obtained from dealers, unless a quotation from only one dealer
is available, in which case only that dealer's price will be used. In the case
of OTC options, there can be no assurance that a liquid secondary market will
exist for any particular option at any specific time.
The staff of the SEC considers purchased OTC options to be illiquid
securities. A Fund or the Portfolio may also sell OTC options and, in connection
therewith, segregate assets or cover its obligations with respect to OTC options
written by the Fund or the Portfolio. The assets used as cover for OTC options
written by a Fund or the Portfolio will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Fund or the Portfolio
may repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC option written
subject to this procedure would be considered illiquid only to the extent that
the maximum repurchase price under the formula exceeds the intrinsic value of
the option.
A Fund's or the Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. Each Fund
and the Portfolio intends to purchase or write only those exchange-traded
options for which there appears to be a liquid secondary market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating directly
with the contra party or by a transaction in the secondary market if any such
market exists. Although each Fund and the Portfolio will enter into OTC options
only with contra parties that are expected to be capable of entering into
closing transactions with the Fund or the Portfolio, there is no assurance that
the Fund or the Portfolio will in fact be able to close out an OTC option
position at a favorable price prior to expiration. In the extent of insolvency
of the contra party, the Fund or the Portfolio might be unable to close out an
OTC option position at any time prior to its expiration.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or
futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. When a Fund or the
Portfolio writes a call on an index, it receives a premium and agrees that,
prior to the expiration date, the purchaser of the call, upon exercise of the
call, will receive from the Fund or the Portfolio an amount of cash if the
closing level of the index upon which the call is based is greater than the
exercise price of the call. The amount of cash is equal to the difference
between the closing price of the index and the exercise price of the call times
a specified multiple (the "multiplier"), which determines the total dollar value
for each point of such difference. When a Fund or the Portfolio buys a call on
an index, it pays a premium and has the same rights as to such call as are
indicated above. When a Fund or the Portfolio buys a put on an index, it pays a
premium and has the right, prior to the expiration date, to require the seller
of the put, upon the Fund's or the Portfolio's exercise of the put, to deliver
to the Fund or the Portfolio an amount of cash if the closing level of the index
upon which the put is based is less than the exercise price of the put, which
amount of cash is determined by the multiplier, as described above for calls.
When a Fund or the Portfolio writes a put on an index, it receives a premium and
the purchaser has the right, prior to the expiration date, to require the Fund
or the Portfolio to deliver to it an amount of cash equal to the difference
between the closing level of the index and the exercise price times the
multiplier, if the closing level is less than the exercise price.
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
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securities similar to those on which the underlying index is based. However, a
Fund or the Portfolio cannot, as a practical matter, acquire and hold a
portfolio containing exactly the same securities as underlie the index and, as a
result, bears a risk that the value of the securities held will vary from the
value of the index.
Even if a Fund or the Portfolio could assemble a securities portfolio that
exactly reproduced the composition of the underlying index, it still would not
be fully covered from a risk standpoint because of the "timing risk" inherent in
writing index options. When an index option is exercised, the amount of cash
that the holder is entitled to receive is determined by the difference between
the exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, the Fund or the Portfolio, as the
call writer, will not know that it has been assigned until the next business day
at the earliest. The time lag between exercise and notice of assignment poses no
risk for the writer of a covered call on a specific underlying security, such as
common stock, because there the writer's obligation is to deliver the underlying
security, not to pay its value as of a fixed time in the past. So long as the
writer already owns the underlying security, it can satisfy its settlement
obligations by simply delivering it, and the risk that its value may have
declined since the exercise date is borne by the exercising holder. In contrast,
even if the writer of an index call holds securities that exactly match the
composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those securities against payment of the
exercise price. Instead, it will be required to pay cash in an amount based on
the closing index value on the exercise date; and by the time it learns that it
has been assigned, the index may have declined, with a corresponding decline in
the value of its securities portfolio. This "timing risk" is an inherent
limitation on the ability of index call writers to cover their risk exposure by
holding securities positions.
If a Fund or the Portfolio purchases an index option and exercises it
before the closing index value for that day is available, it runs the risk that
the level of the underlying index may subsequently change. If such a change
causes the exercised option to fall out-of-the-money, the Fund or the Portfolio
will be required to pay the difference between the closing index value and the
exercise price of the option (times the applicable multiplier) to the assigned
writer.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Government Income Fund, Strategic Income Fund, Growth & Income Fund or the
Portfolio may enter into interest rate or currency futures contracts, including
futures contracts on indices of debt and equity securities, ("Futures" or
"Futures Contracts") as a hedge against changes in prevailing levels of interest
rates, currency exchange rates or stock prices in order to establish more
definitely the effective return on securities or currencies held or intended to
be acquired by the Fund or the Portfolio. Government Income Fund's, Strategic
Income Fund's, Growth & Income Fund's or the Portfolio's hedging may include
sales of Futures as an offset against the effect of expected increases in
interest rates or decreases in currency exchange rates, and purchases of Futures
as an offset against the effect of expected declines in interest rates or
increases in currency exchange rates.
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio only will enter into Futures Contracts that are traded on futures
exchanges and are standardized as to maturity date and underlying financial
instrument. Futures exchanges and trading thereon in the United States are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"). Futures are exchanged in London at the London International
Financial Futures Exchange.
Although techniques other than sales and purchases of Futures Contracts
could be used to reduce a Fund's or the Portfolio's exposure to interest rate
and currency exchange rate fluctuations, a Fund or the Portfolio may be able to
hedge exposure more effectively and at a lower cost through using Futures
Contracts.
A Futures Contract provides for the future sale by one party and purchase
by another party of a specified amount of a specific financial instrument (debt
security or currency) for a specified price at a designated date, time and
place. An index Futures Contract provides for the delivery, at a designated
date, time and place, of an amount of cash equal to a specified dollar amount
times the difference between the
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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, the Growth & Income Fund or the Portfolio realizes a
gain; if it is more, the Government Income Fund, the Strategic Income Fund, the
Growth & Income Fund or the Portfolio realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, Government
Income Fund, Strategic Income Fund, Growth & Income Fund or the Portfolio
realizes a gain; if it is less, Government Income Fund, Strategic Income Fund,
Growth & Income Fund or the Portfolio realizes a loss. The transaction costs
also must be included in these calculations. There can be no assurance, however,
that a Fund or the Portfolio will be able to enter into an offsetting
transaction with respect to a particular Futures Contract at a particular time.
If a Fund or the Portfolio is not able to enter into an offsetting transaction,
the Fund or the Portfolio will continue to be required to maintain the margin
deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one Futures Contract of September Deutschemarks on an
exchange may be fulfilled at any time before delivery under the Futures Contract
is required (i.e., on a specified date in September, the "delivery month") by
the purchase of another Futures Contract of September Deutschemarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to Government
Income Fund, Strategic Income Fund, Growth & Income Fund or the Portfolio.
Government Income Fund's, Strategic Income Fund's, Growth & Income Fund's
and the Portfolio's Futures transactions will be entered into for hedging
purposes only; that is, Futures Contracts will be sold to protect against a
decline in the price of securities or currencies that the Fund or the Portfolio
owns, or Futures Contracts will be purchased to protect the Fund or the
Portfolio against an increase in the price of securities or currencies it has
committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must
be deposited by Government Income Fund, Strategic Income Fund, Growth & Income
Fund or the Portfolio in order to initiate futures trading and to maintain the
Fund's or the Portfolio's open positions in Futures Contracts. A margin deposit
made when the Futures Contract is entered into ("initial margin") is intended to
assure a Fund's or the Portfolio's performance under the Futures Contract. The
margin required for a particular Futures Contract is set by the exchange on
which the Futures Contract is traded, and may be modified significantly from
time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which the Fund or the Portfolio entered into the
Futures Contract will be made on a daily basis as the price of the underlying
security, currency or index fluctuates making the Futures Contract more or less
valuable, a process known as marking-to-market.
Risks of Using Futures Contracts. The prices of Futures Contracts are
volatile and are influenced, among other things, by actual and anticipated
changes in interest and currency rates, which in turn are affected by fiscal and
monetary policies and national and international political and economic events.
There is a risk of imperfect correlation between changes in prices of
Futures Contracts and prices of the securities or currencies in a Fund's or the
Portfolio's portfolio being hedged. The degree of imperfection of correlation
depends upon circumstances such as: variations in speculative market demand for
Futures and
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for securities or currencies, including technical influences in Futures trading;
and differences between the financial instruments being hedged and the
instruments underlying the standard Futures Contracts available for trading. A
decision of whether, when, and how to hedge involves skill and judgment, and
even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in
Futures Contract and option on Futures Contract prices during a single trading
day. The daily limit establishes the maximum amount that the price of a Futures
Contract or option may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular type of Futures Contract or option, no trades may be made on that
day at a price beyond that limit. The daily limit governs only price movement
during a particular trading day and therefore 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
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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 total assets of a Fund's or the
Portfolio's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund or the Portfolio has entered into.
In general, a call option on a Futures Contract is "in-the-money" if the value
of the underlying Futures Contract exceeds the strike, i.e., exercise, price of
the call; a put option on a Futures Contract is "in-the-money" if the value of
the underlying Futures Contract is exceeded by the strike price of the put. This
guideline may be modified by the Trust's or the Portfolio's Board of Trustees,
as applicable, without a shareholder vote. This limitation does not limit the
percentage of a Fund's or the Portfolio's assets at risk to 5%.
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. Government
Income Fund, Strategic Income Fund, Growth & Income Fund and the Portfolio
either may accept or make delivery of the currency at the maturity of the
Forward Contract. A Fund or the Portfolio may also, if its contra party agrees,
prior to maturity, enter into a closing transaction involving the purchase or
sale of an offsetting contract.
A Fund or the Portfolio engages in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund or the Portfolio might sell a particular foreign currency forward, for
example, when it holds bonds denominated in a foreign currency but anticipates,
and seeks to be protected against, a decline in the currency against the U.S.
dollar. Similarly, a Fund or the Portfolio might sell the U.S. dollar forward
when it holds bonds denominated in U.S. dollars but anticipates, and seeks to be
protected against, a decline in the U.S. dollar relative to other currencies.
Further, the Funds or the Portfolio might purchase a currency forward to "lock
in" the price of securities denominated in that currency that it anticipates
purchasing.
Forward Contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
Forward Contract generally has no deposit requirement, and no commissions are
charged at any stage for trades. Government Income Fund, Strategic Income Fund,
Growth & Income Fund or the Portfolio will enter into such Forward Contracts
with major U.S.
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or foreign banks and securities or currency dealers in accordance with
guidelines approved by the Trust's or the Portfolio's Board of Trustees, as
applicable.
Government Income Fund, Strategic Income Fund, Growth & Income Fund or the
Portfolio may enter into Forward Contracts either with respect to specific
transactions or with respect to the overall investment of the Fund or the
Portfolio. The precise matching of the Forward Contract amounts and the value of
specific securities generally will not be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the Forward Contract
is entered into and the date it matures. Accordingly, it may be necessary for
the Fund or the Portfolio to purchase additional foreign currency on the spot
(i.e., cash) market (and bear the expense of such purchase) if the market value
of the security is less than the amount of foreign currency the Fund or the
Portfolio is obligated to deliver and if a decision is made to sell the security
and make delivery of the foreign currency. Conversely, it may be necessary to
sell on the spot market some of the foreign currency the Fund or the Portfolio
is obligated to deliver. The projection of short-term currency market movements
is extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Forward Contracts involve the risk that
anticipated currency movements will not be predicted accurately, causing the
Fund or the Portfolio to sustain losses on these contracts and transaction
costs.
At or before the maturity of a Forward Contract requiring the Fund or the
Portfolio to sell a currency, the Fund or the Portfolio either may sell a
portfolio security and use the sale proceeds to make delivery of the currency or
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which the Fund or the
Portfolio will obtain, on the same maturity date, the same amount of the
currency that it is obligated to deliver. Similarly, the Fund or the Portfolio
may close out a Forward Contract requiring it to purchase a specified currency
by entering into a second contract, if its contra party agrees, entitling it to
sell the same amount of the same currency on the maturity date of the first
contract. The Fund or the Portfolio would realize a gain or loss as a result of
entering into such an offsetting Forward Contract under either circumstance to
the extent the exchange rate or rates between the currencies involved moved
between the execution dates of the first contract and the offsetting contract.
The cost to a Fund or the Portfolio of engaging in Forward Contracts varies
with factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts usually are
entered into on a principal basis, no fees or commissions are involved. The use
of Forward Contracts does not eliminate fluctuations in the prices of the
underlying securities the Fund or the Portfolio owns or intends to acquire, but
it does establish a rate of exchange in advance. In addition, while Forward
Contracts limit the risk of loss due to a decline in the value of the hedged
currencies, they also limit any potential gain that might result should the
value of the currencies increase.
FOREIGN CURRENCY STRATEGIES--SPECIAL CONSIDERATIONS
A Fund or the Portfolio may use options on foreign currencies, Futures on
foreign currencies, options on Futures on foreign currencies and Forward
Contracts to hedge against movements in the values of the foreign currencies in
which the Fund's or the Portfolio's securities are denominated. Such currency
hedges can protect against price movements in a security that a Fund or the
Portfolio owns or intends to acquire that are attributable to changes in the
value of the 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 AIM and/or the Sub-advisor
believe 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.
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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
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 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. Strategic Income Fund and the
Portfolio will also establish and maintain such segregated accounts with respect
to its total obligations under any swaps that are not entered into on a net
basis and with respect to any caps or floors that are written by that Fund or
the Portfolio. The Sub-advisor, Strategic Income Fund and the Portfolio believe
that swaps, caps and floors do not constitute senior securities under the 1940
Act and, accordingly, will not treat them as being subject to the Fund's and the
Portfolio's borrowing restrictions. Strategic Income Fund and the Portfolio
will not enter into any swap, cap, floor, collar or other derivative
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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 or S&P, or has an equivalent rating from a
nationally recognized statistical rating organization or is determined to be of
equivalent credit quality by AIM and/or the Sub-advisor. If a counterparty
defaults, the Strategic Income Fund or the Portfolio may have contractual
remedies pursuant to the agreements related to the transactions. The swap market
has grown substantially in recent years, with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and, for that
reason, they are less liquid than swaps.
RISK FACTORS
NON-DIVERSIFIED CLASSIFICATION
The Funds and the Portfolio are classified as "non-diversified" funds under
the 1940 Act. As a result, the Funds and the Portfolio will be able to invest in
a fewer number of issuers than if they were classified as "diversified" funds
under the 1940 Act. To the extent that the Funds and the Portfolio invest in a
smaller number of issuers, the value of the Funds' and the Portfolio's shares
may fluctuate more widely and the Funds and the Portfolio may be subject to
greater investment and credit risk with respect to the portfolio.
ILLIQUID SECURITIES
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio each may invest up to 15% of net assets in illiquid securities.
Securities may be considered illiquid if a Fund or the Portfolio cannot
reasonably expect within seven days to receive approximately the amount at which
the Fund or the Portfolio values such securities. The sale of illiquid
securities, if they can be sold at all, generally will require more time and
result in higher brokerage charges or dealer discounts and other selling
expenses than will the sale of liquid securities, such as securities eligible
for trading on U.S. securities exchanges or in the over-the-counter markets.
Moreover, restricted securities, which may be illiquid for purposes of this
limitation often sell, if at all, at a price lower than similar securities that
are not subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions
contained in the securities laws of other countries. However, securities that
are freely marketable in the country where they are principally traded, but
would not be freely marketable in the United States, will not be considered
illiquid. Where registration is required, each Fund and the Portfolio may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time a Fund
or the Portfolio may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, a Fund or the Portfolio might obtain a less favorable price than
prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended ("1933 Act"), including
private placements, repurchase agreements, commercial paper, foreign securities
and corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted
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securities have developed as a result of Rule 144A, providing both readily
ascertainable values for restricted securities and the ability to liquidate an
investment to satisfy share redemption orders. Such markets include automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the
National Association of Securities Dealers, Inc. An insufficient number of
qualified institutional buyers interested in purchasing Rule 144A-eligible
restricted securities held by a Fund or the Portfolio, however, could affect
adversely the marketability of such portfolio securities and a Fund or the
Portfolio might be unable to dispose of such securities promptly or at favorable
prices.
With respect to liquidity determinations generally, the Trust's or the
Portfolio's Board of Trustees has the ultimate responsibility for determining
whether specific securities, including restricted securities eligible for resale
to qualified institutional buyers pursuant to Rule 144A under the 1933 Act, are
liquid or illiquid. The Board has delegated the function of making day-to-day
determinations of liquidity to AIM and/or the Sub-advisor in accordance with
procedures approved by the Board. AIM and/or the Sub-advisor take into account a
number of factors in reaching liquidity decisions, including: (i) the frequency
of trading in the security; (ii) the number of dealers that make quotes for the
security; (iii) the number of dealers that have undertaken to make a market in
the security; (iv) the number of other potential purchasers; and (v) the nature
of the security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited and the mechanics of transfer). AIM and/or
the Sub-advisor will monitor the liquidity of securities held by each Fund and
the Portfolio and report periodically on such decisions to the Trust's or the
Portfolio's Board of Trustees. Moreover, as noted in the Prospectus, certain
securities, such as those subject to registration restrictions of more than
seven days, will generally be treated as illiquid. If the liquidity percentage
restriction of a Fund or the Portfolio is satisfied at the time of investment, a
later increase in the percentage of illiquid securities held by a Fund or the
Portfolio resulting from a change in market value or assets will not constitute
a violation of that restriction. If as a result of a change in market value or
assets, the percentage of illiquid securities held by the Fund or Portfolio
increases above the applicable limit, AIM and/or the Sub-advisor will take
appropriate steps to bring the aggregate amount of illiquid assets back within
the prescribed limitations as soon as reasonably practicable, taking into
account the effect of any disposition on the Fund or the Portfolio.
FOREIGN SECURITIES
Political, Social and Economic Risks. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization,
confiscatory taxation or other confiscation by any country, either a Fund or the
Portfolio could lose its entire investment in any such country. Economies in
emerging markets 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.
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.
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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 Government Income Fund,
Strategic Income Fund, Growth & Income Fund or the Portfolio. These restrictions
or controls may at times limit or preclude investment in certain securities and
may increase the cost and expenses of a Fund or the Portfolio. For example,
certain countries require prior governmental approval before investments by
foreign persons may be made, or may limit the amount of investment by foreign
persons in a particular company, or limit the investment by foreign persons to
only a specific class of securities of a company that may have less advantageous
terms than securities of the company available for purchase by nationals.
Moreover, the national policies of certain countries may restrict investment
opportunities in issuers or industries deemed sensitive to national interests.
In addition, some countries require governmental approval for the repatriation
of investment income, capital or the proceeds of securities sales by foreign
investors. In addition, if there is a deterioration in a country's balance of
payments or for other reasons, a country may impose restrictions on foreign
capital remittances abroad. Government Income Fund, Strategic Income Fund,
Growth & Income Fund or the Portfolio could be adversely affected by delays in,
or a refusal to grant, any required governmental approval for repatriation, as
well as by the application to it of other restrictions on investments.
Non-Uniform Corporate Disclosure Standards and Governmental Regulation.
Foreign companies are subject to accounting, auditing and financial standards
and requirements that differ, in some cases significantly, from those applicable
to U.S. companies. In particular, the assets, liabilities and profits appearing
on the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Most of the foreign securities held by Government Income
Fund, Strategic Income Fund, Growth & Income Fund or the Portfolio will not be
registered with the SEC or regulators of any foreign country, nor will the
issuers thereof be subject to the SEC's reporting requirements. Thus, there will
be less available information concerning most foreign issuers of securities held
by Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio than is available concerning U.S. issuers. In instances where the
financial statements of an issuer are not deemed to reflect accurately the
financial situation of the issuer, AIM and/or the Sub-advisor will take
appropriate steps to evaluate the proposed investment, which may include on-site
inspection of the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is substantially less publicly
available information about foreign companies than there are reports and ratings
published about U.S. companies and the U.S. Government. In addition, where
public information is available, it may be less reliable than such information
regarding U.S. issuers. Issuers of securities in foreign jurisdictions are
generally not subject to the same degree of regulation as are U.S. issuers with
respect to such matters as restrictions on market manipulation, insider trading
rules, shareholder proxy requirements and timely disclosure of information.
Currency Fluctuations. Because 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,
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the relative movement of interest rates and the pace of business activity in the
other countries, and the United States, and other economic and financial
conditions affecting the world economy. Many of the currencies in emerging
markets countries have experienced steady devaluations relative to the U.S.
dollar and major devaluations have historically occurred in certain countries.
On January 1, 1999, certain members of the European Economic and Monetary
Union ("EMU"), namely Austria, Belgium, Finland, France, Germany, Ireland,
Italy, Luxembourg, the Netherlands, Portugal, and Spain established a common
European currency known as the "euro" and each member's local currency became a
denomination of the euro. It is anticipated that each participating country will
replace its local currency with the euro on July 1, 2002. Any other European
country that is a member of the European Union and satisfies the criteria for
participation in the EMU may elect to participate in the EMU and may supplement
its existing currency with the euro. The anticipated replacement of existing
currencies with the euro on July 1, 2002 could cause market disruptions before
or after July 1, 2002 and could adversely affect the value of securities held by
a Fund.
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. AIM and/or the Sub-advisor
will consider such difficulties when determining the allocation of each Fund's
or the Portfolio's assets, although AIM and the Sub-advisor do 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 charge
higher custody fees than those attributable to domestic investing and 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.
The risk exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Fund's portfolio securities in such
markets may not be readily available. Section 22(e) of the 1940 Act permits a
registered investment company to suspend redemption of its shares for any period
during which an emergency exists, as determined by the SEC. Accordingly, if the
Fund believes that appropriate circumstances warrant, it will promptly apply to
the SEC for a determination that an emergency exists within the meaning of
Section 22(e) of the 1940 Act. During the period commencing from the Fund's
identification of such conditions until the date of SEC action, the portfolio
securities of the Fund in the affected markets will be valued at fair value as
determined in good faith by or under the direction of the Trust's Board of
Trustees.
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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 "Dividends,
Distributions and Tax Matters" herein.
Concentration. To the extent a Fund invests a significant portion of its
assets in securities of issuers located in a particular country or region of the
world, such Portfolio may be subject to greater risks and may experience greater
volatility than a fund that is more broadly diversified geographically.
Special Considerations Affecting Western European Countries. The countries
that are members of the European Economic Community ("Common Market") (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
Netherlands, Portugal, Spain, Sweden and the United Kingdom) eliminated certain
import tariffs and quotas and other trade barriers with respect to one another
over the past several years. AIM and the Sub-advisor believe 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.
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The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
Special Considerations Affecting Pacific Region Countries. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also exist between South Korea and North Korea. In
addition, the Funds may invest in Hong Kong, which reverted to Chinese
Administration on July 1, 1997. Investments in Hong Kong may be subject to
expropriation, national, nationalization or confiscation, in which case a Fund
could lose its entire investment in Hong Kong. In addition, the reversion of
Hong Kong also presents a risk that the Hong Kong dollar will be devalued and a
risk of possible loss of investor confidence in Hong Kong's currency, stock
market and assets.
Special Considerations Affecting Latin American Countries. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies
to equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by 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. Strategic Income Fund,
Growth & Income Fund, Government Income Fund and the Portfolio may invest in
debt securities in emerging markets. Investing in securities in emerging
countries may entail greater risks than investing in debt securities in
developed countries. Similarly, for Growth & Income Fund, investing in the
equity securities of companies in emerging markets entails additional risks.
These risks affecting debt and equity investments in emerging markets include
(i) less social, political and economic stability; (ii) the small current size
of the markets for such securities and the currently low or nonexistent volume
of trading, which result in a lack of liquidity and in greater price volatility;
(iii) certain national policies which may restrict the Funds' and the
Portfolio's investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests; (iv) foreign
taxation; and (v) the absence of developed structures governing private or
foreign
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investment or allowing for judicial redress for injury to private property.
Because of the special risks associated with investing in emerging markets, an
investment in the Fund should be considered speculative.
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.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
Government Income Fund and Strategic Income Fund may invest in
mortgage-backed and asset-backed securities. The yield characteristics of
mortgage-backed and asset-backed securities differ from those of traditional
bonds. Among the major differences are that interest and principal payments are
made more frequently (usually monthly) and that principal may be prepaid at any
time because the underlying mortgage loans or other assets generally may be
prepaid at any time. Generally, prepayments on fixed-rate mortgage loans will
increase during a period of falling interest rates and decrease during a period
of rising interest rates. Mortgage-backed and asset-backed securities may also
decrease in value as a result of increasing market interest rates and, because
of prepayments, may benefit less than other bonds from declining interest rates.
Reinvestments of prepayments may occur at lower interest rates than the original
investment, thus adversely affecting the yield of the Fund. Actual prepayment
experience may cause the yield of a mortgage-backed security to differ from what
was assumed when the Fund purchased the security. The market for privately
issued mortgage-backed and asset-backed securities is smaller and less liquid
than the market for U.S. government mortgage-backed securities.
Foreign mortgage-backed securities markets are substantially smaller than
U.S. markets, but have been established in several countries, including Germany,
Denmark, Sweden, Canada and Australia, and may be developed elsewhere. Foreign
mortgage-backed securities generally are structured similar to domestic
mortgage-backed securities, and they normally present substantially similar
investment risks as well as the other risks normally associated with foreign
securities.
LOWER QUALITY DEBT SECURITIES
Under normal market conditions the Strategic Income Fund may invest up to
65%, and the Portfolio may invest up to 100%, of their respective total assets
in debt securities rated below investment grade. Such investments involve a high
degree of risk.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by S&P and debt rated Ba, D,
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 issue 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, Strategic Income
Fund and the Portfolio may invest in debt securities rated below C, which are in
default as to principal and/or interest.
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Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit quality in response to subsequent events, so that an
issuer's current financial conditions may be better or worse than a rating
indicates.
The marked 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 Strategic Income Fund and the Portfolio. If an issuer exercises
these provisions in a declining interest rate market, Strategic Income Fund and
the Portfolio may have to replace the security with a lower yielding security,
resulting in a decreased return for investors. In addition, 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 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 Strategic Income Fund and the
Portfolio to obtain accurate market quotations for purposes of valuing the
securities in the portfolios of 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. 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 the respective net asset values of the Funds. 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.
Strategic Income Fund and the Portfolio also may incur additional expenses to
the extent they are required to seek recovery upon a default in the payment of
principal or interest on its portfolio holdings, and Strategic Income 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 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, 1999, the Strategic Income Fund and the Portfolio had
86.84% and 29.72%, respectively, of their total net assets in debt securities
that received a rating from Standard & Poor's and
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8.14% and 63.16%, respectively, of their total net assets in debt securities
that were not so rated. In addition, the Strategic Income Fund had 0.005% in
cash and 5.87% in net payables. The Portfolio had 0.00% in cash and 3.18% in net
receivables. The Strategic Income Fund and the Portfolio had 86.84% and 29.72%,
respectively, of their total net assets invested in rated securities in the
following rating categories: AAA -- 20.86% and 0.00%; AA -- 0.89% and 0.00%;
A+ -- 1.02% and 0.00%; A -- 1.41% and 0.00%; A- -- 1.44% and 0.00%; BBB -- 9.20%
and 1.13%; BBB- -- 2.67% and 6.75%; BB+ -- 1.35% and 3.31%; BB -- 6.34% and
10.46%; BB- --2.26% and 3.24%; B+ -- 9.16% and 3.74%; B -- 14.97% and 1.09%;
B- -- 13.93% and 0.00%; CCC+ -- 0.42% and 0.00%; and D -- 0.93% and 0.00%.
Included in the unrated category are securities held by the Fund or the
Portfolio which, while unrated, have been determined by AIM and/or the
Sub-advisor to be of comparable quality to rated securities. It should be noted
that the allocation of the investments of the Fund and the Portfolio by rating
on any given date will vary and should not be considered representative of the
future composition of the Fund or the Portfolio.
INVESTMENT LIMITATIONS
Each Fund and the Portfolio has adopted the following investment
limitations as fundamental policies which may not be changed without approval by
a majority of the outstanding shares of the Fund or Portfolio, as applicable.
Whenever Emerging Markets Debt Fund is requested to vote on a change in the
investment limitations of the Portfolio, the Fund will hold a meeting of its
shareholders and will cast its votes as instructed by its shareholders.
EMERGING MARKETS DEBT FUND AND THE PORTFOLIO
Emerging Markets Debt Fund and the Portfolio each may not:
(1) Purchase any security if, as a result of that purchase, 25% or
more of the Fund's total assets would be invested in securities of issuers
having their principal business activities in the same industry, except
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-based securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(3) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(4) Engage in the business of underwriting securities of other
issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(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
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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 Emerging Markets Debt Fund and the
Portfolio are not fundamental policies and may be changed by vote of the Trust's
Board of Trustees or the Portfolio's Board of Trustees without shareholder
approval. The Fund and the Portfolio each may not:
(1) Invest in securities of an issuer if the investment would cause
the Fund or the Portfolio to own more than 10% of any class of securities
of any one issuer (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund), except that the
Fund or the Portfolio may purchase securities of Affiliated Money Market
Funds to the extent permitted by exemptive order;
(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), except that the Fund or the Portfolio may purchase securities of
Affiliated Money Market Funds to the extent permitted by exemptive order;
(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.
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GOVERNMENT INCOME FUND
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 Government Income Fund are not
fundamental policies and may be changed by vote of the Trust's Board of Trustees
without shareholder approval. The Fund may not:
(1) Borrow money to purchase securities or borrow money except for
temporary or emergency purposes. While borrowings exceed 5% of the Fund's
total assets, the Fund will not make any additional investments;
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(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,
except that the Fund may purchase securities of Affiliated Money Market
Funds to the extent permitted by exemptive order;
(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.
GROWTH & INCOME FUND
Growth & Income Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or
more of the Fund's total assets would be invested in securities of issuers
having their principal business activities in the same industry, except
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-based securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(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
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<PAGE> 377
borrow up to an additional 5% of its total assets (not including the amount
borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial operations and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments.
Notwithstanding any other investment policy of Growth & Income Fund, Growth
& Income Fund may invest all of its investable assets (cash, securities and
receivables related to securities) in an open-end management investment company
having substantially the same investment objective, policies and limitations as
the Fund.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following operating policies of Growth & Income Fund are not
fundamental policies and may be changed by vote of the Trust's Board of Trustees
without shareholder approval. The Fund may not:
(1) Invest in securities of an issuer if the investment would cause
the Fund to own more than 10% of any class of securities of any one issuer,
except that the Fund may purchase securities of Affiliated Money Market
Funds to the extent permitted by exemptive order;
(2) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(3) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of
those positions (excluding the amount by which options are "in-the-money")
exceeds 5% of the liquidation value of the Fund's portfolio, after taking
into account unrealized profits and unrealized losses on any contracts the
Fund has entered into;
(4) Borrow money except for temporary or emergency purposes (other
than to meet redemptions). While borrowings exceed 5% of the Fund's total
assets, the Fund will not make any additional investments;
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments;
(6) Purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits
maturing in more than seven days, or purchase OTC options or hold assets
set aside to cover OTC options written by the Fund, if immediately after
and as a result, the value of such securities would exceed, in the
aggregate, 15% of the Fund's net assets; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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STRATEGIC INCOME FUND
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 Strategic Income Fund are not
fundamental policies and may be changed by vote of the Trust's Board of Trustees
without shareholder approval. The Fund may not:
(1) Invest more than 15% of its total assets in illiquid securities;
(2) Borrow money to purchase securities and will not invest in
securities of an issuer if the investment would cause the Fund to own more
than 10% of any class of securities of any one issuer (provided, however,
that the Fund may invest all of its investable assets in an open-end
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<PAGE> 379
management investment company with substantially the same investment
objectives, policies, and limitations as the Fund), except that the
Fund may purchase securities of Affiliated Money Market Funds to the
extent permitted by exemptive order;
(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), except that the Fund may purchase
securities of Affiliated Money Market Funds to the extent permitted by
exemptive order;
(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.
Investors should refer to each Fund's Prospectus for further information
about each Fund's respective investment objectives, which may not be changed
without the approval of the Fund's shareholders and its corresponding
Portfolio's investment objectives, which may be changed without the approval of
the Portfolio's shareholders, and other investment policies and techniques,
which may be changed without shareholder approval.
EXECUTION OF PORTFOLIO TRANSACTIONS
Subject to policies established by the Trust's and the Portfolio's Board of
Trustees, AIM and/or the Sub-advisor are responsible for the execution of
Government Income Fund's, Strategic Income Fund's, Growth & Income Fund's and
the Portfolio's portfolio transactions and the selection of broker/dealers that
execute such transactions on behalf of these Funds and the Portfolio. In
executing transactions, AIM and/or the Sub-advisor seek the best net results for
Government Income Fund, Strategic Income Fund, Growth & Income Fund and the
Portfolio, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Although AIM
and/or the Sub-advisor generally seek 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.
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Consistent with the interests of the Funds and the Portfolio, AIM and/or
the Sub-advisor may select brokers to execute the Funds' and the Portfolio's
portfolio transactions on the basis of the research and brokerage services they
provide to AIM and/or the Sub-advisor for their use in managing the Funds and
the Portfolio and their 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).
Broker/dealers may communicate such information electronically, orally, in
written form or on computer software. Research and brokerage services received
from such brokers are in addition to, and not in lieu of, the services required
to be performed by AIM and/or the Sub-advisor under investment management and
administration contracts. A commission paid to such brokers may be higher than
that which another qualified broker would have charged for effecting the same
transaction, provided that AIM and/or the Sub-advisor determine in good faith
that such commission is reasonable in terms either of that particular
transaction or the overall responsibility of AIM and/or the Sub-advisor to the
Funds and the Portfolio and its other clients and that the total commissions
paid by the Funds and the Portfolio will be reasonable in relation to the
benefits received by the Funds and the Portfolio over the long term. Research
services may also be received from dealers who execute Fund transactions in OTC
markets.
Investment decisions for each Fund and the Portfolio and for other
investment accounts managed by AIM and/or the Sub-advisor are made independently
of each other in light of differing conditions. However, the same investment
decision occasionally may be made for two or more of such accounts, including
one or both Funds and the Portfolio. In such cases, simultaneous transactions
may occur. Purchases or sales are then allocated as to price or amount in a
manner deemed fair and equitable to all accounts involved. While in some cases
this practice could have a detrimental effect upon the price or value of the
security as far as the Funds and the Portfolio are concerned, in other cases AIM
and/or the Sub-advisor believe that coordination and the ability to participate
in volume transactions will be beneficial to the Funds and the Portfolio.
Under a policy adopted by the Trust's and the Portfolio's Board of
Trustees, and subject to the policy of obtaining the best net results, AIM
and/or the Sub-advisor may consider a broker/dealer's sale of the shares of the
Funds and the other funds for which AIM or the Sub-advisor serves as investment
manager in selecting brokers and dealers for the execution of portfolio
transactions. This policy does not imply a commitment to execute portfolio
transactions through all broker/dealers that sell shares of the Funds and such
other funds.
Each Fund and the Portfolio contemplates purchasing most foreign equity
securities in over-the-counter markets or stock exchanges located in the
countries in which the respective principal offices of the issuers of the
various securities are located, if that is the best available market. The fixed
commissions paid in connection with most such foreign stock transactions
generally are higher than negotiated commissions on United States transactions.
There generally is less government supervision and regulation of foreign stock
exchanges and brokers than in the United States. Foreign security settlements
may in some instances be subject to delays and related administrative
uncertainties.
Foreign equity securities may be held by a Fund and the Portfolio in the
form of ADRs, ADSs, CDRs, GDRs or EDRs or securities convertible into foreign
equity securities. ADRs, ADSs, CDRs, GDRs and EDRs may be listed on stock
exchanges, or traded in the OTC markets in the United States or Europe, as the
case may be. ADRs, like other securities traded in the United States, will be
subject to negotiated commission rates. The foreign and domestic debt securities
and money market instruments in which the Funds and the Portfolio may invest
generally are traded in the OTC markets.
The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of a Fund, provided the conditions of an exemptive order received by
the Funds from the SEC are met. In addition, a Fund may purchase or sell a
security from or to another AIM Fund or account provided the Funds follow
procedures adopted by the Boards of
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<PAGE> 381
Directors/Trustees of the various AIM Funds, including the Trust. These
inter-fund transactions do not generate brokerage commissions but may result in
custodial fees or taxes or other related expenses.
The Funds and the Portfolio contemplate that, consistent with the policy of
obtaining the best net results, brokerage transactions may be conducted through
certain companies that are affiliates of AIM and the Sub-advisor. The Trust's
Board of Trustees has adopted procedures in conformity with Rule 17e-1 under the
1940 Act to ensure that all brokerage commissions paid to such affiliates are
reasonable and fair in the context of the market in which they are operating.
Any such transactions will be effected and related compensation paid only in
accordance with applicable SEC regulations. For the fiscal years ended October
31, 1999, 1998 and 1997, the Emerging Markets Debt Portfolio paid aggregate
brokerage commissions of $0, $0 and $0, respectively. For the fiscal years ended
October 31, 1999, 1998 and 1997, Government Income Fund paid aggregate brokerage
commissions of $0, $0 and $4,987, respectively. For the fiscal years ended
October 31, 1999, 1998 and 1997, Strategic Income Fund paid aggregate brokerage
commissions of $12,472, $933 and $6,177, respectively. For the fiscal years
ended October 31, 1999, 1998 and 1997, Growth & Income Fund paid aggregate
brokerage commissions of $989,553, $1,105,727 and $463,307, respectively. For
the fiscal year ended October 31, 1997, Growth & Income Fund paid to LGT Bank in
Liechtenstein, AG, which was an "affiliated" broker, aggregate brokerage
commissions of $12,262 for transactions involving purchases and sales of
portfolio securities which represented 2.65% of the total brokerage commissions
paid by the Fund and 2.94% of the aggregate dollar amount of transactions
involving payment of commissions by the Fund.
PORTFOLIO TRADING AND TURNOVER
Each Fund and the Portfolio engages in portfolio trading when AIM and/or
the Sub-advisor concludes that the sale of a security owned by a Fund and the
Portfolio and/or the purchase of another security of better value can enhance
principal and/or increase income. A security may be sold to avoid any
prospective decline in market value, or a security may be purchased in
anticipation of a market rise. Consistent with each Fund's and the Portfolio's
investment objectives, a security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two securities.
Although the Funds and the Portfolio generally do not intend to trade for
short-term profits, the securities in each Fund's and the Portfolio's portfolio
will be sold whenever AIM and/or the Sub-advisor believe it is appropriate to do
so, without regard to the length of time a particular security may have been
held. Portfolio turnover is calculated by dividing the lesser of sales or
purchases of portfolio securities by each Fund's or the Portfolio's average
month-end portfolio value, excluding short-term investments. Higher portfolio
turnover involves correspondingly greater brokerage commissions and other
transaction costs that a Fund or the Portfolio will bear directly, and could
result in the realization of net capital gains that would be taxable when
distributed to shareholders. The portfolio turnover rates for the Emerging
Markets Debt Portfolio, Government Income Fund, Growth & Income Fund and
Strategic Income Fund the last two fiscal years were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCT. 31, OCT. 31,
1999 1998
---- ----
<S> <C> <C>
Emerging Markets Debt Portfolio................................. 336% 339%
Government Income Fund.......................................... 110% 305%
Growth & Income Fund............................................ 89% 92%
Strategic Income Fund........................................... 235% 306%
</TABLE>
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation
of the Funds. The Trust's Board of Trustees has approved all significant
agreements between the Trust on the one side and persons
49
<PAGE> 382
or companies furnishing services to the Fund on the other, including the
investment management and administration agreement with AIM, the investment
sub-advisory agreement between AIM and the Sub-advisor, the agreements with AIM
Distributors regarding distribution of the Fund's shares, the custody agreement
and the transfer agency agreement. The day-to-day operations of the Fund are
delegated to the officers of the Trust, subject always to the investment
objectives and policies of the Fund and to the general supervision of the
Trust's Board of Trustees. Certain trustees and officers of the Trust are
affiliated with AIM and AIM Management Group Inc. ("AIM Management"), the parent
corporation of AIM.
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's and the Portfolio's Trustees and Executive Officers are listed
below. Unless otherwise indicated, the address of each Executive Officer is 11
Greenway Plaza, Suite 100, Houston, Texas 77046.
<TABLE>
<CAPTION>
========================================================================================================================
POSITIONS
NAME, ADDRESS AND AGE HELD WITH PRINCIPAL OCCUPATION WITH REGISTRANT
REGISTRANT
- --------------------------------------- ----------------- --------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (53) Trustee, Director, President and Chief Executive Officer, A I M
Chairman and Management Group, Inc.; Director and President, A I M
President Advisors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company; and Director and
Chief Executive Officer, Managed Products, AMVESCAP PLC.
- --------------------------------------- ----------------- --------------------------------------------------------------
C. DEREK ANDERSON (58) Trustee Senior Managing Partner, Plantagenet Capital Management, LLC
220 Sansome Street (an investment partnership); Chief Executive Officer,
Suite 400 Plantagenet Holdings, Ltd. (an investment banking firm); and
San Francisco, CA 94104 Director, Premium Wear, Inc. (formerly Munsingwear, Inc.) (a
casual apparel company),"R" Homes, Inc., Big Online, Inc.,
Champagne Albert Le Brun and various other privately owned
companies.
- --------------------------------------- ----------------- --------------------------------------------------------------
FRANK S. BAYLEY (60) Trustee Partner, law firm of Baker & McKenzie; Director and Chairman,
Two Embarcadero Center C.D. Stimson Company (a private investment company)and,
Suite 2400 Stimson Marina, Inc. (a subsidiary of C.D. Stimson Company);
San Francisco, CA 94111 and Trustee, The Badgley Funds.
- --------------------------------------- ----------------- --------------------------------------------------------------
RUTH H. QUIGLEY (65) Trustee Private investor; and President, Quigley Friedlander & Co.,
1055 California Street Inc. (a financial advisory services firm) from 1984 to 1986.
San Francisco, CA 94108
========================================================================================================================
</TABLE>
- --------
* A trustee who is an "interested person" of the Trust and A I M Advisors,
Inc. as defined in the 1940 Act.
50
<PAGE> 383
<TABLE>
<CAPTION>
========================================================================================================================
POSITIONS
NAME, ADDRESS AND AGE HELD WITH PRINCIPAL OCCUPATION WITH REGISTRANT
REGISTRANT
- --------------------------------------- ----------------- --------------------------------------------------------------
<S> <C> <C>
SAMUEL D. SIRKO (40) Vice President Vice President, Assistant General Counsel and Assistant
and Secretary Secretary, A I M Advisors, Inc.; and Assistant General Counsel
and Assistant Secretary, A I M Management Group, Inc., A I M
Capital Management, Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company.
- --------------------------------------- ----------------- --------------------------------------------------------------
MELVILLE B. COX (56) Vice President Vice President and Chief Compliance Officer, A I M Advisors,
Inc., A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and Fund Management Company.
- --------------------------------------- ----------------- --------------------------------------------------------------
GARY T. CRUM (52) Vice President Director and President, A I M Capital Management, Inc.;
Director and Executive Vice President, A I M Management Group
Inc.; Director and Senior Vice President, A I M Advisors,
Inc.; and Director, A I M Distributors, Inc. and AMVESCAP PLC.
- --------------------------------------- ----------------- --------------------------------------------------------------
CAROL F. RELIHAN (45) Vice President Director, Senior Vice President, General Counsel and
Secretary, A I M Advisors, Inc.; Senior Vice President,
General Counsel and Secretary, A I M Management Group Inc.;
Director, Vice President and General Counsel, Fund Management
Company; Vice President and General Counsel, A I M Fund
Services, Inc.; and Vice President, A I M Capital Management,
Inc. and A I M Distributors, Inc.
- --------------------------------------- ----------------- --------------------------------------------------------------
DANA R. SUTTON (41) Vice President Vice President and Fund Controller, A I M Advisors, Inc.;
and Treasurer and Assistant Vice President and Assistant Treasurer, Fund
Management Company.
========================================================================================================================
</TABLE>
The Board of Trustees has a Nominating and Audit Committee, composed of
Miss Quigley (Chairman) and Messrs. Anderson and Bayley, which is responsible
for nominating persons to serve as Trustees, reviewing audits of the Trust and
its funds and recommending firms to serve as independent auditors of the Trust.
All of the Trust's Trustees also serve as directors or trustees of some or all
of the other investment companies managed, administered or advised by AIM. All
of the Trust's Executive Officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM.
Each Trustee who is not a trustee, officer or employee of AIM and/or the
Sub-advisor or any affiliated company is paid an annual retainer component plus
a per-meeting fee component, and reimbursed travel and other expenses incurred
in connection with attendance at such meetings. Other Trustees and Officers
receive no compensation or expense reimbursement from the Trust. For the fiscal
year ended October 31, 1999, Mr. Anderson, Mr. Bayley, Mr. Arthur C. Patterson
(a trustee until September 27, 1999, when he retired) and Miss Quigley, who are
not trustees, officers, or employees of the Sub-advisor or any affiliated
company, received total compensation of $50,353, $51,376, $45,584 and $51,376,
respectively, from the Trust for their services as Trustees. For the fiscal year
ended October 31, 1999, Mr. Anderson, Mr. Bayley, Mr. Arthur C. Patterson and
Miss Quigley, who are not trustees, officers or employees of the Sub-advisor or
any other affiliated company, received total compensation of $101,833, $103,833,
$93,583 and $103,083, respectively, from the investment companies managed or
administered by AIM and sub-advised by the Sub-advisor for
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<PAGE> 384
which he or she serves as a Trustee. Fees and expenses disbursed to the Trustees
contained no accrued or payable pension or retirement benefits.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, was organized in
1976 and, together with its subsidiaries, manages or advises approximately 120
investment portfolios encompassing a broad range of investment objectives.
INVESCO Asset Management Limited, 11 Devonshire Square, London, EC2M 4YR,
England, has provided investment management and/or administrative services to
pension funds, insurance funds, index funds, unit trusts, offshore funds and a
variety of institutional accounts since 1967. AIM, the Sub-advisor and their
worldwide asset management affiliates provide investment management and/or
administrative services to institutional, corporate and individual clients
around the world.
AIM is a direct, wholly owned subsidiary of AIM Management, a holding
company that has been engaged in the financial services business since 1976. AIM
is also the sole shareholder of the Funds' principal underwriter, AIM
Distributors.
AIM Management, AIM and the Sub-Advisor are indirect wholly owned
subsidiaries of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR, England.
AMVESCAP PLC and its subsidiaries are an independent 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.
Certain of the directors and officers of AIM are also executive officers of the
Trust and their affiliations are shown under "Management" herein.
In addition to the investment resources of their Houston and London
offices, AIM and the Sub-advisor draw upon the expertise, personnel, data and
systems of other offices in Atlanta, Boston, Dallas, Denver, Louisville, Miami,
New York, Portland (Oregon), Frankfurt, Hong Kong, Singapore, Sydney, Tokyo and
Toronto. In managing the Funds and the Portfolio, AIM and the Sub-advisor employ
a team approach, taking advantage of their investment resources around the
world.
AIM and Trust have adopted a Code of Ethics (the "Code of Ethics") which
requires investment personnel and certain other employees (a) to pre-clear all
personal securities transactions subject to the Code of Ethics, (b) to file
reports or duplicate confirmations regarding such transactions, (c) to refrain
from personally engaging in (i) short-term trading of a security (ii)
transactions involving a security within seven days of an AIM Fund transaction
involving the same security, unless the security qualifies for the De minimus
exemption. The De minimus exemption would allow the trade if the issuer of the
security has a market capitalization of $2 billion or more. In addition such a
request can only be granted once every thirty days for no more than 2,000 shares
total, and (iii) transactions involving securities being considered for
investment by an AIM Fund, unless the security qualifies for the De minimus
exemption, as previously explained, for which the personal security trade would
be allowed even if the security is being considered for investment by an AIM
Fund and (d) abide by certain other provisions under the Code of Ethics. The
Code of Ethics also prohibits employees who are registered with the NASD from
purchasing securities in an initial public offering. Personal trading reports
are reviewed periodically by AIM, and the Board of Trustees review quarterly and
annual reports (including information on any substantial violations of the Code
of Ethics). Sanctions for violations of the Code of Ethics may include censure,
monetary penalties, suspension or termination of employment.
Under an investment management and administration contract between the
Trust and AIM ("Trust Advisory Agreement"), AIM serves as the investment manager
and administrator for Government Income Fund, Strategic Income Fund and Growth &
Income Fund. AIM also serves as the Portfolio's investment manager and
administrator under an Investment Management and Administration Contract between
the Portfolio and AIM ("Portfolio Advisory Agreement"). AIM became investment
manager and administrator to the Funds and the Portfolio effective June 1, 1998.
Prior to that date, Chancellor LGT Asset Management, Inc. served as investment
manager and administrator.
52
<PAGE> 385
For these services, each Fund pays AIM investment management and
administration fees, computed daily and paid monthly, based on its average daily
net assets. With respect to Growth & Income Fund, AIM's fee is calculated at the
annualized rate of 0.975% on the first $500 million, 0.95% on the next $500
million, 0.925% on the next $500 million and 0.90% on the amounts thereafter.
With respect to Government Income Fund and Strategic Income Fund, AIM's fee is
calculated at the annualized rate of 0.725% on the first $500 million, 0.70% on
the next $1 billion, 0.675% on the next $1 billion and 0.65% on amounts
thereafter. With respect to the Portfolio, AIM's fee is calculated at the
annualized rate of 0.475% on the first $500 million, 0.45% on the next $1
billion, 0.425% on the next $1 billion and 0.40% on amounts thereafter, plus a
fee equal to 2% of the Portfolio's total investment income 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 that during any fiscal year this amount will not exceed 2% of the
Portfolio's total investment income. Out of the aggregate fees payable by each
Fund, AIM pays Sub-advisor, sub-advisory fees equal to 40% of the aggregate fees
AIM receives from each Fund. The investment management and administration fees
paid by the Funds are higher than those paid by most mutual funds. The Funds pay
all expenses not assumed by AIM, the Sub-advisor, AIM Distributors or other
agents. AIM has undertaken to limit Emerging Markets Debt Fund's,, Government
Income Fund's and Growth & Income Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate of
1.75%, 2.40% and 2.40% of the average daily net assets of each Fund's Class A,
Class B and Class C shares, respectively, until June 30, 2000. AIM has
undertaken to limit Strategic Income Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate of
1.05%, 1.70% and 1.70% of the Fund's Class A, Class B and Class C Shares,
respectively until June 30, 2000.
AIM may from time to time waive or reduce its fee. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM will retain its
ability to be reimbursed for such fee prior to the end of each fiscal year.
Contractual fee waivers or reductions set forth in the Fee Tables in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund.
For the fiscal years ended October 31, 1999, 1998 and 1997, each of the
named Funds and the Portfolio paid AIM and the prior manager and administrator
the following investment management and administration fees:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Government Income Fund................................ $1,272,103 $1,823,161 $2,403,043
Growth & Income Fund.................................. 7,315,050 7,885,054 6,900,695
Strategic Income Fund................................. 1,749,758 2,691,901 3,474,804
Portfolio............................................. 1,199,895 2,240,953 3,056,493
</TABLE>
INVESCO Asset Management Limited serves as the Portfolio's sub-advisor
under a Sub-advisory Agreement between AIM and INVESCO Asset Management Limited
("Portfolio Sub-Advisory Agreement") and as the sub-advisor for Government
Income Fund and Growth & Income Fund under a separate Sub-advisory Agreement
between AIM and INVESCO Asset Management Limited ("Fund Sub-Advisory Agreement")
and (together with the Portfolio Sub-Advisory Agreement and the Fund
Sub-Advisory Agreement, the Trust Advisory Agreement and the Portfolio Advisory
Agreement, the "Management Agreements"). INVESCO Asset Management Limited, with
respect to Government Income Fund, Growth & Income Fund and the Portfolio, and
INVESCO (NY), Inc., with respect to Strategic Income Fund, became sub-advisors
to the Funds and the Portfolio effective June 1, 1998. Prior to that date,
INVESCO Asset Management Limited's and INVESO (NY), Inc.'s predecessors served
as sub-advisors. Sub-advisory arrangements with respect to Strategic Income Fund
were terminated effective February 11, 2000.
With respect to Growth & Income, AIM pays the Sub-advisor sub-advisory fees
computed weekly and paid monthly based on average daily net assets, at the
annualized rate of 0.39% of the first $500 million,
53
<PAGE> 386
0.38% on the next $500 million, 0.37% on the next $500 million and 0.36% on
amounts thereafter. With respect to the Portfolio and Government Income Fund,
AIM pays the Sub-advisor sub-advisory fees computed weekly and paid monthly
based on average daily net assets, at the annualized rate of 0.29% of the first
$500 million, 0.28% on the next $1 billion, 0.27% on the next $1 billion and
0.26% on amounts thereafter.
For the fiscal years ended October 31, 1999, 1998 and 1997, AIM and the
former investment manager and administrator paid, with respect to the named
Funds and Portfolio, the respective sub-advisors the following sub-advisory
fees:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Government Income Fund............................... $ 508,841 $ 729,264 $ 961,217
Growth & Income Fund................................. 2,926,020 3,154,022 2,760,278
Strategic Income Fund................................ 699,903 1,076,760 1,389,922
Portfolio............................................ 654,863 1,203,843 1,643,055
</TABLE>
AIM also serves as Emerging Markets Debt Fund's administrator under an
Administration Contract between the Trust and AIM.
In each of the last three fiscal years Emerging Markets Debt Fund paid
administration fees to AIM and the Sub-advisor in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------- -----------
<S> <C>
1999........................................................................................... $ 437,262
1998........................................................................................... $ 768,654
1997........................................................................................... $1,051,145
</TABLE>
The Administration Contract will not be deemed an advisory contract, as
defined under the 1940 Act. As investment managers and administrators, AIM and
the Sub-advisor make all investment decisions for Government Income Fund,
Strategic Income Fund, Growth & Income Fund and the Portfolio and as
administrator, AIM administers each Fund's and the Portfolio's affairs. Among
other things, AIM furnishes the services and pays the compensation and travel
expenses of persons who perform the executive, administrative, clerical and
bookkeeping functions of the Trust, the Funds, and the Portfolio and provide
suitable office space, necessary small office equipment and utilities. AIM and
the Sub-advisor also determine the composition of each Fund's portfolio, place
orders to buy, sell, or hold particular securities and supervise all matters
relating to each Fund's operation.
The Management Agreements may be renewed for one-year terms, provided that
any such renewal has been specifically approved at least annually by: (i) the
Trust's or the Portfolio's Board of Trustees, as applicable, or by the vote of a
majority of the Fund's or the Portfolio's outstanding voting securities (as
defined in the 1940 Act), and (ii) a majority of Trustees who are not parties to
the Management Agreements or the Administration Contract 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
Agreements provide that with respect to Government Income Fund, Strategic Income
Fund, Growth & Income Fund and the Portfolio, and the Administration Contract
provide that with respect to Emerging Markets Debt Fund, either the Trust, the
Portfolio or each of AIM or each of Sub-advisor may terminate the Contracts
without penalty upon sixty days' written notice to the other party. The
Management Agreements and the Administration Contract terminate automatically in
the event of their assignment (as defined in the 1940 Act).
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<PAGE> 387
Under a master accounting services agreement AIM serves as the Funds'
pricing and accounting agent. For these services, the Funds pay AIM such fees as
are determined in accordance with methodologies established, from time to time,
by the Trust's Board of Trustees.
For the fiscal years ended October 31, 1999, 1998 and 1997, each named Fund
and the Portfolio paid AIM and the former investment manager and administrator
the following accounting services fees:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Government Income Fund.............................. $ 55,858 $ 67,657 $ 85,149
Growth & Income Fund................................ 207,383 210,440 183,323
Strategic Income Fund............................... 70,274 99,805 123,309
Portfolio........................................... 51,980 82,450 116,607
</TABLE>
In placing securities for a Fund's portfolio transactions, AIM and/or the
Sub-advisor seek to obtain the best net results. Consistent with their
obligation to obtain the best net results, AIM and/or the Sub-advisor may
consider a broker/dealer's sale of shares of the AIM Funds as a factor in
considering through whom portfolio transactions will be effected. Brokerage
transactions may be executed through affiliates of AIM or the Sub-advisor. High
portfolio turnover (over 100%) involves correspondingly greater brokerage
commissions and other transaction costs that the Fund will bear directly and
could result in the realization of net capital gains which would be taxable when
distributed to shareholders. See "Dividends, Distributions and Tax Matters."
EXPENSES OF THE FUNDS AND THE PORTFOLIO
Each Fund and the Portfolio pays all expenses not assumed by AIM, the
Sub-advisor, AIM Distributors and other agents. These expenses include, in
addition to the advisory, distribution, transfer agency, pricing and accounting
agent and brokerage fees discussed above, legal and audit expenses, custodian
fees, trustees' fees, organizational fees, fidelity bond and other insurance
premiums, taxes, extraordinary expenses and the expenses of reports and
prospectuses sent to existing investors. The allocation of general Trust
expenses and expenses shared by the Funds and other funds organized as series of
the Trust are allocated on a basis deemed fair and equitable, which may be based
on the relative net assets of the Funds or the nature of the services performed
and relative applicability to each Fund. Expenditures, including costs incurred
in connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. The ratio of each Fund's and the Portfolio's expenses to its
relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
each Fund and the Portfolio generally are higher than the comparable expenses of
such other funds.
THE DISTRIBUTION PLANS
THE CLASS A AND C PLAN
The Trust has adopted a Master Distribution Plan pursuant to Rule 12b-1
under the 1940 Act relating to the Class A and Class C shares of the Funds (the
"Class A and C Plan"). The Class A and C Plan provides that the Class A shares
of each Fund pays 0.35% per annum of its daily average net assets as
compensation to AIM Distributors for the purpose of financing any activity which
is primarily intended to result in the sale of Class A shares. Under the Class A
and C Plan, Class C shares of the Funds pay compensation to AIM Distributors at
an annual rate of 1.00% of the average daily net assets attributable to Class C
shares. The Class A and C Plan is designed to compensate AIM Distributors, on a
quarterly basis, for certain promotional and other sales-related costs, and to
implement a dealer incentive program which provides for periodic
55
<PAGE> 388
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A or Class C shares of a
Fund. Payments can also be directed by AIM Distributors to selected institutions
who have entered into service agreements with respect to Class A and Class C
shares of each Fund and who provide continuing personal services to their
customers who own Class A and Class C shares of the Fund. The service fees
payable to selected institutions are calculated at the annual rate of 0.25% of
the average daily net asset value of those Fund shares that are held in such
institution's customers' accounts which were purchased on or after a prescribed
date set forth in the Class A and C Plan. Activities appropriate for financing
under the Class A and C Plan include, but are not limited to, the following:
printing of prospectuses and statements of additional information and reports
for other than existing shareholders; overhead; preparation and distribution of
advertising material and sales literature; expenses of organizing and conducting
sales seminars; supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements; and costs of administering the Class A and C Plan.
Of the aggregate amount payable under the Class A and C Plan, payments to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average net assets of the Fund attributable to
the customers of such dealers or financial institutions are characterized as a
service fee, and payments to dealers and other financial institutions in excess
of such amount and payments to AIM Distributors would be characterized as an
asset-based sales charge pursuant to the Class A and C Plan. The Class A and C
Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Trust with respect to the
Fund. The Class A and C Plan does not obligate the Fund to reimburse AIM
Distributors for the actual expenses AIM Distributors may incur in fulfilling
its obligations under the Class A and C Plan on behalf of the Fund. Thus, under
the Class A and C Plan, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Fund will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
THE CLASS B PLAN
The Trust has also adopted a Master Distribution Plan pursuant to Rule
12b-1 under the 1940 Act relating to Class B shares of the Funds (the "Class B
Plan", and collectively with the Class A and C Plan, the "Plans"). Under the
Class B Plan, each Fund pays compensation to AIM Distributors at an annual rate
of 1.00% of the average daily net assets attributable to Class B shares. Of such
amount, each Fund pays a service fee of 0.25% of the average daily net assets
attributable to Class B shares to selected dealers and other institutions which
furnish continuing personal shareholder services to their customers who purchase
and own Class B shares. Amounts paid in accordance with the Class B Plan may be
used to finance any activity primarily intended to result in the sale of Class B
shares, including but not limited to printing of prospectuses and statements of
additional information and reports for other than existing shareholders;
overhead; preparation and distribution of advertising material and sales
literature; expenses of organizing and conducting sales seminars; supplemental
payments to dealers and other institutions such as asset-based sales charges or
as payments of service fees under shareholder service arrangements; and costs of
administering the Class B Plan.
BOTH PLANS
Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Funds; assisting customers
in changing dividend options, account designations and addresses, and in
56
<PAGE> 389
enrolling in any of the several special investment plans offered in connection
with the purchase of the Funds' shares; assisting in the establishment and
maintenance of customer accounts and records and in the processing of purchase
and redemption transactions; investing dividends and any capital gains
distributions automatically in the Funds' shares; and providing such other
information and services as the Funds or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding the Funds;
performing sub-accounting; establishing and maintaining shareholder accounts and
records; processing customer purchase and redemption transactions; providing
periodic statements showing a shareholder's account balance and the integration
of such statements with those of other transactions and balances in the
shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as the Funds reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions which
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive
compensation for selling Fund shares may receive different compensation for
selling shares of one particular class over another.
Under a Shareholder Service Agreement, each Fund agrees to pay periodically
fees to selected dealers and other institutions who render the foregoing
services to their customers. The fees payable under a Shareholder Service
Agreement generally will be calculated at the end of each payment period for
each business day of the Funds during such period at the annual rate of 0.25% of
the average daily net asset value of the Funds' shares purchased or acquired
through exchange. Fees calculated in this manner shall be paid only to those
selected dealers or other institutions who are dealers or institutions of record
at the close of business on the last business day of the applicable payment
period for the account in which such Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable limitations
imposed by rules of the National Association of Securities Dealers, Inc.
("NASD"). The Plans conform to rules of the NASD by limiting payments made to
dealers and other financial institutions who provide continuing personal
shareholder services to their customers who purchase and own shares of the Funds
to no more than 0.25% per annum of the average daily net assets of the Funds
attributable to the customers of such dealers or financial institutions, and by
imposing a cap on the total sales charges, including asset based sales charges,
that may be paid by the Funds and their respective classes.
AIM Distributors may from time to time waive or reduce any portion of its
12b-1 fee for Class A and Class C shares. Voluntary fee waivers or reductions
may be rescinded at any time without further notice to investors. During periods
of voluntary fee waivers or reductions, AIM Distributors will retain its ability
to be reimbursed for such fee prior to the end of each fiscal year. Contractual
fee waivers or reductions set forth in the Fee Table in a Prospectus may not be
terminated or amended to the Funds' detriment during the period stated in the
agreement between AIM Distributors and the Fund.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Fund on an agency basis, may
receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent for the Funds, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Funds and not of AIM Distributors.
Financial intermediaries and any other person entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one class over another.
57
<PAGE> 390
AIM Distributors does not act as principal, but rather as agent for the
Funds, in making dealer incentive and shareholder servicing payments under the
Plans. These payments are an obligation of a Fund and not of AIM Distributors.
Prior to June 1,1998, GT Global Inc. was the distributor of the Funds.
For the fiscal year ended October 31, 1999 for Class A and B shares, and
for the period March 1, 1999 (date operations commenced) through October 31,
1999 for Class C shares, each Fund paid the following amounts under the Plans:
<TABLE>
<CAPTION>
% OF CLASS
AVERAGE DAILY
NET ASSETS
---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
---------- ---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Government Income Fund ............... $ 363,720 $ 710,164 $1,320 0.35% 1.00% 1.00%
Strategic Income Fund ............... $ 302,618 $1,552,007 $ 356 0.35% 1.00% 1.00%
Emerging Markets Debt Fund ............... $ 219,862 $1,097,291 $ 667 0.35% 1.00% 1.00%
Growth & Income Fund ............... $1,039,956 $4,535,906 $6,314 0.35% 1.00% 1.00%
</TABLE>
An estimate by category of actual fees paid by each Fund with regard to the
Class A shares during the year ended October 31, 1999 follows:
<TABLE>
<CAPTION>
EMERGING GOVERNMENT GROWTH & STRATEGIC
MARKETS INCOME INCOME INCOME
DEBT FUND FUND FUND FUND
--------- -------- ---------- --------
<S> <C> <C> <C> <C>
CLASS A
Advertising......................................... $ 35,251 $ 31,888 $ 134,988 $ 37,148
Printing and Mailing prospectuses,
semi-annual reports and annual reports
(other than to current shareholders)............ 2,735 2,615 12,231 3,062
Seminars............................................ 10,636 9,987 43,411 10,826
Compensation to Underwriters to partially
offset other marketing expenses................. 0 0 0 0
Compensation to Dealers including Finders
Fees............................................ 171,241 319,230 849,326 251,582
Compensation to Sales Personnel..................... 0 0 0 0
Annual Report Total................................. $219,863 $363,720 $1,039,956 $302,618
</TABLE>
58
<PAGE> 391
An estimate by category of actual fees paid by each Fund with regard to the
Class B Shares during the year ended October 31, 1999, as follows:
<TABLE>
<CAPTION>
EMERGING GOVERNMENT GROWTH & STRATEGIC
MARKETS INCOME INCOME INCOME
DEBT FUND FUND FUND FUND
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
CLASS B
Advertising......................................... $ 9,483 $ 3,078 $ 18,951 $ 6,546
Printing and Mailing prospectuses,
semi-annual reports and annual reports
(other than to current shareholders)........... 884 327 1,874 579
Seminars............................................ 3,819 908 6,473 2,068
Compensation to Underwriters to partially
offset other marketing expenses................. 822,968 532,623 3,401,930 1,164,005
Compensation to Dealers............................. 260,137 173,228 1,106,679 378,808
Compensation to Sales Personnel..................... 0 0 0 0
Annual Report Total................................. $1,097,291 $710,164 $4,535,907 $1,552,006
</TABLE>
An estimate by category of actual fees paid by each Fund with regard to the
Class C Shares for the period March 1, 1999 (date operations commenced) through
October 31, 1999, as follows:
<TABLE>
<CAPTION>
EMERGING GOVERNMENT GROWTH & STRATEGIC
MARKETS INCOME INCOME INCOME
DEBT FUND FUND FUND FUND
--------- ------ ------ ----
<S> <C> <C> <C> <C>
CLASS C
Advertising......................................... $128 $ 315 $ 6 $ 51
Printing and Mailing prospectuses,
semi-annual reports and annual reports
(other than to current shareholders)............ 0 0 1 0
Seminars............................................ 0 0 4 0
Compensation to Underwriters to partially
offset other marketing expenses................. 500 990 4,342 267
Compensation to Dealers............................. 39 15 1,960 38
Compensation to Sales Personnel..................... 0 0 0 0
Annual Report Total................................. $667 $1,320 $6,313 $356
</TABLE>
The Plans require AIM Distributors to provide the Board of Trustees at
least quarterly with a written report of the amounts expended pursuant to the
Plans and the purposes for which such expenditures were made. The Board of
Trustees reviews these reports in connection with their decisions with respect
to the Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Trustees, including a majority
of the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust and who have no direct or indirect financial interest in the operation
of the Plans or in any agreements related to the Plans ("Qualified Trustees").
In approving the Plans in accordance with the requirements of Rule 12b-1, the
Trustees considered various factors and determined that there is a reasonable
likelihood that the Plans would benefit each class of each Fund and their
respective shareholders.
59
<PAGE> 392
The Plans do not obligate the Funds to reimburse AIM Distributors for the
actual expenses AIM Distributors may incur in fulfilling its obligations under
the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Funds will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Unless terminated earlier in accordance with their terms, the Plans
continue in effect from year to year, as long as such continuance is
specifically approved at least annually by the Board of Trustees, including a
majority of the Qualified Trustees.
The Plans may be terminated by the vote of a majority of the Qualified
Trustees, or, with respect to a particular class, by the vote of a majority of
the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
it may be amended by the Trustees, including a majority of the Qualified
Trustees, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plans are in effect, the selection or
nomination of the Qualified Trustees is committed to the discretion of the
Qualified Trustees. In the event the Class A Plan is amended in a manner which
the Board of Trustees determines would materially increase the charges paid
under the Class A Plan, the Class B shares of the Funds will no longer convert
into Class A shares of the same Funds unless the Class B shares, voting
separately, approve such amendment. If the Class B shareholders do not approve
such amendment, the Board of Trustees will (i) create a new class of shares of
the Funds which is identical in all material respects to the Class A shares as
they existed prior to the implementation of the amendment and (ii) ensure that
the existing Class B shares of the Funds will be exchanged or converted into
such new class of shares no later than the date the Class B shares were
scheduled to convert into Class A shares.
The principal differences between the Class A and C Plan, on the one hand,
and the Class B Plan, on the other hand, are: (i) the Class A and C Plan allows
payment to AIM Distributors or to dealers or financial institutions of up to
0.35% of average daily net assets of the Class A shares of each Fund, as
compared to 1.00% of such assets of each Fund's Class B shares; (ii) the Class B
Plan obligates the Class B shares to continue to make payments to AIM
Distributors following termination of the Class B shares Distribution Agreement
with respect to Class B shares sold by or attributable to the distribution
efforts of AIM Distributors or its predecessor GT Global, Inc. unless there has
been a complete termination of the Class B Plan (as defined in such Plan) and
(iii) the Class B Plan expressly authorizes AIM Distributors to assign, transfer
or pledge its rights to payments pursuant to the Class B Plan.
THE DISTRIBUTOR
The Trust has entered into a Master Distribution Agreement with AIM
Distributors relating to the Class A shares and Class C shares of the Funds and
a Master Distribution Agreement with AIM Distributors relating to the Class B
shares of the Funds. Such Agreements are hereinafter collectively referred to as
the "Distribution Agreements."
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing the Funds'
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Fund), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of the Fund's shares, including expenses
of advertising in connection with such public offerings. AIM Distributors has
not undertaken to sell any specified number of shares of any classes of the
Funds.
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Funds directly and through institutions with
whom AIM Distributors has entered into selected dealer
60
<PAGE> 393
agreements. Under the Distribution Agreement for the Class B shares, AIM
Distributors sells Class B shares of the Funds at net asset value subject to a
contingent deferred sales charge established by AIM Distributors. AIM
Distributors is authorized to advance to institutions through whom Class B
shares are sold a sales commission under schedules established by AIM
Distributors. The Distribution Agreement for the Class B shares provides that
AIM Distributors (or its assignee or transferee) will receive 0.75% (of the
total 1.00% payable under the distribution plan applicable to Class B shares) of
each Fund's average daily net assets attributable to Class B shares attributable
to the sales efforts of AIM Distributors.
AIM Distributors expects to pay sales commissions from its own resources to
dealers and institutions who sell Class B shares of the Funds at the time of
such sales. Payments with respect to Class B shares will equal 4.00% of the
purchase price of the Class B shares sold by the dealer or institution, and will
consist of a sales commission equal to 3.75% of the purchase price of the Class
B shares sold plus an advance of the first year service fee of 0.25% with
respect to such shares. The portion of the payments to AIM Distributors under
the Class B Plan which constitutes an asset-based sales charge (0.75%) is
intended in part to permit AIM Distributors to recoup a portion of such sales
commissions plus financing costs. AIM Distributors anticipates that it will
require a number of years to recoup from Class B Plan payments the sales
commissions paid to dealers and institutions in connection with sales of Class B
shares. In the future, if multiple distributors serve a Fund, each such
distributor (or its assignee or transferee) would receive a share of the
payments under the Class B Plan based on the portion of the Fund's Class B
shares sold by or attributable to the distribution efforts of that distributor.
The Trust (on behalf of any class of any Fund) or AIM Distributors may
terminate the Distribution Agreements on sixty (60) days' written notice without
penalty. The Distribution Agreements will terminate automatically in the event
of their assignment. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset based
distribution fees in respect of the outstanding Class B shares attributable to
the distribution efforts of AIM Distributors and its predecessor; provided,
however, that a complete termination of the Class B Plan (as defined in such
Plan) would terminate all payments by the Fund of asset based distribution fees
and service fees to AIM Distributors. Termination of the Class B Plan or
Distribution Agreement does not affect the obligation of Class B shareholders to
pay contingent deferred sales charges.
From time to time, AIM Distributors may transfer and sell its right to
payments under the Distribution Agreement relating to Class B Shares in order to
finance distribution expenditures in respect of Class B Shares.
The following chart reflects the total sales charges paid in connection
with the sale of Class A shares of each Fund and the amount retained by GT
Global, Inc., the Trust's distributor prior to June 1, 1998, for the fiscal year
or period ended October 31, 1998 and 1997.
<TABLE>
<CAPTION>
NOVEMBER 1, 1997
TO MAY 31, 1998 1997
----------------------- -----------------------
SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund................. $ 83,855 $35,739 $199,201 $65,982
Government Income Fund..................... $ 13,231 $ 1,842 $ 67,477 $10,240
Growth & Income Fund....................... $111,311 $29,395 $208,844 $52,850
Strategic Income Fund...................... $ 46,291 $14,511 $111,949 $29,451
</TABLE>
61
<PAGE> 394
For the fiscal year or period ended October 31, 1999 and 1998, the total
sales charges paid in connection with the Sale of Class A Shares of each Fund
and the amount retained by AIM Distributors are as follows:
<TABLE>
<CAPTION>
JUNE 1, 1998
1999 TO OCTOBER 31, 1998
----------------------- ----------------------
SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund................. $144,625 $26,041 $21,515 $21,190
Government Income Fund..................... $ 52,850 $10,533 $ 4,354 $ 4,130
Growth & Income Fund....................... $513,711 $80,124 $27,462 $27,120
Strategic Income Fund...................... $ 67,438 $10,612 $ 6,190 $ 4,499
</TABLE>
The following chart reflects the contingent deferred sales charges paid by
Class A, Class B and Class C* shareholders for the fiscal years ended October
31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
------ ---------- ----------
<S> <C> <C> <C>
Emerging Markets Debt Fund.............................. $ 481 $ 963,681 $1,617,145
Government Income Fund.................................. $ 418 $ 742,085 $1,123,616
Growth & Income Fund ................................... $3,994 $1,174,587 $1,199,637
Strategic Income Fund................................... $1,132 $1,307,644 $1,750,253
</TABLE>
* Class C shares of each Fund commenced operations on March 1, 1999.
SALES CHARGES AND DEALER CONCESSIONS
CATEGORY I. Certain AIM Funds are currently sold with a sales charge
ranging from 5.50% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds include Class A shares of each of AIM Advisor Flex
Fund, AIM Advisor International Value Fund, AIM Advisor Large Cap Value Fund,
AIM Aggressive Growth Fund, AIM Asian Growth Fund, AIM Basic Value Fund, AIM
Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM
Constellation Fund, AIM Dent Demographic Trends Fund, AIM European Development
Fund, AIM Euroland Growth Fund, AIM Global Utilities Fund, AIM Global Growth &
Income Fund, AIM International Equity Fund, AIM Japan Growth Fund, AIM Large Cap
Basic Value Fund, AIM Large Cap Growth Fund, AIM Large Cap Opportunities Fund,
AIM Mid Cap Equity Fund, AIM Mid Cap Growth Fund, AIM Mid Cap Opportunities
Fund, AIM New Pacific Growth Fund, AIM Select Growth Fund, AIM Small Cap Growth
Fund, AIM Small Cap Opportunities Fund, AIM Value Fund and AIM Weingarten Fund.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------
----------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
--------------------- ----- -------- -----
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
62
<PAGE> 395
- ---------------
(1) AIM Small Cap Opportunities Fund will not accept any single purchase in
excess of $250,000.
CATEGORY II. Certain AIM Funds are currently sold with a sales charge
ranging from 4.75% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds are: the Class A shares of each of AIM Advisor Real
Estate Fund, AIM Balanced Fund, AIM Developing Markets Fund, AIM Emerging
Markets Debt Fund, AIM Global Aggressive Growth Fund, AIM Global Consumer
Products and Services Fund, AIM Global Financial Services Fund, AIM Global
Government Income Fund, AIM Global Growth Fund, AIM Global Health Care Fund, AIM
Global Income Fund, AIM Global Infrastructure Fund, AIM Global Resources Fund,
AIM Global Telecommunications and Technology Fund, AIM Global Trends Fund, AIM
High Income Municipal Fund, AIM High Yield Fund, AIM High Yield Fund II, AIM
Income Fund, AIM Intermediate Government Fund, AIM Latin American Growth Fund,
AIM Municipal Bond Fund, AIM Strategic Income Fund and AIM Tax-Exempt Bond Fund
of Connecticut.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------
----------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
------------------ ----- -------- -----
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
CATEGORY III. Certain AIM Funds are currently sold with a sales charge
ranging from 1.00% to 0.50% of the offering price on purchases of less than
$1,000,000. These AIM Funds are the Class A shares of each of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------
----------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
------------------ ----- -------- -----
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more of Category I,
II or III funds; however, AIM Distributors may pay a dealer concession and/or
advance a service fee on such transactions as set forth below.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
63
<PAGE> 396
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. At the option of the dealer, such
incentives may take the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are
dealers of record for purchases of $1 million or more of Class A shares (or
shares which normally involve payment of initial sales charges), which are sold
at net asset value and are subject to a contingent deferred sales charge, for
all AIM Funds other than Class A shares of each of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund as follows: 1% of the first $2 million
of such purchases, plus 0.80% of the next $1 million of such purchases, plus
0.50% of the next $17 million of such purchases, plus 0.25% of amounts in excess
of $20 million of such purchases. AIM Distributors may make payments to dealers
and institutions who are dealers of record for purchases of $1 million or more
of Class A shares (or shares which normally involve payment of initial sales
charges), and which are sold at net asset value and are not subject to a
contingent deferred sales charge, in an amount up to 0.10% of such purchases of
Class A shares of AIM Limited Maturity Treasury Fund, and in an amount up to
0.25% of such purchases of Class A shares of AIM Tax-Free Intermediate Fund.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.00% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price of the Class C
shares sold by the dealer or institution, and will consist of a sales commission
of 0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. After the first full year, AIM Distributors will make such
payments quarterly to dealers and institutions based on the average net asset
value of Class C shares which are attributable to shareholders for whom the
dealers and institutions are designated as dealers of record. These commissions
are not paid on sales to investors exempt from the CDSC, including shareholders
of record of AIM Advisor Funds, Inc. on April 30, 1995, who purchase additional
shares in any of the Funds on or after May 1, 1995, and in circumstances where
AIM Distributors grants an exemption on particular transactions.
Exchanges of AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares are considered sales of such Class B shares or Class C
shares for purposes of the sales charges and dealer concessions discussed above.
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AIM Distributors may pay investment dealers or other financial service
firms for share purchases (measured on an annual basis) of Class A Shares of all
AIM Funds except AIM Limited Maturity Treasury Fund, AIM Tax-Free Intermediate
Fund and AIM Tax-Exempt Cash Fund sold at net asset value to an employee benefit
plan as follows: 1% of the first $2 million of such purchases, plus 0.80% of the
next $1 million of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in excess of $20 million of such purchases and
up to 0.10% of the net asset value of any Class A shares of AIM Limited Maturity
Treasury Fund sold at net asset value to an employee benefit plan in accordance
with this paragraph.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class
B and Class C shares of the AIM Funds will not be taken into account in
determining whether a purchase qualifies for a reduction in initial sales
charges.
The term "purchaser" means:
o an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a
pension, profit-sharing, or other benefit plan established exclusively
for the benefit of any such person, such as an IRA, Roth IRA, a
single-participant money-purchase/profit-sharing plan or an individual
participant in a 403(b) Plan (unless such 403(b) plan qualifies as the
purchaser as defined below);
o a 403(b) plan, the employer/sponsor of which is an organization
described under Section 501(c)(3) of the Internal Revenue Code of 1986,
as amended (the "Code"), if:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the Funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
o a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under
Section 401 of the Code) and 457 plans, although more than one
beneficiary or participant is involved;
o a Simplified Employee Pension (SEP), Salary Reduction and other
Elective Simplified Employee Pension account (SAR-SEP) or a Savings
Incentive Match Plans for Employees IRA (SIMPLE IRA), where the
employer has notified the distributor in writing that all of its
related employee SEP, SAR-SEP or SIMPLE IRA accounts should be linked;
or
o any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six months
and has some purpose other than the purchase at a discount of
redeemable securities of a registered investment company.
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Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge as provided herein.
1. LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for (i) Class A
shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund, (ii) Class B and Class C shares of the AIM Funds and (iii) shares
of AIM Floating Rate Fund) within the following 13 consecutive months. By
marking the LOI section on the account application and by signing the account
application, the purchaser indicates that he understands and agrees to the terms
of the LOI and is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge
made during the 13-month period will be made at the public offering price
applicable to a single transaction of the total dollar amount indicated by the
LOI, as described under "Sales Charges and Dealer Concessions." It is the
purchaser's responsibility at the time of purchase to specify the account
numbers that should be considered in determining the appropriate sales charge.
The offering price may be further reduced as described under "Rights of
Accumulation" if the Transfer Agent is advised of all other accounts at the time
of the investment. Shares acquired through reinvestment of dividends and capital
gains distributions will not be applied to the LOI. At any time during the
13-month period after meeting the original obligation, a purchaser may revise
his intended investment amount upward by submitting a written and signed
request. Such a revision will not change the original expiration date. By
signing an LOI, a purchaser is not making a binding commitment to purchase
additional shares, but if purchases made within the 13-month period do not total
the amount specified, the investor will pay the increased amount of sales charge
as described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the
initial purchase (or subsequent purchases if necessary) the Transfer Agent will
escrow in the form of shares an appropriate dollar amount (computed to the
nearest full share). All dividends and any capital gain distributions on the
escrowed shares will be credited to the purchaser. All shares purchased,
including those escrowed, will be registered in the purchaser's name. If the
total investment specified under this LOI is completed within the 13-month
period, the escrowed shares will be promptly released. If the intended
investment is not completed, the purchaser will pay the Transfer Agent the
difference between the sales charge on the specified amount and the amount
actually purchased. If the purchaser does not pay such difference within 20 days
of the expiration date, he irrevocably constitutes and appoints the Transfer
Agent as his attorney to surrender for redemption any or all shares, to make up
such difference within 60 days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
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2. RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund,
(ii) Class B and Class C shares of the AIM Funds and (iii) shares of AIM
Floating Rate Fund) at the time of the proposed purchase. Rights of Accumulation
are also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. To determine whether or not a reduced initial sales charge
applies to a proposed purchase, AIM Distributors takes into account not only the
money which is invested upon such proposed purchase, but also the value of all
shares of the AIM Funds (except for (i) Class A shares of AIM Tax-Exempt Cash
Fund and AIM Cash Reserve Shares of AIM Money Market Fund, (ii) Class B and
Class C shares of the AIM Funds and (iii) shares of AIM Floating Rate Fund)
owned by such purchaser, calculated at their then current public offering price.
If a purchaser so qualifies for a reduced sales charge, the reduced sales charge
applies to the total amount of money then being invested by such purchaser and
not just to the portion that exceeds the breakpoint above which a reduced sales
charge applies. For example, if a purchaser already owns qualifying shares of
any AIM Fund with a value of $20,000 and wishes to invest an additional $20,000
in a fund, with a maximum initial sales charge of 5.50%, the reduced initial
sales charge of 5.25% will apply to the full $20,000 purchase and not just to
the $15,000 in excess of the $25,000 breakpoint. To qualify for obtaining the
discount applicable to a particular purchase, the purchaser or his dealer must
furnish AFS with a list of the account numbers and the names in which such
accounts of the purchaser are registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds
at net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a
fund; (b) exchanges of shares of certain funds; (c) use of the reinstatement
privilege; or (d) a merger, consolidation or acquisition of assets of a fund.
The following purchasers will not pay initial sales charges on purchases of
Class A shares because there is a reduced sales effort involved in sales to
these purchasers:
o AIM Management and its affiliates, or their clients;
o Any current or retired officer, director or employee (and members of
their immediate family) of AIM Management, its affiliates or The AIM
Family of Funds(R), and any foundation, trust or employee benefit plan
established exclusively for the benefit of, or by, such persons;
o Any current or retired officer, director, or employee (and members of
their immediate family), of CIGNA Corporation or its affiliates, or of
First Data Investor Services Group; and any deferred compensation plan
for directors of investment companies sponsored by CIGNA Investments,
Inc. or its affiliates;
o Sales representatives and employees (and members of their immediate
family) of selling group members or financial institutions that have
arrangements with such selling group members;
o Purchases through approved fee-based programs;
o Employee benefit plans designated as purchasers as defined above, and
non-qualified plans offered in conjunction therewith, provided the
initial investment in the plan(s) is at least $1 million; the sponsor
signs a $1 million LOI; the employer-sponsored plan(s) has at least 100
eligible employees; or all plan transactions are executed through a
single omnibus account per Fund and the financial institution or
service organization has entered into the appropriate agreements with
the distributor. Section 403(b) plans sponsored by public educational
institutions are not eligible for a sales charge exception based on the
aggregate investment made by the plan or the number of eligible
employees. Purchases of AIM Small Cap Opportunities Fund by such plans
are subject to initial sales charges;
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o Shareholders of record or discretionary advised clients of any
investment advisor holding shares of AIM Weingarten Fund or AIM
Constellation Fund on September 8, 1986, or of AIM Charter Fund on
November 17, 1986, who have continuously owned shares having a market
value of at least $500 and who purchase additional shares of the same
Fund;
o Shareholders of record of Advisor Class shares of AIM International
Growth Fund or AIM Worldwide Growth Fund on February 12, 1999 who have
continuously owned shares of the AIM Funds.
o Unitholders of G/SET series unit investment trusts investing proceeds
from such trusts in shares of AIM Weingarten Fund or AIM Constellation
Fund; provided, however, prior to the termination date of the trusts, a
unitholder may invest proceeds from the redemption or repurchase of his
units only when the investment in shares of AIM Weingarten Fund and AIM
Constellation Fund is effected within 30 days of the redemption or
repurchase;
o A shareholder of a fund that merges or consolidates with an AIM Fund or
that sells its assets to an AIM Fund in exchange for shares of an AIM
Fund;
o Shareholders of the GT Global funds as of April 30, 1987 who since that
date continually have owned shares of one or more of these funds; and
o Certain former AMA Investment Advisers' shareholders who became
shareholders of the AIM Global Health Care Fund in October 1989, and
who have continuously held shares in the GT Global funds since that
time.
o Shareholders of record of Advisor Class shares of an AIM Fund on
February 11, 2000 who have continuously owned shares of that AIM Fund,
and who purchase additional shares of that AIM Fund.
As used above, immediate family includes an individual and his or her
spouse, children, parents and parents of spouse.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
Former GT Global funds Class A shares that are subject to a contingent
deferred sales charge and that were purchased before June 1, 1998 are entitled
to the following waivers from the contingent deferred sales charge otherwise due
upon redemption: (1) minimum required distributions made in connection with an
IRA, Keogh Plan or custodial account under Section 403(b) of the Code or other
retirement plan following attainment of age 70 1/2; (2) total or partial
redemptions resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement plan; (3) when a redemption results
from a tax-free return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code or from the death or disability of the employee; (4)
redemptions pursuant to a Fund's right to liquidate a shareholder's account
involuntarily; (5) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in the former GT Global
funds, which are permitted to be made without penalty pursuant to the Code,
other than tax-free rollovers or transfers of assets, and the proceeds of which
are reinvested in the former GT Global funds; (6) redemptions made in connection
with participant-directed exchanges between options in an employer-sponsored
benefit plan; (7) redemptions made for the purpose of providing cash to fund a
loan to a participant in a tax-qualified retirement plan; (8) redemptions made
in connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (9) redemptions made in connection with
a distribution from any retirement plan or account that involves the return of
an excess deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of
the Code; (10) redemptions made in connection with a distribution from a
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qualified profit-sharing or stock bonus plan described in Section 401(k) of the
Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code
upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (11) redemptions made by or for the
benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof where such entities are prohibited or limited
by applicable law from paying a sales charge or commission.
Former GT Global funds Class B shares purchased before June 1, 1998 are
subject to the following waivers from the contingent deferred sales charge
otherwise due upon redemption: (1) total or partial redemptions resulting from a
distribution following retirement in the case of a tax-qualified
employer-sponsored retirement; (2) minimum required distributions made in
connection with an IRA, Keogh Plan or custodial account under Section 403(b) of
the Code or other retirement plan following attainment of age 70 1/2; (3)
redemptions pursuant to distributions from a tax-qualified employer-sponsored
retirement plan, which is invested in the former GT Global funds, which are
permitted to be made without penalty pursuant to the Code, other than tax-free
rollovers or transfers of assets, and the proceeds of which are reinvested in
the former GT Global funds; (4) redemptions made in connection with
participant-directed exchanges between options in an employer-sponsored benefit
plan; (5) redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan; (6) redemptions made in
connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (7) redemptions made in connection with
a distribution from a qualified profit-sharing or stock bonus plan described in
Section 401(k) of the Code to a participant or beneficiary under Section
401(k)(2)(B)(IV) of the Code upon hardship of the covered employee (determined
pursuant to Treasury Regulation Section 1.401(k)-1(d)(2)); and (8) redemptions
made by or for the benefit of certain states, counties or cities, or any
instrumentalities, departments or authorities thereof where such entities are
prohibited or limited by applicable law from paying a sales charge or
commission.
CDSCs will not apply to the following:
o Additional purchases of Class C shares of AIM Advisor Flex Fund, AIM
Advisor International Value Fund, AIM Advisor Large Cap Value Fund and
AIM Advisor Real Estate Fund by shareholders of record on April 30,
1995, of these Funds, except that shareholders whose broker-dealers
maintain a single omnibus account with AFS on behalf of those
shareholders, perform sub-accounting functions with respect to those
shareholders, and are unable to segregate shareholders of record prior
to April 30, 1995, from shareholders whose accounts were opened after
that date will be subject to a CDSC on all purchases made after March
1, 1996;
o Redemptions following the death or post-purchase disability of (1) any
registered shareholders on an account or (2) a settlor of a living
trust, of shares held in the account at the time of death or initial
determination of post-purchase disability;
o Certain distributions from individual retirement accounts, Section
403(b) retirement plans, Section 457 deferred compensation plans and
Section 401 qualified plans, where redemptions result from (i) required
minimum distributions to plan participants or beneficiaries who are age
70-1/2 or older, and only with respect to that portion of such
distributions that does not exceed 12% annually of the participant's or
beneficiary's account value in a particular AIM Fund; (ii) in kind
transfers of assets where the participant or beneficiary notifies the
distributor of the transfer no later than the time the transfer occurs;
(iii) tax-free rollovers or transfers of assets to another plan of the
type described above invested in Class B or Class C shares of one or
more of the AIM Funds; (iv) tax-free returns of excess contributions or
returns of excess deferral amounts; and (v) distributions on the death
or disability (as defined in the Internal Revenue Code of 1986, as
amended) of the participant or beneficiary;
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o Amounts from a Systematic Withdrawal Plan of up to an annual amount of
12% of the account value on a per fund basis, at the time the
withdrawal plan is established, provided the investor reinvests his
dividends;
o Liquidation by the Fund when the account value falls below the minimum
required account size of $500;
o Investment account(s) of AIM; and
o Class C shares where the investor's dealer of record notifies the
distributor prior to the time of investment that the dealer waives the
payment otherwise payable to him.
Upon the redemption of shares of funds in sales charge Categories I and II
(see "Sales Charges and Dealer Concessions") purchased in amounts of $1 million
or more, no CDSC will be applied in the following situations:
o Shares held more than 18 months;
o Redemptions from employee benefit plans designated as qualified
purchasers, as defined above, where the redemptions are in connection
with employee terminations or withdrawals, provided the total amount
invested in the plan is at least $1,000,000; the sponsor signs a $1
million LOI; or the employer-sponsored plan has at least 100 eligible
employees; provided, however, that 403(b) plans sponsored by public
educational institutions shall qualify for the CDSC waiver on the basis
of the value of each plan participant's aggregate investment in the AIM
Funds, and not on the aggregate investment made by the plan or on the
number of eligible employees;
o Private foundations or endowment funds;
o Redemption of shares by the investor where the investor's dealer waives
the amounts otherwise payable to it by the distributor and notifies the
distributor prior to the time of investment; and
o Shares acquired by exchange from Class A shares of funds in sales
charge Categories I and II unless the shares acquired by exchange are
redeemed within 18 months of the original purchase of the Class A
shares.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Funds may be
purchased appears in the Prospectus under the heading "Purchasing Shares -- How
to Purchase Shares."
The sales charge normally deducted on purchases of Class A shares of the
Funds is used to compensate AIM Distributors and participating dealers for their
expenses incurred in connection with the distribution of such shares. Since
there is little expense associated with unsolicited orders placed directly with
AIM Distributors by persons who, because of their relationship with the Funds or
with AIM and its affiliates, are familiar with the Funds, or whose programs for
purchase involve little expense (e.g., because of the size of the transaction
and shareholder records required), AIM Distributors believes that it is
appropriate and in the Funds' best interests that such persons be permitted to
purchase Class A shares of the Funds through AIM Distributors without payment of
a sales charge. The persons who may purchase Class A shares of the Funds without
a sales charge are listed under the caption "Reductions in Initial Sales Charges
- - Purchases at Net Asset Value."
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Complete information concerning the method of exchanging shares of the
Funds for shares of the other AIM Funds is set forth in the Prospectus under the
heading "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in the
Prospectus under the heading "Redeeming Shares." Shares of the AIM Funds may be
redeemed directly through AIM Distributors or through any dealer who has entered
into an agreement with AIM Distributors. In addition to the Funds' obligation to
redeem shares, AIM Distributors may also repurchase shares as an accommodation
to shareholders. To effect a repurchase, those dealers who have executed
Selected Dealer Agreements with AIM Distributors must phone orders to the order
desk of the Fund telephone: (800) 347-4246 and guarantee delivery of all
required documents in good order. A repurchase is effected at the net asset
value of the Fund next determined after such order is received. Such arrangement
is subject to timely receipt by AFS of all required documents in good order. If
such documents are not received within a reasonable time after the order is
placed, the order is subject to cancellation. While there is no charge imposed
by the Funds or by AIM Distributors (other than any applicable CDSC) when shares
are redeemed or repurchased, dealers may charge a fair service fee for handling
the transaction. AIM intends to redeem all shares of the Funds in cash.
The right of redemption may be suspended or the date of payment postponed
when (a) trading on the New York Stock Exchange ("NYSE") is restricted, as
determined by applicable rules and regulations of the SEC, (b) the NYSE is
closed for other than customary weekend and holiday closings, (c) the SEC has by
order permitted such suspension, or (d) an emergency as determined by the SEC
exists making disposition of portfolio securities or the valuation of the net
assets of the Fund not reasonably practicable.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification
number or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8
(for non-resident aliens) or Form W-9 (certifying exempt status) accompanying
the registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, must, according to IRS regulations,
withhold 31% of redemption payments and reportable dividends (whether paid or
accrued) in the case of any shareholder who fails to provide the Fund with a
taxpayer identification number ("TIN") and a certification that he is not
subject to backup withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN,
or
(3) the investor or the Fund is notified by the IRS that the investor is
subject to backup withholding because the investor failed to report all
of the interest and dividends on such investor's tax return (for
reportable interest and dividends only), or
(4) the investor fails to certify to the Fund that the investor is not
subject to backup withholding under (3) above (for reportable interest
and dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to non-exempt
mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in all
five situations discussed above. Redemption proceeds and long-term gain
distributions are subject to backup withholding only if (1) (2) or (5) above
applies.
Certain payees and payments are exempt from backup withholding and
information reporting. A complete listing of such exempt entities appears in the
Instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
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o a corporation
o an organization exempt from tax under Section 501(a), an individual
retirement plan (IRA), or a custodial account under Section 403(b)(7)
o the United States or any of its agencies or instrumentalities
o a state, the District of Columbia, a possession of the United States,
or any of their political subdivisions or instrumentalities
o a foreign government or any of its political subdivisions, agencies or
instrumentalities
o an international organization or any of its agencies or
instrumentalities
o a foreign central bank of issue
o a dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
o a futures commission merchant registered with the Commodity Futures
Trading Commission
o a real estate investment trust
o an entity registered at all times during the tax year under the 1940
Act
o a common trust fund operated by a bank under Section 584(a)
o a financial institution
o a middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List
o a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct
TIN will be subject to a $50 penalty imposed by the IRS unless such failure is
due to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities
are not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
federal income tax withholding at a 30% rate on ordinary income dividends and
distributions and return of capital distributions. Under applicable treaty law,
residents of treaty countries may qualify for a reduced rate of withholding or a
withholding exemption.
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NET ASSET VALUE DETERMINATION
The net asset value per share of each Fund or Portfolio is normally
determined once daily as of the close of the customary trading session of the
NYSE (generally 4:00 p.m. Eastern time) on each business day of the Fund or
Portfolio. In the event the NYSE closes early (i.e., before 4:00 p.m. Eastern
time) on a particular day, the net asset value of a Fund or Portfolio share is
determined as of the close of the NYSE on such day. Net asset value per share is
determined by dividing the value of the equity securities, cash and other assets
(including interest accrued but not collected) attributable to a particular
class, less all its liabilities (including accrued expenses and dividends
payable) attributable to that class, by the total number of shares outstanding
of that class. Determination of each Fund's or Portfolio's net asset value per
share is made in accordance with generally accepted accounting principles.
Each equity security held is valued at its last sales price on the exchange
where the security is principally traded or, lacking any sales on a particular
day, the security is valued at the last available bid. Each security traded in
the over-the-counter market (but not including securities reported on the NASDAQ
National Market System) is valued at the mean between the last bid and asked
prices based upon quotes furnished by market makers for such securities. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the mean
between the closing bid and asked prices on that day. Debt securities are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance on
quoted prices, and may reflect appropriate factors such as institution-size
trading in similar groups of securities, developments related to special
securities, yield, quality, coupon rate, maturity, type of issue, individual
trading characteristics and other market data. Securities for which market
quotations are not readily available or are questionable are valued at fair
market value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of Trustees.
Short-term obligations having 60 days or less to maturity are valued on the
basis of amortized cost. For purposes of determining net asset value per share,
futures and options contracts generally will be valued 15 minutes after the
close of the customary trading session of the NYSE.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the customary trading session of the NYSE.
The values of such securities used in computing the net asset value of each
Fund's or Portfolio's shares are determined at such times. Foreign currency
exchange rates are also generally determined prior to the close of the NYSE.
Occasionally, events affecting the values of such securities and such exchange
rates may occur between the times at which such values are determined and the
close of the customary trading session of the NYSE which will not be reflected
in the computation of a Fund's or Portfolio's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board(s) of Trustees of the Funds and the
Portfolio.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gain distributions are automatically
reinvested in additional shares of the same class of each Fund unless the
shareholder has requested in writing to receive such dividends and distributions
in cash or that they be invested in shares of another AIM Fund, subject to the
terms and conditions set forth under the caption "Shareholder
Information-Purchasing Shares-Special Plans-Automatic Dividend Investment." If a
shareholder's account does not have any shares in it on a dividend or capital
gain distribution payment date, the dividend or distribution will be paid in
cash whether or not the shareholder has elected to have such dividends or
distributions reinvested.
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TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
TAXATION OF THE FUNDS
Each Fund is treated as a separate corporation for federal income tax
purposes. To continue to qualify for treatment as a regulated investment company
("RIC") under the Code, each Fund must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income (consisting
generally of net investment income, net short-term capital gain and net gains
from certain foreign currency transactions) ("Distribution Requirement") and
must meet several additional requirements. With respect to each Fund, these
requirements include the following: (1) the Fund must derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans and gains from the sale or other disposition of securities
or foreign currencies, or other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in
securities or those currencies ("Income Requirement"); (2) at the close of each
quarter of the Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. government securities,
securities of other RICs and other securities, with these other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Fund's total assets and that does not represent more than 10%
of the issuer's outstanding voting securities; and (3) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its total
assets may be invested in securities (other than U.S. government securities or
the securities of other RICs) of any one issuer. The Emerging Markets Debt Fund,
as an investor in the Portfolio, is deemed to own a proportionate share of the
Portfolio's assets, and to earn a proportionate share of the Portfolio's income,
for purposes of determining whether that Fund satisfies the requirements
described above to qualify as a RIC.
By qualifying for treatment as a RIC, each Fund (but not its shareholders)
will be relieved of federal income tax on the part of its investment company
taxable income and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) that it distributes to its shareholders. If a
Fund failed to qualify for treatment as a RIC for any taxable year, (1) it
would be taxed as an ordinary corporation on the full amount of its taxable
income for that year without being able to deduct the distributions it makes
to its shareholders and (2) the shareholders would treat all those
distributions, including distributions of net capital gain, as dividends (that
is, ordinary income) to the extent of the Fund's earnings and profits. In
addition, the Fund could be required to recognize unrealized gains, pay
substantial taxes and interest and make substantial distributions before
requalifying for RIC treatment.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
See "Taxation of Certain Investment Activities" below for a discussion of
the tax consequences to the Emerging Markets Debt Fund of hedging transactions
engaged in, and investments in passive foreign investment companies ("PFICs")
and other foreign securities by, the Portfolio.
TAXATION OF THE PORTFOLIO--GENERAL
The Portfolio is treated as a partnership for federal income tax purposes
and is not a "publicly traded partnership." As a result, the Portfolio is not
subject to federal income tax; instead, the Emerging Markets Debt Fund, as an
investor in the Portfolio, is required to take into account in determining its
federal income tax liability its share of the Portfolio's income, gains, losses,
deductions and credits, without regard to whether it has received any cash
distributions from the Portfolio. The Portfolio also is not subject to Delaware
income or franchise tax.
Because, as noted above, the Emerging Markets Debt Fund is deemed to own a
proportionate share of the Portfolio's assets, and to earn a proportionate share
of the Portfolio's income, for purposes of determining whether that Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to conduct
its operations so that the Emerging Markets Debt Fund will be able to continue
to satisfy all those requirements.
Distributions to the Emerging Markets Debt Fund from the Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
that Fund's recognition of any gain or loss for federal
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income tax purposes, except that (1) gain will be recognized to the extent any
cash that is distributed exceeds that Fund's basis for its interest in the
Portfolio before the distribution, (2) income or gain will be recognized if the
distribution is in liquidation of that Fund's entire interest in the Portfolio
and includes a disproportionate share of any unrealized receivables held by the
Portfolio, and (3) loss will be recognized if a liquidation distribution
consists solely of cash and/or unrealized receivables. The Emerging Markets Debt
Fund's basis for its interest in the Portfolio generally will equal the amount
of cash and the basis of any property that Fund invests in the Portfolio,
increased by that Fund's share of the Portfolio's net income and gains and
decreased by (a) the amount of cash and the basis of any property the Portfolio
distributes to that Fund and (b) that Fund's share of the Portfolio's losses.
TAXATION OF CERTAIN INVESTMENT ACTIVITIES
For purposes of the following discussion, "Investor Funds" means the
Government Income Fund, the Strategic Income Fund, the Growth & Income Fund and
the Portfolio.
Foreign Taxes. Interest and dividends received by an Investor Fund, and
gains realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that would
reduce the yield and/or total return on its securities. Tax conventions between
certain countries and the United States may reduce or eliminate foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of an
Investor Fund's total assets (taking into account, in the case of the Emerging
Markets Debt Fund, its proportionate share of the Portfolio's assets) at the
close of its taxable year consists of securities of foreign corporations, the
Fund will be eligible to, and may, file an election with the Internal Revenue
Service that will enable its shareholders, in effect, to receive the benefit of
the foreign tax credit with respect to any foreign taxes paid by it (taking into
account, in the case of the Emerging Markets Debt Fund, its proportionate share
of any foreign taxes paid by the Portfolio) (a "Fund's foreign taxes"). Pursuant
to the election, an Investor Fund would treat those taxes as dividends paid to
its shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his proportionate share of the Fund's foreign
taxes, (2) treat his share of those taxes and of any dividend paid by the Fund
that represents its income from foreign and U.S. possessions sources (taking
into account, in the case of the Emerging Markets Debt Fund, its proportionate
share of the Portfolio's income from those sources) as his own income from those
sources and (3) either deduct the taxes deemed paid by him in computing his
taxable income or, alternatively, use the foregoing information in calculating
the foreign tax credit against his federal income tax. Each Investor Fund will
report to its shareholders shortly after each taxable year their respective
shares of the Fund's foreign taxes and income (taking into account, in the case
of the Emerging Markets Debt Fund, its proportionate share of the Portfolio's
income) from sources within foreign countries and U.S. possessions if it makes
this election. Pursuant to the Taxpayer Relief Act of 1997 ("Tax Act"),
individuals who have no more than $300 ($600 for married persons filing jointly)
of creditable foreign taxes included on Form 1099 and all of whose foreign
source income is "qualified passive income" may elect each year to be exempt
from the foreign tax credit limitation and will be able to claim a foreign tax
credit without having to file the Form 1116 that otherwise is required.
Passive Foreign Investment Companies. Each Investor Fund may invest in the
stock of passive foreign investment companies ("PFICs"). A PFIC is any foreign
corporation (with certain exceptions) that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, an Investor Fund will be
subject to federal income tax on a part (or, in the case of the Emerging Markets
Debt Fund, its proportionate share of a part) of any "excess distribution"
received by it (or, in the case of the Emerging Markets Debt Fund, by the
Portfolio) on the stock of a PFIC or of any gain on the
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Fund's (or, in the case of the Emerging Markets Debt Fund, the Portfolio's)
disposition of that stock (collectively "PFIC income"), plus interest thereon,
even if the Fund distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent it distributes that income to its shareholders.
If an Investor Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Investor Fund (or, in the case of the Portfolio, the
Emerging Markets Debt Fund) would be required to include in income each year its
pro rata share (taking into account, in the case of the Emerging Markets Debt
Fund, its proportionate share of the Portfolio's pro rata share) of the QEF's
ordinary earnings and net capital gain which most likely would have to be
distributed by the Investor Fund (or, in the case of the Portfolio, the Emerging
Markets Debt Fund) to satisfy the Distribution Requirement and avoid imposition
of the Excise Tax--even if those earnings and gain were not received thereby
from the QEF. In most instances it will be very difficult, if not impossible, to
make this election because of certain requirements thereof.
Each Investor Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of the stock over an
Investor Fund's adjusted basis therein as of the end of that year. Pursuant to
the election, an Investor Fund also will be allowed to deduct (as an ordinary,
not capital, loss) the excess, if any, of its adjusted basis in PFIC stock over
the fair market value thereof as of the taxable year-end, but only to the extent
of any net mark-to-market gains with respect to that stock included in income by
the Fund for prior taxable years. An Investor Fund's adjusted basis in each
PFIC's stock subject to the election will be adjusted to reflect the amounts of
income included and deductions taken thereunder. Regulations proposed in 1992
provided a similar election with respect to the stock of certain PFICs.
Options, Futures and Foreign Currency Transactions. The Investors Funds'
use of hedging transactions, such as selling (writing) and purchasing options
and futures contracts and entering into forward contracts, involves complex
rules that will determine, for federal income tax purposes, the amount,
character and timing of recognition of the gains and losses an Investor Fund
realizes in connection therewith. Gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations),
and gains from options, futures and forward contracts derived by an Investor
Fund with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income Requirement for
that Investor Fund (or, in the case of the Portfolio, the Emerging Markets Debt
Fund).
Futures and forward contracts that are subject to Section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by an Investor Fund at the end of its taxable year
generally will be deemed to have been sold at that time at market value for
federal income tax purposes. Sixty percent of any net gain or loss recognized on
these deemed sales, and 60% of any net gain or loss realized from any actual
sales of Section 1256 Contracts, will be treated as long-term capital gain or
loss, and the balance will be treated as short-term capital gain or loss. That
60% portion will qualify for the reduced maximum tax rates on noncorporate
taxpayers' net capital gain--20% (10% for noncorporate taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
12 months.
Section 988 of the Code also may apply to gains and losses from
transactions in foreign currencies, foreign-currency-denominated debt securities
and options, futures and forward contracts on foreign currencies ("Section 988"
gains and losses). Each Section 988 gain or loss generally is computed
separately and treated as ordinary income or loss. In the case of overlap
between Sections 1256 and 988, special provisions determine the character and
timing of any income, gain or loss. Each Investor Fund attempts to monitor
Section 988 transactions to minimize any adverse tax impact.
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If an Investor Fund has an "appreciated financial position"--generally, an
interest (including an interest through an option, futures or forward contract
or short sale) with respect to any stock, debt instrument (other than "straight
debt") or partnership interest the fair market value of which exceeds its
adjusted basis--and enters into a "constructive sale" of the same or
substantially identical property, the Fund will be treated as having made an
actual sale thereof, with the result that gain will be recognized at that time
unless the closed transaction exception applies. A constructive sale generally
consists of a short sale, an offsetting notional principal contract or futures
or forward contract entered into by an Investor Fund or a related person with
respect to the same or substantially identical property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially identical property will
be deemed a constructive sale.
The Strategic Income Fund and the Portfolio each may acquire zero coupon or
other securities issued with original issue discount ("OID"). As a holder of
those securities, that Fund and the Portfolio (and, through it, the Emerging
Markets Debt Fund) each must include in its income the portion of the OID that
accrues on the securities during the taxable year, even if no corresponding
payment on them is received during the year. Similarly, the Strategic Income
Fund and the Portfolio each must include in its gross income securities it
receives as "interest" on payment-in-kind securities. Because each Fund annually
must distribute substantially all of its investment company taxable income,
including any OID and other non-cash income, to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax, the Strategic Income Fund or
the Emerging Markets Debt Fund, or both, may be required in a particular year to
distribute as a dividend an amount that is greater than the total amount of cash
it actually receives (or, in the case of the Emerging Markets Debt Fund, its
share of the total amount of cash the Portfolio actually receives). Those
distributions will be made from the Fund's (or, in the case of the Emerging
Markets Debt Fund, its, or its share of the Portfolio's) cash assets or, if
necessary, from the proceeds of sales of portfolio securities. Such Fund may
(directly or through the Portfolio) realize capital gains or losses from those
sales, which would increase or decrease its investment company taxable income
and/or net capital gain.
TAXATION OF THE FUNDS' SHAREHOLDERS
Dividends and other distributions declared by a Fund in, and payable to
shareholders of record as of a date in, October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
A portion of the dividends from the Growth & Income Fund's investment
company taxable income (whether paid in cash or reinvested in additional shares)
may be eligible for the dividends-received deduction allowed to corporations.
The eligible portion may not exceed the aggregate dividends received by that
Fund from U.S. corporations. However, dividends received by a corporate
shareholder and deducted by it pursuant to the dividends-received deduction are
subject indirectly to the federal alternative minimum tax. The Funds other than
the Growth & Income Fund are not expected to pay dividends eligible for that
deduction.
If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Dividends paid by a Fund to a shareholder who, as to the United States, is
a nonresident alien individual, nonresident alien fiduciary of a trust or
estate, foreign corporation or foreign partnership ("foreign shareholder")
generally will be subject to U.S. withholding tax (at a rate of 30% or lower
treaty rate). Withholding will not apply, however, to a dividend paid by a Fund
to a foreign shareholder that is "effectively connected with the conduct of a
U.S. trade or business," in which case the reporting and withholding
requirements applicable to domestic shareholders will apply. A distribution of
net capital gain by a Fund to
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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 that are in effect at the date of this Statement of Additional
Information and that affect the Funds, their shareholders and the Portfolio.
Investors are urged to consult their own tax advisors for more detailed
information and for information regarding any foreign, state and local taxes
applicable to distributions received from a Fund.
EXCHANGE AND REINSTATEMENT PRIVILEGES AND WASH SALES
If a shareholder disposes of a Fund's shares ("original shares") within 90
days after purchase thereof and subsequently reacquires shares of that Fund or
acquires shares of another AIM Fund on which a sales charge normally is imposed
("replacement shares"), without paying the sales charge (or paying a reduced
charge) due to an exchange privilege or a reinstatement privilege, then (1) any
gain on the disposition of the original shares will be increased, or the loss
thereon decreased, by the amount of the sales charge paid when those shares
were acquired and (2) that amount will increase the adjusted basis of the
replacement shares that were subsequently acquired. In addition, if a
shareholder purchases shares of a Fund (whether pursuant to the reinstatement
privilege or otherwise) within 30 days before or after redeeming at a loss
other shares of that Fund (regardless of class), all or part of that loss will
not be deductible and instead will increase the basis of the newly purchased
shares.
SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus under
the title "Shareholder Information."
TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer to ensure
that all orders are transmitted on a timely basis to the Transfer Agent. Any
loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. If a check used to purchase
shares does not clear, or if any investment order must be canceled due to
nonpayment, the investor will be responsible for any resulting loss to an AIM
Fund or to AIM Distributors.
SHARE CERTIFICATES. AIM Funds will issue share certificates upon written
request to AFS. Otherwise, shares are held on the shareholder's behalf and
recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, all shares
are to be held by the Transfer Agent and all dividends and distributions are
reinvested in shares of the applicable AIM Fund by the Transfer Agent. To
provide funds for payments made under the Systematic Withdrawal Plan, the
Transfer Agent redeems sufficient full and fractional shares at their net asset
value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events.
Since such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the AIM Funds and AIM Cash Reserve
Shares of AIM Money Market Fund), it is disadvantageous to effect such purchases
while a Systematic Withdrawal Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
TERMS AND CONDITIONS OF EXCHANGE. Normally, shares of an AIM Fund to be
acquired by exchange are purchased at their net asset value or applicable
offering price, as the case may be, determined on the date that such request is
received, but under unusual market conditions such purchases may be delayed for
up to five business days if it is determined that a fund would be materially
disadvantaged by an immediate transfer of the proceeds of the exchange. If a
shareholder is exchanging into a fund paying daily dividends, and the release of
the exchange proceeds is delayed for the foregoing five-day period, such
shareholder will not begin to accrue dividends until the sixth business day
after the exchange.
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EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with certain
dealers and investment advisory firms to accept telephone instructions to
exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by telegraph or use overnight courier services to expedite exchanges by mail,
which will be effective on the business day received by the Transfer Agent as
long as such request is received prior to NYSE Close. The Transfer Agent and AIM
Distributors may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction.
By signing an account application form, an investor appoints the Transfer
Agent as his true and lawful attorney-in-fact to surrender for redemption any
and all unissued shares held by the Transfer Agent in the designated account(s),
or in any other account with any of the AIM Funds, present or future, which has
the identical registration as the designated account(s), with full power of
substitution in the premises. The Transfer Agent and AIM Distributors are
thereby authorized and directed to accept and act upon any telephone redemptions
of shares held in any of the account(s) listed, from any person who requests the
redemption proceeds to be applied to purchase shares in any one or more of the
AIM Funds, provided that such fund is available for sale and provided that the
registration and mailing address of the shares to be purchased are identical to
the registration of the shares being redeemed. An investor acknowledges by
signing the form that he understands and agrees that the Transfer Agent and AIM
Distributors may not be liable for any loss, expense or cost arising out of any
telephone exchange requests effected in accordance with the authorization set
forth in these instructions if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions. Procedures for verification of telephone transactions
may include recordings of telephone transactions (maintained for six months),
requests for confirmation of the shareholder's Social Security Number and
current address, and mailings of confirmations promptly after the transactions.
The Transfer Agent reserves the right to modify or terminate the telephone
exchange privilege at any time without notice. An investor may elect not to have
this privilege by marking the appropriate box on the application. Then any
exchanges must be effected in writing by the investor.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an
investor appoints the Transfer Agent as his true and lawful attorney-in-fact to
surrender for redemption any and all unissued shares held by the Transfer Agent
in the designated account(s), present or future, with full power of substitution
in the premises. The Transfer Agent and AIM Distributors are thereby authorized
and directed to accept and act upon any telephone redemptions of shares held in
any of the account(s) listed, from any person who requests the redemption. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone redemption requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transaction. The Transfer Agent reserves the
right to cease to act as attorney-in-fact subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone redemption
privilege at any time without notice. An investor may elect not to have this
privilege by marking the appropriate box on the application. Then any
redemptions must be effected in writing by the investor.
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SIGNATURE GUARANTEES. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the SEC, and
further provided that such guarantor institution is listed in one of the
reference guides contained in the Transfer Agent's current Signature Guarantee
Standards and Procedures, such as certain domestic banks, credit unions,
securities dealers, or securities exchanges. The Transfer Agent will also accept
signatures with either: (1) a signature guaranteed with a medallion stamp of the
STAMP Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
TRANSACTIONS BY INTERNET. An investor may effect transactions in his
account through the Internet by selecting the AIM Internet Connect option on his
completed account application form or completing an AIM Internet Connect
Authorization Form. By signing either form the investor acknowledges and agrees
that the Transfer Agent and AIM Distributors will not be liable for any loss,
expense or cost arising out of any internet transaction effected in accordance
with the instructions set forth in the forms if they reasonably believe such
request to be genuine. Procedures for verification of internet transactions
include requests for confirmation of the shareholder's personal identification
number and mailing of confirmations promptly after the transactions. The
investor also acknowledges that (1) if he no longer wants the AIM Internet
Connect option, he will notify the Transfer Agent in writing, and (2) the AIM
Internet Connect option may be terminated at any time by the AIM Funds.
DIVIDENDS AND DISTRIBUTIONS. In determining the amount of capital gains, if
any, available for distribution, net capital gains are offset against available
net capital losses, if any, carried forward from previous fiscal periods.
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than those
for Class A shares or AIM Cash Reserve Shares because of higher distribution
fees paid by Class B and Class C shares. Dividends on all shares may also be
affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by
the shareholder at any time by notice to the Transfer Agent and are effective as
to any subsequent payment if such notice is received by the Transfer Agent prior
to the record date of such payment. Any dividend and distribution election
remains in effect until the Transfer Agent receives a revised written election
by the shareholder.
Any dividend or distribution paid by a fund which does not declare
dividends daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
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MISCELLANEOUS INFORMATION
CHARGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying charges for requests for
copies of shareholder account statements and other historical account
information older than the current year and the immediately preceding year.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street,
Boston, Massachusetts 02110, is custodian of all securities and cash of the
Funds. The Custodian attends to the collection of principal and income, pays and
collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. AIM Fund Services, Inc., a wholly owned
subsidiary of AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, acts
as transfer and dividend disbursing agent for the Funds. These services do not
include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Funds pay the Custodian and the
Transfer Agent such compensation as may be agreed upon from time to time.
INDEPENDENT ACCOUNTANTS
The Funds' and the Portfolio's independent accountants are
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP conducts audits of each
Fund's and the Portfolio's financial statements, assists in the preparation of
the Funds' and the Portfolio's federal and state income tax returns and consults
with the Trust, the Funds and the Portfolio as to matters of accounting,
regulatory filings, and federal and state income taxation.
The audited financial statements of the Funds and the Portfolio included in
this Statement of Additional Information have been examined by
PricewaterhouseCoopers LLP, as stated in their opinion appearing herein and are
included in reliance upon such opinion given upon the authority of that firm as
experts in accounting and auditing.
LEGAL MATTERS
The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue N.W.,
Washington, D.C. 20036-1800, acts as counsel to the Trust and the Funds.
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of the Trust enjoy the same
limitations extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
the Trust Agreement disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
trustee. If a shareholder is held personally liable for the obligations of the
Trust, the Trust Agreement provides that the shareholder shall be entitled out
of the assets belonging to the applicable Fund (or allocable to the applicable
Class), to be held harmless from and indemnified against all loss and expense
arising from such liability in accordance with the Trust's Bylaws and applicable
law. Thus, the risk of a shareholder incurring financial loss on account of such
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations and where the other party was held not to be bound by
the disclaimer.
81
<PAGE> 414
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the holders
of 5% or more of the outstanding shares of any class of each Fund as of February
14, 2000, and the percentage of the outstanding shares held by such holders are
set forth below.
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
NAME AND ADDRESS OWNED OF RECORD AND
FUND OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- ---- --------------- ------------ ------------
<S> <C> <C> <C>
AIM Emerging Markets Debt Fund
Class A Salomon Smith Barney Inc 5.07% -0-
388 Greenwich Street
New York, NY 10013-2339
AIM Emerging Markets Debt Fund
Class B Merrill Lynch Pierce Fenner & Smith 9.37% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
AIM Emerging Markets Debt Fund
Class C Salomon Smith Barney Inc 20.59% -0-
333 West 34th Street - 3rd Floor
New York, NY 10001
Donaldson Lufkin Jenrette 19.44% -0-
Securities Corporation Inc
P.O. Box 2052
Jersey City, NJ 07303-9998
Jane W. Glover -0- 8.81%
1201 Kirkland Road
Covington, GA 30016-2948
ITC Cust Rollover IRA FBO -0- 7.63%
Dennis M. Maziarz
27 Bailey Drive
Washington Crossing, PA 18977-1007
Raymond James & Assoc. Inc CSDN -0- 6.86%
Cosmo D Mastropaolo IRA R/O
9 Pointview Pl
Mountain Lakes, NJ 07046
Key Forms Inc 5.53% -0-
Profit Sharing Plan
295 Buck Rd Ste 103
Holland, PA 18966-1748
</TABLE>
- -------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
82
<PAGE> 415
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
NAME AND ADDRESS OWNED OF RECORD AND
FUND OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- ---- --------------- ------------ ------------
<S> <C> <C> <C>
ITC Cust IRA FBO -0- 5.44%
Ronald S. Brunetti
838 Tall Timber Road
Orange, CT 06477-1424
Robert W. Baird & Co. Inc 5.36% -0-
777 East Wisconsin Avenue
Milwaukee, WI 53202-5391
AIM Global Government Income Fund
Class A Merrill Lynch Pierce Fenner & Smith 6.14% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
AIM Global Government Income Fund
Class B Merrill Lynch Pierce Fenner & Smith 7.64% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
AIM Global Government Income Fund
Class C Painewebber for the benefit of -0- 50.17%
Robert P. Brouillard MD &
Susan M. Brouillard TTEES FBO
9850 Genesee Ave #830
La Jolla, CA 92037-1219
Painewebber for the benefit of -0- 39.72%
Painewebber CDN FBO
Steven R. Awalt
P. O. Box 3321
Weehawken, NJ 07087-8154
Painewebber for the benefit of -0- 10.06%
Painewebber CDN
Roy E. Weyker IRA
P. O. Box 3321
Weehawken, NJ 07087-8154
</TABLE>
- -------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
83
<PAGE> 416
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
NAME AND ADDRESS OWNED OF RECORD AND
FUND OF RECORD OWNER RECORD ONLY* BENEFICIALLY
- ---- --------------- ------------ ------------
<S> <C> <C> <C>
AIM Global Growth & Income Fund
Class A Merrill Lynch Pierce Fenner & Smith 6.84% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
AIM Global Growth & Income Fund
Class C Wexford Clearing Services Corp FBO 11.76% -0-
Nancy Conger, I. Norman
Pearlstine Co-Ttees, Raymond
Pearlstine Gladys Pearlstine
Millington, NJ 07946-1402
Merrill Lynch Pierce Fenner & Smith 8.81% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
AIM Strategic Income Fund
Class B Merrill Lynch Pierce Fenner & Smith 5.62% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
AIM Strategic Income Fund
Class C NFSC FEBO # OSN-455458 39.15% -0-
Hayes Lemmerz International
William D. Shovers-CFO
15300 Centennial Dr
Northville, MI 48167
First Clearing Corporation -0- 20.90%
Timothy P. Cronin and
Margaret R. Cronin
Jt Ten
111 Fort Walker Drive
Donaldson Lufkin Jenrette 7.03% -0-
Securities Corporation Inc
P. O. Box 2052
Jersey City, NJ 07303-9998
</TABLE>
- -------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
84
<PAGE> 417
As of February 14, 2000, the trustees and officers of the Trust as a group
owned beneficially less than 1% of the outstanding shares of each class of
Emerging Markets Debt Fund, Government Income Fund, Growth & Income Fund and
Strategic Income Fund.
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return is as follows:
n
P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable maximum
sales load is deducted at the beginning of the 1, 5, or 10
year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the 1, 5, or 10 year periods (or fractional port
on of such period).
The standardized returns for the Class A shares of each of the named Funds,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund ......................... 15.01% 8.51% N/A 9.11%
Government Income Fund ............................. -12.16% 4.54% 5.44% 5.65%
Growth & Income Fund ............................... -5.41% 12.67% N/A 11.66%
Strategic Income Fund .............................. -5.19% 7.12% 7.40% 7.24%
</TABLE>
* The inception dates for Class A shares of each Fund are as follows:
Emerging Markets Debt Fund 10/22/92, Government Income Fund 03/29/88,
Growth & Income Fund 09/25/90 and Strategic Income Fund 03/29/88.
The standardized returns for Class B shares of each of the named Funds,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund ......................... 15.01% 8.63% N/A 9.15%
Government Income Fund ............................. -12.76% 4.52% N/A 4.25%
Growth & Income Fund ............................... -4.88% 12.98% N/A 12.22%
Strategic Income Fund .............................. -5.82% 7.14% N/A 6.77%
</TABLE>
* The inception date for Class B shares of each Fund is 10/22/92.
85
<PAGE> 418
The standardized returns for Class C shares of each of the named Funds,
stated as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund ............................. N/A N/A N/A 19.56%
Government Income Fund ................................. N/A N/A N/A -5.40%
Growth & Income Fund ................................... N/A N/A N/A 2.50%
Strategic Income Fund .................................. N/A N/A N/A 0.04%
</TABLE>
* The inception date for Class C shares of each Fund is 03/01/99.
NON-STANDARDIZED RETURNS
Standard total return quotes may be accompanied by total return figures
calculated by alternative methods. For example, average annual total return may
be calculated without assuming payment of the full sales load according to the
following formula:
n
P(1+U) =ERV
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only a stated
portion of, or none of, the applicable maximum sales load at the
beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at the
end of the stated period.
The average annual non-standardized returns for the Class A shares of each
of the named Funds, stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund ......................... 20.80% 9.57% N/A 9.85%
Government Income Fund ............................. -7.82% 5.55% 5.96% 6.09%
Growth & Income Fund ............................... 0.12% 13.97% N/A 12.36%
Strategic Income Fund .............................. -0.47% 8.17% 7.92% 7.69%
</TABLE>
* The inception dates for Class A shares of each Fund are as follows:
Emerging Markets Debt Fund 10/22/92, Government Income Fund 03/29/88,
Growth & Income Fund 09/25/90 and Strategic Income Fund 03/29/88.
The average annual non-standardized returns for the Class B shares of each
of the named Funds, stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund ......................... 20.01% 8.85% N/A 9.15%
Government Income Fund ............................. -8.37% 4.84% N/A 4.25%
Growth & Income Fund ............................... -0.39% 13.22% N/A 12.22%
Strategic Income Fund .............................. -1.15% 7.45% N/A 6.77%
</TABLE>
86
<PAGE> 419
* The inception date for Class B shares of each Fund is 10/22/92
The aggregate non-standardized returns for the Class C shares of each
of the named Funds, stated as aggregate total returns for the periods shown,
were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund N/A N/A N/A 20.56%
Government Income Fund N/A N/A N/A -4.47%
Growth & Income Fund N/A N/A N/A 3.43%
Strategic Income Fund N/A N/A N/A 1.00%
</TABLE>
* The inception date for Class C shares of each Fund is 03/01/99.
Cumulative total return across a stated period may be calculated as
follows:
n
P(1+V) =ERV
Where P = a hypothetical initial payment of $1,000.
V = cumulative total return assuming payment of all of, a stated
portion of, or none of, the applicable maximum sales load at the
beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at the
end of the stated period.
The aggregate non-standardized returns (not taking sales charges into
account) for the Class A shares of each of the named Funds, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund ......................... 20.80% 57.96% N/A 96.59%
Government Income Fund ............................. -7.82% 31.02% 78.37% 100.45%
Growth & Income Fund ............................... 0.12% 92.29% N/A 194.29%
Strategic Income Fund .............................. -0.47% 48.06% 114.37% 138.92%
</TABLE>
* The inception dates for Class A shares of each Fund are as follows:
Emerging Markets Debt Fund 10/22/92, Government Income Fund 03/29/88,
Growth & Income Fund 09/25/90 and Strategic Income Fund 03/29/88.
The aggregate non-standardized returns (not taking sales charge into
account) for the Class B shares of each of the named Funds, stated as aggregate
total returns for the periods shown, were:
87
<PAGE> 420
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund ......................... 20.01% 52.83% N/A 87.75%
Government Income Fund ............................. -8.37% 26.64% N/A 34.85%
Growth & Income Fund ............................... -0.39% 86.08% N/A 129.15%
Strategic Income Fund .............................. -1.15% 43.20% N/A 60.15%
</TABLE>
* The inception date for Class B shares of each Fund is 10/22/92
The aggregate non-standardized returns (not taking sales charge into
account) for the Class C shares of each of the named Funds, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund ......................... N/A N/A N/A 20.56%
Government Income Fund .............................. N/A N/A N/A -4.47%
Growth & Income Fund ................................ N/A N/A N/A 3.43%
Strategic Income Fund ............................... N/A N/A N/A 1.00%
</TABLE>
* The inception date for Class C shares of each Fund is 03/01/99
The aggregate non-standardized returns (taking sales charges into account)
for the Class A shares of each of the named Funds, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund ......................... 15.01% 50.46% N/A 87.25%
Government Income Fund .............................. -12.16% 24.86% 69.88% 90.93%
Growth & Income Fund ................................ -5.41% 81.59% N/A 177.94%
Strategic Income Fund ............................... -5.19% 41.02% 104.19% 127.57%
</TABLE>
* The inception dates for Class A shares of each Fund are as follows:
Emerging Markets Debt Fund 10/22/92, Government Income Fund 03/29/88,
Growth & Income Fund 09/25/90 and Strategic Income Fund 03/29/88.
88
<PAGE> 421
The aggregate non-standardized returns (taking sales charges into account)
for the Class B shares of each of the named Funds, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund ......................... 15.01% 51.29% N/A 87.75%
Government Income Fund .............................. -12.76% 24.72% N/A 34.85%
Growth & Income Fund ................................ -4.88% 84.08% N/A 129.15%
Strategic Income Fund ............................... -5.82% 41.20% N/A 60.15%
</TABLE>
* The inception date for Class B shares of each Fund is 10/22/92
The aggregate non-standardized returns (not taking sales charge into
account) for the Class C shares of each of the named Funds, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
---- ----- ----- ----------
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund ......................... N/A N/A N/A 20.56%
Government Income Fund .............................. N/A N/A N/A -4.47%
Growth & Income Fund ................................ N/A N/A N/A 3.43%
Strategic Income Fund ............................... N/A N/A N/A 1.00%
</TABLE>
* The inception date for Class C shares of each Fund is 03/01/99
YIELD QUOTATIONS
The standard formula for calculating yield for each Fund, as described in
the Prospectus, is as follows:
YIELD=2[((a-b)/(cxd)+1)(6)-1]
Where a = dividends and interest earned during a stated 30-day period. For
purposes of this calculation, dividends are accrued rather than
recorded on the ex-dividend date. Interest earned under this
formula must generally be calculated based on the yield to
maturity of each obligation (or, if more appropriate, based on
yield to call date).
b = expenses accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during the period.
d = the maximum offering price per share on the last day of the
period.
The yields of the Class A shares of Strategic Income Fund, Government
Income Fund and Emerging Markets Debt Fund for the one-month period ended
October 31, 1999 were 7.00%, 4.23% and 8.43%, respectively. The current yields
of the Class B shares of Strategic Income Fund, Government Income Fund and
Emerging Markets Debt Fund for the one-month period ended October 31, 1999 were
6.71%, 3.81% and 8.21%, respectively. The current yields of Class C shares of
Strategic Income Fund, Government Income Fund and Emerging Markets Debt Fund for
the one-month period ended October 31, 1999 were 6.71%, 3.81% and 8.21%,
respectively.
PERFORMANCE INFORMATION
All advertisements of a Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
89
<PAGE> 422
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. Further information regarding
the Fund's performance is contained in the Fund's annual report to shareholders,
which is available upon request and without charge.
A Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. Standardized total return
for Class A shares reflects the deduction of the Fund's maximum front-end sales
charge at the time of purchase. Standardized total return for Class B shares
reflects the deduction of the maximum applicable contingent deferred sales
charge on a redemption of shares held for the period.
A Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
Yield is computed in accordance with standardized formulas described herein
and can be expected to fluctuate from time to time and is not necessarily
indicative of future results. Accordingly, yield information may not provide a
basis for comparison with investments which pay a fixed rate of interest for a
stated period of time. Yield reflects investment income net of expenses over the
relevant period attributable to a Fund share, expressed as an annualized
percentage of the maximum offering price per share for Class A shares and net
asset value per share for Class B shares.
Yield is a function of the type and quality of the Fund's investments, the
maturity of the securities held in the Fund's portfolio and the operating
expense ratio of the Fund. A shareholder's investment in the Fund is not insured
or guaranteed.
These factors should be carefully considered by the investor before making
an investment in the Fund.
From time to time, AIM or its affiliates may waive all or a portion of
their fees and/or assume certain expenses of any Fund. Voluntary fee waivers or
reductions or commitments to assume expenses may be rescinded at any time
without further notice to investors. During periods of voluntary fee waivers or
reductions or commitments to assume expenses, AIM will retain its ability to be
reimbursed for such fee prior to the end of each fiscal year. Contractual fee
waivers or reductions or reimbursement of expenses set forth in the Fee Table in
a Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund. Fee waivers or
reductions or commitments to reduce expenses will have the effect of increasing
that Fund's yield and total return.
The performance of each Fund will vary from time to time and past results
are not necessarily indicative of future results. A Fund's performance is a
function of its portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses of the Fund and
market conditions. A shareholder's investment in a Fund is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in any Fund.
A practice of waiving or reducing fees or reimbursing expenses will have
the effect of increasing that Fund's yield and total return. The performance of
each Fund will vary from time to time and past results are not necessarily
indicative of future results. A Fund's performance is a function of its
portfolio management in selecting the type and quality of portfolio securities
and is affected by operating expenses of the Fund and market conditions. A
shareholder's investment in a Fund is not insured or guaranteed. These factors
should be carefully considered by the investor before making an investment in
any Fund.
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<PAGE> 423
Total return and yield figures for the Funds are neither fixed nor
guaranteed, and no Fund's principal is insured. Performance quotations reflect
historical information and should not be considered representative of a Fund's
performance for any period in the future. Performance is a function of a number
of factors which can be expected to fluctuate. The Funds may provide performance
information in reports, sales literature and advertisements. The Funds may also,
from time to time, quote information about the Funds published or aired by
publications or other media entities which contain articles or segments relating
to investment results or other data about one or more of the Funds. Such
publications or media entities may include the following, among others:
<TABLE>
<S> <C> <C>
Advertising Age Global Finance Pensions &
Barron's Hartford Courant Inc. Investments
Best's Review Institutional Investor Personal Investor
Broker World Insurance Forum Financial Services
Business Week Insurance Week Week
Changing Times Investor's Daily Philadelphia Inquirer
Christian Science Journal of the Smart Money
Monitor American Society USA Today
Consumer Reports of CLU & ChFC U.S. News & World
Economist Kiplinger Letter Report
EuroMoney Money Wall Street Journal
FACS of the Week Mutual Fund Washington Post
Financial Planning Forecaster CNN
Financial Product Mutual Fund CNBC
News Magazine PBS
Financial World Nation's Business
Forbes New York Times
Fortune Pension World
</TABLE>
The Funds and AIM Distributors may from time to time, in advertisements,
sales literature and reports furnished to present or prospective shareholders,
compare each Fund with the following, or compare each Fund's performance to
performance data of similar mutual funds as published in the following, among
others:
<TABLE>
<S> <C>
Bank Rate National Monitor Index International Finance Corporation Emerging
Bear Stearns Foreign Bond Index Markets Database
Bond Buyer Index International Financial Statistics
CDA/Wiesenberger Investment Company Lehman Bond Indices
Services (data and mutual fund rankings and Lipper, Inc. (data and mutual fund rankings and
comparisons) comparisons)
CNBC/Financial News Composite Index Micropal. Inc. (data and mutual fund rankings and
COFI comparisons)
Consumer Price Index Moody's Investors Service (publications)
Datastream Morgan Stanley Capital International All Country
Donoghue's (AC) World Index
Dow Jones Industrial Average Morgan Stanley Capital International World
EAFE Index Indices
First Boston High Yield Index Morningstar, Inc. (data and mutual fund rankings
Fitch IBCA, Inc. (publications) and comparisons)
Ibbotson Associates International Bond Index NASDAQ
International Bank for Reconstruction and Organization for Economic Cooperation and
Development (publications) Development (publications)
</TABLE>
91
<PAGE> 424
<TABLE>
<S> <C>
Salomon Brothers Global Telecommunications Stangar
Index Wilshire Associates
Salomon Brothers World Government Bond World Bank (publications and reports)
Index-Non U.S. The World Bank Publication of Trends in
Salomon Brothers World Government Bond Index Developing Countries
Standard & Poor's (publications) Worldscope
Standard & Poor's 500 Composite Stock Price
Index
</TABLE>
Each Fund may also compare its performance to rates on Certificates of
Deposit and other fixed rate investments such as the following:
10-year Treasuries
30-year Treasuries
30-day Treasury Bills
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Funds or AIM
Distributors. Advertising for the Funds may from time to time include
discussions of general economic conditions and interest rates. Advertising for
the Funds may also include reference to the use of those Funds as part of an
individual's overall retirement investment program. From time to time, sales
literature and/or advertisements for any of the Funds may disclose (i) the
largest holdings in the Fund's portfolio, (ii) certain selling group members
and/or (iii) certain institutional shareholders.
From time to time, the Funds' sales literature and/or advertisements may
discuss generic topics pertaining to the mutual fund industry. This includes,
but is not limited to, literature addressing general information about mutual
funds, variable annuities, dollar-cost averaging, stocks, bonds, money markets,
certificates of deposit, retirement, retirement plans, asset allocation,
tax-free investing, college planning, and inflation.
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential investments,
investors should note that the methods of computing performance of other
potential investments are not necessarily comparable to the methods employed by
a Fund.
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<PAGE> 425
APPENDIX
DESCRIPTION OF BOND RATINGS
Moody's Investors Service, Inc. ("Moody's") rates the debt securities
issued by various entities from "Aaa" to "C". Investment grade ratings are the
first four categories: Aaa--Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues. Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future. Baa--Bonds
which are rated Baa are considered as medium-grade obligations, (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. Ba--Bonds which are rated Ba are judged to
have speculative elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B--Bonds which are
rated B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Caa--Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest. Ca--Bonds which are rated Ca
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings. C--Bonds which are rated C
are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Standard & Poor's, a division of The McGraw-Hill Companies, Inc., ("S&P")
rates the securities debt of various entities in categories ranging from "AAA"
to "D" according to quality. Investment grade ratings are the first four
categories:
AAA--An obligation rated "AAA" has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong. AA--An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong. A--An obligation rated "A" is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than obligations in higher rated categories. BBB--An
obligation rated "BBB" exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation. BB, B, CCC, CC, C--Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB" indicates
the least degree of speculation and "C" the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions. BB--An
obligation rated "BB" is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation. B--An
obligation rated "B" is more vulnerable to nonpayment than obligations rated
"BB," but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation. CCC--An obligation rated "CCC" is
currently vulnerable to nonpayment, and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the capacity to meet its
financial commitment on the
93
<PAGE> 426
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 "A-1" for the highest quality obligations to "D" for the lowest. Issues in
the "A" category are delineated with numbers 1, 2, and 3 to indicate the
relative degree of safety. A-1--This highest category indicates that the degree
of safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics will be denoted with a plus sign (+)
designation. A-2--Capacity for timely payments on issues with this designation
is satisfactory; however, the relative degree of safety is not as high as for
issues designated "A-1."
ABSENCE OF RATING
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
94
<PAGE> 427
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.
95
<PAGE> 428
FINANCIAL STATEMENTS
FS
<PAGE> 429
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Emerging Markets Debt Fund
and Board of Trustees of AIM Investment Funds:
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Emerging Markets Debt Fund at October 31, 1999, and
the results of its operations, the changes in its net
assets and the financial highlights for the periods
indicated, in conformity with generally accepted
accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
October 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinions
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
FS-1
<PAGE> 430
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CORPORATE BONDS-12.57%
ARGENTINA-2.29%
Banco Hipotecario S.A.
(Banks-Regional), Sr. Unsec.
Unsub. Notes, 10.00%, 04/17/03
(Acquired 04/07/98; Cost
$1,277,171)(b) $ 1,279,000 $ 1,179,877
- --------------------------------------------------------------
CEI Citicorp Holdings S.A.
(Investment Banking/Brokerage),
Bonds, 11.25%, 02/14/07
(Acquired 08/13/99; Cost
$2,175,315)(b)(c) ARS 3,000,000 2,333,597
- --------------------------------------------------------------
3,513,474
- --------------------------------------------------------------
BRAZIL-1.83%
Banco Nacional De Desenvolri
(Banks- Regional), Unsec. Unsub.
Floating Rate Notes, 13.64%,
06/16/08(d) 3,250,000 2,810,997
- --------------------------------------------------------------
CAYMAN ISLANDS-1.15%
PDVSA Finance Ltd.,
(Banks-Regional), Sr. Unsec.
Notes, 9.75%, 02/15/10 (Acquired
03/31/99; Cost $1,837,494)(b) 1,850,000 1,753,469
- --------------------------------------------------------------
JAMAICA-1.06%
Mechala Group
(Manufacturing-Diversified),
Series B, Sr. Gtd. Sub. Notes,
12.75%, 12/30/99 4,134,000 1,622,595
- --------------------------------------------------------------
MEXICO-6.24%
Alestra S.A., Sr. Notes, 12.625%
5/15/09 3,918,000 3,790,665
- --------------------------------------------------------------
Fideicomiso Petacalco Trust-Topolo
(Financial-Diversified), Sec.
Notes, 10.16%, 12/23/09
(Acquired 06/25/99; Cost
$1,575,000)(b) 1,750,000 1,540,000
- --------------------------------------------------------------
Grupo Televisa S.A.
(Entertainment), Sr. Disc.
Notes, 13.25%, 05/15/08(e) 2,400,000 2,055,000
- --------------------------------------------------------------
Petroleos Mexicanos (Oil &
Gas-Refining & Marketing),
Sr. Gtd. Sub. Bonds, 9.50%,
09/15/27 300,000 257,250
- --------------------------------------------------------------
Unsub. Bonds, 9.50%, 09/15/27 2,000,000 1,925,000
- --------------------------------------------------------------
9,567,915
- --------------------------------------------------------------
Total Corporate Bonds (Cost
$20,115,100) 19,268,450
- --------------------------------------------------------------
GOVERNMENT BONDS & GOVERNMENT
AGENCY OBLIGATIONS-80.32%
ARGENTINA-11.42%
Province of Buenos Aires, Series
2, Unsec. Unsub. Notes, 12.50%,
03/15/02 1,100,000 1,086,250
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
ARGENTINA-(CONTINUED)
Republic of Argentina,
Floating Rate Deb., 6.8125%,
03/31/05(d) $ 4,092,000 $ 3,666,526
- --------------------------------------------------------------
Series L, Floating Rate Gtd.
Bonds, 6.00%, 03/31/23(d) 4,670,000 3,576,281
- --------------------------------------------------------------
Unsec. Unsub. Bonds,
11.375%, 01/30/17 3,395,000 3,250,713
- --------------------------------------------------------------
9.75%, 09/19/27 6,959,000 5,923,849
- --------------------------------------------------------------
17,503,619
- --------------------------------------------------------------
BRAZIL-19.35%
Republic of Brazil,
Bonds,
11.625%, 04/15/04 1,009,000 967,379
- --------------------------------------------------------------
5.75%, 04/15/24(f) 4,220,000 2,540,271
- --------------------------------------------------------------
Floating Rate Deb., 6.9375%,
04/15/06(d) 4,136,000 3,397,782
- --------------------------------------------------------------
Floating Rate Gtd. Notes, 7.00%,
04/15/09(d) 2,100,000 1,553,177
- --------------------------------------------------------------
Floating Rate Gtd. Bonds,
7.00%, 04/15/12(d) 9,493,000 6,297,836
- --------------------------------------------------------------
6.9375%, 04/15/24(d) 5,450,000 3,816,684
- --------------------------------------------------------------
Notes, 14.50%, 10/15/09 2,014,000 2,091,539
- --------------------------------------------------------------
Series C, Bonds, 8.00%, 04/15/14 9,175,507 6,215,626
- --------------------------------------------------------------
Unsec. Bonds, 10.125%, 05/15/27 3,520,000 2,786,164
- --------------------------------------------------------------
29,666,458
- --------------------------------------------------------------
BULGARIA-4.67%
Republic of Bulgaria,
Series A, Gtd. Bonds, 2.75%,
07/28/12(f) 3,520,000 2,379,041
- --------------------------------------------------------------
Series A, Gtd. Floating Rate
Sec. Bonds, 6.50%, 07/28/24(d) 3,999,000 2,984,670
- --------------------------------------------------------------
Floating Rate PDI Deb., 6.50%,
07/28/11(d) 2,350,000 1,795,896
- --------------------------------------------------------------
7,159,607
- --------------------------------------------------------------
COLOMBIA-1.80%
Republic of Colombia,
Unsec. Unsub. Notes, 7.625%,
02/15/07 1,880,000 1,551,000
- --------------------------------------------------------------
Unsub. Notes, 9.75%, 04/23/09 1,324,000 1,208,150
- --------------------------------------------------------------
2,759,150
- --------------------------------------------------------------
QATAR-1.13%
State of Qatar, Bonds, 9.50%,
05/21/09 (Acquired 06/25/99;
Cost $1,674,580)(b) 1,658,000 1,728,714
- --------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 431
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
KAZAKHSTAN-1.74%
Republic of Kazakhstan, Bonds,
13.625%, 10/18/04 (Acquired
09/28/99; Cost $2,669,490)(b) $ 2,700,000 $ 2,673,000
- --------------------------------------------------------------
KOREA-4.37%
Republic of Korea, Unsub. Unsec.
Notes, 8.875%, 04/15/08 6,435,000 6,707,155
- --------------------------------------------------------------
LEBANON-1.22%
Republic of Lebanon, Series 3,
Notes, 10.25%, 10/06/09 1,850,000 1,869,686
- --------------------------------------------------------------
MALAYSIA-2.38%
Republic of Malaysia, Bonds,
8.75%, 06/01/09 3,538,000 3,647,041
- --------------------------------------------------------------
MEXICO-10.67%
United Mexican States,
Bonds,
10.375%, 02/17/09 1,700,000 1,731,875
- --------------------------------------------------------------
11.375%, 09/15/16 2,381,000 2,552,263
- --------------------------------------------------------------
11.50%, 05/15/26 5,248,000 5,930,980
- --------------------------------------------------------------
Series D, Floating Rate Sec.
Gtd. Bonds 6.0675%,
12/31/19(d) 2,220,000 1,970,752
- --------------------------------------------------------------
Sec. Gtd. Bonds, 6.25%, 12/31/19 5,500,000 4,166,382
- --------------------------------------------------------------
16,352,252
- --------------------------------------------------------------
MOROCCO-1.68%
Morocco Tranche A, Registered
Loans, 5.906%, 01/01/09
(Acquired 03/11/99; Cost
$2,420,780)(b) 2,964,000 2,582,385
- --------------------------------------------------------------
PANAMA-1.61%
Republic of Panama,
Bonds,
8.875%, 09/30/27 1,017,000 828,490
- --------------------------------------------------------------
9.375%, 04/01/29 626,000 593,135
- --------------------------------------------------------------
Gtd. Deb., 4.25%, 07/17/14(f) 1,400,000 1,053,392
- --------------------------------------------------------------
2,475,017
- --------------------------------------------------------------
PERU-2.30%
Republic of Peru,
Gtd. Bonds, 3.75%, 03/07/17(f) 2,725,000 1,535,478
- --------------------------------------------------------------
PDI Bonds, 4.50%, 03/07/17(f) 3,136,000 1,984,150
- --------------------------------------------------------------
3,519,628
- --------------------------------------------------------------
PHILIPPINES-1.12%
Republic of Philippines, Bonds,
9.875%, 01/15/19 1,770,000 1,721,325
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
POLAND-2.63%
Republic of Poland,
Sec. Bonds, 3.50%, 10/27/24(f) $ 2,475,000 $ 1,524,214
- --------------------------------------------------------------
Unsec. PDI Bonds, 6.00%,
10/27/14(f) 2,812,000 2,503,501
- --------------------------------------------------------------
4,027,715
- --------------------------------------------------------------
RUSSIA-6.74%
Bank of Foreign Economic Affairs
(Vnesheconombank),
Interest in Arrears Notes, 6.0625%,
12/15/15(d)(g) 627,107 72,901
- --------------------------------------------------------------
Principal Loans, 6.0625%,
12/15/20(d)(g) 37,242,372 3,468,382
- --------------------------------------------------------------
Russian Federation, Sr. Unsec.
Unsub. Bonds, 11.75%, 06/10/03 9,870,000 6,028,191
- --------------------------------------------------------------
12.75%, 06/24/28 1,413,000 771,748
- --------------------------------------------------------------
10,341,222
- --------------------------------------------------------------
TURKEY-1.09%
Republic of Turkey,
Notes, 12.00%, 12/15/08 1,290,000 1,306,125
- --------------------------------------------------------------
Sr. Unsec. Unsub. Notes, 12.375%,
06/15/09 370,000 372,313
- --------------------------------------------------------------
1,678,438
- --------------------------------------------------------------
VENEZUELA-4.40%
Republic of Venezuela,
Floating Rate Deb., 6.313%,
12/18/07(d) 2,226,180 1,800,002
- --------------------------------------------------------------
Gtd. Sec. Bonds, 6.75%, 03/31/20 3,299,000 2,322,239
- --------------------------------------------------------------
Unsec. Bonds, 9.25%, 09/15/27 3,859,000 2,619,007
- --------------------------------------------------------------
6,741,248
- --------------------------------------------------------------
Total Government Bonds &
Government Agency
Obligations (Cost
$135,981,782) 123,153,660
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
WARRANTS-0.33%
SOVEREIGN DEBT-0.33%
Republic of Argentina (Argentina),
expiring 12/03/99(h) 8,810 9,911
- --------------------------------------------------------------
expiring 02/25/00(h) 9,630 217,879
- --------------------------------------------------------------
United Mexican States (Mexico),
expiring 02/18/00(h) 4,033 270,715
- --------------------------------------------------------------
498,505
- --------------------------------------------------------------
Total Warrants (Cost $0) 498,505
- --------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 432
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-3.78%
STIC Liquid Assets Portfolio(i) 2,901,337 $ 2,901,337
- --------------------------------------------------------------
STIC Prime Portfolio(i) 2,901,337 2,901,337
- --------------------------------------------------------------
Total Money Market Funds (Cost
$5,802,674) 5,802,674
- --------------------------------------------------------------
TOTAL INVESTMENTS-97.00% 148,723,289
- --------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-3.00% 4,605,719
- --------------------------------------------------------------
NET ASSETS-100.00% $153,329,008
==============================================================
</TABLE>
Investment Abbreviations:
ARS - Argentine Peso
Deb. - Debentures
Gtd. - Guaranteed
PDI - Past Due Interest
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Notes to Schedule of Investments:
(a)Principal amount is in U.S. dollars except as indicated by note (c).
(b)Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of 1933,
as amended. The valuation of this security has been determined in accordance
with procedures established by the Board of Trustees. The aggregate market
value of these securities at 10/31/99 was $13,791,043, which represented
8.99% of the Fund's net assets.
(c)Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(d)The coupon rate shown of floating rate note represents the rate at period
end.
(e)Discount bond at purchase. Interest rate shown represents the coupon rate at
which the bond will accrue at a specified future date.
(f)The coupon rate shown on step-up coupon bonds represents the rate at period
end.
(g)Defaulted security. Currently, the issuer is in default with respect to
interest payments.
(h)Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(i)The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-4
<PAGE> 433
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $161,899,556) $148,723,289
- ------------------------------------------------------------
Foreign currencies, at value (cost $37) 37
- ------------------------------------------------------------
Receivables for:
Investments sold 2,521,069
- ------------------------------------------------------------
Fund shares sold 114,064
- ------------------------------------------------------------
Dividends and interest 3,619,496
- ------------------------------------------------------------
Other assets 44,238
- ------------------------------------------------------------
Total assets 155,022,193
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,082,939
- ------------------------------------------------------------
Fund shares reacquired 298,225
- ------------------------------------------------------------
Accrued advisory fees 145,351
- ------------------------------------------------------------
Accrued distribution fees 122,295
- ------------------------------------------------------------
Accrued accounting services fees 4,247
- ------------------------------------------------------------
Accrued trustees' fees 2,858
- ------------------------------------------------------------
Accrued operating expenses 37,270
- ------------------------------------------------------------
Total liabilities 1,693,185
- ------------------------------------------------------------
Net assets applicable to shares outstanding $153,329,008
============================================================
NET ASSETS:
Class A $ 54,330,409
============================================================
Class B $ 97,393,834
============================================================
Class C $ 208,357
============================================================
Advisor Class $ 1,396,408
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 6,543,402
============================================================
Class B 11,728,667
============================================================
Class C 25,096
============================================================
Advisor Class 168,733
============================================================
Class A:
Net asset value and redemption price per
share $ 8.30
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $8.30 / 95.25%) $ 8.71
============================================================
Class B:
Net asset value and offering price per share $ 8.30
============================================================
Class C:
Net asset value and offering price per share $ 8.30
============================================================
Advisor Class:
Net asset value, redemption and offering
price per share $ 8.28
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend $ 5,558
- ------------------------------------------------------------
Interest 21,776,257
- ------------------------------------------------------------
Securities lending 179,871
- ------------------------------------------------------------
Total investment income 21,961,686
- ------------------------------------------------------------
EXPENSES:
Advisory and administrative fees 1,712,645
- ------------------------------------------------------------
Accounting services fees 51,980
- ------------------------------------------------------------
Custodian fees 130,677
- ------------------------------------------------------------
Distribution fees -- Class A 219,862
- ------------------------------------------------------------
Distribution fees -- Class B 1,097,291
- ------------------------------------------------------------
Distribution fees -- Class C 667
- ------------------------------------------------------------
Interest expense (Note 4) 221,531
- ------------------------------------------------------------
Transfer agent fees -- Class A 139,579
- ------------------------------------------------------------
Transfer agent fees -- Class B 243,815
- ------------------------------------------------------------
Transfer agent fees -- Class C 221
- ------------------------------------------------------------
Transfer agent fees -- Advisor Class 5,019
- ------------------------------------------------------------
Trustees' fees 7,532
- ------------------------------------------------------------
Other 227,916
- ------------------------------------------------------------
Total expenses 4,058,735
- ------------------------------------------------------------
Less: Expenses paid indirectly (87,116)
- ------------------------------------------------------------
Fees waived by advisor (75,488)
- ------------------------------------------------------------
Net expenses 3,896,131
- ------------------------------------------------------------
Net investment income 18,065,555
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FORWARD CONTRACTS:
Net realized gain (loss) from:
Investment securities (22,143,209)
- ------------------------------------------------------------
Foreign currencies (775,867)
- ------------------------------------------------------------
Forward contracts 972,301
- ------------------------------------------------------------
(21,946,775)
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 32,555,182
- ------------------------------------------------------------
Foreign currencies (31,683)
- ------------------------------------------------------------
32,523,499
- ------------------------------------------------------------
Net gain from investment securities, foreign
currencies and forward contracts 10,576,724
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $ 28,642,279
============================================================
</TABLE>
See Notes to Financial Statements.
FS-5
<PAGE> 434
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 18,065,555 $ 33,382,360
- -------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and forward contracts (21,946,775) (69,501,940)
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and forward
contracts 32,523,499 (49,143,194)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 28,642,279 (85,262,774)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (6,769,760) (9,422,518)
- -------------------------------------------------------------------------------------------
Class B (11,031,707) (14,937,576)
- -------------------------------------------------------------------------------------------
Class C (6,633) --
- -------------------------------------------------------------------------------------------
Advisor Class (257,455) (246,624)
- -------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A (449,410) --
- -------------------------------------------------------------------------------------------
Class B (785,022) --
- -------------------------------------------------------------------------------------------
Class C (710) --
- -------------------------------------------------------------------------------------------
Advisor Class (16,159) --
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A -- (24,756,370)
- -------------------------------------------------------------------------------------------
Class B -- (41,863,802)
- -------------------------------------------------------------------------------------------
Advisor Class -- (638,983)
- -------------------------------------------------------------------------------------------
Return of capital
Class A -- (3,147,917)
- -------------------------------------------------------------------------------------------
Class B -- (4,936,309)
- -------------------------------------------------------------------------------------------
Advisor Class -- (82,579)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A (18,452,955) 3,431,336
- -------------------------------------------------------------------------------------------
Class B (17,772,062) (3,086,499)
- -------------------------------------------------------------------------------------------
Class C 206,296 --
- -------------------------------------------------------------------------------------------
Advisor Class (300,841) (518,649)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (26,994,139) (185,469,264)
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 180,323,147 365,792,411
- -------------------------------------------------------------------------------------------
End of period $153,329,008 $ 180,323,147
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $249,451,851 $ 285,771,413
- -------------------------------------------------------------------------------------------
Distributions in excess of net investment income (1,665,521) (41,564)
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and forward contracts (81,281,069) (59,706,950)
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and forward contracts (13,176,253) (45,699,752)
- -------------------------------------------------------------------------------------------
$153,329,008 $ 180,323,147
===========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE> 435
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Emerging Markets Debt Fund (the "Fund") is a separate series of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware business
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of twelve separate series portfolios, each having an unlimited number of shares
of beneficial interest. The Fund consists of four different classes of shares:
Class A shares, Class B shares, Class C shares and Advisor Class shares. Class A
shares are sold with a front-end sales charge. Class B shares and Class C shares
are sold with a contingent deferred sales charge. Advisor Class shares were sold
without a sales charge. Matters affecting each portfolio or class will be voted
on exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is high current income, and its secondary
investment objective is growth of capital. The Fund invests substantially all of
its investable assets in Emerging Markets Debt Portfolio (the "Portfolio"). The
Portfolio is organized as a Delaware business trust which is registered under
the 1940 Act as an open-end management investment company.
The Portfolio has investment objectives, policies and limitations
substantially identical to those of the Fund. Therefore, the financial
statements of the Fund and Portfolio have been presented on a consolidated
basis, and represent all activities of both the Fund and Portfolio. Through
October 31, 1999, all of the shares of beneficial interest of the Portfolio were
owned by either the Fund or INVESCO (NY) Asset Management, Inc., which has a
nominal ($100) investment in the Portfolio.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund and the Portfolio in the preparation of its financial statements.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. For purposes of
determining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the New
York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Trustees.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such distributions are
declared and paid monthly. The Fund may elect to use a portion of the
proceeds of fund share redemptions as distributions for Federal income tax
purposes. Distributions from net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was decreased
and undistributed net realized gain (loss) increased by $372,656 as a
result of differing book/tax treatment of foreign currency transactions in
order to comply with the requirements of the American Institute of
Certified Public Accountants Statement of Position 93-2. Net assets of the
Fund were unaffected by the reclassification discussed above.
C. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be
FS-7
<PAGE> 436
subject to federal income taxes on otherwise taxable income (including net
realized capital gains) which is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
The Fund has a capital loss carryforward of $76,114,462 as of October 31,
1999 which may be carried forward to offset future taxable gains, if any,
and expires in varying increments, if not previously utilized, in the year
2007.
D. Futures Contracts--The Portfolio may purchase or sell futures contracts
as a hedge against changes in market conditions. Initial margin deposits
required upon entering into futures contracts are satisfied by the
segregation of specific securities as collateral for the account of the
broker (the Portfolio's agent in acquiring the futures position). During
the period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Portfolio recognizes a realized gain or
loss equal to the difference between the proceeds from, or cost of, the
closing transaction and the Portfolio's basis in the contract. Risks
include the possibility of an illiquid market and that a change in value of
the contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. Foreign Currency Contracts--A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Portfolio may enter into a foreign currency contract to
attempt to minimize the risk to the Portfolio from adverse changes in the
relationship between currencies. The Portfolio may also enter into a
foreign currency contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. dollar
price of that security. The Portfolio could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
G. Expenses--Distribution expenses directly attributable to a class of
shares are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
H. 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 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 fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
I. Indexed Securities--The 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.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's and the Portfolio's investment
manager and administrator. INVESCO Asset Management Limited is the Fund's and
the Portfolio's subadvisor. The Fund pays AIM administration fees at an
annualized rate of 0.25% of the Fund's average daily net assets. The Portfolio
pays AIM investment management and administration fees at an annual rate of
0.475% on the first $500 million of the Portfolio's average daily net assets,
plus 0.45% on the next $1 billion of the Portfolio's average daily net assets,
plus 0.425% on the next $1 billion of the Portfolio's average daily net assets,
plus 0.40% on the Portfolio's average daily net assets exceeding $2.5 billion,
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. AIM has contractually agreed to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest and extraordinary
expenses) to the maximum annual rate of 1.75%, 2.40%, 2.40% and 1.40% of the
average daily net assets of the Fund's Class A, Class B, Class C and Advisor
Class shares, respectively. During the year ended October 31, 1999, AIM waived
fees of $75,488.
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund and the Portfolio. Prior to July 1,
1999, AIM was the pricing and accounting agent for the Fund and the Portfolio.
The monthly fee for these services paid to AIM was a percentage, not to exceed
0.03% annually, of a Fund's average daily net assets. The annual fee rate was
derived based on the aggregate net assets of the funds which comprised the
following investment companies: AIM Growth Series, AIM Investment Funds, AIM
Series Trust, G.T. Global Variable Investment Series and G.T. Global Variable
Investment Trust. The fee was calculated at the rate of 0.03% of the first $5
billion of assets and 0.02% to the assets in excess of $5 billion. An amount is
allocated to and paid by each
FS-8
<PAGE> 437
such fund based on its relative average daily net assets. For the year ended
October 31, 1999, AIM was paid $51,980 for such services. The Fund, pursuant to
a transfer agency and service agreement, has agreed to pay A I M Fund Services,
Inc. ("AFS") a fee for providing transfer agency and shareholder services to the
Fund. For the year ended October 31, 1999, AFS was paid $345,384 for such
services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares, Class B shares and Class C shares (collectively the
"Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at
the annual rate of 0.35% of the Fund's average daily net assets of Class A
shares and 1.00% of the average daily net assets of Class B and C shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. For the year ended October 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $219,862, $1,097,291 and $667, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $26,041 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $481 in contingent deferred sales charges imposed on
redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AFS and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $87,116 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$87,116 during the year ended October 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among the
funds based on their respective average net assets for the period. Prior to May
28, 1999, the Fund, along with certain other funds advised and/or administered
by AIM, had a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allowed the Fund and certain other
funds to borrow, on a first come, first served basis, an aggregate maximum
amount of $250,000,000.
During the year ended October 31, 1999, the average outstanding daily balance
of bank loans for the Fund was $3,956,575 with a weighted average interest rate
of 5.60%. Interest expense for the Fund for the year ended October 31, 1999 was
$221,531.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, there were no securities on loan to brokers. For the year
ended October 31, 1999, the Portfolio received fees of $179,871 for securities
lending.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Portfolio during the year ended October 31, 1999 was
$553,770,582 and $602,932,879, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 4,402,200
- ---------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (22,874,837)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities $(18,472,637)
=========================================================
Cost of investments for tax purposes is $167,195,926.
</TABLE>
FS-9
<PAGE> 438
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 3,233,391 $ 26,598,153 10,918,639 $ 129,801,507
- ---------------------------------------------------------------------------------------------------------------------
Class B 4,696,545 38,346,742 5,958,185 73,991,330
- ---------------------------------------------------------------------------------------------------------------------
Class C* 24,266 199,586 -- --
- ---------------------------------------------------------------------------------------------------------------------
Advisor Class 363,714 2,925,142 490,309 6,221,370
- ---------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 565,425 4,586,556 2,191,470 26,459,355
- ---------------------------------------------------------------------------------------------------------------------
Class B 906,003 7,345,956 3,020,192 36,460,585
- ---------------------------------------------------------------------------------------------------------------------
Class C* 830 6,710 -- --
- ---------------------------------------------------------------------------------------------------------------------
Advisor Class 33,070 268,042 76,464 920,280
- ---------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (6,073,553) (49,637,664) (12,901,851) (152,829,526)
- ---------------------------------------------------------------------------------------------------------------------
Class B (7,791,891) (63,464,760) (9,736,068) (113,538,414)
- ---------------------------------------------------------------------------------------------------------------------
Advisor Class (431,949) (3,494,025) (602,542) (7,660,299)
- ---------------------------------------------------------------------------------------------------------------------
(4,474,149) $(36,319,562) (585,202) $ (173,812)
=====================================================================================================================
</TABLE>
* Class C shares commenced sales on March 1, 1999.
NOTE 8-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,
------------------------------------------------------
1999 1998(a) 1997(a) 1996(a) 1995
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.86 $15.56 $ 14.85 $ 11.70 $ 12.56
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.86 1.35(b) 1.19 1.27 1.35
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.51 (4.80) 0.93 3.09 (1.09)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations 1.37 (3.45) 2.12 4.36 0.26
- --------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (0.93) (1.06) (1.18) (1.11) (1.03)
- --------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (2.83) (0.23) (0.10) (0.03)
- --------------------------------------------------------------------------------------------------------------------
Return of capital -- (0.36) -- -- (0.06)
- --------------------------------------------------------------------------------------------------------------------
Total distributions (0.93) (4.25) (1.41) (1.21) (1.12)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.30 $ 7.86 $ 15.56 $ 14.85 $ 11.70
====================================================================================================================
Total return(c) 18.38% (30.07)% 14.46% 39.05% 2.81%
====================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $54,330 $69,321 $133,973 $178,318 $142,002
====================================================================================================================
Ratio of net investment income to average net assets:(d) 10.73%(e) 11.27% 7.39% 9.52% 11.85%
====================================================================================================================
Ratio of expenses to average net assets excluding interest
expense:(f) 1.75%(e) 1.74% 1.58% 1.69% 1.75%
====================================================================================================================
Ratio of interest expense to average net asset 0.13% N/A N/A 0.04% N/A
====================================================================================================================
Portfolio turnover rate 336% 339% 214% 290% 213%
====================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.21 per share.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 10.69% for 1999.
(e) Ratios are based on average net assets of $62,817,833.
(f) After fee waiver and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.79% for 1999.
FS-10
<PAGE> 439
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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,
-----------------------------------------------------------
1999 1998(a) 1997(a) 1996(a) 1995
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.86 $ 15.54 $ 14.83 $ 11.69 $ 12.56
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.81 1.28(b) 1.09 1.17 1.27
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.51 (4.79) 0.93 3.09 (1.09)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations 1.32 (3.51) 2.02 4.26 0.18
- -------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (0.88) (0.98) (1.08) (1.03) (0.96)
- -------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (2.83) (0.23) (0.09) (0.03)
- -------------------------------------------------------------------------------------------------------------------------
Return of capital -- (0.36) -- -- (0.06)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.88) (4.17) (1.31) (1.12) (1.05)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.30 $ 7.86 $ 15.54 $ 14.83 $ 11.69
=========================================================================================================================
Total return(c) 17.61% (30.49)% 13.77% 38.16% 2.07%
=========================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $ 97,394 $109,406 $228,101 $251,002 $214,897
=========================================================================================================================
Ratio of net investment income to average net assets(d) 10.08%(e) 10.62% 6.74% 8.87% 11.20%
=========================================================================================================================
Ratio of expenses to average net assets excluding interest
expense:(f) 2.40%(e) 2.39% 2.23% 2.34% 2.40%
=========================================================================================================================
Ratio of interest expense to average net assets 0.13% N/A N/A 0.04% N/A
=========================================================================================================================
Portfolio turnover rate 336% 339% 214% 290% 213%
=========================================================================================================================
</TABLE>
(a) These selected per share operating data were calculated based upon the
average shares outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.21 per share.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 10.04% for 1999.
(e) Ratios are based on average net assets of $109,729,116.
(f) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.44% for 1999.
FS-11
<PAGE> 440
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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
CLASS C -----------------------------------------------------------
---------------- JUNE 1, 1995
MARCH 1, 1999 YEAR ENDED OCTOBER 31, TO
TO ---------------------------- OCTOBER 31,
OCTOBER 31, 1999 1999(a) 1998(a) 1997(a) 1996(a) 1995
---------------- ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.96 $ 7.83 $15.52 $14.83 $11.71 $11.44
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.53 0.87 1.40(b) 1.22 1.34 0.57
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.37 0.54 (4.79) 0.93 3.05 0.17
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment
operations 0.90 1.41 (3.39) 2.15 4.39 0.74
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (0.56) (0.96) (1.11) (1.23) (1.16) (0.44)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- -- (2.83) (0.23) (0.11) --
- ---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- (0.36) -- -- (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.56) (0.96) (4.30) (1.46) (1.27) (0.47)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.30 $ 8.28 $ 7.83 $15.52 $14.83 $11.71
=================================================================================================================================
Total return(c) 11.74% 18.87% (29.79)% 14.72% 39.38% 6.54%
=================================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $ 208 $1,396 $1,596 $3,719 $15,298 $1,463
=================================================================================================================================
Ratio of net investment income to average net
assets(d) 10.08%(e) 11.08%(f) 11.62% 7.74% 9.87% 12.20%(g)
=================================================================================================================================
Ratio of expenses to average net assets excluding
interest expense:(h) 2.40%(e) 1.40%(f) 1.39% 1.23% 1.34% 1.40%(g)
=================================================================================================================================
Ratio of interest expenses to average net assets 0.13% 0.13% N/A N/A 0.04% N/A
=================================================================================================================================
Portfolio turnover rate 336% 336% 339% 214% 290% 213%(f)
=================================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.21 per share.
(c) Total return does not include sales charge and is not annualized for
periods less than one year.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 10.04% (annualized) and 11.04% for Class C and Advisor
class, respectively, for 1999.
(e) Ratios are annualized and based on average net assets of $99,297.
(f) Ratios are based on average net assets of $2,258,611.
(g) Annualized.
(h) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.44% (annualized) and 1.44% for Class C and Advisor Class, respectively,
for 1999
NOTE 9-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
FS-12
<PAGE> 441
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Global Government Income Fund
and Board of Trustees of AIM Investment Funds:
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Global Government Income Fund at October 31, 1999,
and the results of its operations, the changes in its net
assets and the financial highlights for the periods
indicated, in conformity with generally accepted
accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
October 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
FS-13
<PAGE> 442
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CORPORATE BONDS-15.91%
AUSTRALIA-1.40%
KFW International Finance
(Investment Banking/Brokerage),
Gtd. Unsec. Unsub. Bonds,
7.25%, 07/16/07 AUD 3,100,000 $ 1,987,002
- ---------------------------------------------------------------
GERMANY-1.56%
Bayerische Landesbank
Girozentrale (Banks- Money
Center), Unsec. Sub. Notes,
5.875%, 12/01/08 2,400,000 2,213,702
- ---------------------------------------------------------------
SWITZERLAND-10.19%
UBS Jersey
(Financial-Diversified), Sub.
Bonds, 8.75%, 06/20/05 GBP 8,200,000 14,475,660
- ---------------------------------------------------------------
TUNISIA-2.76%
Banque Cent de Tunisie
(Banks-Money Center), Unsec.
Bonds, 8.25%, 09/19/27 4,750,000 3,916,214
- ---------------------------------------------------------------
Total Corporate Bonds (Cost
$23,886,964) 22,592,578
- ---------------------------------------------------------------
GOVERNMENT BONDS & NOTES-45.37%
CANADA-3.59%
Canadian Government, Bonds,
6.00%, 06/01/08 CAD 7,520,000 5,092,848
- ---------------------------------------------------------------
DENMARK-5.88%
Kingdom of Denmark, Bonds, 7.00%,
11/10/24 DKK 53,300,000 8,345,569
- ---------------------------------------------------------------
GERMANY-11.44%
Bundesrepublik Deutschland,
Bonds, 6.00%, 01/05/06 EUR 14,650,000 16,246,489
- ---------------------------------------------------------------
GREECE-6.44%
Hellenic Republic, Bonds
9.20%, 03/21/02
GRD 2,210,000,000 7,223,898
- ---------------------------------------------------------------
8.80%, 06/19/07 GRD 550,000,000 1,914,372
- ---------------------------------------------------------------
9,138,270
- ---------------------------------------------------------------
ITALY-10.09%
Buoni Poliennali del Tesoro,
Deb., 8.50%, 01/01/04 EUR 4,890,000 5,817,747
- ---------------------------------------------------------------
Bonds, 7.25%, 11/01/26 EUR 7,000,000 8,503,343
- ---------------------------------------------------------------
14,321,090
- ---------------------------------------------------------------
UNITED KINGDOM-5.93%
United Kingdom Treasury, Gtd.
Bonds, 9.00%, 10/13/08 GBP 4,190,000 8,425,473
- ---------------------------------------------------------------
URUGUAY-2.00%
Republica Orient Uruguay, Unsec.
Bonds, 7.875%, 07/15/27 3,000,000 2,842,500
- ---------------------------------------------------------------
Total Government Bonds &
Notes (Cost $72,124,983) 64,412,239
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
MORTGAGE BACKED NOTES-4.75%
DENMARK-4.75%
Realkredit Danmark A/S (Banking),
6.00%, 10/01/26 (Cost
$7,313,393) DKK 50,414,000 $ 6,748,531
- ---------------------------------------------------------------
ASSET-BACKED SECURITIES-7.23%
BANKS (MONEY CENTER)-2.45%
First USA Credit Card Master
Trust, Sub. Series 1998-3 C
Floating Rate Notes, 5.356%,
02/18/04(b) 3,500,000 3,481,953
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUST-1.28%
Contimortgage Home Equity Loan
Trust, Sub. Series 1999-2 B
Notes, 8.50%, 04/25/29(b) 2,000,000 1,818,437
- ---------------------------------------------------------------
RETAIL (HOME SHOPPING)-3.50%
Fingerhut Master Trust, Sub.
Series 1998-1 C Floating Rate
Notes, 5.738%, 02/15/05(b) 5,000,000 4,958,594
- ---------------------------------------------------------------
Total Asset-Backed Securities
(Cost $10,257,846) 10,258,984
- ---------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-9.86%
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-0.71%
Pass Through Certificates,
8.50%, 03/01/10 971,355 1,007,470
- ---------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-9.15%
Pass Through Certificates-TBA,
7.50%, 11/01/29(c) 8,500,000 8,502,635
- ---------------------------------------------------------------
Sr. Unsub. Notes,
6.375%, 08/15/07 AUD 7,300,000 4,488,457
- ---------------------------------------------------------------
12,991,092
- ---------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost
$14,779,756) 13,998,562
- ---------------------------------------------------------------
U.S. TREASURY SECURITIES-8.78%
U.S. TREASURY NOTES-1.23%
5.625%, 05/15/08 1,800,000 1,737,378
- ---------------------------------------------------------------
U.S. TREASURY BONDS-7.55%
6.375%, 08/15/27(d) 10,750,000 10,720,760
- ---------------------------------------------------------------
Total U.S. Treasury
Securities (Cost
$12,937,328) 12,458,138
- ---------------------------------------------------------------
</TABLE>
FS-14
<PAGE> 443
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-6.46%
STIC Liquid Assets Portfolio(e) 4,587,352 $ 4,587,352
- ---------------------------------------------------------------
STIC Prime Portfolio(e) 4,587,352 4,587,352
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $9,174,704) 9,174,704
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.36% 139,643,736
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.64% 2,323,523
- ---------------------------------------------------------------
NET ASSETS-100.00% $141,967,259
===============================================================
</TABLE>
Investment Abbreviations:
AUD - Australian Dollar
CAD - Canadian Dollar
Deb. - Debentures
DKK - Danish Krone
EUR - Euro
GBP - British Pound Sterling
GRD - Greek Drachma
Gtd. - Guaranteed
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
USD - U.S. Dollar
Notes to Schedule of Investments:
(a) Principal amount in U.S. Dollars, except as otherwise indicated.
(b) The coupon rate shown on floating rate note represents rate at period end.
(c) Security purchased on a forward commitment basis. These securities are
subject to dollar roll transactions. See Note 1 Section F.
(d) The principal balance was pledged as collateral to cover securities
purchased on a forward commitment basis.
(e) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-15
<PAGE> 444
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $150,474,974) $139,643,736
- ------------------------------------------------------------
Foreign currencies, at value (cost $7,789,654) 8,143,813
- ------------------------------------------------------------
Receivables for:
Fund shares sold 213,493
- ------------------------------------------------------------
Dividends and interest 3,282,169
- ------------------------------------------------------------
Other assets 8,228
- ------------------------------------------------------------
Total assets 151,291,439
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 8,524,792
- ------------------------------------------------------------
Fund shares reacquired 407,460
- ------------------------------------------------------------
Forward contracts 20,290
- ------------------------------------------------------------
Accrued advisory fees 86,440
- ------------------------------------------------------------
Accrued accounting services fees 4,247
- ------------------------------------------------------------
Accrued distribution fees 92,478
- ------------------------------------------------------------
Accrued trustees' fees 2,483
- ------------------------------------------------------------
Accrued operating expenses 185,990
- ------------------------------------------------------------
Total liabilities 9,324,180
- ------------------------------------------------------------
Net assets applicable to shares outstanding $141,967,259
============================================================
NET ASSETS:
Class A $ 85,669,094
============================================================
Class B $ 55,849,297
============================================================
Class C $ 242,724
============================================================
Advisor Class $ 206,144
- ------------------------------------------------------------
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 10,462,287
============================================================
Class B 6,821,145
============================================================
Class C 29,660
============================================================
Advisor Class 25,070
- ------------------------------------------------------------
Class A:
Net asset value and redemption price per
share $ 8.19
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $8.19 / 95.25%) $ 8.60
- ------------------------------------------------------------
Class B:
Net asset value and offering price per share $ 8.19
- ------------------------------------------------------------
Class C:
Net asset value and offering price per share $ 8.18
- ------------------------------------------------------------
Advisor Class:
Net asset value, redemption and offering
price per share $ 8.22
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $10,916,810
- ------------------------------------------------------------
Dividend 9,622
- ------------------------------------------------------------
Securities lending 38,923
- ------------------------------------------------------------
Total investment income 10,965,355
- ------------------------------------------------------------
EXPENSES:
Advisory and administrative fees 1,272,103
- ------------------------------------------------------------
Accounting services fees 55,858
- ------------------------------------------------------------
Custodian fees 83,324
- ------------------------------------------------------------
Distribution fees -- Class A 363,720
- ------------------------------------------------------------
Distribution fees -- Class B 710,164
- ------------------------------------------------------------
Distribution fees -- Class C 1,320
- ------------------------------------------------------------
Interest (Note 5) 62,649
- ------------------------------------------------------------
Trustees' fees 15,984
- ------------------------------------------------------------
Transfer agent fees -- Class A 140,477
- ------------------------------------------------------------
Transfer agent fees -- Class B 95,998
- ------------------------------------------------------------
Transfer agent fees -- Class C 266
- ------------------------------------------------------------
Transfer agent fees -- Advisor Class 633
- ------------------------------------------------------------
Printing fees 215,029
- ------------------------------------------------------------
Other 116,476
- ------------------------------------------------------------
Total expenses 3,134,001
- ------------------------------------------------------------
Less: Expenses paid indirectly (2,214)
- ------------------------------------------------------------
Net expenses 3,131,787
- ------------------------------------------------------------
Net investment income 7,833,568
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES AND
FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities (3,878,935)
- ------------------------------------------------------------
Foreign currencies (540,747)
- ------------------------------------------------------------
Forward currency contracts 1,386,145
- ------------------------------------------------------------
(3,033,537)
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities (12,237,893)
- ------------------------------------------------------------
Foreign currencies 241,116
- ------------------------------------------------------------
Forward currency contracts (69,604)
- ------------------------------------------------------------
(12,066,381)
- ------------------------------------------------------------
Net gain (loss) from investment securities,
foreign currencies and forward currency
contracts (15,099,918)
- ------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations $(7,266,350)
============================================================
</TABLE>
See Notes to Financial Statements.
FS-16
<PAGE> 445
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 7,833,568 $ 14,544,704
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and forward currency contracts (3,033,537) 11,183,037
- --------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and forward
currency contracts (12,066,381) (2,416,473)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (7,266,350) 23,311,268
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (5,214,153) (8,450,756)
- --------------------------------------------------------------------------------------------
Class B (3,093,713) (5,569,246)
- --------------------------------------------------------------------------------------------
Class C (5,619) --
- --------------------------------------------------------------------------------------------
Advisor Class (24,763) (22,257)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A (26,367,395) (37,966,528)
- --------------------------------------------------------------------------------------------
Class B (29,686,097) (40,171,903)
- --------------------------------------------------------------------------------------------
Class C 255,619 --
- --------------------------------------------------------------------------------------------
Advisor Class (170,615) 300,289
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (71,573,086) (68,569,133)
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 213,540,345 282,109,478
- --------------------------------------------------------------------------------------------
End of period $ 141,967,259 $ 213,540,345
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 282,651,180 $ 338,619,386
- --------------------------------------------------------------------------------------------
Undistributed net investment income 469,694 --
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and forward currency
contracts (130,631,972) (126,623,779)
- --------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and forward currency
contracts (10,521,643) 1,544,738
- --------------------------------------------------------------------------------------------
$ 141,967,259 $ 213,540,345
============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-17
<PAGE> 446
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Government Income Fund (the "Fund") is a separate series of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware business
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of twelve separate series portfolios, each having an unlimited number of shares
of beneficial interest. The Fund consists of four different classes of shares:
Class A shares, Class B shares, Class C shares and Advisor Class shares. Class A
shares are sold with a front-end sales charge. Class B shares and Class C shares
are sold with a contingent deferred sales charge. Advisor Class shares were sold
without a sales charge. Matters affecting each portfolio or class will be voted
on exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is high current income, and its secondary
investment objective is growth of capital and protection of principal.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. For purposes of
determining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the New
York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Trustees.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such distributions are
declared and paid monthly. The Fund may elect to use a portion of the
proceeds of fund share redemptions as distributions for Federal income tax
purposes. Distributions from net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, paid-in capital increased by $282, undistributed
net investment income increased by $974,374, and undistributed net realized
losses was decreased by $974,656 as a result of differing book/tax
treatment of foreign currency transactions and net operating loss
reclassifications in order to comply with the requirements of the American
Institute of Certified Public Accountants Statement of Position 93-2. Net
assets of the Fund were unaffected by the reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $130,001,314 as of October 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires, if not
previously utilized, in the year 2007. D. Foreign Currency Translations
-- Portfolio securities and other assets and liabilities denominated in
foreign currencies are
FS-18
<PAGE> 447
translated into U.S. dollar amounts at date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for that portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. Such fluctuations are included with the net
realized and unrealized gain or loss from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
<TABLE>
<CAPTION>
SETTLEMENT CONTRACT TO CONTRACT TO UNREALIZED
DATE DELIVER RECEIVE VALUE DEPRECIATION
---------- ----------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
01/24/00 CAD 8,000,000 $ 5,427,408 $5,447,698 $(20,290)
----------------------------------------------------------------------------------
</TABLE>
F. Mortgage Dollar Rolls -- The Fund may engage in dollar roll transactions
with respect to mortgage backed securities issued by GNMA, FNMA and FHLMC.
In a dollar roll transaction, the Fund sells a mortgage backed security
held in the Fund to a financial institution such as a bank or
broker-dealer, and simultaneously agrees to repurchase a substantially
similar security (same type, coupon and maturity) from the institution at a
later date at an agreed upon price. The mortgage backed securities that are
repurchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with prepayment
histories. During the period between the sale and repurchase, the Fund will
not be entitled to receive interest and principal payments on securities
sold. Proceeds of the sale will be invested in short-term instruments, and
the income from these investments, together with any additional fee income
received on the sale, could generate income for the Fund exceeding the
yield on the security sold.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the
securities that the Fund has sold but is obligated to repurchase under the
agreement. In the event the buyer of securities in a dollar roll
transaction files for bankruptcy or becomes insolvent, the Fund's use of
the proceeds from the sale of the securities may be restricted pending a
determination by the other party, or its trustee or receiver, whether to
enforce the Fund's obligation to repurchase the securities.
G. Expenses -- Distribution expenses directly attributable to a class of
shares are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
H. 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
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 fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
I. Indexed Securities -- The Fund may invest in indexed securities whose
value is linked either directly or indirectly to changes in foreign
currencies, interest rates, equities, indices, or other reference
instruments. Indexed securities may be more volatile than the reference
instrument itself, but any loss is limited to the amount of the original
investment.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
INVESCO Asset Management Limited is the Fund's subadvisor. The Fund pays AIM
investment management and administration fees at an annual rate of 0.725% on the
first $500 million of the Fund's average daily net assets, plus 0.70% on the
next $1 billion of the Fund's average daily net assets, plus 0.675% on the next
$1 billion of the Fund's average daily net assets, plus 0.65% on the Fund's
average daily net assets exceeding $2.5 billion. AIM has contractually agreed to
limit the Fund's expenses (exclusive of brokerage commissions, taxes, interest
and extraordinary expenses) to the maximum annual rate of 1.75%, 2.40%, 2.40%
and 1.40% of the average daily net assets of the Fund's Class A, Class B, Class
C and Advisor Class shares, respectively.
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund. Prior to July 1, 1999, AIM was the
pricing and accounting agent for the Fund. The monthly fee for these services
paid to AIM was a percentage, not to exceed 0.03% annually, of a Fund's average
daily net assets. The annual fee rate was derived based on the aggregate net
assets of the funds which comprised the following investment companies: AIM
Growth Series, AIM Investment Funds, AIM Series Trust, G.T. Global Variable
Investment Series and G.T. Global Variable Investment Trust. The fee was
calculated at the rate of 0.03% of the first $5 billion of assets and 0.02% to
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets. For the year ended
October 31, 1999, AIM was paid $55,858 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund.
FS-19
<PAGE> 448
For the year ended October 31, 1999, AFS was paid $196,597 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares, Class B shares and Class C shares (collectively the
"Plans"). The Fund , pursuant to the Plans, pays AIM Distributors compensation
at the annual rate of 0.35% of the Fund's average daily net assets of Class A
shares and 1.00% of the average daily net assets of Class B and C shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. For the year ended October 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $363,720, $710,164 and $1,320, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $10,533 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $418 in contingent deferred sales charges imposed on
redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AFS and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $2,214 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$2,214 during the year ended October 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among the
funds based on their respective average net assets for the period. Prior to May
28, 1999, the Fund, along with certain other funds advised and/or administered
by AIM, had a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allowed the Fund and certain other
funds to borrow, on a first come, first served basis, an aggregate maximum
amount of $250,000,000.
During the year ended October 31, 1999, the average outstanding daily balance
of bank loans for the Fund was $1,145,937 with a weighted average interest rate
of 5.47%. Interest expense for the Fund for the year ended October 31, 1999 was
$62,649.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, there were no securities on loan to brokers. For the year
ended October 31, 1999, the Fund received fees of $38,923 for securities
lending.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$179,706,395 and $245,341,305, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 241,589
- ---------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (11,703,485)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities $(11,461,896)
- ---------------------------------------------------------
Cost of investments for tax purposes is $151,105,632.
</TABLE>
FS-20
<PAGE> 449
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 10,753,759 $ 95,017,270 82,946,586 $720,078,445
- ----------------------------------------------------------------------------------------------------------------------
Class B 1,683,644 14,905,906 33,203,356 287,724,801
- ----------------------------------------------------------------------------------------------------------------------
Class C* 28,983 250,000 -- --
- ----------------------------------------------------------------------------------------------------------------------
Advisor Class 56,528 507,460 397,514 3,461,130
- ----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 385,899 3,327,811 537,397 4,673,843
- ----------------------------------------------------------------------------------------------------------------------
Class B 217,787 1,880,996 342,811 2,983,470
- ----------------------------------------------------------------------------------------------------------------------
Class C* 677 5,619 -- --
- ----------------------------------------------------------------------------------------------------------------------
Advisor Class 2,482 21,819 2,169 19,000
- ----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (14,190,581) (124,712,476) (87,859,651) (762,718,816)
- ----------------------------------------------------------------------------------------------------------------------
Class B (5,321,253) (46,472,999) (38,124,508) (330,880,174)
- ----------------------------------------------------------------------------------------------------------------------
Advisor Class (80,666) (699,894) (366,368) (3,179,841)
- ----------------------------------------------------------------------------------------------------------------------
(6,462,741) $ (55,968,488) (8,920,694) $(77,838,142)
======================================================================================================================
</TABLE>
* Class C shares commenced sales on March 1, 1999.
FS-21
<PAGE> 450
NOTE 8-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,
-------------------------------------------------------
1999(a) 1998(a) 1997(a) 1996(a) 1995(a)
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.97 $ 8.62 $ 8.74 $ 8.81 $ 8.63
- -------------------------------------------------------- ------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.41 0.54 0.52 0.57 0.62
- -------------------------------------------------------- ------- -------- -------- -------- --------
Net realized and unrealized gain (loss) on investments (0.76) 0.32 (0.13) 0.03 0.15
- -------------------------------------------------------- ------- -------- -------- -------- --------
Net increase (decrease) from investment operations (0.35) 0.86 0.39 0.60 0.77
- -------------------------------------------------------- ------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income (0.43) (0.16) (0.31) (0.57) (0.59)
- -------------------------------------------------------- ------- -------- -------- -------- --------
From net realized gain on investments -- -- -- (0.10) --
- -------------------------------------------------------- ------- -------- -------- -------- --------
In excess of net investment income -- (0.35) (0.20) -- --
- -------------------------------------------------------- ------- -------- -------- -------- --------
Total distributions (0.43) (0.51) (0.51) (0.67) (0.59)
- -------------------------------------------------------- ------- -------- -------- -------- --------
Net asset value, end of period $ 8.19 $ 8.97 $ 8.62 $ 8.74 $ 8.81
======================================================== ======= ======== ======== ======== ========
Total return(b) (3.97)% 10.20% 4.78% 7.11% 9.22%
======================================================== ======= ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in 000's) $85,669 $121,268 $154,272 $240,945 $385,404
======================================================== ======= ======== ======== ======== ========
Ratio of net investment income to average net assets: 4.72%(c) 6.06% 6.04% 6.52% 6.98%
======================================================== ======= ======== ======== ======== ========
Ratio of expenses to average net assets (excluding
interest expense): 1.49%(c) 1.52% 1.51% 1.39% 1.38%
======================================================== ======= ======== ======== ======== ========
Ratio of interest expense to average net assets 0.04% 0.29% -- -- --
======================================================== ======= ======== ======== ======== ========
Portfolio turnover rate 110% 305% 241% 268% 385%
======================================================== ======= ======== ======== ======== ========
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $103,919,944.
FS-22
<PAGE> 451
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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,
------------------------------------------------------
1999(a) 1998(a) 1997(a) 1996(a) 1995(a)
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.97 $ 8.62 $ 8.74 $ 8.80 $ 8.64
- -------------------------------------------------------- ------ ------ -------- -------- --------
Income from investment operations:
Net investment income 0.35 0.47 0.46 0.51 0.55
- -------------------------------------------------------- ------ ------ -------- -------- --------
Net realized and unrealized gain (loss) on investments (0.75) 0.34 (0.12) 0.04 0.14
- -------------------------------------------------------- ------ ------ -------- -------- --------
Net increase (decrease) from investment operations (0.40) 0.81 0.34 0.55 0.69
- -------------------------------------------------------- ------ ------ -------- -------- --------
Distributions to shareholders:
From net investment income (0.38) (0.11) (0.28) (0.51) (0.53)
- -------------------------------------------------------- ------ ------ -------- -------- --------
From net realized gain on investments -- -- -- (0.10) --
- -------------------------------------------------------- ------ ------ -------- -------- --------
In excess of net investment income -- (0.35) (0.18) -- --
- -------------------------------------------------------- ------ ------ -------- -------- --------
Total distributions (0.38) (0.46) (0.46) (0.61) (0.53)
- -------------------------------------------------------- ------ ------ -------- -------- --------
Net asset value, end of period $ 8.19 $ 8.97 $ 8.62 $ 8.74 $ 8.80
======================================================== ====== ====== ======== ======== ========
Total return(b) (4.62)% 9.65% 4.00% 6.54% 8.22%
======================================================== ====== ====== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in 000's) $55,849 $91,852 $127,722 $166,577 $235,481
======================================================== ====== ====== ======== ======== ========
Ratio of net investment income (loss) to average net assets: 4.07%(c) 5.41% 5.39% 5.87% 6.33%
======================================================== ====== ====== ======== ======== ========
Ratio of expenses to average net assets (excluding interest
expense): 2.14%(c) 2.17% 2.16% 2.04% 2.03%
======================================================== ====== ====== ======== ======== ========
Ratio of interest expense to average net assets 0.04% 0.29% -- -- --
======================================================== ====== ====== ======== ======== ========
Portfolio turnover rate 110% 305% 241% 268% 385%
======================================================== ====== ====== ======== ======== ========
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $71,016,370.
FS-23
<PAGE> 452
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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 C ADVISOR CLASS
------------------- --------------------------------------------------------
JUNE 1, 1995
YEAR ENDED OCTOBER 31, TO
MARCH 1, 1999 TO ---------------------------------------- OCTOBER 31,
OCTOBER 31, 1999(a) 1999(a) 1998(a) 1997(a) 1996(a) 1995(a)
------------------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.63 $ 9.00 $ 8.61 $ 8.73 $ 8.80 $ 8.98
- ---------------------------------------------- ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.20 0.45 0.56 0.55 0.60 0.26
- ---------------------------------------------- ------ ------ ------ ------ ------ ------
Net realized and unrealized gain (loss) on
investments (0.44) (0.77) 0.37 (0.13) 0.03 (0.19)
- ---------------------------------------------- ------ ------ ------ ------ ------ ------
Net increase (decrease) from investment
operations (0.24) (0.32) 0.93 0.42 0.63 0.07
- ---------------------------------------------- ------ ------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income (0.21) (0.46) (0.19) (0.33) (0.60) (0.25)
- ---------------------------------------------- ------ ------ ------ ------ ------ ------
From net realized gain on investments -- -- -- -- (0.10) --
- ---------------------------------------------- ------ ------ ------ ------ ------ ------
In excess of net investment income -- -- (0.35) (0.21) -- --
- ---------------------------------------------- ------ ------ ------ ------ ------ ------
Total distributions (0.21) (0.46) (0.54) (0.54) (0.70) (0.25)
- ---------------------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $ 8.18 $ 8.22 $ 9.00 $ 8.61 $ 8.73 $ 8.80
============================================== ====== ====== ====== ====== ====== ======
Total return(b) (2.80)% (3.73)% 11.18% 5.15% 7.49% 0.83%
============================================== ====== ====== ====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in 000's) $ 243 $ 206 $ 421 $ 116 $ 86 $ 131
============================================== ====== ====== ====== ====== ====== ======
Ratio of net investment income (loss) to average
net assets: 4.07%(c) 5.07%(d) 6.41% 6.39% 6.87% 7.33%(e)
============================================== ====== ====== ====== ====== ====== ======
Ratio of expenses to average net assets
(excluding interest expense): 2.14%(c) 1.14%(d) 1.17% 1.16% 1.04% 1.03%(e)
============================================== ====== ====== ====== ====== ====== ======
Ratio of interest expense to average net assets 0.04% 0.04% 0.29% -- -- --
============================================== ====== ====== ====== ====== ====== ======
Portfolio turnover rate 110% 110% 305% 241% 268% 385%
============================================== ====== ====== ====== ====== ====== ======
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $196,715.
(d) Ratios are based on average net assets of $468,333.
(e) Annualized.
NOTE 9-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
FS-24
<PAGE> 453
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Global Growth & Income Fund
and Board of Trustees of AIM Investment Funds:
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Global Growth & Income Fund at October 31, 1999, and
the results of its operations, the changes in its net
assets and the financial highlights for the periods
indicated, in conformity with generally accepted
accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
October 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
FS-25
<PAGE> 454
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-37.35%
BANKS (MONEY CENTER)-2.32%
Bank of America Corp. 230,000 $ 14,806,250
- --------------------------------------------------------------
BANKS (REGIONAL)-2.35%
First Tennessee National Corp. 440,800 14,987,200
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-3.12%
Anheuser-Busch Companies, Inc. 188,371 13,527,392
- --------------------------------------------------------------
Brown-Forman Corp.-Class B 93,600 6,318,000
- --------------------------------------------------------------
19,845,392
- --------------------------------------------------------------
ELECTRIC COMPANIES-3.72%
Southern Co. 420,000 11,156,250
- --------------------------------------------------------------
Texas Utilities Co. 323,000 12,516,250
- --------------------------------------------------------------
23,672,500
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.56%
Emerson Electric Co. 165,000 9,910,312
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.98%
American General Corp. 170,000 12,611,875
- --------------------------------------------------------------
FOODS-2.77%
Bestfoods 300,000 17,625,000
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-3.19%
Bristol-Myers Squibb Co. 264,800 20,339,950
- --------------------------------------------------------------
INVESTMENT MANAGEMENT-1.22%
PIMCO Advisors Holdings L.P. 225,000 7,804,688
- --------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-3.04%
Mobil Corp. 200,500 19,348,250
- --------------------------------------------------------------
PERSONAL CARE-1.18%
Avon Products, Inc. 234,000 7,546,500
- --------------------------------------------------------------
PUBLISHING-3.03%
McGraw-Hill Cos., Inc. (The) 324,000 19,318,500
- --------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-2.88%
Equity Office Properties Trust 457,000 10,111,125
- --------------------------------------------------------------
Equity Residential Properties
Trust 197,000 8,237,063
- --------------------------------------------------------------
18,348,188
- --------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-1.43%
Dun & Bradstreet Corp. (The) 309,800 9,100,375
- --------------------------------------------------------------
TELEPHONE-2.55%
Bell Atlantic Corp. 250,000 16,234,375
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TOBACCO-1.01%
Philip Morris Companies, Inc. 255,000 $ 6,422,813
- --------------------------------------------------------------
Total Domestic Common Stocks
(Cost $165,685,250) 237,922,168
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-31.16%
AUSTRALIA-3.10%
Foster's Brewing Group Ltd.
(Beverages-Alcoholic) 3,500,000 9,305,685
- --------------------------------------------------------------
National Australia Bank Ltd.
(Banks-Major Regional) 674,825 10,417,395
- --------------------------------------------------------------
19,723,080
- --------------------------------------------------------------
BELGIUM-1.47%
Electrabel S.A. (Electric
Companies) 27,760 9,158,659
- --------------------------------------------------------------
Fortis A.G.-CVG
(Financial-Diversified)(a) 34,440 185,149
- --------------------------------------------------------------
9,343,808
- --------------------------------------------------------------
FRANCE-2.50%
Compagnie de Saint Gobain
(Manufacturing-Diversified)(a) 51,000 8,853,001
- --------------------------------------------------------------
Pernod Ricard
(Beverages-Non-alcoholic) 104,720 7,072,957
- --------------------------------------------------------------
15,925,958
- --------------------------------------------------------------
GERMANY-0.98%
MobilCom A.G.
(Telecommunications-Cellular/
Wireless) 120,000 6,223,928
- --------------------------------------------------------------
ITALY-1.16%
Seat Pagine Gialle S.p.A.
(Publishing)(a) 5,200,000 7,412,744
- --------------------------------------------------------------
NETHERLANDS-6.71%
ING Groep N.V. (Insurance Brokers) 176,878 10,435,619
- --------------------------------------------------------------
Koninklijke KPN N.V.
(Telecommunications-Long
Distance) 220,005 11,292,751
- --------------------------------------------------------------
Royal Dutch Petroleum Co.
(Oil-International Integrated) 351,840 21,035,811
- --------------------------------------------------------------
42,764,181
- --------------------------------------------------------------
NEW ZEALAND-1.62%
Telecom Corp. of New Zealand Ltd.
(Telephone) 2,264,200 9,120,112
- --------------------------------------------------------------
Telecom Corp. of New Zealand
Ltd.-ADR (Telephone) 38,000 1,235,000
- --------------------------------------------------------------
10,355,112
- --------------------------------------------------------------
SWITZERLAND-3.07%
Julius Baer Holding A.G.
(Banks-Major Regional) 4,400 13,231,455
- --------------------------------------------------------------
Swisscom A.G. (Telephone) 20,820 6,342,815
- --------------------------------------------------------------
19,574,270
- --------------------------------------------------------------
</TABLE>
FS-26
<PAGE> 455
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-10.55%
Abbey National PLC (Savings & Loan
Companies) 170,000 $ 3,326,014
- --------------------------------------------------------------
Allied Zurich PLC
(Insurance-Mulit-Line) 600,000 7,250,481
- --------------------------------------------------------------
Cadbury Schweppes PLC (Foods) 1,863,600 12,217,480
- --------------------------------------------------------------
CGU PLC (Insurance Brokers) 694,750 10,125,944
- --------------------------------------------------------------
Diageo PLC (Beverages-Alcoholic) 659,559 6,668,943
- --------------------------------------------------------------
EMAP PLC (Publishing) 250,000 3,247,098
- --------------------------------------------------------------
EMI Group PLC (Leisure
Time-Products) 853,500 6,707,484
- --------------------------------------------------------------
Lloyds TSB Group PLC (Banks-Major
Regional) 688,428 9,524,471
- --------------------------------------------------------------
Reckitt & Colman PLC (Household
Products/ Non-durables) 668,093 8,111,770
- --------------------------------------------------------------
67,179,685
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$147,527,140) 198,502,766
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS & NOTES-15.27%
DENMARK-1.36%
Kingdom of Denmark, Bonds, 8.00%,
03/15/06 DKK 54,000,000 8,647,572
- --------------------------------------------------------------
FRANCE-3.76%
Government of France, Deb., 4.00%,
10/25/09 EUR 25,200,000 23,913,664
- --------------------------------------------------------------
GERMANY-5.19%
Bundesrepublik Deutschland, Bonds,
8.375%, 05/21/01 EUR 19,000,000 21,336,865
- --------------------------------------------------------------
6.00%, 01/04/07 4,600,000 5,085,825
- --------------------------------------------------------------
6.50%, 07/04/27 5,800,000 6,651,676
- --------------------------------------------------------------
33,074,366
- --------------------------------------------------------------
UNITED KINGDOM-4.96%
United Kingdom Treasury, Bond,
7.00%, 06/07/02 GBP 5,500,000 9,225,047
- --------------------------------------------------------------
Gtd. Note, 9.00%, 10/13/08 4,500,000 9,048,837
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Gtd. Bond, 9.00%, 08/06/12 GBP 6,022,000 $ 13,324,001
- --------------------------------------------------------------
31,597,885
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Government Bonds
& Notes (Cost $98,119,358) 97,233,487
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-13.76%
U.S. TREASURY NOTES-8.76%
6.63%, 06/30/01 $35,550,000 36,012,505
- --------------------------------------------------------------
5.63%, 05/15/08 20,500,000 19,787,227
- --------------------------------------------------------------
55,799,732
- --------------------------------------------------------------
U.S. TREASURY BONDS-5.00%
8.75%, 08/15/20 15,120,000 18,950,350
- --------------------------------------------------------------
6.50%, 11/15/26 12,745,000 12,898,832
- --------------------------------------------------------------
31,849,182
- --------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $87,847,744) 87,648,914
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-1.77%
STIC Liquid Assets Portfolio(c) 5,642,621 5,642,621
- --------------------------------------------------------------
STIC Prime Portfolio(c) 5,642,621 5,642,621
- --------------------------------------------------------------
Total Money Market Funds (Cost
$11,285,242) 11,285,242
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.31% 632,592,577
- --------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.69% 4,397,411
- --------------------------------------------------------------
NET ASSETS-100.00% $636,989,988
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Deb. - Debentures
Gtd. - Guaranteed
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(c)The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-27
<PAGE> 456
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $510,464,734) $632,592,577
- ------------------------------------------------------------
Cash 1,245,276
- ------------------------------------------------------------
Receivables for:
Investments sold 1,922,211
- ------------------------------------------------------------
Fund shares sold 986,563
- ------------------------------------------------------------
Dividends and interest 5,456,781
- ------------------------------------------------------------
Other assets 651
- ------------------------------------------------------------
Total assets 642,204,059
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Forward contracts closed 1,618,625
- ------------------------------------------------------------
Fund shares reacquired 2,270,985
- ------------------------------------------------------------
Forward contracts 32,908
- ------------------------------------------------------------
Accrued administrative services fees 11,447
- ------------------------------------------------------------
Accrued advisory fees 526,363
- ------------------------------------------------------------
Accrued distribution fees 423,592
- ------------------------------------------------------------
Accrued transfer agent fees 84,253
- ------------------------------------------------------------
Accrued trustees' fees 1,500
- ------------------------------------------------------------
Accrued operating expenses 244,398
- ------------------------------------------------------------
Total liabilities 5,214,071
- ------------------------------------------------------------
Net assets applicable to shares outstanding $636,989,988
============================================================
NET ASSETS:
Class A $254,060,449
============================================================
Class B $376,180,588
============================================================
Class C $ 1,344,034
============================================================
Advisor Class $ 5,404,917
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 32,565,310
============================================================
Class B 48,228,206
============================================================
Class C 172,358
============================================================
Advisor Class 693,765
============================================================
Class A:
Net asset value and redemption price per
share $ 7.80
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $7.80 / 94.50%) $ 8.25
============================================================
Class B:
Net asset value and offering price per share $ 7.80
============================================================
Class C:
Net asset value and offering price per share $ 7.80
============================================================
Advisor Class:
Net asset value, redemption and offering
price per share $ 7.79
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $815,230 foreign withholding
tax) $ 16,045,328
- ------------------------------------------------------------
Interest 13,957,993
- ------------------------------------------------------------
Securities lending 193,458
- ------------------------------------------------------------
Total investment income 30,196,779
- ------------------------------------------------------------
EXPENSES:
Advisory and administrative fees 7,315,050
- ------------------------------------------------------------
Accounting services fees 207,383
- ------------------------------------------------------------
Custodian fees 358,452
- ------------------------------------------------------------
Distribution fees -- Class A 1,039,956
- ------------------------------------------------------------
Distribution fees -- Class B 4,535,906
- ------------------------------------------------------------
Distribution fees -- Class C 6,314
- ------------------------------------------------------------
Trustees' fees 35,961
- ------------------------------------------------------------
Transfer agent fees -- Class A 508,709
- ------------------------------------------------------------
Transfer agent fees -- Class B 776,580
- ------------------------------------------------------------
Transfer agent fees -- Class C 1,110
- ------------------------------------------------------------
Transfer agent fees -- Advisor Class 9,861
- ------------------------------------------------------------
Interest expense 15,102
- ------------------------------------------------------------
Other 608,387
- ------------------------------------------------------------
Total expenses 15,418,771
- ------------------------------------------------------------
Less: Expenses paid indirectly (4,831)
- ------------------------------------------------------------
Net expenses 15,413,940
- ------------------------------------------------------------
Net investment income 14,782,839
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities 59,608,133
- ------------------------------------------------------------
Foreign currencies (573,951)
- ------------------------------------------------------------
Forward currency contracts 589,736
- ------------------------------------------------------------
59,623,918
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities (64,691,362)
- ------------------------------------------------------------
Foreign currencies (204,635)
- ------------------------------------------------------------
Forward currency contracts (257,665)
- ------------------------------------------------------------
(65,153,662)
- ------------------------------------------------------------
Net gain (loss) from investment securities,
foreign currencies and forward currency
contracts (5,529,744)
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $ 9,253,095
============================================================
</TABLE>
See Notes to Financial Statements.
FS-28
<PAGE> 457
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 14,782,839 $ 12,068,853
- -------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and forward currency contracts 59,623,918 146,741,450
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and forward
currency contracts (65,153,662) (29,909,686)
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 9,253,095 128,900,617
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (3,856,782) (4,583,653)
- -------------------------------------------------------------------------------------------
Class B (2,710,473) (4,410,176)
- -------------------------------------------------------------------------------------------
Class C (654) --
- -------------------------------------------------------------------------------------------
Advisor Class (96,889) (100,933)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (50,854,509) (8,368,465)
- -------------------------------------------------------------------------------------------
Class B (78,557,367) (13,388,382)
- -------------------------------------------------------------------------------------------
Class C (9,250) --
- -------------------------------------------------------------------------------------------
Advisor Class (1,015,481) (131,267)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A (1,923,750) (24,946,235)
- -------------------------------------------------------------------------------------------
Class B (30,585,595) (31,695,480)
- -------------------------------------------------------------------------------------------
Class C 1,396,141 --
- -------------------------------------------------------------------------------------------
Advisor Class (873,736) 3,071,389
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (159,835,250) 44,347,415
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 796,825,238 752,477,823
- -------------------------------------------------------------------------------------------
End of period $ 636,989,988 $796,825,238
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 455,586,900 $467,573,561
- -------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, and forward currency
contracts 59,366,359 142,061,286
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and forward currency contracts 122,036,729 187,190,391
- -------------------------------------------------------------------------------------------
$ 636,989,988 $796,825,238
===========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-29
<PAGE> 458
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Growth & Income Fund (the "Fund") is a separate series of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware business
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of twelve separate series portfolios, each having an unlimited number of shares
of beneficial interest. The Fund consists of four different classes of shares:
Class A shares, Class B shares, Class C shares and Advisor Class shares. Class A
shares are sold with a front-end sales charge. Class B shares and Class C shares
are sold with a contingent deferred sales charge. Advisor Class shares were sold
without a sales charge. Matters affecting each portfolio or class will be voted
on exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital together with
current income.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. For purposes of determining net asset value per
share, futures and options contracts generally will be valued 15 minutes
after the close of trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Trustees.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such distributions are
declared and paid quarterly. The Fund may elect to use a portion of the
proceeds of fund share redemptions as distributions for Federal income tax
purposes. Distributions from net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was decreased by
$8,118,041, undistributed net realized gains decreased by $11,882,238 and
paid-in capital increased by $20,000,279 as a result of differing book/tax
treatment of foreign currency transactions and equalization credits in order
to comply with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such
FS-30
<PAGE> 459
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
Outstanding forward currency contracts at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACT TO CONTRACT TO APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
---------- ---------------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
02/09/00 GBP 19,600,000 $32,208,288 $32,241,196 $(32,908)
====================================================================================
</TABLE>
F. Expenses -- Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
G. 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
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 fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
H. Indexed Securities -- The Fund may invest in indexed securities whose value
is linked either directly or indirectly to changes in foreign currencies,
interest rates, equities, indices, or other reference instruments. Indexed
securities may be more volatile than the reference instrument itself, but any
loss is limited to the amount of the original investment.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
INVESCO Asset Management Limited is the Fund's subadvisor. The Fund pays AIM
investment management and administration fees at an annual rate of 0.975% on the
first $500 million of the Fund's average daily net assets, plus 0.95% on the
next $500 million of the Fund's average daily net assets, plus 0.925% on the
next $500 million of the Fund's average daily net assets, plus 0.90% on the
Fund's average daily net assets exceeding $1.5 billion. AIM has contractually
agreed to limit the Fund's expenses (exclusive of brokerage commissions, taxes,
interest and extraordinary expenses) to the maximum annual rate of 1.75%, 2.40%,
2.40% and 1.40% of the average daily net assets of the Fund's Class A, Class B,
Class C and Advisor Class shares, respectively.
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund. Prior to July 1, 1999, AIM was the
pricing and accounting agent for the Fund. The monthly fee for these services
paid to AIM was a percentage, not to exceed 0.03% annually, of a Fund's average
daily net assets. The annual fee rate was derived based on the aggregate net
assets of the funds which comprised the following investment companies: AIM
Growth Series, AIM Investment Funds, AIM Series Trust, G.T. Global Variable
Investment Series and G.T. Global Variable Investment Trust. The fee was
calculated at the rate of 0.03% of the first $5 billion of assets and 0.02% to
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets. For the year ended
October 31, 1999, AIM was paid $207,383 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended October 31, 1999, AFS was
paid $1,226,855 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares, Class B shares and Class C shares (collectively the
"Plans"). The Fund , pursuant to the Plans, pays AIM Distributors compensation
at the annual rate of 0.35% of the Fund's average daily net assets of Class A
shares and 1.00% of the average daily net assets of Class B and C shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. For the year ended October 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $1,039,956, $4,535,906 and $6,314, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $80,124 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $3,994 in contingent deferred sales charges
FS-31
<PAGE> 460
imposed on redemptions of Fund shares. Certain officers and trustees of the
Trust are officers and directors of AIM, AFS and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $4,831 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$4,831 during the year ended October 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among the
funds based on their respective average net assets for the period. Prior to May
28, 1999, the Fund, along with certain other funds advised and/or administered
by AIM, had a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allowed the Fund and certain other
funds to borrow, on a first come, first served basis, an aggregate maximum
amount of $250,000,000.
During the year ended October 31, 1999, the average outstanding daily balance
of bank loans for the Fund was $268,364 with a weighted average interest rate of
5.63%. Interest expense for the Fund for the year ended October 31, 1999 was
$15,102.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, securities with an aggregate value of $926,250 were on loan
to brokers. The loans were secured by cash collateral of $944,775 received by
the Fund. For the year ended October 31, 1999, the Fund received fees of
$193,458 for securities lending.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$654,207,941 and $785,726,810, respectively.
The amount of unrealized appreciation of investment securities, for tax
purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $131,225,983
- ---------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (10,184,073)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $121,041,910
=========================================================
Cost of investments for tax purposes is
$511,550,667.
</TABLE>
FS-32
<PAGE> 461
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 8,613,668 $ 72,437,015 40,631,419 $ 363,947,180
- -----------------------------------------------------------------------------------------------------------------------
Class B 5,303,281 44,812,675 12,852,707 115,998,695
- -----------------------------------------------------------------------------------------------------------------------
Class C* 195,189 1,576,712 -- --
- -----------------------------------------------------------------------------------------------------------------------
Advisor Class 328,566 2,706,042 4,670,023 41,740,705
- -----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 6,015,569 49,459,293 1,294,169 11,189,344
- -----------------------------------------------------------------------------------------------------------------------
Class B 8,680,071 71,410,220 1,736,739 14,930,372
- -----------------------------------------------------------------------------------------------------------------------
Class C* 1,149 9,140 -- --
- -----------------------------------------------------------------------------------------------------------------------
Advisor Class 135,251 1,109,119 25,259 222,124
- -----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (15,145,571) (123,820,058) (44,464,914) (400,082,759)
- -----------------------------------------------------------------------------------------------------------------------
Class B (18,003,582) (146,808,490) (17,992,943) (162,624,547)
- -----------------------------------------------------------------------------------------------------------------------
Class C* (23,980) (189,711) -- --
- -----------------------------------------------------------------------------------------------------------------------
Advisor Class (552,173) (4,688,897) (4,285,866) (38,891,440)
- -----------------------------------------------------------------------------------------------------------------------
(4,452,562) $ (31,986,940) (5,533,407) $ (53,570,326)
=======================================================================================================================
</TABLE>
* Class C shares commenced sales on March 1, 1999.
NOTE 8-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,
--------------------------------------------------------
1999(a) 1998(a) 1997(a) 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.26 $ 8.21 $ 7.11 $ 6.35 $ 6.21
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.20 0.17 0.21 0.22 0.24
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.05) 1.25 1.12 0.82 0.13
- ------------------------------------------------------------------------------------------------------------------------
Net increase from investment operations 0.15 1.42 1.33 1.04 0.37
- ------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (0.11) (0.13) (0.21) (0.24) (0.22)
- ------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (1.50) (0.24) (0.02) (0.04) (0.01)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (1.61) (0.37) (0.23) (0.28) (0.23)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 7.80 $ 9.26 $ 8.21 $ 7.11 $ 6.35
========================================================================================================================
Total return(b) 1.03% 17.76% 19.01% 16.80% 6.27%
========================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $254,060 $306,279 $292,528 $286,203 $284,069
========================================================================================================================
Ratio of net investment income to average net assets: 2.34%(c) 1.87% 2.74% 3.17% 3.85%
========================================================================================================================
Ratio of expenses to average net assets: 1.65%(c) 1.65% 1.64% 1.66% 1.74%
========================================================================================================================
Portfolio turnover rate 89% 92% 50% 39% 83%
========================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $297,130,261.
FS-33
<PAGE> 462
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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,
--------------------------------------------------------
1999(a) 1998(a) 1997(a) 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.25 $ 8.21 $ 7.11 $ 6.35 $ 6.21
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14 0.11 0.16 0.17 0.20
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.04) 1.25 1.13 0.82 0.13
- ----------------------------------------------------------------------------------------------------------------------
Net increase from investment operations 0.10 1.36 1.29 0.99 0.33
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (0.05) (0.08) (0.17) (0.20) (0.18)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (1.50) (0.24) (0.02) (0.03) (0.01)
- ----------------------------------------------------------------------------------------------------------------------
Total distributions (1.55) (0.32) (0.19) (0.23) (0.19)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 7.80 $ 9.25 $ 8.21 $ 7.11 $ 6.35
======================================================================================================================
Total return(b) 0.42% 16.93% 18.28% 16.06% 5.57%
======================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $376,181 $483,307 $456,893 $383,966 $356,796
======================================================================================================================
Ratio of net investment income to average net assets: 1.69%(c) 1.22% 2.09% 2.52% 3.20%
======================================================================================================================
Ratio of expenses to average net assets: 2.30%(c) 2.30% 2.29% 2.31% 2.39%
======================================================================================================================
Portfolio turnover rate 89% 92% 50% 39% 83%
======================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $453,590,643.
FS-34
<PAGE> 463
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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 C ADVISOR CLASS
------------------- ------------------------------------------
MARCH 1, 1999 YEAR ENDED OCTOBER 31, JUNE 1, 1995
TO ------------------------------------------ TO
OCTOBER 31, 1999(a) 1999(a) 1998(a) 1997(a) 1996 OCTOBER 31, 1995
------------------- ------- ------- ------- ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.05 $ 9.26 $ 8.20 $ 7.10 $ 6.35 $ 6.24
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.10 0.22 0.21 0.23 0.23 0.11
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments (0.26) (0.05) 1.25 1.13 0.82 0.13
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment
operations (0.16) 0.17 1.46 1.36 1.05 0.24
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (0.02) (0.14) (0.16) (0.24) (0.26) (0.13)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (0.07) (1.50) (0.24) (0.02) (0.04) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.09) (1.64) (0.40) (0.26) (0.30) (0.13)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 7.80 $ 7.79 $ 9.26 $ 8.20 $ 7.10 $ 6.35
=================================================================================================================================
Total return(b) (1.98)% 1.30% 18.27% 19.23% 17.19% 3.83%
=================================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $1,344 $5,405 $7,239 $3,057 $3,085 $ 944
=================================================================================================================================
Ratio of net investment income to average
net assets: 1.69%(c) 2.69%(d) 2.22% 3.09% 3.52% 4.20%(e)
=================================================================================================================================
Ratio of expenses to average net assets: 2.30%(c) 1.30%(d) 1.30% 1.29% 1.31% 1.39%(e)
=================================================================================================================================
Portfolio turnover rate 89% 89% 92% 50% 39% 83%
=================================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $944,451.
(d) Ratios are based on average net assets of $5,759,984.
(e) Annualized.
NOTE 9-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
FS-35
<PAGE> 464
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Strategic Income Fund
and Board of Trustees of AIM Investment Funds:
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Strategic Income Fund at October 31, 1999, and the
results of its operations, the changes in its net assets
and the financial highlights for the periods indicated
therein, in conformity with generally accepted accounting
principles. These financial statements and financial
highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
October 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
FS-36
<PAGE> 465
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES-54.60%
AEROSPACE/DEFENSE-0.73%
Sequa Corp.-Class A, Sr. Unsec.
Notes, 9.00%, 08/01/09 $ 1,400,000 $ 1,368,500
- --------------------------------------------------------------
AIRLINES-0.47%
Northwest Airlines Corp., Unsec.
Gtd. Notes, 7.875%, 03/15/08 1,000,000 885,550
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-1.25%
American Axle & Manufacturing,
Inc., Sr. Unsec. Gtd. Sub.
Notes, 9.75%, 03/01/09 1,400,000 1,386,000
- --------------------------------------------------------------
Gentek, Inc., Sr. Gtd. Sub.
Notes, 11.00%, 08/01/09
(Acquired 08/03/99; Cost
$950,000)(b) 950,000 959,500
- --------------------------------------------------------------
2,345,500
- --------------------------------------------------------------
BANKS (MONEY CENTER)-3.07%
Chase Manhattan Corp., Unsec.
Sub. Notes, 6.25%, 01/15/06 2,835,000 2,713,676
- --------------------------------------------------------------
Sanwa Finance Aruba AEC (Aruba),
Unsec. Gtd. Unsub. Notes,
8.35%, 07/15/09 3,000,000 3,053,160
- --------------------------------------------------------------
5,766,836
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-3.46%
Comcast Cable Communications,
Unsec. Unsub. Notes, 6.20%,
11/15/08(o) 4,200,000 3,889,452
- --------------------------------------------------------------
Lenfest Communications, Inc., Sr.
Unsec. Sub. Notes, 8.25%,
02/15/08 1,850,000 1,859,250
- --------------------------------------------------------------
LIN Television Corp., Sr. Unsec.
Gtd. Sub. Notes, 8.375%,
03/01/08 800,000 748,000
- --------------------------------------------------------------
6,496,702
- --------------------------------------------------------------
BUILDING MATERIALS-0.55%
Blount Inc., Sr. Sub Notes,
13.00%, 08/01/09(c) 1,000,000 1,032,500
- --------------------------------------------------------------
CHEMICALS-0.75%
Lyondell Chemical Co., Sr. Gtd.
Sub. Notes, 10.875%, 05/01/09 1,400,000 1,400,000
- --------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-1.52%
Huntsman ICI Chemicals LLC, Sr.
Unsec. Sub. Notes, 10.125%,
07/01/09 (Acquired 06/22/99;
Cost $1,750,000)(b) 1,750,000 1,758,750
- --------------------------------------------------------------
ZSC Specialty Chemicals PLC
(United Kingdom), Sr. Gtd.
Unsub. Notes, 11.00%,
07/01/09(c) 1,100,000 1,105,500
- --------------------------------------------------------------
2,864,250
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT-0.55%
Williams Communications Group,
Inc., Sr. Unsec. Notes,
10.875%, 10/01/09 $ 1,000,000 $ 1,030,000
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-0.53%
Chippac International Ltd., Sr.
Unsec. Gtd. Sub. Notes, 12.75%,
08/01/09 (Acquired 07/23/99;
Cost $1,000,000)(b) 1,000,000 995,000
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-0.45%
Intersil Corp., 13.25%, 08/15/09
(Acquired 08/06/99; Cost
$800,000)(b)(d) 800 852,000
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-1.30%
PSINet Inc., Sr. Notes, 11.00%,
08/01/09 (Acquired 07/16/99;
Cost $1,000,000)(b) 1,000,000 1,030,000
- --------------------------------------------------------------
Rythms NetConnections Inc., Sr.
Unsec. Notes, 12.75%, 04/15/09 1,575,000 1,405,687
- --------------------------------------------------------------
2,435,687
- --------------------------------------------------------------
CONSUMER FINANCE-1.94%
AmeriCredit Corp., Sr. Gtd. Sub.
Notes, 9.875%, 04/15/06 1,000,000 995,000
- --------------------------------------------------------------
General Motors Acceptance Corp.,
Unsec. Notes, 6.625%, 10/15/05 2,700,000 2,643,921
- --------------------------------------------------------------
3,638,921
- --------------------------------------------------------------
ELECTRONICS (COMPONENT
DISTRIBUTORS)-0.43%
Viasystems Group, Inc., Sr. Sub
Unsec. Notes, 9.75%, 06/01/07 1,000,000 805,000
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.51%
Lodgian Financing Corp., Sr.
Unsec. Gtd. Sub. Notes, 12.25%,
07/15/09(c) 1,000,000 965,000
- --------------------------------------------------------------
FOODS-1.44%
Eagle Family Foods-Series B,
Unsec. Gtd. Notes, 8.75%,
01/15/08 1,735,000 1,344,625
- --------------------------------------------------------------
Vlasic Foods International
Inc.-Series B, Sr. Unsec. Sub.
Notes, 10.25%, 07/01/09 1,450,000 1,370,250
- --------------------------------------------------------------
2,714,875
- --------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-4.63%
Hollywood Casino Corp., Sr. Sec.
Gtd. Sub. Notes, 11.25%,
05/01/07 3,000,000 3,022,500
- --------------------------------------------------------------
</TABLE>
FS-37
<PAGE> 466
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-(CONTINUED)
Hollywood Casino Corp.-Class A,
1st Mortgage, 13.00%, 08/01/06(c) $ 1,000,000 $ 1,040,000
- --------------------------------------------------------------
Hollywood Park, Inc.-Series B,
Sr. Gtd. Unsec. Sub. Notes,
9.25%, 02/15/07(o) 750,000 728,437
- --------------------------------------------------------------
Horseshoe Gaming Holding Corp.,
Sr. Unsec. Gtd. Notes, 8.675%,
05/15/09 1,350,000 1,299,375
- --------------------------------------------------------------
Isle of Capri Casinos, Inc.,
Unsec. Gtd. Sub. Notes, 8.75%,
04/15/09 1,500,000 1,361,250
- --------------------------------------------------------------
Mandalay Resort Group, Sr. Sub.
Notes, 9.25%, 12/01/05 1,250,000 1,256,250
- --------------------------------------------------------------
8,707,812
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.49%
ICN Pharmaceuticals, Inc., Sr.
Notes, 8.75%, 11/15/08
(Acquired 07/15/99; Cost
$969,900)(b) 1,000,000 917,500
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.52%
Triad Hospitals Holdings Inc.,
Sr. Sub. Notes, 11.00%,
05/15/09(c) 1,000,000 982,500
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.53%
Express Scripts, Inc.-Class A,
Sr. Gtd. Sub. Notes, 9.625%,
06/15/09 1,000,000 1,005,000
- --------------------------------------------------------------
HOMEBUILDING-0.93%
Engle Homes, Inc.-Series C, Sr.
Unsec. Gtd. Notes, 9.25%,
02/01/08 2,000,000 1,750,000
- --------------------------------------------------------------
HOUSEHOLD FURNISHING & APPLIANCES-0.38%
Winsloew Furniture, Inc., 12.75%,
08/15/07(c)(d) 750 718,125
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.62%
Goldman Sachs Group, Inc. (The),
Medium Term Notes, 2.00%,
07/01/06 1,100,000 1,167,375
- --------------------------------------------------------------
IRON & STEEL-0.51%
Acme Metal, Inc., Sr. Unsec. Gtd.
Deb., 10.875%, 12/15/07(e) 780,000 167,700
- --------------------------------------------------------------
Republic Technologies International
LLC/RTI Capital Corp., 13.75%,
07/15/09 (Acquired 08/06/99;
Cost $839,035)(b)(d) 850 790,500
- --------------------------------------------------------------
958,200
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-2.06%
Boca Resorts, Inc.-Class A, Sr.
Gtd. Sub Notes, 9.875%, 04/15/09 2,050,000 1,937,250
- --------------------------------------------------------------
Premier Parks Inc., Sr. Notes,
9.75%, 06/15/07 1,150,000 1,135,625
- --------------------------------------------------------------
Riddell Sports Inc., Sr. Unsec.
Gtd. Notes, 10.50%, 07/15/07 950,000 793,250
- --------------------------------------------------------------
3,866,125
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
MACHINERY (DIVERSIFIED)-1.06%
SCG Holding Corp./Semiconductor
Components Industries LLC, Sr.
Sub. Notes, 12.00%, 08/01/09
(Acquired 08/03/99; Cost
$1,010,000)(b) $ 1,000,000 $ 1,025,000
- --------------------------------------------------------------
Wec Co., Sr. Notes, 12.00%,
07/15/09 (Acquired 07/23/99;
Cost $1,000,000)(b) 1,000,000 975,000
- --------------------------------------------------------------
2,000,000
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.22%
TeleCorp PCS, Inc., Sr. Disc.
Sub. Notes, 11.625%, 04/15/09
(Acquired 04/20/99; Cost
$1,906,254)(b)(f) 3,250,000 2,006,875
- --------------------------------------------------------------
Mechala Group (Jamaica) Series B,
Sr. Gtd. Sub. Notes, 12.75%,
12/30/99 719,000 282,208
- --------------------------------------------------------------
2,289,083
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.48%
Fairchild Corp. (The)-Class A,
Sr. Unsec. Gtd. Sub. Notes,
10.75%, 04/15/09 1,000,000 865,000
- --------------------------------------------------------------
Fairchild Semiconductor Corp.,
Sr. Unsec. Gtd. Sub. Notes,
10.375%, 10/01/07 975,000 976,219
- --------------------------------------------------------------
Fisher Scientific International
Inc., Sr. Unsec. Sub. Notes,
9.00%, 02/01/08 1,000,000 945,000
- --------------------------------------------------------------
2,786,219
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.49%
United Stationers Supply Co., Sr.
Unsec. Gtd. Sub. Notes, 8.375%,
04/15/08 1,000,000 912,500
- --------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.41%
Vintage Petroleum, Inc., Sr.
Unsec. Sub. Notes, 9.75%,
06/30/09 750,000 761,250
- --------------------------------------------------------------
PERSONAL CARE-1.27%
Chattem, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 8.875%,
04/01/08 1,500,000 1,342,500
- --------------------------------------------------------------
Drypers Corp.-Series B, Sr.
Notes, 10.25%, 06/15/07 1,300,000 1,046,500
- --------------------------------------------------------------
2,389,000
- --------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.56%
Polaroid Corp., Sr. Unsec. Notes,
11.50%, 02/15/06 1,050,000 1,055,250
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.82%
Ames Department Stores, Inc., Sr.
Gtd. Sub. Notes, 10.00%,
04/15/06 1,575,000 1,543,500
- --------------------------------------------------------------
</TABLE>
FS-38
<PAGE> 467
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
RETAIL (DRUG STORES)-0.57%
Duane Reade, Inc., Sr. Unsec.
Gtd. Sub. Notes, 9.25%,
02/15/08 $ 1,100,000 $ 1,078,000
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.46%
Stater Brothers Holdings Inc.,
Sr. Notes, 10.75%, 08/15/06 850,000 869,125
- --------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.73%
Metris Cos., Inc., Sr. Notes,
10.125%, 07/15/06 (Acquired
08/13/99; Cost $1,441,804)(b) 1,500,000 1,368,750
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.38%
Willis Corroon Corp., Sr. Gtd.
Sub. Notes, 9.00%, 02/01/09 800,000 712,000
- --------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-1.46%
American Plumbing & Mechanical
Inc., Sr. Gtd. Sub. Notes,
11.625%, 10/15/08(c)(o) 3,000,000 2,748,750
- --------------------------------------------------------------
SOVEREIGN DEBT-7.37%
Bank of Foreign Economic Affairs
(Vnesheconombank) (Russia),
Interest in Arrears Notes,
6.06%, 12/15/15(e)(g) 278,770 32,407
- --------------------------------------------------------------
Principal Loans, 6.06%,
12/15/20(e)(g) 16,555,492 1,541,813
- --------------------------------------------------------------
Government of Venezuela
(Venezuela), Unsec. Bonds,
9.25%, 09/15/27 183,000 123,525
- --------------------------------------------------------------
Republic of Argentina (Argentina),
Unsec. Unsub. Notes, 11.75%,
04/07/09 1,500,000 1,479,375
- --------------------------------------------------------------
Unsec. Unsub. Bonds, 11.375%,
01/30/17 208,000 199,160
- --------------------------------------------------------------
Republic of Brazil (Brazil),
Bonds, 11.625%, 04/15/04 1,228,000 1,177,345
- --------------------------------------------------------------
Notes, 14.50%, 10/15/09 2,404,000 2,496,554
- --------------------------------------------------------------
Gtd. Floating Rate Bonds,
7.00%, 04/15/12(g) 18,000 11,942
- --------------------------------------------------------------
Republic of Bulgaria (Bulgaria),
Floating Rate PDI Deb., 6.50%,
07/28/11(g) 190,000 145,200
- --------------------------------------------------------------
Series A, Gtd. Bonds, 2.75%,
07/28/12(g) 205,000 138,552
- --------------------------------------------------------------
Series A, Gtd. Floating Rate
Sec. Bonds, 6.50%, 07/28/24(g) 198,000 147,778
- --------------------------------------------------------------
Republic of Columbia (Columbia),
Unsub. Notes, 9.75%, 04/23/09 264,000 240,900
- --------------------------------------------------------------
Republic of Kazakhstan (Kazakhstan),
Bonds, 13.625%, 10/18/04
(Acquired 09/28/99; Cost $59,322)(b) 60,000 59,400
- --------------------------------------------------------------
Republic of Korea (Korea), Unsub.
Unsec. Notes, 8.875%, 04/15/08 990,000 1,031,870
- --------------------------------------------------------------
Republic of Malaysia (Malaysia),
Bonds, 8.75%, 06/01/09 720,000 742,190
- --------------------------------------------------------------
Republic of Panama (Panama),
Bonds, 8.875%, 09/30/27 304,000 247,651
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SOVEREIGN DEBT-(CONTINUED)
Republic of Turkey (Turkey),
Notes, 12.00%, 12/15/08 $ 240,000 $ 243,000
- --------------------------------------------------------------
Republic of Venezuela
(Venezuela), Unsec. Bonds,
9.25%, 09/15/27 817,000 554,477
- --------------------------------------------------------------
United Mexican States (Mexico),
Bonds, 11.375%, 09/15/16 391,000 418,859
- --------------------------------------------------------------
11.50%, 05/15/26 2,500,000 2,825,353
- --------------------------------------------------------------
13,857,351
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-2.22%
Crown Castle International Corp.,
Sr. Disc. Notes, 10.375%,
05/15/11(f) 1,600,000 952,000
- --------------------------------------------------------------
Insight Midwest LP/Insight
Capital Inc., Sr. Notes, 9.75%,
10/01/09 (Acquired 09/28/99;
Cost $500,000)(b) 500,000 516,250
- --------------------------------------------------------------
Level 3 Communications, Inc., Sr.
Unsec. Notes, 9.125%, 05/01/08 1,500,000 1,406,250
- --------------------------------------------------------------
Omnipoint Corp., Sr. Notes,
11.50%, 09/15/09 (Acquired
09/17/99; Cost $750,000)(b) 750,000 787,500
- --------------------------------------------------------------
Worldwide Fiber, Inc. (Canada),
Sr. Notes, 12.00%, 08/01/09(c) 500,000 502,500
- --------------------------------------------------------------
4,164,500
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.32%
Primus Telecommunications Group,
Inc., Sr. Notes, 11.25%, 01/15/09 1,600,000 1,480,000
- --------------------------------------------------------------
Tele1 Europe B.V. (Netherlands),
Sr. Unsec. Notes, 13.00%,
05/15/09(c) 1,000,000 995,000
- --------------------------------------------------------------
2,475,000
- --------------------------------------------------------------
TELEPHONE-0.93%
Intermedia Communications
Inc.-Series B, Sr. Unsec.
Notes, 9.50%, 03/01/09 1,900,000 1,752,750
- --------------------------------------------------------------
TEXTILES (APPAREL)-0.47%
St. John Knits International,
Inc., Sr. Sub. Notes, 12.50%,
07/01/09 (Acquired 07/01/99;
Cost $986,160)(b) 1,000,000 875,000
- --------------------------------------------------------------
TEXTILES (HOME FURNISHINGS)-0.26%
Pillowtex Corp., Sr. Sec. Gtd.
Sub. Notes, 10.00%, 11/15/06 1,325,000 483,625
- --------------------------------------------------------------
WASTE MANAGEMENT-1.50%
Allied Waste North America Inc.,
Sr. Sub. Notes, 10.00%,
08/01/09(c) 3,300,000 2,821,500
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds &
Notes (Cost $114,669,327) 102,612,111
- --------------------------------------------------------------
</TABLE>
FS-39
<PAGE> 468
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES-3.88%
LODGING-HOTELS-0.47%
Hilton Hotels Corp., Conv. Sub.
Notes, 5.00%, 05/15/06 $ 1,125,000 $ 885,937
- --------------------------------------------------------------
RETAIL (DRUG STORES)-1.23%
Rite Aid Corp., Conv. Unsec. Sub.
Notes, 5.25%, 09/15/02 3,320,000 2,307,400
- --------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.69%
Interpublic Group of Companies,
Inc. (The), Conv. Notes, 1.87%,
06/01/06 (Acquired 05/26/99;
Cost $1,176,106)(b) 1,400,000 1,298,500
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.86%
CUC International, Inc., Conv.
Sub. Notes, 3.00%, 02/15/02 1,799,000 1,623,598
- --------------------------------------------------------------
WASTE MANAGEMENT-0.63%
WMX Technologies, Conv. Sub.
Notes, 2.00%, 01/24/05 1,445,000 1,186,706
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Convertible Bonds & Notes
(Cost $8,877,848) 7,302,141
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT(h)
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS & NOTES-11.60%
CANADA-1.97%
Canadian Government, Bonds,
Series H63, 10.75%,
10/01/09 CAD 4,065,000 3,702,317
- --------------------------------------------------------------
GERMANY-5.35%
Bundesrepublik Deutschland, Bonds
8.25%, 09/20/01 EUR 3,000,000 3,395,989
- --------------------------------------------------------------
6.50%, 07/04/27 EUR 5,800,000 6,651,676
- --------------------------------------------------------------
10,047,665
- --------------------------------------------------------------
GREECE-1.50%
Republic of Hellenic, Bonds
9.20%, 03/21/02 GRD 650,000,000 2,124,676
- --------------------------------------------------------------
8.80%, 06/19/07 GRD 200,000,000 696,135
- --------------------------------------------------------------
2,820,811
- --------------------------------------------------------------
ITALY-0.88%
Buoni Poliennali del Tesoro,
Deb., 8.50%, 01/01/04 EUR 1,400,000 1,665,613
- --------------------------------------------------------------
NEW ZEALAND-1.90%
Fannie Mae, Notes, 7.25%,
06/20/02 NZD 7,000,000 3,572,815
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Government
Bonds & Notes (Cost
$24,770,532) 21,809,221
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(h) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS & NOTES-4.17%
AUSTRIA-0.14%
Head Holding GMBH (Manufacturing-
Specialized), Sr. Notes,
10.75%, 07/15/06 EUR 250,000 $ 265,157
- --------------------------------------------------------------
FRANCE-0.15%
Remy Cointreau S.A.
(Beverages-Alcoholic), Sr.
Notes, 10.00%, 07/30/05 EUR 250,000 285,027
- --------------------------------------------------------------
LUXEMBOURG-0.09%
Carrier1 International S.A.
(Communications Equipment),
13.25%, 02/15/09 (Acquired
08/05/99; Cost
$180,103)(b)(d) EUR 150,000 160,964
- --------------------------------------------------------------
NETHERLANDS-0.09%
Impress Metal Packaging Holding
(Containers-Metal & Glass), Sr.
Sub. Notes, 9.875%,
05/29/07 DEM 300,000 168,011
- --------------------------------------------------------------
UNITED KINGDOM-3.70%
Clubhaus PLC (Entertainment), Sr.
Unsec. Notes, 12.875%,
06/01/09 GBP 150,000 257,903
- --------------------------------------------------------------
Colt Telecom Group PLC-Series
DBC (Telephone), Sr. Notes,
7.625%, 07/31/08 DEM 1,600,000 856,899
- --------------------------------------------------------------
ECO-BAT Technologies PLC
(Building Materials), Unsec.
Gtd. Sub. Notes, 9.125%,
06/27/07 GBP 150,000 242,755
- --------------------------------------------------------------
Energis PLC
(Telecommunications-Long
Distance), Unsec. Notes,
9.50%, 06/15/09 GBP 200,000 340,688
- --------------------------------------------------------------
HMV Media Group PLC
(Retail-General Merchandise),
Sr. Sub. Notes, 10.875%,
05/15/08 GBP 200,000 314,666
- --------------------------------------------------------------
Hurst Group PLC
(Broadcasting-Television, Radio
& Cable), Unsec. Unsub. Notes,
11.125%, 08/06/08 (Acquired
07/30/99; Cost $240,818(b) GBP 150,000 241,848
- --------------------------------------------------------------
Jazztel PLC
(Telecommunications-Long
Distance), Sr. Notes, 14.00%,
04/01/09 EUR 300,000 334,126
- --------------------------------------------------------------
Leica Geosystems Finance PLC
(Financial-Diversified), Sr.
Unsec. Gtd. Unsub. Notes,
9.875%, 12/15/08 EUR 250,000 266,217
- --------------------------------------------------------------
London International Exhibition
Center-Series BBR (Land
Development), Sec. Bonds,
7.71%, 11/25/16 GBP 1,730,000 2,299,326
- --------------------------------------------------------------
Ono Finance PLC-Series REGS
(Financial-Diversified), Sr.
Gtd. Sub. Notes, 13.00%,
05/01/09 EUR 300,000 336,514
- --------------------------------------------------------------
Orange PLC
(Telecommunications-Cellular/
Wireless), Sr. Notes, 7.625%,
08/01/08 EUR 1,000,000 1,108,395
- --------------------------------------------------------------
</TABLE>
FS-40
<PAGE> 469
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(h) VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Premier International Foods PLC
(Distributors-Food & Health), Sr.
Notes, 12.25%, 09/01/09 GBP 60,000 $ 98,898
- --------------------------------------------------------------
William Hill Finance PLC
(Financial-Diversified), Gtd.
Notes, 10.625%, 04/30/08 GBP 150,000 254,442
- --------------------------------------------------------------
6,952,677
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Non-Convertible
Bonds & Notes (Cost
$7,930,529) 7,831,836
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-1.76%
PUBLISHING (NEWSPAPERS)-0.71%
Tribune Company, $3.14 Conv. Pfd. 9,900 1,341,450
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.88%
Cendant Corp.(i) 100,000 1,650,000
- --------------------------------------------------------------
SOVEREIGN DEBT-0.13%
Republic of Argentina Wts.
(Argentina),
expiring 12/03/99(j) 2,510 2,824
- --------------------------------------------------------------
expiring 02/25/00(j) 2,370 53,621
- --------------------------------------------------------------
United Mexican States Wts.
(Mexico), expiring 12/18/00(j) 2,662 178,687
- --------------------------------------------------------------
235,132
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.04%
Tele1 Europe B.V. Wts. (Netherlands),
expiring 05/15/09(j) 1,000 80,250
- --------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$3,197,511) 3,306,832
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
ASSET-BACKED SECURITIES-6.49%
CONSUMER FINANCE-2.28%
Green Tree Home Equity Loan
Trust- Series 1999-D-Class A5,
7.88%, 09/15/30 $ 4,200,000 4,273,101
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-1.16%
Contimortgage Home Equity Loan
Trust, Sub. Series 1999-2-Class
B Notes, 8.50%, 04/25/29 2,400,000 2,182,125
- --------------------------------------------------------------
RETAIL (HOME SHOPPING)-2.31%
Fingerhut Master Trust, Sub.
Series 1998-2-Class C Floating
Rate Note, 5.88%, 02/15/07(g) 4,500,000 4,339,642
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SERVICES (COMMERCIAL & CONSUMER)-0.74%
Aircraft Finance Trust-Series
1999-1A-Class A, Sub. Bonds,
8.00%, 05/15/24 $ 1,500,000 $ 1,396,943
- --------------------------------------------------------------
Total Asset-Backed Securities
(Cost $12,311,800) 12,191,811
- --------------------------------------------------------------
SENIOR SECURED FLOATING RATE
INTERESTS LOANS-3.04%(k)(1)
Pacifica Papers Inc.,
8.937%, 03/12/06 1,492,500 1,491,567
- --------------------------------------------------------------
Packaging Corp. of America,
8.687%, 04/12/07 25,620 25,671
- --------------------------------------------------------------
8.75%, 04/12/07 4,132 4,140
- --------------------------------------------------------------
9.187%, 04/12/07 250,000 250,500
- --------------------------------------------------------------
9.25%, 04/12/07 82,645 82,810
- --------------------------------------------------------------
8.937%, 04/12/08 25,620 25,668
- --------------------------------------------------------------
9.00%, 04/12/08 4,132 4,140
- --------------------------------------------------------------
9.437%, 04/12/08 250,000 250,469
- --------------------------------------------------------------
9.50%, 04/12/08 82,645 82,800
- --------------------------------------------------------------
Starwood Hotels & Resorts
Worldwide, Inc., 9.132%,
02/23/03 1,000,000 999,583
- --------------------------------------------------------------
Wyndham International, Inc.,
9.187%, 06/30/06 2,500,000 2,493,750
- --------------------------------------------------------------
Total Senior Secured Floating
Rate Interests Loans (Cost
$5,715,597) 5,711,098
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-7.45%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-7.45%
Pass Through Certificates-TBA,
7.498%, 01/24/29 (Cost
$14,000,000)(m) 14,000,000 14,004,340
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-3.75%
U.S. TREASURY BILLS-0.14%
4.68%, 11/04/99(n) 260,000 259,832
- --------------------------------------------------------------
U.S. TREASURY BONDS-1.41%
6.375%, 08/15/27(o) 2,650,000 2,642,792
- --------------------------------------------------------------
U.S. TREASURY NOTES-2.20%
5.63%, 05/15/08(o) 4,290,000 4,140,751
- --------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $7,928,981) 7,043,375
- --------------------------------------------------------------
</TABLE>
FS-41
<PAGE> 470
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-9.22%
STIC Liquid Assets Portfolio(p) 8,661,739 $ 8,661,739
- --------------------------------------------------------------
STIC Prime Portfolio(p) 8,661,739 8,661,739
- --------------------------------------------------------------
Total Money Market Funds
(Cost $17,323,478) 17,323,478
- --------------------------------------------------------------
TOTAL INVESTMENTS-105.96% 199,136,243
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(5.96%) (11,201,990)
- --------------------------------------------------------------
NET ASSETS-100.00% $187,934,253
==============================================================
</TABLE>
Abbreviations:
CAD - Canadian Dollar
DEM - German Deutschmark
EUR - Euro
FRF - French Franc
GPB - British Pound Sterling
GRD - Greek Drachma
NZD - New Zealand Dollar
Conv. - Convertible
Deb. - Debentures
Disc. - Discounted
Gtd. - Guaranteed
Pfd. - Preferred
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
Wts. - Warrants
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by note (h).
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144 under the Securities Act of 1933,
as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at 10/31/99 was $16,618,337 which
represented 8.84% of the Fund's net assets.
(c) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1993, as amended.
(d) Consists of more than one class of securities traded together as a unit. In
addition to the security listed, each unit represents common or preferred
shares of the issuer.
(e) Defaulted security. Currently, the issuer is partially in default with
respect to interest payments.
(f) The coupon rate shown on step up coupon bond represents the rate at period
end.
(g) The coupon rate shown on floating rate note represents rate at period end.
(h) Foreign denominated security. Par value and coupon rate are denominated in
currency of country indicated.
(i) Non-income producing security.
(j) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(k) Senior secured corporate loans and senior secured debt securities in the
Fund's portfolio generally have variable rates which adjust to a base, such
as the London Inter-Bank Offered Rate ("LIBOR"), on set dates, typically
every 30 days but not greater than one year; and/or have interest rates that
float at a margin above a widely recognized base lending rate such as the
Prime rate of a designated U.S. bank. Senior secured floating rate interests
are, at present, not readily marketable and may be subject to restrictions
on resale.
(l) Senior secured floating rate interests often require prepayments from excess
cash flow or permit the borrower to repay at its election. The degree to
which borrowers repay, whether as a contractual requirement or at their
election, cannot be predicted with accuracy. As a result, the actual
remaining maturity may be substantially less than the stated maturities
shown. However, it is anticipated that the senior secured floating rate
interests will have a expected average life of three to five years.
(m) Security purchased on forward commitment basis. These securities are subject
to dollar roll transactions. See Note 1 Section H.
(n) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(o) The principal balance was pledged as collateral to cover securities
purchased on a forward commitment basis.
(p) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-42
<PAGE> 471
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $216,727,766) $199,136,243
- ------------------------------------------------------------
Cash 9,051
- ------------------------------------------------------------
Foreign currencies, at value (cost $13,173) 12,998
- ------------------------------------------------------------
Receivables for:
Investments sold 325,471
- ------------------------------------------------------------
Fund shares sold 137,308
- ------------------------------------------------------------
Dividends and Interest 3,539,187
- ------------------------------------------------------------
Other assets 25,768
- ------------------------------------------------------------
Total assets 203,186,026
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 14,040,833
- ------------------------------------------------------------
Fund shares reacquired 814,231
- ------------------------------------------------------------
Forward contracts 7,228
- ------------------------------------------------------------
Variation margin 53,019
- ------------------------------------------------------------
Accrued advisory fees 115,750
- ------------------------------------------------------------
Accrued distribution fees 144,295
- ------------------------------------------------------------
Accrued accounting services fees 4,110
- ------------------------------------------------------------
Accrued transfer agent fees 19,261
- ------------------------------------------------------------
Accrued trustees' fees 4,314
- ------------------------------------------------------------
Accrued operating expenses 48,732
- ------------------------------------------------------------
Total liabilities 15,251,773
- ------------------------------------------------------------
Net assets applicable to shares outstanding $187,934,253
============================================================
NET ASSETS:
Class A $ 68,674,962
============================================================
Class B $118,903,697
============================================================
Class C $ 250,621
============================================================
Advisor Class $ 104,973
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 6,776,585
============================================================
Class B 11,716,082
============================================================
Class C 24,712
============================================================
Advisor Class 10,320
============================================================
Class A:
Net asset value and redemption price per
share $ 10.13
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $10.13 divided by
95.25%) $ 10.64
============================================================
Class B:
Net asset value and offering price per share $ 10.15
============================================================
Class C:
Net asset value and offering price per share $ 10.14
============================================================
Advisor Class:
Net asset value, redemption and offering
price per share $ 10.17
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 25,765
- ------------------------------------------------------------
Interest 18,906,781
- ------------------------------------------------------------
Securities lending 37,491
- ------------------------------------------------------------
Total investment income 18,970,037
- ------------------------------------------------------------
EXPENSES:
Advisory and administrative fees 1,749,758
- ------------------------------------------------------------
Accounting services fees 70,274
- ------------------------------------------------------------
Interest expense (Note 4) 48,328
- ------------------------------------------------------------
Distribution fees -- Class A 302,618
- ------------------------------------------------------------
Distribution fees -- Class B 1,552,007
- ------------------------------------------------------------
Distribution fees -- Class C 356
- ------------------------------------------------------------
Trustees' fees 21,973
- ------------------------------------------------------------
Transfer agent fees -- Class A 125,789
- ------------------------------------------------------------
Transfer agent fees -- Class B & C 226,541
- ------------------------------------------------------------
Transfer agent fees -- Advisor Class 219
- ------------------------------------------------------------
Printing fees 204,970
- ------------------------------------------------------------
Other 116,621
- ------------------------------------------------------------
Total expenses 4,419,454
- ------------------------------------------------------------
Less: Expenses paid indirectly (14,544)
- ------------------------------------------------------------
Net Expense 4,404,910
- ------------------------------------------------------------
Net investment income 14,565,127
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
FORWARD CURRENCY CONTRACTS, SWAP AGREEMENTS
AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (14,437,294)
- ------------------------------------------------------------
Foreign currencies (2,620,411)
- ------------------------------------------------------------
Forward contracts 1,245,609
- ------------------------------------------------------------
Swap agreements (344,840)
- ------------------------------------------------------------
Futures contracts (59,818)
- ------------------------------------------------------------
(16,216,754)
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 3,083,204
- ------------------------------------------------------------
Foreign currencies (124,399)
- ------------------------------------------------------------
Forward contracts 59,566
- ------------------------------------------------------------
Futures contracts (65,179)
- ------------------------------------------------------------
2,953,192
- ------------------------------------------------------------
Net gain (loss) from investment securities,
foreign currencies, forward currency
contracts, swap agreements and futures
contracts (13,263,562)
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $ 1,301,565
============================================================
</TABLE>
See Notes to Financial Statements.
FS-43
<PAGE> 472
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 14,565,127 $ 27,101,409
- -------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, forward currency contracts, swap
agreements and future contracts (16,216,754) (9,817,521)
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies, futures
contracts and forward currency contracts 2,953,192 (28,381,099)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 1,301,565 (11,097,211)
- -------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (5,310,549) (7,063,735)
- -------------------------------------------------------------------------------------------
Class B (8,423,847) (12,380,012)
- -------------------------------------------------------------------------------------------
Class C (2,176) --
- -------------------------------------------------------------------------------------------
Advisor Class (14,345) (44,834)
- -------------------------------------------------------------------------------------------
RETURN OF CAPITAL DISTRIBUTION:
Class A (313,916) (1,864,318)
- -------------------------------------------------------------------------------------------
Class B (557,789) (3,267,432)
- -------------------------------------------------------------------------------------------
Class C (193) (11,833)
- -------------------------------------------------------------------------------------------
Advisor Class (640) --
- -------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A (28,748,300) (23,886,355)
- -------------------------------------------------------------------------------------------
Class B (61,297,148) (69,589,947)
- -------------------------------------------------------------------------------------------
Class C 254,116 --
- -------------------------------------------------------------------------------------------
Advisor Class (739,856) 369,213
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (103,853,078) (128,836,464)
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 291,787,331 420,623,795
- -------------------------------------------------------------------------------------------
End of period $187,934,253 $ 291,787,331
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $295,698,026 $ 387,101,752
- -------------------------------------------------------------------------------------------
Undistributed net investment income (809,500) (122)
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, forward currency
contracts, swap agreements and futures contracts (89,286,279) (74,693,113)
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies, forward currency
contracts and futures contracts (17,667,994) (20,621,186)
- -------------------------------------------------------------------------------------------
$187,934,253 $ 291,787,331
===========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-44
<PAGE> 473
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Strategic Income Fund (the "Fund") is a separate series of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware business trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twelve
separate series portfolios, each having an unlimited number of shares of
beneficial interest. The Fund consists of four different classes of shares:
Class A shares, Class B shares, Class C shares and Advisor Class shares. Class A
shares are sold with a front-end sales charge. Class B shares and Class C shares
are sold with a contingent deferred sales charge. Advisor Class shares were sold
without a sales charge. Matters affecting each portfolio or class will be voted
on exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is high current income, and its secondary
investment objective is growth of capital.
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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the Trust's
officers in a manner specifically authorized by the Board of Trustees.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Trustees.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such distributions are
declared and paid monthly. The Fund may elect to use a portion of the
proceeds of fund share redemptions as distributions for Federal income tax
purposes. Distributions from net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was decreased by
$751,050, undistributed net realized gains were increased by $1,623,588 and
paid-in capital decreased by $872,538 as a result of differing book/tax
treatment of foreign currency transactions and net operating loss
reclassifications in order to comply with the requirements of the American
Institute of Certified Public Accountants Statement of Position 93-2. Net
assets of the Fund were unaffected by the reclassification discussed above.
C. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $87,556,284 as of October 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires in varying
increments if not previously utilized, in the year 2007.
D. Futures Contracts--The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to
FS-45
<PAGE> 474
market" on a daily basis to reflect the market value of the contracts at the
end of each day's trading. Variation margin payments are made or received
depending upon whether unrealized gains or losses are incurred. When the
contracts are closed, the Fund recognizes a realized gain or loss equal to
the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and that a change in value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
F. Foreign Currency Contracts--A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
Outstanding forward currency contracts at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACT TO CONTRACT TO APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
- ---------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
01/24/00 CAD (2,850,000) $1,940,743 $1,933,514 $(7,228)
---------- ---------- -------
</TABLE>
G. Swap Agreements--The Fund may enter into interest rate swap agreements 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 their respective portfolio's duration (i.e., price sensitivity to
changes in interest rates) or to protect against any increase in the price
of securities the Fund anticipates purchasing at a later date. Interest rate
swap agreements involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional
amount of principal. Swaps are marked to market daily based upon quotations
from market makers and the change, if any, is recorded as unrealized gain or
loss in the Statement of Operations. Payments received or made at the end of
the measurement period are recorded as realized gain or loss in the
Statement of Operations. Net payments of interest rate swap agreements are
recorded as interest income. Entering into these agreements involves, to
varying degrees, elements of credit and market risk in excess of the amounts
recognized on the Statement of Assets and Liabilities. Such risks involve
the possibility that there will be no liquid market for these agreements,
that the counterparty to the agreements may default on its obligations to
perform and that there may be unfavorable changes in the fluctuation of
interest rates.
H. Mortgage Dollar Rolls--The Fund may engage in dollar roll transactions
with respect to mortgage backed securities issued by GNMA, FNMA and FHLMC.
In a dollar roll transaction, the Fund sells a mortgage backed security held
in the Fund to a financial institution such as a bank or broker-dealer, and
simultaneously agrees to repurchase a substantially similar security (same
type, coupon and maturity) from the institution at a later date at an agreed
upon price. The mortgage backed securities that are repurchased will bear
the same interest rate as those sold, but generally will be collateralized
by different pools of mortgages with prepayment histories. During the period
between the sale and repurchase, the Fund will not be entitled to receive
interest and principal payments on securities sold. Proceeds of the sale
will be invested in short-term instruments, and the income from these
investments, together with any additional fee income received on the sale,
could generate income for the Fund exceeding the yield on the security sold.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the
securities that the Fund has sold but is obligated to repurchase under the
agreement. In the event the buyer of securities in a dollar roll transaction
files for bankruptcy or becomes insolvent, the Fund's use of the proceeds
from the sale of the securities may be restricted pending a determination by
the other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities.
I. Expenses--Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
J. Foreign Securities--There are certain additional considerations and risks
associated with investing in foreign securities and currency transactions
that are not inherent in investments of domestic origin. The Fund's
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 fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
K. Indexed Securities--The Fund may invest in indexed securities whose value
is linked either directly or indirectly to changes in foreign currencies,
interest rates, equities, indices, or other reference instruments. Indexed
securities may be more volatile than the reference instrument itself, but
any loss is limited to the amount of the original investment.
FS-46
<PAGE> 475
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
INVESCO (NY), Inc. is the Fund's subadvisor. The Fund pays AIM investment
management and administration fees at an annual rate of 0.725% on the first $500
million of the Fund's average daily net assets, plus 0.70% on the next $1
billion of the Fund's average daily net assets, plus 0.675% on the next $1
billion of the Fund's average daily net assets, plus 0.65% on the Fund's average
daily net assets exceeding $2.5 billion. AIM has contractually agreed to limit
the Fund's expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the maximum annual rate of 1.75%, 2.40%, 2.40% and
1.40% of the average daily net assets of the Fund's Class A, Class B, Class C
and Advisor Class shares, respectively.
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund. Prior to July 1, 1999, AIM was the
pricing and accounting agent for the Fund. The monthly fee for these services
paid to AIM was a percentage, not to exceed 0.03% annually, of a Fund's average
daily net assets. The annual fee rate was derived based on the aggregate net
assets of the funds which comprised the following investment companies: AIM
Growth Series, AIM Investment Funds, AIM Series Trust, G.T. Global Variable
Investment Series and G.T. Global Variable Investment Trust. The fee was
calculated at the rate of 0.03% of the first $5 billion of assets and 0.02% to
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets. For the year ended
October 31, 1999, AIM was paid $70,274 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended October 31, 1999, AFS was
paid $115,750 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares, Class B shares and Class C shares (collectively the
"Plans"). The Fund , pursuant to the Plans, pays AIM Distributors compensation
at the annual rate of 0.35% of the Fund's average daily net assets of Class A
shares and 1.00% of the average daily net assets of Class B and C shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. For the year ended October 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $302,618, $1,552,007 and $356, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $10,612 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $1,132 in contingent deferred sales charges imposed on
redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AFS and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $14,544 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$14,544 during the year ended October 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among the
funds based on their respective average net assets for the period. Prior to May
28, 1999, the Fund, along with certain other funds advised and/or administered
by AIM, had a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allowed the Fund and certain other
funds to borrow, on a first come, first served basis, an aggregate maximum
amount of $250,000,000.
During the year ended October 31, 1999, the average outstanding daily balance
of bank loans for the Fund was $597,260 with a weighted average interest rate of
5.64%. Interest expense for the Fund for the year ended October 31, 1999 was
$48,328.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, there were no securities on loan to brokers. For the year
ended October 31, 1999, the Fund received fees of $37,491 for securities
lending.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
FS-47
<PAGE> 476
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$556,428,352 and $643,701,169, respectively.
The amount of unrealized appreciation of investment securities, for tax
purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 1,665,165
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (20,986,683)
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities $(19,321,518)
==========================================================================
</TABLE>
Cost of investments for tax purposes is $218,457,761
NOTE 7-FUTURES CONTRACTS
On October 31, 1999, $260,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT DEPRECIATION
- -------- ---------- ----------- -------------
<S> <C> <C> <C>
Euro-Bundes Obligation-Short 150 Dec. 99 $(53,019)
- --------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 3,735,185 $ 40,211,400 11,087,862 $ 132,840,707
- -----------------------------------------------------------------------------------------------------------------------------
Class B 570,671 6,113,002 2,712,341 32,431,379
- -----------------------------------------------------------------------------------------------------------------------------
Class C* 25,089 258,028 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Advisor Class 18,917 210,688 396,726 4,766,864
- -----------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 412,050 4,409,344 520,006 6,103,698
- -----------------------------------------------------------------------------------------------------------------------------
Class B 544,054 5,826,667 752,045 8,848,630
- -----------------------------------------------------------------------------------------------------------------------------
Class C* 196 2,004 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Advisor Class 1,153 12,565 4,186 50,201
- -----------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (6,845,161) (73,369,044) (13,690,399) (162,830,760)
- -----------------------------------------------------------------------------------------------------------------------------
Class B (6,857,590) (73,236,817) (9,428,771) (110,869,956)
- -----------------------------------------------------------------------------------------------------------------------------
Class C* (573) (5,916) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Advisor Class (87,987) (963,109) (367,030) (4,447,852)
- -----------------------------------------------------------------------------------------------------------------------------
(8,483,996) $ (90,531,188) (8,013,034) $ (93,107,089)
=============================================================================================================================
</TABLE>
* Class C shares commenced sales on March 1, 1999.
FS-48
<PAGE> 477
NOTE 9-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,
-------------------------------------------------------
1999 1998(a) 1997 1996(a) 1995(a)
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.80 $ 12.00 $ 11.76 $ 10.32 $ 10.88
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.68 0.91(b) 0.74 0.89 0.97
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Net realized and unrealized gain (loss) on investments and
foreign currencies (0.66) (1.27) 0.34 1.44 (0.69)
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Net increase (decrease) from investment operations 0.02 (0.36) 1.08 2.33 0.28
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income (0.65) (0.65) (0.78) (0.82) (0.80)
- ------------------------------------------------------------ ------- -------- -------- -------- --------
In excess of net investment income -- -- (0.06) (0.07) --
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Return of capital (0.04) (0.19) -- -- (0.04)
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Total distributions (0.69) (0.84) (0.84) (0.89) (0.84)
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Net asset value, end of period $ 10.13 $ 10.80 $ 12.00 $ 11.76 $ 10.32
============================================================ ======= ======== ======== ======== ========
Total return(c) 0.06% (3.41)% 9.40% 23.00% 3.06%
============================================================ ======= ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in 000's) $68,675 $102,280 $138,715 $185,126 $188,165
============================================================ ======= ======== ======== ======== ========
Ratio of net investment income to average net assets 6.44%(d) 7.73% 6.18% 8.09% 9.64%
============================================================ ======= ======== ======== ======== ========
Ratio of expenses to average net assets excluding interest
expense: 1.39%(d) 1.56% 1.44% 1.40% 1.45%
============================================================ ======= ======== ======== ======== ========
Ratio of interest expenses to average net assets 0.02% N/A N/A N/A N/A
============================================================ ======= ======== ======== ======== ========
Portfolio turnover rate 235% 306% 149% 177% 238%
============================================================ ======= ======== ======== ======== ========
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.11 per share.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) Ratios are based on average net assets of $86,462,180.
FS-49
<PAGE> 478
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
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,
-----------------------------------------------------------------
1999 1998(a) 1997 1996(a) 1995(a)
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.81 $ 12.01 $ 11.77 $ 10.33 $ 10.88
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.62 0.84(b) 0.67 0.82 0.91
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net realized and unrealized gain (loss) on investments and
foreign currencies (0.66) (1.28) 0.33 1.44 (0.69)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net increase (decrease) from investment operations (0.04) (0.44) 1.00 2.26 0.22
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income (0.58) (0.57) (0.71) (0.75) (0.73)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
In excess of net investment income -- -- (0.05) (0.07) --
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Return of capital (0.04) (0.19) -- -- (0.04)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.62) (0.76) (0.76) (0.82) (0.77)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 10.15 $ 10.81 $ 12.01 $ 11.77 $ 10.33
============================================================ ======== ======== ======== ======== ========
Total return(c) (0.52)% (4.04)% 8.70% 22.15% 2.48%
============================================================ ======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in 000's) $118,904 $188,660 $281,376 $333,178 $357,852
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 5.78%(d) 7.08% 5.53% 7.44% 8.99%
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets excluding interest
expense: 2.05%(d) 2.21% 2.09% 2.05% 2.10%
============================================================ ======== ======== ======== ======== ========
Ratio of interest expense to average net assets 0.02% N/A N/A N/A N/A
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 235% 306% 149% 177% 238%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.11 per share.
(c) Total investment return does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are based on average net assets of $155,200,726.
FS-50
<PAGE> 479
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
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 C ADVISOR CLASS
---------------- -----------------------------------------------------------------
MARCH 1, 1999 YEAR ENDED OCTOBER 31, JUNE 1, 1995
TO ----------------------------------------- TO
OCTOBER 31, 1999 1999(a) 1998(a) 1997 1996(a) OCTOBER 31, 1995(a)
---------------- --------- ------- ------ ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.78 $10.83 $12.02 $11.77 $10.33 $10.32
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.33 0.76 0.95(b) 0.79 0.93 0.41
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Net realized and unrealized gain (loss)
on investments and foreign currencies (0.63) (0.69) (1.26) 0.34 1.44 (0.04)
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Net increase (decrease) from investment
operations (0.30) 0.07 (0.31) 1.13 2.37 0.37
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income (0.31) (0.69) (0.69) (0.82) (0.86) (0.34)
- ------------------------------------------- ------ ------ ------ ------ ------ ------
In excess of net investment income -- -- -- (0.06) (0.07) --
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Return of capital (0.03) (0.04) (0.19) -- -- (0.02)
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Total distributions (0.34) (0.73) (0.88) (0.88) (0.93) (0.36)
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $10.14 $10.17 $10.83 $12.02 $11.77 $10.33
=========================================== ====== ====== ====== ====== ====== ======
Total return(c) (1.80)% 0.55% (2.97)% 9.86% 23.39% 3.72%
=========================================== ====== ====== ====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in 000's) $ 251 $ 105 $ 847 $ 533 $ 479 $ 443
=========================================== ====== ====== ====== ====== ====== ======
Ratio of net investment income to average
net assets 5.78%(d) 6.78%(e) 8.08% 6.53% 8.44% 9.99%(f)
=========================================== ====== ====== ====== ====== ====== ======
Ratio of expenses to average net assets
excluding interest expense: 2.05%(d) 1.05%(e) 1.21% 1.09% 1.05% 1.10%(f)
=========================================== ====== ====== ====== ====== ====== ======
Ratio of interest expense to average net
assets 0.02% 0.02% N/A N/A N/A N/A
=========================================== ====== ====== ====== ====== ====== ======
Portfolio turnover rate 235% 235% 306% 149% 177% 238%
=========================================== ====== ====== ====== ====== ====== ======
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.11 per share.
(c) Total investment return does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average net assets of $53,046.
(e) Ratios are based on average net assets of $233,208.
(f) Annualized.
NOTE 10-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
FS-51
<PAGE> 480
STATEMENT OF
ADDITIONAL INFORMATION
CLASS A, CLASS B AND CLASS C SHARES OF
AIM GLOBAL THEME FUNDS:
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
AIM GLOBAL FINANCIAL SERVICES FUND
AIM GLOBAL HEALTH CARE FUND
AIM GLOBAL INFRASTRUCTURE FUND
AIM GLOBAL RESOURCES FUND
AIM GLOBAL TELECOMMUNICATIONS AND TECHNOLOGY FUND
(SERIES PORTFOLIOS OF
AIM INVESTMENT FUNDS)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TX 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF THE
ABOVE-NAMED FUNDS, A COPY OF WHICH MAY BE OBTAINED FREE
OF CHARGE FROM AUTHORIZED DEALERS OR BY WRITING
AIM DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 347-4246.
STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 2000 RELATING TO
THE AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
PROSPECTUS DATED FEBRUARY 28, 2000,
THE AIM GLOBAL FINANCIAL SERVICES FUND PROSPECTUS DATED FEBRUARY 28, 2000,
THE AIM GLOBAL HEALTH CARE FUND PROSPECTUS DATED FEBRUARY 28, 2000,
THE AIM GLOBAL INFRASTRUCTURE FUND PROSPECTUS DATED FEBRUARY 28, 2000,
THE AIM GLOBAL RESOURCES FUND PROSPECTUS DATED FEBRUARY 28, 2000
THE AIM GLOBAL TELECOMMUNICATIONS AND TECHNOLOGY FUND PROSPECTUS
DATED FEBRUARY 28, 2000
<PAGE> 481
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION......................................................................................................1
GENERAL INFORMATION ABOUT THE FUNDS...............................................................................1
The Trust and Its Shares.................................................................................1
INVESTMENT STRATEGIES AND RISKS...................................................................................3
Selection of Investments and Asset Allocation............................................................7
Privatizations...........................................................................................8
Temporary Defensive Strategies...........................................................................8
Equity-Linked Derivatives................................................................................9
Investments in Other Investment Companies................................................................9
Depositary Receipts......................................................................................9
Warrants or Rights......................................................................................10
Lending of Portfolio Securities.........................................................................11
Money Market Instruments................................................................................11
Commercial Bank Obligations.............................................................................11
Repurchase Agreements...................................................................................11
Borrowing, Reverse Repurchase Agreements and "Roll" Transactions........................................12
When Issued or Forward Commitment Securities............................................................13
Short Sales.............................................................................................13
OPTIONS, FUTURES AND CURRENCY STRATEGIES.........................................................................14
Introduction............................................................................................14
Special Risks of Options, Futures and Currency Strategies...............................................14
Writing Call Options....................................................................................15
Writing Put Options.....................................................................................16
Purchasing Put Options..................................................................................17
Purchasing Call Options.................................................................................17
Index Options...........................................................................................19
Interest Rate, Currency and Stock Index Futures Contracts...............................................20
Options on Futures Contracts............................................................................22
Limitations on Use of Futures, Options on Futures and Certain Options on Currencies.....................23
Forward Contracts.......................................................................................23
Foreign Currency Strategies--Special Considerations.....................................................24
Cover...................................................................................................25
RISK FACTORS.....................................................................................................25
General.................................................................................................25
Consumer Products and Services Fund.....................................................................25
Financial Services Fund.................................................................................25
Health Care Fund........................................................................................26
Infrastructure Fund.....................................................................................26
Resources Fund..........................................................................................27
Telecommunications and Technology Fund..................................................................27
Lower Quality Debt Securities...........................................................................27
Investing in Smaller Companies..........................................................................28
Illiquid Securities.....................................................................................29
Foreign Securities......................................................................................30
</TABLE>
i
<PAGE> 482
<TABLE>
<S> <C>
INVESTMENT LIMITATIONS...........................................................................................34
Feeder Funds............................................................................................34
Health Care Fund........................................................................................36
Telecommunications and Technology Fund..................................................................38
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................39
General Brokerage Policy................................................................................39
Allocation of Portfolio Transactions....................................................................40
Section 28(e) Standards.................................................................................41
Brokerage Commissions Paid..............................................................................41
Allocation of Initial Public Offering ("IPO") Securities Transactions...................................42
Portfolio Trading and Turnover..........................................................................43
MANAGEMENT.......................................................................................................43
Trustees and Executive Officers.........................................................................44
Investment Management and Administration Services relating to the Feeder Funds and the Portfolios.......46
Investment Management and Administration Services relating to the Health Care Fund and
Telecommunications and Technology Fund................................................................47
Expenses of the Funds and of the Portfolios.............................................................48
THE DISTRIBUTION PLANS...........................................................................................49
The Class A and C Plan..................................................................................49
The Class B Plan........................................................................................49
Both Plans..............................................................................................50
THE DISTRIBUTOR..................................................................................................54
SALES CHARGES AND DEALER CONCESSIONS.............................................................................56
REDUCTIONS IN INITIAL SALES CHARGES..............................................................................59
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS......................................................................63
HOW TO PURCHASE AND REDEEM SHARES................................................................................65
Backup Withholding......................................................................................66
NET ASSET VALUE DETERMINATION....................................................................................67
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................68
Reinvestment of Dividends and Distributions.............................................................68
Tax Matters.............................................................................................68
Taxation of the Funds...................................................................................68
Taxation of the Theme Portfolios........................................................................69
Exchange and Reinstatement Privileges and Wash Sales....................................................69
Taxation of Certain Investment Activities...............................................................69
Taxation of the Funds' Shareholders.....................................................................71
SHAREHOLDER INFORMATION..........................................................................................72
MISCELLANEOUS INFORMATION........................................................................................75
Charges for Certain Account Information.................................................................75
Custodian and Transfer Agent............................................................................75
Independent Accountants.................................................................................75
</TABLE>
ii
<PAGE> 483
<TABLE>
<S> <C>
Legal Matters...........................................................................................75
Shareholder Liability...................................................................................76
Special Servicing Agreement.............................................................................76
Control Persons and Principal Holders of Securities.....................................................76
INVESTMENT RESULTS...............................................................................................80
Total Return Quotations.................................................................................80
Performance Information.................................................................................85
General Information about the Theme Funds and Theme Portfolios..........................................88
Health Care Fund........................................................................................88
Information about the Global Health Care Industries.....................................................89
Telecommunications and Technology Fund..................................................................89
Deregulation in the United States.......................................................................90
Consumer Products and Services Fund.....................................................................90
Infrastructure Fund.....................................................................................91
Financial Services Fund.................................................................................91
Resources Fund..........................................................................................91
APPENDIX.........................................................................................................93
Description of Bond Ratings.............................................................................93
Description of Commercial Paper Ratings.................................................................94
Absence of Rating.......................................................................................94
FINANCIAL STATEMENTS.............................................................................................FS
</TABLE>
iii
<PAGE> 484
INTRODUCTION
This Statement of Additional Information relates to the Class A, Class
B and Class C shares of AIM Global Consumer Products and Services Fund
("Consumer Products and Services Fund"), AIM Global Financial Services Fund
("Financial Services Fund"), AIM Global Health Care Fund ("Health Care Fund"),
AIM Global Infrastructure Fund ("Infrastructure Fund"), AIM Global Resources
Fund ("Resources Fund") and AIM Global Telecommunications and Technology Fund
("Telecommunications and Technology Fund") (formerly, AIM Global
Telecommunications Fund) (each, a "Fund" or "Theme Fund," and, collectively, the
"Funds" or "Theme Funds"). Each Fund is a diversified series of AIM Investment
Funds (the "Trust"), a registered open-end management investment company
organized as a Delaware business trust. The Consumer Products and Services Fund,
Financial Services Fund, Infrastructure Fund and Resources Fund (each, a "Feeder
Fund," and, collectively, the "Feeder Funds") invest all of their investable
assets in the Global Consumer Products and Services Portfolio, Global Financial
Services Portfolio, Global Infrastructure Portfolio and Global Resources
Portfolio (each, a "Portfolio," and, collectively, the "Portfolios"),
respectively.
AIM Advisors, Inc. ("AIM" or the "Advisor") serves as the investment
manager of and administrator for the Health Care Fund, Telecommunications and
Technology Fund and the Portfolios (each a "Theme Portfolio," and collectively
the "Theme Portfolios"). AIM also serves as the administrator for each Feeder
Fund.
The Trust is a series mutual fund. The rules and regulations of the
Securities and Exchange Commission (the "SEC") require all mutual funds to
furnish prospective investors certain information concerning the activities of
the fund being considered for investment. This information for Consumer Products
and Services Fund is included in a Prospectus dated February 28, 2000, for
Financial Services Fund is included in a Prospectus dated February 28, 2000, for
Health Care Fund is included in a Prospectus dated February 28, 2000, for
Infrastructure Fund is included in a Prospectus dated February 28, 2000, for
Resources Fund is included in a Prospectus dated February 28, 2000 and for
Telecommunications and Technology Fund is included in a Prospectus dated
February 28, 2000. Additional copies of the Prospectuses and this Statement of
Additional Information may be obtained without charge by writing the principal
distributor of the Funds' shares, AIM Distributors, Inc. ("AIM Distributors"),
P.O. Box 4739, Houston, TX 77210-4739 or by calling (800) 347-4246. Investors
must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Prospectuses; and, in order to avoid repetition, reference
will be made to sections of the Prospectuses. Additionally, the Prospectuses and
this Statement of Additional Information omit certain information contained in
the Registration Statement filed with the SEC. Copies of the Registration
Statement, including items from the Prospectuses and this Statement of
Additional Information, may be obtained from the SEC by paying the charges
described under its rules and regulations.
GENERAL INFORMATION ABOUT THE FUNDS
THE TRUST AND ITS SHARES
The Trust was organized as a Delaware business trust on May 7, 1998,
and previously operated under the name G.T. Investment Funds, Inc., which was
organized as a Maryland corporation on October 29, 1987. The Trust was
reorganized on September 8, 1998 as a Delaware business trust, and is registered
with the SEC as a diversified open-end series management investment company. The
Trust currently consists of the following portfolios: AIM Developing Markets
Fund, AIM Emerging Markets Debt Fund (formerly, AIM Global High Income Fund),
AIM Global Consumer Products and Services Fund, AIM Global Financial Services
Fund, AIM Global Government Income Fund, AIM Global Growth & Income Fund, AIM
Global Health Care Fund, AIM Global Infrastructure Fund, AIM Global Resources
Fund, AIM Global Telecommunications
1
<PAGE> 485
and Technology Fund, AIM Latin American Growth Fund and AIM Strategic Income
Fund. Each of these funds has three separate classes: Class A, Class B and Class
C shares. The Board is authorized to establish additional series of shares, or
additional classes of shares of any fund, at any time. All historical financial
and other information contained in this Statement of Additional Information for
periods prior to September 8, 1998, is that of the series of AIM Investment
Funds, Inc.
The term "majority of the outstanding shares" of the Trust, of a
particular Fund or of a particular class of a Fund or of a particular Portfolio
means, respectively, the vote of the lesser of (a) 67% or more of the shares of
the Trust, such Fund, such class or such Portfolio present at a meeting of the
Trust's shareholders, if the holders of more than 50% of the outstanding shares
of the Trust, such Fund, such class or such Portfolio are present or represented
by proxy, or (b) more than 50% of the outstanding shares of the Trust, such
Fund, such class or such Portfolio.
Unless specifically noted, the Fund's investment policies described in
the Prospectuses and in this Statement of Additional Information may be changed
by the Trust's Board of Trustees without shareholder approval. The Fund's
policies regarding concentration and lending, and the percentage of the Fund's
assets that may be committed to borrowing, are fundamental policies and may not
be changed without shareholder approval.
The approval of the Fund and of other investors in the Portfolio, if
any, is not required to change the investment objective, policies or limitations
of the Portfolio, unless otherwise specified. Written notice shall be provided
to shareholders of the Fund thirty days prior to any changes in the Portfolio's
investment objective.
If a percentage restriction on investment or utilization of assets in
an investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of the Fund's or Portfolio's investment policies or
restrictions.
Class A, Class B and Class C shares of each Fund have equal rights and
privileges. Each share of a particular class is entitled to one vote, to
participate equally in dividends and distributions declared by the Trust's Board
of Trustees with respect to the class of such Fund and, upon liquidation of the
Fund, to participate proportionately in the net assets of the Fund allocable to
such class remaining after satisfaction of outstanding liabilities of the Fund
allocable to such class. Fund shares are fully paid, non-assessable and fully
transferable when issued and have no preemptive rights and have such conversion
and exchange rights as set forth in the Prospectus and this Statement of
Additional Information. Fractional shares have proportionately the same rights,
including voting rights, as are provided for a full share. Other than the
automatic conversion of Class B Shares to Class A Shares, there are no
conversions.
Shareholders of the Funds do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all Funds
voting together for election of trustees may elect all of the members of the
Board of Trustees of the Trust. In such event, the remaining holders cannot
elect any trustees of the Trust.
On any matter submitted to a vote of shareholders, shares of each Fund
will be voted by each Fund's shareholders individually when the matter affects
the specific interest of a 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 will be voted
in the aggregate on other matters, such as the election of Trustees and
ratification of the selection of the Trust's independent accountants.
Normally there will be no annual meeting of shareholders for any of
the Funds in any year, except as required under the Investment Company Act of
1940, as amended (the "1940 Act"). A Trustee may be removed at any meeting of
the shareholders of the Trust by a vote of the shareholders owning at least
two-thirds of the outstanding shares. Any Trustee may call a special meeting of
shareholders for any purpose. Furthermore, Trustees shall promptly call a
meeting of shareholders solely for the purpose of removing one
2
<PAGE> 486
or more Trustees when requested in writing to do so by shareholders holding 10%
of the Trust's outstanding shares.
Pursuant to the Trust's Agreement and Declaration of Trust, the Trust
may issue an unlimited number of shares of each Fund. Each share of a Fund
represents an interest in the Fund only, has a par value of $0.01 per share,
represents an equal proportionate interest in the Fund with other shares of the
Fund and is entitled to such dividends and distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
by the Board of Trustees. Each share of a Fund is equal in earnings, assets and
voting privileges except that each class normally has exclusive voting rights
with respect to its distribution plan and bears the expenses, if any, related to
the distribution of its shares.
INVESTMENT STRATEGIES AND RISKS
The following discussion of investment policies supplements the
discussion of the investment objectives and policies set forth in the Prospectus
under the headings "Investment Objectives and Strategies" and "Principal Risks
of Investing in the Funds." If a percentage restriction on investment or
utilization of assets in an investment policy or restriction is adhered to at
the time an investment is made, a later change in percentage ownership of a
security or kind of securities resulting from changing market values or a
similar type of event will not be considered a violation of the Fund's and
Portfolio's investment policies or restrictions.
The investment objective of each Feeder Fund, Health Care Fund and
Telecommunications and Technology Fund is long-term capital growth. The
investment objective of a Fund may not be changed without the approval of a
majority of the outstanding voting shares of the Fund.
Each Feeder Fund seeks to achieve its investment objective by
investing all of its investable assets in a Portfolio, each of which is a
subtrust (a "series") of Global Investment Portfolio (an open-end management
investment company), with an investment objective that is identical to that of
its corresponding Feeder Fund. Whenever the phrase "all of a Fund's investable
assets" is used herein and in the Prospectus, it means that the only investment
securities held by a Feeder Fund will be its interest in its corresponding
Portfolio. A Feeder Fund may withdraw its investment in its corresponding
Portfolio at any time, if the Board of Trustees of the Trust determines that it
is in the best interests of the Fund and its shareholders to do so. A change in
the Portfolio's investment objective, policies or limitations that is not
approved by the Board or the shareholders of the Feeder Fund could require the
Feeder Fund to redeem its interest in the Portfolio. Any such redemption could
result in a distribution in kind of portfolio securities (as opposed to a cash
distribution) by the Portfolio. Should such a distribution occur, the Feeder
Fund could incur brokerage fees or other transaction costs in converting such
securities to cash. In addition, a distribution in kind could result in a less
diversified portfolio of investments for the Feeder Fund and could adversely
affect its liquidity. Upon redemption, the Board would consider what action
might be taken, including the investment of all the investable assets of the
Feeder Fund in another pooled investment entity having substantially the same
investment objective as the Feeder Fund or the retention by the Feeder Fund of
its own investment advisor to manage its assets in accordance with its
investment objective, policies and limitations discussed herein.
In addition to selling an interest therein to the Feeder Fund, the
Portfolio may sell interests therein to other non-affiliated investment
companies and/or other institutional investors. All institutional investors in
the Portfolio will pay a proportionate share of the Portfolio's expenses and
will invest in the Portfolio on the same terms and conditions. However, if
another investment company invests any or all of its assets in a Portfolio, it
would not be required to sell its shares at the same public offering price as
the Feeder Fund and may charge different sales commissions. Therefore, investors
in the Feeder Fund may experience different returns than investors in another
investment company that invests exclusively in the Portfolio. As of the date of
this Prospectus, the Feeder Fund is the only institutional investor in the
Portfolio.
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The Feeder Fund may be materially affected by the actions of other
larger investors, if any, in the Portfolio. For example, as with all open-end
investment companies, if a large investor were to redeem its interest in the
Portfolio, (1) the Portfolio's remaining investors could experience higher pro
rata operating expenses, thereby producing lower returns and (2) the Portfolio's
security holdings may become less diverse, resulting in increased risk.
Institutional investors in the Portfolio that have a greater pro rata ownership
interest in the Portfolio than the Feeder Fund could have effective voting
control over the operation of the Portfolio.
In addition to its primary investment policy set forth in its
Prospectus, each Theme Portfolio may invest up to 35% of its total assets in
debt securities issued by companies in the Theme Portfolio's particular industry
and/or equity and debt securities of companies outside of that industry which,
in the opinion of the Advisor, stand to benefit from developments in that
industry. For each Theme Portfolio's investment purposes, an issuer is
considered to be in a particular industry if: (i) at least 50% of either the
revenues or the earnings of the issuer was derived from activities related to
that particular industry or (ii) at least 50% of the assets was devoted to such
activities, based upon the company's most recent fiscal year.
Consumer Products and Services Fund
Examples of consumer products and services companies include those
that manufacture, market, retail, or distribute: durable goods (such as homes,
household goods, automobiles, boats, furniture and appliances, and computers);
non-durable goods (such as food and beverages and apparel); media,
entertainment, broadcasting, publishing and sports-related goods and services
(such as television and radio broadcast, motion pictures, wireless
communications, gaming casinos, theme parks, restaurants and lodging); and goods
and services to companies in the foregoing industries (such as advertisers,
textile companies and distribution and shipping companies).
The Portfolio expects that a significant portion of its assets may be
invested in the securities of U.S. issuers from time to time, particularly those
that market their products globally. However, consumer products and services
companies of a particular nation or region of the world are often operated and
owned in their local markets, close to their customers. These companies, the
Advisor believes, may offer superior opportunities for capital growth as
compared to their larger, multinational counterparts. Certain global markets may
be more attractive than others from time to time; companies dependent on U.S.
markets, for example, may be outperformed by companies not dependent on U.S.
markets.
The Advisor also believes that the demand for consumer products and
services worldwide will increase along with rising disposable incomes in both
developed and developing nations. Emerging economies, such as those in China,
Southeast Asia, Eastern Europe and Latin America, offer opportunities for the
growth and expansion of consumer markets. These regions currently comprise a
growing source of inexpensive consumer products for export and a growing source
of demand for consumer products and services as the disposable incomes of their
populations increase. In the Advisor's view, these changes are likely to create
investment opportunities in companies, both local and multinational, that are
able to employ innovative manufacturing, marketing, retailing and distribution
methods to open new markets and/or expand existing markets.
Financial Services Fund
Examples of financial services companies include commercial banks and
savings institutions and loan associations and their holding companies; consumer
and industrial finance companies; diversified financial services companies;
investment banks; insurance brokerages; securities brokerage and investment
advisory companies; real estate-related companies; leasing companies; and a
variety of firms in all segments of the insurance field such as multi-line,
property and casualty and life insurance and insurance holding companies.
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The Advisor believes an accelerating rate of global economic
interdependence will lead to significant growth in the demand for financial
services. In addition, in the Advisor's view, as the industries evolve,
opportunities will emerge for those companies positioned for the future. Thus,
the Advisor expects that banking and related financial institution consolidation
in the developed countries, increased demand for retail borrowing in developing
countries, a growing need for international trade-based financing, a rising
demand for sophisticated risk management, the proliferating number of liquid
securities markets around the world, and larger concentrations of investable
assets should lead to growth in financial service companies that are positioned
for the future.
Health Care Fund
Examples of health care companies include those that are substantially
engaged in the design, manufacture or sale of products or services used for or
in connection with health care or medicine. Such firms may include
pharmaceutical companies; firms that design, manufacture, sell or supply
medical, dental and optical products, hardware or services; companies involved
in biotechnology, medical diagnostic, and biochemical research and development;
and companies involved in the ownership and/or operation of health care
facilities.
The Fund expects that, from time to time, a significant portion of its
assets may be invested in the securities of U.S. issuers. Health care
industries, however, are global industries with significant, growing markets
outside of the United States. A sizeable portion of the companies which comprise
the health care industries are headquartered outside of the United States, and
many important pharmaceutical and biotechnology discoveries and technological
breakthroughs have occurred outside of the United States, primarily in Japan,
the United Kingdom and Western Europe.
The Advisor believes that the global health care industries offer
attractive long-term supply/demand dynamics. While the United States, Western
Europe, and Japan presently account for a substantial portion of health care
expenditures, this should change dramatically in the coming decade if the
populations of developing countries devote an increasing percentage of income to
health care. Additionally, the Advisor believes demographics on aging point to a
significant increase in demand from the industrialized nations, as the elderly
account for a growing proportion of worldwide health care spending. Finally, in
the Advisor's view, technology will continue to expand the range of products and
services offered, with new drugs, medical devices and surgical procedures
addressing medical conditions previously considered untreatable.
In addition to these underlying trends, the United States is presently
experiencing a period of rapid and profound change in its own health care
system, marked by the rise of managed care, the formation of health care
delivery networks, and widespread consolidation across all segments of the
industry. The Advisor believes that this transition offers investment
opportunities in those companies acting as consolidators or otherwise gaining
market share at the expense of less efficient competitors.
Infrastructure Fund
Examples of infrastructure companies include those engaged in
designing, developing or providing the following products and services:
electricity production; oil, gas, and coal exploration, development, production
and distribution; water supply, including water treatment facilities; nuclear
power and other alternative energy sources; transportation, including the
construction or operation of transportation systems; steel, concrete, or similar
types of products; communications equipment and services (including equipment
and services for both data and voice transmission); mobile communications and
cellular radio/paging; emerging technologies combining telephone, television
and/or computer systems; and other products and services, which, in the
Advisor's judgment, constitute services significant to the development of a
country's infrastructure.
The Advisor believes that a country's infrastructure is one key to the
long-term success of that country's economy. The Advisor believes that adequate
energy, transportation, water, and communications
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systems are essential elements for long-term economic growth. The Advisor
believes that many developing nations, especially in Asia and Latin America,
plan to make significant expenditures to the development of their infrastructure
in the coming years, which is expected to facilitate increased levels of
services and manufactured goods.
In the developed countries of North America, Europe, Japan and the
Pacific Rim, the Advisor expects that the replacement and upgrade of
transportation and communications systems should stimulate growth in the
infrastructure industries of those countries. In addition, in the Advisor's
view, deregulation of telecommunications and electric and gas utilities in many
countries is promoting significant changes in these industries.
The Advisor believes that strong economic growth in developing
countries and infrastructure replacement, upgrade, and deregulation in more
developed countries provide an environment for favorable investment
opportunities in infrastructure companies worldwide. In addition, the long-term
growth rates of certain foreign countries' economies may be substantially higher
than the long-term growth rate of the U.S. economy. An integral aspect of
certain foreign countries' economies may be the development or improvement of
their infrastructure.
Resources Fund
Examples of natural resource companies include those which own,
explore or develop: energy sources (such as oil, gas and coal); ferrous and
non-ferrous metals (such as iron, aluminum, copper, nickel, zinc and lead),
strategic metals (such as uranium and titanium) and precious metals (such as
gold, silver and platinum); chemicals; forest products (such as timber, coated
and uncoated tree sheet, pulp and newsprint); other basic commodities (such as
foodstuffs); refined products (such as chemicals and steel) and service
companies that sell to these producers and refiners; and other products and
services, which, in the Advisor's opinion are significant to the ownership and
development of natural resources and other basic commodities.
The Advisor believes that the liberalization of formerly socialist
economies will bring about dramatic changes in both the supply and demand for
natural resources. In addition, rapid industrialization in developing countries
of Asia and Latin America is generating new demands for industrial materials
that are affecting world commodities markets. The Advisor believes these changes
are likely to create investment opportunities that benefit from new sources of
supply and/or from changes in commodities prices.
The Advisor also believes that investments in natural resource
industries offer an opportunity to protect wealth against the capital-eroding
effects of inflation. During periods of accelerating inflation or currency
uncertainty, worldwide investment demand for natural resources, particularly
precious metals, tends to increase, and during periods of disinflation or
currency stability, it tends to decrease. The Advisor believes that rising
commodity prices and increasing worldwide industrial production may favorably
affect share prices of natural resource companies, and investments in such
companies can offer excellent opportunities to offset the effects of inflation.
Telecommunications and Technology Fund
Telecommunications companies cover a variety of sectors, ranging from
companies concentrating on established technologies to those primarily engaged
in emerging or developing technologies. The characteristics of companies
focusing on the same technology will vary among countries depending upon the
extent to which the technology is established in the particular country. The
Advisor will allocate Telecommunications and Technology Fund's investments among
these sectors depending upon its assessment of their relative long-term growth
potential.
Examples of telecommunications companies include those engaged in
designing, developing or providing the following products and services:
communications equipment and services (including equipment and services for both
data and voice transmission); electronic components and equipment; broadcasting
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(including television and radio, satellite, microwave and cable television and
narrowcasting); computer equipment, mobile communications and cellular
radio/paging; electronic mail; local and wide area networking and linkage of
word and data processing systems; publishing and information systems; videotext
and teletext; and emerging technologies combining telephone, television and/or
computer systems.
The Advisor believes that there are opportunities for continued growth
in demand for components, products, media and systems to collect, store,
retrieve, transmit, process, distribute, record, reproduce and use information.
The pervasive societal impact of communications and information technologies has
been accelerated by the lower costs and higher efficiencies that result from the
blending of computers with telecommunications systems. Accordingly, companies
engaged in the production of methods for using electronic and, potentially,
video technology to communicate information are expected to be important in the
Fund's portfolio. Older technologies, such as photography and print also may be
represented, however.
In addition, for each Theme Portfolio's investment purposes, an issuer
is typically considered as located in a particular country if it (a) is
organized under the laws of or has its principal office in a particular country,
or (b) normally derives 50% or more of its total revenues from business in that
country, provided that, in the Advisor's view, the value of such issuer's
securities will tend to reflect such country's development to a greater extent
than developments elsewhere. However, these are not absolute requirements, and
certain companies incorporated in a particular country and considered by the
Advisor to be located in that country may have substantial foreign operations or
subsidiaries and/or export sales exceeding in size the assets or sales in that
country.
SELECTION OF INVESTMENTS AND ASSET ALLOCATION
Each Theme Portfolio expects that, from time to time, a significant
portion of its assets may be invested in the securities of domestic issuers. The
industry represented in each Theme Portfolio, however, is a global industry with
significant, growing markets outside of the United States. A sizeable proportion
of the companies which comprise the infrastructure industries are headquartered
outside of the United States.
For these reasons, the Advisor believes that a portfolio composed only
of securities of U.S. issuers does not provide the greatest potential for return
from an investment by a Theme Portfolio. The Advisor uses its financial
expertise in markets located throughout the world and the substantial global
resources of AMVESCAP PLC in attempting to identify those countries and
companies then providing the greatest potential for long-term capital
appreciation. In this fashion, the Advisor seeks to enable shareholders to
capitalize on the substantial investment opportunities and the potential for
long-term growth of capital presented by the industry represented in each Theme
Portfolio.
The Advisor allocates each Theme Portfolio's assets among securities
of countries and in currency denominations where opportunities for meeting the
Theme Portfolio's investment objective are expected to be the most attractive.
Each Theme Portfolio may invest substantially in securities denominated in one
or more currencies. Under normal conditions, each Theme Portfolio invests in the
securities of issuers located in at least three countries, including the United
States; investments in securities of issuers in any one country, other than the
United States, will represent no more than 40% of the Global Financial Services
Portfolio's and the Telecommunications and Technology Fund's total assets, and
no more than 50% of each of the other Theme Portfolio's total assets.
In analyzing specific companies for possible investment, the Advisor
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets.
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With respect to the Global Resources Portfolio, the Advisor has
identified four areas that it expects will create investment opportunities: (i)
improving supply/demand fundamentals, which may result in higher commodity
prices; (ii) privatization of state-owned natural resource businesses; (iii)
management which can improve production efficiencies without correspondingly
increasing commodity prices; and (iv) service companies with emerging
technologies that can enhance productivity or reduce production costs. Of
course, there is no certainty that these factors will produce the anticipated
results.
With respect to the Telecommunications and Technology Fund, the
Advisor has identified four areas that it expects will create investment
opportunities: (i) deregulation of companies in the industry, which will allow
competition to promote greater efficiencies; (ii) privatization of state-owned
telecommunications businesses; (iii) development of infrastructure in
underdeveloped countries and upgrading of services in other countries; and (iv)
emerging technologies that will enhance productivity and reduce costs in the
telecommunications industry. Of course, there is no certainty that these factors
will produce the anticipated results.
There may be times when, in the opinion of the Advisor, prevailing
market, economic or political conditions warrant reducing the proportion of the
Theme Portfolios' assets invested in equity securities and increasing the
proportion held in cash (U.S. dollars, foreign currencies or multinational
currency units) or invested in debt securities or high quality money market
instruments issued by corporations, or the U.S., or a foreign government. A
portion of each Theme Portfolio's assets normally will be held in cash (U.S.
dollars, foreign currencies or multinational currency units) or invested in
foreign or domestic high quality money market instruments pending investment of
proceeds from new sales of Fund shares to provide for ongoing expenses and to
satisfy redemptions.
In certain countries, governmental restrictions and other limitations
on investment may affect a Theme Portfolio's ability to invest in such
countries. In addition, in some instances only special classes of securities may
be purchased by foreigners and the market prices, liquidity and rights with
respect to those securities may vary from shares owned by nationals. The Advisor
is not aware at this time of the existence of any investment or exchange control
regulations which might substantially impair the operations of the Theme
Portfolios as described in the Prospectus and this Statement of Additional
Information. Restrictions may in the future, however, make it undesirable to
invest in certain countries. None of the Theme Portfolios has a present
intention of making any significant investment in any country or stock market in
which the Advisor considers the political or economic situation to threaten a
Theme Portfolio with substantial or total loss of its investment in such country
or market.
PRIVATIZATIONS
The governments of some foreign countries have been engaged in selling
part or all of their stakes in government-owned or controlled enterprises
("privatizations"). The Advisor believes that privatizations may offer
opportunities for significant capital appreciation and intends to invest assets
of the Theme Portfolios in privatizations in appropriate circumstances. In
certain foreign countries, the ability of foreign entities such as the Theme
Portfolios to participate may be limited by local law, or by the terms on which
a Theme Portfolio may be permitted to participate may be less advantageous than
those for local investors. There can be no assurance that foreign governments
will continue to sell companies currently owned or controlled by them or that
privatization programs will be successful.
TEMPORARY DEFENSIVE STRATEGIES
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, each of the Theme
Portfolios may temporarily hold all or a portion of its assets in cash (U.S.
dollars, foreign currencies or multinational currency units), money market
instruments, or high-quality debt securities. Each of the Theme Portfolios may
also invest up to 25% of its total assets in money market investment companies
advised by AIM or its affiliates ("Affiliated Money Market Funds") for these
purposes. In addition, for temporary defensive purposes, most or all of each
Theme Portfolio's
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investments may be made in the United States and denominated in U.S. dollars. To
the extent a Fund or a Portfolio employs a temporary defensive strategy, it will
not be invested so as to achieve directly its investment objectives. For a full
description of money market instruments, see "Money Market Instruments" herein.
EQUITY-LINKED DERIVATIVES
The Theme Portfolios may invest in equity-linked derivative products
designed to replicate the composition and performance of particular indices.
Examples of such products include S&P Depositary Receipts ("SPDRs"), World
Equity Benchmark Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones
Industrial Average Instruments ("DIAMONDS") and Optimised Portfolios as Listed
Securities ("OPALS"). Investments in equity-linked derivatives involve the same
risks associated with a direct investment in the types of securities included in
the indices such products are designed to track. There can be no assurance that
the trading price of the equity-linked derivatives will equal the underlying
value of the basket of securities purchased to replicate a particular index or
that such basket will replicate the index. Investments in equity-linked
derivatives may constitute investment in other investment companies. See
"Investments in Other Investment Companies."
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by a Theme Portfolio
presently may be made only by acquiring shares of other investment companies
(including investment vehicles or companies advised by AIM or its affiliates)
with local governmental approval to invest in those countries. At such time as
direct investment in these countries is allowed, the Theme Portfolios anticipate
investing directly in these markets.
A Theme Portfolio may invest in other investment companies to the
extent permitted by the 1940 Act, and the rules and regulations thereunder, and
if applicable, exemptive orders granted by the SEC. The following restrictions
apply to investments in other investment companies other than Affiliated Money
Market Funds: (i) a Theme Portfolio may not purchase more than 3% of the total
outstanding voting stock of another investment company; (ii) a Theme Portfolio
may not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) a Theme Portfolio may not invest more than 10% of
its total assets in securities issued by other investment companies other than
Affiliated Money Market Funds. With respect to a Theme Portfolio's purchase of
shares of another investment company, including Affiliated Money Market Funds,
the Theme Portfolio will indirectly bear its proportionate share of the advisory
fees and other operating expenses of such investment company. The Theme
Portfolios have obtained an exemptive order from the SEC allowing them to invest
in Affiliated Money Market Funds, provided that investments in Affiliated Money
Market Funds do not exceed 25% of the total assets of such Theme Portfolio.
DEPOSITARY RECEIPTS
A Theme Portfolio may hold securities of foreign issuers in the form
of American Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs"),
Global Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs") or
other securities convertible into securities of eligible foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. ADRs and ADSs are typically issued
by an American bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. EDRs, which are sometimes referred
to as Continental Depositary Receipts ("CDRs"), are issued in Europe typically
by foreign banks and trust companies and evidence ownership of either foreign or
domestic securities. GDRs are similar to EDRs and are designed for use in
several international financial markets. Generally, ADRs and ADSs in registered
form are designed for use in U.S. securities markets and EDRs in bearer form are
designed for use in European securities markets. For purposes of each Theme
Portfolio's investment policies, a Theme Portfolio's investments in ADRs, ADSs,
GDRs and EDRs will be deemed to be investments in the equity securities
representing securities of foreign issuers into which they may be converted.
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ADR facilities may be established as either "unsponsored" or
"sponsored." While ADRs issued under these two types of facilities are in some
respects similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depository usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into U.S. dollars, the disposition of non-cash distributions, and
the performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass-through voting
rights to ADR holders in respect of the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Theme Portfolios may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by a Theme Portfolio in connection
with other securities or separately and provide the Theme Portfolio with the
right to purchase at a later date other securities of the issuer. Warrants are
securities permitting, but not obligating, their holder to subscribe for other
securities or commodities. Warrants do not carry with them the right to
dividends or voting rights with respect to the securities that they entitle
their holder to purchase, and they do not represent any rights in the assets of
the issuer. As a result, warrants may be considered more speculative than
certain other types of investments. In addition, the value of a warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to its expiration date.
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LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each Theme Portfolio
may make secured loans of its securities holdings amounting to not more than 30%
of its total assets. Securities loans are made to broker/dealers or
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral consisting of cash, U.S. government
securities, or certain other irrevocable letters of credit at least equal at all
times to the value of the securities lent plus any accrued interest, "marked to
market" on a daily basis. The collateral for such loans, if received in cash,
may be held in investment vehicles with investment objectives and policies
similar to those of money market funds or limited duration income funds (longer
maturities than may be held by money market funds), advised by the Advisor or
its affiliates or by unaffiliated advisers. The Funds may pay a fee to the
Advisor of such investment vehicles for its services. The Theme Portfolios may
pay reasonable administrative and custodial fees in connection with the loans of
their securities. While the securities loan is outstanding, a Theme Portfolio
will continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities, as well as interest on the investment of the
collateral or a fee from the borrower. A Theme Portfolio will have a right to
call each loan and obtain the securities within the stated settlement period. A
Theme Portfolio will not have the right to vote equity securities while they are
being lent, but it may call in a loan in anticipation of any important vote. The
risks in lending portfolio securities, as with other extensions of secured
credit, consist of possible delays in receiving additional collateral or in
recovery of the securities and possible loss of rights in the collateral should
the borrower fail financially. Loans will only be made to firms deemed by the
Advisor to be of good standing and will not be made unless, in the judgment of
the Advisor, the consideration to be earned from such loans would justify the
risk.
MONEY MARKET INSTRUMENTS
Money market instruments in which the Theme Portfolios may invest
include U.S. government securities, high-grade commercial paper, bank
certificates of deposit, bankers' acceptances and repurchase agreements related
to any of the foregoing. "High-grade commercial paper" refers to commercial
paper rated A-1 by Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., or P-1 by Moody's Investors Services, Inc. or, if not rated, determined by
the Advisor to be of comparable quality.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each Theme Portfolio's investment policies with
respect to bank obligations, obligations of foreign branches of U.S. banks and
of foreign banks are obligations of the issuing bank and may be general
obligations of the parent bank. Such obligations may, however, be limited by the
terms of a specific obligation and by government regulation. As with investments
in non-U.S. securities in general, investments in the obligations of foreign
branches of U.S. banks and of foreign banks may subject each Theme Portfolio to
investment risks that are different in some respects from those of investments
in obligations of U.S. issuers. Although each Theme Portfolio will typically
acquire obligations issued and supported by the credit of U.S. or foreign banks
having total assets at the time of purchase of $1 billion or more, this $1
billion figure is not an investment policy or restriction of each Theme
Portfolio. For the purposes of calculation with respect to the $1 billion
figure, the assets of a bank will be deemed to include the assets of its U.S.
and non-U.S. branches.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction in which a Theme Portfolio
purchases a security from a bank or recognized securities dealer and
simultaneously commits to resell that security to the bank or dealer at an
agreed upon price, date, and market rate of interest unrelated to the coupon
rate or maturity of the purchased security. Although repurchase agreements carry
certain risks not associated with direct investments in securities, including
possible decline in the market value of the underlying securities and delays and
costs to the Theme Portfolio if the other party to the repurchase agreement
becomes bankrupt, the Theme Portfolios intend to enter into repurchase
agreements only with banks and dealers believed by the
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Advisor to present minimal credit risks in accordance with guidelines
established by the Trust's or the Portfolios' Board of Trustees, as applicable.
The Advisor will review and monitor the creditworthiness of such institutions
under the applicable Board's general supervision.
Each Theme Portfolio will invest only in repurchase agreements
collateralized at all times in an amount at least equal to the repurchase price
plus accrued interest. To the extent that the proceeds from any sale of such
collateral upon a default in the obligation to repurchase were less than the
repurchase price, a Theme Portfolio would suffer a loss. If the financial
institution which is party to the repurchase agreement petitions for bankruptcy
or otherwise becomes subject to bankruptcy or other liquidation proceedings,
there may be restrictions on a Theme Portfolio's ability to sell the collateral
and a Theme Portfolio could suffer a loss. However, with respect to financial
institutions whose bankruptcy or liquidation proceedings are subject to the U.S.
Bankruptcy Code, each Theme Portfolio intends to comply with provisions under
such Code that would allow the immediate resale of such collateral. Each Theme
Portfolio will not enter into a repurchase agreement with a maturity of more
than seven days if, as a result, more than 15% of the value of its net assets
would be invested in such repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
Each Theme Portfolio may borrow from banks or may borrow through
reverse repurchase agreements and "roll" transactions in connection with meeting
requests for the redemptions of the Funds' shares. Each Theme Portfolio's
borrowings will not exceed 33 1/3% of its total assets, i.e., the Theme
Portfolio's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of a Theme
Portfolio's securities holdings or other factors cause the ratio of a Theme
Portfolio's total assets to outstanding borrowings to fall below 300%, within
three days (excluding Sundays and holidays) of such event that Theme Portfolio
may be required to sell portfolio securities to restore the 300% asset coverage,
even though from an investment standpoint such sales might be disadvantageous.
Each Theme Portfolio may also borrow up to 5% of its total assets for temporary
or emergency purposes other than to meet redemptions. However, no additional
investments will be made if a Theme Portfolio's borrowings exceed 5% of its
total assets. Any borrowing by a Theme Portfolio may cause greater fluctuation
in the value of its shares than would be the case if that Theme Portfolio did
not borrow.
Each Theme Portfolio's fundamental investment limitations permit the
Theme Portfolio to borrow money for leveraging purposes. However, each Theme
Portfolio is currently prohibited, pursuant to a non-fundamental investment
policy, from borrowing money in order to purchase securities. Nevertheless, this
policy may be changed in the future by the Trust's or the Portfolios' Board of
Trustees, as applicable. If a Theme Portfolio employs leverage in the future, it
would be subject to certain additional risks. Use of leverage creates an
opportunity for greater growth of capital but would exaggerate any increases or
decreases in the net asset value of the Financial Services Fund, Infrastructure
Fund, Resources Fund, Consumer Products and Services Fund or a Theme Portfolio.
When the income and gains on securities purchased with the proceeds of
borrowings exceed the costs of such borrowings, a Theme Portfolio's earnings or
a Fund's net asset value will increase faster than otherwise would be the case;
conversely, if such income and gains fail to exceed such costs, a Theme
Portfolio's earnings or a Fund's net asset value would decline faster than would
otherwise be the case.
Each Theme Portfolio may enter into reverse repurchase agreements. A
reverse repurchase agreement is a borrowing transaction in which the Portfolio
transfers possession of a security to another party, such as a bank or
broker/dealer, in return for cash, and agrees to repurchase the security in the
future at an agreed upon price, which includes an interest component. Each Theme
Portfolio may also engage in "roll" borrowing transactions, which involve the
sale of Government National Mortgage Association certificates or other
securities together with a commitment (for which the Theme Portfolio may receive
a fee) to purchase similar, but not identical, securities at a future date. Each
Theme Portfolio will segregate with a custodian liquid assets in an amount
sufficient to cover its obligations under "roll" transactions and reverse
repurchase agreements with broker/dealers. No segregation is required for
reverse repurchase agreements with banks.
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WHEN ISSUED OR FORWARD COMMITMENT SECURITIES
Each Theme Portfolio may purchase debt securities on a "when-issued"
basis and may purchase or sell such securities on a "forward commitment" basis
in order to hedge against anticipated changes in interest rates and prices. The
price, which is generally expressed in yield terms, is fixed at the time that
the commitment is made, but delivery and payment for the securities take place
at a later date. When-issued securities and forward commitments may be sold
prior to the settlement date, but a Theme Portfolio will purchase or sell
when-issued securities or enter into forward commitments only with the intention
of actually receiving or delivering the securities, as the case may be. No
income accrues on securities that have been purchased pursuant to a forward
commitment or on a when-issued basis prior to delivery to the Theme Portfolio.
If a Theme Portfolio disposes of the right to acquire a when-issued security
prior to its acquisition or disposes of its right to deliver or receive against
a forward commitment, it may incur a gain or loss. At the time that a Theme
Portfolio enters into a transaction on a when-issued or forward commitment
basis, the Theme Portfolio will segregate cash or liquid securities equal to the
value of the when-issued or forward commitment securities with its custodian and
will mark to market daily such assets. There is a risk that the securities may
not be delivered and that the Theme Portfolio may incur a loss.
SHORT SALES
Each Theme Portfolio may make short sales of securities. A short sale
is a transaction in which a Theme Portfolio sells a security in anticipation
that the market price of that security will decline. A Theme Portfolio may make
short sales (i) as a form of hedging to offset potential declines in long
positions in securities it owns, or anticipates acquiring, or in similar
securities, and (ii) in order to maintain flexibility in its securities
holdings.
When a Theme Portfolio makes a short sale of a security it does not
own, it must borrow the security sold short and deliver it to the broker/dealer
or other intermediary through which it made the short sale. The Theme Portfolio
may have to pay a fee to borrow particular securities and will often be
obligated to pay over any payments received on such borrowed securities.
A Theme Portfolio's obligation to replace the borrowed security when
the borrowing is called or expires will be secured by collateral deposited with
the intermediary. The Theme Portfolio will also be required to deposit
collateral with its custodian to the extent, if any, necessary so that the value
of both collateral deposits in the aggregate is at all times equal to at least
100% of the current market value of the security sold short. Depending on
arrangements made with the intermediary from which it borrowed the security
regarding payment of any amounts received by that Theme Portfolio on such
security, a Theme Portfolio may not receive any payments (including interest) on
its collateral deposited with such intermediary.
If the price of the security sold short increases between the time of
the short sale and the time a Theme Portfolio replaces the borrowed security,
that Theme Portfolio will incur a loss; conversely, if the price declines, the
Theme Portfolio will realize a gain. Any gain will be decreased, and any loss
increased, by the transaction costs associated with the transaction. Although a
Theme Portfolio's gain is limited by the price at which it sold the security
short, its potential loss theoretically is unlimited.
No Theme Portfolio will make a short sale if, after giving effect to
such sale, the market value of the securities sold short exceeds 25% of the
value of its total assets or the Theme Portfolio's aggregate short sales of the
securities of any one issuer exceed the lesser of 2% of the Theme Portfolio's
net assets or 2% of the securities of any class of the issuer. Moreover, a Theme
Portfolio may engage in short sales only with respect to securities listed on a
national securities exchange. A Theme Portfolio may make short sales "against
the box" without respect to such limitations. In this type of short sale, at the
time of the sale the Theme Portfolio owns the security it has sold short or has
the immediate and unconditional right to acquire at no additional cost the
identical security.
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OPTIONS, FUTURES AND CURRENCY STRATEGIES
INTRODUCTION
Each Theme Portfolio may use forward currency contracts, futures
contracts, options on securities, options on indices, options on currencies, and
options on futures contracts to attempt to hedge against the overall level of
investment and currency risk normally associated with Theme Portfolio
investments. These instruments are often referred to as "derivatives," which may
be defined as financial instruments whose performance is derived, at least in
part, from the performance of another asset (such as a security, currency or an
index of securities). Each Theme Portfolio may invest in such instruments up to
the full value of its portfolio assets.
To attempt to hedge against adverse movements in exchange rates
between currencies, each Theme Portfolio may enter into forward currency
contracts for the purchase or sale of a specified currency at a specified future
date. Such contracts may involve the purchase or sale of a foreign currency
against the U.S. dollar or may involve two foreign currencies. A Theme Portfolio
may enter into forward currency contracts either with respect to specific
transactions or with respect to its portfolio positions. A Theme 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 Theme Portfolio may purchase and sell put and call
options on equity and debt securities to hedge against the risk of fluctuations
in the prices of securities held by a Theme Portfolio or that the Advisor
intends to include in a Theme Portfolio's holdings. Each Theme Portfolio also
may purchase and sell put and call options on stock indexes to hedge against
overall fluctuations in the securities markets generally or in a specific market
sector.
Further, each Theme Portfolio may sell stock index futures contracts
and may purchase put options or write call options on such futures contracts to
protect against a general stock market decline or a decline in a specific market
sector that could adversely affect the Portfolio's holdings. Each Theme
Portfolio also may purchase stock index futures contracts and purchase call
options or write put options on such contracts to hedge against a general stock
market or market sector advance and thereby attempt to lessen the cost of future
securities acquisitions. Each Theme Portfolio may use interest rate futures
contracts and options thereon to hedge the debt portion of its portfolio against
changes in the general level of interest rates.
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use 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 Advisor's ability to predict movements of the overall securities
and currency markets, which requires different skills than predicting
changes in the prices of individual securities. While the Advisor is
experienced in the use of these instruments, there can be no assurance
that any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no
correlation, between price movements of an instrument and price
movements of the investments being hedged. For example, if the value
of an instrument used in a short hedge increased by less than the
decline in value of the hedged investment, the hedge would not be
fully successful. Such a lack of correlation might occur due to
factors unrelated to the value of the investments being hedged, such
as speculative or other pressures on the markets in which the hedging
instrument is traded. The effectiveness of hedges using hedging
instruments on indices will depend on the degree of correlation
between price movements in the index and price movements in the
investments being hedged.
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(3) Hedging strategies, if successful, can reduce risk of
loss by wholly or partially offsetting the negative effect of
unfavorable price movements in the investments being hedged. However,
hedging strategies can also reduce opportunity for gain by offsetting
the positive effect of favorable price movements in the hedged
investments. For example, if a Theme Portfolio entered into a short
hedge because the Advisor projected a decline in the price of a
security in the Theme Portfolio's portfolio, and the price of that
security increased instead, the gain from that increase might be
wholly or partially offset by a decline in the price of the hedging
instrument. Moreover, if the price of the hedging instrument declined
by more than the increase in the price of the security, the Theme
Portfolio could suffer a loss. In either such case, the Theme
Portfolio would have been in a better position had it not hedged at
all.
(4) As described below, the Theme Portfolio might be required
to maintain assets as "cover," maintain segregated accounts or make
margin payments when it takes positions in instruments involving
obligations to third parties (i.e., instruments other than purchased
options). If the Theme Portfolio were unable to close out its
positions in such instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the
position expired or matured. The requirements might impair the Theme
Portfolio's ability to sell a portfolio security or make an investment
at a time when it would otherwise be favorable to do so, or require
that the Theme Portfolio sell a portfolio security at a
disadvantageous time. The Theme Portfolio's ability to close out a
position in an instrument prior to expiration or maturity depends on
the existence of a liquid secondary market or, in the absence of such
a market, the ability and willingness of the other party to the
transaction ("contra party") to enter into a transaction closing out
the position. Therefore, there is no assurance that any position can
be closed out at a time and price that is favorable to the Theme
Portfolio.
WRITING CALL OPTIONS
Each Theme Portfolio may write (sell) call options on securities,
indices and currencies. Call options generally will be written on securities and
currencies that, in the opinion of the Advisor are not expected to make any
major price moves in the near future but that, over the long term, are deemed to
be attractive investments for the Theme Portfolios.
A call option gives the holder (buyer) the right to purchase a
security or currency at a specified price (the exercise price) at any time until
(American style) or on (European style) a certain date (the expiration date). So
long as the obligation of the writer of a call option continues, he or she may
be assigned an exercise notice, requiring him or her to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by purchasing an option
identical to that previously sold.
Portfolio securities or currencies on which call options may be
written will be purchased solely on the basis of investment considerations
consistent with each Theme Portfolio's investment objective. When writing a call
option, a Theme Portfolio, in return for the premium, gives up the opportunity
for profit from a price increase in the underlying security or currency above
the exercise price, and retains the risk of loss should the price of the
security or currency decline. Unlike one who owns securities or currencies not
subject to an option, a Theme Portfolio has no control over when it may be
required to sell the underlying securities or currencies, since most options may
be exercised at any time prior to the option's expiration. If a call option that
a Theme Portfolio has written expires, the Theme Portfolio will realize a gain
in the amount of the premium; however, such gain may be offset by a decline in
the market value of the underlying security or currency during the option
period. If the call option is exercised, the Theme Portfolio will realize a gain
or loss from the sale of the underlying security or currency, which will be
increased or offset by the premium received. Each Theme Portfolio does not
consider a security or currency covered by a call option to be "pledged" as that
term is used in that Theme Portfolio's policy that limits the pledging or
mortgaging of its assets.
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Writing call options can serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security or
currency appreciates to a price higher than the exercise price of the call
option, it can be expected that the option will be exercised and a Theme
Portfolio will be obligated to sell the security or currency at less than its
market value.
The premium that a Theme Portfolio receives for writing a call option
is deemed to constitute the market value of an option. The premium the Theme
Portfolio will receive from writing a call option will reflect, among other
things, the current market price of the underlying investment, the relationship
of the exercise price to such market price, the historical price volatility of
the underlying investment, and the length of the option period. In determining
whether a particular call option should be written, the Advisor will consider
the reasonableness of the anticipated premium and the likelihood that a liquid
secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on
an outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit a Theme Portfolio to
write another call option on the underlying security or currency with either a
different exercise price or expiration date, or both.
Each Theme Portfolio will pay transaction costs in connection with the
writing of options and in entering into closing purchase contracts. Transaction
costs relating to options activity are normally higher than those applicable to
purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the
current market values of the underlying securities, indices or currencies at the
time the options are written. From time to time, a Theme Portfolio may purchase
an underlying security or currency for delivery in accordance with the exercise
of an option, rather than delivering such security or currency from its
portfolio. In such cases, additional costs will be incurred.
A Theme Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more,
respectively, than the premium received from writing the option. Because
increases in the market price of a call option generally will reflect increases
in the market price of the underlying security or currency, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security or currency owned by a Theme
Portfolio.
WRITING PUT OPTIONS
Each Theme Portfolio may write put options on securities, indices and
currencies. A put option gives the purchaser of the option the right to sell,
and the writer (seller) the obligation to buy, the underlying security or
currency at the exercise price at any time until (American style) or on
(European style) the expiration date. The operation of put options in other
respects, including their related risks and rewards, is substantially identical
to that of call options.
A Theme Portfolio generally would write put options in circumstances
where the Advisor wishes to purchase the underlying security or currency for a
Theme Portfolio's holdings at a price lower than the current market price of the
security or currency. In such event, a Theme Portfolio would write a put option
at an exercise price that, reduced by the premium received on the option,
reflects the lower price it is willing to pay. Since the Theme Portfolio would
also receive interest on debt securities or currencies maintained to cover the
exercise price of the option, this technique could be used to enhance current
return during periods of market uncertainty. The risk in such a transaction
would be that the market price of the underlying security or currency would
decline below the exercise price less the premium received.
Writing put options can serve as a limited long hedge because
increases in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the
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security or currency depreciates to a price lower than the exercise price of the
put option, it can be expected that the put option will be exercised and a Theme
Portfolio will be obligated to purchase the security or currency at greater than
its market value.
PURCHASING PUT OPTIONS
Each Theme Portfolio may purchase put options on securities, indices
and currencies. As the holder of a put option, a Theme Portfolio would have the
right to sell the underlying security or currency at the exercise price at any
time until (American style) or on (European style) the expiration date. A Theme
Portfolio may enter into closing sale transactions with respect to such options,
exercise such option or permit such option to expire.
Each Theme Portfolio may purchase a put option on an underlying
security or currency ("protective put") owned by the Theme Portfolio in order to
protect against an anticipated decline in the value of the security or currency.
Such hedge protection is provided only during the life of the put option when
the Theme Portfolio, as the holder of the put option, is able to sell the
underlying security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's exchange value.
The premium paid for the put option and any transaction costs would reduce any
profit otherwise available for distribution when the security or currency is
eventually sold.
A Theme Portfolio may also purchase put options at a time when it does
not own the underlying security or currency. By purchasing put options on a
security or currency it does not own, that Theme Portfolio seeks to benefit from
a decline in the market price of the underlying security or currency. If the put
option is not sold when it has remaining value, and if the market price of the
underlying security or currency remains equal to or greater than the exercise
price during the life of the put option, the Theme Portfolio will lose its
entire investment in the put option. In order for the purchase of a put option
to be profitable, the market price of the underlying security or currency must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale transaction.
PURCHASING CALL OPTIONS
Each Theme Portfolio may purchase call options on securities, indices
and currencies. As the holder of a call option, the Theme Portfolio would have
the right to purchase the underlying security or currency at the exercise price
at any time until (American style) or on (European style) the expiration date. A
Theme Portfolio may enter into closing sale transactions with respect to such
options, exercise such options or permit such options to expire.
Call options may be purchased by a Theme Portfolio for the purpose of
acquiring the underlying security or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable a Theme Portfolio to
acquire the security or currency at the exercise price of the call option plus
the premium paid. At times, the net cost of acquiring the security or currency
in this manner may be less than the cost of acquiring the security or currency
directly. This technique may also be useful to a Theme Portfolio in purchasing a
large block of securities that would be more difficult to acquire by direct
market purchases. So long as it holds such a call option, rather than the
underlying security or currency itself, the Theme Portfolio is partially
protected from any unexpected decline in the market price of the underlying
security or currency and, in such event, could allow the call option to expire,
incurring a loss only to the extent of the premium paid for the option.
A Theme Portfolio may also purchase call options on underlying
securities or currencies it owns to avoid realizing losses that would result in
a reduction of its current return. For example, where a Theme Portfolio has
written a call option on an underlying security or currency having a current
market value below the price at which it purchased the security or currency, an
increase in the market price could result in the exercise of the call option
written by the Theme Portfolio and the realization of a loss on the underlying
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security or currency. Accordingly, the Theme Portfolio could purchase a call
option on the same underlying security or currency, which could be exercised to
fulfill the Theme Portfolio's delivery obligations under its written call (if it
is exercised). This strategy could allow the Theme Portfolio to avoid selling
the portfolio security or currency at a time when it has an unrealized loss;
however, the Theme Portfolio would have to pay a premium to purchase the call
option plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of
each Theme Portfolio's total assets at the time of each purchase.
A Theme Portfolio may attempt to accomplish objectives similar to
those involved in using Forward Contracts, by purchasing put or call options on
currencies. A put option gives the Theme Portfolio as purchaser the right (but
not the obligation) to sell a specified amount of currency at the exercise price
at any time until (American style) or on (European style) the expiration date of
the option. A call option gives the Theme Portfolio as purchaser the right (but
not the obligation) to purchase a specified amount of currency at the exercise
price at any time until (American style) or on (European style) the expiration
date of the option. A Theme Portfolio might purchase a currency put option, for
example, to protect itself against a decline in the dollar value of a currency
in which it holds or anticipates holding securities. If the currency's value
should decline against the dollar, the loss in currency value should be offset,
in whole or in part, by an increase in the value of the put. If the value of the
currency instead should rise against the dollar, any gain to a Theme Portfolio
would be reduced by the premium it had paid for the put option. A currency call
option might be purchased, for example, in anticipation of, or to protect
against, a rise in the value against the dollar of a currency in which a Theme
Portfolio anticipates purchasing securities.
Options may be either listed on an exchange or traded in
over-the-counter ("OTC") markets. Listed options are third-party contracts
(i.e., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation) and have standardized strike prices and
expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. A Theme Portfolio will not purchase an OTC option
unless it believes that daily valuations for such options are readily
obtainable. OTC options differ from exchange-traded options in that OTC options
are transacted with dealers directly and not through a clearing corporation
(which guarantees performance). Consequently, there is a risk of non-performance
by the dealer. Since no exchange is involved, OTC options are valued on the
basis of an average of the last bid prices obtained from dealers, unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. In the case of OTC options, there can be no assurance that a
liquid secondary market will exist for any particular option at any specific
time.
The staff of the SEC considers purchased OTC options to be illiquid
securities. A Theme Portfolio may also sell OTC options and, in connection
therewith, segregate assets or cover its obligations with respect to OTC options
written by the Theme Portfolio. The assets used as cover for OTC options written
by a Theme Portfolio will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Theme Portfolio may repurchase any OTC
option it writes at a maximum price to be calculated by a formula set forth in
the option agreement. The cover for an OTC option written subject to this
procedure would be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
A Theme Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. A Theme
Portfolio intends to purchase or write only those exchange-traded options for
which there appears to be a liquid secondary market. However, there can be no
assurance that such a market will exist at any particular time. Closing
transactions can be made for OTC options only by negotiating directly with the
contra party or by a transaction in the secondary market if any such market
exists. Although a Theme Portfolio will enter into OTC options only with contra
parties that are expected to be capable of entering into closing transactions
with the Theme Portfolio, there is no assurance that the Theme Portfolio will in
fact be able to close out an OTC option position at a favorable price prior to
expiration. In the event of insolvency of the contra party, the Theme Portfolio
might be unable to close out an OTC option position at any time prior to its
expiration.
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INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities
or futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. When a Theme Portfolio
writes a call on an index, it receives a premium and agrees that, prior to the
expiration date, the purchaser of the call, upon exercise of the call, will
receive from the Theme Portfolio an amount of cash if the closing level of the
index upon which the call is based is greater than the exercise price of the
call. The amount of cash is equal to the difference between the closing price of
the index and the exercise price of the call times a specified multiple (the
"multiplier"), which determines the total dollar value for each point of such
difference. When a Theme Portfolio buys a call on an index, it pays a premium
and has the same rights as to such call as are indicated above. When a Theme
Portfolio buys a put on an index, it pays a premium and has the right, prior to
the expiration date, to require the seller of the put, upon the Theme
Portfolio's exercise of the put, to deliver to the Theme Portfolio an amount of
cash if the closing level of the index upon which the put is based is less than
the exercise price of the put, which amount of cash is determined by the
multiplier, as described above for calls. When the Theme Portfolio writes a put
on an index, it receives a premium and the purchaser has the right, prior to the
expiration date, to require the Theme Portfolio to deliver to it an amount of
cash equal to the difference between the closing level of the index and the
exercise price times the multiplier, if the closing level is less than the
exercise price.
The risks of investment in index options may be greater than options
on securities. Because index options are settled in cash, when a Theme Portfolio
writes a call on an index it cannot provide in advance for its potential
settlement obligations by acquiring and holding the underlying securities. A
Theme Portfolio can offset some of the risk of writing a call index option
position by holding a diversified portfolio of securities similar to those on
which the underlying index is based. However, a Theme Portfolio cannot, as a
practical matter, acquire and hold a portfolio containing exactly the same
securities as underlie the index and, as a result, bears a risk that the value
of the securities held will vary from the value of the index.
Even if a Theme Portfolio could assemble a securities portfolio that
exactly reproduced the composition of the underlying index, it still would not
be fully covered from a risk standpoint because of the "timing risk" inherent in
writing index options. When an index option is exercised, the amount of cash
that the holder is entitled to receive is determined by the difference between
the exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, the Theme Portfolio, as the call
writer, will not know that it has been assigned until the next business day at
the earliest. The time lag between exercise and notice of assignment poses no
risk for the writer of a covered call on a specific underlying security, such as
common stock, because there the writer's obligation is to deliver the underlying
security, not to pay its value as of a fixed time in the past. So long as the
writer already owns the underlying security, it can satisfy its settlement
obligations by simply delivering it, and the risk that its value may have
declined since the exercise date is borne by the exercising holder. In contrast,
even if the writer of an index call holds securities that exactly match the
composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those securities against payment of the
exercise price. Instead, it will be required to pay cash in an amount based on
the closing index value on the exercise date; and by the time it learns that it
has been assigned, the index may have declined, with a corresponding decline in
the value of its securities portfolio. This "timing risk" is an inherent
limitation on the ability of index call writers to cover their risk exposure by
holding securities positions.
If a Theme Portfolio purchases an index option and exercises it before
the closing index value for that day is available, it runs the risk that the
level of the underlying index may subsequently change. If such a change causes
the exercised option to fall out-of-the-money, the Theme Portfolio will be
required to pay the difference between the closing index value and the exercise
price of the option (times the applicable multiplier) to the assigned writer.
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INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each Theme Portfolio may enter into interest rate or currency futures
contracts, and may enter into stock index futures contracts (collectively,
"Futures" or "Futures Contracts"), as a hedge against changes in prevailing
levels of interest rates, currency exchange rates or stock price levels in order
to establish more definitely the effective return on securities or currencies
held or intended to be acquired by the Theme Portfolio. A Theme Portfolio's
hedging may include sales of Futures as an offset against the effect of expected
increases in interest rates, and decreases in currency exchange rates and stock
prices, and purchases of Futures as an offset against the effect of expected
declines in interest rates, and increases in currency exchange rates or stock
prices.
Each Theme Portfolio only will enter into Futures Contracts that are
traded on futures exchanges and are standardized as to maturity date and
underlying financial instrument. Futures exchanges and trading thereon in the
United States are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission ("CFTC"). Futures are exchanged in London at the
London International Financial Futures Exchange.
Although techniques other than sales and purchases of Futures
Contracts could be used to reduce a Theme Portfolio's exposure to interest rate,
currency exchange rate and stock market fluctuations, that Theme Portfolio may
be able to hedge its exposure more effectively and at a lower cost through using
Futures Contracts.
A Futures Contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial
instrument (security or currency) for a specified price at a designated date,
time and place. A stock index Futures Contract provides for the delivery, at a
designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of
trading on the contract and the price at which the Futures Contract is
originally struck; no physical delivery of stocks comprising the index is made.
Brokerage fees are incurred when a Futures Contract is bought or sold, and
margin deposits must be maintained at all times the Futures Contract is
outstanding.
Although Futures Contracts typically require future delivery of and
payment for financial instruments or currencies, Futures Contracts usually are
closed out before the delivery date. Closing out an open Futures Contract sale
or purchase is effected by entering into an offsetting Futures Contract purchase
or sale, respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Theme Portfolio realizes a gain;
if it is more, the Theme Portfolio realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, the Theme
Portfolio realizes a gain; if it is less, the Theme Portfolio realizes a loss.
The transaction costs must also be included in these calculations. There can be
no assurance, however, that a Theme Portfolio will be able to enter into an
offsetting transaction with respect to a particular Futures Contract at a
particular time. If a Theme Portfolio is not able to enter into an offsetting
transaction, that Theme Portfolio will continue to be required to maintain the
margin deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual
obligations arising from the sale of one Futures Contract of September
Deutschemarks on an exchange may be fulfilled at any time before delivery under
the Futures Contract is required (i.e., on a specified date in September, the
"delivery month") by the purchase of another Futures Contract of September
Deutschemarks on the same exchange. In such instance, the difference between the
price at which the Futures Contract was sold and the price paid for the
offsetting purchase, after allowance for transaction costs, represents the
profit or loss to the Theme Portfolio.
Each Theme Portfolio's Futures transactions will be entered into for
hedging purposes only; that is, Futures Contracts will be sold to protect
against a decline in the price of securities or currencies that a Theme
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Portfolio owns, or Futures Contracts will be purchased to protect a Theme
Portfolio against an increase in the price of securities or currencies it has
committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that
must be deposited by a Theme Portfolio in order to initiate Futures trading and
maintain the Theme Portfolio's open positions in Futures Contracts. A margin
deposit made when the Futures Contract is entered into ("initial margin") is
intended to ensure the Theme Portfolio's performance under the Futures Contract.
The margin required for a particular Futures Contract is set by the exchange on
which the Futures Contract is traded and may be significantly modified from time
to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the
futures commission merchant through which the Theme Portfolio entered into the
Futures Contract will be made on a daily basis as the price of the underlying
security, currency or index fluctuates making the Futures Contract more or less
valuable, a process known as marking-to-market.
Risks of Using Futures Contracts. The prices of Futures Contracts are
volatile and are influenced by, among other things, actual and anticipated
changes in interest rates and currency exchange rates, and in stock market
movements, which in turn are affected by fiscal and monetary policies and
national and international political and economic events.
There is a risk of imperfect correlation between changes in prices of
Futures Contracts and prices of the securities or currencies in a Theme
Portfolio's portfolio being hedged. The degree of imperfection of correlation
depends upon circumstances such as variations in speculative market demand for
Futures and for securities or currencies, including technical influences in
Futures trading; and differences between the financial instruments being hedged
and the instruments underlying the standard Futures Contracts available for
trading. A decision of whether, when and how to hedge involves skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves
an extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted
in Futures Contract and options on Futures Contracts prices during a single
trading day. The daily limit establishes the maximum amount that the price of a
Futures Contract or option may vary either up or down from the previous day's
settlement price at the end of a trading session. Once the daily limit has been
reached in a particular type of Futures Contract or option, no trades may be
made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures Contract and option prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of positions and subjecting some traders
to substantial losses.
If a Theme Portfolio were unable to liquidate a Futures or option on
Futures position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Theme
Portfolio would continue to be subject to market risk with respect to the
position. In addition, except in the case of purchased options, the Theme
Portfolio would continue to be required to make daily variation margin payments
and might be required to maintain the position being hedged by the Future or
option or to maintain cash or securities in a segregated account.
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Certain characteristics of the Futures market might increase the risk
that movements in the prices of Futures Contracts or options on Futures might
not correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the Futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account,
which represents the amount by which the market price of the Futures Contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the Futures Contract. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the securities, currencies
or index upon which the Futures Contract is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and
the purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If a Theme Portfolio writes an option on a Futures Contract, it will
be required to deposit initial and variation margin pursuant to requirements
similar to those applicable to Futures Contracts. Premiums received from the
writing of an option on a Futures Contract are included in the initial margin
deposit.
A Theme Portfolio may seek to close out an option position by selling
an option covering the same Futures Contract and having the same exercise price
and expiration date. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market.
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LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Theme Portfolio enters into Futures Contracts,
options on Futures Contracts, and options on foreign currencies traded on a
CFTC-regulated exchange, in each case other than for bona fide hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the total assets of the Theme Portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Theme Portfolio has entered into. In general, a call option on a
Futures Contract is "in-the-money" if the value of the underlying Futures
Contract exceeds the strike, i.e., exercise, price of the call; a put option on
a Futures Contract is "in-the-money" if the value of the underlying Futures
Contract is exceeded by the strike price of the put. This guideline may be
modified by the Trust's Board of Trustees and the Portfolio's Board of Trustees,
as applicable, without a shareholder vote. This limitation does not limit the
percentage of a Theme Portfolio's assets at risk to 5%.
FORWARD CONTRACTS
A Forward Contract is an obligation, usually arranged with a
commercial bank or other currency dealer, to purchase or sell a currency against
another currency at a future date and price as agreed upon by the parties. A
Theme Portfolio either may accept or make delivery of the currency at the
maturity of the Forward Contract. A Theme Portfolio may also, if its contra
party agrees prior to maturity, enter into a closing transaction involving the
purchase or sale of an offsetting contract.
A Theme Portfolio engages in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Theme Portfolio might sell a particular foreign currency forward, for example,
when it holds bonds denominated in a foreign currency but anticipates, and seeks
to be protected against, a decline in the currency against the U.S. dollar.
Similarly, a Theme Portfolio might sell the U.S. dollar forward when it holds
bonds denominated in U.S. dollars but anticipates, and seeks to be protected
against, a decline in the U.S. dollar relative to other currencies. Further, a
Theme Portfolio might purchase a currency forward to "lock in" the price of
securities denominated in that currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A Forward Contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. Each Theme Portfolio will enter
into such Forward Contracts with major U.S. or foreign banks and securities or
currency dealers in accordance with guidelines approved by the Trust's or the
Portfolios' Board of Trustees, as applicable.
A Theme Portfolio may enter into Forward Contracts either with respect
to specific transactions or with respect to overall investments of that Theme
Portfolio. The precise matching of the Forward Contract amounts and the value of
specific securities generally will not be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the Forward Contract
is entered into and the date it matures. Accordingly, it may be necessary for
that Theme Portfolio to purchase additional foreign currency on the spot (i.e.,
cash) market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Theme Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency the Theme Portfolio is obligated to
deliver. The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be predicted accurately, causing a Theme Portfolio to sustain
losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Theme
Portfolio to sell a currency, that Theme Portfolio either may sell a security
and use the sale proceeds to make delivery of the currency or retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract
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pursuant to which the Theme Portfolio will obtain, on the same maturity date,
the same amount of the currency that it is obligated to deliver. Similarly, a
Theme Portfolio may close out a Forward Contract requiring it to purchase a
specified currency by entering into a second contract, if its contra party
agrees, entitling it to sell the same amount of the same currency on the
maturity date of the first contract. A Theme Portfolio would realize a gain or
loss as a result of entering into such an offsetting Forward Contract under
either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
the offsetting contract.
The cost to a Theme Portfolio of engaging in Forward Contracts varies
with factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are usually
entered into on a principal basis, no fees or commissions are involved. The use
of Forward Contracts does not eliminate fluctuations in the prices of the
underlying securities a Theme Portfolio owns or intends to acquire, but it does
establish a rate of exchange in advance. In addition, while Forward Contract
sales limit the risk of loss due to a decline in the value of the hedged
currencies, they also limit any potential gain that might result should the
value of the currencies increase.
FOREIGN CURRENCY STRATEGIES--SPECIAL CONSIDERATIONS
A Theme Portfolio may use options on foreign currencies, Futures on
foreign currencies, options on Futures on foreign currencies and Forward
Contracts to hedge against movements in the values of the foreign currencies in
which the Theme Portfolio's securities are denominated. Such currency hedges can
protect against price movements in a security that the Theme Portfolio owns or
intends to acquire that are attributable to changes in the value of the currency
in which it is denominated. Such hedges do not, however, protect against price
movements in the securities that are attributable to other causes.
A Theme Portfolio might seek to hedge against changes in the value of
a particular currency when no Futures Contract, Forward Contract or option
involving that currency is available or one of such contracts is more expensive
than certain other contracts. In such cases, the Theme Portfolio may hedge
against price movements in that currency by entering into a contract on another
currency or basket of currencies, the values of which the Advisor believes will
have a positive correlation to the value of the currency being hedged. The risk
that movements in the price of the contract will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward
Contracts and options on foreign currencies depends on the value of the
underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of Futures Contracts, Forward
Contracts or options, the Theme Portfolio could be disadvantaged by dealing in
the odd lot market (generally consisting of transactions of less than $1
million) for the underlying foreign currencies at prices that are less favorable
than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options
involving foreign currencies might be required to take place within the country
issuing the underlying currency. Thus, the Theme Portfolio might be required to
accept or make delivery of the underlying foreign currency in accordance with
any U.S. or foreign regulations regarding the maintenance of foreign banking
arrangements by U.S. residents and might be required to pay any fees, taxes and
charges associated with such delivery assessed in the issuing country.
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COVER
Transactions using Forward Contracts, Futures Contracts and options
(other than options purchased by a Theme Portfolio) expose the Theme Portfolio
to an obligation to another party. A Theme Portfolio will not enter into any
such transactions unless it owns either (1) an offsetting ("covered") position
in securities, currencies, or other options, Forward Contracts or 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 Theme Portfolio will comply with SEC guidelines
regarding cover for these instruments and, if the guidelines so require, set
aside cash or liquid securities.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Forward Contract, Futures Contract or
option is open, unless they are replaced with other appropriate assets. If a
large portion of a Theme Portfolio's assets is used for cover or otherwise set
aside, it could affect portfolio management or the Theme Portfolio's ability to
meet redemption requests or other current obligations.
RISK FACTORS
GENERAL
Equity securities, particularly common stocks, generally represent the
most junior position in an issuer's capital structure, and entitle holders to an
interest in the assets of the issuer, if any, remaining after all more senior
claims have been satisfied. The value of equity securities held by a Theme
Portfolio will fluctuate in response to general market and economic
developments, as well as developments affecting the particular issuers of such
securities. The value of debt securities held by a Theme Portfolio generally
will fluctuate with changes in the perceived creditworthiness of the issuers of
such securities and interest rates.
CONSUMER PRODUCTS AND SERVICES FUND
The performance of consumer products and services companies relates
closely to the actual and perceived performance of the overall economy, interest
rates, and consumer confidence. In addition, many consumer products and services
companies have unpredictable earnings, due in part to changes in consumer tastes
and intense competition. As a result of either of these factors, consumer
products and services companies may be subject to increased share price
volatility.
Changes in governmental policy and the need for regulatory approvals
may have a material effect on the products and services offered by companies in
the consumer products and services industries. Such governmental regulations may
also hamper the development of new business opportunities.
FINANCIAL SERVICES FUND
Companies in the financial services sector are subject to rapid
business changes, significant competition, value fluctuations due to the
concentration of loans in particular industries significantly affected by
economic conditions (such as real estate or energy), and volatile performance
dependent upon the availability and cost of capital and prevailing interest
rates. In addition, general economic conditions significantly affect these
companies. Credit and other losses resulting from the financial difficulty of
borrowers or other third parties potentially may have an adverse effect on
companies in these industries. Foreign banks, particularly those of Japan, have
reported financial difficulties attributed to increased competition, regulatory
changes, and general economic difficulties.
The financial services area in the United States currently is changing
relatively rapidly as existing distinctions between various financial service
segments become less clear. For instance, recent business
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combinations have included insurance, finance, and securities brokerage under
single ownership. Some primarily retail corporations have expanded into
securities and insurance fields. Investment banking, securities brokerage, and
investment advisory companies are subject to government regulation and risk due
to securities trading and underwriting activities.
Many of the investment considerations discussed in connection with
banks, savings institutions and loan associations, and finance companies also
apply to insurance companies. The performance of insurance company investments
will be subject to risk from several factors. The earnings of insurance
companies will be affected by interest rates, pricing (including severe pricing
competition from time to time), claims activity, marketing competition and
general economic conditions. Particular insurance lines also will be influenced
by specific matters. Property and casualty insurance profits may be affected by
certain weather catastrophes and other disasters. Life and health insurers'
profits may be affected by mortality and morbidity rates. Individual companies
may be exposed to material risks, including reserve inadequacy, problems in
investment portfolios (due to real estate or "junk" bond holdings, for example),
and the inability to collect from reinsurance carriers. Insurance companies are
subject to extensive governmental regulation, including the imposition of
maximum rate levels, which may not be adequate for some lines of business.
Proposed or potential anti-trust or tax law changes also may affect adversely
insurance companies' policy sales, tax obligations, and profitability.
HEALTH CARE FUND
Health care industries generally are subject to substantial
governmental regulation. Changes in governmental policy or regulation could have
a material effect on the demand for products and services offered by companies
in the health care industries and therefore could affect the performance of the
Fund. Regulatory approvals are generally required before new drugs and medical
devices or procedures may be introduced and before the acquisition of additional
facilities by health care providers. In addition, the products and services
offered by such companies may be subject to rapid obsolescence caused by
technological and scientific advances.
INFRASTRUCTURE FUND
The nature of regulation of infrastructure industries continues to
evolve in both the United States and foreign countries, and changes in
governmental policy and the need for regulatory approvals may have a material
effect on the products and services offered by companies in the infrastructure
industries. Electric, gas, water, and most telecommunications companies in the
United States, for example, are subject to both federal and state regulation
affecting permitted rates of return and the kinds of services that may be
offered. Government regulation may also hamper the development of new
technologies. Adverse regulatory developments could therefore potentially affect
the performance of Infrastructure Fund.
In addition, many infrastructure companies have historically been
subject to the risks attendant to increases in fuel and other operating costs,
high interest costs on borrowed funds, costs associated with compliance with
environmental, and other safety regulations and changes in the regulatory
climate. Changes in prevailing interest rates may also affect the Infrastructure
Fund's share values because prices of equity and debt securities of
infrastructure companies tend to increase when interest rates decline and
decrease when interest rates rise. Further, competition is intense for many
infrastructure companies. As a result, many of these companies may be adversely
affected in the future and such companies may be subject to increased share
price volatility. In addition, many companies have diversified into oil and gas
exploration and development, and therefore returns may be more sensitive to
energy prices.
Some infrastructure companies, such as water supply companies, operate
in highly fragmented market sectors due to local ownership. In addition, some of
these companies are mature and experience little or no growth. Either of these
factors could have a material effect on infrastructure companies and could
therefore affect the performance of Infrastructure Fund.
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RESOURCES FUND
Global Resources Portfolio invests in companies that engage in the
exploration, development, and distribution of coal, oil and gas in the United
States. These companies are subject to significant federal and state regulation,
which may affect rates of return on such investments and the kinds of services
that may be offered. In addition, many natural resource companies historically
have been subject to significant costs associated with compliance with
environmental and other safety regulations. Governmental regulation may also
hamper the development of new technologies.
Further, competition is intense for many natural resource companies.
As a result, many of these companies may be adversely affected in the future and
the value of the securities issued by such companies may be subject to increased
price volatility. Such companies may also be subject to irregular fluctuations
in earnings due to changes in the availability of money, the level of interest
rates, and other factors.
The value of securities of natural resource companies will fluctuate
in response to market conditions for the particular natural resources with which
the issuers are involved. The price of natural resources will fluctuate due to
changes in worldwide levels of inventory, and changes, perceived or actual, in
production and consumption. With respect to precious metals, such price
fluctuations may be substantial over short periods of time. In addition, the
value of natural resources may fluctuate directly with respect to various stages
of the inflationary cycle and perceived inflationary trends and are subject to
numerous factors, including national and international politics.
TELECOMMUNICATIONS AND TECHNOLOGY FUND
Telecommunications industries may be subject to greater governmental
regulation than many other industries and changes in governmental policy and the
need for regulatory approvals may have a material effect on the products and
services offered by companies in the telecommunications industries. Telephone
operating companies in the United States, for example, are subject to both
federal and state regulation affecting permitted rates of return and the kinds
of services that may be offered. In addition, certain types of companies in the
telecommunications industries are engaged in fierce competition for market share
that could result in increased share price volatility.
LOWER QUALITY DEBT SECURITIES
The Global Resources Portfolio, Global Consumer Products and Services
Portfolio, and Global Infrastructure Portfolio may invest up to 20%, and Health
Care Fund, Telecommunications and Technology Fund, and Global Financial Services
Portfolio may invest up to 5%, of their respective total assets in below
investment grade debt securities, that is, rated below BBB by Standard & Poor's,
a division of The McGraw-Hill Companies, Inc. ("S&P"), or Baa by Moody's
Investors Service, Inc. ("Moody's") or, if unrated, deemed to be of equivalent
quality in the judgment of the Advisor. Such investments involve a high degree
of risk. However, the Theme Portfolios will not invest in debt securities that
are in default as to payment of principal and interest.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by S&P and debt rated Ba, B,
Caa, Ca or C by Moody's is regarded, on balance, as predominately speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. While such lower quality debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions. Debt rated C
by Moody's or S&P is the lowest rated debt that is not in default as to
principal or interest, and such issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing. Lower
quality debt securities are also generally considered to be subject to greater
risk than securities with higher ratings with regard to a deterioration of
general economic conditions. These lower quality debt securities are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds."
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Ratings of debt securities represent the rating agency's opinion
regarding their quality and are not a guarantee of quality. Rating agencies
attempt to evaluate the safety of principal and interest payments and do not
evaluate the risks of fluctuations in market value. Also, rating agencies may
fail to make timely changes in credit ratings in response to subsequent events,
so that an issuer's current financial condition may be better or worse than a
rating indicates.
The market values of lower quality debt securities tend to reflect
individual developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have
call or buy-back features which would permit an issuer to call or repurchase
that security from a Theme Portfolio. If an issuer exercises these provisions in
a declining interest rate market, the Theme Portfolio may have to replace the
security with a lower yielding security, resulting in a decreased return for
investors. In addition, the Theme Portfolio may have difficulty disposing of
lower quality securities because they may have a thin trading market. There may
be no established retail secondary market for many of these securities, and the
Theme Portfolio anticipates that such securities could be sold only to a limited
number of dealers or institutional investors. The lack of a liquid secondary
market also may have an adverse impact on market prices of such instruments and
may make it more difficult for the Theme Portfolio to obtain accurate market
quotations for purposes of valuing its investments. The Theme Portfolios may
also acquire lower quality debt securities during an initial underwriting or
which are sold without registration under applicable securities laws. Such
securities involve special considerations and risks.
In addition to the foregoing, factors that could have an adverse
effect on the market value of lower quality debt securities in which the Theme
Portfolios may invest include: (i) potential adverse publicity; (ii) heightened
sensitivity to general economic or political conditions, and (iii) the likely
adverse impact of a major economic recession. The Theme Portfolios may also
incur additional expenses to the extent it is required to seek recovery upon a
default in the payment of principal or interest on portfolio holdings, and the
Theme Portfolios may have limited legal recourse in the event of a default.
INVESTING IN SMALLER COMPANIES
While a Theme Portfolio's holdings normally will include securities of
established suppliers of traditional products and services, a Theme Portfolio
may invest in smaller companies which can benefit from the development of new
products and services. These smaller companies may present greater opportunities
for capital appreciation, but may also involve greater risks than large,
established issuers. Such smaller companies may have limited product lines,
markets or financial resources, and their securities may trade less frequently
and in more limited volume than the securities of larger, more established
companies. As a result, the prices of the securities of such smaller companies
may fluctuate to a greater degree than the prices of the securities of other
issuers.
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ILLIQUID SECURITIES
Each Theme Portfolio may invest up to 15% of its net assets in
illiquid securities. Securities may be considered illiquid if a Theme Portfolio
cannot reasonably expect within seven days to sell the securities for
approximately the amount at which that Theme Portfolio values such securities.
See "Investment Limitations." The sale of illiquid securities, if they can be
sold at all, generally will require more time and result in higher brokerage
charges or dealer discounts and other selling expenses than will the sale of
liquid securities such as securities eligible for trading on U.S. securities
exchanges or in OTC markets. Moreover, restricted securities, which may be
illiquid for purposes of this limitation, often sell, if at all, at a price
lower than similar securities that are not subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions
contained in the securities laws of other countries. However, securities that
are freely marketable in the country where they are principally traded, but
would not be freely marketable in the United States, will not be considered
illiquid. Where registration is required, a Theme Portfolio may be obligated to
pay all or part of the registration expenses and a considerable period may
elapse between the time of the decision to sell and the time the Theme Portfolio
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the Theme
Portfolio might obtain a less favorable price than prevailed when it decided to
sell.
The Advisor believes that carefully selected investments in joint
ventures, cooperatives, partnerships and state enterprises which are illiquid
(collectively, "Special Situations") could enable the Theme Portfolios to
achieve capital appreciation substantially exceeding the appreciation the Theme
Portfolios would realize if they did not make such investments. However, in
order to attempt to limit investment risk, the Theme Portfolios will invest no
more than 5% of its total assets in Special Situations.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended ("1933 Act"), including
private placements, repurchase agreements, commercial paper, foreign securities
and corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
have developed as a result of Rule 144A, providing both readily ascertainable
values for restricted securities and the ability to liquidate an investment to
satisfy share redemption orders. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a Theme Portfolio, however, could affect adversely the marketability of such
portfolio securities and the Theme Portfolio might be unable to dispose of such
securities promptly or at favorable prices.
With respect to liquidity determinations generally, the Trust's or the
Portfolios' Board of Trustees, as applicable, has the ultimate responsibility
for determining whether specific securities, including restricted securities
pursuant to Rule 144A under the 1933 Act, are liquid or illiquid. Each Board has
delegated the function of making day-to-day determinations of liquidity to the
Advisor, in accordance with procedures approved by that Board. The Advisor takes
into account a number of factors in reaching liquidity decisions, including, but
not limited to, (i) the frequency of trading in the security; (ii) the number of
dealers that make quotes for the security; (iii) the number of dealers that have
undertaken to make a market in the security;
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(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 Advisor
monitors the liquidity of securities held by each Theme Portfolio and
periodically reports such determinations to the Trust's or the Portfolios' Board
of Trustees, as applicable. If the liquidity percentage restriction of a Theme
Portfolio is satisfied at the time of investment, a later increase in the
percentage of illiquid securities held by the Theme Portfolio resulting from a
change in market value or assets will not constitute a violation of that
restriction. If as a result of a change in market value or assets, the
percentage of illiquid securities held by the Theme Portfolio increases above
the applicable limit, the Advisor will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on the Theme Portfolio.
FOREIGN SECURITIES
Political, Social and Economic Risks. Individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, rate of savings and capital
reinvestment, resource self sufficiency and balance of payments positions.
Investing in securities of non-U.S. companies may entail additional risks due to
the potential political, social and economic instability of certain countries
and the risks of expropriation, nationalization, confiscation or the imposition
of restrictions on foreign investment convertibility of currencies into U.S.
dollars and on repatriation of capital invested. In the event of such
expropriation, nationalization, confiscatory taxation or other confiscation by
any country, a Theme Portfolio could lose its entire investment in any such
country. In addition, governmental regulation in certain foreign countries may
impose interest rate controls, credit controls, and price controls. These
factors could have a material effect on foreign companies and could therefore
affect the performance of the Funds.
Religious, Political and Ethnic Instability. Certain countries in
which a Theme Portfolio may invest may have groups that advocate radical
religious or revolutionary philosophies or support ethnic independence. Any
disturbance on the part of such individuals could carry the potential for
widespread destruction or confiscation of property owned by individuals and
entities foreign to such country and could cause the loss of a Theme Portfolio's
investment in those countries. Instability may also result from, among other
things: (i) authoritarian governments or military involvement in political and
economic decision-making, including changes in government through
extra-constitutional means; (ii) popular unrest associated with demands for
improved political, economic and social conditions; and (iii) hostile relations
with neighboring or other countries. Such political, social and economic
instability could disrupt the principal financial markets in which a Theme
Portfolio invests and adversely affect the value of a Theme Portfolio's assets.
Foreign Investment Restrictions. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as a Theme Portfolio. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the cost and expenses of a Theme Portfolio. For
example, certain countries require prior governmental approval before
investments by foreign persons may be made, or may limit the amount of
investment by foreign persons in a particular company or limit the investment by
foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals. Moreover, the national policies of certain countries may
restrict investment opportunities in issuers or industries deemed sensitive to
national interests. In addition, some countries require governmental approval
for the repatriation of investment income, capital or the proceeds of securities
sales by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
restrictions on foreign capital remittances abroad. A Theme Portfolio could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
Non-Uniform Corporate Disclosure Standards and Governmental
Regulation. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
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appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the foreign securities held by a Theme
Portfolio will not be registered with the SEC or regulators of any foreign
country, nor will the issuers thereof be subject to the SEC's reporting
requirements. Thus, there will be less available information concerning most
foreign issuers of securities held by a Theme Portfolio than is available
concerning U.S. issuers. In instances where the financial statements of an
issuer are not deemed to reflect accurately the financial situation of the
issuer, the Advisor will take appropriate steps to evaluate the proposed
investment, which may include on-site inspection of the issuer, interviews with
its management and consultations with accountants, bankers and other
specialists. There is substantially less publicly available information about
foreign companies than there are reports and ratings published about U.S.
companies and the U.S. government. In addition, where public information is
available, it may be less reliable than such information regarding U.S. issuers.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
restrictions on market manipulation, insider trading rules, shareholder proxy
requirements and timely disclosure of information.
Currency Fluctuations. Because each Theme Portfolio, under normal
circumstances, will invest a substantial portion of its total assets in the
securities of foreign issuers which are denominated in foreign currencies, the
strength or weakness of the U.S. dollar against such foreign currencies will
account for part of a Theme Portfolio's investment performance. A decline in the
value of any particular currency against the U.S. dollar will cause a decline in
the U.S. dollar value of that Theme Portfolio's holdings of securities and cash
denominated in such currency and, therefore, will cause an overall decline in
the appropriate Fund's net asset value and any net investment income and capital
gains derived from such securities to be distributed in U.S. dollars to
shareholders of that Fund. Moreover, if the value of the foreign currencies in
which a Theme Portfolio receives its income falls relative to the U.S. dollar
between receipt of the income and the making of Theme Portfolio distributions,
the Theme Portfolio may be required to liquidate securities in order to make
distributions if the Theme Portfolio has insufficient cash in U.S. dollars to
meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the relative
movement of interest rates and the pace of business activity in the other
countries and the United States, and other economic and financial conditions
affecting the world economy.
On January 1, 1999, certain members of the European Economic and
Monetary Union ("EMU"), namely Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain established a
common European currency known as the "euro" and each member's local currency
became a denomination of the euro. It is anticipated that each participating
country will replace its local currency with the euro on July 1, 2002. Any other
European country that is a member of the European Union and satisfies the
criteria for participation in the EMU may elect to participate in the EMU and
may supplement its existing currency with the euro. The anticipated replacement
of existing currencies with the euro on July 1, 2002 could cause market
disruptions before or after July 1, 2002 and could adversely affect the value of
securities held by a Fund.
Although each Theme Portfolio values its assets daily in terms of U.S.
dollars, the Portfolios do not intend to convert their holdings of foreign
currencies into U.S. dollars on a daily basis. Each Portfolio will do so, from
time to time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference ("spread") between the prices at which
they buy and sell various currencies. Thus, a dealer may offer to sell a foreign
currency to a Portfolio at one rate, while offering a lesser rate of exchange
should a Portfolio desire to sell that currency to the dealer.
Adverse Market Characteristics. Securities of many foreign issuers may
be less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and
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foreign securities transactions usually are subject to fixed commissions, which
generally are higher than negotiated commissions on U.S. transactions. In
addition, foreign securities transactions may be subject to difficulties
associated with the settlement of such transactions. Delays in settlement could
result in temporary periods when assets of a Theme Portfolio are uninvested and
no return is earned thereon. The inability of a Theme Portfolio to make intended
security purchases due to settlement problems could cause that Theme Portfolio
to miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to that Theme
Portfolio due to subsequent declines in value of the portfolio security or, if
that Theme Portfolio has entered into a contract to sell the security, could
result in possible liability to the purchaser. The Advisor will consider such
difficulties when determining the allocation of a Theme Portfolio's assets,
although the Advisor does not believe that such difficulties will have a
material adverse effect on a Theme Portfolio's portfolio trading activities.
Each Theme Portfolio may use foreign custodians, which may charge
higher custody fees than those attributable to domestic investing and may
involve risks in addition to those related to its use of U.S. custodians. Such
risks include uncertainties relating to determining and monitoring the foreign
custodian's financial strength, reputation and standing; maintaining appropriate
safeguards concerning that Theme Portfolio's investments; and possible
difficulties in obtaining and enforcing judgments against such custodians.
Withholding Taxes. Each Theme Portfolio's net investment income from
foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing that income or delaying the receipt of income when
those taxes may be recaptured. See "Dividends, Distributions and Tax Matters."
Concentration. To the extent a Theme Portfolio invests a significant
portion of its assets in securities of issuers located in a particular country
or region of the world, such Portfolio may be subject to greater risks and may
experience greater volatility than a fund that is more broadly diversified
geographically.
Special Considerations Affecting Western European Countries. The
countries that are members of the European Economic Community ("Common Market")
(Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom)
eliminated certain import tariffs and quotas and other trade barriers with
respect to one another over the past several years. The Advisor believes that
this deregulation should improve the prospects for economic growth in many
Western European countries. Among other things, the deregulation could enable
companies domiciled in one country to avail themselves of lower labor costs
existing in other countries. In addition, this deregulation could benefit
companies domiciled in one country by opening additional markets for their goods
and services in other countries. Since, however, it is not clear what the exact
form or effect of these Common Market reforms will be on business in Western
Europe, it is impossible to predict the long-term impact of the implementation
of these programs on the securities owned by a Theme Portfolio.
Special Considerations Affecting Russia and Eastern European
Countries. Investing in Russia and Eastern European countries involves a high
degree of risk and special considerations not typically associated with
investing in the United States securities markets, and should be considered
highly speculative. Such risks include: (1) delays in settling portfolio
transactions and risk of loss arising out of the system of share registration
and custody; (2) the risk that it may be impossible or more difficult than in
other countries to obtain and/or enforce a judgement; (3) pervasiveness of
corruption and crime in the economic system; (4) currency exchange rate
volatility and the lack of available currency hedging instruments; (5) higher
rates of inflation (including the risk of social unrest associated with periods
of hyper-inflation) and high unemployment; (6) controls on foreign investment
and local practices disfavoring foreign investors and limitations on
repatriation of invested capital, profits and dividends, and on a fund's ability
to exchange local currencies for U.S. dollars; (7) political instability and
social unrest and violence; (8) the risk that the governments of Russia and
Eastern European countries may decide not to continue to support the economic
reform programs implemented recently and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed when such countries had a communist form of government; (9)
the financial condition of companies in these countries, including
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large amounts of inter-company debt which may create a payments crisis on a
national scale; (10) dependency on exports and the corresponding importance of
international trade; (11) the risk that the tax system in these countries will
not be reformed to prevent inconsistent, retroactive and/or exorbitant taxation;
and (12) the underdeveloped nature of the securities markets.
Special Considerations Affecting Japan. Japan's economic growth has
declined significantly since 1990. The general government position has
deteriorated as a result of weakening economic growth and stimulative measures
taken to support economic activity and to restore financial stability. Although
the decline in interest rates and fiscal stimulation packages have helped to
contain recessionary forces, uncertainties remain. Japan is also heavily
dependent upon international trade, so its economy is especially sensitive to
trade barriers and disputes. Japan has had difficult relations with its trading
partners, particularly the United States, where the trade imbalance is the
greatest. It is possible that trade sanctions and other protectionist measures
could impact Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high
price-earnings ratios. Differences in accounting methods make it difficult to
compare the earnings of Japanese companies with those of companies in other
countries, especially in the U.S. In general, however, reported net income in
Japan is understated relative to U.S. accounting standards and this is one
reason why price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
The Japanese securities markets are less regulated than those in the
United States. Evidence has emerged from time to time of distortion of market
prices to serve political or other purposes. Shareholders' rights are not always
equally enforced. In addition, Japan's banking industry is undergoing problems
related to bad loans and declining values in real estate.
Special Considerations Affecting Pacific Region Countries. Certain of
the risks associated with international investments are heightened for
investments in Pacific region countries. For example, some of the currencies of
Pacific region countries have experienced steady devaluations relative to the
U.S. dollar, and major adjustments have been made periodically in certain of
such currencies. Certain countries, such as India, face serious exchange
constraints. Jurisdictional disputes also exist between South Korea and North
Korea. In addition, the Theme Portfolios may invest in Hong Kong, which reverted
to Chinese Administration on July 1, 1997. Investments in Hong Kong may be
subject to expropriation, national, nationalization or confiscation, in which
case a Theme Portfolio could lose its entire investment in Hong Kong. In
addition, the reversion of Hong Kong also presents a risk that the Hong Kong
dollar will be devalued and a risk of possible loss of investor confidence in
Hong Kong's currency, stock market and assets.
Special Considerations Affecting Latin American Countries. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their
economies to equity investments by foreigners. Further due to the absence of
securities markets and publicly owned corporations and due to restrictions on
direct investment by foreign entities, investments may only be made in certain
Latin American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are
maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to
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sudden and large adjustments in the currency which, in turn, can have a
disruptive and negative effect on foreign investors. For example, in late 1994,
the value of the Mexican peso lost more than one-third of its value relative to
the U.S. dollar.
Special Considerations Affecting Emerging Markets. Investing in the
securities of companies in emerging markets may entail special risks relating to
potential political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, a Theme Portfolio could lose its entire
investment in any such country.
Emerging securities markets are substantially smaller, less developed,
less liquid and more volatile than the major securities markets. The limited
size of emerging securities markets and limited trading value in issuers
compared to the volume of trading in U.S. securities could cause prices to be
erratic for reasons apart from factors that affect the quality of the
securities. For example, limited market size may cause prices to be unduly
influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of portfolio securities, especially in these
markets. In addition, securities traded in certain emerging markets may be
subject to risks due to the inexperience of financial intermediaries, a lack of
modern technology, the lack of a sufficient capital base to expand business
operations, and the possibility of permanent or temporary termination of
trading.
Settlement mechanisms in emerging securities markets may be less
efficient and reliable than in more developed markets. In such emerging
securities there may be share registration and delivery delays or failures.
Many emerging market countries have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates and corresponding currency devaluations
have had and may continue to have negative effects on the economies and
securities markets of certain emerging market countries.
INVESTMENT LIMITATIONS
FEEDER FUNDS
The Financial Services Fund, Infrastructure Fund, Resources Fund and
Consumer Products and Services Fund each has the following fundamental
investment policy to enable it to invest in the Global Financial Services
Portfolio, Global Infrastructure Portfolio, Global Resources Portfolio and
Global Consumer Products and Services Portfolio, respectively:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
All other fundamental investment policies, and the non-fundamental
investment policies, of each Feeder Fund and its corresponding Portfolio are
identical. Therefore, although the following discusses the investment policies
of each Portfolio and its Board of Trustees, it applies equally to each Feeder
Fund and its Board of Trustees.
Each Portfolio has adopted the following investment limitations as
fundamental policies that (unless otherwise noted) may not be changed without
approval by the affirmative vote of a majority of the outstanding shares of the
Portfolio. Whenever a Feeder Fund is requested to vote on a change in the
investment limitations of its corresponding Portfolio, the Fund will hold a
meeting of its shareholders and will cast its votes as instructed by its
shareholders.
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No Portfolio may:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other
instruments supported by interests in real estate are not subject to
this limitation, and except that the Portfolio may exercise rights
under agreements relating to such securities, including the right to
enforce security interests and to hold real estate acquired by reason
of such enforcement until that real estate can be liquidated in an
orderly manner;
(2) Purchase or sell physical commodities, but the Portfolio
may purchase, sell or enter into financial options and futures,
forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments;
(3) Engage in the business of underwriting securities of
other issuers, except to the extent that the Portfolio might be
considered an underwriter under the federal securities laws in
connection with its disposition of portfolio securities;
(4) Make loans, except through loans of portfolio securities
or through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt
securities or instruments, or participations or other interests
therein and investments in government obligations, commercial paper,
certificates of deposit, bankers' acceptances or similar instruments
will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as
permitted under the 1940 Act and then not in excess of 33 1/3% of the
Portfolio's total assets (including the amount borrowed but reduced by
any liabilities not constituting borrowings) at the time of the
borrowing, except that the Portfolio may borrow up to an additional 5%
of its total assets (not including the amount borrowed) for temporary
or emergency purposes; or
(6) Purchase securities of any one issuer if, as a result,
more than 5% of the Portfolio's total assets would be invested in
securities of that issuer or the Portfolio would own or hold more than
10% of the outstanding voting securities of that issuer, except that
up to 25% of the Portfolio's total assets may be invested without
regard to this limitation, and except that this limitation does not
apply to securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities or to securities issued by other
investment companies.
The following investment policies of each Portfolio are not
fundamental policies and may be changed by vote of the Portfolios' Board of
Trustees without shareholder approval. No Portfolio may:
(1) Invest in securities of an issuer if the investment would
cause the Portfolio to own more than 10% of any class of securities of
any one issuer, except that the Portfolio may purchase securities of
Affiliated Money Market Funds to the extent permitted by exemptive
order;
(2) Invest in companies for the purpose of exercising
control or management;
(3) Invest more than 15% of its net assets in illiquid
securities, including securities that are illiquid by virtue of the
absence of a readily available market;
(4) Enter into a futures contract, an option on a futures
contract, or an option on foreign currency traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as
defined by the CFTC), if the aggregate initial margin and premiums
required to establish all of those positions (excluding the amount by
which options are "in-the-money") exceeds 5% of the
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liquidation value of the Portfolio's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the
Portfolio has entered into;
(5) Borrow money except for temporary or emergency purposes
(other than to meet redemptions). While borrowings exceed 5% of the
Portfolio's total assets, the Portfolio will not make any additional
investments;
(6) Invest more than 10% of its total assets in shares of
other investment companies and may not invest more than 5% of its
total assets in any one investment company or acquire more than 3% of
the outstanding voting securities of any one investment company,
except that the Portfolio may purchase securities of Affiliated Money
Market Funds to the extent permitted by exemptive order;
(7) Purchase securities on margin, provided that each
Portfolio may obtain short-term credits as may be necessary for the
clearance of purchases and sales of securities, and further provided
that the Portfolio may make margin deposits in connection with its use
of financial options and futures, forward and spot currency contracts,
swap transactions and other financial contracts or derivative
instruments; or
(8) Mortgage, pledge, or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral
arrangements in connection with permissible activities.
Investors should refer to the Prospectus for further information with
respect to the investment objective of each Feeder Fund, which may not be
changed without the approval of the Fund's shareholders, and its corresponding
Portfolio's investment objective, which may be changed without the approval of
the Portfolio's shareholders, and other investment policies, techniques and
limitations, which may or may not be changed without shareholder approval.
HEALTH CARE FUND
The Health Care Fund has adopted the following investment limitations
as fundamental policies, which (unless otherwise noted) may not be changed
without approval by the affirmative vote of the lesser of (i) 67% of its 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.
The Health Care Fund may not:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other
instruments supported by interests in real estate are not subject to
this limitation, and except that the Health Care Fund may exercise
rights under agreements relating to such securities, including the
right to enforce security interests and to hold real estate acquired
by reason of such enforcement until that real estate can be liquidated
in an orderly manner;
(2) Engage in the business of underwriting securities of
other issuers, except to the extent that the Health Care Fund might be
considered an underwriter under the federal securities laws in
connection with its disposition of portfolio securities;
(3) Make loans, except through loans of portfolio securities
or through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt
securities or instruments, or participations or other interests
therein and investments in government obligations, commercial paper,
certificates of deposit, bankers' acceptances or similar instruments
will not be considered the making of a loan;
36
<PAGE> 520
(4) Purchase or sell physical commodities, but the Health
Care Fund may purchase, sell or enter into financial options and
futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments;
(5) Issue senior securities or borrow money, except as
permitted under the 1940 Act and then not in excess of 33 1/3% of the
Health Care Fund's total assets (including the amount borrowed but
reduced by any liabilities not constituting borrowings) at the time of
the borrowing, except that the Health Care Fund may borrow up to an
additional 5% of its total assets (not including the amount borrowed)
for temporary or emergency purposes; or
(6) Purchase securities of any one issuer if, as a result,
more than 5% of the Health Care Fund's total assets would be invested
in securities of that issuer or the Health Care Fund would own or hold
more than 10% of the outstanding voting securities of that issuer,
except that up to 25% of the Health Care Fund's total assets may be
invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities or to securities
issued by other investment companies.
Notwithstanding any other investment policy of the Health Care Fund,
the Health Care Fund may invest all of its investable assets (cash, securities
and receivables related to securities) in an open-end management investment
company having substantially the same investment objective, policies and
limitations as the Fund.
The following investment policies of the Health Care Fund are not
fundamental policies and may be changed by vote of the Trust's Board of Trustees
without shareholder approval. The Health Care Fund will not:
(1) Purchase securities for which there is no readily
available market, or enter into repurchase agreements or purchase time
deposits maturing in more than seven days, or purchase OTC options or
hold assets set aside to cover OTC options written by the Health Care
Fund, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 15% of the Health Care
Fund's net assets;
(2) Purchase securities on margin, provided that the Health
Care Fund may obtain short-term credits as may be necessary for the
clearance of purchases and sales of securities, and further provided
that the Health Care Fund may make margin deposits in connection with
its use of financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or
derivative instruments; or
(3) Mortgage, pledge, or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral
arrangements in connection with permissible activities; or
(4) Borrow money except for temporary or emergency purposes
(other than to meet redemptions). While borrowings exceed 5% of the
Health Care Fund's total assets, it will not make any additional
investments.
Investors should refer to the Health Care Fund's Prospectus for
further information with respect to the Health Care Fund's investment objective,
which may not be changed without the approval of its shareholders, and other
investment policies, techniques and limitations, which may be changed without
shareholder approval.
37
<PAGE> 521
TELECOMMUNICATIONS AND TECHNOLOGY FUND
The Telecommunications and Technology Fund has adopted the following
investment limitations as fundamental policies, which (unless otherwise noted)
may not be changed without approval by the affirmative vote of the lesser of (i)
67% of its 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.
The Telecommunications and Technology Fund may not:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other
instruments supported by interests in real estate are not subject to
this limitation, and except that the Telecommunications and Technology
Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real
estate acquired by reason of such enforcement until that real estate
can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the
Telecommunications and Technology Fund may purchase, sell or enter
into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or
derivative instruments;
(3) Engage in the business of underwriting securities of
other issuers, except to the extent that the Telecommunications and
Technology Fund might be considered an underwriter under the federal
securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities
or through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt
securities or instruments, or participations or other interests
therein and investments in government obligations, commercial paper,
certificates of deposit, bankers' acceptances or similar instruments
will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as
permitted under the 1940 Act and then not in excess of 33 1/3% of the
Telecommunications and Technology Fund's total assets (including the
amount borrowed but reduced by any liabilities not constituting
borrowings) at the time of the borrowing, except that the
Telecommunications and Technology Fund may borrow up to an additional
5% of its total assets (not including the amount borrowed) for
temporary or emergency purposes; or
(6) Purchase securities of any one issuer if, as a result,
more than 5% of the Telecommunications and Technology Fund's total
assets would be invested in securities of that issuer or the
Telecommunications and Technology Fund would own or hold more than 10%
of the outstanding voting securities of that issuer, except that up to
25% of the Telecommunications and Technology Fund's total assets may
be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities or to securities
issued by other investment companies.
Notwithstanding any other investment policy of the Telecommunications
and Technology Fund, the Telecommunications and Technology Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
The following investment policies of the Telecommunications and
Technology Fund are not fundamental policies and may be changed by vote of the
Trust's Board of Trustees without shareholder approval. The Telecommunications
and Technology Fund may not:
38
<PAGE> 522
(1) Invest in securities of an issuer if the investment would
cause the Telecommunications and Technology Fund to own more than 10%
of any class of securities of any one issuer, except that the
Telecommunications and Technology Fund may purchase securities of
Affiliated Money Market Funds to the extent permitted by exemptive
order;
(2) Invest in companies for the purpose of exercising
control or management;
(3) Invest more than 15% of its net assets in illiquid
securities, including securities that are illiquid by virtue of the
absence of a readily available market;
(4) Enter into a futures contract, an option on a futures
contract, or an option on foreign currency traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as
defined by the CFTC), if the aggregate initial margin and premiums
required to establish all of those positions (excluding the amount by
which options are "in-the-money") exceeds 5% of the liquidation value
of the Fund's portfolio, after taking into account unrealized profits
and unrealized losses on any contracts the Fund has entered into;
(5) Borrow money except for temporary or emergency purposes
(other than to meet redemptions). While borrowings exceed 5% of the
Telecommunications and Technology Fund's total assets, it will not
make any additional investments;
(6) Purchase securities on margin, provided that the
Telecommunications and Technology Fund may obtain short-term credits
as may be necessary for the clearance of purchases and sales of
securities, and further provided that the Telecommunications and
Technology Fund may make margin deposits in connection with its use of
financial options and futures, forward and spot currency contracts,
swap transactions and other financial contracts or derivative
instruments; or
(7) Mortgage, pledge, or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral
arrangements in connection with permissible activities.
Investors should refer to the Telecommunications and Technology Fund's
Prospectus for further information with respect to the Telecommunications and
Technology Fund's investment objective, which may not be changed without the
approval of its shareholders, and other investment policies, techniques and
limitations, which may be changed without shareholder approval.
If a percentage restriction on investment or utilization of assets in
an investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Fund's or Portfolio's investment policies or
restrictions. A Fund or Portfolio may exchange securities, exercise conversion
or subscription rights, warrants or other rights to purchase common stock or
other equity securities and may hold, except to the extent limited by the 1940
Act, any such securities so acquired without regard to the Fund's or Portfolio's
investment policies and restrictions. The original cost of the securities so
acquired will be included in any subsequent determination of a Fund's or
Portfolio's compliance with the investment percentage limitations referred to
above and in the Prospectus.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
AIM makes decisions to buy and sell securities for each Fund, selects
broker-dealers, effects the Funds' investment portfolio transactions, allocates
brokerage fees in such transactions, and where applicable, negotiates
commissions and spreads on transactions. AIM's primary consideration in
effecting
39
<PAGE> 523
a security transaction is to obtain the most favorable execution of the order,
which includes the best price on the security and a low commission rate. While
AIM seeks reasonably competitive commission rates, the Funds may not pay the
lowest commission or spread available. See "Section 28(e) Standards" below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. In such transactions, a Fund deals directly with
dealers who make markets in the securities involved, except when better prices
are available elsewhere. Portfolio transactions placed through dealers who are
primary market makers are effected at net prices without commissions, but which
include compensation in the form of a mark up or mark down.
Traditionally, commission rates have not been negotiated on stock
markets outside the United States. Although in recent years many overseas stock
markets have adopted a system of negotiated rates, a number of markets maintain
an established schedule of minimum commission rates.
AIM may determine target levels of commission business with various
brokers on behalf of its clients (including the Funds) over a certain time
period. The target levels will be based upon the following factors, among
others: (1) the execution services provided by the broker; (2) the research
services provided by the broker; and (3) the broker's interest in mutual funds
in general and in the Funds and other mutual funds advised by AIM or A I M
Capital Management, Inc. ("AIM Capital") (collectively, the "AIM Funds") in
particular, including sales of the Funds and of the other AIM Funds. In
connection with (3) above, the Funds' trades may be executed directly by dealers
that sell shares of the AIM Funds or by other broker-dealers with which such
dealers have clearing arrangements. AIM will not use a specific formula in
connection with any of these considerations to determine the target levels.
AIM will seek, whenever possible, to recapture for the benefit of a
Fund any commissions, fees, brokerage or similar payments paid by the Fund on
portfolio transactions. Normally, the only fees which AIM can recapture are the
soliciting dealer fees on the tender of a Fund's portfolio securities in a
tender or exchange offer.
The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of a Fund, provided the conditions of an exemptive order received by
the Funds from the SEC are met. In addition, a Fund may purchase or sell a
security from or to another AIM Fund provided the Funds follow procedures
adopted by the Board of Directors/Trustees of the various AIM Funds, including
the Company. These inter-fund transactions do not generate brokerage commissions
but may result in custodial fees or taxes or other related expenses.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage several other investment accounts. Some
of these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by one of
the Funds and by another Fund or one or more of these investment accounts.
However, the position of each account in the same securities and the length of
time that each account may hold its investment in the same securities may vary.
The timing and amount of purchase by each account will also be determined by its
cash position. If the purchase or sale of securities is consistent with the
investment policies of the Fund(s) and one or more of these accounts, and is
considered at or about the same time, AIM will fairly allocate transactions in
such securities among the Fund(s) and these accounts. AIM may combine such
transactions, in accordance with applicable laws and regulations, to obtain the
most favorable execution. Simultaneous transactions could, however, adversely
affect a Fund's ability to obtain or dispose of the full amount of a security
which it seeks to purchase or sell.
Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM could have an adverse effect on the
price or amount of securities available to a Fund. In making such allocations,
AIM considers the investment objectives and policies of its advisory clients,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash
40
<PAGE> 524
for investment, the size of investment commitments generally held, and the
judgments of the persons responsible for recommending the investment.
SECTION 28(e) STANDARDS
Section 28(e) of the Securities Exchange Act of 1934 provides that AIM,
under certain circumstances, lawfully may cause an account to pay a higher
commission than the lowest available. Under Section 28(e), AIM must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided ... viewed in terms of
either that particular transaction or [AIM's] overall responsibilities with
respect to the accounts as to which it exercises investment discretion." The
services provided by the broker also must lawfully and appropriately assist AIM
in the performance of its investment decision-making responsibilities.
Accordingly, in recognition of research services provided to it, a Fund may pay
a broker higher commissions than those available from another broker.
Research services received from broker-dealers supplement AIM's own
research (and the research of its affiliates), and may include the following
types of information: statistical and background information on the U.S. and
foreign economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
accounts; information concerning prices of securities; and information supplied
by specialized services to AIM and to the Company's directors with respect to
the performance, investment activities, and fees and expenses of other mutual
funds. Broker-dealers may communicate such information electronically, orally,
in written form or on computer software. Research services may also include the
providing of custody services, as well as the providing of equipment used to
communicate research information, the providing of specialized consultations
with AIM personnel with respect to computerized systems and data furnished to
AIM as a component of other research services, the arranging of meetings with
management of companies, and the providing of access to consultants who supply
research information.
The outside research assistance is useful to AIM since the
broker-dealers used by AIM tend to follow a broader universe of securities and
other matters than AIM's staff can follow. In addition, the research provides
AIM with a diverse perspective on financial markets. Research services provided
to AIM by broker-dealers are available for the benefit of all accounts managed
or advised by AIM or by its affiliates. Some broker-dealers may indicate that
the provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by AIM's clients,
including the Funds. However, the Funds are not under any obligation to deal
with any broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the
broker-dealer providing them. In other cases, the research services may be
obtainable from alternative sources in return for cash payments. AIM believes
that the research services are beneficial in supplementing AIM's research and
analysis and that they improve the quality of AIM's investment advice. The
advisory fee paid by the Funds is not reduced because AIM receives such
services. However, to the extent that AIM would have purchased research services
had they not been provided by broker-dealers, the expenses to AIM could be
considered to have been reduced accordingly.
BROKERAGE COMMISSIONS PAID
For the fiscal years ended October 31, 1999, 1998 and 1997, the Global
Consumer Products and Services Portfolio paid aggregate brokerage commissions of
$719,925, $1,004,439 and $1,454,348, respectively.
41
<PAGE> 525
For the fiscal years ended October 31, 1999, 1998 and 1997, the Global
Financial Services Portfolio paid aggregate brokerage commissions of $302,742,
$404,804 and $250,893, respectively.
For the fiscal years ended October 31, 1999, 1998 and 1997, the Health
Care Fund paid aggregate brokerage commissions of $1,680,496, $1,647,939 and
$1,150,118, respectively.
For the fiscal years ended October 31, 1999, 1998 and 1997, the Global
Infrastructure Portfolio paid aggregate brokerage commissions of $110,072,
$317,191 and $131,543, respectively.
For the fiscal years ended October 31, 1999, 1998 and 1997, the Global
Resources Portfolio paid aggregate brokerage commissions of $221,586, $798,398
and $1,281,212, respectively
For the fiscal years ended October 31, 1999, 1998 and 1997, the
Telecommunications and Technology Fund paid aggregate brokerage commissions of
$3,353,749, $2,740,833 and $2,254,069, respectively.
For the fiscal years ended October 31, 1998 and 1997, the Health Care
Fund paid to LGT Bank in Liechtenstein AG, which was an "affiliated" broker,
aggregate brokerage commissions of $23,081 and $32,898, respectively, for
transactions involving purchases and sales of portfolio securities which
represented 2.01% and 2.03%, respectively of the total brokerage commissions
paid by the Health Care Fund and 1.61% and 1.71%, respectively, of the aggregate
dollar amount of transactions involving payment of commissions by the Health
Care Fund.
For fiscal year ended October 31, 1998 and 1997, the Telecommunications
and Technology Fund paid to LGT Bank in Liechtenstein, AG, which was an
"affiliated" broker, aggregate brokerage commissions of $22,584 for transactions
involving purchases and sales of portfolio securities which represented 1.00% of
the total brokerage commissions paid by the Fund and 0.67% of the aggregate
dollar amount of transactions involving payment of commissions by the Fund.
ALLOCATION OF INITIAL PUBLIC OFFERING ("IPO") SECURITIES TRANSACTIONS
From time to time, certain of the mutual funds managed by AIM or A I M
Capital Management, Inc. (collectively, the "AIM Funds") or accounts managed by
AIM or A I M Capital Management, Inc., may become interested in participating
in security distributions that are available in an IPO, and occasions may arise
when purchases of such securities by one AIM Fund or account may also be
considered for purchase by one or more other AIM Funds or accounts. In such
cases, it shall be AIM's practice to specifically combine or otherwise bunch
indications of interest for IPO securities for all AIM Funds and accounts
participating in purchase transactions for that security, and to allocate such
transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that
seeks to participate in a particular IPO by reviewing a number of factors,
including suitability of the investment with the AIM Fund's or account's
investment objective, policies and strategies, the liquidity of the AIM Fund or
account if such investment is purchased, and whether the portfolio manager
intends to hold the security as a long-term investment. The allocation of
limited supply securities issued in IPOs will be made to eligible AIM Funds and
accounts in a manner designed to be fair and equitable for the eligible AIM
Funds and accounts, and so that there is equal allocation of IPOs over the
longer term. Where multiple funds or accounts are eligible, rotational
participation may occur, based on the extent to which an AIM Fund or account has
participated in previous IPOs as well as the size of the AIM Fund or account.
Each eligible AIM Fund or account with an asset level of less than $500 million,
will be placed in one of three tiers, depending upon its asset level. The AIM
Funds and accounts in the tier containing funds and accounts with the smallest
asset levels will participate first, each receiving a 40 basis point allocation
(rounded to the nearest share round lot that approximates 40 basis points) (the
"Allocation"), based on that AIM Fund's or account's net assets. This process
continues until all of the AIM Funds and accounts in the three tiers receive
their Allocations, or until the shares are all allocated. Should
42
<PAGE> 526
securities remain after this process, eligible AIM Funds and accounts will
receive their Allocations on a straight pro rata basis. For the tier of AIM
Funds and accounts not receiving a full Allocation, the Allocation may be made
only to certain AIM Funds or accounts so that each may receive close to or
exactly 40 basis points.
When any AIM Fund and/or account with substantially identical
investment objectives and policies participates in syndicates, they will do so
in amounts that are substantially proportionate to each other. In these cases,
the net assets of the largest AIM Fund will be used to determine in which tier,
as described in the paragraph above, such group of AIM Funds or accounts will be
placed. If no AIM Fund is participating, then the net assets of the largest
account will be used to determine tier placement. The price per share of
securities purchased in such syndicate transactions will be the same for each
AIM Fund and account.
PORTFOLIO TRADING AND TURNOVER
Although each Theme Portfolio does not intend generally to trade for
short-term profits, the securities held by that Theme Portfolio will be sold
whenever management believes it is appropriate to do so, without regard to the
length of time a particular security may have been held. Portfolio turnover rate
is calculated by dividing the lesser of sales or purchases of portfolio
securities by each Theme Portfolio's average month-end portfolio value,
excluding short-term investments. The portfolio turnover rate will not be a
limiting factor when management deems portfolio changes appropriate. Higher
portfolio turnover involves correspondingly greater brokerage commissions and
other transaction costs that the Theme Portfolio will bear directly, and may
result in the realization of net capital gains that are taxable when distributed
to each Fund's shareholders.
The portfolio turnover rates for Global Consumer Products and Services
Portfolio, Global Financial Services Portfolio, Health Care Fund, Global
Infrastructure Portfolio, Global Resources Portfolio and Telecommunications and
Technology Fund the last two fiscal years were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCT. 31, OCT. 31,
1999 1998
---- ----
<S> <C> <C>
Global Consumer Products and Services Portfolio....... 160% 221%
Global Financial Services Portfolio................... 107% 111%
Health Care Fund...................................... 123% 187%
Global Infrastructure Portfolio....................... 49% 96%
Global Resources Portfolio............................ 123% 201%
Telecommunications and Technology Fund................ 122% 75%
</TABLE>
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the
operation of the Funds. The Trust's Board of Trustees has approved all
significant agreements between the Trust on the one side and persons or
companies furnishing services to the Fund on the other, including the investment
management and administration agreement with AIM, the agreements with AIM
Distributors regarding distribution of the Fund's shares, the custody agreement
and the transfer agency agreement. The day-to-day operations of the Fund are
delegated to the officers of the Trust, subject always to the investment
objectives and policies of the Fund and to the general supervision of the
Trust's Board of Trustees. Certain trustees and officers of the Trust are
affiliated with AIM and AIM Management Group Inc. ("AIM Management"), the parent
corporation of AIM.
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<PAGE> 527
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers and the Portfolios'
Trustees and Executive Officers are listed below. Unless otherwise indicated,
the address of each Executive Officer is 11 Greenway Plaza, Suite 100, Houston,
Texas 77046.
<TABLE>
<CAPTION>
==================================================================================================================
POSITIONS
HELD WITH PRINCIPAL OCCUPATION WITH REGISTRANT
NAME, ADDRESS AND AGE REGISTRANT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (53) Trustee, Director, President and Chief Executive Officer, A I M
Chairman and Management Group, Inc.; Director and President, A I M
President Advisors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and Fund Management Company; and
Director and Chief Executive Officer, Managed Products,
AMVESCAP PLC.
- ------------------------------------------------------------------------------------------------------------------
C. DEREK ANDERSON (58) Trustee Senior Managing Partner, Plantagenet Capital Management,
220 Sansome Street LLC (an investment partnership); Chief Executive Officer,
Suite 400 Plantagenet Holdings, Ltd. (an investment banking firm);
San Francisco, CA 94104 and Director, Premium Wear, Inc. (formerly Munsingwear, Inc.)
(a casual apparel company), "R" Homes, Inc., Big Online, Inc.,
Champagne Albert Le Brun, and various other privately owned
companies.
- ------------------------------------------------------------------------------------------------------------------
FRANK S. BAYLEY (60) Trustee Partner, law firm of Baker & McKenzie; Director and
Two Embarcadero Center Chairman, C. D. Stimson Company (a private investment
Suite 2400 company) and Stimson Marina, Inc.(a subsidiary of C.D.
San Francisco, CA 94111 Stimson Company); and Trustee, The Badgley Funds.
- ------------------------------------------------------------------------------------------------------------------
RUTH H. QUIGLEY (65) Trustee Private investor; and President, Quigley Friedlander & Co.,
1055 California Street Inc. (a financial advisory services firm) from 1984 to 1986.
San Francisco, CA 94108
- ------------------------------------------------------------------------------------------------------------------
SAMUEL D. SIRKO (40) Vice President Vice President, Assistant General Counsel and Assistant
and Secretary Secretary, A I M Advisors, Inc.; and Assistant General
Counsel and Assistant Secretary, A I M Management Group,
Inc., A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and Fund Management Company.
==================================================================================================================
</TABLE>
- -------------------
* A trustee who is an "interested person" of the Trust and A I M Advisors,
Inc. as defined in the 1940 Act.
44
<PAGE> 528
<TABLE>
<CAPTION>
==================================================================================================================
POSITIONS
HELD WITH PRINCIPAL OCCUPATION WITH REGISTRANT
NAME, ADDRESS AND AGE REGISTRANT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MELVILLE B. COX (56) Vice President Vice President and Chief Compliance Officer, A I M Advisors,
Inc., A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and Fund Management Company.
- ------------------------------------------------------------------------------------------------------------------
GARY T. CRUM (52) Vice President Director and President, A I M Capital Management, Inc.;
Director and Executive Vice President, A I M Management
Group Inc.; Director and Senior Vice President, A I M
Advisors, Inc.; and Director, A I M Distributors, Inc. and
AMVESCAP PLC.
- ------------------------------------------------------------------------------------------------------------------
CAROL F. RELIHAN (45) Vice President Director, Senior Vice President, General Counsel and
Secretary, A I M Advisors, Inc.; Senior Vice President,
General Counsel and Secretary, A I M Management Group Inc.;
Director, Vice President and General Counsel, Fund
Management Company; Vice President and General Counsel, A I M
Fund Services, Inc.; and Vice President, A I M Capital
Management, Inc. and A I M Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (41) Vice President Vice President and Fund Controller, A I M Advisors, Inc.;
and Treasurer and Assistant Vice President and Assistant Treasurer, Fund
Management Company.
==================================================================================================================
</TABLE>
The Board of Trustees has a Nominating and Audit Committee, comprised
of Miss Quigley (Chairman) and Messrs. Anderson and Bayley, which is responsible
for nominating persons to serve as Directors, reviewing audits of the Trust and
its funds and recommending firms to serve as independent auditors of the Trust.
All of the Trust's Trustees also serve as directors or trustees of some or all
of the other investment companies managed, administered or advised by AIM. All
of the Trust's executive officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM.
Each Trustee who is not a director, officer or employee of AIM or any
affiliated company is paid an annual retainer component plus a per-meeting fee
component, and reimbursed travel and other expenses incurred in connection with
attendance at such meetings. Other Trustees and Officers receive no compensation
or expense reimbursement from the Trust. For the fiscal year ended October 31,
1999, Mr. Anderson, Mr. Bayley, Mr. Arthur C. Patterson (a trustee until
September 27, 1999, when he retired) and Miss Quigley, who are not directors,
officers or employees of any affiliated company, received total compensation of
$50,353, $51,376, $45,584 and $51,376, respectively, from the Trust for their
services as Trustees. For the fiscal year ended October 31, 1999, Mr. Anderson,
Mr. Bayley, Mr. Patterson and Miss Quigley, who are not directors, officers or
employees of any other affiliated company, received total compensation of
$101,833, $103,833, $93,583 and $103,083, respectively, from the investment
companies managed or administered by AIM and 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.
45
<PAGE> 529
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE FEEDER FUNDS
AND THE PORTFOLIOS
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, was organized
in 1976 and, together with its subsidiaries, manages or advises approximately
120 investment portfolios encompassing a broad range of investment objectives.
AIM and its worldwide asset management affiliates provide investment management
and/or administrative services to institutional, corporate and individual
clients around the world.
AIM is a direct, wholly owned subsidiary of AIM Management, a holding
company that has been engaged in the financial services business since 1976. AIM
is also the sole shareholder of the Funds' principal underwriter, AIM
Distributors.
AIM Management and AIM are indirect wholly owned subsidiaries of
AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR, England. AMVESCAP PLC and
its subsidiaries are an independent 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. Certain of
the directors and officers of AIM are also executive officers of the Trust and
their affiliations are shown under "Management" herein.
In addition to the investment resources of their Houston office, AIM
draws upon the expertise, personnel, data and systems of other offices in
Atlanta, Boston, Dallas, Denver, Louisville, Miami, New York, Portland (Oregon),
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the Funds and the Portfolios, the Advisor employs a team approach, taking
advantage of its investment resources around the world.
AIM and Trust have adopted a Code of Ethics (the "Code of Ethics")
which requires investment personnel and certain other employees (a) to pre-clear
all personal securities transactions subject to the Code of Ethics, (b) to file
reports or duplicate confirmations regarding such transactions, (c) to refrain
from personally engaging in (i) short-term trading of a security (ii)
transactions involving a security within seven days of an AIM Fund transaction
involving the same security, unless the security qualifies for the De minimus
exemption. The De minimus exemption would allow the trade if the issuer of the
security has a market capitalization of $2 billion or more. In addition such a
request can only be granted once every thirty days for no more than 2,000 shares
total, and (iii) transactions involving securities being considered for
investment by an AIM Fund, unless the security qualifies for the De minimus
exemption, as previously explained, for which the personal security trade would
be allowed even if the security is being considered for investment by an AIM
Fund and (d) abide by certain other provisions under the Code of Ethics. The
Code of Ethics also prohibits employees who are registered with the NASD from
purchasing securities in an initial public offering. Personal trading reports
are reviewed periodically by AIM, and the Board of Trustees review quarterly and
annual reports (including information on any substantial violations of the Code
of Ethics). Sanctions for violations of the Code of Ethics may include censure,
monetary penalties, suspension or termination of employment.
AIM serves as each Portfolio's investment manager and administrator
under an investment management and administration contract between each
Portfolio and AIM ("Portfolio Management Contract"). AIM serves as administrator
to each Feeder Fund under an administration contract between the Trust and AIM
("Administration Contract"). The Administration Contract will not be deemed an
advisory contract, as defined under the 1940 Act. As investment manager and
administrator, AIM makes all investment decisions for each Portfolio and, as
administrator, administers each Portfolio's and each Feeder Fund's affairs.
Among other things, AIM furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of each Portfolio and each Feeder Fund and provides
suitable office space, necessary small office equipment and utilities.
The Portfolio Management Contract may be renewed with respect to a
Portfolio for additional one-year terms, provided that any such renewal has been
specifically approved at least annually by (i) the
46
<PAGE> 530
Portfolios' Board of Trustees or the vote of a majority of the Portfolio's
outstanding voting securities (as defined in the 1940 Act) and (ii) a majority
of Trustees who are not parties to the Portfolio Management Contract or
"interested persons" of any such party (as defined in the 1940 Act), cast in
person at a meeting called for the specific purpose of voting on such approval.
The Portfolio Management Contract provides that with respect to each Portfolio,
and the Administration Contract provides that with respect to each Feeder Fund,
either the Trust, each Portfolio or AIM may terminate the Contracts without
penalty upon sixty days' written notice to the other party. The Portfolio
Management Contract terminates automatically in the event of its assignment (as
defined in the 1940 Act).
AIM became investment manager and/or administrator to the Funds and
the Portfolios effective June 1, 1998. Prior to that date, Chancellor LGT Asset
Management, Inc. served as investment manager and administrator.
Each of the named Theme Portfolios paid the following investment
management and administration fees net of any expense limitations (fee waivers)
for the years ended October 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Global Consumer Products and
Services Portfolio $1,323,258 $1,329,063 $1,207,854
Global Financial Services Portfolio 520,478 726,002 346,965
Global Infrastructure Portfolio 280,012 418,974 772,727
Global Resources Portfolio 191,117 434,214 979,215
</TABLE>
For the fiscal year ended October 31, 1999, the Advisor reimbursed the
Global Consumer Products and Services Portfolio, Global Financial Services
Portfolio, Global Infrastructure Portfolio and Global Resources Portfolio for
their respective investment management and administration fees in the amounts
$16,422, $114,306, $123,428 and $135,288, respectively.
For the fiscal years ended October 31, 1999, 1998 and 1997, each named
Feeder Funds paid AIM and the prior investment manager and administrator the
following administrative services fees:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Consumer Products and
Services Fund $461,258 $457,314 $416,297
Financial Services Fund 218,971 250,093 119,765
Infrastructure Fund 138,782 210,329 266,025
Resources Fund 112,982 233,400 388,578
</TABLE>
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE HEALTH CARE
FUND AND TELECOMMUNICATIONS AND TECHNOLOGY FUND
AIM serves as the investment manager and administrator to the Health
Care Fund and Telecommunications and Technology Fund under an Investment
Management and Administration Contract ("Management Contract") between the Trust
and AIM. As investment manager and administrator, AIM makes all investment
decisions for the Health Care Fund and Telecommunications and Technology Fund
and administers the Health Care Fund's and Telecommunications and Technology
Fund's affairs. Among other things, AIM furnishes the services and pays the
compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of the Trust and the Health
Care Fund and Telecommunications and Technology Fund, and provides suitable
office space, necessary small office equipment and utilities.
47
<PAGE> 531
The Management Contract may be renewed for additional one-year terms
with respect to the Health Care Fund and Telecommunications and Technology Fund,
provided that any such renewal has been specifically approved at least annually
by: (i) the Trust's Board of Trustees, or by the vote of a majority of the
Health Care Fund and Telecommunications and Technology Fund's outstanding voting
securities (as defined in the 1940 Act), and (ii) a majority of Trustees who are
not parties to the Management Contract 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 Contract provides
that with respect to the Health Care Fund and Telecommunications and Technology
Fund either the Trust or AIM may terminate the Contracts without penalty upon
sixty days' written notice to the other party. The Management Contract will
terminate automatically in the event of their assignment (as defined in the
1940 Act).
Under a master accounting services agreement AIM serves as the Funds'
pricing and accounting agent. For these services, the Funds pay AIM such fees as
are determined in accordance with methodologies established, from time to time,
by the Trust's Board of Trustees.
For the fiscal years ended October 31, 1999, 1998 and 1997, each Fund
paid AIM and the prior investment manager the following accounting services
fees:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Consumer Products and
Services Fund $ 49,731 $ 47,155 $ 43,330
Financial Services Fund 34,005 27,027 12,292
Health Care Fund 142,382 142,357 153,780
Infrastructure Fund 25,171 22,640 27,303
Resources Fund 24,486 24,981 34,698
Telecommunications and Technology Fund 320,819 437,627 493,322
</TABLE>
For these services, Health Care Fund and Telecommunications and
Technology Fund pay AIM investment management and administration fees, computed
daily and paid monthly, based on its average daily net assets, at the annualized
rate of 0.975% on the first $500 million, 0.95% on the next $500 million, 0.925%
on the next $500 million and 0.90% on the amounts thereafter. For these
services, the Portfolios pay AIM investment management and administration fees
computed daily and paid monthly, based on average daily net assets, at the
annualized rate of 0.725% on the first $500 million, 0.70% on the next $500
million, 0.675% on the next $500 million and 0.65% on amounts thereafter. The
investment management and administration fees paid by the Funds are higher than
those paid by most mutual funds. The Funds pay all expenses not assumed by AIM,
AIM Distributors or other agents. AIM has undertaken to limit each Fund's
expenses (exclusive of brokerage commissions, taxes, interest and extraordinary
expenses) to the annual rate of 2.00%, 2.50% and 2.50% of the average daily net
assets of each Fund's Class A, Class B and Class C shares, respectively, until
June 30, 2000.
AIM may from time to time waive or reduce its fee. Voluntary fee
waivers or reductions may be rescinded at any time without further notice to
investors. During periods of voluntary fee waivers or reductions, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund.
EXPENSES OF THE FUNDS AND OF THE PORTFOLIOS
Each Fund and each Portfolio pays all expenses not assumed by AIM, AIM
Distributors and other agents. These expenses include, in addition to the
advisory, administration, distribution, transfer agency, pricing and accounting
agency and brokerage fees discussed above, legal and audit expenses, custodian
fees, trustees' fees, organizational fees, fidelity bond and other insurance
premiums, taxes, extraordinary expenses and expenses of reports and prospectuses
sent to existing investors. The allocation of general
48
<PAGE> 532
Trust expenses and expenses shared among the Funds and other funds organized as
series of the Trust are allocated on a basis deemed fair and equitable, which
may be based on the relative net assets of the Funds or the nature of the
service performed and relative applicability to the Funds. Expenditures,
including costs incurred in connection with the purchase or sale of portfolio
securities, which are capitalized in accordance with generally accepted
accounting principles applicable to investment companies, are accounted for as
capital items and not as expenses. The ratio of each Fund's expenses to its
relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
the Funds or the Portfolios generally are higher than the comparable expenses of
such other funds.
THE DISTRIBUTION PLANS
THE CLASS A AND C PLAN
The Trust has adopted a Master Distribution Plan pursuant to Rule
12b-1 under the 1940 Act relating to the Class A and C shares of the Funds (the
"Class A and C Plan"). The Class A and C Plan provides that the Class A shares
pay 0.50% per annum of their average daily net assets as compensation to AIM
Distributors for the purpose of financing any activity which is primarily
intended to result in the sale of Class A shares. Under the Class A and C Plan,
Class C shares of the Funds pay compensation to AIM Distributors at an annual
rate of 1.00% of the average daily net assets attributable to Class C shares.
Payments can also be directed by AIM Distributors to selected institutions who
have entered into service agreements with respect to Class A and Class C shares
of each Fund and who provide continuing personal services to their customers who
own Class A and C shares of the Fund. The service fees payable to selected
institutions are calculated at the annual rate of 0.25% of the average daily net
asset value of those Fund shares that are held in such institution's customers'
accounts which were purchased on or after a prescribed date set forth in the
Class A and C Plan. Activities appropriate for financing under the Class A and C
Plan include, but are not limited to, the following: printing of prospectuses
and statements of additional information and reports for other than existing
shareholders; overhead; preparation and distribution of advertising material and
sales literature; expenses of organizing and conducting sales seminars;
supplemental payments to dealers and other institutions such as asset-based
sales charges or as payments of service fees under shareholder service
arrangements; and costs of administering the Class A and C Plan.
Of the aggregate amount payable under the Class A and C Plan, payments
to dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average daily net assets of the Fund
attributable to the customers of such dealers or financial institutions are
characterized as a service fee, and payments to dealers and other financial
institutions in excess of such amount and payments to AIM Distributors would be
characterized as an asset-based sales charge pursuant to the Class A and C Plan.
The Class A and C Plan also imposes a cap on the total amount of sales charges,
including asset-based sales charges, that may be paid by the Trust with respect
to the Fund. The Class A and C Plan does not obligate the Fund to reimburse AIM
Distributors for the actual expenses AIM Distributors may incur in fulfilling
its obligations under the Class A and C Plan on behalf of the Fund. Thus, under
the Class A and C Plan, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Fund will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
THE CLASS B PLAN
The Trust has also adopted a Master Distribution Plan pursuant to Rule
12b-1 under the 1940 Act relating to Class B shares of the Funds (the "Class B
Plan", and collectively with the Class A and C Plan, the "Plans"). Under the
Class B Plan, each Fund pays compensation to AIM Distributors at an annual rate
of 1.00% of the average daily net assets attributable to Class B shares. Of such
amount, each Fund pays a service fee of 0.25% of the average daily net assets
attributable to Class B shares to selected dealers and
49
<PAGE> 533
other institutions which furnish continuing personal shareholder services to
their customers who purchase and own Class B shares. Amounts paid in accordance
with the Class B Plan may be used to finance any activity primarily intended to
result in the sale of Class B shares, including but not limited to printing of
prospectuses and statements of additional information and reports for other than
existing shareholders; overhead; preparation and distribution of advertising
material and sales literature; expenses of organizing and conducting sales
seminars; supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements; and costs of administering the Class B Plan.
BOTH PLANS
Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Fund; assisting customers in
changing dividend options, account designations and addresses, and in enrolling
in any of the several special investment plans offered in connection with the
purchase of a Fund's shares; assisting in the establishment and maintenance of
customer accounts and records and in the processing of purchase and redemption
transactions; investing dividends and any capital gains distributions
automatically in a Fund's shares; and providing such other information and
services as a Fund or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding the Funds;
performing sub-accounting; establishing and maintaining shareholder accounts and
records; processing customer purchase and redemption transactions; providing
periodic statements showing a shareholder's account balance and the integration
of such statements with those of other transactions and balances in the
shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as a Fund reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions which
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive
compensation for selling Fund shares may receive different compensation for
selling shares of one particular class over another.
Under a Shareholder Service Agreement, each Fund agrees to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement generally will be calculated at the end of each payment period
for each business day of a Fund during such period at the annual rate of 0.25%
of the average daily net asset value of the Fund's shares purchased or acquired
through exchange. Fees calculated in this manner shall be paid only to those
selected dealers or other institutions who are dealers or institutions of record
at the close of business on the last business day of the applicable payment
period for the account in which each Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc. ("NASD"). The Plans conform to rules of the NASD by limiting payments made
to dealers and other financial institutions who provide continuing personal
shareholder services to their customers who purchase and own shares of the Funds
to no more than 0.25% per annum
50
<PAGE> 534
of the average daily net assets of the funds attributable to the customers of
such dealers or financial institutions, and by imposing a cap on the total sales
charges, including asset based sales charges, that may be paid by the Fund and
its respective classes.
AIM Distributors may from time to time waive or reduce any portion of
its 12b-1 fee for Class A and Class C shares. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM Distributors will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM Distributors and the Fund.
Under the Plans, certain financial institutions which have entered
into service agreements and which sell shares of the Fund on an agency basis,
may receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent for the Funds, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Funds and not of AIM Distributors.
Financial intermediaries and any other person entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one class over another.
For the fiscal year ended October 31, 1999, for Class A and B shares,
and for the period March 1, 1999 (date operations commenced) through October 31,
1999, for Class C shares, each Fund paid the following distribution fees:
<TABLE>
<CAPTION>
% OF CLASS
AVERAGE DAILY
NET ASSETS
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Consumer Products and
Services Fund $ 344,198 $1,032,430 $ 827 .50% 1.00% 1.00%
Financial Services Fund $ 151,168 $ 495,394 $ 1,687 .50% 1.00% 1.00%
Health Care Fund $1,919,476 $1,088,812 $ 4,464 .50% 1.00% 1.00%
Infrastructure Fund $ 108,405 $ 283,904 $ 70 .50% 1.00% 1.00%
Resources Fund $ 86,740 $ 239,305 $ 406 .50% 1.00% 1.00%
Telecommunications and
Technology Fund $4,313,052 $7,605,277 $ 27,171 .50% 1.00% 100%
</TABLE>
Prior to June 1, 1998, the Trust had adopted a different Rule 12b-1
plan, that operated as a "reimbursement-type" plan (the "Prior Plan"). The Trust
provided GT Global, Inc., the distributor at the time the Prior Plan was in
effect, $11,171,511 in payments under the Prior Plan for 1998. For 1998, the
Trust provided AIM Distributors, the current distributor of the Funds,
$7,270,614.
An estimate by category of actual fees paid by each Fund with regard
to the Class A shares during the fiscal year ended October 31, 1999 are as
follows:
51
<PAGE> 535
<TABLE>
<CAPTION>
CONSUMER
PRODUCTS TELECOMMUNICATIONS
AND FINANCIAL HEALTH AND
SERVICES SERVICES CARE INFRASTRUCTURE RESOURCES TECHNOLOGY
FUND FUND FUND FUND FUND FUND
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Advertising $ 39,560 $ 18,577 $ 195,252 $ 11,711 $ 12,403 $ 422,275
Printing and Mailing
prospectuses, semi-annual
reports and annual
reports (other than
to current shareholders) 3,487 1,704 17,557 0 0 37,946
Seminars 10,762 6,760 59,114 0 0 130,644
Compensation to Underwriters
to partially offset
other marketing expenses 0 0 0 0 0 0
Compensation to Dealers
including Finder's Fees 290,389 124,126 1,647,552 96,695 74,336 3,722,187
Compensation to Sales
Personnel 0 0 0 0 0 0
Annual Report Total $ 344,198 $ 151,167 $1,919,475 $ 108,406 $ 86,739 $4,313,052
</TABLE>
52
<PAGE> 536
An estimate by category of actual fees paid by each Fund with regard
to the Class B Shares during the fiscal year ended October 31, 1999 are as
follows:
<TABLE>
<CAPTION>
CONSUMER
PRODUCTS TELECOMMUNICATIONS
AND FINANCIAL HEALTH AND
SERVICES SERVICES CARE INFRASTRUCTURE RESOURCES TECHNOLOGY
FUND FUND FUND FUND FUND FUND
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Advertising $ 8,043 $ 4,277 $ 6,809 $ 796 $ 3,019 $ 25,099
Printing and Mailing
prospectuses, semi-annual
reports and annual
reports (other than
to current shareholders) 657 372 540 0 113 2,222
Seminars 2,526 1,291 2,100 0 627 7,893
Compensation to Underwriters
to partially offset
other marketing expenses 774,322 371,545 816,609 212,928 179,479 5,703,958
Compensation to Dealers 246,881 117,909 262,754 70,180 56,067 1,866,105
Compensation to Sales
Personnel 0 0 0 0 0 0
Annual Report Total $1,032,429 $ 494,394 $1,088,812 $ 283,904 $ 239,305 $7,605,277
</TABLE>
An estimate by category of actual fees paid by each Fund with regard
to the Class C Shares for the period March 1, 1999 (date operations commenced)
through October 31, 1999 are as follows:
<TABLE>
<CAPTION>
CONSUMER
PRODUCTS TELECOMMUNICATIONS
AND FINANCIAL HEALTH AND
SERVICES SERVICES CARE INFRASTRUCTURE RESOURCES TECHNOLOGY
FUND FUND FUND FUND FUND FUND
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CLASS C
Advertising $ 199 $ 312 $ 0 $ 17 $ 2 $ 159
Printing and Mailing
prospectuses, semi-annual
reports and annual
reports (other than
to current shareholders) 0 0 0 0 0 16
Seminars 0 0 0 0 0 58
Compensation to Underwriters
to partially offset
other marketing expenses 620 1,265 3,348 53 240 17,582
Compensation to Dealers 7 109 1,116 0 163 9,355
Compensation to Sales
Personnel 0 0 0 0 0 0
Annual Report Total $ 826 $ 1,686 $ 4,464 $ 70 $ 405 $ 27,170
</TABLE>
The Plans require AIM Distributors to provide the Board of Trustees at
least quarterly with a written report of the amounts expended pursuant to the
Plans and the purposes for which such expenditures were made. The Board of
Trustees reviews these reports in connection with their decisions with respect
to the Plans.
53
<PAGE> 537
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Trustees, including a majority
of the trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust and who have no direct or indirect financial interest in the operation
of the Plans or in any agreements related to the Plans ("Qualified Trustees").
In approving the Plans in accordance with the requirements of Rule 12b-1, the
Trustees considered various factors and determined that there is a reasonable
likelihood that the Plans would benefit each class of each Fund and their
respective shareholders.
The Plans do not obligate the Funds to reimburse AIM Distributors for
the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, a Fund will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Unless terminated earlier in accordance with their terms, the Plans
continue in effect from year to year, as long as such continuance is
specifically approved at least annually by the Board of Trustees, including a
majority of the Qualified Trustees.
The Plans may be terminated by the vote of a majority of the Qualified
Trustees, or, with respect to a particular class, by the vote of a majority of
the outstanding voting securities of that class.
Any change in the Plans that would increase materially the
distribution expenses paid by the applicable class requires shareholder
approval; otherwise, it may be amended by the trustees, including a majority of
the Qualified Trustees, by votes cast in person at a meeting called for the
purpose of voting upon such amendment. As long as the Plans are in effect, the
selection or nomination of the Qualified Trustees is committed to the discretion
of the Qualified Trustees. In the event the Class A and C Plan is amended in a
manner which the Board of Trustees determines would materially increase the
charges paid under the Class A and C Plan, the Class B shares of each Fund will
no longer convert into Class A shares of the same Fund unless the Class B
shares, voting separately, approve such amendment. If the Class B shareholders
do not approve such amendment, the Board of Trustees will (i) create a new class
of shares of the Fund which is identical in all material respects to the Class A
shares as they existed prior to the implementation of the amendment and (ii)
ensure that the existing Class B shares of the Fund will be exchanged or
converted into such new class of shares no later than the date the Class B
shares were scheduled to convert into Class A shares.
The principal differences between the Class A and C Plan, on the one
hand, and the Class B Plan, on the other hand, are: (i) the Class A and C Plan
allows payment to AIM Distributors or to dealers or financial institutions of up
to 0.50% of average daily net assets of the Class A shares of each Fund, as
compared to 1.00% of such assets of the Funds' Class B shares; (ii) the Class B
Plan obligates the Class B shares to continue to make payments to AIM
Distributors following termination of the Class B shares Distribution Agreement
with respect to Class B shares sold by or attributable to the distribution
efforts of AIM Distributors or its predecessor, GT Global, Inc. unless there has
been a complete termination of the Class B Plan (as defined in such Plan) and
(iii) the Class B Plan expressly authorizes AIM Distributors to assign, transfer
or pledge its rights to payments pursuant to the Class B Plan.
THE DISTRIBUTOR
Information concerning AIM Distributors and the continuous offering of
each Fund's shares is set forth in the Prospectuses under the heading
"Purchasing Shares." The Trust has entered into a Master Distribution Agreement
with AIM Distributors relating to the Class A shares and Class C shares of the
Funds and a Master Distribution Agreement with AIM Distributors relating to the
Class B shares of the Funds. Such Master Distribution Agreements are hereinafter
collectively referred to as the "Distribution Agreements."
54
<PAGE> 538
The Distribution Agreements provide that AIM Distributors will bear
the expenses of printing from the final proof and distributing each Fund's
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Fund), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of each Fund's shares, including expenses
of advertising in connection with such public offerings. AIM Distributors has
not undertaken to sell any specified number of shares of any classes of any
Fund.
The Distribution Agreements provide AIM Distributors with the
exclusive right to distribute shares of the Funds directly and through
institutions with whom AIM Distributors has entered into selected dealer
agreements. AIM Distributors is authorized to advance to institutions through
whom Class B shares are sold, a sales commission under schedules established by
AIM Distributors. The Distribution Agreement for the Class B shares provides
that AIM Distributors (or its assignee or transferee) will receive 0.75% (of the
total 1.00% payable under the distribution plan applicable to Class B shares of
each Fund's average daily net assets attributable to Class B shares attributable
to the sales efforts of AIM Distributors.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B shares of the Funds at
the time of such sales. Payments with respect to Class B shares will equal 4.00%
of the purchase price of the Class B shares sold by the dealer or institution,
and will consist of a sales commission equal to 3.75% of the purchase price of
the Class B shares sold plus an advance of the first year service fee of 0.25%
with respect to such shares. The portion of the payments to AIM Distributors
under the Class B Plan which constitutes an asset-based sales charge (0.75%) is
intended in part to permit AIM Distributors to recoup a portion of such sales
commissions plus financing costs. AIM Distributors anticipates that it will
require a number of years to recoup from Class B Plan payments the sales
commissions paid to dealers and institutions in connection with sales of Class B
shares. In the future, if multiple distributors serve a Fund, each such
distributor (or its assignee or transferee) would receive a share of the
payments under the Class B Plan based on the portion of the Fund's Class B
shares sold by or attributable to the distribution efforts of that distributor.
The Trust (on behalf of any class of a Fund) or AIM Distributors may
terminate the Distribution Agreements on sixty (60) days' written notice without
penalty. The Distribution Agreements will terminate automatically in the event
of their assignment. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset based
distribution fees in respect of the outstanding Class B shares attributable to
the distribution efforts of AIM Distributors and its predecessor; provided,
however, that a complete termination of the Class B Plan (as defined in such
Plan) would terminate all payments by the Fund of asset based distribution fees
and service fees to AIM Distributors. Termination of the Class B Plan or
Distribution Agreement does not affect the obligation of Class B shareholders to
pay contingent deferred sales charges.
From time to time, AIM Distributors may transfer and sell its right to
payments under the Distribution Agreement relating to Class B shares in order to
finance distribution expenditures in respect of Class B shares.
The following chart reflects the total sales charges paid in
connection with the sale of Class A shares of each Fund and the amount retained
by the Trust's distributors for the fiscal years ended October 31, 1999 and
1998:
55
<PAGE> 539
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------ -------------------------
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGE RETAINED CHARGE RETAINED CHARGE RETAINED
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Consumer Products and
Services Fund $ 162,704 $ 27,585 $ 14,898 $ 13,455 $ 286,139 $ 85,990
Financial Services Fund $ 86,372 $ 16,231 $ 5,454 $ 5,299 $ 84,341 $ 22,263
Health Care Fund $ 276,656 $ 51,905 $ 8,771 $ 9,735 $ 13,880 $ 54,971
Infrastructure Fund $ 15,244 $ 3,065 $ 1,469 $ 1,423 $ 100,622 $ 24,988
Resources Fund $ 47,364 $ 10,174 $ 3,733 $ 3,635 $ 221,895 $ 63,915
Telecommunications and $1,167,764 $ 205,929 $ 36,792 $ 34,813 $ 497,045 $ 131,495
Technology Fund
</TABLE>
Prior to June 1, 1998, GT Global Inc. was the Trust's distributor, and
a total of $389,099 sales charges were paid in connection with the sale of Class
A shares of each Fund and the amount retained by GT Global Inc. was $97,425.
The following chart reflects the contingent deferred sales charges
paid by Class A, Class B and Class C* shareholders for the fiscal years ended
October 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Consumer Products and Services Fund $ 94 $ 353,264 $ 545,758
Financial Services Fund $ 1,268 $ 191,418 $7,116,869
Health Care Fund $ 3,480 $ 511,753 $ 81,031
Infrastructure Fund $ 0 $ 352,924 $ 261,619
Resources Fund $ 0 $ 357,602 $ 417,878
Telecommunications and Technology Fund $ 8,313 $2,950,006 $ 508,410
</TABLE>
* Class C shares of each fund commenced operations on 03/01/99.
SALES CHARGES AND DEALER CONCESSIONS
CATEGORY I. Certain AIM Funds are currently sold with a sales charge
ranging from 5.50% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds include Class A shares of each of AIM Advisor Flex
Fund, AIM Advisor International Value Fund, AIM Advisor Large Cap Value Fund,
AIM Aggressive Growth Fund, AIM Asian Growth Fund, AIM Basic Value Fund, AIM
Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM
Constellation Fund, AIM Dent Demographic Trends Fund, AIM European Development
Fund, AIM Euroland Growth Fund, AIM Global Utilities Fund, AIM Global Growth &
Income Fund, AIM International Equity Fund, AIM Japan Growth Fund, AIM Large Cap
Basic Value Fund, AIM Large Cap Growth Fund, AIM Large Cap Opportunities Fund,
AIM Mid Cap Equity Fund, AIM Mid Cap Growth Fund, AIM Mid Cap Opportunities
Fund, AIM New Pacific Growth Fund, AIM Select Growth Fund, AIM Small Cap Growth
Fund, AIM Small Cap Opportunities Fund, AIM Value Fund and AIM Weingarten Fund.
56
<PAGE> 540
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge -----------
------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
------------------------ ------------- ----------- -----------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
- -----------------
(1) AIM Small Cap Opportunities Fund will not accept any single purchase in
excess of $250,000.
CATEGORY II. Certain AIM Funds are currently sold with a sales charge
ranging from 4.75% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds are: the Class A shares of each of AIM Advisor Real
Estate Fund, AIM Balanced Fund, AIM Developing Markets Fund, AIM Emerging
Markets Debt Fund, AIM Global Aggressive Growth Fund, AIM Global Consumer
Products and Services Fund, AIM Global Financial Services Fund, AIM Global
Government Income Fund, AIM Global Growth Fund, AIM Global Health Care Fund, AIM
Global Income Fund, AIM Global Infrastructure Fund, AIM Global Resources Fund,
AIM Global Telecommunications and Technology Fund, AIM Global Trends Fund, AIM
High Income Municipal Fund, AIM High Yield Fund, AIM High Yield Fund II, AIM
Income Fund, AIM Intermediate Government Fund, AIM Latin American Growth Fund,
AIM Municipal Bond Fund, AIM Strategic Income Fund and AIM Tax-Exempt Bond Fund
of Connecticut.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge -----------
------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
CATEGORY III. Certain AIM Funds are currently sold with a sales charge
ranging from 1.00% to 0.50% of the offering price on purchases of less than
$1,000,000. These AIM Funds are the Class A shares of each of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
57
<PAGE> 541
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge -----------
------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,0000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more of
Category I, II or III funds; however, AIM Distributors may pay a dealer
concession and/or advance a service fee on such transactions as set forth below.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the
entire initial sales charge to dealers for all sales with respect to which
orders are placed with AIM Distributors during a particular period. Dealers to
whom substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of
the initial sales charge paid by investors, AIM Distributors may, from time to
time, at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. At the option of the dealer, such
incentives may take the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are
dealers of record for purchases of $1 million or more of Class A shares (or
shares which normally involve payment of initial sales charges), which are sold
at net asset value and are subject to a contingent deferred sales charge, for
all AIM Funds other than Class A shares of each of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund as follows: 1% of the first $2 million
of such purchases, plus 0.80% of the next $1 million of such purchases, plus
0.50% of the next $17 million of such purchases, plus 0.25% of amounts in excess
of $20 million of such purchases. AIM Distributors may make payments to dealers
and institutions who are dealers of record for purchases of $1 million or more
of Class A shares (or shares which normally involve payment of initial sales
charges), and which are sold at net asset value and are not subject to a
contingent deferred sales charge, in an amount up to 0.10% of such purchases of
Class A shares of AIM Limited Maturity Treasury Fund, and in an amount up to
0.25% of such purchases of Class A shares of AIM Tax-Free Intermediate Fund.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class B shares of the AIM Funds at the time of such sales. Payments
with respect to Class B shares will equal 4.00% of the purchase price of the
Class B shares sold by the dealer or institution, and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
The portion of the payments to AIM Distributors under the Class B Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to
58
<PAGE> 542
permit AIM Distributors to recoup a portion of such sales commissions plus
financing costs.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of the AIM Funds at the time of such sales. Payments
with respect to Class C shares will equal 1.00% of the purchase price of the
Class C shares sold by the dealer or institution, and will consist of a sales
commission of 0.75% of the purchase price of the Class C shares sold plus an
advance of the first year service fee of 0.25% with respect to such shares. AIM
Distributors will retain all payments received by it relating to Class C shares
for the first year after they are purchased. The portion of the payments to AIM
Distributors under the Class A and C Plan attributable to Class C shares which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of on-going sales commissions to dealers
plus financing costs, if any. After the first full year, AIM Distributors will
make such payments quarterly to dealers and institutions based on the average
net asset value of Class C shares which are attributable to shareholders for
whom the dealers and institutions are designated as dealers of record. These
commissions are not paid on sales to investors exempt from the CDSC, including
shareholders of record of AIM Advisor Funds, Inc. on April 30, 1995, who
purchase additional shares in any of the Funds on or after May 1, 1995, and in
circumstances where AIM Distributors grants an exemption on particular
transactions.
Exchanges of AIM Cash Reserve Shares of AIM Money Market Fund for
Class B shares or Class C shares are considered sales of such Class B shares or
Class C shares for purposes of the sales charges and dealer concessions
discussed above.
AIM Distributors may pay investment dealers or other financial service
firms for share purchases (measured on an annual basis) of Class A Shares of all
AIM Funds except AIM Limited Maturity Treasury Fund, AIM Tax-Free Intermediate
Fund and AIM Tax-Exempt Cash Fund sold at net asset value to an employee benefit
plan as follows: 1% of the first $2 million of such purchases, plus 0.80% of the
next $1 million of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in excess of $20 million of such purchases and
up to 0.10% of the net asset value of any Class A shares of AIM Limited Maturity
Treasury Fund sold at net asset value to an employee benefit plan in accordance
with this paragraph.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge
tables (quantity discounts) apply to purchases of shares of the AIM Funds that
are otherwise subject to an initial sales charge, provided that such purchases
are made by a "purchaser" as hereinafter defined. Purchases of Class A shares of
AIM Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and
Class B and Class C shares of the AIM Funds will not be taken into account in
determining whether a purchase qualifies for a reduction in initial sales
charges.
The term "purchaser" means:
o an individual and his or her spouse and children, including any
trust established exclusively for the benefit of any such person;
or a pension, profit-sharing, or other benefit plan established
exclusively for the benefit of any such person, such as an IRA,
Roth IRA, a single-participant money-purchase/profit-sharing plan
or an individual participant in a 403(b) Plan (unless such 403(b)
plan qualifies as the purchaser as defined below);
o a 403(b) plan, the employer/sponsor of which is an organization
described under Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code"), if:
a. the employer/sponsor must submit contributions for all
participating employees in a single contribution transmittal
(i.e., the Funds will not accept contributions submitted
with respect to individual participants);
59
<PAGE> 543
b. each transmittal must be accompanied by a single check or
wire transfer; and
c. all new participants must be added to the 403(b) plan by
submitting an application on behalf of each new participant
with the contribution transmittal;
o a trustee or fiduciary purchasing for a single trust, estate or
single fiduciary account (including a pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Code) and 457 plans, although more than
one beneficiary or participant is involved;
o a Simplified Employee Pension (SEP), Salary Reduction and other
Elective Simplified Employee Pension account (SAR-SEP) or a
Savings Incentive Match Plans for Employees IRA (SIMPLE IRA),
where the employer has notified the distributor in writing that
all of its related employee SEP, SAR-SEP or SIMPLE IRA accounts
should be linked; or
o any other organized group of persons, whether incorporated or
not, provided the organization has been in existence for at least
six months and has some purpose other than the purchase at a
discount of redeemable securities of a registered investment
company.
Investors or dealers seeking to qualify orders for a reduced initial
sales charge must identify such orders and, if necessary, support their
qualification for the reduced charge. AIM Distributors reserves the right to
determine whether any purchaser is entitled, by virtue of the foregoing
definition, to the reduced sales charge. No person or entity may distribute
shares of the AIM Funds without payment of the applicable sales charge other
than to persons or entities who qualify for a reduction in the sales charge as
provided herein.
1. LETTERS OF INTENT. A purchaser, as previously defined, may pay
reduced initial sales charges by completing the appropriate section of the
account application and by fulfilling a Letter of Intent ("LOI"). The LOI
privilege is also available to holders of the Connecticut General Guaranteed
Account, established for tax qualified group annuities, for contracts purchased
on or before June 30, 1992. The LOI confirms such purchaser's intention as to
the total investment to be made in shares of the AIM Funds (except for (i) Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund, (ii) Class B and Class C shares of the AIM Funds and (iii) shares
of AIM Floating Rate Fund) within the following 13 consecutive months. By
marking the LOI section on the account application and by signing the account
application, the purchaser indicates that he understands and agrees to the terms
of the LOI and is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales
charge made during the 13-month period will be made at the public offering price
applicable to a single transaction of the total dollar amount indicated by the
LOI, as described under "Sales Charges and Dealer Concessions." It is the
purchaser's responsibility at the time of purchase to specify the account
numbers that should be considered in determining the appropriate sales charge.
The offering price may be further reduced as described under "Rights of
Accumulation" if the Transfer Agent is advised of all other accounts at the time
of the investment. Shares acquired through reinvestment of dividends and capital
gains distributions will not be applied to the LOI. At any time during the
13-month period after meeting the original obligation, a purchaser may revise
his intended investment amount upward by submitting a written and signed
request. Such a revision will not change the original expiration date. By
signing an LOI, a purchaser is not making a binding commitment to purchase
additional shares, but if purchases made within the 13-month period do not total
the amount specified, the investor will pay the increased amount of sales charge
as described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases
60
<PAGE> 544
made more than 90 days before signing an LOI will be applied toward completion
of the LOI based on the value of the shares purchased calculated at the public
offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the
initial purchase (or subsequent purchases if necessary) the Transfer Agent will
escrow in the form of shares an appropriate dollar amount (computed to the
nearest full share). All dividends and any capital gain distributions on the
escrowed shares will be credited to the purchaser. All shares purchased,
including those escrowed, will be registered in the purchaser's name. If the
total investment specified under this LOI is completed within the 13-month
period, the escrowed shares will be promptly released. If the intended
investment is not completed, the purchaser will pay the Transfer Agent the
difference between the sales charge on the specified amount and the amount
actually purchased. If the purchaser does not pay such difference within 20 days
of the expiration date, he irrevocably constitutes and appoints the Transfer
Agent as his attorney to surrender for redemption any or all shares, to make up
such difference within 60 days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes
to cancel the agreement, he must give written notice to AIM Distributors. If at
any time before completing the LOI Program the purchaser requests the Transfer
Agent to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
2. RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may
also qualify for reduced initial sales charges based upon such purchaser's
existing investment in shares of any of the AIM Funds (except for (i) Class A
shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund, (ii) Class B and Class C shares of the AIM Funds and (iii) shares
of AIM Floating Rate Fund) at the time of the proposed purchase. Rights of
Accumulation are also available to holders of the Connecticut General Guaranteed
Account, established for tax-qualified group annuities, for contracts purchased
on or before June 30, 1992. To determine whether or not a reduced initial sales
charge applies to a proposed purchase, AIM Distributors takes into account not
only the money which is invested upon such proposed purchase, but also the value
of all shares of the AIM Funds (except for (i) Class A shares of AIM Tax-Exempt
Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund, (ii) Class B and
Class C shares of the AIM Funds and (iii) shares of AIM Floating Rate Fund)
owned by such purchaser, calculated at their then current public offering price.
If a purchaser so qualifies for a reduced sales charge, the reduced sales charge
applies to the total amount of money then being invested by such purchaser and
not just to the portion that exceeds the breakpoint above which a reduced sales
charge applies. For example, if a purchaser already owns qualifying shares of
any AIM Fund with a value of $20,000 and wishes to invest an additional $20,000
in a fund, with a maximum initial sales charge of 5.50%, the reduced initial
sales charge of 5.25% will apply to the full $20,000 purchase and not just to
the $15,000 in excess of the $25,000 breakpoint. To qualify for obtaining the
discount applicable to a particular purchase, the purchaser or his dealer must
furnish AFS with a list of the account numbers and the names in which such
accounts of the purchaser are registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM
Funds at net asset value (without payment of an initial sales charge) may be
made in connection with: (a) the reinvestment of dividends and distributions
from a fund; (b) exchanges of shares of certain funds; (c) use of the
reinstatement privilege; or (d) a merger, consolidation or acquisition of assets
of a fund.
The following purchasers will not pay initial sales charges on
purchases of Class A shares because there is a reduced sales effort involved in
sales to these purchasers:
o AIM Management and its affiliates, or their clients;
61
<PAGE> 545
o Any current or retired officer, director or employee (and members
of their immediate family) of AIM Management, its affiliates or
The AIM Family of Funds--Registered Trademark--, and any
foundation, trust or employee benefit plan established
exclusively for the benefit of, or by, such persons;
o Any current or retired officer, director, or employee (and
members of their immediate family), of CIGNA Corporation or its
affiliates, or of First Data Investor Services Group; and any
deferred compensation plan for directors of investment companies
sponsored by CIGNA Investments, Inc. or its affiliates;
o Sales representatives and employees (and members of their
immediate family) of selling group members or financial
institutions that have arrangements with such selling group
members;
o Purchases through approved fee-based programs;
o Employee benefit plans designated as purchasers as defined above,
and non-qualified plans offered in conjunction therewith,
provided the initial investment in the plan(s) is at least $1
million; the sponsor signs a $1 million LOI; the
employer-sponsored plan(s) has at least 100 eligible employees;
or all plan transactions are executed through a single omnibus
account per Fund and the financial institution or service
organization has entered into the appropriate agreements with the
distributor. Section 403(b) plans sponsored by public educational
institutions are not eligible for a sales charge exception based
on the aggregate investment made by the plan or the number of
eligible employees. Purchases of AIM Small Cap Opportunities Fund
by such plans are subject to initial sales charges;
o Shareholders of record or discretionary advised clients of any
investment advisor holding shares of AIM Weingarten Fund or AIM
Constellation Fund on September 8, 1986, or of AIM Charter Fund
on November 17, 1986, who have continuously owned shares having a
market value of at least $500 and who purchase additional shares
of the same Fund;
o Shareholders of record of Advisor Class shares of AIM
International Growth Fund or AIM Worldwide Growth Fund on
February 12, 1999 who have continuously owned shares of the AIM
Funds.
o Unitholders of G/SET series unit investment trusts investing
proceeds from such trusts in shares of AIM Weingarten Fund or AIM
Constellation Fund; provided, however, prior to the termination
date of the trusts, a unitholder may invest proceeds from the
redemption or repurchase of his units only when the investment in
shares of AIM Weingarten Fund and AIM Constellation Fund is
effected within 30 days of the redemption or repurchase;
o A shareholder of a fund that merges or consolidates with an AIM
Fund or that sells its assets to an AIM Fund in exchange for
shares of an AIM Fund;
o Shareholders of the GT Global funds as of April 30, 1987 who
since that date continually have owned shares of one or more of
these funds; and
o Certain former AMA Investment Advisers' shareholders who became
shareholders of the AIM Global Health Care Fund in October 1989,
and who have continuously held shares in the GT Global funds
since that time.
o Shareholders of record of Advisor Class shares of an AIM Fund on
February 11, 2000 who have continuously owned shares of that AIM
Fund, and who purchase additional shares of that AIM Fund.
62
<PAGE> 546
As used above, immediate family includes an individual and his or her
spouse, children, parents and parents of spouse.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
Former GT Global funds Class A shares that are subject to a contingent
deferred sales charge and that were purchased before June 1, 1998 are entitled
to the following waivers from the contingent deferred sales charge otherwise due
upon redemption: (1) minimum required distributions made in connection with an
IRA, Keogh Plan or custodial account under Section 403(b) of the Code or other
retirement plan following attainment of age 70 1/2; (2) total or partial
redemptions resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement plan; (3) when a redemption results
from a tax-free return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code or from the death or disability of the employee; (4)
redemptions pursuant to a Fund's right to liquidate a shareholder's account
involuntarily; (5) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in the former GT Global
funds, which are permitted to be made without penalty pursuant to the Code,
other than tax-free rollovers or transfers of assets, and the proceeds of which
are reinvested in the former GT Global funds; (6) redemptions made in connection
with participant-directed exchanges between options in an employer-sponsored
benefit plan; (7) redemptions made for the purpose of providing cash to fund a
loan to a participant in a tax-qualified retirement plan; (8) redemptions made
in connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (9) redemptions made in connection with
a distribution from any retirement plan or account that involves the return of
an excess deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of
the Code; (10) redemptions made in connection with a distribution from a
qualified profit-sharing or stock bonus plan described in Section 401(k) of the
Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code
upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (11) redemptions made by or for the
benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof where such entities are prohibited or limited
by applicable law from paying a sales charge or commission.
Former GT Global funds Class B shares purchased before June 1, 1998
are subject to the following waivers from the contingent deferred sales charge
otherwise due upon redemption in addition to the waivers provided for
redemptions of currently issued Class B shares as described in a Prospectus: (1)
total or partial redemptions resulting from a distribution following retirement
in the case of a tax-qualified employer-sponsored retirement; (2) minimum
required distributions made in connection with an IRA, Keogh Plan or custodial
account under Section 403(b) of the Code or other retirement plan following
attainment of age 70 1/2; (3) redemptions pursuant to distributions from a
tax-qualified employer-sponsored retirement plan, which is invested in the
former GT Global funds, which are permitted to be made without penalty pursuant
to the Code, other than tax-free rollovers or transfers of assets, and the
proceeds of which are reinvested in the former GT Global funds; (4) redemptions
made in connection with participant-directed exchanges between options in an
employer-sponsored benefit plan; (5) redemptions made for the purpose of
providing cash to fund a loan to a participant in a tax-qualified retirement
plan; (6) redemptions made in connection with a distribution from any retirement
plan or account that is permitted in accordance with the provisions of Section
72(t)(2) of the Code, and the regulations promulgated thereunder; (7)
redemptions made in connection with a distribution from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the Code to a
participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon
hardship of the covered employee (determined pursuant to Treasury Regulation
Section 1.401(k)-1(d)(2)); and (8) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
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CDSCs will not apply to the following:
o Additional purchases of Class C shares of AIM Advisor Flex Fund,
AIM Advisor International Value Fund, AIM Advisor Large Cap Value
Fund and AIM Advisor Real Estate Fund by shareholders of record
on April 30, 1995, of these Funds, except that shareholders whose
broker-dealers maintain a single omnibus account with AFS on
behalf of those shareholders, perform sub-accounting functions
with respect to those shareholders, and are unable to segregate
shareholders of record prior to April 30, 1995, from shareholders
whose accounts were opened after that date will be subject to a
CDSC on all purchases made after March 1, 1996;
o Redemptions following the death or post-purchase disability of
(1) any registered shareholders on an account or (2) a settlor of
a living trust, of shares held in the account at the time of
death or initial determination of post-purchase disability;
o Certain distributions from individual retirement accounts,
Section 403(b) retirement plans, Section 457 deferred
compensation plans and Section 401 qualified plans, where
redemptions result from (i) required minimum distributions to
plan participants or beneficiaries who are age 70-1/2 or older,
and only with respect to that portion of such distributions that
does not exceed 12% annually of the participant's or
beneficiary's account value in a particular AIM Fund; (ii) in
kind transfers of assets where the participant or beneficiary
notifies the distributor of the transfer no later than the time
the transfer occurs; (iii) tax-free rollovers or transfers of
assets to another plan of the type described above invested in
Class B or Class C shares of one or more of the AIM Funds; (iv)
tax-free returns of excess contributions or returns of excess
deferral amounts; and (v) distributions on the death or
disability (as defined in the Internal Revenue Code of 1986, as
amended) of the participant or beneficiary;
o Amounts from a Systematic Withdrawal Plan of up to an annual
amount of 12% of the account value on a per fund basis, at the
time the withdrawal plan is established, provided the investor
reinvests his dividends;
o Liquidation by the Fund when the account value falls below the
minimum required account size of $500;
o Investment account(s) of AIM; and
o Class C shares where the investor's dealer of record notifies the
distributor prior to the time of investment that the dealer
waives the payment otherwise payable to him.
Upon the redemption of shares of funds in sales charge Categories I
and II (see "Sales Charges and Dealer Concessions") purchased in amounts of $1
million or more, no CDSC will be applied in the following situations:
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o Shares held more than 18 months;
o Redemptions from employee benefit plans designated as qualified
purchasers, as defined above, where the redemptions are in
connection with employee terminations or withdrawals, provided
the total amount invested in the plan is at least $1,000,000; the
sponsor signs a $1 million LOI; or the employer-sponsored plan
has at least 100 eligible employees; provided, however, that
403(b) plans sponsored by public educational institutions shall
qualify for the CDSC waiver on the basis of the value of each
plan participant's aggregate investment in the AIM Funds, and not
on the aggregate investment made by the plan or on the number of
eligible employees;
o Private foundations or endowment funds;
o Redemption of shares by the investor where the investor's dealer
waives the amounts otherwise payable to it by the distributor and
notifies the distributor prior to the time of investment; and
o Shares acquired by exchange from Class A shares of funds in sales
charge Categories I and II unless the shares acquired by exchange
are redeemed within 18 months of the original purchase of the
Class A shares.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of each Fund may
be purchased appears in the Prospectus under the heading "Purchasing Shares--How
to Purchase Shares."
The sales charge normally deducted on purchases of Class A shares of
the Funds is used to compensate AIM Distributors and participating dealers for
their expenses incurred in connection with the distribution of such shares.
Since there is little expense associated with unsolicited orders placed directly
with AIM Distributors by persons who, because of their relationship with the
Funds or with AIM and its affiliates, are familiar with the Funds, or whose
programs for purchase involve little expense (e.g., because of the size of the
transaction and shareholder records required), AIM Distributors believes that it
is appropriate and in the Funds' best interests that such persons be permitted
to purchase Class A shares of the Funds through AIM Distributors without payment
of a sales charge. The persons who may purchase Class A shares of the Funds
without a sales charge are listed under the caption "Reductions in Initial Sales
Charges - Purchases at Net Asset Value."
Complete information concerning the method of exchanging shares of the
Funds for shares of the other AIM Funds is set forth in the Prospectus under the
heading "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in
each Fund's Prospectus under the caption "Redeeming Shares." Shares of the AIM
Funds may be redeemed directly through AIM Distributors or through any dealer
who has entered into an agreement with AIM Distributors. In addition to the
Funds' obligation to redeem shares, AIM Distributors may also repurchase shares
as an accommodation to shareholders. To effect a repurchase, those dealers who
have executed Selected Dealer Agreements with AIM Distributors must phone orders
to the order desk of the Fund telephone: or (800) 347-4246 and guarantee
delivery of all required documents in good order. A repurchase is effected at
the net asset value of the Fund next determined after such order is received.
Such arrangement is subject to timely receipt by AFS of all required documents
in good order. If such documents are not received within a reasonable time after
the order is placed, the order is subject to cancellation. While there is no
charge imposed by the Funds or by AIM Distributors (other than any applicable
CDSC) when shares are redeemed or repurchased, dealers may charge a fair service
fee for handling the transaction. AIM intends to redeem all shares of the Funds
in cash.
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The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange ("NYSE") is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the NYSE is closed for other than customary weekend and holiday closings, (c)
the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of a Fund not reasonably practicable.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer
identification number or, alternatively, a completed Internal Revenue Service
("IRS") Form W-8 (for non-resident aliens) or Form W-9 (certifying exempt
status) accompanying the registration information will generally be subject to
backup withholding.
Each AIM Fund, and other payers, must, according to IRS regulations,
withhold 31% of redemption payments and reportable dividends (whether paid or
accrued) in the case of any shareholder who fails to provide the Fund with a
taxpayer identification number ("TIN") and a certification that he is not
subject to backup withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an
incorrect TIN, or
(3) the investor or the Fund is notified by the IRS that the investor
is subject to backup withholding because the investor failed to
report all of the interest and dividends on such investor's tax
return (for reportable interest and dividends only), or
(4) the investor fails to certify to the Fund that the investor is
not subject to backup withholding under (3) above (for reportable
interest and dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to
non-exempt mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in
all five situations discussed above. Redemption proceeds and long-term gain
distributions are subject to backup withholding only if (1) (2) or (5) above
applies.
Certain payees and payments are exempt from backup withholding and
information reporting. A complete listing of such exempt entities appears in the
Instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
o a corporation
o an organization exempt from tax under Section 501(a), an individual
retirement plan (IRA), or a custodial account under Section 403(b)(7)
o the United States or any of its agencies or instrumentalities
o a state, the District of Columbia, a possession of the United States,
or any of their political subdivisions or instrumentalities
o a foreign government or any of its political subdivisions, agencies or
instrumentalities
o an international organization or any of its agencies or
instrumentalities
o a foreign central bank of issue
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o a dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
o a futures commission merchant registered with the Commodity Futures
Trading Commission
o a real estate investment trust
o an entity registered at all times during the tax year under the 1940
Act
o a common trust fund operated by a bank under Section 584(a)
o a financial institution
o a middleman known in the investment community as a nominee or listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List
o a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a
correct TIN will be subject to a $50 penalty imposed by the IRS unless such
failure is due to reasonable cause and not willful neglect. If an investor
falsifies information on this form or makes any other false statement resulting
in no backup withholding on an account which should be subject to backup
withholding, such investor may be subject to a $500 penalty imposed by the IRS
and to certain criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign
entities are not subject to the backup withholding previously discussed, but
must certify their foreign status by attaching IRS Form W-8 to their
application. Form W-8 remains in effect for three calendar years beginning with
the calendar year in which it is received by the Fund. Such shareholders may,
however, be subject to federal income tax withholding at a 30% rate on ordinary
income dividends and distributions and return of capital distributions. Under
applicable treaty law, residents of treaty countries may qualify for a reduced
rate of withholding or a withholding exemption.
NET ASSET VALUE DETERMINATION
The net asset value per share of each Fund is normally determined once
daily as of the close of the customary trading session of the NYSE (generally
4:00 p.m. Eastern time) on each business day of the Fund. In the event the NYSE
closes early (i.e., before 4:00 p.m. Eastern time) on a particular day, the net
asset value of a Fund share is determined as of the close of the NYSE on such
day. Net asset value per share is determined by dividing the value of each Theme
Portfolio's securities, cash and other assets (including interest accrued but
not collected) attributable to a particular class, less all its liabilities
(including accrued expenses and dividends payable) attributable to that class,
by the total number of shares outstanding of that class. Determination of each
Fund's net asset value per share is made in accordance with generally accepted
accounting principles.
Each equity security held by a Theme Portfolio is valued at its last
sales price on the exchange where the security is principally traded or, lacking
any sales on a particular day, the security is valued at the last available bid.
Each security traded in the over-the-counter market (but not including
securities reported on the NASDAQ National Market System) is valued at the mean
between the last bid and asked prices based upon quotes furnished by market
makers for such securities. Each security reported on the NASDAQ
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National Market System is valued at the last sales price on the valuation date
or absent a last sales price, at the mean between the closing bid and asked
prices on that day. Debt securities are valued on the basis of prices provided
by an independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, developments related to special securities, yield, quality, coupon
rate, maturity, type of issue, individual trading characteristics and other
market data. Securities for which market quotations are not readily available or
are questionable are valued at fair value as determined in good faith by or
under the supervision of the Trust's officers in a manner specifically
authorized by the Board of Trustees. Short-term obligations having 60 days or
less to maturity are valued on the basis of amortized cost. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of the customary trading session of
the NYSE.
Generally, trading in foreign securities, corporate bonds, U.S.
Government securities and money market instruments is substantially completed
each day at various times prior to the close of the customary trading session of
the NYSE. The values of such securities used in computing the net asset value of
each Fund's shares are determined at such times. Foreign currency exchange rates
are also generally determined prior to the close of the NYSE. Occasionally,
events affecting the values of such securities and such exchange rates may occur
between the times at which such values are determined and the close of the
customary trading session of the NYSE which will not be reflected in the
computation of a Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees of the Fund and the Portfolio.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gain distributions are automatically
reinvested in additional shares of the same class of each Fund unless the
shareholder has requested in writing to receive such dividends and distributions
in cash or that they be invested in shares of another AIM Fund, subject to the
terms and conditions set forth in "Shareholder Information-Purchasing
Shares-Special Plans-Automatic Dividend Investment." If a shareholder's account
does not have any shares in it on a dividend or capital gain distribution
payment date, the dividend or distribution will be paid in cash whether or not
the shareholder has elected to have such dividends or distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning.
TAXATION OF THE 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
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currencies ("Income Requirement"); and (2) the Diversification Requirements.
Each Feeder Fund, as an investor in its corresponding Portfolio, is deemed to
own a proportionate share of the Portfolio's assets, and to earn a proportionate
share of the Portfolio's income, for purposes of determining whether the Fund
satisfies the requirements described above to qualify as a RIC.
By qualifying for treatment as a RIC, each Fund (but not its
shareholders) will be relieved of federal income tax on the part of its
investment company taxable income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) that it distributes to
its shareholders. If a Fund failed to qualify for treatment as a RIC for any
taxable year, (1) it would be taxed as an ordinary corporation on the full
amount of its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and (2) the shareholders would treat
all those distributions, including distributions of net capital gain, as
dividends (that is, ordinary income) to the extent of the Fund's earnings and
profits. In addition, the Fund could be required to recognize unrealized gains,
pay substantial taxes and interest and make substantial distributions before
requalifying for RIC treatment.
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 each Feeder Fund of hedging transactions engaged in,
and investments in passive foreign investment companies ("PFICs") and other
foreign securities by its corresponding Portfolio and to the Health Care Fund
and Telecommunications and Technology Fund of those transactions and
investments.
TAXATION OF THE THEME PORTFOLIOS
The Portfolios and their Relationship to the Feeder Funds. Each
Portfolio is treated as a separate partnership for federal income tax purposes
and is not a "publicly traded partnership." As a result, each Portfolio is not
subject to federal income tax; instead, each Feeder Fund, as an investor in its
corresponding Portfolio, is required to take into account in determining its
federal income tax liability its share of the Portfolio's income, gains, losses,
deductions and credits, without regard to whether it has received any cash
distributions from the Portfolio. Each Portfolio also is not subject to Delaware
income or franchise tax.
Because, as noted above, each Feeder Fund is deemed to own a
proportionate share of its corresponding Portfolio's assets, and to earn a
proportionate share of its corresponding Portfolio's income, for purposes of
determining whether the Fund satisfies the requirements to qualify as a RIC,
each Portfolio intends to conduct its operations so that its corresponding Fund
will be able to continue to satisfy all those requirements.
Distributions to each Feeder Fund from its corresponding Portfolio
(whether pursuant to a partial or complete withdrawal or otherwise) will not
result in the Fund's recognition of any gain or loss for federal income tax
purposes, except that (1) gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, and
(3) loss will be recognized if a liquidation distribution consists solely of
cash and/or unrealized receivables. Each Feeder Fund's basis for its interest in
its corresponding Portfolio generally will equal the amount of cash and the
basis of any property the Fund invests in the Portfolio, increased by the Fund's
share of the Portfolio's net income and gains and decreased by (a) the amount of
cash and the basis of any property the Portfolio distributes to the Fund and (b)
the Fund's share of the Portfolio's losses.
EXCHANGE AND REINSTATEMENT PRIVILEGES AND WASH SALES
If a shareholder disposes of a Fund's shares ("original shares")
within 90 days after purchase thereof and subsequently reacquires shares of
that Fund or acquires shares of another AIM Fund on which a sales charge
normally is imposed ("replacement shares"), without paying the sales charge (or
paying a reduced charge) due to an exchange privilege or a reinstatement
privilege, then (1) any gain on the disposition of the original shares will be
increased, or the loss thereon decreased, by the amount of the sales charge
paid when those shares were acquired and (2) that amount will increase the
adjusted basis of the replacement shares that were subsequently acquired. In
addition, if a shareholder purchases shares of a Fund (whether pursuant to the
reinstatement privilege or otherwise) within 30 days before or after redeeming
at a loss other shares of that Fund (regardless of class), all or part of that
loss will not be deductible and instead will increase the basis of the newly
purchased shares.
TAXATION OF CERTAIN INVESTMENT ACTIVITIES
Foreign Taxes. Dividends and interest received by a Theme Portfolio,
and gains realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that would
reduce the yield and/or total return on its securities. Tax conventions between
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certain countries and the United States may reduce or eliminate foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of a
Fund's total assets (taking into account, in the case of a Feeder Fund, its
proportionate share of its corresponding Portfolio's assets) at the close of its
taxable year consists of securities of foreign corporations, the Fund will be
eligible to, and may, file an election with the Internal Revenue Service that
will enable its shareholders, in effect, to receive the benefit of the foreign
tax credit with respect to any foreign taxes paid by it (taking into account, in
the case of a Feeder Fund, its proportionate share of any foreign taxes paid by
its corresponding Portfolio) (a "Fund's foreign taxes"). Pursuant to the
election, a Fund would treat those taxes as dividends paid to its shareholders
and each shareholder would be required to (1) include in gross income, and treat
as paid by him, his share of the Fund's foreign taxes, (2) treat his share of
those taxes and of any dividend paid by the Fund that represents its income from
foreign and U.S. possessions sources (taking into account, in the case of a
Feeder Fund, its proportionate share of its corresponding Portfolio's income
from those sources) as his own income from those sources and (3) either deduct
the taxes deemed paid by him in computing his taxable income or, alternatively,
use the foregoing information in calculating the foreign tax credit against his
federal income tax. Each Fund will report to its shareholders shortly after each
taxable year their respective shares of the Fund's foreign taxes and income
(taking into account, in the case of a Feeder Fund, its proportionate share of
its corresponding Portfolio's income) from sources within foreign countries and
U.S. possessions if it makes this election. Pursuant to the Taxpayer Relief Act
of 1997 ("Tax Act"), individuals who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign taxes included on Form 1099 and
all of whose foreign source of income is "qualified passive income" may elect
each year to be exempt from the foreign tax credit limitation and will be able
to claim a foreign tax credit without having to file the Form 1116 that
otherwise is required.
Passive Foreign Investment Companies. Each Theme Portfolio may invest
in the stock of passive foreign investment companies ("PFICs"). A PFIC is any
foreign corporation (with certain exceptions) that, in general, meets either of
the following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a Fund will be subject to
federal income tax on a part (or, in the case of a Feeder Fund, its
proportionate share of a part) of any "excess distribution" received by it (or,
in the case of a Feeder Fund, by its corresponding Portfolio) on the stock of a
PFIC or of any gain on the Fund's (or, in the case of a Feeder Fund, its
corresponding Portfolio's) disposition of that stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent it distributes that income to its
shareholders.
If a Theme Portfolio invests in a PFIC and elects to treat the PFIC as
a "qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Theme Portfolio (or, in the case of a Portfolio, its
corresponding Feeder Fund) would be required to include in income each year its
pro rata share (taking into account, in the case of a Feeder Fund, its
proportionate share of its corresponding Portfolio's pro rata share) of the
QEF's ordinary earnings and net capital gain which most likely would have to be
distributed by the Theme Portfolio (or, in the case of a Portfolio, its
corresponding Feeder Fund) to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax--even if those earnings and gain were not received
thereby from the QEF. In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.
A holder of stock in any PFIC may elect to include in ordinary income
for each taxable year beginning after 1997 the excess, if any, of the fair
market value of the stock over the adjusted basis therein as of the end of that
year. Pursuant to the election, a deduction (as an ordinary, not capital, loss)
also will be allowed for
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the excess, if any, of the holder's adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included in income for prior
taxable years. The adjusted basis in each PFIC's stock subject to the election
will be adjusted to reflect the amounts of income included and deductions taken
thereunder. Regulations proposed in 1992 provided a similar election with
respect to the stock of certain PFICs.
Options, Futures and Foreign Currency Transactions. The Theme
Portfolios' use of hedging transactions, such as selling (writing) and
purchasing options and futures and entering into forward contracts, involves
complex rules that will determine, for federal income tax purposes, the amount,
character and timing of recognition of the gains and losses a Theme Portfolio
realizes in connection therewith. Gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations),
and gains from options, futures and forward contracts derived by a Theme
Portfolio with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income Requirement for
that Theme Portfolio (or, in the case of a Portfolio, its corresponding Feeder
Fund).
Futures and forward contracts that are subject to section 1256 of the
Code (other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by a Theme Portfolio at the end of its taxable
year generally will be deemed to have been sold at that time at market value for
federal income tax purposes. Sixty percent of any net gain or loss recognized on
these deemed sales, and 60% of any net gain or loss realized from any actual
sales of Section 1256 Contracts, will be treated as long-term capital gain or
loss, and the balance will be treated as short-term capital gain or loss. That
60% portion will qualify for the reduced maximum tax rates on noncorporate
taxpayers' net capital gain--20% (10% for non-corporate taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
12 months.
Section 988 of the Code also may apply to gains and losses from
transactions in foreign currencies, foreign-currency-denominated debt securities
and options, futures and forward contracts on foreign currencies ("Section 988"
gains and losses). Each Section 988 gain or loss generally is computed
separately and treated as ordinary income or loss. In the case of overlap
between Sections 1256 and 988, special provisions determine the character and
timing of any income, gain or loss. Each Theme Portfolio attempts to monitor
section 988 transactions to minimize any adverse tax impact.
If a Theme Portfolio has an "appreciated financial
position"--generally, an interest (including an interest through an option,
futures or forward contract or short sale) with respect to any stock, debt
instrument (other than "straight debt") or partnership interest the fair market
value of which exceeds its adjusted basis--and enters into a "constructive sale"
of identical property, the Theme Portfolio will be treated as having made an
actual sale thereof, with the result that gain will be recognized at that time
unless the closed transaction exception applies. A constructive sale generally
consists of a short sale, an offsetting notional principal contract or futures
or forward contract entered into by a Theme Portfolio or a related person with
respect to the same or substantially identical property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially identical property will
be deemed a constructive sale.
TAXATION OF THE FUNDS' SHAREHOLDERS
Dividends and other distributions declared by a Fund in, and payable
to shareholders of record as of a date in, October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
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 that fund
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from U.S. corporations. However, dividends received by a corporate shareholder
and deducted by it pursuant to the dividends-received deduction are subject
indirectly to the federal alternative minimum tax.
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
Investors also should be aware that if shares are purchased shortly before the
record date for any dividend or other distribution, the shareholder will pay
full price for the shares and receive some portion of the price back as a
taxable distribution.
Dividends paid by a Fund to a shareholder who, as to the United
States, is a nonresident alien individual, nonresident alien fiduciary of a
trust or estate, foreign corporation or foreign partnership ("foreign
shareholder") generally will be subject to U.S. withholding tax (at a rate of
30% or lower treaty rate). Withholding will not apply, however, to a dividend
paid by a Fund to a foreign shareholder that is "effectively connected with the
conduct of a U.S. trade or business," in which case the reporting and
withholding requirements applicable to domestic shareholders will apply. A
distribution of net capital gain by a Fund to a foreign shareholder generally
will be subject to U.S. federal income tax (at the rates applicable to domestic
persons) only if the distribution is "effectively connected" or the foreign
shareholder is treated as a resident alien individual for federal income tax
purposes.
The foregoing is a general and abbreviated summary of certain federal
tax considerations affecting the Funds, their shareholders and the Portfolios at
the date of this Statement of Additional Information. Investors are urged to
consult their own tax advisors for more detailed information and for information
regarding any foreign, state and local taxes applicable to distributions
received from a Fund.
SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus
under the title "Shareholder Information."
TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent.
Any loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. If a check used to purchase
shares does not clear, or if any investment order must be canceled due to
nonpayment, the investor will be responsible for any resulting loss to an AIM
Fund or to AIM Distributors.
SHARE CERTIFICATES. AIM Funds will issue share certificates upon
written request to AFS. Otherwise, shares are held on the shareholder's behalf
and recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, all
shares are to be held by the Transfer Agent and all dividends and distributions
are reinvested in shares of the applicable AIM Fund by the Transfer Agent. To
provide funds for payments made under the Systematic Withdrawal Plan, the
Transfer Agent redeems sufficient full and fractional shares at their net asset
value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events.
Since such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the AIM Funds and AIM Cash Reserve
Share of AIM Money Market Fund), it is disadvantageous to effect such purchases
while a Systematic Withdrawal Plan is in effect.
72
<PAGE> 556
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
TERMS AND CONDITIONS OF EXCHANGE. Normally, shares of an AIM Fund to
be acquired by exchange are purchased at their net asset value or applicable
offering price, as the case may be, determined on the date that such request is
received, but under unusual market conditions such purchases may be delayed for
up to five business days if it is determined that a fund would be materially
disadvantaged by an immediate transfer of the proceeds of the exchange. If a
shareholder is exchanging into a fund paying daily dividends, and the release of
the exchange proceeds is delayed for the foregoing five-day period, such
shareholder will not begin to accrue dividends until the sixth business day
after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with
certain dealers and investment advisory firms to accept telephone instructions
to exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by telegraph or use overnight courier services to expedite exchanges by mail,
which will be effective on the business day received by the Transfer Agent as
long as such request is received prior to NYSE Close. The Transfer Agent and AIM
Distributors may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction.
By signing an account application form, an investor appoints the
Transfer Agent as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by the Transfer Agent in the
designated account(s), or in any other account with any of the AIM Funds,
present or future, which has the identical registration as the designated
account(s), with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption proceeds to be applied to purchase shares
in any one or more of the AIM Funds, provided that such fund is available for
sale and provided that the registration and mailing address of the shares to be
purchased are identical to the registration of the shares being redeemed. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone exchange requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transactions. The Transfer Agent reserves the
right to modify or terminate the telephone exchange privilege at any time
without notice. An investor may elect not to have this privilege by marking the
appropriate box on the application. Then any exchanges must be effected in
writing by the investor.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an
investor appoints the Transfer Agent as his true and lawful attorney-in-fact to
surrender for redemption any and all unissued shares held by the Transfer Agent
in the designated account(s), present or future, with full power of substitution
in the premises. The Transfer Agent and AIM Distributors are thereby authorized
and directed to accept and act upon any telephone redemptions of shares held in
any of the account(s) listed, from any person who requests the redemption. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss,
73
<PAGE> 557
expense or cost arising out of any telephone redemption requests effected in
accordance with the authorization set forth in these instructions if they
reasonably believe such request to be genuine, but may in certain cases be
liable for losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transaction. The Transfer Agent reserves the
right to cease to act as attorney-in-fact subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone redemption
privilege at any time without notice. An investor may elect not to have this
privilege by marking the appropriate box on the application. Then any
redemptions must be effected in writing by the investor.
SIGNATURE GUARANTEES. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the SEC, and
further provided that such guarantor institution is listed in one of the
reference guides contained in the Transfer Agent's current Signature Guarantee
Standards and Procedures, such as certain domestic banks, credit unions,
securities dealers, or securities exchanges. The Transfer Agent will also accept
signatures with either: (1) a signature guaranteed with a medallion stamp of the
STAMP Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
TRANSACTIONS BY INTERNET. An investor may effect transactions in his
account through the Internet by selecting the AIM Internet Connect option on his
completed account application form or completing an AIM Internet Connect
Authorization Form. By signing either form the investor acknowledges and agrees
that the Transfer Agent and AIM Distributors will not be liable for any loss,
expense or cost arising out of any internet transaction effected in accordance
with the instructions set forth in the forms if they reasonably believe such
request to be genuine. Procedures for verification of internet transactions
include requests for confirmation of the shareholder's personal identification
number and mailing of confirmations promptly after the transactions. The
investor also acknowledges that (1) if he no longer wants the AIM Internet
Connect option, he will notify the Transfer Agent in writing, and (2) the AIM
Internet Connect option may be terminated at any time by the AIM Funds.
DIVIDENDS AND DISTRIBUTIONS. In determining the amount of capital
gains, if any, available for distribution, net capital gains are offset against
available net capital losses, if any, carried forward from previous fiscal
periods.
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than
those for Class A shares or AIM Cash Reserve Shares because of higher
distribution fees paid by Class B and Class C shares.
74
<PAGE> 558
Dividends on all shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made
by the shareholder at any time by notice to the Transfer Agent and are effective
as to any subsequent payment if such notice is received by the Transfer Agent
prior to the record date of such payment. Any dividend and distribution election
remains in effect until the Transfer Agent receives a revised written election
by the shareholder.
Any dividend or distribution paid by a fund which does not declare
dividends daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
MISCELLANEOUS INFORMATION
CHARGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying charges for requests for
copies of shareholder account statements and other historical account
information older than the current year and the immediately preceding year.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of all securities and cash of
the Funds. The Custodian attends to the collection of principal and income, pays
and collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. AIM Fund Services, Inc., a wholly owned
subsidiary of AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, acts
as transfer and dividend disbursing agent for the Funds. These services do not
include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Funds pay the Custodian and the
Transfer Agent such compensation as may be agreed upon from time to time.
INDEPENDENT ACCOUNTANTS
The Trust's and Theme Portfolios' independent accountants are
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP conducts annual audits of
the Portfolios' and the Funds' financial statements, assists in the preparation
of each Portfolio's and each Fund's federal and state income tax returns and
consults with the Trust and Global Investment Portfolio as to matters of
accounting, regulatory filings, and federal and state income taxation.
The audited financial statements of the Trust included in this
Statement of Additional Information have been examined by PricewaterhouseCoopers
LLP, as stated in their opinion appearing herein, and are included in reliance
upon such opinion given upon the authority of that firm as experts in accounting
and auditing.
LEGAL MATTERS
The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Trust and the Funds.
75
<PAGE> 559
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of the Trust enjoy the same
limitations extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
the Trust Agreement disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
trustee. If a shareholder is held personally liable for the obligations of the
Trust, the Trust Agreement provides that the shareholder shall be entitled out
of the assets belonging to the applicable Fund (or allocable to the applicable
Class), to be held harmless from and indemnified against all loss and expense
arising from such liability in accordance with the Trust's Bylaws and applicable
law. Thus, the risk of a shareholder incurring financial loss on account of such
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations and where the other party was held not to be bound by
the disclaimer.
SPECIAL SERVICING AGREEMENT
Subject to receipt of an exemptive order from the SEC, the Funds will
be parties to a Special Servicing Agreement ("Agreement") among the Trust on
behalf of the Funds, AIM Series Trust on behalf of its sole series, AIM Global
Trends Fund ("Global Trends Fund"), AIM and AFS. The Agreement will provide
that, if the Trust's Board of Trustees determines that a Fund's share of the
aggregate expenses of Global Trends Fund is less than the estimated savings to
the Fund from the operation of Global Trends Fund, the Fund will bear those
expenses in proportion to the average daily value of its shares owned by Global
Trends Fund, provided that no Fund will bear such expenses in excess of the
estimated savings to it. Those savings are expected to result primarily from the
elimination of numerous separate shareholder accounts that are or would have
been invested directly in the Funds and the resulting reduction in shareholder
servicing costs. Although these cost savings are not certain, the estimated
savings to the Funds generated by the operation of Global Trends Fund are
expected to be sufficient to offset most, if not all, of the expenses incurred
by that Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding shares of any class of each Fund's
equity securities as of February 14, 2000, and the percentage of the outstanding
shares held by such holders are set forth below:
<TABLE>
<CAPTION>
PERCENT PERCENT
OWNED OF OWNED OF
NAME AND ADDRESS RECORD RECORD AND
FUND OF RECORD OWNER ONLY* BENEFICIALLY
- ---- ---------------- -------- ------------
<S> <C> <C> <C>
Consumer Products and Services Fund -
Class B Merrill Lynch Pierce Fenner & Smith 7.17% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
</TABLE>
- ------------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
76
<PAGE> 560
<TABLE>
<CAPTION>
PERCENT PERCENT
OWNED OF OWNED OF
NAME AND ADDRESS RECORD RECORD AND
FUND OF RECORD OWNER ONLY* BENEFICIALLY
- ---- ---------------- -------- ------------
<S> <C> <C> <C>
Consumer Products and Services Fund -
Class C Merrill Lynch Pierce Fenner & Smith 28.42% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
Salomon Smith Barney Inc. 5.23% -0-
333 West 34th Street - 3rd Floor
New York, NY 10001
Financial Services Fund -
Class A Merrill Lynch Pierce Fenner & Smith 11.70% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
Financial Services Fund -
Class B Merrill Lynch Pierce Fenner & Smith 12.55% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
Financial Services Fund -
Class C Merrill Lynch Pierce Fenner & Smith 26.77% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
Health Care Fund -
Class A Merrill Lynch Pierce Fenner & Smith 12.70% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
Health Care Fund -
Class B Merrill Lynch Pierce Fenner & Smith 9.56% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
Health Care Fund -
Class C Merrill Lynch Pierce Fenner & Smith 13.19% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
</TABLE>
- ------------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
77
<PAGE> 561
<TABLE>
<CAPTION>
PERCENT PERCENT
OWNED OF OWNED OF
NAME AND ADDRESS RECORD RECORD AND
FUND OF RECORD OWNER ONLY* BENEFICIALLY
- ---- ---------------- -------- ------------
<S> <C> <C> <C>
Infrastructure Fund -
Class B Merrill Lynch Pierce Fenner & Smith 7.91% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
Infrastructure Fund -
Class C Double John Partnership 48.63% -0-
8655 Camargo Rd
Cincinnati, OH 45243
Salomon Smith Barney Inc 38.46% -0-
333 West 34th St - 3rd Floor
New York, NY 10001
Resources Fund -
Class B Merrill Lynch Pierce Fenner & Smith 7.15% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
Resources Fund -
Class C Huntleigh Securities 16.28% -0-
Clinton C. Initial Cntrbtn Fnd
8000 Maryland Ave
St. Louis, MO 63105
Huntleigh Securities 16.11% -0-
Contribution Fund
8000 Maryland Ave
St. Louis, MO 63105
Huntleigh Securities 12.39% -0-
Bond Co Initial Cont Fund
8000 Maryland Ave
St. Louis, MO 63105
NFSC FEBO # EBP-217620 -0- 10.76%
John C. Kristoff
4 Sunset Dr
Sterling, MA 01564
NFSC FEBO # STL-037290 -0- 9.71%
NFSC/FMTC IRA Rollover
FBO Joseph E. Nelson
2545 Marcal Rd
Birmingham, AL 35244
</TABLE>
- ------------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
78
<PAGE> 562
<TABLE>
<CAPTION>
PERCENT PERCENT
OWNED OF OWNED OF
NAME AND ADDRESS RECORD RECORD AND
FUND OF RECORD OWNER ONLY* BENEFICIALLY
- ---- ---------------- -------- ------------
<S> <C> <C> <C>
NFSC FEBO # STL-115541 7.44% -0-
Marilyn Stocks TTEE
Daniel F and Mabel S Carrick Fam
2590 Bennett Ridge Rd
Santa Rosa, CA 95404
Painewebber for the Benefit of -0- 6.34%
Painewebber Cust - JT10008
FBO Robert L Guynn
P. O. Box 1108
New York, NY 10268-1108
Merrill Lynch Pierce Fenner & Smith 5.34% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
Telecommunications and Technology Fund -
Class A Merrill Lynch Pierce Fenner & Smith 9.09% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
Telecommunications and Technology Fund -
Class B Merrill Lynch Pierce Fenner & Smith 10.35% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
Telecommunications and Technology Fund -
Class C Merrill Lynch Pierce Fenner & Smith 8.97% -0-
FBO The Sole Benefit of Customers
4800 Deer Lake Dr East 2nd Floor
Jacksonville, FL 32246
</TABLE>
As of February 14, 2000, the trustees and officers of the Trust owned
beneficially less than 1% of the outstanding shares of each class of Consumer
Products and Services Fund, Financial Services Fund, Health Care Fund,
Infrastructure Fund, Resources Fund and Telecommunications and Technology Fund.
- ------------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
79
<PAGE> 563
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return is as follows:
n
P(1+T) = ERV
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable
maximum sales load is deducted at the beginning of the
1, 5, or 10 year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the 1, 5, or 10 year periods
(or fractional portion of such period).
The standardized returns for the Class A shares for each of the named
Funds, stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Consumer Products and Services Fund ....... 35.84% 29.70% N/A 29.69%
Financial Services Fund ................... 18.33% 19.07% N/A 15.90%
Health Care Fund .......................... 0.51% 16.86% 13.23% 13.61%
Infrastructure Fund ....................... 32.36% 13.11% N/A 12.27%
Resources Fund ............................ 13.02% 2.88% N/A 2.89%
Telecommunications and Technology Fund .... 98.15% 24.80% N/A 20.83%
</TABLE>
* The inception dates for Class A shares of the Funds are as follows:
Consumer Products and Services Fund 02/01/95, Financial Services Fund
05/31/94, Health Care Fund 08/07/89, Infrastructure Fund 05/31/94,
Resources Fund 05/31/94 and Telecommunications and Technology Fund
01/27/92.
The standardized returns for the Class B shares for each of the named
Funds, stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Consumer Products and Services Fund ....... 36.91% 30.18% N/A 30.23%
Financial Services Fund ................... 18.67% 19.47% N/A 16.25%
Health Care Fund .......................... 0.25% 17.21% N/A 15.91%
Infrastructure Fund ....................... 33.29% 13.43% N/A 12.58%
Resources Fund ............................ 13.23% 3.04% N/A 3.14%
Telecommunications and Technology Fund .... 102.04% 25.25% N/A 23.02%
</TABLE>
* The inception dates for Class B shares of the Funds are as follows:
Consumer Products and Services Fund 02/01/95, Financial Services Fund
05/31/94, Health Care Fund 04/01/93, Infrastructure Fund 05/31/94,
Resources Fund 05/31/94 and Telecommunications and Technology Fund
04/01/93.
80
<PAGE> 564
The standardized returns for the Class C shares for each of the named
Funds, stated as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Consumer Products and Services Fund ....... N/A N/A N/A 43.07%
Financial Services Fund ................... N/A N/A N/A 20.40%
Health Care Fund .......................... N/A N/A N/A 4.45%
Infrastructure Fund ....................... N/A N/A N/A 40.64%
Resources Fund ............................ N/A N/A N/A 26.10%
Telecommunications and Technology Fund .... N/A N/A N/A 94.04%
</TABLE>
* The inception date for Class C shares of Consumer Products and
Services Fund, Financial Services Fund, Health Care Fund,
Infrastructure Fund, Resources Fund and Telecommunications and
Technology Fund is 03/01/99.
Standard total return quotes may be accompanied by total return
figures calculated by alternative methods. For example, average annual total
return may be calculated without assuming payment of the full sales load
according to the following formula:
n
P(1+U) = ERV
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only a
stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment
at the end of the stated period.
The average annual non-standardized returns for Class A shares for
each of the named Funds, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Consumer Products and Services Fund ....... 42.62% 30.97% N/A 30.95%
Health Care Fund .......................... 5.52% 18.01% 13.78% 14.15%
Telecommunications and Technology Fund .... 108.08% 26.03% N/A 21.57%
</TABLE>
* The inception dates for Class A shares of the Funds are as follows:
Consumer Products and Services Fund 02/01/95, Health Care Fund
08/07/89 and Telecommunications and Technology Fund 01/27/92.
The average annual non-standardized returns for Class B shares for
each of the named Funds, stated as average annualized total returns for the
periods shown, were:
81
<PAGE> 565
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Consumer Products and Services Fund ....... 41.91% 30.32% N/A 30.30%
Health Care Fund .......................... 4.99% 17.42% N/A 15.91%
Telecommunications and Technology Fund .... 107.04% 25.41% N/A 23.02%
</TABLE>
* The inception dates for Class B shares of the Funds are as follows:
Consumer Products and Services Fund 02/01/95, Health Care Fund
04/01/93 and Telecommunications and Technology Fund 04/01/93.
The aggregate non-standardized returns for Class C shares for each of
the named Funds, stated as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Consumer Products and Services Fund ....... N/A N/A N/A 44.07%
Health Care Fund .......................... N/A N/A N/A 5.40%
Telecommunications and Technology Fund .... N/A N/A N/A 95.04%
</TABLE>
* The inception date for Class C shares Consumer Products and Services,
Health Care Fund and Telecommunications and Technology Fund is
03/01/99.
The aggregate non-standardized returns for Class A shares for each of
the named Funds, stated as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Financial Services Fund ................... 24.24% 151.26% N/A 139.38%
Infrastructure Fund ....................... 38.96% 94.43% N/A 100.38%
Resources Fund ............................ 18.69% 21.00% N/A 23.11%
</TABLE>
* The inception dates for Class A shares of the Funds are as follows:
Financial Services Fund 05/31/94, Infrastructure Fund 05/31/94 and
Resources Fund 05/31/94.
The aggregate non-standardized returns for Class B shares for each of
the named Funds, stated as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Financial Services Fund ................... 23.67% 145.38% N/A 132.93%
Infrastructure Fund ....................... 38.29% 89.75% N/A 94.90%
Resources Fund ............................ 18.23% 18.14% N/A 19.83%
</TABLE>
* The inception dates for Class B shares of the Funds are as follows:
Financial Services Fund 05/31/94, Infrastructure Fund 05/31/94 and
Resources Fund 05/31/94.
The aggregate non-standardized returns for Class C shares for each of
the named Funds, stated as aggregate total returns for the periods shown, were:
82
<PAGE> 566
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Financial Services Fund ................... N/A N/A N/A 21.40%
Infrastructure Fund ....................... N/A N/A N/A 41.64%
Resources Fund ............................ N/A N/A N/A 27.10%
</TABLE>
* The inception date for Class C shares Financial Services Fund,
Infrastructure Fund and Resources Fund is 03/01/99.
Cumulative total return across a stated period may be calculated as
follows:
n
P(1+V) = ERV
Where P = a hypothetical initial payment of $1,000.
V = cumulative total return assuming payment of all of, a
stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment
at the end of the stated period.
The aggregate non-standardized returns (not taking sales charges into
account) for the Class A shares for each of the named Funds, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Consumer Products and Services Fund ....... 42.62% 285.40% N/A 285.40%
Financial Services Fund ................... 24.24% 151.26% N/A 139.38%
Health Care Fund .......................... 5.52% 128.82% 263.76% 295.93%
Infrastructure Fund ....................... 38.96% 94.43% N/A 100.38%
Resources Fund ............................ 18.69% 21.00% N/A 23.11%
Telecommunications and Technology Fund .... 108.08% 217.95% N/A 370.55%
</TABLE>
* The inception dates for Class A shares of the Funds are as follows:
Consumer Products and Services Fund 02/01/95, Financial Services Fund
05/31/94, Health Care Fund 08/07/89, Infrastructure Fund 05/31/94,
Resources Fund 05/31/94 and Telecommunications and Technology Fund
01/27/92.
The aggregate non-standardized returns (not taking sales charges into account)
for the Class B shares for each of the named Funds, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Consumer Products and Services Fund ....... 41.91% 275.90% N/A 275.90%
Financial Services Fund ................... 23.97% 145.38% N/A 132.93%
Health Care Fund .......................... 4.99% 123.24% N/A 170.96%
Infrastructure Fund ....................... 38.29% 89.75% N/A 94.90%
Resources Fund ............................ 18.23% 18.14% N/A 19.83%
Telecommunications and Technology Fund .... 107.04% 210.25% N/A 304.84%
</TABLE>
* The inception dates for Class B shares of the Funds are as follows:
Consumer Products and Services Fund 02/01/95, Financial Services Fund
05/31/94, Health Care Fund 04/01/93, Infrastructure Fund
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<PAGE> 567
05/31/94, Resources Fund 05/31/94 and Telecommunications and
Technology Fund 04/01/93.
The aggregate non-standardized returns (not taking sales charges into
account) for the Class C shares for each of the named Funds, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Consumer Products and Services Fund ....... N/A N/A N/A 44.07%
Financial Services Fund ................... N/A N/A N/A 21.40%
Health Care Fund .......................... N/A N/A N/A 5.40%
Infrastructure Fund ....................... N/A N/A N/A 41.64%
Resources Fund ............................ N/A N/A N/A 27.10%
Telecommunications and Technology Fund .... N/A N/A N/A 95.04%
</TABLE>
* The inception date for Class C shares of Consumer Products and
Services Fund, Financial Services Fund, Health Care Fund,
Infrastructure Fund, Resources Fund and Telecommunications and
Technology Fund is 03/01/99.
The aggregate standardized returns (taking sales charges into account)
for the Class A shares for each of the named Funds, stated as aggregate total
returns for the periods shown were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Financial Services Fund ................... 18.33% 139.38% N/A 128.01%
Health Care Fund .......................... 0.51% 117.98% 246.45% 277.11%
Infrastructure Fund ....................... 32.36% 85.16% N/A 90.87%
Resources Fund ............................ 13.02% 15.24% N/A 17.26%
Telecommunications and Technology Fund .... 98.15% 202.79% N/A 348.20%
</TABLE>
* The inception dates for Class A shares of each Fund are as follows:
Financial Services Fund 05/31/94, Health Care Fund 08/07/89,
Infrastructure Fund 05/31/94, Resources Fund 05/31/94, and
Telecommunications and Technology Fund 01/27/92.
The aggregate standardized returns (taking sales charges into account)
for the Class B shares for each of the named Funds, stated as aggregate total
returns for the periods shown were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Financial Services Fund ................... 18.67% 143.38% N/A 131.93%
Health Care Fund .......................... 0.25% 121.24% N/A 170.96%
Infrastructure Fund ....................... 33.29% 87.75% N/A 93.90%
Resources Fund ............................ 13.23% 16.14% N/A 18.83%
Telecommunications and Technology Fund .... 102.04% 208.25% N/A 304.84%
</TABLE>
* The inception dates for Class B shares of each Fund are as follows:
Financial Services Fund 05/31/94, Health Care Fund 04/01/93,
Infrastructure Fund 05/31/94, Resources Fund 05/31/94, and
Telecommunications and Technology Fund 04/01/93.
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<PAGE> 568
The aggregate standardized returns (taking sales charges into account)
for the Class C shares for each of the named Funds, stated as aggregate total
returns for the periods shown were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Financial Services Fund ................... N/A N/A N/A 20.40%
Health Care Fund .......................... N/A N/A N/A 4.45%
Infrastructure Fund ....................... N/A N/A N/A 40.64%
Resources Fund ............................ N/A N/A N/A 26.10%
Telecommunications and Technology Fund .... N/A N/A N/A 94.04%
</TABLE>
* The inception date for Class C shares of Financial Services Fund,
Health Care Fund, Infrastructure Fund, Resources Fund and
Telecommunications and Technology Fund is 03/01/99.
The aggregate non-standardized returns for the Class A shares of the
Consumer Products and Services Fund, stated as aggregate total returns for the
periods shown, were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Consumer Products and Services Fund ....... 35.84% 267.09% N/A 267.09%
</TABLE>
* The inception date for Class A shares of Consumer Products and
Services Fund is 02/01/95.
The aggregate non-standardized returns for the Class B shares of
Consumer Products and Services Fund stated as aggregate total returns for the
periods shown were:
<TABLE>
<CAPTION>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION*
------ ----- ----- ----------
<S> <C> <C> <C> <C>
Consumer Products and Services Fund ....... 36.91% 273.90% N/A 274.90%
</TABLE>
* The inception date for Class B shares of Consumer Products and
Services Fund is 02/01/95.
Each Fund's investment results will vary from time to time depending
upon market conditions, the composition of each Fund's portfolio and operating
expenses of each Fund, so that current or past yield or total return should not
be considered representative of what an investment in each Fund may earn in any
future period. These factors and possible differences in the methods used in
calculating investment results should be considered when comparing each Fund's
investment results with those published for other investment companies and other
investment vehicles. Each Fund's results also should be considered relative to
the risks associated with such Fund's investment objective and policies.
PERFORMANCE INFORMATION
All advertisements of a Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. Further information regarding
the Fund's performance is contained in the Fund's annual report to shareholders,
which is available upon request and without charge.
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<PAGE> 569
A Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. Standardized total return
for Class A shares reflects the deduction of the Fund's maximum front-end sales
charge at the time of purchase. Standardized total return for Class B and Class
C shares reflects the deduction of the maximum applicable contingent deferred
sales charge on a redemption of shares held for the period.
A Fund's total return shows its overall change in value, including
changes in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
From time to time, AIM or its affiliates may waive all or a portion of
their fees and/or assume certain expenses of any Fund. Voluntary fee waivers or
reductions or commitments to assume expenses may be rescinded at any time
without further notice to investors. During periods of voluntary fee waivers or
reductions or commitments to assume expenses, AIM will retain its ability to be
reimbursed for such fee prior to the end of each fiscal year. Contractual fee
waivers or reductions or reimbursement of expenses set forth in the Fee Table in
a Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund. Fee waivers or
reductions or commitments to reduce expenses will have the effect of increasing
that Fund's yield and total return.
The performance of each Fund will vary from time to time and past
results are not necessarily indicative of future results. A Fund's performance
is a function of its portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses of the Fund and
market conditions. A shareholder's investment in a Fund is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in any Fund.
A practice of waiving or reducing fees or reimbursing expenses will
have the effect of increasing that Fund's yield and total return. The
performance of each Fund will vary from time to time and past results are not
necessarily indicative of future results. A Fund's performance is a function of
its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund and market
conditions. A shareholder's investment in a Fund is not insured or guaranteed.
These factors should be carefully considered by the investor before making an
investment in any Fund.
Some or all of the Theme Portfolios may participate in the IPO market,
and a significant portion of those Theme Portfolios' returns may be attributable
to their investment in IPOs, which have a magnified impact due to the Theme
Portfolios' small asset bases. There is no guarantee that as the Theme
Portfolios' assets grow, they will continue to invest to the same degree in IPOs
or that they will experience substantially similar performance.
Total return and yield figures for the Funds are neither fixed nor
guaranteed, and no Fund's principal is insured. Performance quotations reflect
historical information and should not be considered representative of a Fund's
performance for any period in the future. Performance is a function of a number
of factors which can be expected to fluctuate. The Funds may provide performance
information in reports, sales literature and advertisements. The Funds may also,
from time to time, quote information about the Funds published or aired by
publications or other media entities which contain articles or segments relating
to investment results or other data about one or more of the Funds. Such
publications or media entities may include the following, among others:
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<PAGE> 570
<TABLE>
<S> <C> <C>
Advertising Age Fortune New York Times
Barron's Global Finance Pension World
Best's Review Hartford Courant Inc. Pensions & Investments
Broker World Institutional Investor Personal Investor
Business Week Insurance Forum Financial Services Week
Changing Times Insurance Week Philadelphia Inquirer
Christian Science Monitor Investor's Daily Smart Money
Consumer Reports Journal of the American USA Today
Economist Society of CLU & ChFC U.S. News & World Report
EuroMoney Kiplinger Letter Wall Street Journal
FACS of the Week Money Washington Post
Financial Planning Mutual Fund Forecaster CNN
Financial Product News Mutual Fund Magazine CNBC
Financial World Nation's Business PBS
Forbes
</TABLE>
The Funds and AIM Distributors may from time to time, in
advertisements, sales literature and reports furnished to present or prospective
shareholders, compare each Fund with the following, or compare each Fund's
performance to performance data of similar mutual funds as published in the
following, among others:
<TABLE>
<S> <C>
Bank Rate National Monitor Index Micropal, Inc. (data and mutual fund rankings
Bear Stearns Foreign Bond Index and comparisons)
Bond Buyer Index Moody's Investors Service (publications)
CDA/Wiesenberger Investment Company Services Morgan Stanley Capital International All Country
(data and mutual fund rankings (AC) World Index
and comparisons) Morgan Stanley Capital International World Indices
CNBC/Financial News Composite Index Morningstar, Inc. (data and mutual fund rankings
COFI and comparisons)
Consumer Price Index NASDAQ
Datastream Organization for Economic Cooperation and
Donoghue's Development (publications)
Dow Jones Industrial Average Salomon Brothers Global Telecommunications
EAFE Index Index
First Boston High Yield Index Salomon Brothers World Government Bond
Fitch IBCA, Inc. (publications) Index -Non-U.S.
Ibbotson Associates International Bond Index Salomon Brothers World Government Bond Index
International Bank for Reconstruction and Standard & Poor's (publications)
Development (publications) Standard & Poor's 500 Composite Stock Price Index
International Finance Corporation Emerging Stangar
Markets Database Wilshire Associates
International Financial Statistics World Bank (publications and reports)
Lehman Bond Indices The World Bank Publication of Trends in
Lipper Inc. (data and mutual fund rankings Developing Countries
and comparisons) Worldscope
</TABLE>
Each Fund may also compare its performance to rates on Certificates of
Deposit and other fixed rate investments such as the following:
10-year Treasuries
30-year Treasuries
30-day Treasury Bills
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<PAGE> 571
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Funds or AIM
Distributors. Advertising for the Funds may from time to time include
discussions of general economic conditions and interest rates. Advertising for
the Funds may also include reference to the use of those Funds as part of an
individual's overall retirement investment program. From time to time, sales
literature and/or advertisements for any of the Funds may disclose (i) the
largest holdings in the Fund's portfolio, (ii) certain selling group members
and/or (iii) certain institutional shareholders.
From time to time, the Funds' sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. This
includes, but is not limited to, literature addressing general information about
mutual funds, variable annuities, dollar-cost averaging, stocks, bonds, money
markets, certificates of deposit, retirement, retirement plans, asset
allocation, tax-free investing, college planning, and inflation.
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential investments,
investors should note that the methods of computing performance of other
potential investments are not necessarily comparable to the methods employed by
a Fund.
GENERAL INFORMATION ABOUT THE THEME FUNDS AND THEME PORTFOLIOS
Each Theme Portfolio may invest worldwide across industries within the
Portfolio's area of concentration without national or regional restrictions. The
ability of each Theme Portfolio to invest worldwide may allow the portfolio
managers to select industries in different economic cycles and varying stages of
development, though there is no assurance that the managers will be successful
in this selection.
Each Theme Portfolio's area of concentration reflects the underlying
theme of the Portfolio. AIM Distributors believes that there are certain social,
political and economic trends that may benefit one or more industries within a
Theme Portfolio's area of concentration. Of course, there is no assurance that
any of the Funds will benefit as a result.
HEALTH CARE FUND
From time to time the Fund and AIM Distributors will quote information
including data regarding:
o Trading volume, number of listed companies and the largest
companies of the global health care industry
o Expenditures by various countries, regions and age groups on
health care
o Population of countries, regions and age groups
o Natality and mortality rates in various regions, countries and
age groups
o Life expectancy rates in various regions, countries and age
groups
o New health care products and products seeking approval
o Health maintenance organizations (HMOs) and their enrollment
growth
o Studies from, but not limited to, the American Medical
Association showing the effectiveness of using drugs to cure
illness
o Medical technology and devices in use or in development
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<PAGE> 572
o Regulatory environment of health care industries
o Consolidation in the health care industries
The information quoted has not been independently verified by a Fund or
AIM Distributors and will be based on data provided that is believed to be
reliable and accurate from sources including the following:
o Research firms such as Mehta and Isaly which publishes
Pharmaceutical Portfolio Recommendations
o OECD and its publications such as the OECD Health Data, as
supplemented annually
o Morgan Stanley Capital International stock market industry
indices such as Health & Personal Care
o The World Bank and its publications such as The World Development
Report, as supplemented annually
o IFC and publications such as the Emerging Stock Markets Factbook
INFORMATION ABOUT THE GLOBAL HEALTH CARE INDUSTRIES
The Fund and the Advisor believe that certain market and demographic
factors merit an investor's consideration when making a health care investment.
Worldwide standards of living and life expectancy have increased at a
substantial rate. The Advisor expects this growth, which works to the general
benefit of the global health care industry, to continue at a roughly comparable
rate in the future, although no assurances can be given in this regard.
Moreover, according to the Advisor, the health care industry historically has
proven to be a relatively non-cyclical industry that continues to provide goods
and services to the public in periods of economic weakness as well as economic
strength.
The Advisor believes that the anticipated increase in the world's
elderly population could increase demand for health care products and services.
For example, according to data compiled by the Advisor, in Japan the number of
people age 65 and older is expected to grow over 100% by the year 2025; in
Germany, France and the U.S., the same age group should grow 40%. Similarly, the
U.S. Census Bureau predicts the number of Americans 85 and older to double in
the next 30 years. From time to time, the Fund and AIM Distributors will quote
information including, but not limited to, international data regarding
populations, birth rates, mortality rates, life expectancy, health care
expenditures, and gross domestic product vs. life expectancy. The information
quoted has not been independently verified by the Fund or AIM Distributors and
will be based on data that is believed to be reliable and accurate.
TELECOMMUNICATIONS AND TECHNOLOGY FUND
From time to time the Fund and AIM Distributors will quote information
including data regarding:
o Increased usage of new technologies such as, but not limited to,
cellular and wireless communications in emerging and established
countries around the world
o Supply and demand of telephone equipment and services
o Regulatory environment of telecommunications industries
o Revenue, price and usage of telecommunications products and
services
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<PAGE> 573
o Privatization and/or deregulation of telecommunications companies
The information quoted has not been independently verified by the Fund
or AIM Distributors and will be based on data provided that is believed to be
reliable and accurate from sources including the following:
o Salomon Brothers World Equity Telecommunications Index, which
includes stock market data about the telecommunications industry
in established and developing markets
o OECD and other publications from its subsidiaries such as the
International Telecommunications Union
o Morgan Stanley Capital International stock market industry
indices such as Telecommunications, Broadcasting & Publishing and
Data Processing & Reproduction
o International Technology Consultants, a Washington D.C. based
firm which publishes reports such as Eastern European & Soviet
Telecom Report and Latin American Telecom Report
o Telegeography and other publications
DEREGULATION IN THE UNITED STATES
The United States has been the bellwether for deregulation of the
telephone industry. The divestiture of the Bell System from American Telephone
and Telegraph has produced competing companies in the United States. Such U.S.
market-driven competition has, for example, led to lower costs for consumers
which in turn led to greater consumer usage and to higher industrywide revenues.
The Advisor expects this scenario to continue to benefit such companies in the
U.S. and to similarly to be realized by the established telecommunications
companies in established economies, although no assurances can be made in this
regard.
CONSUMER PRODUCTS AND SERVICES FUND
From time to time the Fund and AIM Distributors will quote information
including data regarding:
o Trading volume, number of listed companies and the largest
companies located around the world in the consumer products and
services industries
o Expenditures, demand and consumption by various countries,
regions, income classes and age groups of consumer products and
services
o Population of countries, regions and age groups
o Life expectancy rates in various regions, countries and age
groups
o New consumer products and services in the development or
manufacturing stages
o Income of various regions, countries and age groups
o Sales and sales growth of consumer products and services
companies in their own country and abroad
o Sales, supply and demand of consumer products and services
o Parent Companies and the products and services they distribute
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<PAGE> 574
o Regulatory environment of consumer products industries
The information quoted will not be independently verified by the Fund
or AIM Distributors and will be based on data provided that is believed to be
reliable and accurate from sources including the following:
o Consumer and trade groups
o Fortune magazine and other periodicals
o The World Bank and its publications
o The International Monetary Fund (IMF) and its publications
o IFC and its publications
o OECD and its publications
INFRASTRUCTURE FUND
From time to time the Fund and AIM Distributors may quote information
including:
o Supply and demand of telephone equipment and services,
electricity, water, transportation, construction materials and
other infrastructure-related products and services
o Regulatory environment of infrastructure industries
o Quantity and costs of current and projected infrastructure
projects
o Privatization of industries and companies
o New technologies, products and services used in infrastructure
industries
o Infrastructure Finance Magazine and other periodicals
FINANCIAL SERVICES FUND
From time to time the Fund and AIM Distributors may quote information
including:
o Supply and demand of financial services
o Regulatory environment of financial service industries
o Credit ratings of U.S. and non-U.S. banks
o New technologies, products and services used in the financial
services industries
o Consolidation in the financial services industries
RESOURCES FUND
From time to time the Fund and AIM Distributors may quote information
including:
o Supply, demand and prices of natural resources
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<PAGE> 575
o Regulatory environment of natural resources
o Supply, demand and prices of products manufactured from natural
resources
o New technologies, products and services used in the natural
resources industries
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<PAGE> 576
APPENDIX
DESCRIPTION OF BOND RATINGS
Moody's Investors Service, Inc. ("Moody's") rates the debt securities
issued by various entities from "Aaa" to "C." Investment grade ratings are the
first four categories: Aaa--Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues. Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future. Baa--Bonds
which are rated Baa are considered as medium-grade obligations, (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. Ba--Bonds which are rated Ba are judged to
have speculative elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B--Bonds which are
rated B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Caa--Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest. Ca--Bonds which are rated Ca
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings. C--Bonds which are rated C
are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
("S&P"), rates the securities debt of various entities in categories ranging
from "AAA" to "D" according to quality. Investment grade ratings are the first
four categories: AAA--An obligation rated "AAA" has the highest rating assigned
by S&P. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong. AA--An obligation rated "AA" differs from the
highest rated obligations only in a small degree. The obligor's capacity to meet
its financial commitment on the obligation is very strong. A--An obligation
rated "A" is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories. BBB--An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation. BB, B, CCC, CC, C--Obligations rated "BB," "B,"
"CCC," "CC," and "C" are regarded as having significant speculative
characteristics. "BB" indicates the least degree of speculation and "C" the
highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions. BB--An obligation rated "BB" is less vulnerable
to nonpayment than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation. B--An obligation rated "B" is more vulnerable to
nonpayment than obligations rated "BB," but the obligor currently has the
capacity to meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's capacity or
willingness to meet its financial commitment on the obligation. CCC--An
obligation rated "CCC" is currently vulnerable to nonpayment, and
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<PAGE> 577
is dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation. CC--An
obligation rated "CC" is currently highly vulnerable to nonpayment. C--The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed or similar action has been taken, but payments on this obligation are
being continued. D--An obligation rated "D" is in payment default. The "D"
rating category is used when payments on an obligation are not made on the date
due even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The "D" rating also
will be used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's employs the designation "Prime-1" to indicate commercial paper
having a superior ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 have a strong ability for repayment of
senior short-term debt obligations. This normally will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into several categories
ranging from "A-1" for the highest quality obligations to "D" for the lowest.
Issues in the "A" category are delineated with numbers 1, 2, and 3 to indicate
the relative degree of safety. A-1--This highest category indicates that the
degree of safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics will be denoted with a plus sign
(+) designation. A-2--Capacity for timely payments on issues with this
designation is satisfactory; however, the relative degree of safety is not as
high as for issues designated "A-1."
ABSENCE OF RATING
Where no rating has been assigned or where a rating has been suspended
or withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or
companies that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the
issue or issuer.
4. The issue was privately placed, in which case the
rating is not published in Moody's publications.
94
<PAGE> 578
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.
95
<PAGE> 579
FINANCIAL STATEMENTS
FS
<PAGE> 580
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Global Consumer Products and
Services Fund and Board of Trustees of AIM Investment
Funds
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Global Consumer Products and Services
Fund--Consolidated at October 31, 1999, and the results
of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in
conformity with generally accepted accounting principles.
These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our
responsibility is to express an opinion on these
financial statements based on our audits. We conducted
our audits of these financial statements in accordance
with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made
by management, and evaluating the overall financial
statement presentation. We believe that our audits, which
included confirmation of securities at October 31, 1999
by correspondence with the custodian and brokers, provide
a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
FS-1
<PAGE> 581
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-53.56%
BEVERAGES (ALCOHOLIC)-1.34%
Adolph Coors Co. 12,800 $ 710,400
- --------------------------------------------------------------
Anheuser-Busch Companies, Inc. 24,600 1,766,587
- --------------------------------------------------------------
2,476,987
- --------------------------------------------------------------
BIOTECHNOLOGY-0.94%
Amgen, Inc.(a) 21,800 1,738,550
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-2.31%
AT&T Corp.-Liberty Media
Group-Class A(a) 45,700 1,813,719
- --------------------------------------------------------------
Comcast Corp.-Class A 40,400 1,701,850
- --------------------------------------------------------------
TiVo Inc.(a) 17,600 754,600
- --------------------------------------------------------------
4,270,169
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-4.44%
ANTEC Corp.(a) 31,900 1,547,150
- --------------------------------------------------------------
Comverse Technology, Inc.(a) 26,400 2,996,400
- --------------------------------------------------------------
Lucent Technologies Inc. 30,360 1,950,630
- --------------------------------------------------------------
Spanish Broadcasting System, Inc.(a) 40,600 1,080,975
- --------------------------------------------------------------
Sycamore Networks, Inc.(a) 3,000 645,000
- --------------------------------------------------------------
8,220,155
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-0.81%
Cisco Systems, Inc.(a) 20,243 1,497,982
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.92%
Lexmark International Group,
Inc.-Class A(a) 21,900 1,709,569
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-4.14%
Adobe Systems, Inc. 36,000 2,517,750
- --------------------------------------------------------------
Microsoft Corp.(a) 36,500 3,378,531
- --------------------------------------------------------------
Oracle Corp.(a) 37,000 1,759,812
- --------------------------------------------------------------
7,656,093
- --------------------------------------------------------------
CONSUMER FINANCE-0.78%
Providian Financial Corp. 13,250 1,444,250
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.92%
Altera Corp.(a) 35,000 1,701,875
- --------------------------------------------------------------
ENTERTAINMENT-0.88%
Time Warner, Inc. 23,300 1,623,719
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-2.59%
Applied Materials, Inc.(a) 14,000 1,257,375
- --------------------------------------------------------------
KLA-Tencor Corp.(a) 17,000 1,346,187
- --------------------------------------------------------------
Lam Research Corp.(a) 26,000 2,195,375
- --------------------------------------------------------------
4,798,937
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-1.94%
Citigroup, Inc. 38,550 $ 2,086,519
- --------------------------------------------------------------
Fannie Mae 21,300 1,506,975
- --------------------------------------------------------------
3,593,494
- --------------------------------------------------------------
FOODS-2.10%
Dean Foods Co. 28,000 1,295,000
- --------------------------------------------------------------
Quaker Oats Co. (The) 37,000 2,590,000
- --------------------------------------------------------------
3,885,000
- --------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-1.12%
Aztar Corp.(a) 82,000 794,375
- --------------------------------------------------------------
Station Casinos, Inc.(a) 53,000 1,281,937
- --------------------------------------------------------------
2,076,312
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-3.74%
Allergan, Inc. 17,000 1,825,375
- --------------------------------------------------------------
Bristol-Myers Squibb Co. 29,000 2,227,562
- --------------------------------------------------------------
Johnson & Johnson 9,000 942,750
- --------------------------------------------------------------
Warner-Lambert Co. 24,000 1,915,500
- --------------------------------------------------------------
6,911,187
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.43%
VISX, Inc.(a) 12,600 788,287
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-1.00%
American International Group, Inc. 17,976 1,850,405
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-1.20%
Morgan Stanley, Dean Witter,
Discover & Co. 20,100 2,217,281
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-1.13%
Case Corp. 39,300 2,082,900
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.35%
Tyco International Ltd. 62,400 2,492,100
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.66%
Briggs & Stratton Corp. 21,000 1,227,188
- --------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-1.13%
Marine Drilling Companies, Inc.(a) 129,600 2,097,900
- --------------------------------------------------------------
RESTAURANTS-0.30%
Tricon Global Restaurants, Inc.(a) 13,600 546,550
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-2.07%
Home Depot, Inc. (The) 30,200 2,280,100
- --------------------------------------------------------------
Lowe's Companies, Inc. 28,008 1,540,440
- --------------------------------------------------------------
3,820,540
- --------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 582
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (COMPUTERS & ELECTRONICS)-2.77%
Best Buy Co., Inc.(a) 18,000 $ 1,000,125
- --------------------------------------------------------------
Circuit City Stores-Circuit City
Group 24,800 1,058,650
- --------------------------------------------------------------
Tandy Corp. 48,600 3,058,763
- --------------------------------------------------------------
5,117,538
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-1.16%
Burlington Coat Factory Warehouse
Corp. 75,000 1,284,375
- --------------------------------------------------------------
Family Dollar Stores, Inc. 41,300 851,813
- --------------------------------------------------------------
2,136,188
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.57%
Safeway, Inc.(a) 30,000 1,059,375
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-1.47%
Wal-Mart Stores, Inc. 48,000 2,721,000
- --------------------------------------------------------------
RETAIL (HOME SHOPPING)-1.04%
Chemdex Corp.(a) 50,600 1,929,125
- --------------------------------------------------------------
RETAIL (SPECIALTY)-1.36%
Haverty Furniture Cos., Inc. 60,000 825,000
- --------------------------------------------------------------
Linens 'n Things, Inc.(a) 21,200 842,700
- --------------------------------------------------------------
Sonic Automotive, Inc.(a) 81,400 849,613
- --------------------------------------------------------------
2,517,313
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-2.50%
American Eagle Outfitters, Inc.(a) 21,200 907,625
- --------------------------------------------------------------
AnnTaylor Stores Corp.(a) 16,900 719,306
- --------------------------------------------------------------
Chico's Fas, Inc.(a) 44,000 1,380,500
- --------------------------------------------------------------
TJX Companies, Inc. (The) 59,600 1,616,650
- --------------------------------------------------------------
4,624,081
- --------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-1.13%
Outdoor Systems, Inc.(a) 49,400 2,093,325
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-2.37%
Nextel Communications, Inc.-Class
A(a) 50,800 4,378,325
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.41%
Global TeleSystems Group, Inc.(a) 32,000 766,000
- --------------------------------------------------------------
TELEPHONE-0.54%
NTL, Inc.(a) 7,250 546,469
- --------------------------------------------------------------
Qwest Communications International,
Inc.(a) 12,600 453,600
- --------------------------------------------------------------
1,000,069
- --------------------------------------------------------------
Total Domestic Common Stocks
(Cost $72,802,212) 99,069,769
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-37.70%
BELGIUM-1.09%
Fortis (B)
(Financial-Diversified)(a) 60,000 2,026,248
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-5.28%
Cominco Ltd. (Metals Mining) 118,000 2,083,814
- --------------------------------------------------------------
Imasco Ltd.
(Manufacturing-Diversified) 147,300 $ 3,951,878
- --------------------------------------------------------------
Nortel Networks Corp.
(Communications Equipment) 60,600 3,727,046
- --------------------------------------------------------------
9,762,738
- --------------------------------------------------------------
FINLAND-2.26%
Nokia Oyj-ADR (Communications
Equipment) 36,200 4,183,363
- --------------------------------------------------------------
FRANCE-6.26%
Banque Nation de Paris (Financial
Diversified), Wts., expiring
07/15/02(a) 5,460 32,282
- --------------------------------------------------------------
Banque Nationale de Paris
(Banks-Major Regional) 23,080 2,027,490
- --------------------------------------------------------------
Carrefour Supermarche S.A.
(Retail-Food Chains) 15,300 2,832,960
- --------------------------------------------------------------
Lafarge S.A. (Engineering &
Construction) 18,200 1,751,979
- --------------------------------------------------------------
Renault S.A. (Automobiles) 33,300 1,723,637
- --------------------------------------------------------------
SEITA (Tobacco) 29,400 1,639,304
- --------------------------------------------------------------
Societe Television Francaise 1
(Broadcasting-Television, Radio &
Cable) 5,000 1,567,555
- --------------------------------------------------------------
11,575,207
- --------------------------------------------------------------
GERMANY-1.10%
Mannesmann A.G.
(Machinery-Diversified) 13,000 2,044,659
- --------------------------------------------------------------
IRELAND-2.69%
Bank of Ireland (Banks-Major
Regional) 191,238 1,492,847
- --------------------------------------------------------------
CRH PLC (Construction-Cement &
Aggregates) 94,200 1,778,901
- --------------------------------------------------------------
Jefferson Smurfit Group PLC-ADR
(Containers & Packaging-Paper) 66,000 1,699,500
- --------------------------------------------------------------
4,971,248
- --------------------------------------------------------------
ITALY-2.35%
Banca Commerciale Italiana
(Banks-Major Regional) 145,467 867,729
- --------------------------------------------------------------
Luxottica Group S.p.A.-ADR
(Consumer-Jewelry, Novelties &
Gifts) 100,900 1,936,019
- --------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telecommunications-
Cellular/Wireless) 247,300 1,545,421
- --------------------------------------------------------------
4,349,169
- --------------------------------------------------------------
JAPAN-2.87%
Nippon Telegraph & Telephone Corp.
(Telecommunications-Long Distance) 190 2,915,927
- --------------------------------------------------------------
Toyota Motor Corp.
(Automobile-Manufacturers) 69,000 2,389,238
- --------------------------------------------------------------
5,305,165
- --------------------------------------------------------------
NETHERLANDS-2.03%
ABN AMRO Holding N.V. (Banks-Major
Regional) 67,422 1,630,711
- --------------------------------------------------------------
Equant N.V.
(Computers-Networking)(a) 5,900 574,156
- --------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 583
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS-(CONTINUED)
Heineken N.V. (Beverages-Alcoholic) 30,325 $ 1,546,997
- --------------------------------------------------------------
3,751,864
- --------------------------------------------------------------
NORWAY-0.95%
Den Norske Bank A.S.A. (Banks-Major
Regional) 451,600 1,748,983
- --------------------------------------------------------------
SINGAPORE-0.95%
NatSteel Ltd. (Iron & Steel) 1,056,000 1,765,610
- --------------------------------------------------------------
SOUTH KOREA-1.52%
Pohang Iron & Steel Co. Ltd.-ADR
(Iron & Steel) 84,000 2,803,500
- --------------------------------------------------------------
SWITZERLAND-1.01%
Compagnie Financiere Richemont A.G.
(Tobacco) 980 1,871,686
- --------------------------------------------------------------
UNITED KINGDOM-7.34%
BG PLC (Oil & Gas-Exploration &
Production) 325,800 1,809,150
- --------------------------------------------------------------
Centrica PLC (Oil & Gas-Exploration
& Production) 964,400 2,802,495
- --------------------------------------------------------------
COLT Telecom Group PLC
(Communications Equipment)(a) 31,150 931,577
- --------------------------------------------------------------
Energis PLC (Telephone)(a) 56,500 1,803,027
- --------------------------------------------------------------
Imperial Tobacco Group PLC (Tobacco) 125,000 1,325,556
- --------------------------------------------------------------
Royal Bank of Scotland Group PLC
(Banks-Major Regional) 106,620 2,457,621
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Vodafone AirTouch PLC-ADR
(Telecommunications-
Cellular/Wireless) 51,000 $ 2,444,813
- --------------------------------------------------------------
13,574,239
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$56,003,482) 69,733,679
- --------------------------------------------------------------
MONEY MARKET FUNDS-7.95%
STIC Liquid Assets Portfolio(b) 7,355,453 7,355,453
- --------------------------------------------------------------
STIC Prime Portfolio(b) 7,355,453 7,355,453
- --------------------------------------------------------------
Total Money Market Funds (Cost
$14,710,906) 14,710,906
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.21% 183,514,354
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.79% 1,459,553
- --------------------------------------------------------------
NET ASSETS-100.00% $184,973,907
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Wts. - Warrants
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-4
<PAGE> 584
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $143,516,600) $183,514,354
- ------------------------------------------------------------
Foreign currencies, at value (cost $2,441,639) 2,424,475
- ------------------------------------------------------------
Receivables for:
Investments sold 4,528,952
- ------------------------------------------------------------
Fund shares sold 150,825
- ------------------------------------------------------------
Dividends and interest 179,289
- ------------------------------------------------------------
Other assets 28,752
- ------------------------------------------------------------
Total assets 190,826,647
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 5,205,192
- ------------------------------------------------------------
Fund shares reacquired 272,640
- ------------------------------------------------------------
Accrued advisory fees 166,482
- ------------------------------------------------------------
Accrued distribution fees 130,099
- ------------------------------------------------------------
Accrued administrative services fees 4,247
- ------------------------------------------------------------
Accrued transfer agent fees 21,000
- ------------------------------------------------------------
Accrued trustees' fees 967
- ------------------------------------------------------------
Accrued operating expenses 52,113
- ------------------------------------------------------------
Total liabilities 5,852,740
- ------------------------------------------------------------
Net assets applicable to shares outstanding $184,973,907
============================================================
NET ASSETS:
Class A $ 73,695,007
============================================================
Class B $109,807,990
============================================================
Class C $ 232,240
============================================================
Advisor Class $ 1,238,670
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 2,393,840
============================================================
Class B 3,661,997
============================================================
Class C 7,745
============================================================
Advisor Class 39,217
============================================================
Class A:
Net asset value and redemption price per
share $ 30.79
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $30.79 divided by
95.25%) $ 32.33
============================================================
Class B:
Net asset value and offering price per share $ 29.99
============================================================
Class C:
Net asset value and offering price per share $ 29.99
============================================================
Advisor Class:
Net asset value, redemption and offering
price per share $ 31.59
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $117,570 foreign withholding
tax) $ 1,509,215
- ------------------------------------------------------------
Interest 610,144
- ------------------------------------------------------------
Securities lending 104,422
- ------------------------------------------------------------
Total investment income 2,223,781
- ------------------------------------------------------------
EXPENSES:
Advisory and administrative fees 1,800,938
- ------------------------------------------------------------
Accounting services fees 49,731
- ------------------------------------------------------------
Custodian fees 88,399
- ------------------------------------------------------------
Distribution fees -- Class A 344,198
- ------------------------------------------------------------
Distribution fees -- Class B 1,032,430
- ------------------------------------------------------------
Distribution fees -- Class C 827
- ------------------------------------------------------------
Trustees' fees 8,975
- ------------------------------------------------------------
Transfer agent fees -- Class A 144,457
- ------------------------------------------------------------
Transfer agent fees -- Class B 216,650
- ------------------------------------------------------------
Transfer agent fees -- Class C 173
- ------------------------------------------------------------
Transfer agent fees -- Advisor Class 25,806
- ------------------------------------------------------------
Other 277,018
- ------------------------------------------------------------
Total expenses 3,989,602
- ------------------------------------------------------------
Less: Expenses waived (16,422)
- ------------------------------------------------------------
Expenses paid indirectly (1,368)
- ------------------------------------------------------------
Net expenses 3,971,812
- ------------------------------------------------------------
Net investment income (loss) (1,748,031)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities 44,400,506
- ------------------------------------------------------------
Foreign currencies 74,456
- ------------------------------------------------------------
44,474,962
- ------------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 20,689,784
- ------------------------------------------------------------
Foreign currencies 20,185
- ------------------------------------------------------------
20,709,969
- ------------------------------------------------------------
Net gain from investment securities and
foreign currencies 65,184,931
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $63,436,900
============================================================
</TABLE>
See Notes to Financial Statements.
FS-5
<PAGE> 585
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (1,748,031) $ (1,905,277)
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 44,474,962 4,655,445
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 20,709,969 10,772,689
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 63,436,900 13,522,857
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (1,486,208) (5,574,558)
- ------------------------------------------------------------------------------------------
Class B (2,314,110) (8,128,120)
- ------------------------------------------------------------------------------------------
Advisor Class (341,039) (962,828)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A (8,462,976) (2,635,230)
- ------------------------------------------------------------------------------------------
Class B (14,746,418) (1,579,168)
- ------------------------------------------------------------------------------------------
Class C 209,527 --
- ------------------------------------------------------------------------------------------
Advisor Class (17,338,191) 8,711,156
- ------------------------------------------------------------------------------------------
Net increase in net assets 18,957,485 3,354,109
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 166,016,422 162,662,313
- ------------------------------------------------------------------------------------------
End of period $184,973,907 $166,016,422
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $104,692,946 $144,231,004
- ------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities
and foreign currencies 40,244,803 2,459,227
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 40,036,158 19,326,191
- ------------------------------------------------------------------------------------------
$184,973,907 $166,016,422
==========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE> 586
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Consumer Products and Services Fund (the "Fund") is a separate series
of AIM Investment Funds (the "Trust"). The Trust is organized as a Delaware
business trust and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end series management investment company
consisting of twelve separate series portfolios, each having an unlimited number
of shares of beneficial interest. The Fund consists of four different classes of
shares: Class A shares, Class B shares, Class C shares and Advisor Class shares.
Class A shares are sold with a front-end sales charge. Class B shares and Class
C shares are sold with a contingent deferred sales charge. Advisor Class shares
were sold without a sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund.
The Fund's investment objective is long-term growth of capital. The Fund
invests substantially all of its investable assets in Global Consumer Products
and Services Portfolio (the "Portfolio"). The Portfolio is organized as a
Delaware business trust which is registered under the 1940 Act as an open-end
management investment company.
The Portfolio has investment objectives, policies and limitations
substantially identical to those of the Fund. Therefore, the financial
statements of the Fund and Portfolio have been presented on a consolidated
basis, and represent all activities of both the Fund and Portfolio. Through
October 31, 1999, all of the shares of beneficial interest of the Portfolio were
owned by either the Fund or INVESCO (NY) Asset Management, Inc., which has a
nominal ($100) investment in the Portfolio.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund and the Portfolio in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. For purposes of determining net asset value per
share, futures and options contracts generally will be valued 15 minutes
after the close of trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Trustees.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of fund
share redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$1,748,031, undistributed net realized gains was decreased by $2,548,031 and
paid-in capital increased by $800,000 as a result of differing book/tax
treatment of foreign currency transactions, equalization credits and net
operating loss reclassifications in order to comply with the requirements of
the American Institute of Certified Public Accountants Statement of Position
93-2. Net assets of the Fund were unaffected by the reclassification
discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
FS-7
<PAGE> 587
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Portfolio may enter into a foreign currency contract to attempt to
minimize the risk to the Portfolio from adverse changes in the relationship
between currencies. The Portfolio may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Portfolio could be exposed to risk if counterparties to the contracts are
unable to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
F. Expenses -- Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
G. 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 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 fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
In addition, the Portfolio's policy of concentrating its investments in
companies in the consumer products and services industry subjects the
Portfolio to greater risk than a fund that is more diversified.
H. Indexed Securities -- The 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.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's and the Portfolio's investment
manager and administrator. The Fund pays AIM administration fees at an
annualized rate of 0.25% of the Fund's average daily net assets. The Portfolio
pays AIM investment management and administration fees at an annual rate of
0.725% on the first $500 million of the Portfolio's average daily net assets,
plus 0.70% on the next $500 million of the Portfolio's average daily net assets,
plus 0.675% on the next $500 million of the Portfolio's average daily net
assets, plus 0.65% on the Portfolio's average daily net assets exceeding $1.5
billion. AIM has contractually agreed to limit the Fund's expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the
maximum annual rate of 2.00%, 2.50%, 2.50% and 1.50% of the average daily net
assets of the Fund's Class A, Class B, Class C and Advisor Class shares,
respectively. During the year ended October 31, 1999, AIM waived fees of
$16,422.
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund and the Portfolio. Prior to July 1,
1999, AIM was the pricing and accounting agent for the Fund and the Portfolio.
The monthly fee for these services paid to AIM was a percentage, not to exceed
0.03% annually, of a Fund's average daily net assets. The annual fee rate was
derived based on the aggregate net assets of the funds which comprised the
following investment companies: AIM Growth Series, AIM Investment Funds, AIM
Series Trust, G.T. Global Variable Investment Series and G.T. Global Variable
Investment Trust. The fee was calculated at the rate of 0.03% of the first $5
billion of assets and 0.02% to the assets in excess of $5 billion. An amount is
allocated to and paid by each such fund based on its relative average daily net
assets. For the year ended October 31, 1999, AIM was paid $49,731 for such
services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended October 31, 1999, AFS was
paid $371,278 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares, Class B shares and Class C shares (collectively the
"Plans"). The Fund , pursuant to the Plans, pays AIM Distributors compensation
at the annual rate of 0.50% of the Fund's average daily net assets of Class A
shares and 1.00% of the average daily net assets of Class B and C shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. For the year ended October 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $344,198, $1,032,430 and $827, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $27,585 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are
FS-8
<PAGE> 588
deducted from, and are not included in, the proceeds from sales of Class A
shares. During the year ended October 31, 1999, AIM Distributors received $94 in
contingent deferred sales charges imposed on redemptions of Fund shares. Certain
officers and trustees of the Trust are officers and directors of AIM, AFS and
AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $1,368 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$1,368 during the year ended October 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended October 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. The
commitment fee is allocated among the funds based on their respective average
net assets for the period. Prior to May 28, 1999, the Fund, along with certain
other funds advised and/or administered by AIM, had a line of credit with
BankBoston and State Street Bank & Trust Company. The arrangements with the
banks allowed the Fund and certain other funds to borrow, on a first come, first
served basis, an aggregate maximum amount of $250,000,000.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, securities with an aggregate value of $10,734,244 were on
loan to brokers. The loans were secured by cash collateral of $10,948,928
received by the Portfolio. For the year ended October 31, 1999, the Portfolio
received fees of $104,422 for securities lending.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Portfolio during the year ended October 31, 1999 was
$272,531,597 and $321,676,079, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $41,092,549
- ---------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (1,435,765)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $39,656,784
=========================================================
</TABLE>
Cost of investments for tax purposes is $143,857,570.
FS-9
<PAGE> 589
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 487,583 $ 12,807,548 1,525,543 $ 35,645,676
- --------------------------------------------------------------------------------------------------------------------
Class B 423,749 10,940,298 1,214,959 28,040,109
- --------------------------------------------------------------------------------------------------------------------
Class C* 9,183 251,095 -- --
- --------------------------------------------------------------------------------------------------------------------
Advisor Class 21,722 582,165 675,379 15,761,998
- --------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 59,498 1,416,648 232,572 5,000,306
- --------------------------------------------------------------------------------------------------------------------
Class B 91,284 2,126,010 327,547 6,924,836
- --------------------------------------------------------------------------------------------------------------------
Advisor Class 14,024 340,931 44,088 962,424
- --------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (855,317) (22,687,172) (1,879,330) (43,281,212)
- --------------------------------------------------------------------------------------------------------------------
Class B (1,075,236) (27,812,726) (1,618,880) (36,544,113)
- --------------------------------------------------------------------------------------------------------------------
Class C* (1,437) (41,568) -- --
- --------------------------------------------------------------------------------------------------------------------
Advisor Class (638,988) (18,261,287) (345,732) (8,013,266)
- --------------------------------------------------------------------------------------------------------------------
(1,463,935) $ (40,338,058) 176,146 $ 4,496,758
====================================================================================================================
</TABLE>
* Class C shares commenced sales on March 1, 1999.
NOTE 8-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, DECEMBER 30, 1994
------------------------------------------ TO
1999(a) 1998(a) 1997(a) 1996(a) OCTOBER 31, 1995(a)
------- ------- ------- ------- --------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 22.16 $ 22.19 $ 20.98 $ 14.59 $ 11.43
- ----------------------------------------------------------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) (0.19) (0.19) (0.15) (0.22) 0.02(b)
- ----------------------------------------------------------- ------- ------- ------- ------- -------
Net realized and unrealized gain on investments 9.38 2.05 2.27 7.13 3.14
- ----------------------------------------------------------- ------- ------- ------- ------- -------
Net increase from investment operations 9.19 1.86 2.12 6.91 3.16
- ----------------------------------------------------------- ------- ------- ------- ------- -------
Distributions to shareholders:
From net realized gains on investments (0.56) (1.89) (0.91) (0.52) --
- ----------------------------------------------------------- ------- ------- ------- ------- -------
Total distributions (0.56) (1.89) (0.91) (0.52) --
- ----------------------------------------------------------- ------- ------- ------- ------- -------
Net asset value, end of period $ 30.79 $ 22.16 $ 22.19 $ 20.98 $ 14.59
=========================================================== ======= ======= ======= ======= =======
Total return(c) 42.20% 8.66% 10.55% 48.82% 27.65%
=========================================================== ======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in 000's) $73,695 $59,880 $62,637 $76,900 $ 4,082
=========================================================== ======= ======= ======= ======= =======
Ratio of expenses to average net assets: 1.91%(d) 1.95% 1.99% 2.34% 13.63%(e)
=========================================================== ======= ======= ======= ======= =======
Ratio of net investment income (loss) to average net assets: (0.70)%(d) (0.83)% (0.87)% (1.24)% (11.11)%(e)
=========================================================== ======= ======= ======= ======= =======
Portfolio turnover rate 160% 221% 392% 169% 240%(e)
=========================================================== ======= ======= ======= ======= =======
</TABLE>
(a) These selected per share operating data were calculated based upon average
shares outstanding during the period.
(b) Before reimbursement net investment income (loss) per share would have been
reduced (increased) by $1.12.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) Ratios are based on average net assets of $68,839,613.
(e) Annualized.
FS-10
<PAGE> 590
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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, DECEMBER 30, 1994
----------------------------------------- TO
1999(a) 1998(a) 1997(a) 1996(a) OCTOBER 31, 1995(a)
-------- ------- ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.70 $ 21.86 $ 20.79 $ 14.53 $ 11.43
- ----------------------------------------------------------- -------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) (0.31) (0.30) (0.24) (0.31) (0.04)(b)
- ----------------------------------------------------------- -------- ------- ------- ------- -------
Net realized and unrealized gain on investments 9.16 2.03 2.22 7.09 3.14
- ----------------------------------------------------------- -------- ------- ------- ------- -------
Net increase from investment operations 8.85 1.73 1.98 6.78 3.10
- ----------------------------------------------------------- -------- ------- ------- ------- -------
Distributions to shareholders:
From net realized gain on investments (0.56) (1.89) (0.91) (0.52) --
- ----------------------------------------------------------- -------- ------- ------- ------- -------
Total distributions (0.56) (1.89) (0.91) (0.52) --
- ----------------------------------------------------------- -------- ------- ------- ------- -------
Net asset value, end of period $ 29.99 $ 21.70 $ 21.86 $ 20.79 $ 14.53
=========================================================== ======== ======= ======= ======= =======
Total return(c) 41.52% 8.16% 9.95% 48.11% 27.12%
=========================================================== ======== ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in 000's) $109,808 $91,613 $93,978 $87,904 $ 2,959
=========================================================== ======== ======= ======= ======= =======
Ratio of expenses to average net assets: 2.41%(d) 2.45% 2.49% 2.84% 14.13%(e)
=========================================================== ======== ======= ======= ======= =======
Ratio of net investment income (loss) to average net assets: (1.20)%(d) (1.33)% (1.37)% (1.74)% (11.61)%(e)
=========================================================== ======== ======= ======= ======= =======
Portfolio turnover rate 160% 221% 392% 169% 240%(e)
=========================================================== ======== ======= ======= ======= =======
</TABLE>
(a) These selected per share operating data were calculated based upon average
shares outstanding during the period.
(b) Before reimbursement net investment income (loss) per share would have been
reduced (increased) by $1.04.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) Ratios are based on average net assets of $103,242,997.
(e) Annualized.
FS-11
<PAGE> 591
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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 C ADVISOR CLASS
------------------- -------------------------------------------------------------------
YEAR ENDED OCTOBER 31, JUNE 1, 1995
MARCH 1, 1999 TO ----------------------------------------- TO
OCTOBER 31, 1999(a) 1999(a) 1998(a) 1997(a) 1996(a) OCTOBER 31, 1995(a)
------------------- ------- ------- ------- ------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $24.70 $ 22.61 $ 22.50 $21.15 $14.64 $ 11.84
- ------------------------------------- ------ ------- ------- ------ ------ -------
Income from investment operations:
Net investment income (loss) (0.22) (0.05) (0.08) (0.04) (0.13) 0.04(b)
- ------------------------------------- ------ ------- ------- ------ ------ -------
Net realized and unrealized gain on
investments 5.51 9.59 2.08 2.30 7.16 2.76
- ------------------------------------- ------ ------- ------- ------ ------ -------
Net increase from investment
operations 5.29 9.54 2.00 2.26 7.03 2.80
- ------------------------------------- ------ ------- ------- ------ ------ -------
Distributions to shareholders:
From net realized gains on
investments -- (0.56) (1.89) (0.91) (0.52) --
- ------------------------------------- ------ ------- ------- ------ ------ -------
Total distributions -- (0.56) (1.89) (0.91) (0.52) --
- ------------------------------------- ------ ------- ------- ------ ------ -------
Net asset value, end of period $29.99 $ 31.59 $ 22.61 $22.50 $21.15 $ 14.64
===================================== ====== ======= ======= ====== ====== =======
Total return(c) 21.42% 42.93% 9.20% 11.15% 49.50% 23.65%
===================================== ====== ======= ======= ====== ====== =======
Ratios and supplemental data:
Net assets, end of period (in 000's) $ 232 $ 1,239 $14,523 $6,047 $7,446 $ 164
===================================== ====== ======= ======= ====== ====== =======
Ratio of expenses to average net
assets: 2.41%(d) 1.41%(e) 1.45% 1.49% 1.84% 13.13%(f)
===================================== ====== ======= ======= ====== ====== =======
Ratio of net investment income (loss)
to average net assets: (1.20)%(d) (0.20)%(e) (0.33)% (0.37)% (0.74)% (10.61)%(f)
===================================== ====== ======= ======= ====== ====== =======
Portfolio turnover rate 160% 160% 221% 392% 169% 240%(f)
===================================== ====== ======= ======= ====== ====== =======
</TABLE>
(a) These selected per share operating data were calculated based upon average
shares outstanding during the period.
(b) Before reimbursement net investment income (loss) per share would have been
reduced (increased) by $0.61.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) Ratios are annualized and based on average net assets of $123,130.
(e) Ratios are based on average net assets of $12,297,480.
(f) Annualized.
NOTE 9-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
FS-12
<PAGE> 592
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Global Financial Services Fund
and Board of Trustees of AIM Investment Funds:
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Global Financial Services Fund - Consolidated at
October 31, 1999, and the results of its operations, the
changes in its net assets and the financial highlights
for the periods indicated, in conformity with generally
accepted accounting principles. These financial
statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of
the Fund's management; our responsibility is to express
an opinion on these financial statements based on our
audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing
standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating
the overall financial statement presentation. We believe
that our audits, which included confirmation of
securities at October 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the
opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
FS-13
<PAGE> 593
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-79.31%
BANKS (MAJOR REGIONAL)-6.33%
Bank of New York Co., Inc. (The) 30,000 $ 1,256,250
- --------------------------------------------------------------
Fleet Boston Corp. 31,978 1,395,040
- --------------------------------------------------------------
Mellon Financial Corp. 29,600 1,093,350
- --------------------------------------------------------------
Wells Fargo Co. 30,000 1,436,250
- --------------------------------------------------------------
5,180,890
- --------------------------------------------------------------
BANKS (MONEY CENTER)-4.82%
Bank of America Corp. 13,843 891,143
- --------------------------------------------------------------
Chase Manhattan Corp. (The) 35,000 3,058,125
- --------------------------------------------------------------
3,949,268
- --------------------------------------------------------------
BANKS (REGIONAL)-6.70%
City National Corp. 43,350 1,679,812
- --------------------------------------------------------------
First Tennessee National Corp. 19,100 649,400
- --------------------------------------------------------------
North Fork Bancorporation, Inc. 30,000 620,625
- --------------------------------------------------------------
UnionBanCal Corp. 28,200 1,224,937
- --------------------------------------------------------------
UST Corp. 19,300 598,300
- --------------------------------------------------------------
Zions Bancorp 12,100 713,144
- --------------------------------------------------------------
5,486,218
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-2.85%
Digital Insight Corp.(a) 20,200 800,425
- --------------------------------------------------------------
HomeStore.com, Inc.(a) 7,900 370,806
- --------------------------------------------------------------
Intuit, Inc.(a) 40,000 1,165,000
- --------------------------------------------------------------
2,336,231
- --------------------------------------------------------------
CONSUMER FINANCE-11.65%
Capital One Financial Corp. 43,500 2,305,500
- --------------------------------------------------------------
Doral Financial Corp. 40,000 512,500
- --------------------------------------------------------------
Investors Financial Services Corp. 60,100 2,223,700
- --------------------------------------------------------------
MBNA Corp. 38,500 1,063,562
- --------------------------------------------------------------
Providian Financial Corp. 31,500 3,433,500
- --------------------------------------------------------------
9,538,762
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.82%
General Electric Co. 11,000 1,491,187
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-15.58%
American Express Co. 17,000 2,618,000
- --------------------------------------------------------------
Associates First Capital Corp.-Class
A 45,000 1,642,500
- --------------------------------------------------------------
Citigroup, Inc. 77,137 4,175,040
- --------------------------------------------------------------
Fannie Mae 31,000 2,193,250
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-(CONTINUED)
Freddie Mac 39,500 $ 2,135,469
- --------------------------------------------------------------
12,764,259
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-3.62%
AFLAC, Inc. 25,000 1,278,125
- --------------------------------------------------------------
AXA Financial, Inc. 35,000 1,122,187
- --------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 15,000 568,125
- --------------------------------------------------------------
2,968,437
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-4.65%
American International Group, Inc. 32,500 3,345,469
- --------------------------------------------------------------
Hartford Financial Services Group,
Inc. (The) 9,000 466,313
- --------------------------------------------------------------
3,811,782
- --------------------------------------------------------------
INSURANCE BROKERS-2.91%
Marsh & McLennan Co. 30,100 2,379,781
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-6.39%
Merrill Lynch & Co., Inc. 8,000 628,000
- --------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover
& Co. 28,000 3,088,750
- --------------------------------------------------------------
Schwab (Charles) Corp. (The) 39,000 1,518,563
- --------------------------------------------------------------
5,235,313
- --------------------------------------------------------------
INVESTMENT MANAGEMENT-3.26%
Alliance Capital Management L.P. 68,800 1,887,700
- --------------------------------------------------------------
Knight/Trimark Group, Inc.-Class A(a) 30,000 781,875
- --------------------------------------------------------------
2,669,575
- --------------------------------------------------------------
RAILROADS-1.74%
Kansas City Southern Industries, Inc. 30,000 1,423,125
- --------------------------------------------------------------
SAVINGS & LOAN COMPANIES-1.51%
Golden West Financial Corp. 11,100 1,240,425
- --------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-1.05%
Metris Companies, Inc. 25,000 860,938
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-4.43%
Concord EFS, Inc.(a) 42,000 1,136,625
- --------------------------------------------------------------
First Data Corp. 41,000 1,873,188
- --------------------------------------------------------------
Profit Recovery Group International,
Inc.(a) 15,000 617,813
- --------------------------------------------------------------
3,627,626
- --------------------------------------------------------------
Total Domestic Common Stocks
(Cost $49,466,406) 64,963,817
- --------------------------------------------------------------
</TABLE>
FS-14
<PAGE> 594
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS-12.46%
FRANCE-3.21%
AXA (Insurance-Multi-Line) 18,650 $ 2,631,140
- --------------------------------------------------------------
HONG KONG-1.88%
Dah Sing Financial Group
(Banks-Regional) 386,000 1,540,403
- --------------------------------------------------------------
IRELAND-1.52%
Bank of Ireland (Banks-Major
Regional) 159,601 1,245,876
- --------------------------------------------------------------
JAPAN-2.72%
Nikko Securities Co., Ltd. (The)
(Investment Banking/Brokerage) 94,000 883,603
- --------------------------------------------------------------
Nomura Securities Co., Ltd.
(Finance-Asset Management)(a) 37,000 610,781
- --------------------------------------------------------------
Shohkoh Fund & Co., Ltd.
(Financial-Diversified) 1,200 734,353
- --------------------------------------------------------------
2,228,737
- --------------------------------------------------------------
NETHERLANDS-1.04%
Aegon N.V. (Insurance-Multi-Line
Property) 9,263 851,617
- --------------------------------------------------------------
PHILIPPINES-0.80%
Equitable PCI Bank (Banks-Major
Regional) 370,000 655,112
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SINGAPORE-1.29%
DBS Group Holdings Ltd. (Banks-Money
Center)(a) 93,040 $ 1,051,995
- --------------------------------------------------------------
Total Foreign Stocks (Cost
$7,511,744) 10,204,880
- --------------------------------------------------------------
MONEY MARKET FUNDS-8.17%
STIC Liquid Assets Portfolio(b) 3,346,551 3,346,551
- --------------------------------------------------------------
STIC Prime Portfolio(b) 3,346,551 3,346,551
- --------------------------------------------------------------
Total Money Market Funds (Cost
$6,693,102) 6,693,102
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.94% 81,861,799
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.06% 51,486
- --------------------------------------------------------------
NET ASSETS-100.00% $81,913,285
- --------------------------------------------------------------
</TABLE>
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-15
<PAGE> 595
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $63,671,252) $81,861,799
- ------------------------------------------------------------
Foreign currencies, at value (cost $1,048) 1,055
- ------------------------------------------------------------
Receivables for:
Fund shares sold 1,240,372
- ------------------------------------------------------------
Dividends and interest 161,989
- ------------------------------------------------------------
Other assets 18,589
- ------------------------------------------------------------
Total assets 83,283,804
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 942,162
- ------------------------------------------------------------
Fund shares reacquired 252,474
- ------------------------------------------------------------
Accrued advisory fees 66,119
- ------------------------------------------------------------
Accrued administrative services fees 4,110
- ------------------------------------------------------------
Accrued distribution fees 58,202
- ------------------------------------------------------------
Accrued transfer agent fees 8,098
- ------------------------------------------------------------
Accrued trustees' fees 2,000
- ------------------------------------------------------------
Accrued operating expenses 37,354
- ------------------------------------------------------------
Total liabilities 1,370,519
- ------------------------------------------------------------
Net assets applicable to shares outstanding $81,913,285
============================================================
NET ASSETS:
Class A $30,987,361
============================================================
Class B $49,618,581
============================================================
Class C $ 604,996
============================================================
Advisor Class $ 702,347
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 1,334,046
============================================================
Class B 2,189,216
============================================================
Class C 26,690
============================================================
Advisor Class 29,792
============================================================
Class A:
Net asset value and redemption price per
share $ 23.23
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $23.23 / 95.25%) $ 24.39
============================================================
Class B:
Net asset value and offering price per share $ 22.67
============================================================
Class C:
Net asset value and offering price per share $ 22.67
============================================================
Advisor Class:
Net asset value, redemption and offering
price per share $ 23.58
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends income (net of $54,994 foreign
withholding tax) $ 1,308,600
- ------------------------------------------------------------
Interest 327,608
- ------------------------------------------------------------
Securities lending 35,500
- ------------------------------------------------------------
Total investment income 1,671,708
- ------------------------------------------------------------
EXPENSES:
Advisory and administrative fees 853,755
- ------------------------------------------------------------
Accounting services fees 34,005
- ------------------------------------------------------------
Custodian fees 41,915
- ------------------------------------------------------------
Distribution fees -- Class A 151,168
- ------------------------------------------------------------
Distribution fees -- Class B 495,394
- ------------------------------------------------------------
Distribution fees -- Class C 1,687
- ------------------------------------------------------------
Printing fees 137,968
- ------------------------------------------------------------
Trustees' fees 13,287
- ------------------------------------------------------------
Transfer agent fees -- Class A 78,627
- ------------------------------------------------------------
Transfer agent fees -- Class B 127,932
- ------------------------------------------------------------
Transfer agent fees -- Class C 436
- ------------------------------------------------------------
Transfer agent fees -- Advisor Class 17,835
- ------------------------------------------------------------
Other 113,101
- ------------------------------------------------------------
Total expenses 2,067,110
- ------------------------------------------------------------
Less: Expenses paid indirectly (787)
- ------------------------------------------------------------
Fees waived by advisor (114,306)
- ------------------------------------------------------------
Net expenses 1,952,017
- ------------------------------------------------------------
Net investment income (loss) (280,309)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
AND FORWARD CONTRACTS:
Net realized gain (loss) from:
Investment securities 19,323,357
- ------------------------------------------------------------
Foreign currencies (132,395)
- ------------------------------------------------------------
Forward contracts (336,844)
- ------------------------------------------------------------
18,854,118
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 8,598,450
- ------------------------------------------------------------
Foreign currencies (2,573)
- ------------------------------------------------------------
Forward contracts 287,308
- ------------------------------------------------------------
8,883,185
- ------------------------------------------------------------
Net gain from investment securities, foreign
currencies, and forward contracts 27,737,303
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $27,456,994
============================================================
</TABLE>
See Notes to Financial Statements.
FS-16
<PAGE> 596
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (280,309) $ 140,505
- -----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, and forward contracts 18,854,118 (702,889)
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, and forward contracts 8,883,185 1,398,601
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 27,456,994 836,217
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (27,914) (11,044)
- -----------------------------------------------------------------------------------------
Class B -- (16,883)
- -----------------------------------------------------------------------------------------
Advisor Class (62,446) (2,239)
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAINS:
Class A (50,561) (1,099,618)
- -----------------------------------------------------------------------------------------
Class B (88,384) (1,681,050)
- -----------------------------------------------------------------------------------------
Advisor Class (16,133) (222,890)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A (6,952,812) (847,176)
- -----------------------------------------------------------------------------------------
Class B (14,361,940) 2,731,796
- -----------------------------------------------------------------------------------------
Class C 578,307 --
- -----------------------------------------------------------------------------------------
Advisor Class (11,056,810) 5,846,237
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets (4,581,699) 5,533,350
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 86,494,984 80,961,634
- -----------------------------------------------------------------------------------------
End of period $ 81,913,285 $86,494,984
=========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 46,550,387 $78,345,098
- -----------------------------------------------------------------------------------------
Undistributed net investment income (loss) 736,025 88,991
- -----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, and forward contracts 16,437,684 (1,245,109)
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, and forward contracts 18,189,189 9,306,004
- -----------------------------------------------------------------------------------------
$ 81,913,285 $86,494,984
=========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-17
<PAGE> 597
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Financial Services Fund (the "Fund") is a separate series of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware business
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of twelve separate series portfolios, each having an unlimited number of shares
of beneficial interest. The Fund consists of four different classes of shares:
Class A shares, Class B shares, Class C shares and Advisor Class shares. Class A
shares are sold with a front-end sales charge. Class B shares and Class C shares
are sold with a contingent deferred sales charge. Advisor Class shares were sold
without a sales charge. Matters affecting each portfolio or class will be voted
on exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital. The Fund
invests substantially all of its investable assets in Global Financial Services
Portfolio (the "Portfolio"). The Portfolio is organized as a Delaware business
trust which is registered under the 1940 Act as an open-end management
investment company.
The Portfolio has investment objectives, policies and limitations
substantially identical to those of the Fund. Therefore, the financial
statements of the Fund and Portfolio have been presented on a consolidated
basis, and represent all activities of both the Fund and Portfolio. Through
October 31, 1999, all of the shares of beneficial interest of the Portfolio were
owned by either the Fund or INVESCO (NY) Asset Management, Inc., which has a
nominal ($100) investment in the Portfolio.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund and the Portfolio in the preparation of its financial statements.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. For purposes of determining net asset value per
share, futures and options contracts generally will be valued 15 minutes
after the close of trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Trustees.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of fund
share redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$1,017,703, undistributed net realized gains decreased by $1,016,247 and
paid-in capital decreased by $1,458 as a result of differing book/tax
treatment of foreign currency transactions and net operating loss
reclassifications in order to comply with the requirements of the American
Institute of Certified Public Accountants Statement of Position 93-2. Net
assets of the Fund were unaffected by the reclassification discussed above.
C. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify
FS-18
<PAGE> 598
as a regulated investment company and, as such, will not be subject to
federal income taxes on otherwise taxable income (including net realized
capital gains) which is distributed to shareholders. Therefore, no provision
for federal income taxes is recorded in the financial statements.
D. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
E. Foreign Currency Contracts--A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Portfolio may enter into a foreign currency contract to attempt to
minimize the risk to the Portfolio from adverse changes in the relationship
between currencies. The Portfolio may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Portfolio could be exposed to risk if counterparties to the contracts are
unable to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
F. Expenses--Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
G. 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 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 fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
In addition, the Portfolio's policy of concentrating its investments in
companies in the financial services industry subjects the Portfolio to
greater risk than a fund that is more diversified.
H. Indexed Securities--The 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.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's and the Portfolio's investment
manager and administrator. The Fund pays AIM administration fees at an
annualized rate of 0.25% of the Fund's average daily net assets. The Portfolio
pays AIM investment management and administration fees at an annual rate of
0.725% on the first $500 million of the Portfolio's average daily net assets,
plus 0.70% on the next $500 million of the Portfolio's average daily net assets,
plus 0.675% on the next $500 million of the Portfolio's average daily net
assets, plus 0.65% on the Portfolio's average daily net assets exceeding $1.5
billion. AIM has contractually agreed to limit the Fund's expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the
maximum annual rate of 2.00%, 2.50%, 2.50% and 1.50% of the average daily net
assets of the Fund's Class A, Class B, Class C and Advisor Class shares,
respectively. During the year ended October 31, 1999, AIM waived fees of
$114,306.
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund and the Portfolio. Prior to July 1,
1999, AIM was the pricing and accounting agent for the Fund and the Portfolio.
The monthly fee for these services paid to AIM was a percentage, not to exceed
0.03% annually, of a Fund's average daily net assets. The annual fee rate was
derived based on the aggregate net assets of the funds which comprised the
following investment companies: AIM Growth Series, AIM Investment Funds, AIM
Series Trust, G.T. Global Variable Investment Series and G.T. Global Variable
Investment Trust. The fee was calculated at the rate of 0.03% of the first $5
billion of assets and 0.02% to the assets in excess of $5 billion. An amount was
allocated to and paid by each such fund based on its relative average daily net
assets. For the year ended October 31, 1999, AIM was paid $34,005 for such
services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended October 31, 1999, AFS was
paid $204,616 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares, Class B shares and Class C shares (collectively the
"Plans"). The Fund , pursuant to the Plans, pays AIM Distributors compensation
at the annual rate of 0.50% of the Fund's average daily net assets of Class A
shares and 1.00% of the average daily net assets of Class B and C shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under
FS-19
<PAGE> 599
the Plans would constitute an asset-based sales charge. The Plans also impose a
cap on the total sales charges, including asset-based sales charges that may be
paid by the respective classes. For the year ended October 31, 1999, the Class
A, Class B and Class C shares paid AIM Distributors $151,168, $495,394 and
$1,687, respectively, as compensation under the Plans.
AIM Distributors received commissions of $16,231 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $1,268 in contingent deferred sales charges imposed on
redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AFS and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $787 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of $787
during the year ended October 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended October 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. The
commitment fee is allocated among the funds based on their respective average
net assets for the period. Prior to May 28, 1999, the Fund, along with certain
other funds advised and/or administered by AIM, had a line of credit with
BankBoston and State Street Bank & Trust Company. The arrangements with the
banks allowed the Fund and certain other funds to borrow, on a first come, first
served basis, an aggregate maximum amount of $250,000,000.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, securities with an aggregate value of $1,843,403 were on
loan to brokers. The loans were secured by cash collateral of $1,880,271
received by the Portfolio. For the year ended October 31, 1999, the Portfolio
received fees of $35,500 for securities lending. For international securities,
cash collateral is received by the Fund against loaned securities in an amount
at least equal to 105% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 103%
of the market value of the loaned securities during the period of the loan. For
domestic securities, cash collateral is received by the Fund against loaned
securities in the amount at least equal to 102% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 100% of the market value of the loaned securities
during the period of the loan. The cash collateral is invested in a securities
lending trust which consists of a portfolio of high quality short duration
securities whose average effective duration is restricted to 120 days or less.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Portfolio during the year ended October 31, 1999 was
$86,951,106 and $123,914,428, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 18,691,989
- ---------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (1,021,422)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $ 17,670,567
=========================================================
Cost of investments for tax purposes is $64,191,232.
</TABLE>
FS-20
<PAGE> 600
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998*
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Sold:
Class A 833,262 $ 17,299,042 3,687,543 $ 67,971,118
- ---------------------------------------------------------------------------------------------------------------------------
Class B 676,623 13,852,370 2,101,129 37,907,965
- ---------------------------------------------------------------------------------------------------------------------------
Class C* 32,543 712,656 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Advisor Class 27,443 605,576 563,080 10,164,684
- ---------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 4,035 73,215 54,738 960,105
- ---------------------------------------------------------------------------------------------------------------------------
Class B 4,616 82,070 76,614 1,322,362
- ---------------------------------------------------------------------------------------------------------------------------
Advisor Class 4,287 78,579 12,691 225,008
- ---------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (1,170,739) (24,325,069) (3,795,511) (69,778,399)
- ---------------------------------------------------------------------------------------------------------------------------
Class B (1,411,988) (28,296,380) (2,061,758) (36,498,531)
- ---------------------------------------------------------------------------------------------------------------------------
Class C* (5,853) (134,349) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Advisor Class (537,683) (11,740,965) (254,804) (4,543,455)
- ---------------------------------------------------------------------------------------------------------------------------
(1,543,454) $ (31,793,255) 383,722 $ 7,730,857
===========================================================================================================================
</TABLE>
FS-21
<PAGE> 601
NOTE 8-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,
---------------------------------------------------
1999(a) 1998(a) 1997(a) 1996(a) 1995(a)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.05 $ 17.22 $ 14.20 $11.92 $11.62
- ------------------------------------------------------------ ------- ------- ------- ------ ------
Income from investment operations:
Net investment income (loss) (0.02) 0.07 0.04 0.05(b) 0.17(c)
- ------------------------------------------------------------ ------- ------- ------- ------ ------
Net realized and unrealized gain on investments 6.25 0.37 3.97 2.36 0.13
- ------------------------------------------------------------ ------- ------- ------- ------ ------
Net increase from investment operations 6.23 0.44 4.01 2.41 0.30
- ------------------------------------------------------------ ------- ------- ------- ------ ------
Distributions to shareholders:
From net investment income (0.02) (0.01) -- (0.12) --
- ------------------------------------------------------------ ------- ------- ------- ------ ------
From net realized gain on investments (0.03) (0.60) (0.99) (0.01) --
- ------------------------------------------------------------ ------- ------- ------- ------ ------
Total distributions (0.05) (0.61) (0.99) (0.13) --
- ------------------------------------------------------------ ------- ------- ------- ------ ------
Net asset value, end of period $ 23.23 $ 17.05 $ 17.22 $14.20 $11.92
============================================================ ======= ======= ======= ====== ======
Total return(d) 36.62% 2.53% 29.91% 20.21% 2.58%
============================================================ ======= ======= ======= ====== ======
Ratios and supplemental data:
Net assets, end of period (in 000s) $30,987 $28,433 $29,639 $7,302 $5,687
============================================================ ======= ======= ======= ====== ======
Ratio of net investment income (loss) to average net assets:
With fee waivers (0.08)%(e) 0.37% 0.23% 0.41% 1.46%
- ------------------------------------------------------------ ------- ------- ------- ------ ------
Without fee waivers (0.21)%(e) 0.35% 0.16% (0.66)% (5.34)%
============================================================ ======= ======= ======= ====== ======
Ratio of expenses to average net assets:
With fee waivers 1.99%(e) 1.97% 2.29% 2.32% 2.34%
- ------------------------------------------------------------ ------- ------- ------- ------ ------
Without fee waivers 2.12%(e) 1.99% 2.36% 3.39% 9.14%
============================================================ ======= ======= ======= ====== ======
Portfolio turnover rate 107% 111% 91% 103% 170%
============================================================ ======= ======= ======= ====== ======
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.13.
(c) Before reimbursement the net investment income per share would have been
reduced by $0.59.
(d) Total return does not include sales charge.
(e) Ratios are based on average net assets of $30,233,569.
FS-22
<PAGE> 602
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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,
---------------------------------------------------
1999(a) 1998(a) 1997(a) 1996(a) 1995(a)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.71 $16.97 $14.06 $11.83 $11.60
- ------------------------------------------------------------ ------- ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) (0.12) (0.02) (0.04) (0.01)(b) 0.11(c)
- ------------------------------------------------------------ ------- ------ ------ ------ ------
Net realized and unrealized gain on investments 6.11 0.37 3.94 2.34 0.12
- ------------------------------------------------------------ ------- ------ ------ ------ ------
Net increase from investment operations 5.99 0.35 3.90 2.33 0.23
- ------------------------------------------------------------ ------- ------ ------ ------ ------
Distributions to shareholders:
From net investment income -- (0.01) -- (0.09) --
- ------------------------------------------------------------ ------- ------ ------ ------ ------
From net realized gain on investments (0.03) (0.60) (0.99) (0.01) --
- ------------------------------------------------------------ ------- ------ ------ ------ ------
Total distributions (0.03) (0.61) (0.99) (0.10) --
- ------------------------------------------------------------ ------- ------ ------ ------ ------
Net asset value, end of period $ 22.67 $16.71 $16.97 $14.06 $11.83
============================================================ ======= ====== ====== ====== ======
Total return(d) 35.91% 2.08% 29.13% 19.81% 1.98%
============================================================ ======= ====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in 000s) $49,619 $48,785 $47,585 $9,886 $4,548
============================================================ ======= ====== ====== ====== ======
Ratio of net investment income (loss) to average net assets:
With fee waivers (0.58)%(e) (0.13)% (0.27)% (0.09)% 0.96%
- ------------------------------------------------------------ ------- ------ ------ ------ ------
Without fee waivers (0.71)%(e) (0.15)% (0.34)% (1.16)% (5.84)%
============================================================ ======= ====== ====== ====== ======
Ratio of expenses to average net assets:
With fee waivers 2.49%(e) 2.47% 2.79% 2.82% 2.84%
- ------------------------------------------------------------ ------- ------ ------ ------ ------
Without fee waivers 2.62%(e) 2.49% 2.86% 3.89% 9.64%
============================================================ ======= ====== ====== ====== ======
Portfolio turnover rate 107% 111% 91% 103% 170%
============================================================ ======= ====== ====== ====== ======
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.13.
(c) Before reimbursement the net investment income per share would have been
reduced by $0.59.
(d) Total return does not include sales charges.
(e) Ratios are based on average net assets of $49,539,408.
FS-23
<PAGE> 603
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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 C ADVISOR CLASS
------------------- --------------------------------------------------------------
YEAR ENDED OCTOBER 31,
MARCH 1, 1999 TO ---------------------------------------- JUNE 1, 1995 TO
October 31, 1999(a) 1999(a) 1998(a) 1997(a) 1996(a) OCTOBER 31, 1995(a)
------------------- ------- ------- ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $19.58 $17.31 $17.40 $14.26 $11.95 $11.09
- ---------------------------------------- ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) (0.08) 0.08 0.17 0.12 0.12(b) 0.09(c)
- ---------------------------------------- ------ ------ ------ ------ ------ ------
Net realized and unrealized gain on
investments 3.17 6.34 0.35 4.01 2.36 0.77
- ---------------------------------------- ------ ------ ------ ------ ------ ------
Net increase from investment
operations 3.09 6.42 0.52 4.13 2.48 0.86
- ---------------------------------------- ------ ------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income -- (0.12) (0.01) -- (0.16) --
- ---------------------------------------- ------ ------ ------ ------ ------ ------
From net realized gain on investments -- (0.03) (0.60) (0.99) (0.01) --
- ---------------------------------------- ------ ------ ------ ------ ------ ------
Total distributions -- (0.15) (0.61) (0.99) (0.17) --
- ---------------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $22.67 $23.58 $17.31 $17.40 $14.26 $11.95
======================================== ====== ====== ====== ====== ====== ======
Total return(d) 15.78% 37.37% 3.03% 30.52% 20.87% 7.75%
======================================== ====== ====== ====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in 000s) $ 605 $ 702 $9,276 $3,738 $ 72 $ 31
======================================== ====== ====== ====== ====== ====== ======
Ratio of net investment income (loss) to
average net assets:
With fee waivers (0.58)%(e) 0.43%(f) 0.87% 0.73% 0.91% 1.96%(g)
- ---------------------------------------- ------ ------ ------ ------ ------ ------
Without fee waivers (0.71)%(e) 0.30%(f) 0.85% 0.66% (0.16)% 4.84%(g)
======================================== ====== ====== ====== ====== ====== ======
Ratio of expenses to average net assets:
With fee waivers 2.49%(e) 1.48(f) 1.47% 1.79% 1.82% 1.84%(g)
- ---------------------------------------- ------ ------ ------ ------ ------ ------
Without fee waivers 2.62%(e) 1.61(f) 1.49% 1.86% 2.89% 8.64%(g)
======================================== ====== ====== ====== ====== ====== ======
Portfolio turnover rate 107% 107% 111% 91% 103% 170%
======================================== ====== ====== ====== ====== ====== ======
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.13.
(c) Before reimbursement the net investment income per share would have been
reduced by $0.30.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are annualized and based on average net assets of $251,286.
(f) Ratios are based on average net assets of $7,564,046.
(g) Annualized.
NOTE 9-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
FS-24
<PAGE> 604
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Global Health Care Fund
and Board of Trustees of AIM Investment Funds:
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Global Health Care Fund at October 31, 1999, and the
results of its operations, the changes in its net assets
and the financial highlights for the periods indicated
therein, in conformity with generally accepted accounting
principles. These financial statements and financial
highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
October 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
FS-25
<PAGE> 605
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS & OTHER
EQUITY INTERESTS-75.32%
BIOTECHNOLOGY-9.59%
Amgen, Inc.(a)(b) 530,000 $ 42,267,500
- --------------------------------------------------------------
Enzon, Inc., Series A Cumulative
Conv. Pfd. (Acquired 03/22/90;
Cost $400,000)(b)(c)(d) 16,000 1,064,630
- --------------------------------------------------------------
Genzyme Surgical Products(b) 450 2,419
- --------------------------------------------------------------
PathoGenesis Corp.(b) 16,000 240,000
- --------------------------------------------------------------
Protein Design Labs, Inc.(b) 20,000 801,250
- --------------------------------------------------------------
44,375,799
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.20%
AmeriSource Health Corp.-Class A(b) 60,000 900,000
- --------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-2.86%
Varian Inc.(b) 263,000 4,964,125
- --------------------------------------------------------------
Varian Medical Systems, Inc. 128,000 2,696,000
- --------------------------------------------------------------
Varian Semiconductor Equipment
Associates, Inc.(b) 247,000 5,588,375
- --------------------------------------------------------------
13,248,500
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-18.49%
Abbott Laboratories 120,000 4,845,000
- --------------------------------------------------------------
Bristol-Myers Squibb Co.(a) 320,000 24,580,000
- --------------------------------------------------------------
Sierra Health Services, Inc.(b) 33,000 241,312
- --------------------------------------------------------------
Warner-Lambert Co. 700,000 55,868,750
- --------------------------------------------------------------
85,535,062
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.46%
Alpharma, Inc.-Class A 10,000 351,875
- --------------------------------------------------------------
Barr Laboratories, Inc.(b) 59,000 1,788,438
- --------------------------------------------------------------
2,140,313
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-9.98%
Lilly (Eli) & Co.(a) 35,000 2,410,625
- --------------------------------------------------------------
Merck & Co., Inc.(a) 270,000 21,481,875
- --------------------------------------------------------------
Schering-Plough Corp. 450,000 22,275,000
- --------------------------------------------------------------
46,167,500
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.23%
Health Management Associates,
Inc.-Class A(b) 120,000 1,065,000
- --------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.79%
Ventas, Inc. 750,000 3,656,250
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-13.21%
PacifiCare Health Systems, Inc.(b) 700,000 27,606,250
- --------------------------------------------------------------
United Healthcare Corp. 513,900 26,562,206
- --------------------------------------------------------------
Wellpoint Health Networks, Inc.(b) 120,000 6,960,000
- --------------------------------------------------------------
61,128,456
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-17.95%
Acuson Corp.(b) 28,000 $ 290,500
- --------------------------------------------------------------
Bausch & Lomb Inc. 75,500 4,077,000
- --------------------------------------------------------------
Baxter International, Inc. 75,000 4,865,625
- --------------------------------------------------------------
Biomet, Inc. 90,000 2,711,250
- --------------------------------------------------------------
EndoSonics Corp.(b) 1,125,000 4,183,594
- --------------------------------------------------------------
Guidant Corp.(a) 392,000 19,355,000
- --------------------------------------------------------------
Medtronic, Inc.(a) 625,000 21,640,625
- --------------------------------------------------------------
Mentor Corp. 143,200 3,374,150
- --------------------------------------------------------------
Molecular Biosystems, Inc.(b) 290,000 290,000
- --------------------------------------------------------------
Orthofix International N.V.(b) 27,000 378,000
- --------------------------------------------------------------
VISX, Inc.(b) 350,000 21,896,875
- --------------------------------------------------------------
83,062,619
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.82%
Aetna, Inc. 75,000 3,768,750
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.65%
CIGNA Corp. 40,000 2,990,000
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.09%
IMS Health, Inc. 15,000 435,000
- --------------------------------------------------------------
Total Domestic Common Stocks &
Other Equity Interests (Cost
$277,184,917) 348,473,249
- --------------------------------------------------------------
FOREIGN STOCKS-18.20%
FRANCE-1.24%
Sanofi-Synthelabo S.A. (Health
Care-Drugs- Generic & Other)(b) 129,720 5,724,997
- --------------------------------------------------------------
GERMANY-3.05%
Altana A.G. (Health
Care-Drugs-Generic & Other) 200,000 14,118,511
- --------------------------------------------------------------
ISRAEL-0.09%
Teva Pharmaceutical Industries
Ltd.-ADR (Health
Care-Drugs-Generic & Other) 8,700 420,863
- --------------------------------------------------------------
JAPAN-4.04%
Banyu Pharmaceutical Co., Ltd.
(Health Care-Drugs-Generic &
Other) 36,000 659,191
- --------------------------------------------------------------
Chugai Pharmaceutical Co., Ltd.
(Health Care-Drugs-Generic &
Other) 108,000 1,284,543
- --------------------------------------------------------------
Daiichi Pharmaceutical Co., Ltd.
(Health Care-Drugs-Generic &
Other) 39,000 559,254
- --------------------------------------------------------------
Eisai Co., Ltd.
(Health Care-Drugs-Generic &
Other) 40,000 1,099,228
- --------------------------------------------------------------
</TABLE>
FS-26
<PAGE> 606
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN-(CONTINUED)
Kissei Pharmaceutical Co., Ltd.
(Health Care-Drugs-Generic & Other) 14,000 $ 268,572
- --------------------------------------------------------------
Kyowa Hakko Kogyo
(Health Care-Drugs-Generic & Other) 69,000 495,055
- --------------------------------------------------------------
Rohto Pharmaceutical Co., Ltd.
(Health Care-Drugs-Generic & Other) 76,000 589,746
- --------------------------------------------------------------
Shionogi & Co., Ltd.
(Health Care-Drugs-Generic & Other) 44,000 404,738
- --------------------------------------------------------------
Taisho Pharmaceutical Co., Ltd.
(Health Care-Drugs-Generic & Other) 50,000 2,081,435
- --------------------------------------------------------------
Takeda Chemical Industries, Ltd.
(Health Care-Drugs-Generic & Other) 154,000 8,848,113
- --------------------------------------------------------------
Uni-Charm Corp. (The)
(Paper & Forest Products) 5,400 315,438
- --------------------------------------------------------------
Yamanouchi Pharmaceutical Co., Ltd.
(Health Care-Drugs-Generic & Other) 46,000 2,086,998
- --------------------------------------------------------------
18,692,311
- --------------------------------------------------------------
NETHERLANDS-2.87%
Akzo Nobel N.V.
(Chemicals-Diversified) 280,000 12,059,860
- --------------------------------------------------------------
Akzo Nobel N.V.-ADR
(Chemicals-Diversified) 28,000 1,207,500
- --------------------------------------------------------------
13,267,360
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SWITZERLAND-3.24%
Roche Holding A.G.
(Health Care-Drugs-Generic & Other) 1,251 $ 15,014,954
- --------------------------------------------------------------
UNITED KINGDOM-3.67%
AstraZeneca Group PLC-ADR
(Health Care-Drugs-Major
Pharmaceuticals) 350,000 16,012,500
- --------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Health Care-Drugs-Major
Pharmaceuticals) 15,000 960,000
- --------------------------------------------------------------
16,972,500
- --------------------------------------------------------------
Total Foreign Stocks (Cost
$65,836,293) 84,211,496
- --------------------------------------------------------------
MONEY MARKET FUNDS-8.10%
STIC Liquid Assets Portfolio(e) 18,742,434 18,742,434
- --------------------------------------------------------------
STIC Prime Portfolio(e) 18,742,434 18,742,434
- --------------------------------------------------------------
Total Money Market Funds (Cost
$37,484,868) 37,484,868
- --------------------------------------------------------------
TOTAL INVESTMENTS-101.62% 470,169,613
- --------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS-(1.62%) (7,500,322)
- --------------------------------------------------------------
NET ASSETS-100.00% 462,669,291
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
Notes to Schedule of Investments:
(a) A portion of this security is subject to call options written. See Note 8.
(b) Non-income producing security.
(c) Security fair valued in accordance with procedures established by the Board
of Trustees.
(d) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The market
value of this security at 10/31/99 was $1,064,630 which represented 0.23% of
the Fund's net assets.
(e) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-27
<PAGE> 607
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $380,506,078) $ 470,169,613
- -------------------------------------------------------------
Receivables for:
Fund shares sold 258,340
- -------------------------------------------------------------
Dividends and interest 293,704
- -------------------------------------------------------------
Other assets 1,952
- -------------------------------------------------------------
Total assets 470,723,609
- -------------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 746,897
- -------------------------------------------------------------
Options written (Premiums received $7,216,094) 6,345,313
- -------------------------------------------------------------
Accrued advisory fees 381,886
- -------------------------------------------------------------
Accrued distribution fees 303,320
- -------------------------------------------------------------
Accrued administrative services fees 13,000
- -------------------------------------------------------------
Accrued transfer agent fees 98,000
- -------------------------------------------------------------
Accrued trustees' fees 1,600
- -------------------------------------------------------------
Accrued operating expenses 164,302
- -------------------------------------------------------------
Total liabilities 8,054,318
- -------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 462,669,291
=============================================================
NET ASSETS:
Class A $ 357,746,590
=============================================================
Class B $ 102,915,544
=============================================================
Class C $ 1,278,126
=============================================================
Advisor Class $ 729,031
=============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 14,905,069
=============================================================
Class B 4,483,105
=============================================================
Class C 55,675
=============================================================
Advisor Class 29,545
=============================================================
Class A:
Net asset value and redemption price per
share $ 24.00
- -------------------------------------------------------------
Offering price per share:
(Net asset value of $24.00 divided by
95.25) $ 25.20
=============================================================
Class B:
Net asset value and offering price per
share $ 22.96
=============================================================
Class C:
Net asset value and offering price per
share $ 22.96
=============================================================
Advisor Class:
Net asset value, redemption and offering
price per share $ 24.68
=============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $177,844 foreign withholding
tax) $ 3,168,794
- ------------------------------------------------------------
Interest 1,712,526
- ------------------------------------------------------------
Securities lending 165,966
- ------------------------------------------------------------
Total investment income 5,047,286
- ------------------------------------------------------------
EXPENSES:
Advisory and administrative fees 4,855,959
- ------------------------------------------------------------
Accounting services fees 142,382
- ------------------------------------------------------------
Custodian fees 95,286
- ------------------------------------------------------------
Distribution fees -- Class A 1,919,476
- ------------------------------------------------------------
Distribution fees -- Class B 1,088,812
- ------------------------------------------------------------
Distribution fees -- Class C 4,464
- ------------------------------------------------------------
Trustees' fees 19,026
- ------------------------------------------------------------
Transfer agent fees -- Class A 749,616
- ------------------------------------------------------------
Transfer agent fees -- Class B 212,608
- ------------------------------------------------------------
Transfer agent fees -- Class C 871
- ------------------------------------------------------------
Transfer agent fees -- Advisor Class 9,409
- ------------------------------------------------------------
Other 504,928
- ------------------------------------------------------------
Total expenses 9,602,837
- ------------------------------------------------------------
Less: Expenses paid indirectly (4,130)
- ------------------------------------------------------------
Net expenses 9,598,707
- ------------------------------------------------------------
Net investment income (loss) (4,551,421)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 34,924,655
- ------------------------------------------------------------
Foreign currencies (72,071)
- ------------------------------------------------------------
Option contracts written 9,881,201
- ------------------------------------------------------------
44,733,785
- ------------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 44,979,725
- ------------------------------------------------------------
Foreign currencies 35,250
- ------------------------------------------------------------
Option contracts written 870,781
- ------------------------------------------------------------
45,885,756
- ------------------------------------------------------------
Net gain from investment securities, foreign
currencies, and option contracts 90,619,541
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $ 86,068,120
============================================================
</TABLE>
See Notes to Financial Statements.
FS-28
<PAGE> 608
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (4,551,421) $ (5,699,337)
- -------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts 44,733,785 (805,542)
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts 45,885,756 (18,545,458)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 86,068,120 (25,050,337)
- -------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAINS:
Class A -- (111,031,821)
- -------------------------------------------------------------------------------------------
Class B -- (34,132,236)
- -------------------------------------------------------------------------------------------
Advisor Class -- (1,792,960)
- -------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A (66,396,665) 14,570,400
- -------------------------------------------------------------------------------------------
Class B (15,601,954) (6,081,715)
- -------------------------------------------------------------------------------------------
Class C 1,345,583 --
- -------------------------------------------------------------------------------------------
Advisor Class (6,483,138) 913,897
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (1,068,054) (162,604,772)
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 463,737,345 626,342,117
- -------------------------------------------------------------------------------------------
End of period $462,669,291 $ 463,737,345
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $329,089,377 $ 420,849,043
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and option contracts 43,046,264 (1,759,592)
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and option contracts 90,533,650 44,647,894
- -------------------------------------------------------------------------------------------
$462,669,291 $ 463,737,345
===========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-29
<PAGE> 609
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Health Care Fund (the "Fund") is a separate series of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware business trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twelve
separate series portfolios, each having an unlimited number of shares of
beneficial interest. The Fund consists of four different classes of shares:
Class A shares, Class B shares, Class C shares and Advisor Class shares. Class A
shares are sold with a front-end sales charge. Class B shares and Class C shares
are sold with a contingent deferred sales charge. Advisor Class shares were sold
without a sales charge. Matters affecting each portfolio or class will be voted
on exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the Trust's
officers in a manner specifically authorized by the Board of Trustees.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Trustees.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
fund share redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$4,551,421, undistributed net realized gains increased by $72,071 and
paid-in capital decreased by $4,623,492 as a result of differing book/tax
treatment of foreign currency transactions and net operating loss
reclassifications in order to comply with the requirements of the American
Institute of Certified Public Accountants Statement of Position 93-2. Net
assets of the Fund were unaffected by the reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such
FS-30
<PAGE> 610
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
F. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
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 written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option
was written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at such
earlier time at which the Fund effects a closing purchase transaction by
purchasing (at a price which may be higher than that received when the call
option was written) a call option identical to the one originally written.
G. Put Options -- The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
H. Expenses -- Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
I. 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
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 fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
In addition, the Fund's policy of concentrating its investments in
companies in the health care industry subjects the Fund to greater risk than
a fund that is more diversified.
J. Indexed Securities -- The Fund may invest in indexed securities whose value
is linked either directly or indirectly to changes in foreign currencies,
interest rates, equities, indices, or other reference instruments. Indexed
securities may be more volatile than the reference instrument itself, but
any loss is limited to the amount of the original investment.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
The Fund pays AIM investment management and administration fees at an annual
rate of 0.975% on the first $500 million of the Fund's average daily net assets,
plus 0.95% on the next $500 million of the Fund's average daily net assets, plus
0.925% on the next $500 million of the Fund's average daily net assets, plus
0.90% on the Fund's average daily net assets exceeding $1.5 billion. AIM has
contractually agreed to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the maximum annual
rate of 2.00%, 2.50%, 2.50% and 1.50% of the average daily net assets of the
Fund's Class A, Class B, Class C and Advisor Class shares, respectively.
FS-31
<PAGE> 611
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund. Prior to July 1, 1999, AIM was the
pricing and accounting agent for the Fund. The monthly fee for these services
paid to AIM was a percentage, not to exceed 0.03% annually, of a Fund's average
daily net assets. The annual fee rate was derived based on the aggregate net
assets of the funds which comprised the following investment companies: AIM
Growth Series, AIM Investment Funds, AIM Series Trust, G.T. Global Variable
Investment Series and G.T. Global Variable Investment Trust. The fee was
calculated at the rate of 0.03% of the first $5 billion of assets and 0.02% to
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets. For the year ended
October 31, 1999, AIM was paid $142,382 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended October 31, 1999, AFS was
paid $972,504 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares, Class B shares and Class C shares (collectively the
"Plans"). The Fund , pursuant to the Plans, pays AIM Distributors compensation
at the annual rate of 0.50% of the Fund's average daily net assets of Class A
shares and 1.00% of the average daily net assets of Class B and C shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. For the year ended October 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $1,919,476, $1,088,812 and 4,464, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $51,905 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $3,480 in contingent deferred sales charges imposed on
redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AFS and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $4,130 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$4,130 during the year ended October 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among the
funds based on their respective average net assets for the period. Prior to May
28, 1999, the Fund, along with certain other funds advised and/or administered
by AIM, had a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allowed the Fund and certain other
funds to borrow, on a first come, first served basis, an aggregate maximum
amount of $250,000,000.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, securities with an aggregate value of $2,087,256 were on
loan to brokers. The loans were secured by cash collateral of $2,129,001
received by the Fund. For the year ended October 31, 1999, the Fund received
fees of $165,966 for securities lending.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$569,311,572 and $591,125,893, respectively. The amount of unrealized
appreciation (depreciation) of investment securities, for tax purposes, as of
October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 99,703,597
- ---------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (10,972,470)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $ 88,731,127
- ---------------------------------------------------------
Cost of investments for tax purposes is $381,438,486.
</TABLE>
FS-32
<PAGE> 612
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
---------- ------------
<S> <C> <C>
Beginning of year -- $ --
- ---------------------------------------------------------------------------------------
Written 92,970 30,864,043
- ---------------------------------------------------------------------------------------
Closed (55,720) (18,608,125)
- ---------------------------------------------------------------------------------------
Exercised (13,045) (3,104,014)
- ---------------------------------------------------------------------------------------
Expired (5,155) (1,935,810)
- ---------------------------------------------------------------------------------------
End of year 19,050 $ 7,216,094
=======================================================================================
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- ------------------------------------------- -------- ------- ---------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Amgen, Inc. Dec-99 $ 80 5,300 $3,126,206 $ 2,650,000 $ 476,206
- ---------------------------------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. Dec-99 75 3,200 1,329,105 1,520,000 (190,895)
- ---------------------------------------------------------------------------------------------------------------------------------
Guidant Corp. Jan-00 60 1,500 912,720 271,875 640,845
- ---------------------------------------------------------------------------------------------------------------------------------
Guidant Corp. Nov-99 55 1,000 271,991 68,750 203,241
- ---------------------------------------------------------------------------------------------------------------------------------
Lilly (Eli) & Co. Nov-99 65 350 95,197 164,063 (68,866)
- ---------------------------------------------------------------------------------------------------------------------------------
Medtronic, Inc. Nov-99 37.5 3,000 466,584 196,875 269,709
- ---------------------------------------------------------------------------------------------------------------------------------
Medtronic, Inc. Nov-99 40 2,000 371,988 56,250 315,738
- ---------------------------------------------------------------------------------------------------------------------------------
Merck & Co., Inc. Nov-99 75 2,700 642,303 1,417,500 (775,197)
- ---------------------------------------------------------------------------------------------------------------------------------
19,050 $7,216,094 $ 6,345,313 $ 870,781
=================================================================================================================================
</TABLE>
NOTE 8-PUT OPTION CONTRACTS
Transactions in put options during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
---------- -----------
<S> <C> <C>
Beginning of year -- $ --
- --------------------------------------------------------------------------------------
Purchased 5,950 1,894,123
- --------------------------------------------------------------------------------------
Closed (1,850) (488,808)
- --------------------------------------------------------------------------------------
Exercised (1,900) (256,104)
- --------------------------------------------------------------------------------------
Expired (2,200) (1,149,211)
- --------------------------------------------------------------------------------------
End of year -- $ --
======================================================================================
</TABLE>
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 6,319,231 $ 143,915,406 24,980,706 $ 526,818,779
- ----------------------------------------------------------------------------------------------------------------------
Class B 691,366 16,088,681 3,933,442 81,783,021
- ----------------------------------------------------------------------------------------------------------------------
Class C * 58,588 1,413,024 -- --
- ----------------------------------------------------------------------------------------------------------------------
Advisor Class 18,009 438,450 2,760,416 60,020,116
- ----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A -- -- 4,212,044 87,484,194
- ----------------------------------------------------------------------------------------------------------------------
Class B -- -- 1,393,872 27,961,083
- ----------------------------------------------------------------------------------------------------------------------
Advisor Class -- -- 84,210 1,780,217
- ----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (9,158,822) (210,312,070) (28,318,023) (599,732,573)
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,386,892) (31,690,636) (5,554,950) (115,825,819)
- ----------------------------------------------------------------------------------------------------------------------
Class C* (2,913) (67,441) -- --
- ----------------------------------------------------------------------------------------------------------------------
Advisor Class (274,593) (6,921,588) (2,799,107) (60,886,436)
- ----------------------------------------------------------------------------------------------------------------------
(3,736,026) $ (87,136,174) 692,610 $ 9,402,582
======================================================================================================================
</TABLE>
* Class C shares commenced sales on March 1, 1999.
FS-33
<PAGE> 613
NOTE 10-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,
---------------------------------------------------------
1999(A) 1998(a) 1997(a) 1996(a) 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.15 $ 27.98 $ 23.60 $ 21.84 $ 19.60
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.19) (0.21) (0.25) (0.17) (0.15)
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 4.04 (0.91) 6.48 4.79 3.73
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations 3.85 (1.12) 6.23 4.62 3.58
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gain on investments -- (6.70) (1.85) (2.86) (1.34)
- -----------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- (0.01) -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total distributions -- (6.71) (1.85) (2.86) (1.34)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 24.00 $ 20.15 $ 27.98 $ 23.60 $ 21.84
=======================================================================================================================
Total return(b) 19.11% (4.71)% 28.36% 23.14% 19.79%
=======================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $357,747 $357,534 $472,083 $467,861 $426,380
=======================================================================================================================
Ratio of net investment income (loss) to average net assets: (0.81)%(c) (0.98)% (1.03)% (0.75)% (0.78)%
=======================================================================================================================
Ratio of expenses to average net assets: 1.82%(c) 1.84% 1.80% 1.84% 1.91%
=======================================================================================================================
Portfolio turnover rate 123% 187% 149% 157% 99%
=======================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charge and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $383,895,122.
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,
--------------------------------------------------------
1999(a) 1998(a) 1997(a) 1996(A) 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.37 $ 27.27 $ 23.15 $ 21.56 $ 19.46
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.30) (0.30) (0.37) (0.27) (0.25)
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 3.89 (0.89) 6.34 4.72 3.69
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations 3.59 (1.19) 5.97 4.45 3.44
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gain on investments -- (6.70) (1.85) (2.86) (1.34)
- -----------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- (0.01) -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total distributions -- (6.71) (1.85) (2.86) (1.34)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 22.96 $ 19.37 $ 27.27 $ 23.15 $ 21.56
=======================================================================================================================
Total return(b) 18.53% (5.20)% 27.75% 22.59% 19.17%
=======================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $102,916 $100,311 $147,440 $107,622 $70,740
=======================================================================================================================
Ratio of net investment income (loss) to average net assets: (1.32)%(c) (1.48)% (1.53)% (1.25)% (1.28)%
=======================================================================================================================
Ratio of expenses to average net assets: 2.33%(c) 2.34% 2.30% 2.34% 2.41%
=======================================================================================================================
Portfolio turnover rate 123% 187% 149% 157% 99%
=======================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $108,881,226.
FS-34
<PAGE> 614
NOTE 10-FINANCIAL HIGHLIGHTS (CONTINUED)
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 C ADVISOR CLASS
------------------- ------------------------------------------------------------
MARCH 1, 1999 YEAR ENDED OCTOBER 31, JUNE 1, 1995
TO ----------------------------------------- TO
OCTOBER 31, 1999(a) 1999(a) 1998(a) 1997(a) 1996(a) OCTOBER 31, 1995
------------------- ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $22.50 $ 20.59 $ 28.34 $ 23.77 $ 21.88 $18.66
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.21) (0.08) (0.10) (0.12) (0.05) (0.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.67 4.17 (0.94) 6.54 4.80 3.24
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment
operations 0.46 4.09 (1.04) 6.42 4.75 3.22
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gain on investments -- -- (6.70) (1.85) (2.86) --
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments -- -- (0.01) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (6.71) (1.85) (2.86) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $22.96 $ 24.68 $20.59 $28.34 $23.77 $21.88
=================================================================================================================================
Total return(b) 2.04% 19.86% (4.28)% 29.00% 23.82% 17.10%
=================================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $1,278 $ 729 $5,892 $6,819 $1,152 $ 539
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets: (1.32)%(c) (0.33)%(d) (0.48)% (0.53)% (0.25)% (0.28)%(e)
=================================================================================================================================
Ratio of expenses to average net assets: 2.33%(c) 1.34%(d) 1.34% 1.30% 1.34% 1.41%(e)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 123% 123% 187% 149% 157% 99%
=================================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $670,519.
(d) Ratios are based on average net assets of $4,818,675.
(e) Annualized.
NOTE 11-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
FS-35
<PAGE> 615
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Global Infrastructure Fund
and Board of Trustees of AIM Investment Funds
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Global Infrastructure Fund at October 31, 1999, and
the results of its operations, the changes in its net
assets and the financial highlights for the periods
indicated, in conformity with generally accepted
accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
October 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
FS-36
<PAGE> 616
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-46.84%
AEROSPACE/DEFENSE-3.25%
General Dynamics Corp. 26,494 $ 1,468,761
- -------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-5.64%
Aether Systems, Inc.(a) 5,200 361,725
- -------------------------------------------------------------
Juniper Networks, Inc.(a) 1,500 413,437
- -------------------------------------------------------------
Lucent Technologies Inc. 9,700 623,225
- -------------------------------------------------------------
Sycamore Networks, Inc.(a) 800 172,000
- -------------------------------------------------------------
Tellabs, Inc.(a) 11,270 712,827
- -------------------------------------------------------------
Williams Communications Group, Inc.(a) 8,200 261,375
- -------------------------------------------------------------
2,544,589
- -------------------------------------------------------------
COMPUTERS (NETWORKING)-3.66%
Cisco Systems, Inc.(a) 17,684 1,308,616
- -------------------------------------------------------------
Foundry Networks, Inc.(a) 1,800 341,100
- -------------------------------------------------------------
1,649,716
- -------------------------------------------------------------
ELECTRIC COMPANIES-7.71%
Calpine Capital Trust-$2.88 Conv. Pfd. 6,200 365,800
- -------------------------------------------------------------
Dominion Resources, Inc. 18,700 899,937
- -------------------------------------------------------------
FPL Group, Inc. 12,700 638,969
- -------------------------------------------------------------
Montana Power Co. 19,400 551,687
- -------------------------------------------------------------
Pinnacle West Capital Corp. 13,700 505,187
- -------------------------------------------------------------
Texas Utilities Co. 13,400 519,250
- -------------------------------------------------------------
3,480,830
- -------------------------------------------------------------
MACHINERY (DIVERSIFIED)-1.82%
Ingersoll-Rand Co. 15,700 820,325
- -------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.77%
United Technologies Corp. 13,200 798,600
- -------------------------------------------------------------
NATURAL GAS-4.79%
El Paso Energy Corp. 8,100 332,100
- -------------------------------------------------------------
Enron Corp. 45,800 1,829,138
- -------------------------------------------------------------
2,161,238
- -------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-1.87%
AES Corp.(a) 14,988 845,885
- -------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.32%
Navigant Consulting, Inc.(a) 5,000 142,813
- -------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-1.45%
Clarent Corp.(a) 6,900 654,638
- -------------------------------------------------------------
TELECOMMUNICATIONS
(CELLULAR/WIRELESS)-3.17%
Phone.com, Inc.(a) 4,800 986,400
- -------------------------------------------------------------
Triton PCS Holdings, Inc.-Class A(a) 9,600 338,400
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS
(CELLULAR/WIRELESS)-(CONTINUED)
Western Wireless Corp.-Class A(a) 2,000 $ 105,750
- -------------------------------------------------------------
1,430,550
- -------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-5.28%
AT&T Corp. 14,242 665,814
- -------------------------------------------------------------
MCI WorldCom, Inc.(a) 20,000 1,716,250
- -------------------------------------------------------------
2,382,064
- -------------------------------------------------------------
TELEPHONE-6.11%
Bell Atlantic Corp. 19,700 1,279,269
- -------------------------------------------------------------
SBC Communications, Inc. 29,000 1,477,188
- -------------------------------------------------------------
2,756,457
- -------------------------------------------------------------
Total Domestic Common Stocks &
Other Equity Interests (Cost
$13,486,635) 21,136,466
- -------------------------------------------------------------
FOREIGN STOCKS-49.10%
CANADA-1.72%
Canadian National Railway Co.
(Railroads) 25,600 776,364
- -------------------------------------------------------------
FINLAND-5.61%
Nokia Oyj-ADR (Communications
Equipment) 20,000 2,311,250
- -------------------------------------------------------------
Sonera Oyj
(Telecommunications-Cellular/Wireless) 7,350 220,765
- -------------------------------------------------------------
2,532,015
- -------------------------------------------------------------
FRANCE-4.23%
Suez Lyonnaise des Eaux S.A.
(Manufacturing- Diversified) 3,650 589,437
- -------------------------------------------------------------
Vivendi (Consumer Services) 17,400 1,318,924
- -------------------------------------------------------------
1,908,361
- -------------------------------------------------------------
GERMANY-5.31%
Mannesmann A.G.
(Machinery-Diversified) 12,800 2,013,203
- -------------------------------------------------------------
Viag A.G. (Manufacturing-Diversified) 20,800 384,040
- -------------------------------------------------------------
2,397,243
- -------------------------------------------------------------
IRELAND-2.40%
CRH PLC (Construction-Cement &
Aggregates) 38,000 717,603
- -------------------------------------------------------------
Esat Telecom Group PLC-ADR
(Telecommunications-Long
Distance)(a) 8,200 366,950
- -------------------------------------------------------------
1,084,553
- -------------------------------------------------------------
ISRAEL-0.44%
Partner Communications Co. Ltd.-ADR
(Telecommunications-Cellular/
Wireless)(a) 12,700 200,025
- -------------------------------------------------------------
ITALY-3.17%
ACEA S.p.A. (Water Utilities)(a) 72,800 810,314
- -------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 126,300 620,521
- -------------------------------------------------------------
1,430,835
- -------------------------------------------------------------
</TABLE>
FS-37
<PAGE> 617
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN-3.67%
Nippon Telegraph & Telephone Corp.
(Telecommunications-Long Distance) 30 $ 460,410
- -------------------------------------------------------------
NTT Mobile Communications Network,
Inc.
(Telecommunications-Cellular/Wireless) 45 1,195,626
- -------------------------------------------------------------
1,656,036
- -------------------------------------------------------------
MEXICO-0.11%
Nuevo Grupo Iusacell S.A. de C.V.-ADR
(Telecommunications-Cellular/Wireless) 4,300 51,062
- -------------------------------------------------------------
NETHERLANDS-3.07%
Equant N.V. (Computers-Networking)(a) 8,980 871,060
- -------------------------------------------------------------
Libertel N.V.
(Telecommunications-Cellular/
Wireless)(a) 9,750 184,635
- -------------------------------------------------------------
Versatel Telecom International N.V.
(Telecommunications-Long
Distance)(a) 26,500 328,976
- -------------------------------------------------------------
1,384,671
- -------------------------------------------------------------
PORTUGAL-0.78%
Brisa-Auto Estradas de Portugal, S.A.
(Engineering & Construction) 8,900 350,654
- -------------------------------------------------------------
SOUTH KOREA-3.34%
Korea Electric Power Corp.-ADR
(Electric Companies) 29,500 464,625
- -------------------------------------------------------------
Pohang Iron & Steel Co. Ltd.-ADR (Iron
& Steel) 31,200 1,041,300
- -------------------------------------------------------------
1,505,925
- -------------------------------------------------------------
SPAIN-3.34%
Endesa S.A.-ADR (Electric Companies) 39,600 789,525
- -------------------------------------------------------------
Sogciable S.A. (Electric Companies)(a) 10,100 277,968
- -------------------------------------------------------------
Union Electrica Fenosa, S.A. (Electric
Companies) 30,000 439,020
- -------------------------------------------------------------
1,506,513
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-11.91%
BG PLC (Oil & Gas-Exploration &
Production) 104,100 $ 578,062
- -------------------------------------------------------------
eircom PLC (Telecommunication-Long
Distance)(a) 282,900 1,180,083
- -------------------------------------------------------------
General Electric Co. PLC
(Manufacturing- Diversified) 63,700 692,783
- -------------------------------------------------------------
Hanson PLC-ADR
(Manufacturing-Diversified) 16,000 619,000
- -------------------------------------------------------------
National Grid Group PLC (Electric
Companies) 95,060 710,330
- -------------------------------------------------------------
Vodafone AirTouch PLC
(Telecommunications-Cellular/Wireless) 159,145 740,470
- -------------------------------------------------------------
Vodafone AirTouch PLC-ADR
(Telecommunications-
Cellular/Wireless) 17,750 850,891
- -------------------------------------------------------------
5,371,619
- -------------------------------------------------------------
Total Foreign Stocks (Cost
$13,333,929) 22,155,876
- -------------------------------------------------------------
MONEY MARKET FUNDS-3.99%
STIC Liquid Assets Portfolio(b) 899,465 899,465
- -------------------------------------------------------------
STIC Prime Portfolio(b) 899,465 899,465
- -------------------------------------------------------------
Total Money Market Funds (Cost
$1,798,930) 1,798,930
- -------------------------------------------------------------
TOTAL INVESTMENTS-99.93% 45,091,272
- -------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.07% 33,185
- -------------------------------------------------------------
NET ASSETS-100.00% $45,124,457
=============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-38
<PAGE> 618
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $28,619,494) $45,091,272
- ------------------------------------------------------------
Foreign currencies, at value (cost $147) 149
- ------------------------------------------------------------
Receivables for:
Investments sold 782,960
- ------------------------------------------------------------
Fund shares sold 46,900
- ------------------------------------------------------------
Dividends and interest 97,266
- ------------------------------------------------------------
Other assets 17,376
- ------------------------------------------------------------
Total assets $46,035,923
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 654,250
- ------------------------------------------------------------
Fund shares reacquired 62,156
- ------------------------------------------------------------
Accrued advisory fees 35,467
- ------------------------------------------------------------
Accrued administrative services fees 4,110
- ------------------------------------------------------------
Accrued distribution fees 31,525
- ------------------------------------------------------------
Accrued transfer agent fees 17,285
- ------------------------------------------------------------
Accrued trustees' fees 1,923
- ------------------------------------------------------------
Accrued operating expenses 104,750
- ------------------------------------------------------------
Total liabilities 911,466
- ------------------------------------------------------------
Net assets applicable to shares outstanding $45,124,457
============================================================
NET ASSETS:
Class A $19,957,501
============================================================
Class B $25,134,053
============================================================
Class C $ 15,553
============================================================
Advisor Class $ 17,350
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 1,222,309
============================================================
Class B 1,576,927
============================================================
Class C 976
============================================================
Advisor Class 1,042
============================================================
Class A:
Net asset value and redemption price per
share $ 16.33
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $16.33 / 95.25%) $ 17.14
============================================================
Class B:
Net asset value and offering price per share $ 15.94
============================================================
Class C:
Net asset value and offering price per share $ 15.94
============================================================
Advisor Class:
Net asset value, redemption and offering
price per share $ 16.65
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $56,941 foreign withholding
tax) $ 945,552
- ------------------------------------------------------------
Interest 189,760
- ------------------------------------------------------------
Securities lending 24,031
- ------------------------------------------------------------
Total investment income 1,159,343
============================================================
EXPENSES:
Advisory and administrative fees 542,222
- ------------------------------------------------------------
Accounting services fees 25,171
- ------------------------------------------------------------
Custodian fees 23,054
- ------------------------------------------------------------
Distribution fees -- Class A 108,405
- ------------------------------------------------------------
Distribution fees -- Class B 283,904
- ------------------------------------------------------------
Distribution fees -- Class C 70
- ------------------------------------------------------------
Printing fees 85,468
- ------------------------------------------------------------
Professional fees 89,512
- ------------------------------------------------------------
Trustees' fees 10,382
- ------------------------------------------------------------
Transfer agent fees -- Class A 59,181
- ------------------------------------------------------------
Transfer agent fees -- Class B 80,806
- ------------------------------------------------------------
Transfer agent fees -- Class C 20
- ------------------------------------------------------------
Transfer agent fees -- Advisor 2,504
- ------------------------------------------------------------
Other 38,488
- ------------------------------------------------------------
Total expenses 1,349,187
- ------------------------------------------------------------
Less: Expenses paid indirectly (559)
- ------------------------------------------------------------
Fees waived by advisor (123,428)
- ------------------------------------------------------------
Net expenses 1,225,200
- ------------------------------------------------------------
Net investment income (loss) (65,857)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
AND FORWARD CONTRACTS:
Net realized gain (loss) from:
Investment securities 5,973,179
- ------------------------------------------------------------
Foreign currencies (57,640)
- ------------------------------------------------------------
Forward contracts (354,572)
- ------------------------------------------------------------
5,560,967
- ------------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 5,616,936
- ------------------------------------------------------------
Foreign currencies 21,529
- ------------------------------------------------------------
Forward contracts 354,572
- ------------------------------------------------------------
5,993,037
- ------------------------------------------------------------
Net gain from investment securities, foreign
currencies, and forward contracts 11,554,004
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $11,488,147
============================================================
</TABLE>
See Notes to Financial Statements.
FS-39
<PAGE> 619
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (65,857) $ 244,486
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, and forward contracts 5,560,967 4,856,101
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies, and forward
contracts 5,993,037 (8,253,926)
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 11,488,147 (3,153,339)
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (90,183) --
- ------------------------------------------------------------------------------------------
Advisor Class (56,937) --
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (1,403,586) (275,162)
- ------------------------------------------------------------------------------------------
Class B (1,925,203) (454,982)
- ------------------------------------------------------------------------------------------
Advisor Class (392,100) (39,917)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A (6,581,799) (13,535,979)
- ------------------------------------------------------------------------------------------
Class B (11,163,548) (22,658,418)
- ------------------------------------------------------------------------------------------
Class C 14,334 --
- ------------------------------------------------------------------------------------------
Advisor Class (7,642,305) 4,976,375
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (17,753,180) (35,141,422)
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 62,877,637 98,019,059
- ------------------------------------------------------------------------------------------
End of period $ 45,124,457 $ 62,877,637
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 22,848,512 $ 47,321,830
- ------------------------------------------------------------------------------------------
Undistributed net investment income (loss) -- 147,120
- ------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, and forward contracts 5,806,741 4,932,520
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, and forward contracts 16,469,204 10,476,167
- ------------------------------------------------------------------------------------------
$ 45,124,457 $ 62,877,637
==========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-40
<PAGE> 620
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Infrastructure Fund (the "Fund") is a separate series of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware business
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of twelve separate series portfolios, each having an unlimited number of shares
of beneficial interest. The Fund consists of four different classes of shares:
Class A shares, Class B shares, Class C shares and Advisor Class shares. Class A
shares are sold with a front-end sales charge. Class B shares and Class C shares
are sold with a contingent deferred sales charge. Advisor Class shares were sold
without a sales charge. Matters affecting each portfolio or class will be voted
on exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital. The Fund
invests substantially all of its investable assets in Global Infrastructure
Portfolio (the "Portfolio"). The Portfolio is organized as a Delaware business
trust which is registered under the 1940 Act as an open-end management
investment company.
The Portfolio has investment objectives, policies and limitations
substantially identical to those of the Fund. Therefore, the financial
statements of the Fund and Portfolio have been presented on a consolidated
basis, and represent all activities of both the Fund and Portfolio. Through
October 31, 1999, all of the shares of beneficial interest of the Portfolio were
owned by either the Fund or INVESCO (NY) Asset Management, Inc., which has a
nominal ($100) investment in the Portfolio.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund and the Portfolio in the preparation of its financial statements.
A. Security Valuations--A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. For purposes of determining net asset value per
share, futures and options contracts generally will be valued 15 minutes
after the close of trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Trustees.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of fund
share redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$65,857, undistributed net realized gains decreased by $965,857 and paid-in
capital increased by $900,000 as a result of differing book/tax treatment of
foreign currency transactions, equalization credits and net operating loss
reclassifications in order to comply with the requirements of the American
Institute of Certified Public Accountants Statement of Position 93-2. Net
assets of the Fund were unaffected by the reclassification discussed above.
C. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify
FS-41
<PAGE> 621
as a regulated investment company and, as such, will not be subject to
federal income taxes on otherwise taxable income (including net realized
capital gains) which is distributed to shareholders. Therefore, no provision
for federal income taxes is recorded in the financial statements.
D. Futures Contracts--The Portfolio may purchase or sell futures contracts as
a hedge against changes in market conditions. Initial margin deposits
required upon entering into futures contracts are satisfied by the
segregation of specific securities as collateral for the account of the
broker (the Portfolio's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Portfolio recognizes a realized gain or loss equal to the
difference between the proceeds from, or cost of, the closing transaction and
the Portfolio's basis in the contract. Risks include the possibility of an
illiquid market and that a change in value of the contracts may not correlate
with changes in the value of the securities being hedged.
E. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
F. Foreign Currency Contracts--A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Portfolio may enter into a foreign currency contract to attempt to
minimize the risk to the Portfolio from adverse changes in the relationship
between currencies. The Portfolio may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Portfolio could be exposed to risk if counterparties to the contracts are
unable to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. Expenses--Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
H. 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 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 fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
In addition, the Portfolio's policy of concentrating its investments in
companies in the infrastructure industry subjects the Portfolio to greater
risk than a fund that is more diversified.
I. Indexed Securities--The 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.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's and the Portfolio's investment
manager and administrator. The Fund pays AIM administration fees at an
annualized rate of 0.25% of the Fund's average daily net assets. The Portfolio
pays AIM investment management and administration fees at an annual rate of
0.725% on the first $500 million of the Portfolio's average daily net assets,
plus 0.70% on the next $500 million of the Portfolio's average daily net assets,
plus 0.675% on the next $500 million of the Portfolio's average daily net
assets, plus 0.65% on the Portfolio's average daily net assets exceeding $1.5
billion. AIM has contractually agreed to limit the Fund's expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the
maximum annual rate of 2.00%, 2.50%, 2.50% and 1.50% of the average daily net
assets of the Fund's Class A, Class B, Class C and Advisor Class shares,
respectively. During the year ended October 31, 1999, AIM waived fees of
$123,428.
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund and the Portfolio. Prior to July 1,
1999, AIM was the pricing and accounting agent for the Fund and the Portfolio.
The monthly fee for these services paid to AIM was a percentage, not to exceed
0.03% annually, of a Fund's average daily net assets. The annual fee rate was
derived based on the aggregate net assets of the funds which comprised the
following investment companies: AIM Growth Series, AIM Investment Funds, AIM
Series Trust, G.T. Global Variable Investment Series and G.T. Global Variable
Investment Trust. The fee was calculated at the rate of 0.03% of the first $5
billion of assets and 0.02% to the assets in excess of $5 billion. An amount is
allocated to and paid by each
FS-42
<PAGE> 622
such fund based on its relative average daily net assets. For the year ended
October 31, 1999, AIM was paid $25,171 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended October 31, 1999, AFS was
paid $112,334 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares, Class B shares and Class C shares (collectively the
"Plans"). The Fund , pursuant to the Plans, pays AIM Distributors compensation
at the annual rate of 0.50% of the Fund's average daily net assets of Class A
shares and 1.00% of the average daily net assets of Class B and C shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. For the year ended October 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $108,405, 283,904 and $70, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $3,065 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $0 in contingent deferred sales charges imposed on
redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AFS and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $559 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of $559
during the year ended October 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended October 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. The
commitment fee is allocated among the funds based on their respective average
net assets for the period. Prior to May 28, 1999, the Fund, along with certain
other funds advised and/or administered by AIM, had a line of credit with
BankBoston and State Street Bank & Trust Company. The arrangements with the
banks allowed the Fund and certain other funds to borrow, on a first come, first
served basis, an aggregate maximum amount of $250,000,000.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, securities with an aggregate value of $1,699,825 were on
loan to brokers. The loans were secured by cash collateral of $1,733,821
received by the Portfolio. For the year ended October 31, 1999, the Portfolio
received fees of $24,031 for securities lending.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Portfolio during the year ended October
31, 1999 was $25,277,982 and $50,642,469, respectively. The amount of unrealized
appreciation (depreciation) of investment securities, for tax purposes, as of
October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 17,098,924
- ---------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (627,146)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $ 16,471,778
=========================================================
Investments have the same cost for the tax and financial
statement purposes.
</TABLE>
FS-43
<PAGE> 623
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 1999 OCTOBER 31, 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 162,299 $ 2,474,900 127,344 $ 1,959,159
- -----------------------------------------------------------------------------------------------------------------------------
Class B 80,398 1,180,744 378,526 5,629,835
- -----------------------------------------------------------------------------------------------------------------------------
Class C * 976 14,334 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Advisor Class 29,602 453,399 454,559 7,054,949
- -----------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 102,312 1,428,280 16,842 254,490
- -----------------------------------------------------------------------------------------------------------------------------
Class B 126,907 1,737,353 24,629 365,775
- -----------------------------------------------------------------------------------------------------------------------------
Advisor Class 32,402 459,131 2,594 39,803
- -----------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (701,304) (10,484,979) (1,036,046) (15,749,628)
- -----------------------------------------------------------------------------------------------------------------------------
Class B (963,484) (14,081,645) (1,949,017) (28,654,028)
- -----------------------------------------------------------------------------------------------------------------------------
Advisor Class (544,836) (8,554,835) (139,981) (2,118,377)
- -----------------------------------------------------------------------------------------------------------------------------
(1,674,728) $ (25,373,318) (2,120,550) $ (31,218,022)
=============================================================================================================================
</TABLE>
* Class C shares commenced sales on March 1, 1999.
NOTE 8-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,
---------------------------------------------------
1999 1998(a) 1997(a) 1996(a) 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.18 $15.01 $14.42 $12.11 $ 12.47
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) -- 0.07(b) (0.01) (0.03) (0.03)(c)
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 3.07 (0.79) 1.32 2.34 (0.33)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations 3.07 (0.72) 1.31 2.31 (0.36)
- -------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (0.07) -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (0.85) (0.11) (0.72) -- --
- -------------------------------------------------------------------------------------------------------------------
Total distributions (0.92) (0.11) (0.72) -- --
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.33 $14.18 $15.01 $14.42 $ 12.11
===================================================================================================================
Total return(d) 22.72% (4.82)% 9.38% 19.08% (2.89)%
===================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $19,958 $23,531 $38,281 $38,397 $36,241
===================================================================================================================
Ratio of net investment income (loss) to average net assets:
With fee waivers 0.09%(e) 0.52% (0.09)% (0.19)% (0.32)%
- -------------------------------------------------------------------------------------------------------------------
Without fee waivers (0.13)%(e) 0.28% (0.17)% (0.30)% (0.58)%
- -------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:
With fee waivers 2.00%(e) 1.99% 2.00% 2.14% 2.36%
- -------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.22%(e) 2.23% 2.08% 2.25% 2.62%
===================================================================================================================
Portfolio turnover rate 49% 96% 41% 41% 45%
===================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.03.
(c) Before reimbursement the net investment income per share would have been
reduced by $0.03.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $21,681,105.
FS-44
<PAGE> 624
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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,
-------------------------------------------------------------
1999(a) 1998(a) 1997(a) 1996(a) 1995
--------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.87 $14.75 $14.24 $12.03 $ 12.45
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) --(b) (0.09) (0.09) (0.09)(c)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 2.98 (0.77) 1.32 2.30 (0.33)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations 2.92 (0.77) 1.23 2.21 (0.42)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gain on investments (0.85) (0.11) (0.72) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (0.85) (0.11) (0.72) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 15.94 $13.87 $14.75 $14.24 $ 12.03
===========================================================================================================================
Total return(d) 22.03% (5.31)% 8.83% 18.37% (3.37)%
===========================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $25,134 $32,349 $57,199 $53,678 $50,181
===========================================================================================================================
Ratio of net investment income (loss) to average net assets:
With fee waivers (0.41)%(e) 0.02% (0.59)% (0.69)% (0.82)%
- ---------------------------------------------------------------------------------------------------------------------------
Without fee waivers (0.63)%(e) (0.22)% (0.67)% (0.80)% (1.08)%
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:
With fee waivers 2.50%(e) 2.49% 2.50% 2.64% 2.86%
- ---------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.72%(e) 2.73% 2.58% 2.75% 3.12%
===========================================================================================================================
Portfolio turnover rate 49% 96% 41% 41% 45%
===========================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.03.
(c) Before reimbursement the net investment income per share would have been
reduced by $0.03.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $28,390,371.
FS-45
<PAGE> 625
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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 C ADVISOR CLASS
------------- --------------------------------------------
MARCH 1, 1999 JUNE 1, 1995
TO YEAR ENDED OCTOBER 31, TO
OCTOBER 31, -------------------------------------------- OCTOBER 31,
1999(a) 1999(a) 1998(a) 1997(a) 1996(a) 1995
------------- ----------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.99 $14.46 $15.23 $14.52 $12.14 $12.00
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) 0.05 0.16(b) 0.05 0.04 0.02(c)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 1.98 3.15 (0.82) 1.38 2.34 0.12
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment
operations 1.95 3.20 (0.66) 1.43 2.38 0.14
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income -- (0.16) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (0.85) (0.11) (0.72) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (1.01) (0.11) (0.72) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.94 $16.65 $14.46 $15.23 $14.52 $12.14
================================================================================================================================
Total return(d) 13.94% 23.29% (4.35)% 10.10% 19.60% 1.17%
================================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $ 16 $ 17 $6,997 $2,539 $ 344 $ 216
================================================================================================================================
Ratio of net investment income (loss) to average
net assets:
With fee waivers (0.41)%(e) 0.59%(f) 1.02% 0.41% 0.31% 0.18%(g)
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers (0.63)%(e) 0.37%(f) 0.78% 0.33% 0.20% (0.08)%(g)
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:
With fee waivers 2.50%(e) 1.50%(f) 1.49% 1.50% 1.64% 1.86%(g)
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.72%(e) 1.72%(f) 1.73% 1.58% 1.75% 2.12%(g)
================================================================================================================================
Portfolio turnover rate 49% 49% 96% 41% 41% 45%
================================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Before reimbursement the net investment income per share would have been
reduced by $0.04.
(c) Before reimbursement the net investment income per share would have been
reduced by $0.02.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are annualized and based on average net assets of $10,439.
(f) Ratios are based on average net assets of $5,431,028.
(g) Annualized.
NOTE 9-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
FS-46
<PAGE> 626
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Global Resources Fund
and Board of Trustees of AIM Investment Funds:
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Global Resources Fund -- at October 31, 1999, and the
results of its operations, the changes in its net assets
and the financial highlights for the periods indicated,
in conformity with generally accepted accounting
principles. These financial statements and financial
highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
October 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
FS-47
<PAGE> 627
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-48.79%
ALUMINUM-2.55%
Reynolds Metals Co. 15,200 $ 918,650
- -------------------------------------------------------------
CHEMICALS-1.64%
Du Pont (E.I.) de Nemours & Co. 4,669 300,838
- -------------------------------------------------------------
Solutia, Inc. 16,800 288,750
- -------------------------------------------------------------
589,588
- -------------------------------------------------------------
CONTAINERS & PACKAGING (PAPER)-3.21%
Gaylord Container Corp.-Class A(a) 64,500 362,812
- -------------------------------------------------------------
Smurfit-Stone Container Corp.(a) 14,300 309,237
- -------------------------------------------------------------
Temple-Inland, Inc. 8,300 482,437
- -------------------------------------------------------------
1,154,486
- -------------------------------------------------------------
GOLD & PRECIOUS METALS MINING-1.54%
Stillwater Mining Co.(a) 27,550 554,444
- -------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.88%
USEC Inc. 34,800 315,375
- -------------------------------------------------------------
METALS MINING-1.05%
Freeport-McMoRan Copper & Gold,
Inc.-Class B(a) 22,700 378,806
- -------------------------------------------------------------
NATURAL GAS-1.44%
Enron Corp. 13,000 519,187
- -------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-8.81%
Baker Hughes, Inc. 12,700 354,806
- -------------------------------------------------------------
BJ Services Co.(a) 16,600 569,587
- -------------------------------------------------------------
Cooper Cameron Corp.(a) 10,300 398,481
- -------------------------------------------------------------
ENSCO International, Inc. 29,300 567,688
- -------------------------------------------------------------
Oceaneering International, Inc.(a) 20,500 278,031
- -------------------------------------------------------------
RPC, Inc. 7,200 49,950
- -------------------------------------------------------------
Schlumberger Ltd. 7,500 454,219
- -------------------------------------------------------------
Smith International, Inc.(a) 10,500 362,906
- -------------------------------------------------------------
Veritas DGC, Inc.(a) 9,700 136,406
- -------------------------------------------------------------
3,172,074
- -------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-9.28%
Apache Corp. 11,700 456,300
- -------------------------------------------------------------
Barrett Resources Corp.(a) 20,600 691,388
- -------------------------------------------------------------
Devon Energy Corp. 19,700 765,838
- -------------------------------------------------------------
Triton Energy Ltd.(a) 33,900 561,469
- -------------------------------------------------------------
Union Pacific Resources Group, Inc. 24,700 358,150
- -------------------------------------------------------------
Vastar Resources, Inc. 8,600 507,938
- -------------------------------------------------------------
3,341,083
- -------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-7.36%
Amerada Hess Corp. 8,300 476,213
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL (DOMESTIC INTEGRATED)-(CONTINUED)
Atlantic Richfield Co. 9,000 $ 838,688
- -------------------------------------------------------------
Conoco, Inc.-Class B 28,326 768,343
- -------------------------------------------------------------
USX-Marathon Group 19,400 565,025
- -------------------------------------------------------------
2,648,269
- -------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-4.52%
Chevron Corp. 4,200 383,513
- -------------------------------------------------------------
Exxon Corp. 4,100 303,656
- -------------------------------------------------------------
Mobil Corp. 5,600 540,400
- -------------------------------------------------------------
Texaco, Inc. 6,500 398,938
- -------------------------------------------------------------
1,626,507
- -------------------------------------------------------------
PAPER & FOREST PRODUCTS-6.51%
Boise Cascade Corp. 10,800 384,750
- -------------------------------------------------------------
Georgia-Pacific Group 14,900 591,344
- -------------------------------------------------------------
International Paper Co. 5,200 273,650
- -------------------------------------------------------------
Weyerhaeuser Co. 11,600 692,375
- -------------------------------------------------------------
Willamette Industries, Inc. 9,700 403,156
- -------------------------------------------------------------
2,345,275
- -------------------------------------------------------------
Total Domestic Common Stocks &
Other Equity Interests (Cost
$18,488,926) 17,563,744
- -------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-46.29%
BELGIUM-1.30%
Solvay S.A. (Chemicals-Diversified) 6,100 468,157
- -------------------------------------------------------------
CANADA-20.80%
Alliance Forest Products Inc. (Paper &
Forest Products)(a) 40,200 457,346
- -------------------------------------------------------------
Anderson Exploration Ltd. (Oil &
Gas-Exploration & Production)(a) 42,900 552,166
- -------------------------------------------------------------
Berkley Petroleum Corp. (Oil &
Gas-Exploration & Production)(a) 74,200 655,165
- -------------------------------------------------------------
Cameco Corp. (Metals Mining) 21,400 361,197
- -------------------------------------------------------------
Canadian Occidental Petroleum Ltd.
(Oil & Gas- Exploration &
Production) 23,700 463,601
- -------------------------------------------------------------
Cominco Ltd. (Metals Mining) 59,100 1,043,673
- -------------------------------------------------------------
EdperBrascan Corp.-Class A
(Conglomerates) 27,819 373,175
- -------------------------------------------------------------
Inco Ltd. (Metals Mining)(a) 61,200 1,230,401
- -------------------------------------------------------------
Nexfor Inc. (Paper & Forest Products) 94,100 476,156
- -------------------------------------------------------------
NOVA Chemicals Corp. (Natural Gas) 16,900 332,307
- -------------------------------------------------------------
Placer Dome, Inc. (Gold & Precious
Metals Mining) 29,700 360,113
- -------------------------------------------------------------
Precision Drilling Corp. (Oil &
Gas-Drilling & Equipment)(a) 29,100 674,756
- -------------------------------------------------------------
</TABLE>
FS-48
<PAGE> 628
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Suncor Energy, Inc. (Oil-International
Integrated) 13,200 $ 507,451
- -------------------------------------------------------------
7,487,507
- -------------------------------------------------------------
FRANCE-8.61%
Air Liquide S.A. (Chemicals-Specialty) 3,600 554,851
- -------------------------------------------------------------
Total Fina S.A.-ADR (Oil-International
Integrated) 29,823 1,988,826
- -------------------------------------------------------------
Bouygues Offshore S.A. (Oil &
Gas-Drilling & Equipment) 29,200 554,800
- -------------------------------------------------------------
3,098,477
- -------------------------------------------------------------
GERMANY-2.49%
BASF A.G. (Chemicals-Diversified) 9,900 445,254
- -------------------------------------------------------------
Bayer A.G. (Chemicals) 11,000 450,172
- -------------------------------------------------------------
895,426
- -------------------------------------------------------------
IRELAND-1.18%
Jefferson Smurfit Group PLC-ADR
(Containers & Packaging-Paper) 16,500 424,875
- -------------------------------------------------------------
ITALY-2.10%
ENI S.p.A-ADR (Oil-International
Integrated) 12,900 757,875
- -------------------------------------------------------------
NETHERLANDS-2.40%
Royal Dutch Petroleum Co.-New York
Shares-ADR (Oil-International
Integrated) 14,400 863,100
- -------------------------------------------------------------
NORWAY-0.93%
Petroleum Geo-Services ASA-ADR (Oil &
Gas- Drilling & Equipment)(a) 23,000 336,375
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SOUTH KOREA-1.86%
Pohang Iron & Steel Co. Ltd.-ADR (Iron
& Steel) 20,100 $ 670,838
- -------------------------------------------------------------
UNITED KINGDOM-4.62%
Corus Group PLC-ADR (Iron & Steel) 20,700 399,769
- -------------------------------------------------------------
Enterprise Oil PLC (Oil &
Gas-Exploration & Production) 60,000 427,137
- -------------------------------------------------------------
Rio Tinto PLC (Metals Mining) 48,800 835,216
- -------------------------------------------------------------
1,662,122
- -------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$14,792,259) 16,664,752
- -------------------------------------------------------------
MONEY MARKET FUNDS-3.96%
STIC Liquid Assets Portfolio(b) 713,041 713,041
- -------------------------------------------------------------
STIC Prime Portfolio(b) 713,041 713,041
- -------------------------------------------------------------
Total Money Market Funds (Cost
$1,426,082) 1,426,082
- -------------------------------------------------------------
TOTAL INVESTMENTS-99.04% 35,654,578
- -------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.96% 343,910
- -------------------------------------------------------------
NET ASSETS-100.00% $35,998,488
- -------------------------------------------------------------
</TABLE>
Investment Abbreviation:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-49
<PAGE> 629
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $34,707,267) $35,654,578
- ------------------------------------------------------------
Receivables for:
Investments sold 635,103
- ------------------------------------------------------------
Fund shares sold 5,388
- ------------------------------------------------------------
Dividends and interest 29,032
- ------------------------------------------------------------
Other assets 17,888
- ------------------------------------------------------------
Total assets 36,341,989
- ------------------------------------------------------------
LIABILITIES:
Payables for fund shares reacquired 278,037
- ------------------------------------------------------------
Accrued distribution fees 7,803
- ------------------------------------------------------------
Accrued administrative services fees 4,247
- ------------------------------------------------------------
Accrued transfer agent fees 13,594
- ------------------------------------------------------------
Accrued trustees' fees 4,451
- ------------------------------------------------------------
Accrued operating expenses 35,369
- ------------------------------------------------------------
Total liabilities 343,501
- ------------------------------------------------------------
Net assets applicable to shares outstanding $35,998,488
============================================================
NET ASSETS:
Class A $15,664,324
============================================================
Class B $20,018,869
============================================================
Class C $ 40,559
============================================================
Advisor Class $ 274,736
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 1,292,031
============================================================
Class B 1,691,309
============================================================
Class C 3,427
============================================================
Advisor Class 22,293
============================================================
Class A:
Net asset value and redemption price per
share $ 12.12
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $12.12 divided by
95.25%) $ 12.72
============================================================
Class B:
Net asset value and offering price per share $ 11.84
============================================================
Class C:
Net asset value and offering price per share $ 11.84
============================================================
Advisor Class:
Net asset value, redemption and offering
price per share $ 12.32
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $48,007 foreign withholding
tax) $ 873,103
- ------------------------------------------------------------
Interest 97,061
- ------------------------------------------------------------
Securities lending 20,468
- ------------------------------------------------------------
Total investment income 990,632
- ------------------------------------------------------------
EXPENSES:
Advisory and administrative fees 439,387
- ------------------------------------------------------------
Accounting services fees 24,486
- ------------------------------------------------------------
Custodian fees 13,573
- ------------------------------------------------------------
Distribution fees -- Class A 86,740
- ------------------------------------------------------------
Distribution fees -- Class B 239,305
- ------------------------------------------------------------
Distribution fees -- Class C 406
- ------------------------------------------------------------
Printing fees 101,444
- ------------------------------------------------------------
Trustees' fees 11,563
- ------------------------------------------------------------
Transfer agent fees -- Class A 62,751
- ------------------------------------------------------------
Transfer agent fees -- Class B 86,561
- ------------------------------------------------------------
Transfer agent fees -- Class C 147
- ------------------------------------------------------------
Transfer agent fees -- Advisor 13,940
- ------------------------------------------------------------
Other 61,392
- ------------------------------------------------------------
Total expenses 1,141,695
- ------------------------------------------------------------
Less: Expenses paid indirectly (278)
- ------------------------------------------------------------
Fees waived by advisor (135,288)
- ------------------------------------------------------------
Net expenses 1,006,129
- ------------------------------------------------------------
Net investment income (loss) (15,497)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (1,213,755)
- ------------------------------------------------------------
Foreign currencies 3,341
- ------------------------------------------------------------
(1,210,414)
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 5,873,629
- ------------------------------------------------------------
Foreign currencies (112)
- ------------------------------------------------------------
5,873,517
- ------------------------------------------------------------
Net gain from investment securities and
foreign currencies 4,663,103
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $ 4,647,606
============================================================
</TABLE>
See Notes to Financial Statements.
FS-50
<PAGE> 630
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (15,497) $ (912,829)
- -------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (1,210,414) (21,878,975)
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies 5,873,517 (39,191,661)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 4,647,606 (61,983,465)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A -- (602,063)
- -------------------------------------------------------------------------------------------
Class B -- (769,604)
- -------------------------------------------------------------------------------------------
Advisor Class -- (57,919)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A -- (1,584,312)
- -------------------------------------------------------------------------------------------
Class B -- (2,025,190)
- -------------------------------------------------------------------------------------------
Advisor Class -- (152,412)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A (5,463,882) (23,633,558)
- -------------------------------------------------------------------------------------------
Class B (11,256,193) (21,986,110)
- -------------------------------------------------------------------------------------------
Class C 43,424 --
- -------------------------------------------------------------------------------------------
Advisor Class (5,519,490) (5,331,917)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (17,548,535) (118,126,550)
- -------------------------------------------------------------------------------------------
Net assets:
Beginning of period 53,547,023 171,673,573
- -------------------------------------------------------------------------------------------
End of period $ 35,998,488 $ 53,547,023
===========================================================================================
Net assets consist of:
Shares of beneficial interest $ 58,323,182 $ 80,825,848
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (23,271,715) (22,352,329)
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies 947,021 (4,926,496)
- -------------------------------------------------------------------------------------------
$ 35,998,488 $ 53,547,023
===========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-51
<PAGE> 631
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Resources Fund (the "Fund") is a separate series of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware business trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twelve
separate series portfolios, each having an unlimited number of shares of
beneficial interest. The Fund consists of four different classes of shares:
Class A shares, Class B shares, Class C shares and Advisor Class shares. Class A
shares are sold with a front-end sales charge. Class B shares and Class C shares
are sold with a contingent deferred sales charge. Advisor Class shares were sold
without a sales charge. Matters affecting each portfolio or class will be voted
on exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital. The Fund
invests substantially all of its investable assets in Global Resources Portfolio
(the "Portfolio"). The Portfolio is organized as a Delaware business trust which
is registered under the 1940 Act as an open-end management investment company.
The Portfolio has investment objectives, policies and limitations
substantially identical to those of the Fund. Therefore, the financial
statements of the Fund and Portfolio have been presented on a consolidated
basis, and represent all activities of both the Fund and Portfolio. Through
October 31, 1999, all of the shares of beneficial interest of the Portfolio were
owned by either the Fund or INVESCO (NY) Asset Management, Inc., which has a
nominal ($100) investment in the Portfolio.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund and the Portfolio in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the Trust's
officers in a manner specifically authorized by the Board of Trustees.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Trustees.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
fund share redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$15,497, undistributed net realized gains increased by $291,028 and paid-in
capital decreased by $306,525 as a result of differing book/tax treatment of
foreign currency transactions and net operating loss reclassifications in
order to comply with the requirements of the American Institute of Certified
Public Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income
FS-52
<PAGE> 632
(including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded
in the financial statements. The Fund has a capital loss carryforward of
$23,240,307 as of October 31, 1999 which may be carried forward to offset
future taxable gains, if any, and expires in varying increments, if not
previously utilized, through the year 2007.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Portfolio may enter into a foreign currency contract to
attempt to minimize the risk to the Portfolio from adverse changes in the
relationship between currencies. The Portfolio may also enter into a
foreign currency contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. dollar
price of that security. The Portfolio could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
F. Expenses -- Distribution expenses directly attributable to a class of
shares are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
G. 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 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 fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
In addition, the Portfolio's policy of concentrating its investments in
companies in the natural resources industry subjects the Portfolio to
greater risk than a fund that is more diversified.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's and the Portfolio's investment
manager and administrator. INVESCO Asset Management Limited is the Fund's and
the Portfolio's subadvisor. The Fund pays AIM administration fees at an
annualized rate of 0.25% of the Fund's average daily net assets. The Portfolio
pays AIM investment management and administration fees at an annual rate of
0.725% on the first $500 million of the Portfolio's average daily net assets,
plus 0.70% on the next $500 million of the Portfolio's average daily net assets,
plus 0.675% on the next $500 million of the Portfolio's average daily net
assets, plus 0.65% on the Portfolio's average daily net assets exceeding $1.5
billion. AIM has contractually agreed to limit the Fund's expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the
maximum annual rate of 2.00%, 2.50%, 2.50% and 1.50% of the average daily net
assets of the Fund's Class A, Class B, Class C and Advisor Class shares,
respectively. During the year ended October 31, 1999, AIM waived fees of
$135,288.
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund and the Portfolio. Prior to July 1,
1999, AIM was the pricing and accounting agent for the Fund and the Portfolio.
The monthly fee for these services paid to AIM was a percentage, not to exceed
0.03% annually, of a Fund's average daily net assets. The annual fee rate was
derived based on the aggregate net assets of the funds which comprised the
following investment companies: AIM Growth Series, AIM Investment Funds, AIM
Series Trust, G.T. Global Variable Investment Series and G.T. Global Variable
Investment Trust. The fee was calculated at the rate of 0.03% of the first $5
billion of assets and 0.02% to the assets in excess of $5 billion. An amount is
allocated to and paid by each such fund based on its relative average daily net
assets. For the year ended October 31, 1999, AIM was paid $24,486 for such
services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended October 31, 1999, AFS was
paid $160,230 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares, Class B shares and Class C shares (collectively the
"Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at
the annual rate of 0.50% of the Fund's average daily net assets of Class A
shares and 1.00% of the average daily net assets of Class B and C shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. For the year ended October 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $86,740, $239,305 and $406, respectively, as
compensation under the Plans.
FS-53
<PAGE> 633
AIM Distributors received commissions of $10,174 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $0 in contingent deferred sales charges imposed on
redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AFS and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $278 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of $278
during the year ended October 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among the
funds based on their respective average net assets for the period. Prior to May
28, 1999, the Fund, along with certain other funds advised and/or administered
by AIM, had a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allowed the Fund and certain other
funds to borrow, on a first come, first served basis, an aggregate maximum
amount of $250,000,000.
During the year ended October 31, 1999, the average outstanding daily balance
of bank loans for the Fund was $2,101 with a weighted average interest rate of
5.5%. Interest expense for the Fund for the year ended October 31, 1999 was
$116.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, securities with an aggregate value of $2,312,119 were on
loan to brokers. The loans were secured by cash collateral of $2,358,361
received by the Portfolio. For the year ended October 31, 1999, the Portfolio
received fees of $20,468 for securities lending.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Portfolio during the year ended October 31, 1999 was
$54,131,709 and $75,745,779, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 3,714,231
- -----------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (2,798,328)
- -----------------------------------------------------------
Net unrealized appreciation of investment
securities $ 915,903
===========================================================
Cost of investments for tax purposes is $34,738,675
</TABLE>
FS-54
<PAGE> 634
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 1,483,872 $ 16,786,501 11,040,421 $157,454,416
- --------------------------------------------------------------------------------------------------------------------
Class B 623,453 7,240,416 1,539,841 23,469,862
- --------------------------------------------------------------------------------------------------------------------
Class C* 10,161 124,881 -- --
- --------------------------------------------------------------------------------------------------------------------
Advisor Class 40,141 464,770 1,211,598 19,441,802
- --------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A -- -- 107,234 1,988,098
- --------------------------------------------------------------------------------------------------------------------
Class B -- -- 132,618 2,421,607
- --------------------------------------------------------------------------------------------------------------------
Advisor Class -- -- 11,203 209,263
- --------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (1,968,466) (22,250,382) (12,759,254) (183,076,072)
- --------------------------------------------------------------------------------------------------------------------
Class B (1,629,584) (18,496,610) (3,237,031) (47,877,579)
- --------------------------------------------------------------------------------------------------------------------
Class C* (6,734) (81,457) -- --
- --------------------------------------------------------------------------------------------------------------------
Advisor Class (477,178) (5,984,260) (1,479,078) (24,982,982)
- --------------------------------------------------------------------------------------------------------------------
(1,924,335) $(22,196,141) (3,432,448) $(50,951,585)
====================================================================================================================
</TABLE>
* Class C shares commenced sales on March 1, 1999.
NOTE 8-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,
---------------------------------------------------
1999(a) 1998(a) 1997(a) 1996(a) 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.95 $ 20.65 $ 17.43 $ 11.44 $ 12.41
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02 (0.11)(b) (0.25) (0.24) 0.04(c)
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.15 (8.91) 4.08 6.28 (0.98)
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations 1.17 (9.02) 3.83 6.04 (0.94)
- -----------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income -- (0.19) -- (0.04) (0.03)
- -----------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (0.49) (0.61) (0.01) --
- -----------------------------------------------------------------------------------------------------------------
Total distributions -- (0.68) (0.61) (0.05) (0.03)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.12 $ 10.95 $ 20.65 $ 17.43 $ 11.44
=================================================================================================================
Total return(d) 10.68% (45.02)% 22.64% 53.04% (7.58)%
=================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $15,664 $19,463 $69,975 $48,729 $12,598
=================================================================================================================
Ratio of net investment income (loss) to average net assets:
With fee waivers 0.19%(e) 0.75)% (1.41)% (1.55)% 0.41%
- -----------------------------------------------------------------------------------------------------------------
Without fee waivers (0.11)%(e) (1.06)% (1.51)% (1.65)% (0.69)%
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.00%(e) 1.98% 2.03% 2.20% 2.37%
- -----------------------------------------------------------------------------------------------------------------
Without fee waivers 2.30%(e) 2.29% 2.13% 2.30% 3.47%
=================================================================================================================
Portfolio turnover rate 123% 201% 321% 94% 87%
=================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Before reimbursement the net investment loss per share would have been
increased by $0.04.
(c) Before reimbursement the net investment income (loss) per share would have
been reduced (increased) by $0.14.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $17,347,953.
FS-55
<PAGE> 635
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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,
-----------------------------------------------------
1999(a) 1998(a) 1997(a) 1996(a) 1995
--------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.75 $ 20.37 $ 17.29 $ 11.36 $ 12.38
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.18)(b) (0.33) (0.31) (0.02)(c)
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.13 (8.76) 4.02 6.25 (0.98)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations 1.09 (8.94) 3.69 5.94 (1.00)
- -------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income -- (0.19) -- -- (0.02)
- -------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (0.49) (0.61) (0.01) --
- -------------------------------------------------------------------------------------------------------------------
Total distributions -- (0.68) (0.61) (0.01) (0.02)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.84 $ 10.75 $ 20.37 $ 17.29 $ 11.36
===================================================================================================================
Total return(d) 10.14% (45.25)% 21.99% 52.39% (8.05)%
===================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $20,019 $28,996 $86,812 $57,749 $13,978
===================================================================================================================
Ratio of net investment income (loss) to average net assets:
With fee waivers (0.31)%(e) (1.25)% (1.91)% (2.05)% (0.09)%
===================================================================================================================
Without fee waivers (0.61)%(e) (1.56)% (2.01)% (2.15)% (1.19)%
===================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.50%(e) 2.48% 2.53% 2.70% 2.87%
===================================================================================================================
Without fee waivers 2.80%(e) 2.79% 2.63% 2.80% 3.97%
===================================================================================================================
Portfolio turnover rate 123% 201% 321% 94% 87%
===================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Before reimbursement the net investment loss per share would have been
increased by $0.04.
(c) Before reimbursement the net investment income (loss) per share would have
been reduced (increased) by $0.13.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $23,930,469.
FS-56
<PAGE> 636
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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 C ADVISOR CLASS
------------------- --------------------------------------------------------------
MARCH 1, 1999 YEAR ENDED OCTOBER 31, JUNE 1, 1995
TO ------------------------------------------ TO
OCTOBER 31, 1999(a) 1999(a) 1998(a) 1997(a) 1996(a) OCTOBER 31, 1995
------------------- --------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $11.08 $ 20.80 $ 17.47 $11.47 $11.45
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) 0.08 (0.03)(b) (0.14) (0.17) 0.11(c)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 1.87 1.16 (9.01) 4.08 6.28 (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from
investment operations 1.84 1.24 (9.04) 3.94 6.11 0.02
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income -- -- (0.19) -- (0.10) --
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- -- (0.49) (0.61) (0.01) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (0.68) (0.61) (0.11) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.84 $12.32 $ 11.08 $ 20.80 $17.47 $11.47
=================================================================================================================================
Total return(d) 18.40% 11.19% (44.79)% 23.23% 53.76% 0.17%
=================================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $ 41 $ 275 $ 5,089 $14,886 $5,502 $ 95
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets:
With fee waivers (0.31)%(e) 0.69%(f) (0.25)% (0.91)% (1.05)% 0.91%(g)
=================================================================================================================================
Without fee waivers (0.61)%(e) 0.39%(f) (0.56)% (1.01)% (1.15)% (0.19)%(g)
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.50%(e) 1.50%(f) 1.48% 1.53% 1.70% 1.87%(g)
=================================================================================================================================
Without fee waivers 2.80%(e) 1.80%(f) 1.79% 1.63% 1.80% 2.97%(g)
=================================================================================================================================
Portfolio turnover rate 123% 123% 201% 321% 94% 87%
=================================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Before reimbursement the net investment loss per share would have been
increased by $0.04.
(c) Before reimbursement the net investment income (loss) per share would have
been reduced (increased) by $0.12.
(d) Total return does not include sales charges and is not annualized for
periods less than one year.
(e) Ratios are annualized and based on average net assets of $60,471.
(f) Ratios are based on average net assets of $3,853,899.
(g) Annualized.
NOTE 9-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
FS-57
<PAGE> 637
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Global Telecommunications and
Technology Fund and Board of Trustees of AIM Investment
Funds:
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Global Telecommunications and Technology Fund at
October 31, 1999, and the results of its operations, the
changes in its net assets and the financial highlights
for the periods indicated, in conformity with generally
accepted accounting principles. These financial
statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of
the Fund's management; our responsibility is to express
an opinion on these financial statements based on our
audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing
standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating
the overall financial statement presentation. We believe
that our audits, which included confirmation of
securities at October 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the
opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
FS-58
<PAGE> 638
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-67.89%
BROADCASTING (TELEVISION, RADIO &
CABLE)-2.76%
Comcast Corp.-Class A 440,000 $ 18,535,000
- ---------------------------------------------------------------
UnitedGlobalCom Inc.-Class A(a) 400,000 34,800,000
- ---------------------------------------------------------------
53,335,000
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-16.36%
Corning, Inc. 402,000 31,607,250
- ---------------------------------------------------------------
General Instrument Corp.(a) 250,000 13,453,125
- ---------------------------------------------------------------
Harmonic, Inc.(a) 400,000 23,750,000
- ---------------------------------------------------------------
JDS Uniphase Corp.(a) 770,000 128,493,750
- ---------------------------------------------------------------
Lucent Technologies Inc. 400,000 25,700,000
- ---------------------------------------------------------------
Motorola, Inc. 701,000 68,303,687
- ---------------------------------------------------------------
Tellabs, Inc.(a) 400,000 25,300,000
- ---------------------------------------------------------------
316,607,812
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-6.16%
Cisco Systems, Inc.(a) 1,000,000 74,000,000
- ---------------------------------------------------------------
Exodus Communications, Inc.(a) 170,800 14,688,800
- ---------------------------------------------------------------
Extreme Networks, Inc.(a) 150,000 12,046,875
- ---------------------------------------------------------------
VeriSign, Inc.(a) 150,000 18,525,000
- ---------------------------------------------------------------
119,260,675
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.07%
EMC Corp.(a) 550,000 40,150,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-19.63%
America Online, Inc.(a) 700,400 90,833,125
- ---------------------------------------------------------------
Clarus Corp.(a) 100,000 1,875,000
- ---------------------------------------------------------------
eBay, Inc.(a) 520,000 70,265,000
- ---------------------------------------------------------------
InfoSpace.com, Inc.(a) 194,800 10,835,750
- ---------------------------------------------------------------
Inktomi Corp.(a) 291,800 29,599,462
- ---------------------------------------------------------------
Lycos, Inc.(a) 350,000 18,725,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 650,000 60,165,625
- ---------------------------------------------------------------
NaviSite, Inc.(a) 77,500 3,642,500
- ---------------------------------------------------------------
RealNetworks, Inc.(a) 130,000 14,259,375
- ---------------------------------------------------------------
Verity, Inc.(a) 100,000 6,887,500
- ---------------------------------------------------------------
VerticalNet, Inc.(a) 150,000 8,400,000
- ---------------------------------------------------------------
Yahoo! Inc.(a) 360,327 64,521,053
- ---------------------------------------------------------------
380,009,390
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.19%
EchoStar Communications Corp.(a) 60,000 3,712,500
- ---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.25%
General Motors Corp.-Class H(a) 65,000 4,732,813
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (INSTRUMENTATION)-0.41%
Alpha Industries, Inc.(a) 145,000 $ 8,011,250
- ---------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-4.07%
Broadcom Corp.-Class A(a) 230,000 29,396,875
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 380,000 35,815,000
- ---------------------------------------------------------------
Texas Instruments, Inc. 150,000 13,462,500
- ---------------------------------------------------------------
78,674,375
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.64%
GoTo.com, Inc.(a) 216,700 12,351,900
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-2.22%
Brocade Communications Systems,
Inc.(a) 160,000 43,040,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-1.52%
Triton PCS Holdings, Inc.-Class
A(a) 234,200 8,255,550
- ---------------------------------------------------------------
Western Wireless Corp.-Class A(a) 400,000 21,150,000
- ---------------------------------------------------------------
29,405,550
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-2.61%
MCI WorldCom, Inc.(a) 500,000 42,906,250
- ---------------------------------------------------------------
WinStar Communications, Inc.(a) 195,000 7,568,439
- ---------------------------------------------------------------
50,474,689
- ---------------------------------------------------------------
TELEPHONE-9.00%
Bell Atlantic Corp. 700,000 45,456,250
- ---------------------------------------------------------------
NTL, Inc.(a) 626,771 47,242,883
- ---------------------------------------------------------------
Qwest Communications
International, Inc.(a) 1,150,000 41,400,000
- ---------------------------------------------------------------
RCN Corp.(a) 150,000 7,181,250
- ---------------------------------------------------------------
SBC Communications, Inc. 646,934 32,953,201
- ---------------------------------------------------------------
174,233,584
- ---------------------------------------------------------------
Total Domestic Common Stocks
(Cost $830,639,283) 1,313,999,538
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-28.10%
AUSTRALIA-0.49%
Telstra Corp. (Telephone)(a) 2,972,900 9,538,957
- ---------------------------------------------------------------
CANADA-2.73%
BCE, Inc. (Telephone) 495,425 29,813,662
- ---------------------------------------------------------------
Nortel Networks (Communications
Equipment) 371,000 22,978,812
- ---------------------------------------------------------------
52,792,474
- ---------------------------------------------------------------
FINLAND-4.12%
Nokia Oyj (Communications Equipment) 696,000 79,673,598
- ---------------------------------------------------------------
</TABLE>
FS-59
<PAGE> 639
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GERMANY-2.60%
Mannesmann A.G.
(Machinery-Diversified) 320,000 $ 50,330,072
- ---------------------------------------------------------------
HONG KONG-0.70%
China Telecom Ltd.
(Telecommunications-
Cellular/Wireless)(a) 3,948,000 13,493,570
- ---------------------------------------------------------------
IRELAND-1.02%
Esat Telecom Group PLC-ADR
(Telecommunications-Long
Distance)(a) 441,300 19,748,175
- ---------------------------------------------------------------
JAPAN-6.72%
Kyocera Corp.
(Electronics-Component
Distributors) 150,000 14,387,799
- ---------------------------------------------------------------
Nippon Telegraph & Telephone Corp.
(Telecommunications-Long Distance) 2,001 30,709,318
- ---------------------------------------------------------------
NTT Mobile Communications Network, Inc.
(Telecommunications-Cellular/Wireless) 2,170 57,649,105
- ---------------------------------------------------------------
Softbank Corp.
(Computers-Software & Services)(a) 30,000 12,459,834
- ---------------------------------------------------------------
Yahoo Japan Corp.
(Computers-Software & Services)(a) 28 14,771,474
- ---------------------------------------------------------------
129,977,530
- ---------------------------------------------------------------
NETHERLANDS-0.50%
Equant N.V.-ADR
(Computers-Networking)(a) 54,700 5,305,900
- ---------------------------------------------------------------
Equant N.V.
(Computers-Networking)(a) 45,300 4,408,353
- ---------------------------------------------------------------
9,714,253
- ---------------------------------------------------------------
RUSSIA-0.00%
Russian Telecommunications
Development Corp.-Non-Voting
(Telecommunications-Cellular-Wireless)
(Acquired 12/22/93;
Cost $4,530,000)(b)(c) 453,000 0
- ---------------------------------------------------------------
Russian Telecommunications
Development Corp.-Voting
(Telecommunications-Cellular-Wireless)
(Acquired 12/22/93; Cost
$3,310,000)(b)(c) 331,000 0
- ---------------------------------------------------------------
0
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SPAIN-0.90%
Telefonica S.A. (Telephone)(a) 1,058,409 $ 17,415,135
- ---------------------------------------------------------------
SWEDEN-1.10%
Telefonaktiebolaget LM
Ericsson-ADR (Communications
Equipment) 500,000 21,375,000
- ---------------------------------------------------------------
UNITED KINGDOM-7.22%
British Sky Broadcasting Group
PLC (Broadcasting-Television,
Radio & Cable) 980,000 10,529,310
- ---------------------------------------------------------------
British Telecommunications PLC
(Communications Equipment) 1,005,000 18,233,357
- ---------------------------------------------------------------
Orange PLC (Telephone)(a) 1,671,300 41,683,888
- ---------------------------------------------------------------
Vodafone AirTouch PLC
(Telecommunications-
Cellular/Wireless) 7,185,000 33,430,390
- ---------------------------------------------------------------
Vodafone AirTouch PLC-ADR
(Telecommunications-
Cellular/Wireless) 750,000 35,953,125
- ---------------------------------------------------------------
139,830,070
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$235,295,660) 543,888,834
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES-0.96%
TELECOMMUNICATIONS (LONG DISTANCE)-0.96%
Level 3 Communications Inc.,
Conv. Bonds, 6.00%, 09/15/09
(Cost $15,047,500) $15,000,000 18,450,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-3.85%
STIC Liquid Assets Portfolio(d) 37,285,702 37,285,702
- ---------------------------------------------------------------
STIC Prime Portfolio(d) 37,285,702 37,285,702
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $74,571,404) 74,571,404
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.80% 1,950,909,776
- ---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.80%) (15,433,144)
- ---------------------------------------------------------------
NET ASSETS-100.00% $1,935,476,632
===============================================================
</TABLE>
Investment Abbreviation:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at 10/31/99 was $0.
(d) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-60
<PAGE> 640
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $1,155,553,847) $1,950,909,776
- -------------------------------------------------------------
Cash 1,184
- -------------------------------------------------------------
Foreign currencies, at value (cost
$12,905,416) 13,018,879
- -------------------------------------------------------------
Receivables for:
Investments sold 1,997,433
- -------------------------------------------------------------
Fund shares sold 8,062,379
- -------------------------------------------------------------
Dividends and interest 766,409
- -------------------------------------------------------------
Other assets 111
- -------------------------------------------------------------
Total assets 1,974,756,171
- -------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 32,954,728
- -------------------------------------------------------------
Fund shares reacquired 2,452,926
- -------------------------------------------------------------
Accrued advisory fees 1,463,119
- -------------------------------------------------------------
Accrued administrative service fees 14,251
- -------------------------------------------------------------
Accrued distribution fees 1,297,984
- -------------------------------------------------------------
Accrued transfer agent fees 446,518
- -------------------------------------------------------------
Accrued trustees' fees 16,478
- -------------------------------------------------------------
Accrued operating expenses 633,535
- -------------------------------------------------------------
Total liabilities 39,279,539
- -------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $1,935,476,632
=============================================================
NET ASSETS:
Class A $1,023,124,164
=============================================================
Class B $ 898,399,932
=============================================================
Class C $ 12,352,198
=============================================================
Advisor Class $ 1,600,338
=============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 38,700,841
=============================================================
Class B 35,327,893
=============================================================
Class C 485,820
=============================================================
Advisor Class 58,931
=============================================================
Class A:
Net asset value and redemption price per
share $ 26.44
- -------------------------------------------------------------
Offering price per share:
(Net asset value of $26.44 divided by
95.25%) $ 27.76
=============================================================
Class B:
Net asset value and offering price per
share $ 25.43
=============================================================
Class C:
Net asset value and offering price per
share $ 25.43
=============================================================
Advisor Class:
Net asset value, redemption and offering
price per share $ 27.16
=============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $387,393 foreign withholding
tax) $ 5,147,508
- ------------------------------------------------------------
Interest 4,430,526
- ------------------------------------------------------------
Securities lending 1,219,467
- ------------------------------------------------------------
Total investment income 10,797,501
- ------------------------------------------------------------
EXPENSES:
Advisory and administrative fees 15,437,508
- ------------------------------------------------------------
Accounting services fees 320,819
- ------------------------------------------------------------
Custodian fees 287,382
- ------------------------------------------------------------
Distribution fees -- Class A 4,313,052
- ------------------------------------------------------------
Distribution fees -- Class B 7,605,277
- ------------------------------------------------------------
Distribution fees -- Class C 27,171
- ------------------------------------------------------------
Printing fees 1,124,218
- ------------------------------------------------------------
Trustees' fees 66,075
- ------------------------------------------------------------
Transfer agent fees -- Class A 1,659,429
- ------------------------------------------------------------
Transfer agent fees -- Class B 1,463,050
- ------------------------------------------------------------
Transfer agent fees -- Class C 7,787
- ------------------------------------------------------------
Transfer agent fees -- Advisor 10,787
- ------------------------------------------------------------
Other 447,944
- ------------------------------------------------------------
Total expenses 32,770,499
- ------------------------------------------------------------
Less: Expenses paid indirectly (14,651)
- ------------------------------------------------------------
Net expenses 32,755,848
- ------------------------------------------------------------
Net investment income (loss) (21,958,347)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
AND FORWARD CONTRACTS:
Net realized gain (loss) from:
Investment securities 304,153,021
- ------------------------------------------------------------
Foreign currencies (3,359,421)
- ------------------------------------------------------------
Forward contracts (1,095,245)
- ------------------------------------------------------------
299,698,355
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 535,189,501
- ------------------------------------------------------------
Foreign currencies (485,052)
- ------------------------------------------------------------
Forward contracts 2,729,985
- ------------------------------------------------------------
537,434,434
- ------------------------------------------------------------
Net gain from investment securities, foreign
currencies and forward contracts 837,132,789
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $815,174,442
============================================================
</TABLE>
See Notes to Financial Statements.
FS-61
<PAGE> 641
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (21,958,347) $ (18,787,161)
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and forward contracts 299,698,355 71,148,199
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and forward
contracts 537,434,434 (65,095,698)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 815,174,442 (12,734,660)
- ----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAINS:
Class A (23,149,236) (59,979,418)
- ----------------------------------------------------------------------------------------------
Class B (21,143,550) (54,057,223)
- ----------------------------------------------------------------------------------------------
Advisor Class (150,968) (239,075)
- ----------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A (101,952,900) (140,083,034)
- ----------------------------------------------------------------------------------------------
Class B (72,208,921) (120,556,830)
- ----------------------------------------------------------------------------------------------
Class C 11,141,603 --
- ----------------------------------------------------------------------------------------------
Advisor Class (5,609,698) (92,959)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 602,100,772 (387,743,199)
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,333,375,860 1,721,119,059
- ----------------------------------------------------------------------------------------------
End of period $1,935,476,632 $1,333,375,860
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 863,973,212 $1,003,778,129
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) 5,534 5,534
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and forward contracts 275,954,959 71,483,704
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and forward contracts 795,542,927 258,108,493
- ----------------------------------------------------------------------------------------------
$1,935,476,632 $1,333,375,860
==============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-62
<PAGE> 642
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Telecommunications and Technology Fund (the "Fund") is a separate
series of AIM Investment Funds (the "Trust"). The Trust is organized as a
Delaware business trust and is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end series management investment
company consisting of twelve separate series portfolios, each having an
unlimited number of shares of beneficial interest. The Fund consists of four
different classes of shares: Class A shares, Class B shares, Class C shares and
Advisor Class shares. Class A shares are sold with a front-end sales charge.
Class B shares and Class C shares are sold with a contingent deferred sales
charge. Advisor Class shares were sold without a sales charge. Matters affecting
each portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund. The Fund's investment objective is long-term growth
of capital.
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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the Trust's
officers in a manner specifically authorized by the Board of Trustees.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE"). Generally, trading in foreign securities is substantially
completed each day at various times prior to the close of the NYSE. The
values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the NYSE.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the NYSE which would not be reflected in the computation of the
Fund's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
their fair value as determined in good faith by or under the supervision of
the Board of Trustees.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
fund share redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased
by $21,958,348, undistributed net realized gains decreased by $50,783,348
and paid-in capital increased by $28,825,000 as a result of differing
book/tax treatment of foreign currency transactions and net operating loss
reclassifications in order to comply with the requirements of the American
Institute of Certified Public Accountants Statement of Position 93-2. Net
assets of the Fund were unaffected by the reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations
FS-63
<PAGE> 643
arising from changes in market prices of securities held. Such fluctuations
are included with the net realized and unrealized gain or loss from
investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
F. Expenses -- Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
G. 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
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 fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
H. Indexed Securities -- The Fund may invest in indexed securities whose value
is linked either directly or indirectly to changes in foreign currencies,
interest rates, equities, indices, or other reference instruments. Indexed
securities may be more volatile than the reference instrument itself, but
any loss is limited to the amount of the original investment.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
The Fund pays AIM investment management and administration fees at an annual
rate of 0.975% on the first $500 million of the Fund's average daily net assets,
plus 0.95% on the next $500 million of the Fund's average daily net assets, plus
0.925% on the next $500 million of the Fund's average daily net assets, plus
0.90% on the Fund's average daily net assets exceeding $1.5 billion. AIM has
contractually agreed to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the maximum annual
rate of 2.00%, 2.50%, 2.50% and 1.50% of the average daily net assets of the
Fund's Class A, Class B, Class C and Advisor Class shares, respectively.
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund. Prior to July 1, 1999, AIM was the
pricing and accounting agent for the Fund. The monthly fee for these services
paid to AIM was a percentage, not to exceed 0.03% annually, of a Fund's average
daily net assets. The annual fee rate was derived based on the aggregate net
assets of the funds which comprised the following investment companies: AIM
Growth Series, AIM Investment Funds, AIM Series Trust, G.T. Global Variable
Investment Series and G.T. Global Variable Investment Trust. The fee was
calculated at the rate of 0.03% of the first $5 billion of assets and 0.02% to
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets. For the year ended
October 31, 1999, AIM was paid $320,819 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended October 31, 1999, AFS was
paid $3,141,053 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares, Class B shares and Class C shares (collectively the
"Plans"). The Fund , pursuant to the Plans, pays AIM Distributors compensation
at the annual rate of 0.50% of the Fund's average daily net assets of Class A
shares and 1.00% of the average daily net assets of Class B and C shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. For the year ended October 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $4,313,052, $7,605,277 and $27,171, respectively,
as compensation under the Plans.
AIM Distributors received commissions of $205,929 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $8,313 in contingent deferred sales charges imposed on
redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AFS and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $14,651 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$14,651 during the year ended October 31, 1999.
FS-64
<PAGE> 644
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among the
funds based on their respective average net assets for the period. Prior to May
28, 1999, the Fund, along with certain other funds advised and/or administered
by AIM, had a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allowed the Fund and certain other
funds to borrow, on a first come, first served basis, an aggregate maximum
amount of $250,000,000.
During the year ended October 31, 1999, the average outstanding daily balance
of bank loans for the Fund was $112,348 with a weighted average interest rate of
5.47%. Interest expense for the Fund for the year ended October 31, 1999 was
$12,459.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, securities with an aggregate value of $261,274,438 were on
loan to brokers. The loans were secured by cash collateral of $266,656,351
received by the Fund. For the year ended October 31, 1999, the Fund received
fees of $1,219,467 for securities lending.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$1,890,552,707 and $2,086,302,700, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $800,003,800
- -------------------------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (6,592,795)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $793,411,005
=========================================================================
</TABLE>
Cost of investments for tax purposes is $1,157,498,771.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Sold:
Class A 42,637,825 $ 826,757,794 108,008,301 $1,941,688,002
- -------------------------------------------------------------------------------------------------------------------------
Class B 6,195,698 131,627,637 10,070,976 179,810,719
- -------------------------------------------------------------------------------------------------------------------------
Class C* 544,069 12,490,317 -- --
- -------------------------------------------------------------------------------------------------------------------------
Advisor Class 664,975 14,200,299 3,217,206 58,029,142
- -------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 1,233,567 21,142,757 3,004,072 49,839,899
- -------------------------------------------------------------------------------------------------------------------------
Class B 1,176,293 19,479,129 2,786,131 44,943,256
- -------------------------------------------------------------------------------------------------------------------------
Advisor Class 8,588 150,375 14,131 237,955
- -------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (49,011,051) (949,853,451) (117,654,141) (2,131,610,935)
- -------------------------------------------------------------------------------------------------------------------------
Class B (11,052,108) (223,315,687) (19,680,426) (345,310,805)
- -------------------------------------------------------------------------------------------------------------------------
Class C* (58,249) (1,348,714) -- --
- -------------------------------------------------------------------------------------------------------------------------
Advisor Class (900,945) (19,960,372) (3,206,646) (58,360,056)
- -------------------------------------------------------------------------------------------------------------------------
(8,561,338) $(168,629,916) (13,440,396) $ (260,732,823)
=========================================================================================================================
</TABLE>
* Class C shares commenced sales on March 1, 1999.
FS-65
<PAGE> 645
NOTE 8-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,
----------------------------------------------------------------
1999 1998(a) 1997(a) 1996(a) 1995
---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.28 $ 18.04 $ 16.69 $ 16.42 $ 17.80
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.25) (0.17) (0.17) (0.13) (0.09)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 10.97 (0.39) 2.93 1.22 (0.43)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations 10.72 (0.56) 2.76 1.09 (0.52)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gain on investments (0.56) (1.20) (1.41) (0.82) (0.86)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 26.44 $ 16.28 $ 18.04 $ 16.69 $ 16.42
- ------------------------------------------------------------------------------------------------------------------------------
Total return(b) 67.63% (3.16)% 17.70% 7.00% (2.88)%
==============================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000s) $1,023,124 $713,904 $910,801 $1,204,428 $1,353,722
==============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.11)%(c) (0.93)% (1.06)% (0.89)% (0.55)%
==============================================================================================================================
Ratio of expenses to average net assets 1.77%(c) 1.88% 1.84% 1.79% 1.83%
==============================================================================================================================
Portfolio turnover rate 122% 75% 35% 37% 62%
==============================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges.
(c) Ratios are based on average net assets of $862,610,444.
FS-66
<PAGE> 646
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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,
------------------------------------------------------------
1999 1998(a) 1997(a) 1996(a) 1995
--------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.76 $ 17.58 $ 16.37 $ 16.20 $ 17.66
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.35) (0.25) (0.25) (0.23) (0.17)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 10.58 (0.37) 2.87 1.22 (0.43)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations 10.23 (0.62) 2.62 0.99 (0.60)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gain on investments (0.56) (1.20) (1.41) (0.82) (0.86)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 25.43 $ 15.76 $ 17.58 $ 16.37 $ 16.20
===========================================================================================================================
Total return(b) 66.84% (3.67)% 17.15% 6.46% (3.37)%
===========================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000s) $898,400 $614,715 $805,535 $1,007,654 $1,111,520
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.62)%(c) (1.43)% (1.56)% (1.39)% (1.05)%
===========================================================================================================================
Ratio of expenses to average net assets 2.28%(c) 2.38% 2.34% 2.29% 2.33%
===========================================================================================================================
Portfolio turnover rate 122% 75% 35% 37% 62%
===========================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charges.
(c) Ratios are based on average net assets of $760,527,702.
FS-67
<PAGE> 647
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
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 C ADVISOR CLASS
-------------- -------------------------------------------------------------
MARCH 1, 1999 YEAR ENDED OCTOBER 31,
TO OCTOBER 31, ---------------------------------------- JUNE 1, 1995 TO
1999 1999 1998(a) 1997(a) 1996(a OCTOBER 31, 1995
-------------- ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.23 $ 16.61 $ 18.28 $ 16.81 $ 16.46 $15.24
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11) (0.11) (0.08) (0.09) (0.05) --
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 6.31 11.22 (0.39 2.97 1.22 1.22
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment
operations 6.20 11.11 (0.47) 2.88 1.17 1.22
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gain on investments -- (0.56) (1.20) (1.41) (0.82) --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 25.43 $ 27.16 $ 16.61 $ 18.28 $ 16.81 $16.46
==============================================================================================================================
Total return(b) 32.24% 68.67% (2.59)% 18.33% 7.49% 7.94%
==============================================================================================================================
Ratios and supplemental data:
Net assets, end of period (in 000's) $12,352 $ 1,600 $ 4,757 $ 4,783 $ 945 $ 681
==============================================================================================================================
Ratio of net investment income (loss) to
average net assets: (1.62)%(c) (0.56)%(d) (0.43)% (0.56)% (0.39)% (0.05)%(e)
==============================================================================================================================
Ratio of expenses to average net assets: 2.28%(c) 1.22%(d) 1.38% 1.34% 1.29% 1.33%(e)
==============================================================================================================================
Portfolio turnover rate 122% 122% 75% 35% 37% 62%
==============================================================================================================================
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Total return does not include sales charge and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $4,047,890.
(d) Ratios are based on average net assets of $5,607,430.
(e) Annualized.
NOTE 9-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
FS-68
